Government Employes Insurance Co. (Geico), which last year was struggling for survival, yesterday reported continued improvement in earnings.

Net income for the second quarter of 1977 was $14 million (71 cents) compared with a loss of $13.7 million (77 cents) in the second quarter of 1976. For the first six months, net income totaled $23.4 million ($2.26) in 1976.

In a letter to the company's shareholders, Geico chairman John J. Byrne stated, "Our company's recovery continues to proceed essentially according to plan. . . Our insurance operations produced an underwriting profit for the second consecutive quarter - a modest improvement from that of that of the first quarter."

But Byrne said this profit ($7.3 million for the half) was still "far from satisfactory."

He noted that Geico's financial condition is "vastly improved" compared with a year ago, thanks in large part to an agressive management program and a reinsurance agreement backed by two dozen insurance firms.

Byrne said Geico has been able to reduce its quota share reinsurance by one fourth of the original agreement. Starting with the third quarter of 1977, the portion of Geico's business to be reinsured will be approximately 19 per cent rather than the 25 per cent it was originally.

Also, Geico has proposed, but has yet to receive approval for, the purchase of a controlling interest in three sister companies, which Byrne said would further improve earnings.

Peoples Drug Stores reported an increase in sales and income for the third quarter of 1977 ended July 2.

Net income for the period totaled $905,000 (25 cents a share) on sales of $81.9 million, compared with adjusted net income for the similar period last year of $853,000 (23 cents) on sales of $80.4 million.

For the nine-month period, income rose to $3.5 million (95 cents on sales of $285 million, compared with adjusted net income of $3.3 million (90 cents) on sales of $271 million.

The 1976 figures are adjusted to account for a change in fiscal year which occurred in June 1976, when Peoples merged with the Lane Drug Co.

A statement by the drug store chain noted that another change in the way the company accounts for inventory resulted in a decrease in net income of 13 cents a share for the quarter month period.

Criterion Insurance Co., an affiliate of the Government Employees Insurance Co. (GEICO), reported earnings for the six months ended June 30 of $4.4 million ($3.03), compared to a loss for the first half of 1976 of $4.9 million ($3.32).

The company noted it had an underwriting profit of $2 million for the latest six months, compares withan underwriting loss of $7.1 million in 1976. A spokesman said the primary reason for the underwriting turnaroundwas rare increases.

Dart Drug Corp. reported net income of $425,000 (23 cents) on sales of $42,322,000 for the first quarter ended June 30, 1977 compared to net income of $535,000 (29 cents) on sales of $39,816,000 in the first three months last year.

Herbert H. Haft, dart president, pointed out that weak retail sales in the Washington market during the quarter an intense price competition had an adverse effect on sales and earnings.

He said he was optimistic about the company's prospects for the current year. Haft noted that during the first quarter, the chain remodeled three stores as part of its ongoing program to make its super drug stores more productive. This program and the opening of new stores during the year should result in improved sales and net income, he added.

Rouse Co. of Columbia, Md., reported earnings before non-cash charges of $4.5 million for the first six months of 1976.

This is down from non-cash earnings one year ago of $9.4 million, but this included gains of $8.6 million from the sale of half-interests in retail centers, the company noted. After adjusting for these special gains, earnings were $4.1 million 1977 compared to $799,000 a year ago.

Net earnings after non-cash charges and after translation of Canadian debt were $2.9 million in 1977 compared to $6.9 million a year ago.

The company reported improved results from all of its operating divisions, with particularly strong performace from its 26 retail centers and from its mortgage banking subsidiary, James W. Rouse & Co.