Shooting way up to 90th place on the Fortune 500 list wasn’t the goal of MassMutual Financial Group’s business strategy—it was a result of it. Despite its 154-year history of conservatism, the Springfield, Mass.-based Massachusetts Mutual Life Insurance Company (MassMutual) has been able to incorporate innovation and diversification to grow into a global company with a 2004 premium of approximately $18 billion.

MassMutual has seen exponential growth in recent years. For instance, 2004 saw a 14% growth in assets under management, a 35% increase in sales, and a 17% rise in premiums and other deposits. Chairman, President, and CEO Robert O’Connell gives credit to the combination of a strengthening economy and MassMutual’s talent for having a presence in all key aspects of the business. “We are in such institutional and retail businesses as insurance, mutual funds, and annuities. Not all of them are likely to be strong at the same time, but whichever ones are, we are likely to be there,” he said.

Acquiring the best
In offering a variety of insurance, retirement, and investment services, MassMutual enjoys long-term financial stability and excellent financial strength ratings. Its wide range of products—everything from trusts to short-term investments—allows it to weather economic swings. “We have products that work well in high- and low-interest rate environments,” O’Connell said. For instance, a mutual fund that focuses on growth can work well when interest rates are low, while a fixed annuity may be a good choice when interest rates are high.

MassMutual strives for diversification not only in its products and services, but also in geographic location. Strategic growth and acquisitions have led to offices in Japan, Hong Kong, Taiwan, the UK, and Chile, among other regions, as well as 1,500-plus US offices. In addition to its myriad products, global locations offer additional sources of revenue that mitigate the effects of a potentially volatile US market. For instance, in 2004, MassMutual International’s sales grew by nearly 500%, and its international division reached record levels of premiums and assets under management.

And MassMutual is continuing to shop, O’Connell said. “We have an ongoing interest in acquisitions with a special emphasis on finding a partnership with a major US life insurance carrier,” he said, noting that the company continues to keep an eye out for new foreign acquisitions. Currently, MassMutual subsidiaries include OppenheimerFunds, Babson Capital Management, Cornerstone Real Estate Advisers, and MassMutual International, Inc.

Conservative but innovative
MassMutual’s impressive list of products and acquisitions would not exist without a unique culture behind it. O’Connell explained that his company’s culture is a result of blending financial discipline and conservatism with innovation. “We recognize that a company that is purely conservative can get into a lot of trouble in the modern world,” he said. “We encourage our employees to set goals for themselves to develop new products and new ideas. I insist, for instance, that each year at least one-third of our sales come from products or services that were not in existence three years earlier.”

At MassMutual, revenue doesn’t come at the expense of corporate philanthropy. In fact, in 2002, MassMutual launched a first-of-its-kind program called Life Bridge, which gives away free 10-year, $50,000 term life insurance policies to working poor families. If a parent passes away during the term of the insurance policy, the money goes into an educational trust fund for the children. “In the early going, one of the difficulties we had was persuading people it really was free, that we weren’t getting anything out of it,” O’Connell said. The company has given away $150 million of LifeBridge policies—on its way to achieving its goal of giving away $1 billion of such policies to qualifying individuals.

“What we have discovered is that people who believe most passionately in life insurance can often least afford it. Our employees developed that program and are proud of the fact that we have been a good corporate citizen,” O’Connell said.

Good corporate citizenship also means setting foot inside the political arena. MassMutual is working with the Bush administration on the The Class Action Fairness Act, which was introduced in Congress in February. The tort reform bill will help protect companies, customers, and the economy at large from frivolous lawsuits, O’Connell explained.

Rotating executives
O’Connell also strives for internal diversification. By rotating executives into new positions every few years, MassMutual can cultivate a management team that is well versed in every aspect of the business. “For a broadly diversified company like ours, it is vitally important that executives know not only their own field of expertise, but they can participate in making management decisions that involve the enterprise as a whole,” he said. “That means they should never spend their entire career in one area.”

Placing executives into new positions, often ones they know little about, tests their flexibility and creativity, O’Connell explained. “It tends to reinvigorate the company periodically by bringing in fresh thoughts to new areas,” he said. This strategy also leaves O’Connell hopeful that when he retires, his replacement will be an internal candidate who has overseen many areas of the company, therefore knowing it inside and out.

Having top-notch executives means starting out with well-trained employees who truly enjoy their jobs. To O’Connell, motivating his staff means more than just handing out bonuses—it is the exciting and passionate environment at MassMutual he takes most pride in.

“The three most important things to motivating people are to first give them challenging work worthy of their skills. Second is to create a passionate business environment where they also have fun and where new ideas are always encouraged. Only then do compensation and bonuses come into play,” he said.