MILWAUKEE, Wis., Feb. 27 /PRNewswire/ -- Northwestern Mutual today announced its financial results for 2008, highlighted by more than $4.5 billion in dividends approved for payment to policyowners in 2009. The company expects to remain the industry leader in payment of life insurance dividends. Other highlights for 2008 included maintenance of a strong financial position despite unprecedented market turmoil, continued revenue growth, excellent operating fundamentals across all product lines and another record year for recruiting of new financial representatives.
"Northwestern Mutual entered 2008 with a near-record level of surplus, which enabled us to withstand the tough economic and investment climate that all companies faced," said Edward J. Zore, President and CEO of Northwestern Mutual. "While not immune to the adverse economic environment, we were well-prepared and are in a good position for the future.
"As the difficult market conditions continue, our strong capital base and distinctive business model position us to weather the volatility," Zore added. "Nearly three-quarters of our total insurance premium revenue is generated by the company's large block of whole life insurance, considered the most stable and lowest risk type of product in the industry. We do not make aggressive guarantees, either with universal life insurance or variable annuities. We have no debt on our balance sheet, and our dividend payout reflects our continuing commitment to financial security and long-term value for policyowners. By every measure, Northwestern Mutual remains very sound financially."
The company highlighted the following from its 2008 financial results:
- Dividends approved for payment to participating policyowners in 2009 are expected to be more than $4.5 billion, including a dividend interest rate of 6.5% on most unborrowed permanent life insurance funds. The estimated dividend payout includes over $200 million in total dividends on individual disability insurance policies, a 29% increase over the prior year. Northwestern Long Term Care Insurance Company has approved payment of an estimated $9 million in dividends to its participating long-term care policyowners in 2009.
- The company's capital position remained strong, with a combination of surplus and asset valuation reserve (total surplus) of $13.4 billion at year-end 2008 and a total surplus ratio of 11.5%. These figures included the effect of two permitted accounting practices. The first allowed the company to reflect some of the substantial value of Russell Investments, its global investment services subsidiary. The second change related to the treatment of deferred tax assets affected by investments that suffered market declines in 2008. This change allowed the company to provide a more realistic valuation of future tax benefits. Without the permitted practices, the company's total surplus would have been $11.8 billion and its total surplus ratio would have been 10.1%, higher than company surplus ratios in all but 13 of the past 115 years.
- During the unprecedented market turmoil, the company's portfolio remained diversified and concentrated in high-quality, fixed-income investments. The $79.3 billion bond portfolio is comprised of corporate, government, residential and commercial mortgage-backed securities, with limited exposure to any single industry or issuer and with 89% rated as investment-grade at year-end 2008. The company's $21.7 billion commercial mortgage loan portfolio, underwritten by the company's real estate field offices, is diversified geographically and by property type, is well-collateralized, and at the end of 2008 had no delinquencies or defaults. Policy loans provide important financial flexibility for policyowners and are fully secured by policy cash values. The company has maintained strong liquidity, with holdings of more than $25 billion in cash equivalents, U.S. Treasuries, or government-guaranteed debt. In addition, the company has issued no debt or funding agreements.
- Total insurance premium revenue, including new and renewal premiums, increased 2% to $13.6 billion in 2008, with each insurance product line contributing to the overall premium growth. Especially noteworthy was the 6% increase in premium sales of the company's flagship traditional whole life insurance product. The company's persistency rate for life insurance protection in-force remained over 96% during 2008. In addition, mortality, morbidity and expense fundamentals for the insurance businesses were all excellent.
- Net investment income increased 4% to $7.8 billion in 2008, as total general account investments increased 3% to $135.1 billion after mark-to-market adjustments to the reported value of public and private common stocks. Separate account assets, which represent the mutual fund investments made by variable life and variable annuity policyowners, are also marked to market and decreased 32% during 2008 to $13.4 billion at year-end 2008. The company finished 2008 with total assets of more than $155 billion.
- Insurance benefits paid to policyowners and their beneficiaries increased 10% to $6.1 billion during 2008, and an additional $8.4 billion of insurance reserves were established for future policy benefits. These reserves for future policy benefits, which totaled $118 billion at year-end 2008, represent a conservative estimate of the company's future benefit obligations to policyowners.
