External Analysis for Massachusetts Mutual Life Insurance Group

Introduction Massachusetts Mutual Life Insurance Company or simple MassMutual is an American based company that specializes in the services related to health care, retirement plans and life insurances as well as various financial services. It is among the top rated life insurance companies in the United States of America. The company has over 1500 offices and more than one million clients in domestic and international markets (MassMutual, 2011). It is currently ranked at number ninety three in the Fortune 500 companies list (Fortune, 2010). According to the MassMutual financial reports (2010) of the company, the revenues earned for the year were over twenty billion US dollars with the assets over four hundred billion US dollars.

The company has very strong market position and is financially very strong. The top notch rating companies in the USA have giving it A++ ranking. The rating companies include A.M Best Company, Fitch Ratings, Moodys Investor Service and Standard & Poors rating company respectively (MassMutual Financial Report, 2010)

SWOT Analysis SWOT Matrix Strengths y y Market position Financial stability y y Weaknesses Legal preceedings Geographic concentration

Opportunities y y y Expansion Shift in the domestic population Innovative product offerings y y y

Threats Competition Government framework changes (legal, political etc.) Economic conditions

Strengths According to the MassMutual financial reports (2010) of the company, the revenues earned for the year were over twenty billion US dollars with the assets over four hundred billion US dollars.The company has very strong market position and is financially very strong. The top notch rating companies in the USA have giving it A++ ranking. The rating companies include A.M Best Company, Fitch Ratings, Moodys Investor Service and Standard & Poors rating company respectively (MassMutual Financial Report, 2010).

MassMutual has its operations in various regions of the world including United States of America, Europe, Latin America and Asian countries respectively (MassMutual Financial Group, 2011). The financial reports of the company shows very impressive image of the company. The total adjusted capital of the company is nearly 13000 million US dollars in the domestic markets which shows 13% increase if compared to the market capital in 2009 which was 11000 million US dollars respectively. The total assets under management are approximately five hundred billion US dollars and the worldwide sales of the insurance business is over four hundred and fifty million US dollars for the year 2010 (MassMutual Financials, 2010).

Weaknesses No doubt MassMutual is among the top insurance companies in the United States but it lags at certain points too. One of its weaknesses is the number of legal proceedings against the company. The company maintains the history of legal proceedings which can have great impact on the business procedures of the company. The company is notorious for delaying the insurance payments and is involved in various bad faith insurance claims (David Law Group, 2011). Another weakness of the company is failure to strategically poise itself in the geographical regions where the returns are more than expected. It has its operations in Europe, Asia and Latin America. Asia is like a hen laying golden eggs to large number of companies. The failure of MassMutual to utilize its presence in the emerging markets of Asia like China, India etc. represents a strategic weakness of the company. Opportunities As specified in the weaknesses, MassMutual has very little geographic presence in the countries where the growth ratio is much higher. So when speaking about opportunities, MassMutual can utilize its current presence in Asia to penetrate in the markets of China, India, Bangkok etc. to expand its business portfolio and maximize its profitability and market shares. Another opportunity available to Massachusetts Mutual Life Insurance Groupis to innovate its current service offerings. The company is currently offering wide range of service like health insurance, retirement benefits, financial and investment management services respectively (Massachusetts Mutual Life Insurance Group, 2009). It can innovate its current product lines by adding more options in it like offering car insurance, child education plans etc. in their service plans to attract large number of potential and current customers.

