P-C Stock, Mutual Insurers' Performances Differ

NU Online News Service, Aug. 24, 11:45 a.m.EDT?Large stock property-casualty companies outperformedtheir mutual counterparts in recent years, according to a newConning 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 greateroversight at a public company brought on by shareholder pressure aswell as reporting requirements led overall to the greaterperformance.

In addition, in the time period studied, the soft market thatwas quickly hardening had a greater impact at first on commerciallines, which are for the most part offered by stock companies.Personal lines coverage is more the province of the big mutualcompanies such as State Farm and Nationwide.

Moreover, the poor performance of the homeowners lines over thepast few years would skew the results more in favor of the stockcompanies, Ms. Riley added.

She noted that the smaller mutuals "tended to outperform thesmaller stock insurers." Mutual companies have tended to have agreater freedom to invest in common stocks over the years, whichcould have skewed their investment results.

"A lot of the public company's investment policies arereserve-based so they can't be risky," Ms. Riley said.

Stephan Christiansen, director of research at Conning, said thecapital access afforded public companies clearly gives them anadvantage in pursuing growth objectives.

"But the mission of mutuals is decidedly different than that ofstock companies," Mr. Christiansen said. "Our study found thedifferences in geography, legal systems, lines of businessconcentration and risk tolerance define the growth opportunitiesfor mutual and stock investors. Mutuals grow to meet the needs,while stock companies need to grow to survive."