Geico spent $935.1 million on advertising in 2013—over $280 million more than its closest competitor, Allstate, a new report shows.
In its “U.S. Insurance Weekly” update, Nomura reveals the top-10 insurers for ad spending in personal lines. For some perspective, Geico spent nearly $100 million more on advertising in 2013 than the 6th through 10th ranked companies combined.
Geico also experienced 11.2% personal-lines growth in 2013, outpacing its 9.1% growth in 2012.
Nomura says, “Berkshire Hathaway’s auto-insurance company Geico has been a growth machine in recent years and the advertising data…show just how important good advertising is to growth.”
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Liberty Mutual saw the second-largest growth in personal lines for 2013 among the top-10 advertisers at 10.7%, although Nomura says, "Liberty Mutual has been more active in the M&A space to grow its market, on top of materially increasing its advertising budget."
John Cusolito, Liberty Mutual vice president and manager, public and media relations, contested that point, stating that personal-insurance growth was "100% organic in 2012 and 2013." He says auto and homeowners grew 10% and 12% respectively, adding, "Growth was achieved through a combination of rate and new-business acquisition. Strong new-business acquisition can be tied directly to the increases in advertising...."
Nomura analyst Clifford Gallant clarifies that the report does not attribute overall growth specifically to 2012 and 2013, and adds that Liberty Mutual has done several deals since 2007 to grow.
USAA placed 10th in ad spending ($133 million), but first in its ad-spending growth from 2012 to 2013 (120.2%). USAA saw 9.8% personal-lines growth last year.
State Farm, the largest insurance group by net premiums written, dialed back its adveritising slightly (0.2%) in 2013 compared to 2012, but the insurer still placed third among ad spenders at $608.1 million. The company saw 5% personal-lines growth for the year. From 2011-2013, State Farm’s market-share gain was 1.3%, tops among the 10 insurers. Geico was second at 1.2%
Nomura says Geico’s main direct-channel competitors—Progressive and Allstate’s Esurance—are struggling to keep up. “Esurance is growing rapidly, but still working off a relatively small base and generating an underwriting loss for Allstate,” says Nomura, “while Progressive has been rapidly increasing its advertising budget in recent quarters.” The firm adds Geico has “consistently been outpacing [Progressive] in almost every growth and underwriting metric.”
Progressive increased its ad spending by 18.7% in 2013 and ranked 4th among the top-10 spenders at $604.2 million. It experienced 6.5% personal-lines growth for 2013.
Mutual personal-lines competitors, such as State Farm, “can be more aggressive on pricing and bundling discounts given they are not beholden to shareholder-return expectations,” Nomura says.