Which of the following is NOT a characteristic of mutual companies?

Mutual companies are unique entities in the insurance industry, primarily because they are owned by their policyholders rather than stockholders. This distinction is crucial; policyholders invest in the company through their premiums and have a say in the company's governance, aligning the company's interests with those of its clients.

The characteristics of mutual companies include paying out dividends to policyholders, issuing participating policies, and returning excess premiums. When a mutual company has a profitable year, it may distribute those profits in the form of dividends to policyholders, rewarding them for their participation in the mutual structure. Additionally, participating policies are those that allow policyholders to share in the company’s profits, which is a hallmark of mutual companies.

In contrast, the structure in which a company is owned by stockholders is affiliated with stock companies, not mutual ones. Therefore, the ownership by stockholders is not a characteristic of mutual companies, making it the correct answer. Understanding this distinction helps clarify the fundamental operational differences between mutual and stock insurance companies.