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 of aa of Northwestern Mutuals outstanding $1.75 billion 6.063% surplus notes due 2040 and the $1.2 billion 3.85% surplus notes due 2047. The outlook of these Credit Ratings (rating) is stable.
The ratings reflect NMGs 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).
NMGs balance sheet is aided by its robust risk-adjusted capital position combined with a higher quality of capital with low leverage, no use of captives or permitted practices that would make its capital position less conservative than peers. Its reserve book is enhanced qualitatively by its concentration in whole life insurance, which AM Best categorizes as the highest creditworthy product on its product continuum. The companys low risk tolerance on its products and capital management strategy is consistent with its ratings. NMGs investment portfolio is highly diversified with a well-managed asset-liability management strategy; however, it does contain higher allocations to real estate-related asset classes as a percentage of capital and surplus, although this is mitigated partially by diversification in segment and geography, as well as strong loan-to-value ratios and debt service coverage ratios
NMGs operating performance has shown 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. The consistent profitability is aided by a flexible dividend policy. 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 NMGs very favorable business profile is the groups 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 leads to 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. NMGs 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 NMGs ERM program as very strong, and it has been effective over full market cycles historically. The groups ERM program is enhanced by its considerable excess capital on a regulatory basis.
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