Boston Mutual Life Insurance Company2012 A n n u A l R e p o R t

BOSTON MUTUAL - Big Enough to Matter, Small Enough to Care

OUR MISSION –

To bring Financial Peace of Mind to Those Who Care

Since 1891, Boston Mutual’s steadfast goal has been to providefamilies with Stability & Security. Coverage they can Trust.

BOSTON MUTUAL - Big Enough to Matter, Small Enough to Care

Statement of Ethical Market Conduct

Boston Mutual is a proud supporter of the Life & HealthInsurance Foundation for Education (LIFE).

P R O U D S U P P O R T E R

For 121 years, Boston Mutual has been providing affordable insurancecoverage for working people.

We are committed to the promises we have made to you, our customers.

HTo Safeguard the welfare of our customers;

HTo Retain professional, ethical, well-trained people to sell and service our products;

HTo Provide you with product information that is clear and honest;

HTo Ensure that our sales representatives offer products suited to your insurance needs and financial objectives;

HTo Adhere to all insurance laws and regulations;

HTo Deliver prompt, accurate, and courteous service;

HTo Respect the confidentiality of information you share with us;

HTo Resolve any dispute you may have with us quickly and fairly.

Boston Mutual

Life InsuranceCompany

to pReseRve the tRust you hAve plAced in us, we pledge the following:

Corporate Message

PAUL A. QUARANTO, JR., mbA, llif

President & Chief Operating Officer

The theme for this year’s Annual Report is “Big Enough to Matter, Small Enough to Care.” It speaks to our success over the last 121 years and reminds us of how we got to where we are today.

I am proud of the respect and appreciation our employees havefor you, our agents and each other, and the strong feelingsexpressed by you and our agents in return. Our focus on meeting the unique needs of our niche markets, primarily working Americans, defines who we are and sets us apart from our competitors.

Our Mission is “to bring financialpeace of mind to those who care.” As a policyholder of Boston Mutual you have demonstrated that you do care. “Big Enough to Matter” means we have the financial wherewithal to be there when you need us. “Small Enough to Care” means we have not lost sight of what has made us successful; our people, passion and commitment to deliver on the promises that we have made to you and your loved ones.

The young, aspiring super-hero on the cover of our Annual Report reminds us of just how important those promises are to the over one million families for whom we provide some degree ofsecurity.

The Year in ReviewIt was a year ago in our 2011 Annual Report that Paul Petry, CEO and Chairman of the Board, announced that I would be succeeding him as President of Boston Mutual. It is an honor and privilege to serve as President of this great company, just the 7th in our 121 year history, and to have the opportunity to present to you my first Corporate Message.

Most importantly, I am pleased to report that Boston Mutual had another excellent year in 2012 and that the foundation for our continued success is strong. It was our ninth consecutive year of strong pre-tax earnings and after-tax earnings reached a record level.

Before I get into some of those details, I want to report that the first year of our leadership transition went well. Paul Petry has certainly provided some big shoes to fill. The company is in excellent shape strategically, operationally and financially and we are most grateful for his leadership over the last 15 years. As your new President I will work diligently to validate the trust that the Board of Directors has placed in me.

Sales & Premium IncomeWith the challenging economic and competitive environment, along with some product “re-tooling” efforts, overall sales for 2012 lagged behind last year’s very strong results.

General Agencies had an excellent sales year with a significant increase over 2011, Group Insurance sales were basically flat and Worksite Marketing fell short of last year’s record sales results.

Premium income experienced modest growth in 2012 due primarily to the shortfall in sales; renewal premium income experienced a healthy increase.

We remain committed to our three sales and marketing areas and expect to see sales results increase in 2013.

H H H H H H H H

3

Investment IncomeNet investment income for 2012 was 2% less than last year and the yield on invested assets dropped from 5.4% to 5.02%. This reflects the continuing low interest rate environment we are all living with and the lack of viable opportunities for new and maturing investments.

Experts continue to predict that interest rates will rise at some point, but that time continues to be unknown. In the mean-time, we ensure the financial strength of Boston Mutual by following our conservative investment standards.

Total BenefitsWe paid out over $100 million in benefits to policyholders or their beneficiaries again in 2012.

As reported last year, we began using Social Security data to identify policyholders who have died, but their beneficiaries have not notif ied us, mainly because they wereunaware of their role as beneficiary. In 2012, we paid $1.1 million in death benefits resulting from this continuing effort.

General ExpensesGeneral Expenses rose by 3.6%, slightly above our Premium Income growth but at a reasonable level. We continue to monitor expenses but recognize that we will need to invest in our future. We balanced those objectives well again in 2012.

Operating GainIt was our ninth consecutive year of strong pre-tax earnings at $18.4 million. This was a $900,000 increase over 2011. After-tax earnings at $12.6 million reached a record level.

Worksite Marketing and General Agencies continued to post strong results. Group Insurance, which experienced challenges similar to other Group carriers, posted a loss.

