AM Best has affirmed the Financial Strength Rating of A++ (Superior) and the Long-Term Issuer Credit Ratings of “aaa” of The Northwestern Mutual Life Insurance Company (Northwestern Mutual) and its subsidiary, Northwestern Long Term Care Insurance Company. The companies are domiciled in Milwaukee, WI, and collectively are known as Northwestern Mutual Group (NMG). Concurrently, AM Best has affirmed the Long-Term Issue Credit Ratings (Long-Term IR) of Northwestern Mutual’s outstanding surplus notes. The outlook of these Credit Ratings (rating) is stable. (See below for a detail list of the Long-Term IRs.)
The ratings reflect NMG’s balance sheet strength, which AM Best categorizes as strongest, as well as its very strong operating performance, very favorable business profile and very strong enterprise risk management (ERM).
NMG’s risk-adjusted capital and surplus-to-liability positions are consistent with its Superior rating. The quantitative assessments are aided by its high quality of capital compared with its peers. NMG’s leverage is within AM Best tolerances, and makes no use of captives or permitted practices that would make its capital position less conservative. Its reserve book is enhanced qualitatively by its concentration in whole life insurance, which AM Best categorizes as a high creditworthy product on the life insurance product continuum. Slightly offsetting these positives is an investment portfolio that while well-diversified, contains an allocation to risky assets that is likely to be impacted negatively by the recent downturn; however, AM Best expects only modest impacts to NMG’s risk-adjusted capital ratio and expects its Best’s Capital Adequacy Ratio (BCAR) to remain in the strongest category.
NMG’s operating performance has a long track record of remaining profitable from an operating income basis and net income basis throughout a full market cycle with a low volatility of earnings. This consistent profitability is aided by a flexible dividend policy, which management has shown it is capable of reducing while maintaining sales targets. Offsetting this, is the highly competitive market segment of ordinary life in the affluent market segment, which continues to constrain top-line growth.
Contributing to NMG’s very favorable business profile is the group’s exclusive agency force, which provides it with a distinct competitive advantage, with strong market positions in the whole life insurance line of business with diversification coming from disability and long-term care, and its variable annuity segment. NMG has a recruitment program, which has led to a consistent flow of younger talent into the career agency system, and its business profile benefits from strong brand recognition, with national reach in the affluent market. These strengths are offset partially by its concentration within traditional product lines, which lack some of the product features offered in the highly competitive life insurance and annuity market.
Northwestern Mutual has demonstrated a robust commitment to strong ERM practices. NMG’s ERM program includes comprehensive economic capital modeling and multi-model stress testing including a liquidity reverse test and various investment, macroeconomic, interest rate and insurance-related stress tests. AM Best views NMG’s ERM program as very strong, and it has been effective historically over full market cycles. The group’s ERM program is enhanced by its economic capital modeling capabilities.
The following Long-Term IRs have been affirmed with a stable outlook:
The Northwestern Mutual Life Insurance Company—
— “aa” on $1.2 billion 6.063% surplus notes due 2040
— “aa” on $1.2 billion 3.85% surplus notes due 2047
— “aa” on $1.2 billion 3.625% surplus notes due 2059
This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media – Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.
AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.
