GEICO

# GEICO **GEICO** (Government Employees Insurance Company) is Berkshire Hathaway's crown jewel insurance subsidiary and one of the most important contributors to the company's success. ## History GEICO was founded in 1936 to provide auto insurance to government employees. Its low-cost direct-to-consumer model gave it a structural advantage over traditional insurance companies that sold through agents. ## Berkshire's Investment Buffett first invested in GEICO in 1951 as a student of Benjamin Graham. Berkshire gradually increased its stake over the decades, completing the full acquisition in 1996. ## Competitive Advantage GEICO's **economic moat** comes from its cost structure: - **Direct sales model** — No agent commissions - **Low overhead** — Minimal physical infrastructure - **Scale advantages** — As one of the largest auto insurers, GEICO benefits from economies of scale ## The Float GEICO generates enormous **float**—premiums collected before claims are paid. This float is invested by Berkshire, providing cost-free capital for other investments. ## Conclusion GEICO exemplifies the kind of business Buffett loves: a simple, understandable business with a durable competitive advantage, excellent management, and attractive economics.