Likewise, the demographic structure of United States of America represents the favorable structure for Massachusetts Mutual Life Insurance Group. According to the CIA world fact book (2010), there is large number of baby boomers in the US population (age range 60 and over: 20%). Most of these people have reached old age and are retired from their life-long work related duties. This market segment offers the room of opportunities to Massachusetts Mutual Life Insurance Group in the form of retirement and pension plans and offerings. Threats There are number of external threats faced by MassMutual in the domestic and international markets. Among them is the level of intense competition.The insurance markets in United States are highly competitive in nature with a large number of market players offering wide range of products. MassMutual has cut throat competition with New York Life Insurance Company, The Northwestern Mutual Life Insurance Company, Inc. and Prudential Financial, Inc. (Hoovers, 2011). Another level of threat to the company is the economic recession in the United States. The downfall in the US economy has touched all the levels of business and lives of people. It has severely affected the companies operating in the domestic markets and the demand of the customers. The demand of insurance products is directly related to the demographics of the clients and the commercial requirements of the business to business clients. If these economic conditions continued to prevail, then Massachusetts Mutual Life Insurance Group will be among the sufferers of economic recession in the markets. Likewise, another possible threat faced by Massachusetts Mutual Life Insurance Group is the changing regulations by the US and international governments. The company has to comply

with the legal requirements of the countries it operates in. Any changes in these rules, regulations; procedures can have direct impact on the business operations of MassMutual respectively.

PESTEL Analysis Political Massachusetts Mutual Life Insurance Group is involved in the political contributions via its political action committee called Massachusetts Mutual Life Insurance Group Political Action Committee (MMPAC). Through its political action committee, Massachusetts Mutual Life

Insurance Group has spent and raised over one million US dollars in the year 2010 for making political contributions to the wide range of national and state level parties (open secrets org, 2011). The political action committee of the company has spent over three hundred thousand US dollars for the year 2010 in the favor of Democratic Party (open secrets org, 2011). Economic The economic conditions of a country play an important role on determining the success and failure of a company. Most of the functions of MassMutual are in the domestic markets of America. The downfall in the economy of United States has adversely affected large number of organizations operating in United States and increased the opportunity costs associated with their business segments and operations. Moreover, these declining market conditions have increased the unemployment rate in the company. The declining economic conditions of US markets can have huge impact on the business of MassMutual.

Despite these economic conditions MassMutual is performing very well in the domestic markets. The revenues earned by the company were over twenty five million US dollars for the year 2010 in the domestic markets while its global sales were around five hundred billion US dollars from the insurance business (MassMutual, 2010). If the market conditions get worse than the current situation then this will have direct impact on the consumer buying and their likelihood of having insurance services (MassMutual Financial Report, 2010). Social In order to achieve the community involvement, MassMutual Group has established Community Foundation of Western Massachusetts to serve the needs of people from these communities. The foundation along with its not for profit organizations allies is spending in these communities in the form of various programs including charitable giving, education, academic achievement programs, scholars programs and economic development initiatives respectively (MassMutual, 2011). Likewise, the employees are given proper rewards and recognitions in the company to motivate their performance level. The company has developed performance appraisal system in the business units and is effectively educating and training their employees to sustain long term relationships (MassMutual Corporate Social Responsibility, 2007). Technological The technological advancement is vital to the success of a company in todays competitive environment where large numbers of counterparts are ready to snatch the market share of a company. The business operations and processes are significantly dependent on the latest information technology systems. The Massachusetts Mutual Life Insurance Group has

implemented the latest information technology systems to facilitate the flow of information within the offices and all the other business divisions (MassMutual, 2011). The company is offering specialized intranet services to its clients and business partners for the improved information systems and the offerings by the company (MassMutual, 2011). This intranet site services helps the company communicate about its products and services in a much better and advanced way to the clients and boosts its online presence to many folds. The company has recently won awards for maintaining up to date contact centers and the specialized customer services centers with excellent customer relationship officers to guide the clients at the various levels of service (Vaid, 2010). Environmental The products and services offered by Massachusetts Mutual Life Insurance Company do not have direct impact on the environment and the nature but it strives to maintain its processes and operations in a environmental friendly way. The company is a member of OCHA environmental compliance program and is working hard to reduce its footsteps on the environmental safety. The environmental management objectives of the company are to prevent the adverse environmental effects of the business and to utilize the benefits of better environmental procedures.

