Recently, Geico has focused on the increasingly profitable auto insurance business, bypassing sales agents in favor of sales over the phone, saving up to 15% in fees. The transaction must be approved by state insurance regulators and the holders of 80% of Geico shares, of which Berkshire Hathaway already owns 51%. Both boards have already approved the measure, which is expected to be completed in January. A key attraction for Buffett is Geico's participation in the auto insurance business.
Insuring drivers and cars has become more cost-effective as claims have declined. That trend is due to stricter laws against drunk driving, older baby boomers who drive relatively safely, and the greater number of safety devices built into cars. How did NationsBank gain control of those shares? In 1976, Buffett's company, Berkshire Hathaway Inc., but the District of Columbia Insurance Superintendent, then Geico's state regulator, ordered Buffett to place voting power over those shares in the hands of a trustee. So Buffett ceded his voting power to Suburban Trust Co.