This story is from BostonGlobe.com, the only place for complete digital access to the Globe.
Massachusetts insurance giants Liberty Mutual and MassMutual both gave their top executives significantly bigger pay packages last year as the companies continued to grow, the companies reported this week.
Liberty Mutual chief executive David H. Long received $8.9 million in total compensation, including $1 million salary, $3.6 million bonus, and millions more in phantom stock awards and other compensation. That’s up 29 percent from 2011, when he served as chief executive for only part of the year.
The Boston insurance company’s profits more than doubled last year to $829 million, despite recording $886 million in pre-tax losses due to Hurricane Sandy, the company reported in year-end earnings Friday. Liberty Mutual, best known for its auto and home insurance, received nearly 100,000 claims from the storm, pushing the company into the red for the fourth quarter.
Massachusetts Mutual Life Insurance Co. chief executive Roger Crandall earned $11.3 million last year, up 20 percent from 2011, as the company reported stronger profits. His total compensation included nearly $1 million salary and a $3.4 million bonus (more than double his 2011 incentive), plus phantom stock awards and other compensation. Private companies use phantom stock programs to mimic stock and options at publicly traded companies to reward executives who make the company more valuable.
Both companies reported the compensation on their websites this week to comply with new state rules requiring mutual insurers, which are owned by their policyholders rather than shareholders, to disclose how much they paid their top executives and directors either by mailing the information to policyholders or posting the data online. State lawmakers and regulators enacted the new rules last year after the Globe reported that former Liberty Mutual chief executive Edmund F. “Ted” Kelly had received roughly $200 million from the company over four years, making him one of the highest paid executives in the country.
The payments were particularly controversial because Liberty Mutual is mutually owned for the benefit of its policyholders, so critics said the money should have gone back to members or been invested back into the business. Liberty Mutual defended the pay at the time, saying the figures were misleading because Kelly cashed in phantom stock awards that he had accumulated over more than a decade.
Executives also credited Kelly with helping to build the company into Boston’s only Fortune 100 firm, making the awards worth more.
The company also reported Friday that Kelly, the former top executive who stepped down in 2011, received $422,636 for his service as chairman of the board last year. Other company directors received pay ranging from about $134,000 to $279,000. Meanwhile, MassMutual said it paid all five of its top executives more last year, mostly because of higher incentive awards. Three executives received increases ranging from 33 percent to 45 percent.
But the company also pointed out it enjoyed a strong year. The company’s revenue climbed 36 percent to $19.7 billion, while earnings rose 90 percent to $872 million. The company ended the year with a surplus (one measure of financial strength) of $12.7 billion, up 11 percent.
Company spokesman Mark Cybulski said the company’s compensation is designed to help attract and retain talented executives and is determined by the board based on company performance, individual performance, industry practices, and other factors.
The company said board members, who set the pay, received between $202,000 and $241,000 each.
The state Division of Insurance launched a review of executive compensation practices at insurers last year, but has yet to release the findings.