2017: Growing Pains at Property-Casualty Mutuals - Strategies for Action

Price : $1,750.00

Property-casualty mutual insurers confront rising pressures to grow, including high technology costs and expense ratios, demographic changes, the prospect for decline in the private passenger automobile insurance market, and more. Yet mutual insurers face more and different obstacles to achieving growth than do stock insurers. This study analyzes the growth pressures facing mutuals and describes strategies undertaken by mutuals to position themselves for future success through both structural and nonstructural change initiatives.

1. Introduction 

2. Executive Summary   

3. Mutual Insurers Facing Pressures   

  • The Technology Challenge for Mutuals
  • The Expense Challenge
  • Changing Socioeconomic and Demographic Realities
  • Winning the War for Talent
  • The Future of Personal Automobile Insurance
  • Mutual Insurers Respond to the Pressures
  • Opportunities for Mutuals

4. Nonstructural Change Initiatives        

  • Operational Improvement
  • Affiliation
  • Surplus Notes
  • Reinsurance Strategies

5. Structural Change Options for Mutuals 

  • Merger
  • Demutualization
  • Mutual Holding Company Formation

6. Moving Ahead
  • Responding to the Pressures
  • Execution Trumps Strategy

A. Mutual Insurance Transaction Database
B. Mutual Insurer Expense Ratios, 2016
C. The Mutual Insurance Universe
D. Mutual Insurance Glossary
E. Mutual Insurer Surplus Note Issuance


Property-casualty insurers organized as mutuals confront rising pressures to grow. Sources of the pressure include the need to keep up with insurance technology advances, high expense ratios, demographic changes, the war for talent, and the prospects for future shrinkage in the private passenger automobile insurance market. The combined impact of these forces is leading mutual insurer executives increasingly to focus on growth.

Mutual insurers face more obstacles to achieving growth than do stock insurers. Barriers to growth are rooted in the mutual form, which precludes mutuals from straightforward capital-raising in equity or debt markets. In recent years, many mutuals have embarked on a variety of nonstructural and structural initiatives to support growth. This study analyzes the pressures facing mutuals and describes current and past activity by mutuals to position themselves for future success through various nonstructural and structural change initiatives.

The core mission of serving policyholders has empowered property-casualty mutuals to adapt to the times, enabling them to stay relevant amid members’ developing needs and thrive through close to three centuries of transformational change in the U.S. economy. This study sheds light on how mutuals may confront the current unfolding chapter of their existence and continue to fulfill their member-centric mission.

The study reveals that mutual insurers are no strangers to change. There have been close to 300 transactions involving mutual insurers since the 1980s. In addition to structural changes to the mutual form of organization, including demutualization, mergers and acquisitions, and mutual holding company formations, our study examines the record of insurers that have pursued less transformational nonstructural initiatives to boost capital or enhance growth. These include affiliations, surplus note issuance, product line diversification, geographic expansion, and various forms of operational improvement.

As a group, property-casualty mutuals are currently in strong operating positions, with low leverage, ample invested assets, favorable underwriting performance, and high financial strength ratings. The good results have been supported in part by lower-than-average natural catastrophe losses in recent years. Nevertheless, we have found that C- suite mutual insurance leadership is actively seeking to identify new sources of revenue and growth. Growth is perceived as a proactive response to the imperative to compete with other insurers that may be ahead in the never-ending technology arms race, with other forms of innovation, and with a scale advantage.

Years of “normal” and above-normal catastrophe losses will return, as evidenced by the flurry of third-quarter 2017 events, and other new challenges will emerge. How might mutual insurer executives position their companies to be equipped with the staff and services needed to face the risk profiles and client expectations five to ten years hence? This study explores this important question based on a review of current strategies pursued at leading mutual insurers, analysis of the history of transactions and initiatives undertaken by mutuals, and discussions with mutual C-suite executives, brokers, and bankers serving mutual insurer customers.