Property-casualty mutual firms are well positioned to compete against their publicly traded counterparts as insurance prices continue to slide, a research firm reports.

The finding was made by Hartford, Conn.-based Conning Research & Consulting in a study titled “Property-Casualty Mutuals Managing Through the Softening Cycle.”

Conning said mutuals are likely to face increased competition over the next few years due to overall capital buildup in the insurance industry.

Stephan Christiansen, director of research at Conning Research, noted in a statement that property-casualty insurers are coming off five years of strong operating performance and capital buildup.

“While mutual insurers should be happy about that strong foundation, stock companies may be particularly pressured to seek profitable revenue growth to maintain an acceptable return on capital. That can lead to increasing competition for new business, which in turn can pressure pricing,” he said.

The Conning study identifies the strategic differences between stock and mutual companies in the industry and analyzes how that may affect the softening cycle.

Mutuals, the firm found, have several structural advantages, including “a perceived closer alignment of interests with policyholders and their ability to take a longer-term view on growth and the use of capital.”

However, Conning said mutuals need to maintain capital across the price cycle in order to maintain favor with regulators and rating agencies when prices go up. “Stock companies have a greater ability to access capital, develop structured incentives for management, focus on profitability as a primary mission, and use stock and debt to finance acquisitions.”

The study noted pressures on stock companies to maintain constant growth and profitability compared with mutuals that “may be opportunistic based on economic and competitive conditions.”

Mr. Christiansen said if the country goes into recession, price softening may be made worse “and a return to catastrophes and increasing casualty frequency may challenge capital resources of some companies.”

“But there is much that mutuals can do to prepare and respond. Turning more focus toward policyholder retention is the best solution for both the increased competition and the softening price cycle. In addition, anticipating future capital needs may be prudent now, while profitability is still strong.”

The report is available for purchase by calling 888-707-1177 or online at www.conningresearch.com .

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Conning Says Mutual Firms Set For Soft Market

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