THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK History

Company History:

The Mutual Life Insurance Company of New York (MONY) has been successful for most of its history. It played a key role in the development of the U.S. life insurance industry. Although it has been selling conventional whole life policies for more than a century, MONY has accounted for several industry innovations. Despite its conservative heritage, MONY diversified in the rough and tumble 1980s, branching off in several directions and acquiring new companies. Now the 11th-largest insurance firm in the United States, MONY is heading into the 1990s on solid footing.

MONY is the oldest continuous writer of insurance policies in the United States. It was chartered in 1892, and began business on February 1, 1843, at the beginning of an eight-year boom that saw the founding of other insurance giants like Aetna, Massachusetts Mutual, and New York Life. MONY's founders--Alfred Pell, who had worked for the Mutual Safety Insurance Company, and Morris Robinson, a businessman--decided in 1841 to form a life insurance company. They received a charter from the state of New York on April 12, 1842, and opened the doors of the Mutual Life Insurance Company of New York for business less than a year later.

From its inception, MONY was a mutual company, owned by its policyholders and run by a board of trustees elected by policyowners. Offering whole life and term insurance, MONY was an industry pioneer, helping to develop mortality tables, actuarial techniques, and premium computations--all essential tools of the insurance trade.

At first, MONY concentrated its organization and sales in large eastern cities. As the company expanded, however, full-time MONY agents established themselves in far-flung cities and contracted with the firm to sell insurance in their territories. MONY institutionalized this system in 1858, when the first general agent was appointed. Reflecting the hazards of 19th century U.S. life, MONY was cautious about whom it insured. At first standard rates were given only to those living in northern states and in the settled parts of the northwest territories, areas with comparatively lower death rates. MONY also tried to avoid issuing standard policies to people traveling to China or around the Cape of Good Hope, or to seamen engaged in whaling. In 1886 the company policy handbook precluded "gamblers, barkeepers . . . saloon keepers, keepers of billiard parlors," among others, from receiving the comfort of MONY insurance.

By the outbreak of the Civil War in 1861, MONY had business all over the country. Because no policies provided for insurance in the case of war, MONY called together 16 leading companies to determine a common policy for insuring soldiers. Surprisingly the company did not suffer any losses on war risks, even though every southern policy was considered surrendered. All operations below the Mason-Dixon Line stopped during the Civil War.

In its early years, MONY followed a conservative investment policy, investing heavily in government securities, New York state bonds, and real estate mortgages. Sound fiscal management, under the leadership of Frederick Winston, who served as president from 1853 to 1865, helped MONY's assets multiply from $1.3 million in 1851 to $44 million in 1870.

In 1866 MONY began paying dividends annually, to stave off competition from companies like The Equitable and New York Life. Together with the latter two, MONY constituted the Big Three, for whom the period 1870 to 1906 was a boom time. In these years, MONY's insurance in force increased more than fivefold. In 1885 MONY introduced deferred dividend policies, which paid dividends at the end of a specified interval, usually longer than one year. They proved immensely popular. Within three years after their introduction, less than 1% of the company's new business consisted of the old annual dividend policies.

In 1885 Richard McCurdy, a company vice president assumed control. Determined to make MONY the biggest of the Big Three, he dispatched agents throughout the West and Southwest, pursued an ambitious investment policy, and took steps to extend MONY's coverage not only throughout the United States but overseas. He succeeded. In the first three years of McCurdy's stewardship, new insurance doubled. By 1904 it would quadruple. In 1889 MONY surpassed New York Life in new business, and four years later, in 1893, it overtook The Equitable.

In 1886 alone MONY established foreign agencies in Mexico City, Hamburg, Berlin, Sydney, and London, and in Puerto Rico Over the next 20 years, 19 other foreign agencies were established. They ultimately proved to be more trouble than they were worth. Prussia, for example, prohibited the company from doing business there in 1900, and Germany followed suit in 1904. Other countries required investment in local government bonds, which effectively forced MONY out of those countries. By 1914 all foreign agencies were closed.