As result of its environmental stewardship, the company is effectively engaged in the recycling of wastes and costs wherever it is possible including recycling the paper, reducing the costs by maintaining control in the office supplies, updating the entire energy system to reduce the use of energy in the current office premise etc. (MassMutual, 2007).

Legal Many insurance companies are in a practice to save their money by delaying the settlement funds asked by the customers as long as they can. This strategy allows them to make and save money. They make the investigations extremely very costly for the individual clients that it makes difficult for them to afford the investigations. Some of the legal proceeding against the company includes: dividend claims (MassMutual v. William A Karges), bad faith claims, insurance coverage disputes (Davis Law group, 2011),Investors file class action lawsuit against MassMutual seeking to recover losses in Madoff scandal (Freeman, 2008), delaying payment claims (Legal Malpractice News, 2009), fraud and breach of duty regarding the payment of dividends (Rumpf V. Massachusetts Mutual Life Insurance, 2004) and various other lawsuits. These legal proceedings have greatly affected the public image and goodwill of the company in the domestic markets.

Porters Five Forces Analysis

Porters Five Forces Analysis helps the managers to understand the market position and the effectiveness of business strategies of a firm with reference to five micro and macro level environments (Porter, 2008). These five forces include Competition, New Entrants, and Buyers Power, Suppliers Power and Substitute Products and/or services respectively. The Five Forces Analysis for Massachusetts Mutual Life Insurance is as follows: Rivalry among established competitions

The level of competition among the existing competitors in the industry is very stiff. The top three competitors of Massachusetts Mutual Life Insurance are New York Life Insurance Company, The Northwestern Mutual Life Insurance Company, Inc. and Prudential Financial, Inc. (Hoovers, 2011). The costs of medical care are main drivers of the demand of the customers in the industry. The success of the companies in the markets and their profitability is dependent on the operations and performance in the markets. Their ability to obtain favorable contracts with the medical and health care personnel is highly related to their market success (Hoovers, 2011). Bargaining power of suppliers The bargaining power of suppliers is dependent on their power to affect the prices of supplies of their own choice.The suppliers have no such power in the insurance industry and therefore it is not a big threat to the companies operating in markets. But the threat that exists is that suppliers are taking away human capital. This industry is entirely based on the human capital. If a talented person is working in the small company or in a company that maintains its niche in the market, then there likely to be the case of snatching that human capital by the large companies from those small companies.

The bargaining power of buyers The individual buyers do not have much power to influence the insurance industry at large. The large corporate clients and other related businesses pay large sums of money as health insurance premium to these companies. These market players in the insurance industry long to get high margin corporate clients.

The threat of substitute products or services

The threat of substitutes is very high in the insurance industry as there are plenty of substitutes available in the market. Many of the firms offer the services that are similar to that of large companies. There exists high level of competition on all the grounds whether it is auto insurance or health insurance. There are companies operating in the markets that offers unique products and services to their customers and have competitive advantage over their counterparts which depends on the size of their business segments.

The threat of the entry of new competitors

The industry imposes certain barriers to the entry of the new companies in the markets. This means that the level of threat of new entrants is relatively low in the industry. There are varying reasons to the low rate of entry. Among them is the entry barriers imposed by the industry. The new entrants will have to comply with the governmental regulations in order to make their entry in the markets. Then the existing players are protected by the number of barriers which makes it difficult for the new entrants to give hard time to them. Among them are: entry restrictions, tariff rates, high capital requirement, distribution channels etc. These barriers limit them to compete against the existing market players.

Recommendations This study provided brief overview on the external environment analysis of Massachusetts Mutual Life Insurance Group. The findings of the study suggested that Massachusetts Mutual Life Insurance should focus on the following factors in order to excel its business and social image in the world:

1. MassMutual can expand its business portfolio further in the Asian countries especially the emerging markets like China and India etc. 2. It can increase its social and community involvement to improve its social image ruined by the legal proceedings against the company. 3. The company can expand its existing product portfolio by including various other services to attract the large number of potential customers. 4. MassMutual can tap the untapped domestic markets like the baby boomers etc. to expand its customer base.