AssetsAssets increased by almost $36 million ending the year at $1.14 billion. We had no significant asset issues in 2012 and our asset allocation was consistent with prior years. At year end, bonds represented 69% of invested assets. Wehave very few bonds below investment grade and our average bond rating is A+. Our commercial mortgage portfolio represented 13% of our invested assets. We added another year to the enviable record of no delinquencies, foreclosures, write-downs or even a late pay-ment with our commercial mortgage portfolio. We continue with our conservative under-writing requirements; they have served us well. Our modest common stock port-folio, including our New York subsidiary, represented a little over 3% of invested assets and increased $3.3 million in value during the year. Policy loans made up about 12% and the balance is in cash and short term investments.

We continue to closely monitor all of our investments.

H H H H H H H H H H H H H H H

4

SurplusOur surplus and all of our surplus ratios continue to be very strong. We remain diligent in this regard; maintaining a safety first attitude. This takes on even more importance in times of economic uncertainty.

New York SubsidiaryThe Life Insurance Company of Boston & New York crossed the $100 million threshold for assets in 2012; a notable accomplish-ment representing a 10% growth in assets in 2012. Premium Income grew by 13%, driven largely by an excellent Worksite Marketing sales year. Investment income and surplus grew by almost 6% and 6.6%, respectively.

Pre-tax earnings of $2 million and after-tax earnings of $1.1 million were both down from last year. The additional strain resulting from higher-than-expected sales had an impact on earnings.

Commitment to Our EmployeesOur employees are our greatest asset and we are committed to their professional development and well being. In 2012, we formalized a comprehensive program that incorporates training and developmentopportunities, as well as a wellness initiative that promotes good nutrition, exercise and financial planning.

Troop SupportSince 2004, Linda Morris, an employee in IT, and our home office team of volunteers have delivered “Care Packages” to our troops in Iraq and Afghanistan. Linda has pledged to continue this effort as long as there are US troops remaining in that region of the world. The enthusiasm and support she continues to receive from the Boston Mutual Family is very heartwarming and the responses we get from the recipients of the Care Packages are very gratifying. This represents in a small way an expression of our appreciation of the sacrifices the men and women in uniform make on our behalf.

Community InvolvementOur generosity does not end with our troops; the Boston Mutual Family is making a difference in the local community as well. The list of our charitable endeavors includes United Way, American Cancer Society, American Red Cross, Massachusetts Society for the Prevention of Cruelty to Children, My Brother’s Keeper, Junior Achievement and the Canton High Math Team. I would invite you to visit our web-site at www.bostonmutual.com and click on the Community News tab to see some examples of the good work being done by our people. We are believers in good corporate citizenship and our employees make us proud.

H H H H H H H H H H H H H H H

Big Enough to Matter

5

He was the former President and CEO of BayBank and Vice Chairman Emeritus of Bank of America. Giles was a wonderful man; very giving of himself and his time. He will be missed by his loving family and many friends. We dedicate this Annual Report in his memory.

SummaryBoston Mutual had another excellent year in 2012. We are proud of our accomplish-ments to date and, equally important, the manner in which we have gone about achieving them. “Big Enough to Matter, Small Enough to Care”… it is who we are and why we expect our success to continue in the years ahead. You can be assured that we will be there to deliver on our promises.

Board of Director ChangesIn last year’s Annual Report, Paul Petry announced that Nils Peterson, a retired Boston Mutual Board member, agreed to rejoin the Board due to a death. Nils reached the mandatory retirement age and retired for a second time in 2012. We thank him again for his service and dedication to Boston Mutual.

In 2012, the Board voted to elect Austin Lydon to fill the vacancy left by Nils’ retire-ment. Austin is a retired Deloitte & Touche Partner. In 2013, he will also assume the role of Audit Committee Chairman. We welcome Austin to our Board and thank him for his willingness to serve.

In 2013, Marnie Mueller and Vin O’Reilly will be retiring from the Board of Directors. The Board has voted to add two new members to fill their vacancies; Anne Hawley and John Cornish. More information on these changes will be provided in our 2013 Annual Report.

Annual Report DedicationIn February of this year, we were saddened at the news of the death of Giles E. Mosher, Jr. Giles was elected to the Boston Mutual Board of Directors in 1985 and served for 24 years, retiring in 2009. His contributions to Boston Mutual were significant and greatly appreciated.

H H H H H H H H H H H H H H H

Small Enough toCare

6

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

1150

1100

1050

1000

950

900

850

800

750

700

650

600

Balance Sheet

H

H

H

H

H

H

H

H

H

H

H

H

H

H H H H H H H H H H H H H

Year Ended December 31Dollars in Thousands

ASSETS 2012 2011Bonds $702,515 $668,030Preferred Stocks 0 0Common Stocks 34,692 31,400Mortgage Loans 129,327 124,913Real Estate 8,403 7,182Policy Loans 126,289 119,279Cash & Short Term Securities 15,775 19,519Premiums Deferred and Uncollected 46,059 46,861Other Assets 75,371 85,563

totAl Admitted Assets $1,138,431 $1,102,747

Millions of Dollars

ASSETS

Balance Sheet H H H H H H H H H H H H H

7

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

135

130

125

120

115

110

105

100

95

90

85

80

75

70

Millions of Dollars

ADJUSTED SURPLUS (Surplus & AVR)

