The factors that seemed a decade ago to be weaknesses for mutual life insurers appear now to be strengths, according to a new report.

In the late 1990s, as a number of prominent U.S. mutual life insurers demutualized because of their inability to access the capital markets.
But with the recession, many mutual insurers have fared the downturn far better than their publicly held counterparts, according to Standard & Poor’s.

“Mutual companies have a distinct competitive advantage relative to public companies because they can profitably issue participating life insurance products,” according to the analysis. “Participating products pass excess investment earnings back to the policyholder through dividends. In times of financial stress, the mutual insurer can lower or even suspend the dividends, which can go a long way toward stabilizing capital. Mutual companies, especially larger ones, have captive distribution systems, which consistently sell high-quality life insurance with very high persistency, even in challenging economic cycles.”

The analysis said that mid-sized mutual companies lack pressure to merge because they have such a “strong position” in a regional or niche-product market, as well as strong capital positions and minimal activism from their owners/policyholders.

“Consolidation among mutual insurers has been glacially slow, as larger companies would rather build capabilities than acquire them,” the analysis said.