What Matters Most 2011 ANNUAL AND CORPORATE RESPONSIBILITY REPORT

Transcription

1 What Matters Most 2011 ANNUAL AND CORPORATE RESPONSIBILITY REPORT

2 About this report. This report combines the annual business review and the Corporate Responsibility report of the Massachusetts Mutual Life Insurance Company (MassMutual). The report offers our perspective on MassMutual, our performance and what matters most to us. As this report explains in detail, as a mutual company operating for the benefit of our policyholders, what matters most to us is helping protect those who matter most to you. For an interactive version of this report, including our consolidated statutory financial statements, visit MassMutual.com/WhatMattersMost. Chairman s Letter 2 Performance Matters 8 Knowledge Matters 20 Community Matters 24 Culture Matters 30 Planet Matters 34 Board of Directors 36 Senior Management 37 Online Resources 38

3 You Do. MassMutual is operated for the benefit of our policyholders. The decisions we make are based on our mutual interests. Simply put: What matters most to you, matters most to us.

4 We Make Decisions Based on Our Policyholders Interests 2 MassMutual 2011 Annual Report

5 Chairman s Letter To Our Policyholders and Clients, At MassMutual, where we celebrated our 160th anniversary in 2011, our priorities are as clear today as they were at our founding. As a mutual company, we are run for the benefit of our participating policyholders, and their long-term interests come first. No stockholders, no quarterly analyst projections to meet. Instead, we focus on long-term strength and stability to help you meet your goals. For MassMutual, that s what matters most. Strength & Stability Matters Perhaps the most obvious measure of our success, one that every employee and MassMutual financial professional can be proud of, is that more than three million people relied on us in 2011 to help achieve their financial goals and help protect themselves and their loved ones against life s financial risks. And we delivered, paying more than $2.6 billion in insurance and annuity benefits last year to help families weather difficulty and loss, contribute to a secure retirement or manage a business transition. Our financial strength and sound decision-making have enabled us to play this critical role in the lives of millions of Americans since And I m pleased to report that, despite the uncertain economic climate last year, MassMutual continued its 160-year tradition of strength, stability and performance in We finished the year with record levels of surplus and total adjusted capital, two key measures of the financial cushion that can provide you with confidence that we ll be here when you need us most. And we maintained some of the highest financial strength ratings of any company in any industry. People continue to value our strength and benefit from it. Sales of our core product, whole life insurance, grew to record levels for the sixth straight year, and our institutional retirement business surpassed last year s sales record by 13 percent. As a mutual company, we can share the benefits of our strong performance directly with participating policyholders and we ll be paying an estimated $1.33 billion in dividends to more than a million eligible participating policyholders in 2012, an increase of more than $100 million from the prior year. While dividends are not guaranteed, we have paid dividends consistently since the 1860s. Roger W. Crandall Chairman, President and Chief Executive Officer MassMutual 2011 Annual Report 3

6 Current market conditions, including the extremely low interest-rate environment, are difficult. But we ve weathered storms before, and we are taking prudent steps to help ensure we remain well positioned for future challenges. In addition to appropriate product pricing and design and careful cost management, we continue to invest in the future. For example, we ve enhanced our already robust risk management efforts, continuing to advance our investment hedging strategies and asset-liability matching program. MassMutual continued its 160-year tradition of strength, stability and performance in Our investment philosophy also plays a key role in stabilizing our performance under both good and bad economic conditions, and has helped us earn steady, long-term returns that support our ability to pay consistent dividends. In addition to diversifying our investments, we get to know the industries and companies we invest in from the ground up. That includes traditional investments, in capital markets for example, as well as strategic investments in international insurance businesses, and asset managers OppenheimerFunds, Babson Capital and Baring Asset Management. These subsidiaries generate diversified earnings that have helped us pay higher dividends and grow capital at a faster rate than some of our competitors with a less diversified strategic footprint. People Matter There is no doubt that overall economic conditions remain tough for millions of American individuals, families and businesses. Unemployment is stubbornly high, uncertainty seems to be the new normal, interest rates are at historic lows, and in 2011 the U.S. government borrowed about 37 cents of every dollar it spent. Americans from all walks of life, from those facing retirement to those just beginning their careers, are seriously concerned about their financial security. Put all these factors together and it s clear people need help with their finances more than ever. That s why we continue to build and support one of the industry s strongest nationwide networks of more than 5,200 financial professionals as of year-end These are people who get to know your needs and help you create the right strategy for protecting what matters most to you. It s natural for people to seek financial guidance from someone whose judgment and knowledge they trust. We are that resource. It s also why we offer proven solutions that can help meet a range of key financial needs regardless of the economic environment. Products like whole life insurance, which builds value throughout your life and can provide peace of mind for your family and business after you die. Disability income insurance, which helps protect your ability to provide for yourself and your family if you are too sick or injured to work for an extended period of time. Long-term care insurance, which helps protect your assets and preserve your independence. And annuities and retirement plans that can provide income in retirement. 4 MassMutual 2011 Annual Report

7 Chairman s Letter continued Combine trusted guidance with proven products and you get holistic financial solutions for your individual needs. A great example is the new Chartered Special Needs Consultant (ChSNC ) designation, developed by MassMutual in conjunction with The American College. Financial professionals who earn the ChSNC designation work with families taking care of individuals with special needs, helping them with their financial strategy to secure their loved one s future. Currently available only to MassMutual financial professionals who meet rigorous prerequisites, the ChSNC designation will be available industry wide in 2013, and is expected to quickly become the standard for special-needs financial training. To continue earning your confidence once you become a client, we ve maintained our strong focus on customer service. I m proud that for the third consecutive year, MassMutual has been recognized by ContactCenterWorld as one of the top performers in delivering outstanding service to our clients. Our retirement and insurance call centers earned a combined silver award, ranking second in the entire Americas region. More broadly, we re constantly developing new tools and programs to help people understand insurance and retirement needs and solutions. Those efforts include using social media to explain Why Life? and make life insurance a little less daunting, a series of short on-the-street conversations around Generation Y attitudes toward retirement, and an analysis tool called PlanSmart SM that helps companies assess how well their plans are doing at preparing employees for retirement. As new tools and communication channels develop, you ll see us continue to use them to help you better understand and address your financial needs. A Plan for the Future Ramon s wife and brother-in-law had a business in south Texas for more than 25 years, employing two generations of family. A MassMutual financial professional helped them implement a strategy to help ensure their business would pass to a third generation in case one of the founders passed away prematurely. When Ramon s brother-in-law died unexpectedly several years later, the MassMutual benefits helped keep the business in the family. To learn more, visit MassMutual.com/WhatMattersMost. Inclusion Matters Building on our strong foundation, MassMutual continues to evolve and adapt. And as U.S. demographics shift, we ve made a strong commitment to diversity and inclusion in the market and in our workforce. For example, we have commissioned groundbreaking research over the past several years among business owners, with a special focus on women and multicultural business owners, and redesigned our educational materials and tools based on what we learned. At the same time, we have doubled our number of multicultural financial professionals across the country over the last three years. We ve launched initiatives with minority business and professional associations and many of our General Agencies in cities across the country are working in various multicultural communities. As a result, our customer base is becoming increasingly diverse. MassMutual 2011 Annual Report 5

