The Fed remains committed to lowering inflation down to its 2% target rate, but what will more interest rate hikes mean for insurance companies and policy holders? MassMutual CEO Roger Crandall highlights the ways economic conditions may pressure workers, asserting the insurance company will “be there when… families need us” in the long term. Crandall breaks down the outlook for regional banks amid M&A activity in the financial system, as well as worker anxieties surrounding consumer savings and retirement.

Video Transcript

SEANA SMITH: Joining us now is MassMutual CEO Roger Crandall. Roger, it’s great to see you here. So let’s start with the Fed’s decision today. What does this mean for your business and how you’re positioning MassMutual at this point.

ROGER CRANDALL: Well, good afternoon. Really pleased to be here today. I mean, you were just saying in the previous segment, 99% of the people asked and the economists thought that we’re going to raise rates a quarter. That’s just what they did.

Markets basically didn’t move. So I think the Fed delivered on what they told us they were going to do. And they, as the press conference showed us, they’re going to continue to make sure that inflation gets back down to their 2% target one way or another.

And so far, boy, the economy’s held in really well. Jobs have held in really well. Financial conditions are much better than they were after the crisis. So for MassMutual, this continues to be a positive for our policyholders and allow us to continue to invest for the long-term for them.

AKIKO FUJITA: Yeah, I mean, but what does it ultimately mean, when you look ahead in terms of the– you consider the trajectory of the Fed, and I guess that’s still a big question mark. But as you think about your business, how do you position yourself for the long-term or at least the medium-term?

ROGER CRANDALL: Yeah, well, well, I mean, look, for us, the medium-term is, like, 10 years. We are a very long-term company. And so we look a lot at the underlying strength of the companies that we invest in, securities that we own to back our life insurance policies and making sure that we’re going to have the financial strength to be there.

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So, frankly, whether the Fed ends up having the terminal rate be 5 and 1/2, 5 and 3/4, or 6 in this tightening cycle is much less important to us than making sure that the American economy continues to perform well. And I give the Fed a lot of credit.

So what we’re continuing to do right now is to invest for the long-term to make sure that when the 7 million folks who are owners of our company and policy owners of MassMutual, we’re going to be there when their families need us like we’ve been doing since we were started way back in 1851.

SEANA SMITH: Roger, what about the latest one it comes to the banking sector? Powell, from our own Jen Schonberger, got this question during the press conference and he was saying that things have settled, but the Fed is still closely monitoring what’s playing out right now within regionals. I know that’s something that you were closely watching back in March.

On the heels of the news yesterday with PacWest and Banc of California merging, is that at all– does that reassure you that the government didn’t need to be involved in that deal or is that maybe some rumblings there showing some signs that we could see more stress within banks in the near term?

ROGER CRANDALL: Yeah, look, I think it’s hard to envision that 5 or 10 years from now, we’re not going to have fewer banks in the United States. I think this is going to be the first of many combinations of smaller and mid-sized banks as they try to get scaled to compete against the very large banks that are out there.

I think it’s a really good thing that private capital came into this deal. Remember we really couldn’t work our way through the last failed bank without one of the really big banks getting even bigger which I suspect policymakers didn’t really want.

So I think we’re going to continue to see stress on the small and mid-sized banks as their deposit costs rise. I think some of them are going to have some challenges on the asset side, particularly with some commercial mortgages and particularly office.

But I can’t envision that if you look at 5, 10, 15 years in the future that we’re going to not have fewer banks in the US. And I suspect there will be many more combinations like the one we saw today.

Again, really want to highlight, it’s really critical that private capital have confidence in the system to invest. So seeing $400 million get injected in here, I think is a really good thing for the health system.

AKIKO FUJITA: Roger, you were just saying that, at the end of the day, MassMutual is about the long-term plan here. But this comes at a time when we’ve heard increasingly that Americans in this macro environment are really concerned about what that future looks like, what their retirement looks like, how their savings are being depleted. I wonder how you’re seeing some of those concerns, that anxiety being reflected at least within your business? What are those customers seeking out?

ROGER CRANDALL: Yeah, so we have 7,500 financial professionals in the MassMutual Financial Advisory Network and they’re talking to people every day. And I think where we see it is there’s a real demand to talk to a financial professional that’s on either side to help make sure that whatever happens in the years ahead, you and your family are going to be situated as well as possible.

So that means insurance products as you’d expect. At the end of the day, making sure you’re protected if someone dies early is really important to a family and that’s something that’s core to what we do but also disability income insurance. Most people’s biggest asset is their ability to work. We just heard how the labor market is holding in really well. But if you get injured and you can’t work, disability is really important.

And then with over 10,000 Americans retiring every day in the country continuing to age, it’s really critical that you begin saving early and have a plan. Because, look, we don’t know whether the S&P is going to stay at the high levels it’s been at in the recovery this year or whether it could have another bad year like 2022 and whether the 10 year is going to go to 5% before it goes back down to 2%.

All those things are possible. What a financial advisor does is works with you, with you and your family’s particular situation to maximize your chances for success. So that concern talking to people. But when people have a plan, they feel better. And I’m really proud about the number of families that Massmutual’s helping today, put a plan together, and then execute on that plan over time.

SEANA SMITH: Certainly important to have a plan that’s intact at a time like this when there is so much uncertainty out there. Roger, great to have you here. Roger Crandall, CEO of MassMutual.