Built on more than a century-and-a-half of financial strength and
\ncustomer service, Massachusetts Mutual Life Insurance Company
\n(MassMutual\u00ae) is a leading mutual life insurance company that is run for
\nthe benefit of its members and participating policyowners.1 MassMutual
\noffers a wide range of protection, accumulation, wealth management, and
\nretirement products and services.<\/p>\n
Strength and stability
\nOur continued financial strength supports
\nthe value of our products and services.
\nOur clients trust us with their long-term
\nfinancial protection, and effective investment
\nmanagement is an essential factor in supporting
\nthat trust. As recent history has confirmed,
\ninvestment markets can be volatile, and it is
\nreassuring for our policyowners and clients to
\nknow that they can depend on MassMutual. The
\ncompany has been continually guided by one
\nconsistent purpose: We help people secure their
\nfuture and protect the ones they love.<\/p>\n
Mutuality
\nAs a mutual life insurance company, we
\ndo not have shareholders. We operate
\nfor the benefit of our members and participating
\npolicyowners. We are able to take a long-term
\nview when investing and focus less on
\nshort-term fluctuations in asset values.
\nWe are long-term investors concerned with
\nmeeting commitments that stretch far into
\nthe future.<\/p>\n
Diversity
\nOur investment management expertise,
\nwhich is integral to the success of our company
\nand our products, is drawn primarily from our
\ninvestment subsidiary: Barings, a public and
\nprivate fixed income, real estate, and equity
\nmanager with global investment expertise
\nand reach.
\nYou should be confident that the company
\nproviding you with financial services is strong
\nand will be there to help you, not just now
\nbut well into the future. MassMutual offers
\nthat confidence so you can worry less about
\nthe future and spend more time enjoying the
\npresent. A key reason you can trust MassMutual
\nis our approach to investing.<\/p>\n
Investment philosophy
\nMassMutual and Barings, the primary investment adviser for MassMutual\u2019s
\nGeneral Investment Account (GIA), share the same philosophy relative
\nto the investment of policyowner assets. This philosophy provides the
\nframework for GIA portfolio construction and investment decision-making.
\nThe following are the keys to our approach.<\/p>\n
In our pursuit of consistent long-term
\nreturns, we use a two-pronged approach
\nto manage the GIA.
\n\u2022 A top-down process, where we work to
\nidentify the global economic and market
\nfactors that will drive returns across asset
\nclasses and seek to optimize the portfolio
\nallocation across these classes.
\n\u2022 A bottom-up approach, where our
\ninvestment professionals identify
\nindividual investments that offer
\nthe appropriate level of risk\/reward
\nrelative to alternatives.
\nThrough the regular application of this approach,
\nwe seek to position the portfolio to capture
\nevolving opportunities, while remaining invested
\nacross a variety of asset classes to incorporate a
\nsignificant level of risk diversification.
\nWe believe that one cannot consistently
\npredict the level or direction of markets.
\nAs a result, diversification is a prudent,
\nappropriate response to managing risks
\nthrough market fluctuations.<\/p>\n
Diversification within and across asset classes
\nincreases the opportunity to capture positive
\nreturns across issuers and sectors while
\nminimizing the impact of underperformance.
\nOther components of our approach include:
\n\u2022 Through rigorous analysis, our investment
\nprofessionals use a relative value
\napproach to security selection, seeking to
\nbuy undervalued securities and sectors,
\nwhile selling those more fully valued. A
\nregular assessment of value allows us to
\ncapitalize on market inefficiencies in the
\nvaluation of securities, sectors, and
\nasset classes.
\n\u2022 We rely on experienced teams of
\nspecialists focused on a range of
\nsectors to help manage the GIA. Our
\ncommon goal is the success of the
\noverall enterprise rather than the
\nsuccess of specific sectors, resulting in a
\ncollaborative approach where objective
\nanalysis can produce optimal long-term
\ninvestment performance.<\/p>\n
We regularly assess the risk and return
\npotential of developing asset classes to
\nidentify opportunities to enhance the
\nlong-term performance of the GIA.
\n\u2022 In assessing investment opportunities,
\nwe distill the numerous factors that
\ncan impact value down to basic,
\nunderstandable concepts to facilitate
\ncomparison. It pays to be skeptical of
\nopportunities that are unrealistic or
\nnot credible.<\/p>\n
Ultimately, our objective is to profitably
\ngrow the GIA for the benefit of the
\npolicyowners. The continual review,
\nrefinement, and application of our
\ninvestment process support
\nthat objective.
