New England Mutual Life Insurance Company
New England Mutual Life Insurance Company
501 Boylston Street
Boston, Massachusetts 02117
Fax: (617) 578-3776
Assets: $16.75 billion
New England Mutual Life Insurance Company is a broadbased corporation offering insurance, personal financial services, and institutional investment. Its subsidiaries offer diverse services, including commodity trading advice; estate equity management; private financing to small and midsized companies; financial, educational, and planning services; brokerage of mutual funds; investment partnerships; individual retirement accounts (IRAs); and marketing and sales support to other New England subsidiaries.
In April 1835 Willard Phillips, a Massachusetts lawyer, chartered and founded New England Mutual Life Insurance Company. The New England issued its first life insurance policy in February 1844.
Phillips was influenced strongly throughout his life by his New England heritage. A writer on law, insurance, and economics, Phillips was involved in politics, his law practice, and scholarship sufficiently to see a need to form a life insurance company. In 1835 interest in life insurance was increasing. William Lloyd Garrison had begun to speak out against slavery; public education was a concern to Horace Mann; and Willard Phillips saw the need for the ordinary man to accumulate capital through frugality and savings. His company, with mutual ownership at its core, would give dividends back to the policyholders, the dividends being the return of excess premiums collected to cover safely the worst possible contingencies.
The charter for the New England Mutual Life (NEL) contained a clause providing that each year the Massachusetts General Hospital would be paid one third of NEL profits. All insurance companies chartered by the Massachusetts legislature were subject to the same provision. Eventually amended to provide the hospital with one third of profits over 6%, the legal rate of interest, this provision cut down on the early profitability of NEL. Among the original subscribers were prominent Bostonians like Josiah Quincy, John Lowell, Charles Curtis, Charles Francis Adams, Samuel Eliot, and Copley Greene.
Agents soon were selling policies and were paid 5% commission on the first year’s premium and 2.5% commission on following years. Married women who had policies written before marriage were allowed to have their policies continue intact, payable separately from their husbands’ estates. Willard Phillips petitioned the legislature for this change, which was an early victory for women’s rights.
The first dividends—20% of the policy premium—were paid by NEL in 1848. Dividends could be paid in cash, used to reduce future premiums, or used to buy additional insurance, as the insured preferred.
Elizur Wright joined NEL in 1844. In 1858 he became one of two insurance commissioners in Massachusetts. Wright, who was shocked by abuses in the British insurance industry, introduced progressive ideas at NEL such as lower rates to non-drinkers and extended coverage to the elderly. He also devised a method of calculating early reserve valuation tables, which was eventually legislated for use and adopted by all insurance companies.
Benjamin F. Stevens became president of NEL in 1865. He was to remain as president until 1908. In 1865 he chaired the Chamber of Life Insurance, the first insurance trade association. Stevens had worked for Willard Phillips and NEL as secretary of the company. He was a member of the crew on the U.S.S. Constitution on its around-the-world tour in 1844. The Constitution would, in 1956, be used as the NEL logo.
During Stevens’s term as president, the agency commission of NEL rose to 15% of the first year’s premium and 7.5% of following years. Stevens had NEL pay “fair compensation” to the agents and was not swayed by competition from other companies.
In 1868 NEL opened an office in London, but it closed in 1872. Differing political, social, and economic conditions in England and other countries showed NEL that mutual life insurance was not yet salable outside the United States.
Despite the economic fluctuations of 1869 and 1873, NEL prospered. In 1885, NEL’s 50th-anniversary, total insurance in effect was $65 million. The company had expanded to other states, such as Maine and Alabama, despite the poor economy.
In November 1872, the Great Boston Fire destroyed 65 acres of Boston real estate. NEL was then located at 39 State Street, near the area burned. Securities and other valuables were removed from the office by company officer Dwight Foster. The NEL building, however, escaped the fire. When Boston was rebuilt, the NEL State Street property was taken by eminent domain, and NEL built another headquarters at 87 Milk Street, where it remained from 1873 to 1941.
During World War I, NEL, as it had done during the Civil War, issued new insurance policies to servicemen with an extra war-risk premium of $37.50 per $1,000. One-third of the premiums paid was refunded after the war. The influenza epidemic of 1918 caused NEL to pay claims that were 50% greater than those paid during the war.
As early as 1908, NEL began to use independent auditors to review the company books. Many companies simply relied on state examiners.
