A.M. Best Affirms Credit Ratings of The Northwestern Mutual Life Insurance Company and Its Subsidiary

Business Wire

OLDWICK, N.J.--(BUSINESS WIRE)-- A.M. Best has affirmed the Financial Strength Rating of A++ (Superior) and the Long-Term Issuer Credit Rating of “aaa” of The Northwestern Mutual Life Insurance Company (Northwestern Mutual), and its subsidiary, Northwestern Long Term Care Insurance Company. The two companies are domiciled in Milwaukee, WI, and collectively are known as Northwestern Mutual Group (NMG). Concurrently, A.M. Best has affirmed the Long-Term Issue Credit Ratings of “aa” on Northwestern Mutual’s 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 NMG’s balance sheet strength, which A.M. Best categorizes as strongest, as well as its very strong operating performance, very favorable business profile and very strong enterprise risk management (ERM).

NMG’s balance sheet is underpinned by its robust risk-based capital position combined with a high quality of capital with significant excess capital on a regulatory basis. Its reserve book is qualitatively enhanced by its concentration in whole life insurance, which A.M. Best categorizes as the highest creditworthy product on its product continuum scale. The company's low risk tolerance on its products and capital management strategy is consistent with its ratings. NMG’s 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 partially mitigated by diversification in segment and geography, as well as strong loan-to-value ratios and debt service coverage ratios.

The very strong operating performance is reflective of low earnings volatility compared with its peers and a proven track record of remaining profitable throughout a full market cycle with effective management of the company’s dividend. This is partially offset by the highly competitive affluent marketplace, which has constrained top-line growth.

The very favorable business profile is due to NMG’s exclusive agency force, which provides it with a distinct competitive advantage, with strong market positions in the whole life insurance line of business. 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 partially offset by a modest amount of long-term care reserves, which A.M. Best views as less creditworthy given market dynamics related to morbidity, lapses and low investment yields. However, the vast majority of its products are concentrated within traditional product lines, which lack some of the product features offered in the highly competitive life insurance and annuity market.

NMG’s ERM program also is viewed as very strong, and it has historically been effective over full market cycles. It also includes comprehensive economic capital modeling and multi-model stress testing, which incorporates various macro-economic, interest rate and insurance-related stress tests, including a liquidity reverse stress test. NMG’s ERM program is enhanced by its considerable excess capital on a regulatory basis.

This press release relates to Credit Ratings 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. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and A.M. Best Rating Action Press Releases.

A.M. Best is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

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A.M. Best

Erik Miller, +1 908-439-2200, ext. 5187

Senior Financial Analyst

erik.miller@ambest.com

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Christopher Sharkey, +1 908-439-2200, ext. 5159

Manager, Public Relations

christopher.sharkey@ambest.com

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Rosemarie Mirabella, +1 908-439-2200, ext. 5892

Director

rosemarie.mirabella@ambest.com

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Jim Peavy, +1 908-439-2200, ext. 5644

Director, Public Relations

james.peavy@ambest.com