\nAsset Class Statement Value
\n($ Millions)
\n% of Total
\nInvested Assets
\nPublic Bonds3 $55,550 23.7%
\nPrivate Bonds 69,889 29.8
\nEquity4 1,867 0.8
\nMortgage Loans5 24,419 10.4
\nPolicy Loans 17,294 7.3
\nReal Estate Equity6 355 0.2
\nPartnerships & LLCs7 12,342 5.2
\nShort-Terms & Cash 5,255 2.2
\nOther Invested Assets8 47,882 20.4
\n$234,852 100.0%<\/p>\n
Overview
\nThe GIA consists primarily of assets that support
\nour insurance and retirement products. We
\norganize the assets into smaller portfolios
\nto better manage the assets relative to the
\nliabilities. The nature of the product liabilities
\nserves as the foundation for the investment
\npolicies that are developed for each portfolio.
\nAn investment policy provides the general
\nframework for how a portfolio is constructed
\nand managed by specifying acceptable levels
\nof exposure to issuers, asset sectors, asset
\nclasses, and other dimensions of diversification.
\nPut another way, investment policies integrate
\nthe liabilities\u2019 return objectives, sensitivities
\nto changing economic conditions, expected
\ncash flows, risk tolerances, and other factors
\nto help determine portfolio composition.
\nWe use both quantitative and qualitative
\napproaches to analyze the liabilities in normal
\nand stressed environments. By developing
\na deeper understanding of the liabilities and
\ntheir behavior in different environments, we
\nare better able to develop an appropriate
\ninvestment policy and strategy. The asset
\nportfolios are constructed and managed within
\nthese allowable ranges to support the return
\nobjectives of the liabilities.<\/p>\n
Asset\/liability
\nmanagement (ALM)
\nALM is a key component of our approach to
\nmanaging the GIA and involves the analysis of
\ncash flows and maturities of the liabilities and
\ntheir corresponding assets. These cash flows
\ncan differ based on their sensitivity to various
\neconomic conditions. Duration is the sensitivity
\nof a security\u2019s price to changes in interest rates.
\nWe project liability cash flows under various
\neconomic and behavioral scenarios for the
\nproducts supported by each portfolio. We then
\nconstruct asset portfolios with duration profiles
\nsimilar to those of the liabilities. By closely
\nmanaging the duration of the assets relative to
\nthat of the liabilities, we strive to mitigate the
\nimpact that changes in interest rates will have on
\nour ability to meet policyowner needs.
\nDerivatives are an integral component of our
\nALM and portfolio management processes.
\nDerivatives are instruments whose returns are
\nbased on, or \u201cderived\u201d from, the performance of
\nother securities or market indices. They include
\nsuch widely used financial tools as swaps,
\nfutures, and options. Derivatives may offset
\nasset or liability risks, provide additional return,
\nor both. Some derivatives are particularly useful
\nfor managing interest rate risk and MassMutual
\nuses derivatives extensively for this purpose.
\nSome derivatives may be combined with other
\ninvestments to capture incremental returns or
\nto mirror the economics of conventional bonds
\nwhile gaining exposure to issuers or security
\ntypes that might otherwise be unavailable. It is
\nimportant to remember that most derivatives
\nare collateralized, either directly with the
\ntrade counterparty or indirectly through a
\nclearinghouse. Either way, this means that the
\nmarket value of a contract is backed by cash
\nor high quality securities held in trust. Finally,
\nMassMutual does not use derivatives for
\nspeculative purposes.<\/p>\n
Liquidity management
\nLiquidity management works in conjunction with
\nALM to ensure MassMutual has the ability to
\nmeet policyowner needs while not forcing the
\nsales of assets at inopportune times. Cash flow
\nand liquidity needs are routinely addressed as
\npart of the investment management process. We
\nalso perform periodic liquidity stress testing to
\nreview both potential needs and the sources of
\nthese needs. This analysis of possible demands
\non portfolio liquidity under adverse scenarios
\nconfirms that the company continues to have
\na strong liquidity position. The GIA maintains
\na large share of its assets in high-quality public
\nbonds and short-term investments that can be
\nsold quickly and easily to satisfy policyowner
\nand client needs, if necessary. However, such
\nsales are unlikely as the company has historically
\nenjoyed strong positive cash flow. Moreover,
\nMassMutual has a $1.5 billion commercial
\npaper program which permits it to borrow on
\na short-term basis for various corporate needs
\nand $6 billion of secured borrowing capacity<\/p>\n
with Federal Home Loan Bank of Boston (FHLB
\nBoston). While our liquidity planning does not
\nrely on the ability to issue commercial paper
\nor borrow from FHLB Boston, they add to our
\nfinancial flexibility.<\/p>\n
Risk management
\nPortfolio, ALM, and liquidity analysis help
\nto monitor and manage the investment risks of
\na portfolio. Investment risks exist in different
\nforms, including but not limited to the following:
\n\u2022 Interest rate risk, or a change in
\ninterest rates, can change the fair value
\nof debt securities.