In the 1880s MONY also acquired an entrepreneurial bent--building large office buildings and renting out excess space, and buying debentures of other banks. MONY's high-ranking status and go-go spirit made it a chief target of the Armstrong Committee investigation of 1905, which agency looked into charges of fraud and abuse in the New York insurance industry. McCurdy and other MONY executives testified before the committee, which recommended new restrictions on insurance companies operating within the state. The New York legislature responded by placing prohibitions on the holding of common stock, limiting the amount of new insurance any company could issue in a given year, and banning deferred-dividend policies--a MONY mainstay. In the wake of the investigation, MONY switched to more conservative investing and marketing policies. McCurdy cut his salary in half and then resigned in late 1905. More importantly, the company underwent structural renovations, switching from a general agency system to a managerial agency system. Under the managerial system, general agents working on commission became salaried branch-office managers.

McCurdy was succeeded by Charles Peabody, a former lawyer who sat at the helm until 1927. He was succeeded by David Houston, who ran MONY until 1940. The two guided MONY with conservative hands, presiding over uninterrupted growth. During that 35-year period, MONY extended coverage to the middle and lower classes, began training its agents more extensively, and offered more specific kinds of coverage. In 1913 MONY introduced disability benefits. In 1925 a payroll deduction plan was implemented for the payment of premiums of group coverage. Assets and insurance in force grew continuously. Between 1903 and 1930 insurance in force tripled, from $1.5 billion to nearly $4.5 billion; assets in the same period grew from $401 million to $1.05 billion.

The only period in which MONY did not experience continuous growth was the Great Depression, which, as it did to every other sector of the U.S. economy, hit MONY hard. Voluntary terminations, service contractions, policy lapses, and general economic morass caused a temporary dip in assets and a long decline of insurance in force. In 1931 the issuance of disability income benefits in connection with life insurance policies was discontinued. The company continued, however, to introduce new products during the 1930s. In 1934 a family protection policy was offered, and a family income plan was offered in 1940. Even with the economic recovery of the late 1930s, MONY did not immediately regain its prior vitality. In 1942 the amount of insurance in force--about $3.6 billion--was only 80% of the 1930 total.

In 1940 Lewis Douglas was elected president; he led the company's postwar comeback. Under Douglas MONY changed its investment policies. Insurance companies had traditionally put most of their money into low-interest, low-risk bonds. In 1944, for example, 83% of the assets was tied up in bonds, with less than 1% in stocks; 13% was in mortgages. In the 1950s insurance companies moved to more lucrative stocks and to diversify into lending. By 1959 bonds accounted for less than half of admitted assets, while stocks constituted 6%; mortgages made up 32%.

During the 1950s MONY was carried along by the strong tide of the postwar boom, which caused almost every financial institution to prosper. Aside from shifting investment gears in the 1950s, MONY expanded again, reentering Alaska in 1949 and Texas soon after. In 1952 the first personal sickness and health policies were made available. As unions and collective bargaining units grew in strength, the atmosphere became more conducive to the development of group coverage. In 1953 MONY developed its first group plan for small businesses, providing pension, life insurance, disability, hospital, surgical, and polio benefits. In 1954 MONY made its initial foray into the general group field. By 1959 assets had grown to $2.7 billion and insurance in force topped $7 billion.

In 1961 Roger Hull took over MONY's reins, and during the next several years, he oversaw further expansion and the development of new coverages. In 1963 the first substandard-risk accident and health policy was written, and in 1965 MONY became the first New York firm to enter the group variable-annuity field. Assets and insurance in force grew steadily every year, so that in 1971 assets edged toward $4 billion, and insurance in force was nearly $17 billion.