8 Of course, one of the most powerful ways to understand the needs of an increasingly diverse population is to ensure that our own workforce better reflects the populations we serve. That commitment begins with our board of directors: 40 percent of our directors are now either women or people of color, putting us well ahead of the Fortune 500 average of approximately 25 percent. Why does that matter? A 2011 study by Catalyst Group found that major companies with three or more female directors achieved significantly better financial results than those with none. And from experience, we ve found that when a diverse team sits down to tackle a problem, the group will propose solutions that might not otherwise have surfaced. When you embed many different approaches into the decision-making process, you typically end up with a much better decision. To help those attitudes gain traction throughout the company, we have developed and nurtured employee resource groups that facilitate networking for employees from diverse backgrounds, and serve as valuable business resources to the company for recruiting and market strategy development. With the many changes we ve made over the past several years to instill a broader sense of inclusion into the fabric of our company, I m pleased that DiversityInc has included us on its Noteworthy 25 list, recognizing our potential to make its list of the top 50 companies for diversity management. 1-on-1 Guidance Responsibility Matters With more than 3 million clients, it s tough to generalize. But one thing I think MassMutual shares with our customers is a sense of responsibility. You ll see it in the way we manage our business. From our long-term investment philosophy and riskmanagement planning to the ethics and integrity we bring to daily business decisions, we hold ourselves to the same high standards that have brought us this far. Personalized guidance from a trusted MassMutual financial professional like Judy Luddy 1 (right) can help people prepare for a wide variety of insurance needs. In her more than 30 years in the business, Judy has worked closely with many clients like Christine, whom she has helped with both business needs and personal financial goals. Judy s insight, careful guidance and thorough industry knowledge has helped me to provide protection for my employees, extra security for my husband, and now a legacy for our three beautiful granddaughters. And you ll see it in the way we leverage our resources and expertise for the greater good. One simple but important example: In 2011, MassMutual was awarded LEED Silver certification for Existing Buildings at our Springfield headquarters, a strong validation of MassMutual s commitment to the environment. The work doesn t stop there as we continue to do our part for the environment by making more improvements to our facilities with energy-saving mechanical systems, installing additional solar panels and offering electric vehicle docking stations for our employees. 1 Judy Luddy is an insurance representative of Massachusetts Mutual Life Insurance Company. She is licensed to offer insurance products and services in AR, CA, CT, FL, ME, MA, NY and SC (CA lic. #0C10273). 6 MassMutual 2011 Annual Report

9 Chairman s Letter continued We also increased corporate giving in 2011, supporting local communities across the country, targeting both education and community vitality. And in a year rocked by global natural disasters, we used our strength to help others. We donated to relief efforts for the tsunami in Japan, catastrophic flooding in Tennessee, and New England s first major tornado in decades, which caused massive destruction within sight of our corporate offices. I was proud that MassMutual was able to provide $1.6 million in financial assistance toward rebuilding affected areas of our home office community, but it was the outpouring of on-the-ground help from our employees for each other and those in the communities around us that demonstrated the strength of the MassMutual spirit. This spirit of helping others stems from the generosity of our employees, who dedicated more than 13,000 hours in 2011 to volunteer efforts such as Junior Achievement, the United Way and Habitat for Humanity, as well as our Career Pathways programs, which prepare students to succeed in school, aspire to college and pursue careers in our industry. This commitment extends to the local communities where our financial professionals work and live. For example, we provided nearly $1.2 million in scholarships to 188 students nationwide who have an interest in pursuing careers in the insurance and financial services industry. Our employees dedicated more than 13,000 hours in 2011 to volunteer efforts. Many other community partnerships, from longstanding relationships with the local United Way and American Red Cross chapters and local public schools to timely gifts like our $3 million commitment to help fund major upgrades at a local hospital, stand as reminders of our deep-rooted commitment to our city and region. As important as those efforts can be for those we re privileged to help, they re just as important for us, as a reflection of who we are and what we value. Confidence Matters For 160 years, MassMutual has proven again and again that you re making a good decision to include us as part maybe even the foundation of your overall financial strategy. You can count on us to continue focusing on the long-term financial strength and stability you need to protect what matters most to you. Because that s what matters most to us. Sincerely, Roger W. Crandall Chairman, President and Chief Executive Officer MassMutual 2011 Annual Report 7

10 Performance Matters Those policies helped my parents take care of me, and they gave me all of these amazing opportunities. I have been fortunate to enjoy the benefits of our life insurance while both my mom and dad are still alive. A family of MassMutual policyholders: Sandy and Norm Page used the cash value 1 in their MassMutual life insurance policies to pay for medical expenses and other special needs for their son Adam, born with spina bifada in Despite enormous challenges, Adam has become a world champion sled hockey player (inset). And in 2011, he became a policyholder. Adam Page, Lancaster, N.Y., Paralympic gold medalist 1 Access to cash values through borrowing or partial surrenders will reduce the policy s cash value 8 and death MassMutual benefit, increase 2011 the Annual chance the Report policy will lapse and may result in a tax liability if the policy terminates before the death of the insured.

11 Performance Matters Building on Our Strengths A conversation with Michael Rollings, Executive Vice President and Chief Financial Officer Q: How would you summarize MassMutual s 2011 financial results? A: 2011 was a year of volatile market conditions, a sluggish economy, and continued low interest rates. However, the strong operating fundamentals of our core businesses and our financial strength allowed us to remain focused on providing high dividends, trusted financial guidance and excellent service to our policyholders. In addition, our major subsidiaries including OppenheimerFunds, Baring Asset Management, Babson Capital Management and its subsidiary Cornerstone Real Estate Advisers, along with our international insurance businesses were also important contributors to the growth and strength of MassMutual. They provided additional earnings and capital growth that benefited our participating policyholders. Q: How profitable was MassMutual in 2011? A: We had solid profitability in 2011 with statutory net gain from operations of $686 million and net income of $459 million. While these amounts were lower than our 2010 results, the decrease was largely due to higher variable annuity reserves for product guarantees resulting from lower long-term interest rates. Reserves support our long-term financial strength and security, bolstering our ability to pay benefits far into the future. These reserve increases were largely offset by economic hedges, however the positive impact from these hedges was primarily reflected in our surplus account, rather than operating earnings. Higher net investment income, higher asset-based fees and lower operating expenses all contributed favorably to earnings in Overall, our solid profitability, combined with the protection from our economic hedges, drove the significant increase in our surplus for Q: What is surplus and why is it so important? A: Surplus is a key metric for evaluating the strength and stability of an insurance company. It represents the financial resources a company has on hand after setting aside reserves to meet projected future obligations. MassMutual has maintained a strong surplus position throughout one of the most difficult economic periods in history, increasing by 10 percent in 2011 to $11.4 billion the highest level in our history. Since 1996, we have increased surplus by an average annual rate of 10 percent, giving MassMutual the financial strength and stability our policyholders and clients expect from us. Q: What does all this mean for the future? A: Our financial performance in 2011 again validates our long-term strategy. MassMutual s financial strength continues to build with solid earnings, strong growth in capital and surplus and significant liquidity to ensure that we continue to remain well prepared to weather periods of uncertainty and volatility. Looking forward, our businesses are positioned extremely well as our insurance operations and asset management businesses provide diversified sources of growth and earnings. Overall, the consumer and institutional demand for our products and services shows that the marketplace continues to see the strength of MassMutual and the value of doing business with a mutual company. MassMutual 2011 Annual Report 9