Alfred Foster served as president of NEL from 1908 to 1921 and Daniel F. Appel, vice president, became president in 1921. Appel had been with NEL for 28 years. He had been superintendent of agencies and secretary of the company in 1905. When Appel became president, George W. Smith became vice president. Smith started with NEL as an actuarial clerk and had been a vice president of the agency and underwriting divisions.
In 1932, during the Great Depression, life insurance company security values were based on 1931 quotations; otherwise many companies would have appeared insolvent. It was not until 1940 that security values, bonds, and mortgages were again carried at amortized rates. At NEL, George Smith wisely purchased short-term treasury bills to keep the company liquid. Despite the economy, NEL paid its claims.
In 1933 the Securities and Exchange Act was passed. Although NEL and other insurance companies did not issue securities directly, they did buy them through investment bankers and securities dealers. To avoid the strict rules of SEC registration, investment bankers and securities dealers then began to “privately place” unregistered securities on behalf of insurance companies.
In the 1930s, insurance companies began to sell an increasing number of group insurance policies, along with corporate pensions. Aetna, Travelers, Metropolitan, and Prudential had high rates of success in the group insurance market. NEL saw group insurance as highly competitive, but began to sell individual group policies to a selected clientele comprised of small pension trusts, partnerships, and people with estate problems. NEL became a leader in this area.
George Smith served as president from 1928 to 1951. He built a new headquarters on Boylston Street for $2.5 million. The old headquarters on Milk Street was eventually torn down, and the land was sold to the city of Boston.
During World War II NEL and other companies placed war clauses in policies for servicemen that provided only for a return of premiums as a death benefit. This was in contrast to policies for servicemen in World War I and the Civil War, when coverage was provided at extra cost. NEL had 250 home office and field associates in the U.S. services locations.
O. Kelley Anderson, who had started with NEL as a director in 1947, was elected president of NEL in 1951 and served until 1966. During those years the company grew steadily. Individual sales, stock values, and investment earnings grew. Overall costs to policyholders dropped.
Anderson, who was in the investment-trust industry before joining NEL, now directed the company into the group life market, as well as group health. Walter Tebbets was hired to spark this effort. In 1952 and 1953 the approach to the group life market proved successful, and the NEL board approved the entry into the disability and hospital insurance markets. By 1964 group life covered 226,000 employees, and $1 billion of insurance was in effect. Group life was 16% of new insurance sold. Group health in 1966 was $12.9 million and group annuity was $10.9 million.
In 1957 NEL purchased a UNIVAC II computer, and in 24 months all punch card records were transferred to the computer. NEL reassigned with no reduction in pay any employee affected by the computerization of the records. No NEL employee lost a job because of it. In 1962 NEL built a $7.5 million addition to its building.
The Anderson years showed a shift in the distribution of assets at NEL. Decreases were made in federal and state bonds, public utilities, and railroads. Increases were made in industrial bonds, common stocks, and mortgage loans. Anderson resigned from NEL as chairman and director in 1971.
Abram T. Collier became president of NEL in 1966. A lawyer and general counsel at John Hancock before coming to NEL, Collier was a director of New England Merchants Bank. He quickly developed new equity products. Collier attempted to get employees to work together in solving problems and started a progress sharing plan as an incentive for employee savings. A deferred compensation plan was started for agents, and financial seminars with advice from attorneys, trust officers, and accountants were offered.
Collier involved NEL in the equity investments market to develop new capital for both the company and policy holders. A then-recent change in Massachusetts law enabled life insurance companies to purchase a majority of shares in corporations the business of which was supplementary or complementary to life insurance. NEL purchased Loomis, Sayles & Company, an investment counseling firm, with $2 billion in assets. The purchase was of 75% of Loomis stock, with 25% retained by Loomis. By 1983, after 15 years, assets of Loomis had grown to $12 billion. In 1990 Loomis had $21 billion under management.
During the Vietnam War NEL and other insurance companies participated in the Urban Investment Program making $1 billion available in loans to finance black business, housing, and other inner city needs. An additional $1 billion was subsequently advanced.
In the 1970s NEL entered the real estate investment trust (REIT) market, as real estate market prices and stocks continued to appreciate. In 1990 NEL’s subsidiary, Copley Real Estate Advisors, had $11 billion in assets under management, including the company’s new headquarters on Boylston Street in Boston. NEL occupied 25% of the building and Copley Real Estate rented out the additional 520,000 square feet. The revenues are split by NEL and Copley.
