The circumstances of MassMutual’s last CEO change were not exactly ideal. Former CEO Robert O’Connell was booted for personal misconduct four years ago, an unwelcome scandal for a company that rather likes its sober reputation.
But the man who stepped into O’Connell’s hastily vacated position is now on his way out. And this time, succession is going to be a very different story.
Roger W. Crandall, the man tapped for the CEO position, is a 44-year-old career MassMutual employee. He has a penchant for mini-asides on U.S. financial history; he uses the word “prudent” in conversation. And he’s been climbing with measured steps toward this role since well before the company’s official announcement of his succession this summer.
Since 2007, he’s gone from co-COO, to COO, to president, at regular intervals. He candidly admits the company wants to provide a smooth shift. There will be no boat-rocking here.
“[The previous changeover] is clearly not how anyone wants to go through a transition,’ he said. “So this has been very orderly and well thought-out. … I don’t see any big changes from a strategy perspective at all.”
Investment Man
Interestingly enough – for somebody about to run an insurance company – Crandall’s experience weighs heavily on the investment side of the business. He started out in the investment management division in 1988, and moved to subsidiary Babson Capital Management in 2000. By 2005, he was back at the parent company as its chief investment officer, and only in the past few years has he dug into learning the “day-to-day” of insurance distribution.
Crandall cut his teeth in an era that saw other insurance companies going under, largely thanks to liquidity problems, and those formative experiences had an impact on how he views the business.
“The history of financial firms failing typically comes down to investment problems,” he said. At its core, an insurance company is an investment company, he added, so lessons about fundamentals such as asset diversity were drilled in early.
Ben Branch, professor of the Isenberg School of Management at the University of Massachusetts Amherst, says it makes sense for the company to hire an investment-minded CEO because insurance companies in general are wading further into more complicated investment activities.
That being said, MassMutual tends to keep away from wild thrusts into untried territory.
In some respects, “It’s kind of a stodgy old company,” Branch said, adding, “It has steadfastly decided to stay a mutual, which I think gives it a certain amount of flexibility and protection.”
MassMutual, too, likes to remind others that it isn’t beholden to shareholders’ whims, and that it also hangs onto coveted – and rarer, these days – top ratings from A.M. Best and Fitch Ratings.
MassMutual’s Madoff Problem
That’s not to say MassMutual is trouble-free. It’s had to deal with fallout from the Bernard Madoff scandal, as subsidiary Tremont Group Holdings lost $3.3 billion in investor dollars through the scheme. That’s put MassMutual as the subject of massive lawsuits, although the company – and Crandall himself – declines from speaking in-depth about the cases.
Other troubles have led to more routine difficulties: MassMutual, with more than 6,000 employees in Massachusetts and Connecticut, is laying off 4-8 percent of its workforce this year.
Crandall points to a volatile stock market as a source of pressure for the company: Markets have battered the company’s revenues from assets under management, which fell by 28 percent last year. Cuts have become necessary, Crandall said, but the company is trying to be smart about who gets the ax.
“It’s easy to say we’re going to do an across-the-board cut, but that’s not what we’re paid to do,” he said; instead, it’s an opportunity to streamline the company’s operations. For example, the company had given up its plans to sell annuities with living benefits, so, clearly, there was one area that was ripe for the chopping block.
“All the sudden it didn’t make sense to have a whole group of people who were doing nothing but selling guaranteed living benefits,” he said, adding that no one at the company took pleasure in having to lay employees off.
The volatile markets and economy have made directional changes necessary: Crandall pointed especially to those variable annuity benefits that guaranteed a minimum income benefit. In a down market, such guarantees on variable annuities quickly boomeranged back to strike insurance companies that sold too many – such as the case of The Hartford Financial Services Group, which took federal Troubled Asset Recovery Program money partly as a result of those products.
Crandall said MassMutual introduced such a product on Sept. 1, 2008, but had it yanked by December, which he believed to be the fastest a product has ever been pulled in the company’s history.
The CEO-to-be might have a larger depth of experience in investments, but he says his insurance know-how is deeper than it might appear.
In the investment department, as well as at Babson Capital – the biggest client of which is MassMutual itself – he had to know the company’s investments thoroughly in order to determine how to invest its money. That required knowing something of its insurance makeup – the qualitative side, in other words.
On a personal level, he was learning about insurance from the cradle. His father was a MassMutual salesman in New York City for his entire career, and Crandall says he grew up knowing “more than the average person” about insurance distribution.
Crandall later sought a job at his dad’s old employer: “My intention was to stay here a couple years and then move back.” But those first couple years stretched on, and Crandall found less and less reason to uproot his life.
“Every time I thought of moving, I asked myself, ‘Why am I moving?’” he said.
