Mutual insurance company

A mutual insurance company has no outside shareholders. Its owners are its eligible policyholders, who typically elect the board of directors. Profits are kept as surplus to strengthen the company or returned to owners of participating policies as dividends. Several of the largest U.S. life insurers are mutuals, including Northwestern Mutual, New York Life, MassMutual, Guardian and Penn Mutual.

The structure shapes how the company operates. Without shareholders expecting quarterly earnings growth, mutuals often emphasize long-term financial strength and participating whole life. Say, hypothetically, a mutual's actual mortality, investment and expense results beat its pricing assumptions: the board can declare a dividend that policyholders take as cash, use to reduce premiums or apply to buy paid-up additions. Dividends aren't guaranteed and are declared each year.

A mutual can't raise capital by selling stock, which can limit growth or acquisitions. Some mutuals have converted to stock companies through demutualization: when a mutual insurer goes public, or reorganized under a mutual holding company. Ownership type alone doesn't mean better or worse value, so compare actual products, guarantees, dividend history and financial strength. See mutual vs stock life insurance companies and whole life dividends: how participating policies pay.