12 Enterprise-Wide Measures 1 These metrics include the results of all businesses within the MassMutual Financial Group, including subsidiaries. $498 $355 $408 $448 $443 $460 $477 $483 $490 $504 $27 $25 $23 $23 $ Assets Under Management 2 in billions The value of funds managed by MassMutual and its subsidiaries remained strong despite volatile market conditions, an unprecedented downturn in the economy and prolonged low interest rates Worldwide Insurance in Force in billions MassMutual s wide array of products continues to resonate with clients around the world as this global measure of insurance protection has steadily increased Premium & Other Deposits in billions A measure of revenue across the MassMutual Financial Group, including both core insurance and non-insurance operations, premium and other deposits consistently exceeded $20 billion. Financial Strength Ratings A.M. Best Company Fitch Ratings Moody s Investors Service Standard & Poor s A++ Superior AA+ Very Strong Aa2 Excellent AA+ Very Strong Ratings are for Massachusetts Mutual Life Insurance Company and its subsidiaries: C.M. Life Insurance Company and MML Bay State Life Insurance Company. Ratings are as of 3/15/2012 and are subject to change. 1 The results of the discontinued operations of MassMutual Mercuries Life Insurance Co., Ltd. in Taiwan, which was sold in 2010, have been excluded from 2010 and all prior years shown. 2 Assets Under Management include assets and certain external investment funds managed by MassMutual subsidiaries, including OppenheimerFunds, Inc., Baring Asset Management Limited, Babson Capital Management LLC and its subsidiary, Cornerstone Real Estate Advisers LLC. 10 MassMutual 2011 Annual Report

13 Performance Matters Consolidated Statutory Results 3 These measures reflect the performance of the consolidated insurance operations of Massachusetts Mutual Life Insurance Company. $1,373 $1,331 $1,212 $1,209 $1,313 $10.3 $9.5 $11.0 $12.4 $13.2 $131.4 $132.9 $125.1 $141.2 $ Dividends to Policyholders in millions Total Adjusted Capital in billions Life Company Assets in billions Dividends paid in 2011 grew 9 percent over the prior year, reflecting our commitment to providing value and competitive dividends 4 to our policyholders. This commitment continues into 2012 with an estimated $1.33 billion in dividends to be paid to eligible participating policyholders. A peak in yet another measure of MassMutual s overall strength in addition to record surplus. After two years of double-digit growth, total adjusted capital grew 7 percent in 2011 against a volatile global economy. Our total assets grew 5 percent in 2011, as did our liabilities (which reached $137 billion). Our strong growth contributes to our financial strength and helps provide security for the long term. The financial information and summary financial statements provided in this report are derived from our audited consolidated financial statements, which are prepared on the statutory basis of accounting. MassMutual engages independent public accountants, KPMG LLP, to audit the fair presentation of its financial statements and disclosures, which can be obtained by written request to Massachusetts Mutual Life Insurance Company, Policyholder & Investor Relations, 1295 State Street, Springfield, MA For more information on our financials, visit MassMutual.com/Financials. Since 2000, MassMutual has been named to Fortune magazine s prestigious Fortune 500, which ranks the largest 500 domestic, U.S.-incorporated companies by total operating revenues. MassMutual ranked 101 on the 2011 Fortune 500 list. 3 These consolidated results of Massachusetts Mutual Life Insurance Company also include its U.S.-domiciled, wholly owned subsidiaries: MML Bay State Life Insurance Company and C.M. Life Insurance Company. 4 Dividends are not guaranteed. MassMutual 2011 Annual Report 11

14 Summary of Financial Position (consolidated statutory basis, in millions) December 31: Short-term investments and cash $ 1,788 $ 1,590 Bonds 58,391 54,740 Other invested assets 38,677 34,457 Total invested assets $ 98,856 $ 90,787 Other assets 2,499 3,030 Separate account assets 47,245 47,285 Total assets $ 148,600 $ 141,102 Policyholders reserves $ 78,716 $ 73,410 Policyholders dividends 1,335 1,230 Other liabilities 8,164 7,379 Asset valuation reserve 1,731 1,459 Separate account liabilities 47,237 47,272 Total liabilities 137, ,750 Surplus 11,417 10,352 Total liabilities and surplus $ 148,600 $ 141,102 Strong Operating Fundamentals and Financial Strength MassMutual continues to maintain a broad product portfolio centered on whole life insurance, employs a diversified investment strategy focused on prudent investing to support our long-term obligations, and incorporates a disciplined risk management approach to help protect and grow assets for the benefit of our policyholders. These operating fundamentals, coupled with our financial strength, are a primary reason why customers continue to see the value in doing business with our company. In 2011, MassMutual saw increases in both total assets and capital as our operations continued to profitably grow despite challenging economic conditions. Surplus and total adjusted capital grew to $11.4 billion and $13.2 billion, respectively, to historic levels. As of December 31, 2011, MassMutual s total assets were $148.6 billion, up 5 percent from year-end The increase was primarily driven by cash flows from operations, a result of the strong operating fundamentals of our key businesses. In conjunction with this growth in assets, we also increased policyholder reserves, which are amounts set aside to pay expected future benefits to our customers, by 7 percent, and strengthened our capital base. MassMutual s surplus and total adjusted capital grew to $11.4 billion and $13.2 billion, respectively, to historic levels. 12 MassMutual 2011 Annual Report

15 Performance Matters Summary of Operations (consolidated statutory basis, in millions) Year ended December 31: Premium income $ 13,893 $ 11,617 Net investment income 5,127 4,748 Fees and other income Total revenue 19,687 17,005 Policyholders benefits 10,960 11,020 Increase in policyholders reserves 5,001 2,066 Commissions and other expenses 2,017 2,065 Total benefits and expenses 17,978 15,151 Net gain from operations before dividends and taxes 1,709 1,854 Dividends to policyholders 1,313 1,209 Net gain from operations before taxes Federal income tax benefit (290) (217) Net gain from operations Net realized capital losses (227) (268) Net income $ 459 $ 594 Record Sales in Key Areas and Strong Earnings Overall, 2011 was a year of solid financial performance achieved as a result of the success of MassMutual s quality products and services in protection, retirement and asset management. As evidence of this, we reported record sales in key areas, including whole life insurance, as well as generated solid earnings that supported our ability to pay one of the most competitive dividends in our industry to our eligible participating policyholders. For the year, total premium revenue was $13.9 billion which represented an increase of 20 percent, primarily due to record retirement sales as well as increases in whole life renewal premium and bank-owned life insurance sales. MassMutual also generated growth in net investment income of 8 percent to $5.1 billion from higher portfolio yields combined with an increase in average assets. Underwriting results improved with better mortality and morbidity experience positively impacting benefits paid, while additional policyholders reserves were established to support the future benefit payments on our variable annuity products. In addition, we also paid $1.3 billion in policyholder dividends which represented an increase of over $100 million or 9 percent from All of this contributed to statutory net gain from operations of $686 million and $459 million of net income premium revenue increased 20 percent to $13.9 billion. MassMutual 2011 Annual Report 13

16 MassMutual As we celebrated our 160th year, we continued to provide the strength and stability people have come to expect from us, and showed our policyholders that working with MassMutual to help achieve financial security is a good decision Business Highlights U.S. Insurance WHO WE SERVE Individuals, businesses and business owners, key business executives and employee benefit plan sponsors PRODUCTS/SERVICES A comprehensive portfolio of insurance and accumulation products, including life insurance (individual and group executive), disability income insurance, long-term care insurance and annuities, brokerdealer and trust services 3 $3,600 $3,679 $3,399 $2,988 $2, U.S. Insurance Sales 1 in millions MassMutual increased sales of its protection and accumulation products 6 percent despite market volatility and economic uncertainty. Mike Fanning, Executive Vice President 14 MassMutual 2011 Annual Report U.S. Whole Life Sales 2 in millions MassMutual achieved record whole life insurance sales for the sixth consecutive year and continued to be among the top three providers of this product in the United States in U.S. Insurance sales include life insurance, disability income insurance, long-term care insurance, bank-owned life insurance, corporate-owned life insurance and annuities. 2 These consolidated results of Massachusetts Mutual Life Insurance Company also include its U.S.-domiciled, wholly owned subsidiaries: MML Bay State Life Insurance Company and C.M. Life Insurance Company. 3 Trust services provided by The MassMutual Trust Company, FSB, a wholly owned stock subsidiary. 4 Weighted sales are based on weighted annualized new premium, with single premium payments weighted at 10 percent. 5 LIMRA, U.S. Individual Life Insurance Sales Report. $269 $317 $382 $419 $427 KEY HIGHLIGHTS $241 million in weighted whole life insurance sales 4 an increase of more than $100 million For 160 years, MassMutual has provided financial security and enduring stability to our policyholders. Our strategic focus on providing a quality customer experience, competitive solutions and products, financial strength and high dividends enables us to provide value to policyholders in even the harshest economic conditions. Every day, our highly skilled financial professionals help people create strategies to meet long-term family and business needs, and are supported by our award-winning customer call center. Such factors help explain why more than 105,000 policyholders have been with MassMutual for at least 50 years. Life insurance can be the foundation of any sound financial strategy, and whole life insurance is versatile, flexible and provides a compelling sense of stability. In 2011, MassMutual found ways to help more Americans benefit from life insurance. We broadened eligibility for people with cardiovascular conditions and revised underwriting guidelines for breast cancer survivors, building on our long-standing commitment to help people before, during and after a cancer diagnosis. Our life insurance offerings include other essentials for long-term protection. In 2011, sales grew for our long-term care insurance and disability income insurance, and our annuity sales surpassed $2 billion. Performance including the industry s third most whole life sales and 10th most life insurance sales 5 is an indication of the continued need for our products and guidance from our nationwide team of financial professionals.

