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ORLANDO, Fla. -- Structural options such as demutualization won't spell the end of mutual insurers, but they are alternatives many mutuals should consider, consultants and attorneys say.

A panel at the National Assn. of Mutual Insurance Cos.' 103rd annual convention last month in Orlando gave a glimpse into the findings of a NAMIC task force on mutual company structures and a new monograph the association commissioned that outlines possible capital enhancement strategies.

Steven C. Elliott, NAMIC's vp for regulatory affairs, noted that the task force's findings "do not conclude that mutuality is obsolete."

In studying demutualization, the perspective the task force has sought to achieve "is that of mutual property/casualty executives considering the best interests of their policyholders," according to Mr. Elliott.

In addition, a changing environment makes it essential that mutual companies consider all options, said James W. Schacht, national director of insurance regulatory practice for PricewaterhouseCoopers L.L.P in Chicago. At the meeting, Mr. Schacht discussed some of the contents of the upcoming monograph, prepared for NAMIC by PricewaterhouseCoopers and the LeBoeuf, Lamb, Green & MacRae law firm.

"Not only is the financial services industry, of which you are a part, changing, the world is changing," Mr. Schacht said. And, in the process, insurance customers are changing, he said. "They're buying smarter; they're buying less; in some cases, they're not buying at all."

"Certainly, another factor that's going on in the insurance industry is how mature the U.S. insurance industry and insurance markets are," Mr. Schacht said, suggesting the growth that U.S. insurers experienced in the post-World War II and Cold War eras won't be repeated.

In that kind of environment, the various capital enhancement options before mutual insurance companies, such as demutualization, surplus notes, affiliation and the formation of downstream holding companies, "are really tools to establish a business strategy or plan."

"The market that you're in is intensely competitive. It's changing radically, and it's changing overnight," agreed Peter K. Demmerle, head of the property/casualty practice for LeBoeuf, Lamb in New York.

Mr. Demmerle noted that options such as joint ventures or the creation of downstream holding companies can be undertaken with less expense or effort than such steps as merging with other companies or demutualizing.

Whatever the option selected, Mr. Schacht emphasized that any capital enhancement technique should be part of a broader strategic plan for the company.

Such a plan, he said, must begin with an evaluation of the company and its attributes, a determination of exactly what the company seeks to accomplish, and an identification of what changes might be needed in distribution systems, product offerings or operations.

"All of these various factors and options need to be evaluated," he said. And the process should include an evaluation of competitors' abilities and characteristics.

Further, a strategic plan should be a dynamic instrument, Mr. Schacht said, continually subject to updating and review.

Another critical element in coping with the changing business environment is ensuring that the mutual company's board is prepared to address those changes, said Karen Balaban, special counsel at the Saul, Ewing, Remick & Saul L.L.P. law firm in Harrisburg, Pa.

"In order to get a culture and a mentality that will look to the future, you have to start with your directors," she said.

That includes taking a hard look at directors' competencies. "I think you'll want to look for some strong business attributes," Ms. Balaban said.

"I'm not saying, 'Dump your board of directors,' " she said, but mutual company executives do have a responsibility to educate their directors so they can deal with the current business environment.

"How can you make a change if you don't truly understand what the options are, what it would mean to you?" Ms. Balaban asked.

Mutual executives also should use their regulators as resources in developing capital enhancement strategies, Ms. Balaban suggested.

"Talk to your regulator. Many times they'll allow you to sit down and discuss on an informal basis some of the options that are before you," she said.

Mr. Demmerle agreed on the value of building relationships with regulators and discussing options with them. "I don't think you should ever be in a position where you're going to your regulator with a plan out of the blue," he said.

He added that mutual executives considering a capital enhancement strategy should be prepared to make a case for just why the additional capital is needed.