Northwestern Mutual has consistently performed well financially even during difficult times for the insurance industry. It maintains a conservative investment strategy focused on fixed income, with less than 0.5% of assets exposed to subprime markets. It also takes a prudent approach to underwriting to avoid needing to raise prices on existing policies. Northwestern Mutual attributes its success to its mutual structure, which avoids pressure for short-term gains, and its emphasis on long-term client relationships through its large network of financial representatives.

1. As seen in the May 2009 issue of
InsuranceNewsNet Magazine.
Secrets of Our Success Northwestern Mutual
Survival of the By Steven A. Morelli,
Senior Editor
Fittest How Northwestern Mutual Does it Best Year After Year
I
t’s not a pretty picture these days: Life insurance com- For most people in the life/health industry, it is not
panies are fighting for their lives, begging for bailouts, surprising that Northwestern Mutual, America’s largest
watching their profits and ratings slip. Insurers are direct provider of life insurance, would be doing well
laying off workers and slashing dividends, some for the even in the worst times. Its success transcends time.
first time in their history. Carriers are cutting annuity It maintained the No.1 position of its industry in the
supply to keep reserves from fading. history of Fortune magazine’s “most admired” survey,
Alongside this scrum for survival, an alternate universe for 25 years (until this year, when Fortune combined the
hums away. It is where an insurance company conducts a American and world lists).
conservative investment strategy quarter after quarter over What’s the secret to the company’s success? Doing
decades, holds the highest ratings possible, builds a steady the right thing. Like all paths to achievement, it is not
but burgeoning book of business, plans to pay out $4.6 hidden – just tough. You want to lose weight? Diet and
billion in dividends this year, and adds to its field force. No, exercise. You want to run a successful insurance com-
it is not 1995; it’s Northwestern Mutual. pany? Promise and deliver.

2. For the full online issue, go to www.insurancenewsnetmagazine.com/may09
Secrets of Our Success Profiles on Industry Newsmakers
A big part of the company’s success
derives from being a mutual com- Northwestern Mutual Quick Facts
pany. Like its well-respected brethren
Founded: March 2, 1857
such as New York Life and MassMu-
tual, Northwestern does not have to $155 billion in total assets
dance to Wall Street’s tune, which, $13.4 billion in surplus and asset valuation reserve
of course, has been a bit dissonant
$22 billion in revenues
lately. The company does not have to
chase after the short-term gains that 3.3 million life insurance policyowners holding 5 million policies with more
stockholders demand. But the com- than $1 trillion of insurance in force
pany did indulge in risky investing – $6.1 billion in benefits paid to policyowners or their beneficiaries in 2008
slightly. The company had less than a
$4.6 billion in dividends expected to be paid to policyowners in 2009
half of 1 percent of its assets exposed
to subprime markets at the end of Products sold exclusively through the Northwestern Mutual network
last year, when other companies were Northwestern Mutual’s network of financial representatives comprises
gasping from their toxic assets. more than 7,000 professionals nationwide
That’s part of the company’s long
game. Twenty percent of its investments
are in a diversified portfolio of equities. Northwestern has a legendary and disability. New representatives are
The other 80 are in fixed income securi- recruiting and retention program. In expected to focus on that bottom layer
ties. The company learned the lesson of its 2007 report, Moody’s said, “The for the first five years and expand their
prudent investing when many people Northwestern Mutual Financial Net- client base. Next comes wealth accu-
did – during the Great Depression – work is one of the best trained, most mulation, and at the top are wealth
and has not forgotten it, no matter what productive and efficient distribution preservation and distribution.
high-return thrill ride pulled up. forces in the industry.” “Our representatives are out there
That’s also the company’s way with While others in the industry forming relationships with people
products. The company prices prod- are decrying the absence of new and engaging in financial security
ucts based on prudent underwriting, blood, Northwestern is pulling in planning,” Oberland says. “It’s the
even when the actuaries crunch college students and young gradu- nature of our business.”
numbers that come in above market. ates by the thousands. In 2008, the Recruits are taught that nature over
“Our goal is to price our products so company recruited 2,300 college the first 60 working days, much of
that we never have to go back to our interns and hired 2,089 new full-time which is spent learning the Granum
policyowners and ask for a premium representatives. system. Al Granum was North-
increase,” according to Gregory C. For 13 consecutive years, the western’s top agent for decades and
Oberland, executive vice president company’s internship program has developed a system in the 1960s that
of insurance and technology. “We been ranked among America’s “Top is still in use today. It is the 10-3-1
never want to be in the position with Ten Internships” by the Internship method, which means that for every
our policyowners where we need to Informants in the Vault Guide to Top 10 contacts comes three appoint-
raise prices on in-force policies or Internships. Training magazine named ments leading to one sale.
get tougher with claims” to make the Northwestern in its 2009 “Training Todd Schoon, Northwestern’s
numbers work, continued Oberland. Top 125.” And in 2008, for the third senior vice president of agencies,
Even when they’re not competing year in a row, BusinessWeek magazine swears by the ratio. He said he
on price, the sales force has stuck named Northwestern one of the “Best reviewed his sales over decades and
with the company and “The North- Places to Launch a Career.” it fell within that pattern. Even the
western Mutual Way,” knowing that Once new people are aboard, sales record of the entire New York
a conservative underwriting strategy Northwestern gives them tools and City office followed the numbers.
wins over time, Oberland says. time. First, they are introduced to the The next piece is the practice
The sales force is another fea- financial security pyramid. At the base management system, part of which
ture that sets the company apart. is risk protection, covering early death is also an outgrowth of a Granum

