History Lesson: Five MassMutual Stories

    History Lesson: Five MassMutual Stories

    By Allen Wastler

    It’s MassMutual’s anniversary this month. At 165 years old, the company has a lot of history to contemplate. We thought we’d point out some more notable moments that we’re proud of.

    Cash During the Great Depression

    People can borrow against the cash value in their permanent life  insurance policies and receive the loans in cash. That was pretty important during times when banks were going on “holidays” and not letting people have access to their accounts. It was particularly acute in the Detroit area, where the state had specific fiscal problems with declines in the auto and mining industries.

    So MassMutual sent $300,000 in cash to its agency in Detroit (along with deputizing agents as deputy sheriffs so they could carry guns and provide security). It also arranged for another $100,000 cash payment to a coal dealer so he could get supplies to freezing customers. You can read more about it here: How Insurance Money Helped in Hard, Cold Times.

    The Great New England Flood of 1936

    On March 11, 1936, it started raining … and didn’t stop for two weeks. The result was overflowing rivers and busted dams, resulting in flooding that killed as many as 200 people and left thousands homeless.

    Flooding in the Springfield, Massachusetts, area alone is believed to have displaced as many as 20,000 people. MassMutual used the facilities and equipment at its company headquarters in the city to establish a feeding center for refugees. The company, working with the Red Cross through the crisis, served between 1,100 and 1,300 meals a day, according to a company history, well beyond the 500 meals a day it originally planned for.1

    The company stepped up to help residents again in 2011, when a tornado ripped through the Springfield area on June 1, leaving three dead and at least 200 people injured. MassMutual donated $1.6 million to rebuilding efforts and employees participated in various restoration projects.

    Restoring the Chrysler Building

    Are you familiar with that iconic skyscraper so discernible on the New York City skyline? It had fallen on pretty hard times in the mid-1970s. The Chrysler Building, considered a monument of the Art Deco movement, had passed through a number of owners and was suffering from deferred maintenance. It was 58 percent occupied.2

    MassMutual bought the Chrysler Building in a foreclosure proceeding in 1975.

    ''Many people felt that the city had lost its image and significance as the location for major corporations,'' Edward J. Kulik, the MassMutual senior vice president who spearheaded the restoration project, told The New York Times. “We did not share this view.''

    MassMutual spent $58 million refurbishing the building, rehabilitating the marble and granite lobby, restoring the stainless steel eagles and gargoyles, and brushing up the spire. When it sold the building in 1979, 96 percent of its space had found tenants.3

    The Seuss Connection

    MassMutual is headquartered in Springfield, Massachusetts, in a formidable Georgian-style building erected in 1927.

    The site where it was built was once a brewery run by Theodor Robert Geisel, father of Theodor Seuss Geisel, better known as Dr. Seuss.

    The brewery had been started by Dr. Seuss’ grandfather, an immigrant from Germany, and sold in 1899 to Springfield Breweries. Theodor Robert continued to work at the operation and became president in 1919, when the brewery had to shut down due to Prohibition.

    Ironically, one of Dr. Seuss’ first jobs as an illustrator would be for Narragansett Brewing Co.4

    That Tontine Thing

    OK, this last one may be a little esoteric. And it’s not so much about what MassMutual did, but didn’t do. But if you are a financial history geek, it’s pretty interesting.

    In the late 1800s the insurance industry was seeing something of a “tontine” craze.

    Tontine insurance was a variation of a scheme developed in the 17th century by a count as a way for Louis XIV to raise money. Essentially individuals invested in a group “tontine” and received annual dividends. As each investor died, his or her share is reapportioned among the remaining investors. So as investors diminished, each individual’s annual dividend grew. But the original capital was never returned (which is why various governments from Louis XIV on used tontine programs to raise cash).

    Tontine life insurance (also called deferred dividend policies) had death benefits, like typical insurance. But no dividends, return premium, or surrender value was offered for a so-called “tontine period,” which could range from five to 20 years. And if an investor failed to keep up the premiums or was late on a payment, he or she forfeited the policy entirely, without the return of any cash value.

    But tontine policies had attraction. After that tontine period, the policy owner could receive dividends. And the dividends would be based not only on the investor’s premium returns, but also on the returns of anyone in the pool who died or let their policies lapse.

    Tontine policies allowed insurance companies to hoard cash, since they didn’t have to pay dividends for long periods of time and didn’t have to return the cash value of lapsed policies. But some in the business found them immoral.

    “The basic premise was seen as directly profiting from other people’s deaths and the inclusion of lapsed policy premiums in the tontine pool was seen as directly profiting from other people’s economic misfortunes,” noted one historian.5

    MassMutual was a major critic of tontine policies and did not offer them. In fact, one MassMutual executive is believed to have been behind various attacks and lampoons of such policies in a local newspaper (under the pseudonym “Samuel Sharkey”).

    The popularity of tontine policies died around the turn of the century. The returns weren’t as great as originally advertised, thanks to some skimming and self-dealing by various companies that dealt in them. After some investigations, they were outlawed by New York State, home to the primary insurance companies dealing in them, in 1906.

    That’s just a few items from MassMutual’s 165-year history. Want more?

    The MassMutual Timeline

    MassMutual’s First President…An Executioner?

    The Father of American Life Insurance

    1 Richard Hooker, “A Century of Service: The Massachusetts Mutual Story,” 1951.

    2 Sarasota Herald-Tribune, “Chrysler Building Has Look of the Phoenix,” March 19, 1978.

    3 The New York Times, “Edward J. Kulik Dies at 76; Revived Chrysler Building,” Dec. 31, 2002.

    4 Narragansett Brewing Co., “Who Knew Dr. Seuss could Brew,” Dec. 17, 2009.

    5 Kent McKeever, “A Short History of Tontines,” Fordham Journal of Corporate and Financial Law, 2009.