Up until the 1970s growth took place within MONY's basic structure; new products and services were generated from within. Then MONY began acquiring other companies and developing new ones. In rapid succession, a number of services were added. In 1970 MONY established an investment fund--MONY Fund; in 1971 it gained control of North American Life and Casualty Company. Two years later, MONY formed two more companies: MONY Life of Canada, to serve insurance needs of Canadians, and MONYCo, a holding company that would manage several other newly acquired and newly created subsidiaries. In 1975 under the leadership of Richard Fricke, who had taken over in 1972, MONY entered the property-and-liability reinsurance business.

The 1970s had its problems: the oil squeeze of the early part of the decade and the rampant inflation of the latter part. Under the leadership of Fricke and James Devitt, who succeeded Fricke in 1979, however, MONY experienced tremendous, nonstop growth. Through most of the 1970s, MONY remained the 11th-largest insurance company in the United States, as ranked by assets. Between 1970 and 1979, insurance in force doubled, from nearly $16 billion in 1970 to $33.9 billion in 1979.

Some of MONY's growth can be attributed to its unique and pioneering advertising efforts. In 1971 MONY switched the lion's share of its advertising from print to television, becoming the first major insurance company to rely almost exclusively on the spoken rather than the written word for promotions. In 1975 MONY aired the first advertisement in which death and the need for life insurance were explicitly discussed. A young, unknown actor--John Travolta--was featured in that first commercial; he played a son who was forced to work as a busboy after the death of his inadequately insured father.

James Attwood took the helm of MONY in 1983 after James Devitt's retirement. Attwood, who had previously worked at The Equitable, was the first MONY chief to come from outside the company. Prior to 1983 MONY had 7 subsidiaries; four years later, in 1987, the number had grown to 33. In 1985 MONY acquired Evaluation Associates, Inc., an investment consultant group. Two years later it bought Kelly & Associates, a third-party administrator for group and pension benefit programs. In 1986 MONY added Financial Services Corporation, a broker-dealer. The same year, MONY purchased Unified Management Corporation, an investment management company that offered a variety of mutual funds and was, at the time, the tenth-largest mortgage company in the United States.

To help manage all these new units, Attwood substantially restructured the company in 1985, reorganizing several operations, separating its design and sales units, and dividing the primary businesses into five units. Technology also helped spur growth. In 1983 MONY added TOPS, the total on-line policyowner service, a huge database that streamlined operations and made MONY more responsive to customers.

The 1980s also brought the introduction of new services and products. In 1985 MONY was the first insurance company to offer additional life insurance protection for policy-holders who died as a result of an automobile accident while wearing a seat belt. More importantly, financial services were expanded in the 1980s. MONY had started a modest pension division in 1981. Through aggressive marketing, MONY grew to manage $5.2 billion in pension funds by 1987, and assets under management have continued to grow--to $7.9 billion in 1988 and $8.7 billion in 1989. Subsidiaries of the parent company also ventured into other areas of the financial sector. In 1987, for example, a MONY unit issued a ten-year, $150 million Eurodollar bond issue.

In 1989 MONY had nearly $22 billion in assets, and insurance in force was $84 billion, up from $51 billion in 1983. Despite all this growth, MONY had slipped a little. In 1987 MONY was the nation's 14th-largest insurer in terms of assets, 20th in terms of new policies issued, and 24th in terms of total life insurance in force.

MONY entered the 1990s a more diverse and diffuse company than ever before, the economic downturns of the 1980s having caused some retrenchment. In 1989 for example, MONY unloaded Financial Services Corporation, which it had acquired just three years prior. The same year, James Farley, who took over as CEO in 1988, initiated a multimillion dollar cost cutting program. Simultaneously feeding off its deep, strong roots in the insurance industry and drawing sustenance from newly initiated services, MONY is looking to ascend to the top of the industry again.

Principal Subsidiaries: MONY Life Insurance Company of America; MONY Legacy Life Insurance Company; MONYCO, Inc.

Further Reading:

Clough, Shepard B., A Century of American Life Insurance: A History of the Mutual Life Insurance Company of New York, 1843-1943, Westport, Connecticut, Greenwood Press, 1970.

Source: International Directory of Company Histories, Vol. 3. St. James Press, 1991.

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