17 Performance Matters Retirement Services WHO WE SERVE Businesses, unions, nonprofit and governmental organizations and professional employer organizations PRODUCTS/SERVICES A full range of retirement plan products and services for defined contribution, defined benefit and nonqualified deferred compensation plans Our sustained record sales growth is a direct result of our focus on our goal to help as many participants as we can to achieve their highest possible level of replacement income in retirement. KEY HIGHLIGHTS from 2010 SM Ready and PlanSmart SM Analysis, breakthrough tools to help ensure that participants are on track toward their personalized goals for creating replacement income in retirement For more than 65 years, MassMutual Retirement Services has been a leader in helping Americans prepare for retirement. In 2011, we served 1.4 million participants in more than 7,500 retirement plans, reaching $55 billion in assets under management at year-end, a new record. With so many Americans concerned about achieving their retirement goals, MassMutual is helping our customers better understand their progress. Our RetireSmart SM Ready tool is an innovative, personalized solution that provides participants with a simple way to calculate and implement saving rates and asset allocation strategies that may significantly increase their chances of achieving enough income in retirement. For employers and retirement plan advisors, MassMutual s PlanSmart SM Analysis report helps them assess the percentage of employees who are on track to replace a targeted level of income in retirement. Our best-in-class customer retention level of 95.7 percent reflects MassMutual s commitment to world-class service. We received top honors for outstanding communication and education programs from the Plan Sponsor Council of America, and our participant website, RetireSmart.com, was recognized by the Web Marketing Association. In a survey by Boston Research Group, retirement plan advisors rated us #1 in overall satisfaction among 17 leading recordkeepers. And we were a Retirement Leader of the Year nominee for the second consecutive year in the Mutual Fund Industry Awards sponsored by Institutional Investor. $3.7 $3.8 $ Retirement Services Sales 6 in billions A third consecutive year of record sales and a 13 percent increase from Elaine Sarsynski, Executive Vice President $5.3 $6.0 $0.01 $2.3 $1.9 $ Retirement Services Net Cash Flow in billions The net inflow of retirement assets under management has been positive, even during the recession of 2008, and the 2011 total was highest in the business s 65-year history. 6 Retirement Services sales include defined contribution, defined benefit and nonqualified deferred compensation plans. $0.8 MassMutual 2011 Annual Report 15

18 Affiliates & Subsidiaries 2011 Overview The MassMutual Advantage: A mutual structure that focuses on policyholders, not shareholders, and strategic business investments to enhance our long-term strength and sustainability. Policyholders pay insurance premiums that MassMutual uses to pay benefits ($2.6 billion in 2011), cover the expenses of providing insurance protection and generate value for our policyholders. Policyholders MassMutual s mutual structure and our long-term, diversified investment strategy have helped support the payment of more than $25 billion of dividends to eligible participating policyholders since 1960 and reinforce the financial strength of MassMutual for the benefit of all our customers. Benefits & Expenses Like all insurance companies, MassMutual invests cash in a variety of asset classes. MassMutual is unique in that we also invest in our portfolio of strategic business subsidiaries, which helps to diversify our holdings and generate attractive, long-term investment returns. The MassMutual Advantage Investments INVESTED ASSETS TGAGES Capital & Dividends Our investment returns and strategic business earnings help: Pay our participating policyholder dividends Grow our capital and surplus ( financial cushion ) Provide for future benefit payments, and Support reinvestment in our business to further strengthen MassMutual. TEGIC BUSINESSES TIONAL LLC 16 MassMutual 2011 Annual Report

19 Performance Matters Through our investment in strategic businesses, MassMutual has diversified sources of growth and earnings that, ultimately, have helped us pay higher dividends and grow our capital base. As such, they are a strategic advantage for us, adding to our financial strength and to the value we bring to our policyholders and customers. Roger Crandall Chairman, President and Chief Executive Officer Asset Management Our asset management subsidiaries include OppenheimerFunds, Inc., Babson Capital Management LLC and its subsidiary, Cornerstone Real Estate Advisers LLC, and Baring Asset Management Limited. Each offers a suite of products to help meet the needs of a wide range of customers, and their diversified stream of earnings can add to our growth and dividend-paying ability. Their offerings include mutual funds, separately managed accounts, investment management for institutions and sub-advisory services, fixed income and absolute return strategies. And their investment proficiencies are often leveraged across the MassMutual Financial Group. WHO THEY SERVE Corporations and institutions, retirement and pension plans, endowments and foundations, insurance companies, individuals and capital markets participants WHO THEY ARE Babson Capital Management LLC Serving a broad array of global institutions primarily as a fixed income and real estate manager, Babson Capital is also the lead investment advisor to MassMutual. Babson Capital s subsidiary, Cornerstone Real Estate Advisers LLC, is one of the world s largest international real estate platforms, as measured by assets under management. In 2011, Babson Capital grew consolidated assets under management by $6 billion to $139 billion. Baring Asset Management Limited An international investment management firm based in London, Barings reach spans the world s major markets with $45 billion in assets under management and a rich history which dates back to Barings continued to enhance its global offerings in 2011 with new funds launched in the Asian, Indian and European markets. OppenheimerFunds, Inc. Founded in 1960, OppenheimerFunds is one of the largest mutual fund managers in the United States with more than $168 billion in assets under management and more than 11 million shareholder accounts. OppenheimerFunds has developed distribution, product and digital capabilities that reach over 100,000 active sellers across multiple markets and channels. Its operations include its corporate headquarters in New York City and significant offices in Denver and Rochester, New York. In 2011, 67 percent of Oppenheimer s funds were ranked in the top quartile and 91 percent in the top half of their respective categories, based on asset-weighted performance for the three-year period, according to Lipper Analytical Services and Strategic Insight. International Insurance MassMutual International LLC Operating businesses in Hong Kong, Japan and Luxembourg and participating in joint ventures in the People s Republic of China and Chile, our international insurance businesses bring added geographic and market diversification and value to the MassMutual Financial Group. Each business offers insurance, savings and retirement products to meet the needs of local consumers. MassMutual International LLC grew assets under management 12 percent to $21 billion in 2011, despite global economic disruptions. WHO THEY SERVE Individuals, key business executives, corporations, businesses, institutions, and advisers and intermediaries MassMutual 2011 Annual Report 17