References Davis Law Group (2011) MassMutual Insurance Company, retrieved on July 22, 2011 from http://www.injurytriallawyer.com/library/legal-action-against-massmutual-davis-law-group.cfm CIA World Fact Book (2010) United States, retrieved on July 22, 2011 from https://www.cia.gov/library/publications/the-world-factbook/geos/us.html Court of Appeals of South Carolina (2011) Rumpf v. MassMutual 2004, retrieved on July 22, 2011 from http://caselaw.findlaw.com/sc-court-of-appeals/1292665.html Freeman, S. (2008) Investors file class action lawsuit against MassMutual, retrieved on July 22, 2011 from http://www.masslive.com/news/index.ssf/2008/12/investors_file_class_action_la.html Harp (2002) MassMutual v. William A karges, retrieved on July 22, 2011 from http://www.harp.org/mmlic.htm

Hoovers (2011) Competitive Landscape, retrieved on July 21, 2011 from http://www.hoovers.com/company/Massachusetts_Mutual_Life_Insurance_Company/cfyfri-11njea3.html Huff Post (2010) US Supreme Court Ruling, retrieved on July 22, 2011 from http://www.huffingtonpost.com/2010/07/27/disclose-act-faces-gop-fi_n_660461.html Legal Malpractice News (2009) A Particularly Shocking Judiciary Law 487 and Legal Malpractice Case, retrieved on July 22, 2011 from http://blog.bluestonelawfirm.com/legalmalpractice-news-a-particularly-shocking-judiciary-law-487-and-legal-malpractice-case.html

Massachusetts Mutual Life Insurance Group (2009) Condensed Consolidated Statutory Financial Statements, retrieved on July 22, 2011 from http://www.massmutual.com/mmfg/pdf/2009Q2_mmsub_stat.pdf MassMutual (2007) Corporate Social Responsibility Report, retrieved on July 22, 2011 from http://admin.csrwire.com/system/report_pdfs/516/original/1208540174_MMCorpRespReport.pd f (2010) Our Business, retrieved on July 22, 2011 from http://www.massmutual.com/mmfg/docs/annual_report/our-business/ (2010) Financials, retrieved on July 22, 2011 from http://www.massmutual.com/mmfg/docs/annual_report/financials/ (2011) Corporate Social Responsibility, retrieved on July 22, 2011 from http://www.massmutual.com/aboutmassmutual/corporateresponsibility/community/ (2011) Financial Reports 2010, retrieved on July 21, 2011 fromhttp://www.massmutual.com/mmfg/pdf/mm_annual_report.pdf (2011) Technology, retrieved on July 22, 2011 from http://www.massmutualcareers.com/advanced-support/technology.aspx Open Secrets Org (2011) Massachusetts Mutual Life Insurance Group, retrieved on July 22, 2011 from http://www.opensecrets.org/pacs/lookup2.php?strID=C00118943&cycle=2010 Porter, M. E., (2008) The Five Competitive Forces that Shape Strategy, Harvard Business Review, p.86-104, retrieved on July 21, 2011 from http://hbr.org/2008/01/the-five-competitiveforces-that-shape-strategy/ar/1

Fortune (2010) Massachusetts Mutual Life Insurance, retrieved on July 21, 2011 from http://money.cnn.com/magazines/fortune/fortMassachusetts Mutual Life Insurancene500/2010/snapshots/2359.html Vaid, V. (2010) Insurance Technology - MassMutual Secures Gold among Top Contact Centre Performers, retrieved on July 22, 2011 from http://insurancetechnology.tmcnet.com/topics/insurance-technology/articles/101712-massmutual-secures-goldamong-top-contact-centre-performers.htm