Property-casualty mutual firms are well positioned to competeagainst their publicly traded counterparts as insurance pricescontinue to slide, a research firm reports.

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

Conning said mutuals are likely to face increased competitionover the next few years due to overall capital buildup in theinsurance industry.

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

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

The Conning study identifies the strategic differences betweenstock and mutual companies in the industry and analyzes how thatmay affect the softening cycle.

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

However, Conning said mutuals need to maintain capital acrossthe price cycle in order to maintain favor with regulators andrating agencies when prices go up. “Stock companies have a greaterability to access capital, develop structured incentives formanagement, focus on profitability as a primary mission, and usestock and debt to finance acquisitions.”

The study noted pressures on stock companies to maintainconstant growth and profitability compared with mutuals that “maybe opportunistic based on economic and competitive conditions.”

Mr. Christiansen said if the country goes into recession, pricesoftening may be made worse “and a return to catastrophes andincreasing casualty frequency may challenge capital resources ofsome companies.”

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

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