20 A Steady Strategy in Turbulent Times A conversation with Tim Corbett, Executive Vice President and Chief Investment Officer Q: What drove the volatile investment markets and low interest rates we saw in 2011? A: It has been a difficult investment market for some time. In 2011 there were three main events that added to the volatility. The first was the unexpectedly weak economic growth in the first half of the year precipitated by high energy prices and the tsunami disaster in Japan. The second was the contentious debate over raising the federal debt ceiling and the subsequent Standard & Poor s downgrade of the U.S. government s credit rating. The third event was the European sovereign debt crisis. These three events, coupled with ongoing high unemployment, helped to further weaken investor confidence. The resulting volatility in equity markets drove many investors to the safety of U.S. Treasuries, in spite of the downgrade. As the price of Treasuries rose to meet demand, interest rates fell, and they have remained low. Q: How did MassMutual s long-term approach to investments help in 2011? A: MassMutual is extremely well-positioned today based on our long-term investment philosophy. The decisions we have made throughout our history as a mutual company have enabled us to maintain our financial strength in this environment. Our investment goal is unchanged to generate competitive longterm results for our policyholders while maintaining the ability to weather downturns in financial markets, such as the conditions we re now experiencing. Q: What are the components of your investment philosophy? A: We have a steady, consistent strategy that has served us well over time. We emphasize broad diversification within and across asset types to reduce the impact of negative economic events. We are prudent when selecting securities. We search for incremental value based on fundamental, bottom-up research to help ensure we fully understand current and potential holdings. Finally, we have a disciplined risk management process that helps ensure financial strength in volatile, uncertain times. 18 MassMutual 2011 Annual Report

21 Performance Matters Q: MassMutual has several leading investment subsidiaries, which differentiates us from our peers. What are the advantages? A: Our investment subsidiaries, including OppenheimerFunds, Babson Capital Management and Baring Asset Management, offer several advantages for our policyholders. First of all, the experienced investment professionals in these firms provide a broad range of asset management capabilities that are key in implementing our investment strategy, achieving our investment goals and supporting MassMutual s broad array of products. Total Invested Assets in millions Bonds: $58,391 Mortgage Loans: $13,283 Common Stocks: $4,635 Real Estate: $1,217 Our investment subsidiaries can also provide a very strong, well-diversified contribution to the earnings and surplus of the company that is particularly important in a low rate environment. Despite the current market volatility, earnings from these businesses remain significant and are a valuable component of our financial strength. With our investment subsidiaries we not only get a broad range of high-quality investment expertise, but they also contribute to an investment portfolio with a diversified stream of earnings, creating a competitive advantage and ultimately helping lower the all-in cost of insurance to our policyholders. Partnerships & LLCs: $5,871 Policy Loans: $9,768 1 Short-Term Investments & Cash: $1,788 Other Assets: $3,903 TOTAL $98,856 1 Policy loans are loans taken by policyholders against the cash surrender value of their policies and as such are secured by the cash surrender value of those policies. Q: How are you preparing for 2012 and beyond? A: At MassMutual, we will prepare for the future the same way we always have by investing and making decisions that will benefit our policyholders for years to come. Years like 2011 are a reminder that a focus on long-term performance can allow us to weather short-term market disruptions. Our disciplined investment approach has positioned us for strong performance, even in the current environment. In 2011, despite volatile markets, our investment philosophy and strategy helped us achieve record levels of surplus and total adjusted capital. I think the fact that we enhanced our financial strength in this kind of market speaks very well for our ability to operate for the long-term benefit of our policyholders. Long-Term Bonds in millions Corporate Credit Public: $15,876 Corporate Credit Private: $15,544 U.S. Treasury & Agency: $9,678 Municipal & Sovereign: $2,558 Agency Residential Mortgage-Backed Securities: $1,406 Non-Agency Residential Mortgage-Backed Securities: $2,743 Commercial Mortgage-Backed & Other Asset-Backed Securities: $7,175 Investment Funds: $1,418 Other: $1,993 TOTAL $58,391 For more information on our investment philosophy, visit MassMutual.com/WhatMattersMost. MassMutual 2011 Annual Report 19

22 Knowledge Matters Just like dental problems, it is easy to overlook our financial health. Luckily for me, I was able to review my insurance coverage regularly with Jon and MassMutual. I feel more confident about my financial well-being. Brian Hong, Pediatric Dentist, Los Angeles, and President of Korean American Dental Association (left) and Jon Kim 1, MassMutual sales manager 1 Jongsik Kim is an insurance representative of Massachusetts Mutual Life Insurance Company. He is licensed to offer insurance products and services in CA, GA, IL, NJ and TX (CA lic. # ). 20 MassMutual 2011 Annual Report

23 Knowledge Matters Our responsibility to our policyholders and customers extends well beyond providing a life insurance policy or retirement product. We strive to be a resource for our customers to continually enhance their knowledge and understanding of their financial health. This requires two-way engagement between MassMutual and customers in order to better understand their needs and preferences and to provide options that address both. Our Financial Professionals Every day our nationwide network of highly skilled financial professionals works with customers to help them prepare for the long term, identify solutions and address the financial issues that can impact those plans. To do this, we have a focus on continuous learning. For example, our MassMutual Academy, launched in 2010, is an intensive three-day program that brings our new and experienced financial professionals together with home office experts for training, education and networking. We also have a broad range of programs in place to help solve more specific needs. An example is the Chartered Special Needs Consultant (ChSNC ) designation, which we created with The American College. Earning a ChSNC better prepares financial services professionals to help families of children with special needs plan for their children s future, and in 2011 The American College s first 58 ChSNC designations were conferred exclusively to MassMutual financial professionals. Education The manner in which MassMutual communicates with customers today spans a wide variety of media. Our Why Life? campaign, where kids made the case to adults about the value of life insurance, was delivered entirely through social media. We sponsor educational advertorials in major U.S. newspapers, and our website features a wealth of news articles, interactive tools, calculators and client testimonials to help our customers make good financial decisions. In 2011, we also sponsored Autism: Coming of Age, an hour-long PBS documentary providing an inside look at the lives of adults with autism. Our RetireSmart SM Ready tool and our PlanSmart SM Analysis report help participants, employers and their retirement plan advisors focus on helping employees replace a targeted level of income in retirement. And last year MassMutual joined forces with Farnoosh Torabi, independent Generation Y money coach, multiple best-selling author and personal finance journalist, to help inspire younger people to take a more active role in planning and saving for retirement. Outreach In 2011, we continued to use research to gain a better understanding of the financial issues facing Americans and, therefore, better align our services to help meet these needs. For example, we released a breakthrough study that captured the thoughts of business owners in regard to both their personal and business finances. Our State of the American Family: Families, Financial Attitudes, and Planning study also explored the financial stresses and outlooks of families. We also further expanded our efforts in multicultural markets to bring our financial solutions to a broader audience. We continue to open offices in ethnic communities, such as Los Angeles s Koreatown and Chicago s Chinatown during We also have developed alliances with several national organizations. For example, in 2011 we began a collaborative relationship with the Association of Latino Professionals in Finance and Accounting (ALPFA) to help the rapidly growing number of Latino small business owners and families make good financial decisions. In 2011, Retirement Services continued its education program with customer Gorton s Inc., a frozen seafood business in Gloucester, MA, which has four retirement plans. Using a broad array of proprietary tools, including the RetireSmart SM participant website, and group and one-on-one meetings, Gorton s employees like Caitlin learned more about retirement saving and investment, and, in one of the plans, participation increased more than 40 percent. See more about MassMutual s commitment to participant education at MassMutual.com/WhatMattersMost. MassMutual 2011 Annual Report 21