\n\u2022 Credit risk, or the ability of the borrower
\nto repay the interest and principle of the
\nloan, can impact the value of a bond.
\n\u2022 Default risk can impact the value
\nof a bond, even in the event of
\neventual repayment.<\/p>\n
Prepayment risk, or the risk of changes in
\nthe timing of cash flows from a security,
\ncan impact the duration management of
\nthe portfolio
\n\u2022 Liquidity risk is the risk that you can\u2019t sell
\na security at a fair value
\nWorking within these risk parameters, the goal
\nof prudent portfolio management is to structure
\nthe risk\/reward profile of the investment
\nportfolio in an optimal manner relative to the
\nliabilities. Sophisticated quantitative techniques
\nand systems are used to measure and monitor<\/p>\n
exposures to the investment risks. Various
\nstrategies are employed to protect our portfolios
\nfrom adverse consequences that might arise
\nfrom significant changes in the economic
\nenvironment. Our value-driven investment
\napproach leads us to consider a broad range
\nof investments for potential purchase. Riskier
\ninvestments may be purchased when we are
\ncompensated for the risks involved. However,
\nthere are issuer and overall quality limits for
\neach portfolio and for the entire GIA.<\/p>\n
Portfolio construction
\nWe employ a disciplined approach to portfolio construction.<\/p>\n
Beginning with the potential universe of
\nsecurities as defined in the investment policy,
\npotential and current investments are viewed
\nthrough risk\/reward and economic frameworks.
\nThe former incorporates relative value and
\nrisk perspectives, while the latter considers
\nthe sensitivities to economic variables.
\nDiversification across these perspectives
\nincreases the likelihood of achieving the
\ninvestment objectives with reduced volatility,
\nwhile limiting the impact of a potential loss
\nfrom any one security, issuer, or event. Prudent
\nportfolio construction dictates that we focus
\non both the return of and return on principal.
\nPrincipal losses on investments require that the
\nremaining assets generate higher returns on
\nprincipal to maintain expected portfolio returns.
\nReflecting the conservative approach that best
\nhelps us provide value to our policyowners,
\nthe core of our GIA is comprised of bond
\nholdings, or debt instruments issued by
\ngovernments, corporations, and other entities.
\nThe conditions and expectations related to the
\ndebt of specific issuers determine the relative
\nvalue and expected performance of a security.
\nIndustries and security classes differ as to their
\nsensitivity to economic cycles, the impact of
\nfuture conditions and events, and idiosyncratic
\nrisk factors, leading us to regularly monitor
\nmarket conditions as we assess relative value.
\nA by-product of this monitoring is our ability to
\nregularly invest in attractive opportunities while
\nlimiting or reducing our exposure to fully valued
\nsectors. This consistent approach translates into
\nholding investments across vintage, sector, and
\nmaturity spectrums, allowing us to harvest the
\ngains from some, while providing others with
\nmore time to develop. By always being in the
\nmarket for opportunities, we believe we
\nincrease our awareness of and access to
\nattractive opportunities.
\nFinally, the regular cash flow of a debt
\nsecurity helps provide the funds we use to
\npay policyowner benefits and enables us to be
\nsteady asset buyers in all market environments.
