OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has affirmed the financial strength rating of A++ (Superior) and the issuer credit rating of “aaa” of The Northwestern Mutual Life Insurance Company (Northwestern Mutual) and its subsidiary, Northwestern Long Term Care Insurance Company (NLTC), both domiciled in Milwaukee, WI. Concurrently, A.M. Best has affirmed the issue rating of “aa” on Northwestern Mutual’s outstanding $1.75 billion 6.063 % surplus notes due 2040. The outlook for each rating is stable.
The superior rating reflects Northwestern Mutual’s favorable level of risk-adjusted capitalization, exclusive career agency distribution system, strong liquidity and leading market position in participating whole life insurance, a product that A.M. Best views as highly creditworthy given its inherent pricing flexibility to adjust dividend scales prospectively to recognize current investment experience. The ratings also acknowledge the depth and strength of its enterprise risk management program, along with the earnings diversification provided by complementary life, annuity and disability product lines. Operating performance remains solid as measured by growth in invested assets, capital and direct premiums written, along with a relatively stable investment yield when benchmarked against other ordinary life companies. Northwestern Mutual’s liquidity and operating profile benefit from strong persistency in its whole life line, along with a sizeable highly liquid asset portfolio and access to capital markets.
Partially offsetting rating factors include saturation in the ordinary life market given ongoing high levels of competition, particularly within the affluent market. Northwestern Mutual’s field agency force has remained relatively flat in total over the five-year period amid contraction of representatives with less than five years’ experience, which reflects industry-wide challenges in recruiting financial representatives. A.M. Best also notes that Northwestern Mutual maintains an elevated level of investment risk which includes below investment grade bonds and real estate assets, broadly defined to include commercial mortgages, structured securities, wholly owned real estate and joint ventures. Aggregate risk is higher than peers, albeit mitigated by its substantial capital position, stable liquidity profile and conservative underwriting standards as reflected by historically low levels of realized credit losses within these asset classes. Finally, Northwestern Mutual has a modest level of exposure to long term care (LTC) which exposes it to interest rate, lapse and morbidity risk. Northwestern Mutual has executed an internal reinsurance agreement with NLTC for all of its retained LTC risks outside of a longstanding external reinsurance agreement.
A.M. Best believes a negative rating action could occur if there are significant investment losses that result in a material decline in risk-adjusted capital. In addition, a negative rating action could occur if there is a material shift in the business mix toward less creditworthy products and or a sustained decline in ordinary life production.
This press release relates to rating(s) that have been published on A.M. 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 A.M. Best’s Recent Rating Activity web page.
A.M. Best is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.
Copyright © 2016 by A.M. Best Rating Services, Inc. ALL RIGHTS RESERVED.