24 Providing a Lifetime of Solutions Financial opportunities and challenges appear to us all during the course of a lifetime. Our array of products can address many financial needs and, along with the valued guidance of a MassMutual financial professional, help give our customers greater confidence as they pursue larger goals such as peace of mind, independence, dignity and a legacy. Independence Among American workers, saving enough for retirement is the biggest financial worry for both men and women 3. MassMutual annuities and employer-sponsored retirement plans can help customers retire with confidence by providing tools to help determine and track progress toward retirement savings goals, by providing education about how assets can grow, by providing access to their money and by delivering a predictable stream of income that can t be outlived. Peace of Mind Individual life insurance ownership is at a 50-year low 1, and only one in 10 of working Americans own individual disability income insurance 2. For most of us, the single most valuable asset we can protect is our ability to provide for ourselves and our families. A MassMutual financial professional can help people develop a strategy to do just that. 1 LIMRA, The Facts of Life and Annuities, September LIMRA, 2010 U.S. Individual Life Ownership Study. 3 Brightwork Partners 2011 DC Participant Survey, sponsored by MassMutual. 22 MassMutual 2011 Annual Report

25 Knowledge Matters Legacy Most who have spent a lifetime raising a family or building a business want to be remembered for what they have accomplished. The guidance of a MassMutual financial professional when developing a financial strategy can help ensure that our customers achievements will benefit the people and causes most important to them. Dignity As we live longer, the possibility of health issues arising increases as well. Taking steps now to plan for future care could help protect assets and reduce the emotional and financial impact on family members. MassMutual s broad array of products, including long-term care insurance, can help people and their families be prepared financially to manage when health and elder-care concerns arise. MassMutual 2011 Annual Report 23

26 Community Matters Taking stock: Jaime Martinez, a student participating in Junior Achievement s 2011 Stock Investing Competition, works with MassMutual employee Dawn Spenard to make a stock trade for his team. MassMutual sponsored the event and employees like Dawn volunteered to challenge the stock-selection skills of teams of young people to help them develop competencies for the future business world. MassMutual invests in community initiatives that support key issues in our home office communities and where our financial professionals do business. I am always impressed by our people s commitment of time and talent to worthy causes. They share our attitude that helping in the community is not only the right thing to do it s also good for our business. Nick Fyntrilakis, Assistant Vice President, Community Responsibility 24 MassMutual 2011 Annual Report

27 Community Matters MassMutual s reputation is for financial services expertise, but our commitment to community also defines us. Our philosophy is simple: Encourage a positive impact on the environment, consumers, employees, communities and other stakeholders, and we all benefit. This philosophy begins in our Springfield, MA, and Enfield, CT, home office communities, and extends across the country to the communities where our more than 5,000 financial professionals work and live. Charitable Giving In 2011, MassMutual donated more than $7 million, focused on three primary areas community vitality, education and economic development. These funds helped make possible a wide variety of programs, along with supporting disaster relief efforts. Our community vitality initiatives make our home office communities a more enjoyable place to live and work. Our focus on education includes cultivating diverse talent from our community, promoting academic achievement and offering scholarships linked to career opportunities at MassMutual. Finally, our extensive economic development programs focus on our Springfield home and how we can keep it thriving for years to come. All in all, our support of community responsibility efforts totals over $9.5 million. In addition to the over $7 million in charitable giving, another $2.2 million allows us to offer our unique LifeBridge SM free term life insurance program. Engagement MassMutual employees and financial professionals give generously. We applaud their efforts and match qualifying donations to qualified nonprofit organizations through our Matching Gifts Program. In 2011, MassMutual contributed more than $900,000 in matching gift support on behalf of eligible employees and financial professionals. United Way MassMutual consistently supports the United Way through our employee giving campaign and volunteering. We provided over $2.4 million to the United Way in 2011 through the generosity of our employees and financial professionals, and the company s match of those funds. After a tornado struck the Springfield area in June 2011, we partnered with the United Way to develop the Springfield Community Rebuilding Fair that connected affected families with local agencies offering assistance. Attendees met with legal, insurance, financial, housing, zoning, career, construction and sustainability experts to ask questions and obtain assistance with the rebuilding process Charitable Donations Community Vitality: $3,351,200 Economic Development: $1,320,806 Education: $1,493,620 Volunteerism Many of our employees and financial professionals donate time more than 13,000 hours in 2011 and knowledge to charitable organizations. In 2011, we celebrated the 15th year of our Community Service Award (CSA) Program. Each year, we donate $125,000 to nonprofit organizations on behalf of our financial professionals volunteer efforts. Since its inception, we have contributed more than $1.1 million to organizations across the country. Matching Gifts: $946,238 Other: $334,381 (sponsorships, programs outside of priorities above) In-kind Donations: $40,187 TOTAL $7,486,432 MassMutual 2011 Annual Report 25

28 Helping at Every Step Fostering a lifetime of learning in children is a top priority for parents and educators. At MassMutual, we also make young people a priority, as we know that supporting education is crucial for them to become successful adults. From school-age children to young adults entering the workforce, MassMutual is there to help. We believe that one of the best ways to support our communities is to support the education and financial well-being of the next generation, because their future matters to all of us. LifeBridge SM A parent s life insurance might someday pay for his or her child s education. MassMutual s LifeBridge SM Free Life Insurance program provides $50,000 term life insurance policies to eligible parents or guardians. MassMutual pays the premiums. If the insured dies during the 10-year term, MassMutual funds a trust 1 to help pay their children s educational expenses. Since its inception, LifeBridge has provided over $615 million of life insurance coverage to more than 12,000 individuals, and paid $750,000 in benefits for educational funding to help ensure that families dreams for their children s future can be realized. MassMutual Career Pathways Middle and high school is a great time for kids to think about the future. MassMutual s Career Pathways programs provide opportunities for students to be successful. Career Pathways helps students develop academic and professional skills, connects them with internships and scholarships, helps them learn about careers and how to get into college, and seeks to recruit them after college. Programs include a high school internship program and IT academy, as well as college internship programs. 26 MassMutual 2011 Annual Report Junior Achievement A middle school student develops his business venture while his sister shadows an investment analyst. It is all part of MassMutual s involvement with Junior Achievement (JA), the world s largest organization educating K-12 students about entrepreneurship and financial literacy. Our employees volunteer time and experience to teach JA programs to business-minded kids. JA programs include JA in a Day, the Stock Investing Competition and Job Shadow Day.

29 Community Matters MassMutual Academic Achievers A high school sophomore is better prepared for the college admissions process after attending a free PSAT workshop. Springfield students who maintain a B or better for four consecutive marking periods are eligible to be MassMutual Academic Achievers. The more than 725 students who qualified during 2011 can take advantage of MassMutual Career Pathways programs, including job shadowing, the Building Your Future Conference, scholarships and internships. Internships A high school senior works at MassMutual during the summer as an IT Academy intern. The student gets exposure to working in a corporate environment, hands-on experience in a field of interest and guidance from employees on ways to improve his or her candidacy for future employment. MassMutual had 73 interns in 2011, and these internships help students understand the financial services industry and can assist us in identifying future potential employees. MassMutual Scholars For many students, college may not seem financially possible. The MassMutual Scholars program works to expand access to higher education for students across the country. In 2011, MassMutual provided nearly $1.2 million in scholarship dollars to 188 students, all of whom demonstrated academic success and were interested in pursuing careers in the business, insurance, financial services or information technology fields. 1 The trust is administered by The MassMutual Trust Company, FSB, a wholly owned stock subsidiary of MassMutual. MassMutual 2011 Annual Report 27