- Gains before dividends and taxes of $5.4 billion were down slightly from 2007. Net gain from operations, including a tax reserve adjustment and a reduction in the dividend interest rate, rose to more than $1.1 billion. Net income, reduced by investment write downs of $1 billion and other realized capital losses, was $483 million, a decrease from $1.0 billion for 2007. Like all other investors, the company was impacted by the severe deterioration of the financial markets, including the demise of several major financial institutions.
- Net cash flow attributable to the retail investment business, conducted through the company's subsidiaries, was more than $2.8 billion, an outstanding achievement at a time when the investment management industry experienced substantial outflows from retail mutual funds.
- New Financial Representatives were recruited into the Northwestern Mutual Financial Network in record numbers for the second consecutive year during 2008 as 2,089 new full-time Financial Representatives began their careers with Northwestern Mutual--a 15% increase over 2007. The Network's internship program has been ranked in Vault Inc.'s "Top-Ten" list of best internships in each of the past thirteen years (1997-2009), and Northwestern Mutual again ranked in Selling Power magazine's annual "America's 50 Best Companies to Sell For" survey (Nov./Dec. 2008).
The Northwestern Mutual Life Insurance Company - Milwaukee, WI (Northwestern Mutual) has helped clients achieve financial security for more than 150 years. As a mutual company with over $1 trillion of life insurance protection in force, Northwestern Mutual seeks to share its gains with policyowners and deliver consistent and dependable value to clients over time.
Northwestern Mutual is an industry leader in total individual life insurance and disability insurance dividends paid to participating policyowners. Though dividends are not guaranteed, are reviewed annually and are subject to change, the company has paid life insurance dividend every year since 1872. For 25 years Northwestern Mutual has been "America's Most Admired" life insurance company according to the March 17, 2008 issue FORTUNE® magazine survey.
Northwestern Mutual and its subsidiaries offer a holistic approach to financial security solutions including: life insurance, long-term care insurance, disability insurance, annuities, investment products, and advisory products and services. Subsidiaries include Northwestern Mutual Investment Services, LLC, broker-dealer, registered investment advisor, member FINRA and SIPC; the Northwestern Mutual Wealth Management Company, limited purpose federal savings bank; and Northwestern Long Term Care Insurance Company; and Russell Investment Group.
Summary of Operations
(Consolidated statutory basis, in millions)
Year ended December 31: 2008 2007
Premiums $13,551 $13,242
Net investment income 7,835 7,568
Other income 537 545
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Total revenue 21,923 21,355
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Policyowner benefits paid 6,071 5,544
Increase in benefit reserves 8,389 8,388
Commissions and expenses 2,070 2,009
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Total benefits and expenses 16,530 15,941
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Gain before dividends and taxes 5,393 5,414
Policyowner dividends 4,547 5,012
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Gain before taxes 846 402
Income tax expense (benefit) (304) 21
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Net gain from operations 1,150 381
Net realized capital gains (losses) (667) 619
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Net income $483 $1,000
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Summary of Financial Position
(Consolidated statutory basis, in millions)
December 31: 2008 2007
Bonds $79,314 $76,842
Mortgage loans 21,677 20,833
Policy loans 12,884 11,797
Common and preferred stocks 5,744 9,525
Real estate 1,528 1,499
Other investments 9,185 8,749
Cash and short-term investments 4,807 2,547
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Total investments 135,139 131,792
Other assets 6,628 5,051
Separate account assets 13,387 19,704
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Total assets $155,154 $156,547
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Policy benefit reserves $117,954 $109,573
Policyowner dividends payable 4,555 5,024
Other liabilities 5,834 6,453
Separate account liabilities 13,387 19,704
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Liabilities (excluding AVR) 141,730 140,754
Asset valuation reserve (AVR) 1,023 3,687
Surplus 12,401 12,106
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Surplus and AVR 13,424 15,793
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Total liabilities and surplus $155,154 $156,547
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The accompanying financial information is based on the statutory basis of accounting. Financial statements prepared on the statutory basis of accounting differ materially from financial statements prepared in accordance with generally accepted accounting principles ("GAAP").
SOURCE: Northwestern Mutual
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Northwestern Mutual's Historical Surplus Ratio |
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