Which of the following describes dividends from a mutual insurer?

Dividends from a mutual insurer are characterized as a distribution of profits to policyholders. This means that when a mutual insurer performs well financially, it may choose to share its excess earnings with its policyholders, as opposed to shareholders in a stock company. These dividends are not guaranteed; rather, they are contingent upon the insurer's performance in terms of premiums collected and claims paid. These distributions serve to reward policyholders for their loyalty and participation in the mutual insurance structure.

Mutual insurers operate under the principle that policyholders are both customers and owners, which differentiates their profit distribution compared to that of stock insurers, which disburse profits to shareholders. Therefore, the accurate understanding of dividends within mutual insurance emphasizes the rewarding of policyholders through profit sharing rather than mechanisms like rebates or incentives aimed at attracting new policyholders or making mandatory returns to the insurer.