30 Economic Development MassMutual s ongoing economic development initiatives help advance Springfield s prosperity. Capital campaign grants focus on providing support for brick-and-mortar projects of nonprofit organizations in Springfield. During the past year, these grants have helped support the Caring Health Center, Springfield College and Environmental Center for Our Schools, an environmental education program for students in grades State Street Alliance MassMutual played a key role in the establishment and funding of the State Street Alliance, dedicated to the redevelopment of the State Street corridor, a central artery of Springfield. Working closely with city officials, MassMutual helped convene a group of more than 60 stakeholders, representing a diverse constituent base consisting of commercial property owners, leaders from academic institutions, neighborhood groups and communitybased organizations. Since 2006, the State Street Alliance has championed numerous commercial projects that have contributed to the ongoing revitalization and development of the area. From new construction to many other aesthetic improvements, the Alliance s efforts are a vital link to successful redevelopment in Springfield. Curb Appeal Homeowners also benefit from MassMutual s commitment to Springfield. Our Curb Appeal program provides grants up to $5,000 to homeowners in neighborhoods along the State Street corridor who wish to make meaningful exterior improvements to their homes. These grants can help purchase new siding, a new roof or porch, fresh landscaping, upgrades to fencing, windows or entry doors, etc. The grant program is administered by Springfield Neighborhood Housing Services, an agency that helps revive neighborhoods through sustainable home ownership and rehabilitation of tired properties. 28 MassMutual 2011 Annual Report

31 Community Building and Rebuilding Investing in communities helps create places where people and businesses can thrive. We re focused on local community-building initiatives and are also there to support world relief efforts when disaster strikes. Disaster Relief In 2011, we stepped beyond the boundaries of our formal charitable giving program to provide relief in the wake of numerous natural disasters. Our relief support extended to the other side of the world when Japan was struck by a devastating earthquake and tsunami. We demonstrated our support through a donation of $100,000 to the American Red Cross Japan Earthquake and Pacific Tsunami Fund. The Southeast then experienced one of the deadliest weather disasters in history, as tornadoes touched down in five states. MassMutual presented a check for $100,000 to the local American Red Cross chapter to support relief efforts. Our own neighborhood of Springfield was also dealt a devastating blow on June 1, when an EF-3 tornado ripped through several neighborhoods, including downtown Springfield. We made a $100,000 donation to our local American Red Cross, helped organize community resources with the United Way, and also helped our own employees who were impacted by the storms by opening up our facilities for meals and showers. Our employees and financial professionals generously stepped up to help with individual donations toward each of the disaster relief efforts, which MassMutual matched. We never want to see such widespread disasters but are proud that we were able to do our part to help relief efforts around the world. DevelopSpringfield Springfield s economic vitality is of utmost importance to us. We have championed the establishment of DevelopSpringfield, a nonprofit corporation pursuing a wide range of development opportunities within the city. The overall mission is to create conditions that encourage private development with a brick-and-mortar focus, while meeting the city s diverse redevelopment needs. DevelopSpringfield and the Springfield Redevelopment Authority were tasked with creating a comprehensive master plan for the City of Springfield including tornado-impacted areas. In 2011, MassMutual provided one of its leaders to co-chair the rebuilding effort and announced its contribution of $1.6 million to DevelopSpringfield to implement the plan. We work with both public and private entities and community groups to implement effective, sustainable and fiscally responsible projects that revitalize neighborhoods, generate capital investment, retain and create jobs, and advance economic growth. The Corridor Storefront Improvement Program (CSIP) is a DevelopSpringfield initiative that provides grants to fund storefront improvements. Through the CSIP, business and commercial property owners can receive grants up to $10,000 to fund exterior improvements such as painting, window replacement and architectural refurbishment. MassMutual 2011 Annual Report 29

32 Culture Matters Our focus on the customer is what drives everything we do. It makes us as collaborative and creative as we can be and feeds our desire for continual improvement. It s exciting when your results exceed customer expectations. Susan Prunier (at board) MassMutual employee 30 MassMutual 2011 Annual Report

33 Culture Matters While much has changed at MassMutual over 160 years, a dedication to our people has not. What matters to us is creating an environment where exceeding our customer and policyholder expectations is a priority. More than 5,000 employees strong, we are committed to acting with integrity, valuing people and their ideas, and working collaboratively to get the best results. This means providing employees with opportunities for personal and professional growth, fostering a community within MassMutual that s supportive and inclusive, and instilling a sense of pride in our company. Diversity Our multifaceted approach to diversity, highlighted on the following page, is leading us to build a more inclusive workplace. With nearly 1,100 employees in our six employee resource groups, we have the means to enrich our internal understanding, reach out to new employees to increase engagement and enhance our overall diversity of thought within the company. They also help recruit a more diverse workforce and reach a wider variety of audiences. Another example is the MassMutual Diversity Fellowships, which promote diversity in the legal profession by awarding a yearly stipend to a law student of color who exemplifies exceptional academics, leadership and commitment to community service. Recognition for these efforts and others came from a variety of sources in Working Mother magazine named MassMutual as one of its 100 Best Companies. DiversityInc named us one of 25 Noteworthy companies. Our Law division was honored for exceptional commitment to increasing diversity from the Boston University Black Law Students Association and given an Employer of Choice Award from the Northeast Region of the Minority Corporate Counsel Association. Integrity Operating with the highest ethical standards includes a commitment to transparency, trustworthiness and careful and continual attention to enterprise risk management. We actively educate and inform our employees to help us identify potential risks and compliance or ethics issues, and we regularly promote the ways in which employees can report these issues. We also continually assess our ethical culture and employee engagement to better understand employee perceptions and identify potential risks. Maintaining a strong ethical culture is extremely important to us. We are also proud that MassMutual was recognized by Fortune magazine for the 11th year in a row on its annual World s Most Admired Companies list in the life and health insurance industry category. Opportunities and Balance Challenging assignments, rewards and recognition for a job well done, personal and professional growth, a range of career options they are all employee opportunities at MassMutual. In 2011, we introduced an enhanced career planning strategy to help employees take control of their careers with a range of tools and resources to better understand opportunities within MassMutual and how to prepare themselves for these roles. We also recognize that health is an important factor in employee performance and quality of life. We are committed to an integrated wellness program that includes onsite wellness activity centers, employee assistance counselors and employee health services. In addition, we offer online wellness resources and free flu shots, a broad range of nutritious cafeteria offerings and employee education seminars that cover a variety of topics such as nutrition, weight management and stress relief. In 2011, 74 percent of employees enrolled in a MassMutual health plan completed a health assessment, and more than 2,600 completed physical activity programs and earned incentive dollars. For healthier diets, in 2011 we introduced an onsite nutritionist, offering individual counseling, and continued our Springfield and Enfield campus seasonal Farmers Markets, a convenient way for employees to purchase locally grown fresh foods. MassMutual 2011 Annual Report 31

34 Including Everyone Chris Mendoza, Assistant Vice President, Multicultural Market Development Lorie Valle-Yanez, Vice President and Chief Diversity Officer For 160 years, MassMutual has remained true to our core values while adapting to the changing national and global environment. Such balance is key to resilience and stability. So it s natural and essential as America s face changes, MassMutual changes as well. While everyone in the MassMutual community shares this responsibility, Lorie Valle-Yanez and Chris Mendoza play leadership roles. Q: With both a Diversity and Inclusion team and a Multicultural Markets team, MassMutual seems to address the issue from a varied perspective. A: Lorie. Our strategy for diversity and inclusion is comprehensive and enterprise-wide. We focus on four key areas: marketplace (brand and reputation), sales force (Career Agency System), workforce (home office) and workplace (environment). Our business leaders understand the potential of diverse markets, which are thus far untapped or underserved. And they see that understanding, reaching and growing a broader customer base requires a workforce and sales force that reflects diversity in the marketplace and an integrated approach to diversity and inclusion. Having a wide range of perspectives and experiences allows us to make better decisions and come up with innovative solutions. Q: Does market demand drive these changes? A: Chris. Yes. As Lorie mentioned, we can only effectively serve new markets if we understand them. Consumers are more likely to consider us if we understand them, their communities, their values, what matters most to them. A strong record of community involvement and investment is critical to success. Lorie. Beyond the focus of ethnic- or gender-based markets, a good example of a growing diverse community is the LGBT (lesbian, gay, bisexual and transgender) segment. This group had an estimated buying power of $835 billion in Overall, consumers are savvy. They want to do business with organizations that value diversity and inclusion. They want to see themselves reflected and know they are welcome and valued. Chris. I couldn t agree more. While the word marketing is in my title, I spend time helping MassMutual financial professionals understand how they can reach local diverse communities effectively and become genuine community members. When I m not doing this, my team and I work with home office employees on products, sales strategies and processes to improve the customer experience. 32 MassMutual 2011 Annual Report

