Buffett's "First Business Love" spends, but also spins off cash

"I am perfectly willing to spend whatever it takes to get everyone in the country to check our price," says Warren Buffett. Berkshire Hathaway's (BRK.A, BRK.B) Geico's ubiquitous ads - the company spent $1.2B last year (and Buffett says it will be more in 2014) - account for nearly 25% of all U.S. insurance companies' advertising spending. And it made Berkshire Hathaway the 7th largest advertiser in the country in 2013.

Since shortly after current CEO Tony Nicely took the top job at Geico in 1993, the insurer's market share in personal auto insurance has about quadrupled to 10%, and last year the company became the 2nd largest U.S. auto insurer - behind State Farm, but ahead of Allstate and Progressive. Pretax underwriting profit of $393M in 2013 was up 17% from a year earlier.

One reason for the need for the lavish ad spending for this otherwise thrifty company: Geico doesn't use agents, but instead sells policies directly to consumers via the Web or the phone.

Geico execs are "cost-conscious connoisseurs," says the author of an upcoming book on Berkshire. "At headquarters, they're as thrifty as can be….Geico is the quintessential Berkshire company."

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Comments (5)
  • into dark shadows
    , contributor
    Comments (473) | Send Message
    Hey Warren, spend away pal, you could give me one of your products for free and I still would NOT take it!
    I have not been to a Dairy Queen since childhood and will never return!
    Heinz products?
    Yeah, I don't think so.
    I do NOT endorse you and your tactic's!


    AARP? Same goes for you.
    You lay down with dog, you get fleas!
    25 Aug 2014, 11:52 AM Reply Like
  • psychological-dividends
    , contributor
    Comments (820) | Send Message
    Get a life, I'm a conservative and I still think the world of Warren. Liberals do this stupid thing were they don't buy products from Koch Industries like Brawny paper towels or Quilted Northern products. I don't fault anyone for their success because they politically disagree with me.


    Warren didn't use shady tactics to acheive it.


    Business acumen and success are what they are, and should be emulated and appreciated.


    FYI: Oh, and by the way, chances are some merchandise you bought traveled on BNSF. You just didn't "see" it to get mad about it.
    25 Aug 2014, 12:54 PM Reply Like
  • chopchop0
    , contributor
    Comments (5271) | Send Message
    you must be bummed you missed out on BRK when it was cheap a few years ago. Love seeing it on the 52-week high list a lot lately, myself ;)
    25 Aug 2014, 01:27 PM Reply Like
  • Transcripts&10-K's
    , contributor
    Comments (1222) | Send Message
    Outstanding business with a clear competitive advantage; $1.1 billion in underwriting gains last year, before considering investment gains on $12.5 billion in float.
    25 Aug 2014, 12:23 PM Reply Like
  • terryshead11
    , contributor
    Comments (28) | Send Message
    I have just bought 207 B shares of berk and probably never sell it.


    There's know getting away with it the man is brilliant, and I have been investing a lot of years.


    Terry Shead
    4 Sep 2014, 04:45 AM Reply Like
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