What is a stock company?

A stock company is characterized by its capital structure, which is divided into shares that can be bought and sold by investors. These shareholders own the company and have a claim on its profits in the form of dividends, as well as a voice in company decisions, typically exercised through shareholder voting rights. The ability to raise capital from public markets by issuing shares is a fundamental aspect of how stock companies operate, allowing them to fund their operations, grow, and meet regulatory capital requirements.

In contrast, a mutual company is owned by its policyholders rather than shareholders, meaning that profits are typically returned to policyholders rather than distributed as dividends to shareholders. A government-owned insurance provider is funded and operated by the government, often serving specific public interests, rather than having shareholders per se. Lastly, an insurance firm with no shareholders would not fit the definition of a stock company since a defining feature of that type of company is the presence of shareholders who own its capital. These distinctions are essential for understanding the different business models within the insurance industry.