3. For the full online issue, go to www.insurancenewsnetmagazine.com/may09
Secrets of Our Success Profiles on Industry Newsmakers
method, the one-card system that average Northwestern Mutual client
allows financial representatives to relationship can often exceed 40
keep track of their clients’ needs years, Schoon says.
through the years. “It’s all organic. We have 87 net-
Schoon says Northwestern work offices across the country led by Northwestern Mutual Financial Network
doesn’t want new representatives to managing partners,” Schoon says. “All is the marketing name for the sales and
focus entirely on the investment side 87 managing partners grew up within distribution arm of The Northwestern Mu-
of the business, which is why the our system. They generally sold for tual Life Insurance Company, Milwaukee,
one-card system is so useful. “It’s five to 10 years. They’ve had another WI (NM) (life and disability income insur-
really about client and relationship five years of leadership experience. So ance, annuities) and its subsidiaries and
building, and helping clients achieve when they are appointed managing affiliates. The article describes the invest-
financial security through a full partners, they’ve been in our system ment strategy for the managed assets in
suite of financial services,” he said. 10 to 15 years. It all starts with treat- Northwestern Mutual’s general account.
That is also part of the company’s ing your recruits right.” The dividend scale and the underlying
long-term perspective, since the And doing the right thing. interest rates are reviewed annually and
are subject to change. Future dividends
are not guaranteed.
Did you know?
Did you know the vessel made
famous by Gordon Lightfoot
in The Wreck of the Edmund
Fitzgerald was named after a
Northwestern Mutual president?
The ore carrier was named for
Northwestern Mutual President
Edmund Fitzgerald, the compa-
ny’s president from 1947-1958.
It was built by Northwestern
Mutual as an investment and
leased for operation to Oglebay-
Norton, a mining and shipping
company. Construction started in
1957 at the River Rouge Ship-
yards near Detroit. Northwestern
Mutual’s Board of Trustees voted
to name the carrier in Fitzger-
ald’s honor as he was approach-
ing retirement. Launched in June
1958, it was the largest vessel
to hit fresh water and set many
volume records on the Great
Lakes in its years of service. It
sank in a storm on Nov. 11, 1975,
taking 29 sailors with her.