\nConsistent market participation across asset
\nclasses promotes market intelligence. Other
\nasset classes in which we invest can provide
\nreturns in the form of price appreciation,
\ndividends, earnings, or other distributions
\nthat may, unlike the required coupon of a debt
\nsecurity, fluctuate in value.<\/p>\n
Sector overview: Putting it all together
\nOur general approach to security selection begins with analyzing issuers
\nand then determining the appropriate way to invest in them. The issuer
\nprovides diversification, while the security provides a method to assess
\nrelative value.<\/p>\n
Government debt
\nU.S. government and agency debt have
\nappeal for their typically lower relative credit
\nrisk, high level of liquidity, and extensive
\nrange of maturities. As a result, these issues
\nare important components of our liquidity
\nmanagement and ALM processes.
\nCorporate debt
\nCorporate debt provides an opportunity
\nto invest in a range of companies, industries,
\ncredit ratings, and maturities that provide yields
\ngreater than those earned by government debt.
\nWhile investing in corporate debt introduces
\ndefault risk, diversification serves to reduce the
\npotential adverse impact. We reduce the risk
\nfurther by limiting exposure to individual issues,
\nissuers, and industry sectors. We have included
\nseveral tables that we believe provide insight
\ninto how we manage the bond portfolio. In the
\ntable below, you will note the low absolute level
\nof exposure in the top 10 long-term corporate
\nbond obligors, while in other tables you will
\nsee a high level of industry diversification
\nand limited exposure to lower-rated issues.
\nThe largest long-term corporate bond obligor
\nrepresents less than 0.2% of Total Invested
\nAssets, while the 10 largest long-term corporate
\nbond obligors combined are 1.0% of Total
\nInvested Assets. Our average exposure across
\nobligors remains relatively small as we maintain
\nbroad diversification.<\/p>\n
Products exist for a number of collateral
\ntypes, including corporate bonds, leveraged
\nloans, commercial mortgage loans, residential
\nmortgage loans, and other types of lending to
\nbusinesses and consumers. Securities backed by
\nleveraged loans are referred to as collateralized
\nloan obligations (CLOs). We manage and invest
\nin CLOs, and have developed specialized
\nanalytic systems to help us look through these
\nstructured securities to the underlying collateral
\nto facilitate evaluation and analysis. Purchase
\nof these instruments for our portfolios arises
\nnaturally from the consistent application of
\nour value-driven investment philosophy, which
\nseeks the most attractive risk\/reward available
\nfrom the array of suitable investments. In
\naddition to our securitized exposure, we invest
\nin residential mortgage loan pools. These are
\nsimilar to publicly traded mortgage pass-through
\nsecurities, but they are whole loans and not
\nsecuritized. As a result, they typically have
\nhigher yields than residential mortgage-backed
\nsecurities (RMBS) while providing more stable
\ncash flows than the typical RMBS. A majority
\nof the $4.3 billion of loans underlying these
\npools have government support from either the
\nFederal Housing Administration or Department
\nof Veterans Affairs.
\nCommercial real estate
\nInvesting in commercial real estate provides
\nanother source of potentially attractive returns
\nthat are less correlated with other asset classes
\nand helps to diversify risks across a wider
\nvariety of sources. Our affiliated asset manager,
\nBarings, handles the vast majority of our real
\nestate investment management. Consistent with
\nother members of the investment management
\norganization, its goal is to generate value for
\nthe policyowners.<\/p>\n
Commercial mortgage loans (CMLs) are one of
\nthe three primary methods we have for investing
\nin the sector. CMLs are secured by all major
\nproperty types including office, apartment,
\nretail, industrial, and hotel. As shown in the
\ncharts on page 13, our year-end 2022 holdings
\nof $20.2 billion, or 8.7% of Total Invested
\nAssets, are diversified geographically and by
\nproperty type, and are typically secured against
\nproperties with stabilized cash flows. The direct
\ninvestments in CMLs enable extensive up-front
\ndue diligence and offer the ability to structure
\nloan terms and covenants that can help mitigate
\npotential risks associated with future property
\nperformance. Using our network of regional
\noffices, we rely on commercial real estate
\nprofessionals from both the debt and equity
\ndisciplines to proactively monitor, identify, and
\nassess local market trends. This same level of
\ndiligence and surveillance is continued through
\nthe life of the loan, with a dedicated team
\nof asset managers that closely monitors the
\nongoing performance of the borrower in
\nrelation to the markets and the borrowers\u2019
\nbusiness plans.
\nWe use a similar approach when investing in
\ncommercial mortgage-backed securities (CMBS).