Year Ended December 31Dollars in Thousands

LIABILITIES 2012 2011Policy Reserves $913,198 $875,555Policy & Contract Claims 15,366 14,674Deposit-Type Contracts 17,201 17,629Other Policyholder Funds 2,645 2,586Other Liabilities 51,532 54,891Interest Maintenance Reserve (IMR) 4,193 4,111Asset Valuation Reserve (AVR) 8,306 6,999TOTAL LIABILITIES 1,012,441 976,445SURPLUS 125,990 126,302

totAl liAbilities & suRplus $1,138,431 $1,102,747

H

H

H

H

H

H

H

H

H

H

H

H

H

8

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

200

190

180

170

160

150

140

130

120

110

Statement of Operations & Surplus

H

H

H

H

H

H

H

H

H

H

H H H H H H H

Year Ended December 31Dollars in Thousands

INCOME 2012 2011Premium Income $180,384 $180,134Net Investment Income 50,071 50,861Other Income 16,036 16,891TOTAL INCOME 246,491 247,886POLICYHOLDER BENEFITS & EXPENSESLife Insurance Benefits 59,494 60,727Accident & Health Benefits 14,705 14,247Other Policy Benefits 33,087 31,007Increase in Reserves 37,329 39,349Commissions 34,992 38,523General Expenses 39,890 38,482Taxes Other Than Federal Income Taxes 7,607 7,177Dividends to Policyholders 966 865TOTAL BENEFITS & EXPENSES 228,070 230,377

gAin fRom opeRAtions $18,421 $17,509

Millions of Dollars

PREMIUM INCOME

9

Statement of Operations & Surplus H H H H H H H

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

24

21

18

15

12

9

6

3

Billions of Dollars

LIFE INSURANCE IN FORCE

Year Ended December 31Dollars in Thousands

SURPLUS 2012 2011GAIN FROM OPERATIONS $18,421 $17,509Less Federal Income Tax 5,815 5,541

NET GAIN FROM OPERATIONS 12,606 11,968

Realized Capital Gain (loss) 724 1,449Transfer (to)/from IMR (576) (1,319)

NET INCOME 12,754 12,098

Other Surplus Changes (Net) (13,066) (4,579)

Surplus Beginning of Year 126,302 118,783

suRplus At end of yeAR $125,990 $126,302

H

H

H

H

H

H

H

H

H

10

JOHN J. COOK, JR.Managing DirectorSeaward Management

H H HHENRY T. GOLDMAN, esq.

Attorney at LawLaw Office of Henry T. Goldman

H H HTHOMAS M. JOYCE, JR., esq.

Attorney at LawJoyce and Joyce

H H HAUSTIN T. LYDON

Partner (Retired)Deloitte & Touche

H H HMARNIE W. MUELLER, phd, clu

Senior Vice President (Retired)Connecticut Mutual Life Insurance Company

VINCENT M. O’REILLY, cpA

Distinguished Senior LecturerCarroll School of Management - Boston College

H H HNILS P. PETERSON

Chief Investment Officer (Retired)Harvard Management Company

H H HPAUL E. PETRY, fsA, clu

Chairman & Chief Executive Officer

H H H

PAUL A. QUARANTO, JR., mbA, llif

President & Chief Operating OfficerH H H

RICHARD P. QUINCYPresident

Quincy & Company

Board of Directors H H H H HH H H H H

11

PAUL E. PETRY, fsA, clu

Chairman & Chief Executive Officer

H H HPAUL A. QUARANTO, JR., mbA, llif

President & Chief Operating Officer

H H HERIC J. BERNAZZANI

Vice President - Chief Information Officer

H H HCHRISTINE T. COUGHLIN, cpA

2nd Vice President - Treasurer

H H HSTEPHEN G. EVANS

Second Vice President & Auditor

H H HTIMOTHY E. FLANNIGAN

Vice President - General Agencies

H H HJOHN R. FLORES, esq.

Vice President - General Counsel & Secretary

H H HSUSAN J. GARDNER, cpA

2nd Vice President - Controller

LINDA M. IZZOVice President - Human Resources &

Individual Insurance Operations

H H H

CLIFFORD A. LANGE, fsA, clu

Vice President - Chief Financial Officer,Chief Actuary & Chief Risk Officer

H H HDAVID C. MITCHELL

Vice President - Group Insurance

H H HHOWARD V. NEFF, JR.

Senior Vice President - Chief Investment Officer

H H HPHILIP G. SULLIVAN, m.d.

Medical Director

H H HFREDERICK C. THURSTON

2nd Vice President - Chief Compliance Officer

H H HMARY T. TILLSON

Vice President - Product & Field Support

H H HPETER S. TILLSON

Senior Vice President - Worksite Marketing& Chief Marketing Officer

Officers H H H H H HH H H H H H

Over a Century of Service

boston mutuAl . . .

BOSTON MUTUAL LIFE INSURANCE COMPANY

120 Royall Street • Canton, Massachusetts 02021

800-669-2668 • Fax 781-770-0490 • www.bostonmutual.com

410-016 4/13