Northwestern Mutual reports record surplus in 2018

Expects to pay out $5.6 billion in dividends to policy owners

The Northwestern Mutual Tower and Commons office building in downtown Milwaukee.

Last updated on June 18th, 2019 at 12:44 pm

Milwaukee-based Northwestern Mutual Life Insurance Co. reported that it grew its total surplus to a record-high $26.7 billion in 2018 and plans to pay out another record $5.6 billion in dividends to its policy owners in 2019.

The company said its “exceptional” growth in its surplus – a key indicator of the company’s financial strength – along with an increase in operating gain and record-high general account investment portfolio contributed to a strong fiscal 2018.

Meanwhile, Northwestern Mutual’s net income decreased from $1 billion in 2017 to $783 million in 2018. However, the company considers operating gain – which was $6.2 billion in 2018 – to be a more important metric for the company.

“When we measure value for our policy owners, we look at it from a dividends perspective; and we pay (dividends) from our operating gains,” said Todd Jones, vice president and controller. “So operating gain is more important to us than net income because net income is after we pay out our dividends … We plan on paying out almost $300 million more in policy owner dividends (this year), so that’s driving our value, but is also decreasing net income.”

Total revenue was $28.5 billion in 2018, up from $28.1 billion in 2017, as premiums and net investment income grew slightly.

“Even in this low interest rate environment, we’re growing that top-line of net investment income and that helps us then grow the dividend that gets returned to the policy owners,” Jones said.

The general account investment portfolio was up $9.7 billion, to $235 billion in 2018.

Northwestern Mutual paid $4.8 billion in insurance claims to policy owners and their beneficiaries in 2018. It plans to pay out more in policy owner dividends, at $5.6 billion, up from $5.3 billion in the prior year.

The company’s assets total $272 billion, up from $265 billion at the end of 2017.

“We exist to help clients achieve financial security, and our company’s financial strength ensures we are well positioned to deliver on our promises for generations to come,” said John Schlifske, chairman, president and chief executive officer. “I’m proud of these results, which show that our wise investment approach and diligent expense management enable us to consistently deliver value to everyone who counts on us. We continue to be preeminently the policy owners’ company.”

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