Government Employees Insurance Co.'s operating income fell 22.7 percent in 1985, but the automobile insurance giant boosted net income 29.9 percent nonetheless through a $93 million gain on the sale of securities.

Geico Chairman Bill Snyder blamed the poor results on intense competition among property and casualty insurers that in recent years has led to widespread underwriting losses.

Geico's net income for the year rose to $170.6 million ($9.25 a share) on revenue of $1.2 billion from $131.3 million ($6.68) a year earlier on revenue of $995 million. Fourth-quarter net income was $61.8 million ($3.46) on revenue of $331.9 million, nearly double the $33.2 million ($1.75) reported for the same period a year earlier on revenue of $265.4 million.

*Smithfield Foods Inc. of Arlington reported a record third quarter for fiscal 1986, as net income rose 47.6 percent on a revenue gain of 81.2 percent. The company attributed the performance to strong sales in fresh and processed meats.

Earnings for the three months that ended Jan. 26 were $3.1 million ($1.39 a share) on revenue of $252.4 million compared with earnings for the same period a year earlier of $2.1 million (70 cents) on revenue of $139.3 million.

The results brought earnings for the first nine months of the fiscal year to $1.8 million (77 cents) on revenue of $654 million.