After years of playing second banana to their publicly traded counterparts, suddenly mutual life insurers are cool.

The mutuals are looking good, having weathered the market downturn better than publicly traded life insurers because of what many once called a "stodgy" view of capital, products, and distribution, according to a report published Friday by Moody's Investors Service.

In the boom years earlier this decade, "mutual company managements were known to proudly proclaim that their company is 'run like a stock company,'" wrote Arthur Fliegelman, the report's author. When the stock market began its slide, mutual insurers tended to have more capital and less exposure to volatility.

Until the early part of this decade, U.S. life insurance assets were about evenly split between stockholder owned insurers and mutuals, which are owned by their policyholders. Then came the demutualization of MetLife Inc. (MET), Prudential Financial Inc. (PRU), Principal Financial Group Inc. (PFG), John Hancock Financial Services Inc., which merged with Manulife Financial Corp. (MFC), Phoenix Cos. Inc. (PNX) and others, as companies sought capital in order to boost growth and earnings, the report said.

In robust markets, stockholder insurers have tended to outperform mutuals, but during the market downturn of the last year "the mutual companies - compared with their stockholder-owned peers - have displayed business and financial characteristics that have enabled them to better protect and maintain their robust creditworthiness," Fliegelman said.

Mutuals have been downgraded less than stockholder companies in the last year, and when mutual downgrades occur, they are generally less severe, Moody's said.

Moody's lists five reasons for mutuals' better performance: stronger capitalization, less risky business focus and products, less "headline risk," less dependence on capital markets and greater alignment of owners and creditors and policyholders.

Among the largest insurers, only mutual life insurers have maintained Moody's highest triple-A rating throughout the past year. They include TIAA-CREF Group, a not-for-profit stock company, New York Life Group, and Northwestern Mutual Group.

-By Lavonne Kuykendall, Dow Jones Newswires; (312) 750 4141; lavonne.kuykendall@dowjones.com