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Northwestern Mutual Life Review

Northwestern Mutual Life Ratings and Company Information

Company Rating:
Best Insurance Reports: A++
Url of page where rating was collected:
http://www.ambest.com/ratings/

Best Rating: A.M. Best rating: A++ (superior)

Type of Insurance Company: Mutual

Name of Parent Company:

Company Overview:
Company History: Founded 1857, Northwestern Mutual is one of the largest sellers of individual life insurance in the United States with total assets of $176 billion as of September 2010. However, although Northwestern Mutual still appears on some “most admired” lists, recent serious allegations raise doubts about Northwestern Mutual’s trustworthiness, and point out its unwillingness to honor its obligations to large numbers of policyholders or to treat policyholders fairly, as discussed below.

The Northwestern Mutual Life Insurance Company, founded in 1857 (present name adopted in 1865), is the lead company in a group of financial companies known collectively as the Northwestern Mutual Group. The group, headquartered in Milwaukee, Wisconsin, has than 3 million policyholders. The Northwestern Mutual Life Insurance Company primarily provides individual insurance products to middle and upper income people as well as to businesses.

Traditional whole life, universal and variable life insurance are Northwestern Mutual’s mainstays, and the company also sells term life, disability insurance and fixed and variable annuities and bank owned life insurance. Individual annuities (both fixed and variable) are offered on a tax-qualified and non-qualified basis. Long-term care insurance is offered through its Northwestern Long Term Care Company subsidiary.

Northwestern Mutual’s statements reveal that its general account assets are approximately $152 billion. The 3 largest asset classes of its general account are bonds ($95 billion), mortgage loans on real estate ($21 billion) and policyholder loans primarily against the cash values of their life insurance ($14.3 billion) as of September 2010. Separate account assets for variable life and variable annuities (where the underlying assets are principally invested in exchange and OTC traded securities), represent about 10% of Northwestern Mutual’s total reserves as of September 30, 2010.

The Northwestern Mutual Life Insurance Company distributes its products primarily through a general agency system consisting of more than 6,500 sales agents in about 350 independently managed offices of what they call their Northwestern Mutual Financial Network.

Investment products and services are distributed through an additional system of subsidiaries and affiliated companies including a wholly owned broker-dealer subsidiary (Northwestern Mutual Investment Services, LLC) which sells mutual funds and other investment products and the Russell Investment Group (acquired in 1999) which provides investment management, investment consulting services and analysis to clients in 39 countries and is well known for its Russell 2000 index of small company stocks. The Northwestern Mutual Wealth Management Company (a limited purpose savings bank) offers trust services and wealth management including investment management and fee-based financial planning services.

One recent lawsuit filed as a putative class action against Northwestern Mutual in November, 2010 challenges the company’s practices in overcharging tens of thousands of policyholders on policy loans. According to the complaint, the company agreed to charge policyholders interest rates on policy loans that would vary with “long term economic conditions.” Despite that obligation the company has charged the policyholders 8% on policy loans for 33 straight years, although prevailing interest rates have fallen significantly over the past 10 to 20 years. As noted above, policy loans represent the 3rd largest category of assets in Northwestern Mutual’s general account. Northwestern Mutual is claiming that an 8.0% rate on policy loans for each of the past 33 years has been and still is appropriate based on “long term economic conditions.” Outrageous claims like that call into question the company’s honesty and integrity. See Northwestern Lawsuit Website. Another case, awaiting a judge’s decision after vigorous attempts by Northwestern Mutual to side-track the matter, charged Northwestern Mutual with a long-running, sophisticated, and ongoing scheme by to quietly, deliberately and repeatedly cheat owners of certain Northwestern annuities out of millions of dollars in dividends; Northwestern claimed that it was justified in doing so as a matter of management discretion. See Complaint over change in annuity dividends. In 2009 Northwestern Mutual’s investment arm was fined over $200,000 by FINRA for misleading its customers, and also had to refund millions of dollars to customers as a result.


Principle Sales Methods: The Northwestern Mutual Life Insurance Company distributes its products primarily through a general agency system consisting of more than 6,500 agents in about 350 independently managed offices of what they call their Northwestern Mutual Financial Network.

Investment products and services are distributed through an additional system of subsidiaries and affiliated companies including a wholly owned broker-dealer subsidiary (Northwestern Mutual Investment Services, LLC) which sells mutual funds and other investment products and the Russell Investment Group (acquired in 1999) which provides investment management, investment consulting services and analysis to clients in 39 countries and is well known for its Russell 2000 index of small company stocks. The Northwestern Mutual Wealth Management Company offers trust services and wealth management including investment management and fee-based financial planning services.

In 2005, the average ordinary life insurance policy issued was for approximately $401,000 and the largest amounts of direct premium came from California (5.9%), New York (5.8%), Illinois (5.5%), Florida (4.1%) and Wisconsin (3.7%).

Life Annuity Business: Northwestern Mutual's website shows at least 21 different Life Insurance and four Annuity products.

Health Business: Northwestern Mutual's website shows five individual Disability and four Group Disability products, plus Long Term Care insurance nationwide.

Special Business: Northwestern Mutual offers an array of Employee Benefits products.

Company Financial Status:
Assets & Premiums: Assets at year end 2009: Approximately $167 billion

Surplus at year end 2009: Approximately $14.2 billion

2009 Premiums: Approximately $13 Billion
(down approximately $500 million from 2008)

Lines of Insurance:
Long Term Care, Life, Disability

States licensed to sell insurance in:
AL, AK, AZ, AR, CA, CO, CT, DE, DC, FL, GA, HI, ID, IL, IN, IA, KS, KY, LA, ME, MD, MA, MI, MN, MS, MO, MT, NE, NV, NH, NJ, NM, NY, NC, ND, OH, OK, OR, PA, RI, SC, SD, TN, TX, UT, VT, VA, WA, WV, WI, WY

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