Almost five years after Massachusetts Mutual Life Insurance Co. entered the retirement income market, the firm has shut down the division devoted to the business — indicating how difficult it is to break into.
In 2005, MassMutual was one of the first insurance companies to announce formally that it was building a business designed to target investors near or at retirement.
Today, all of the major insurance companies are launching products, as they see this as a growing business opportunity. Total investible assets for retail investors ages 55 to 70 are expected to grow to $24.2 trillion by 2012, from $9.1 trillion last year.
But MassMutual's stumble has many experts noting how important it is for companies to be patient with seeing a return on investment with this market.
“I think a lot of firms underestimated how much it would cost them to run a successful retirement income and distribution business,” said Moshe Milevsky, an associate professor of finance at York University in Toronto. “So some firms are refocusing their attention on their core business and throwing out things that would have worked with time.”
MassMutual launched its retirement income group in 2005, when it acquired Jerome S. Golden's business, Golden Retirement Resources Inc., which was based on a mutual fund wrap program with an immediate-income-annuity option.
The product was ahead of its time, according to industry experts, but might have been too complicated to catch on with investors. MassMutual said it is considering tweaking the program to make it easier to understand and next year plans to launch three products to help investors on both the accumulation and “decumulation” sides of retirement. But observers said it could be too little, too late for a company once considered ahead of the game.
After acquiring Mr. Golden's firm, the insurer brought on Gary F. Baker, an 18-year veteran of GE Capital Assurance Co. (now Genworth Financial Inc.) as a vice president in the retirement income business division; Stephen L. Deschenes, who had helped manage Fidelity Investments' retirement business, as senior vice president and chief marketing officer; and Tom Johnson, a former retirement executive at Federated Investors Inc., as senior vice president for retirement income and strategic business development.
But over the past several months, still smarting from the market turmoil and a credit ratings downgrade, the company has tried unsuccessfully to sell the business it bought from Mr. Golden, according to people familiar with the situation. MassMutual has folded its retirement income group, which had 380 employees, into its insurance group and has seen the departures of Messrs. Johnson, Deschenes and Baker.