\nWe are opportunistic participants in this
\nsector, with a bias toward the highest quality
\nissues where we underwrite the underlying
\nloans as part of our analysis. We participate
\nwhen conditions are favorable or when the
\nopportunities would complement our CML
\nportfolio. At year-end 2022, our CMBS holdings
\nwere $1.9 billion of which over 82.2% were
\nconsidered investment grade by the NAIC.
\nOverall, we have assembled a portfolio of
\nCMLs and CMBS to well-qualified borrowers
\nwhose loans are backed predominantly by
\npriority secured liens against properties with
\nstabilized cash flows. As a result of our ability
\nto direct control of the underlying real estate
\nin distressed situations, we emphasize CMLs
\nover CMBS, but both play a part in constructing
\na diversified portfolio best able to generate
\nattractive long-term returns for the GIA.
\nEquity investments
\nWhile the investment strategy of the GIA is
\nfocused predominately on high quality fixed
\nincome assets, the GIA does have an appetite
\nfor equity assets, including real estate equity.
\nEquity investments provide another means
\nfor investing in diverse issuers. Benefits of
\nequity investing include the opportunity to
\ncapitalize on changing prospects for companies
\nand industries, to enjoy returns that are not
\nhighly correlated with returns on other asset
\nclasses, and to invest in issuers or industries
\nthat don\u2019t have much debt outstanding. While
\nnot guaranteed, equity investments can provide
\nsome level of inflation protection in their
\nunderlying value, an attractive feature to
\nhave in the current environment. Many of
\nthe characteristics of equity investments
\nalign with the GIA\u2019s long-term goals, thus
\nwe opportunistically seek value in our
\nequity investing.
\nWe invest in the public and private equity
\nmarkets both held directly and through limited
\npartnerships. Publicly listed shares are readily
\navailable and are fairly liquid, however the
\ntypical investor is far removed from the senior
\nmanagement of the enterprise. Conversely,
\nprivate equity is less liquid, requiring a
\nlonger-term focus, and is typically available in
\na limited partnership or similar structure, thus
\nlimiting the total number of company owners.
\nPrivate equity increases opportunities for us
\nto be closer to the senior management of the
\nenterprise in which we are investing. As a result,
\nprivate equity makes up the larger portion of
\nthe equity portfolio and has provided significant
\nbenefits for many years, both directly through
\nownership and indirectly through attractive
\nlending opportunities that arise from
\nthese relationships.
\nAt year-end 2022, we also had real estate equity
\ninvestments, directly and through funds and
\npartnerships, of $1.1 billion or 0.5% of Total
\nInvested Assets. Similar to mortgage loans, real
\nestate equity provides a source of return that
\nis less correlated with other asset classes and
\nhelps to diversify our returns across a larger
\ngroup of investments, minimizing the impact of
\nany one event.
\nWhy are issuer and asset sector
\ndiversification so important?
\nDiversification is a key component of our
\nstrategy to generate competitive long-term
\nreturns for the GIA and reduce idiosyncratic
\nrisk, while ensuring that we are able to meet our
\nobligations to policyowners. A well-diversified
\nGIA results from the approach our investment
\nprofessionals take to assess the relative value
\nof asset sectors and issuers as they make
\ninvestment decisions. While past returns may
\nnot be replicated in the future, we believe it is
\nprudent to review past asset behavior as part
\nof a framework for assessing potential
\nfuture outcomes.<\/p>\n
Earning your confidence
\nOur primary objective continues to be maintaining the financial strength to
\nfulfill our commitments to our policyowners and clients, over the long-term.<\/p>\n
In support of that goal, we will continue to
\npursue the same value-driven investment
\nphilosophy that has served you so well. We
\nthink you will agree that doing business with
\nMassMutual is a good decision.
\nWe welcome your comments and questions.
\nPlease direct any inquiries to your
\nMassMutual representative or your financial
\nadviser, or feel free to submit them via our
\nwebsite at www.MassMutual.com, which
\nyou can also explore for additional financial and
\ninvestment information<\/p>\n","url":"https:\/\/www.denislifeinsurance.com\/","url_text":"denislifeinsurance.com","main_services":" ","image_1":"https:\/\/diib.com\/featuredmembers\/wp-content\/uploads\/2023\/08\/Logo-Omega-Investments.jpg","client_review":"","why_we":"","history":"","image_2":false,"image_3":false},"yoast_head":"\n