Subject: Re: GEICO
Yes, GEICO has dramatically cut spending on advertisement. Look at their last three years of expenses and they have been cutting their expenses dramatically while still getting killed on their combined ratio. They are shrinking and customers are leaving for Progressive (and others, but primarily PGR) en masse. But what baffles me is that Progressive is both undercutting GEICO on price (at least for the first year of these new auto policies) and - so far - reporting better underwriting results. Something has to give, and I believe it is about to be PGR's auto underwriting results that show the weakness. I am a longtime Progressive shareholder and it makes me nervous. But they are very well run and auto insurance pricing can be adjusted fairly quickly.

I don't see auto parts inflation, used car values, catastrophe flooding, or the Hyundai/Kia challenge introducing an entire generation of inner-city youth to the ease of auto theft for joyriding reversing meaningfully in the near future.

In my small US city (see if you can guess by my handle), several hundred vehicles are stolen by children each month. It is still primarily Hyundai and Kia from the era without an immobilizer but the kids are quickly realizing that there are many other easy to steal vehicles and branching out. Once you've figured out how to separate an ignition into the two pieces by pushing the little pin in, starting many cars is awfully easy. Unfortunately this is now institutional knowledge in our nation's inner city high schools (and I've seen kids as young as 10 stealing these cars! - they crash quickly of course)