In order to manage the REIT program in the 1970s, NEL set up its own mortgage investment pool. It borrowed $50 million at 7.75% and reinvested it at 9.25% during the 1974-1975 recession. In order to curb inflation in the real estate investment program, NEL issued loans with the reserved right to call them after 10 years, even if the loans were initially written for 20 or 30 years.
In late 1960s and early 1970s NEL changed computers from UNIVAC to IBM. All individual policies and dividend valuations, as well as accounting, investment, group, and other procedures, were added to the new computer, which brought the agencies into closer contact with the home office.
In 1969 Ted Phillips, to become NEL president in 1974, joined the company in charge of home-office administration. A lawyer with John Hancock, Phillips was also a fellow in 1965 with Brookings Institute in Washington, D.C., where he worked on legislation concerning the federal Department of Health, Education and Welfare.
In 1969 the Massachusetts legislature increased premium taxes for out-of-state as well as domestic insurance companies. In addition, Massachusetts insurance companies were taxed 1% on gross investment income. This put NEL and other Massachusetts insurance companies at a disadvantage with their out-of-state insurance competitors. In 1978 premium taxes levied on Massachusetts companies were replaced with a stipulation that insurance companies invest $100 million over five years into the Massachusetts economy through the Massachusetts Capital Resources Corporation.
John A. Fibiger was hired in 1973 to boost group insurance sales, and the long term group disability and group variable annuity markets were explored.
In 1969-1970 and 1974-1975, a large number of policy loans were made by astute investors who could reinvest the proceeds at higher interest rates. NEL attempted to influence the Federal Reserve Board for higher and more flexible policy loan rates. Attempts were not unsuccessful.
In the 1970s the agency structure was strengthened. Agents were permitted to sell products other than life insurance. From 1974 to 1976 several new projects were undertaken and completed: new policy lines were written, computer conversion was completed, new group-annuity products were developed, the real estate mutual fund and investment counseling businesses were developed further.
NEL showed its first loss in 1985, an $11.8 million operating loss. In 1986, however, a $6.5 million operating gain, made possible by a $38 million tax break, appeared as a hefty $177 million gain. The explanation for this circumstance is that the National Association of Insurance Commissioners allowed realized investment gains to be moved up into the bottom line for overall operations.
In 1981 Ted Phillips became chief executive and chairman. John Fibiger became president. Phillips and Fibiger began a detailed analysis of the company and its potential. A new mission statement was set forth. Phillips and Fibiger saw the company as a broad-based financial institution with growth as a goal, supplying first-quality services in a multitude of different markets. NEL purchased Covenant Life Insurance, in 1981, in order to have a stock subsidiary available in planning for the future. It was renamed Connecticut Life Insurance Company.
In positioning the company for the 1980s and beyond, the company took several steps away from the traditional. Individual policies were revised to project very low net costs. The Vanguard series of new policies treated non-smokers as preferred risks, increased interest rates on policy loans to 8%, and allowed dividends to reflect federal tax deductions. Other Vanguard series provided for lower dividends in early policy years with higher dividends in later years. NEL in 1981 introduced universal life policies with flexible premiums. In 1983 variable life was introduced, with investment options in stocks, long-term bonds, or money-market instruments.
In 1982 NEL mutual funds had substantial assets. One of them, NEL Cash Management Fund, had assets of $847 million. The NEL Equity Services Company offered instruments that provided investment with tax advantages. Discount brokerage was offered in 1983. NEL agents could now compete better with banks, security firms, and others.
By 1985, 55% of NEL professional and managerial positions were filled by women. Equal opportunity and affirmative action policy at the company were programs sponsored by presidents Abram Collier and Ted Phillips.
The company in 1989 had total assets of $16.75 billion with $77.4 billion of insurance in force. It expected to continue in the 1990s as a leader in life and health insurance coverage and to offer many other diversified financial products.
New England General Life Insurance Company; New England Variable Life Insurance Company; New England Financial Advisors; New England Investment Companies, Inc.; New England Institutional Marketing.
Clark, Sydney A., The First Hundred Years of the New England Mutual Life Insurance Company: 1835-1935, Boston, New England Mutual Life Insurance Company, 1935; Collier, Abram T, A Capital Ship, New England Life: A History of America’s First Chartered Mutual Life Insurance Company 1835-1985, Boston, New England Mutual Life Insurance Company, 1985; Suskind, Ron, “Matters of Life and Death,” Boston Business, June 1, 1988.
—John D. Cathcart