NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Organizational Form and Insurance Company Performance: Stocks versus Mutuals

Patricia Born, William M. Gentry, W. Kip Viscusi, Richard J. Zeckhauser

NBER Working Paper No. 5246
Issued in September 1995
NBER Program(s):Corporate Finance, Industrial Organization

One unusual feature of the U.S. property-casualty insurance industry is the coexistence of stock and mutual companies. This paper explores the performance of these forms in the industry through a dynamic assessment of how mutual and stock insurance companies respond to differences in their underwriting environment. Agency theories suggest that the stock company may be more 'opportunistic' and less obligated to their insureds than mutuals. This article assesses the responses by stock and mutual firms to changes in the underwriting environment from 1984 to 1991, using measures of individual firms' performance, by state and by line, in eight different lines of insurance. Stock companies are more likely than mutuals to reduce their business in unprofitable situations, and have higher losses than mutuals for a given amount of premiums.

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Document Object Identifier (DOI): 10.3386/w5246

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