35 Culture Matters Q: How do you go about doing that? A: Chris. We engage home-office business partners, our financial professionals, and national and local organizations we work with to help us reach local communities. Our employee resource groups (ERGs) are another great example. They provide networking and support for diverse individuals within the company and offer invaluable guidance as we develop multicultural strategies and materials. For example, as we put together our strategy for the Asian Indian market, we asked our Asian ERG to review our standard advertising. They noted that family imagery and people doing things in groups would be more emotionally powerful than, say, individuals doing something symbolic like climbing a mountain. When you aim to deliver effective messages to a new community, it s important to understand the consumer attitudes, needs and mindset. Lorie. Integration means everyone; managers in particular play a key role in our diversity and inclusion strategy. That s why we just completed a diversity training program for all our managers, an effort that took more than a year. We help employees and managers better understand why diversity is important for business and ensure access to tools, resources, and information to help make meaningful progress. Diversity is sustainable only if integrated into the way we conduct business every day. My role is not to tell people what to do. I help the organization understand the value of diversity and inclusion, and allow others to take ownership. Q: What internal factors are key in helping to drive change? A: Lorie. Leadership sets the tone in any organization. MassMutual s leadership has embraced diversity they own it and drive it throughout the culture and operations, and most importantly, they lead by example. Chris. We also leverage our existing financial professionals and their strengths. There s a genuine drive to help more people to build financial security for themselves, their families and those who come after them. When our employees and financial professionals see our research data, it s clear we need to resemble those communities and understand those communities to share what we offer. Maybe that s old-fashioned, but it inspires many here. Q: How does MassMutual measure its progress in incorporating diversity and inclusion? A: Chris. There are a number of ways. We go out and ask. We pioneered research with minority business owners and families African American, Hispanic, Chinese, Korean and Asian Indian to help understand their needs, attitudes and concerns so we can approach these markets more effectively. Multicultural business owners want to leave a legacy, but they often lack the basic financial planning knowledge for their families or their businesses, possibly putting future generations at risk. We educate our financial professionals to help business owners understand a succession plan s importance and arm them with resources needed to help translate the family s financial vision into a reality. Lorie. And we do external benchmarking. While we need to find solutions that work for MassMutual, it s also important to benchmark against our industry and best-in-class diversity organizations. We aspire to be among the best. Our ERGs also help us gauge where we need to go. They act as focus groups to give us insight and they roll up their sleeves to create and manage programs and events to make a difference. Beyond our ERGs, we monitor progress through employee surveys and exit interviews, and create new forums for gathering information. Last year we gathered female thought leaders together and asked them what we do well and what we don t do well as it relates to female engagement. The group gave us great feedback on engagement drivers and recommendations on how to address gaps. We are currently acting on their recommendations. We re really taking a 360-degree approach leadership-driven, employee-driven, market-driven, inside out, outside in, national, local, legislative, educational. I think this speaks to the commitment throughout this company to get where we need to go in a way that s both timely and genuine. MassMutual 2011 Annual Report 33

36 Planet Matters Every bit helps: Charles Jackson, MassMutual employee, is doing his part for the environment by taking part in MassMutual s recycling program. The company recycles a wide variety of items, including bottles and cans, various metals and carpet. Conservation, efficiency and renewable energy are the three most important parts of MassMutual s green strategy, which helps us minimize our environmental impact and contribute to a cleaner, healthier earth and better environment for generations to come. Sean Anderson, Director of Corporate Green Initiatives 34 MassMutual 2011 Annual Report

37 Planet Matters At MassMutual we are proud of our long history of working to create a cleaner, greener and environmentally responsible atmosphere for our employees and operations. We facilitate a number of conservation and recycling programs that help to reduce our environmental impact and set a positive example for other businesses to follow. One example of our dedication to environmental sustainability is the recent LEED Silver certification for the main building at our company headquarters, originally built in In addition, MassMutual recently expanded our solar array to include more than 1,700 photovoltaic and thermal panels, which, over their lifetime, will reduce our carbon emissions by an estimated 5,500-plus tons, the equivalent of saving more than 640,000 gallons of gasoline. As we continue to follow our tradition of taking the long-term view when it comes to business, the environment and sustainability are no different. We continually seek out opportunities that will allow us to operate our facilities efficiently, conserve natural resources and provide savings for the longer term, while being ever mindful of the environment and our impact on it. Some examples of our ongoing efforts: 12,782 units of electronic waste recycled or reused including computers, printers and mobile devices 382 tons of paper recycled annually the equivalent of 2,750 trees 5 million gallons of water saved annually enough to fill 7.5 Olympic-size swimming pools 2,400+ light bulbs upgraded to a more efficient bulb to save more than $30,000 annually 200,000 customers (and growing) receiving statements, prospectuses and regulatory supplements electronically rather than print MassMutual 2011 Annual Report 35

38 Board of Directors Roger W. Crandall (2,3*,5) Chairman, President and Chief Executive Officer Massachusetts Mutual Life Insurance Company, Springfield, MA Thomas C. Barry (1,3,5*) Chief Executive Officer and Founder Zephyr Management, L.P., New York, NY Cristóbal I. Conde (1,4) Former President and Chief Executive Officer SunGard Data Systems, Inc., New York, NY Kathleen A. Corbet (1,5) Founder and Principal Cross Ridge Capital, LLC, New Canaan, CT Former President Standard & Poor s, New York, NY James H. DeGraffenreidt, Jr. (2*,3,4) Chairman and Chief Executive Officer, Retired WGL Holdings, Inc., Washington, D.C. Patricia Diaz Dennis (2,3,4*) Senior Vice President and Assistant General Counsel, Retired AT&T Inc., San Antonio, TX Robert A. Essner (2,3,4) Lead Director Massachusetts Mutual Life Insurance Company, Springfield, MA Chairman and Chief Executive Officer, Retired Wyeth, Madison, NJ Robert M. Furek (2,4) President and Chief Executive Officer, Retired Heublein, Inc., Hartford, CT Raymond W. LeBoeuf (1*,3,4) Chairman and Chief Executive Officer, Retired PPG Industries, Inc., Pittsburgh, PA Cathy E. Minehan (1,5) Dean, School of Management Simmons College, Boston, MA Managing Director Arlington Advisory Partners LLC, Boston, MA President and Chief Executive Officer, Retired Federal Reserve Bank of Boston, Boston, MA Marc F. Racicot (2,4) Former Governor of Montana Former President American Insurance Association, Washington, D.C. William T. Spitz (2,5) Director and Principal Diversified Trust Company, Nashville, TN Vice Chancellor for Investments Emeritus Vanderbilt University, Nashville, TN H. Todd Stitzer (1,5) Former Chief Executive Officer Cadbury PLC, London, U.K. Board Committees: 1 Audit 2 Corporate Governance 3 Executive 4 Human Resources 5 Investment *chair 36 MassMutual 2011 Annual Report