P-C Stock, Mutual Insurers' Performances Differ
NU Online News Service, Aug. 24, 11:45 a.m. EDT?Large stock property-casualty companies outperformed their mutual counterparts in recent years, according to a new Conning study looking at the years 1998-2002.[@@]
Stamford, Conn.-based Conning Research and Consulting Inc. analyst Geri Riley, one of the study's authors, said the greater oversight at a public company brought on by shareholder pressure as well as reporting requirements led overall to the greater performance.
In addition, in the time period studied, the soft market that was quickly hardening had a greater impact at first on commercial lines, which are for the most part offered by stock companies. Personal lines coverage is more the province of the big mutual companies such as State Farm and Nationwide.
Moreover, the poor performance of the homeowners lines over the past few years would skew the results more in favor of the stock companies, Ms. Riley added.
She noted that the smaller mutuals "tended to outperform the smaller stock insurers." Mutual companies have tended to have a greater freedom to invest in common stocks over the years, which could have skewed their investment results.
"A lot of the public company's investment policies are reserve-based so they can't be risky," Ms. Riley said.
Stephan Christiansen, director of research at Conning, said the capital access afforded public companies clearly gives them an advantage in pursuing growth objectives.
"But the mission of mutuals is decidedly different than that of stock companies," Mr. Christiansen said. "Our study found the differences in geography, legal systems, lines of business concentration and risk tolerance define the growth opportunities for mutual and stock investors. Mutuals grow to meet the needs, while stock companies need to grow to survive."
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