2018 Policyowners'
Examining Committee Report

Throughout its 161-year history, Northwestern Mutual has stayed committed to its foundational principles.

Northwestern Mutual has always put our policyowners first, and today that means anticipating your changing financial security needs and expectations as the world around you changes. To continue helping you enjoy life in the moment while preparing for tomorrow, we must transform and serve you in new ways by reinventing our client experience while maintaining financial strength that delivers superior product value year after year.

At the heart of that client experience is a plan, the expertise of financial representatives and advisors to guide you along the way, and industry-leading products. To further build on our strengths, our powerful new digital planning experience consolidates your entire financial picture into a personalized financial roadmap you can access anytime, anywhere – evolving as your needs change. It’s just one way that we’re transforming to create a new financial security experience.

Since 1907, a group of policyowners has been given unrestricted access to the company to independently evaluate its operations, management and strategic plans. Each year, the committee’s findings are reported to senior leadership and the Board of Trustees. This is the 2018 POEC’s complete report.

It has been an honor to serve as this year’s Policyowners’ Examining Committee. We had the personal opportunity to get to know Northwestern Mutual’s leaders and employees and learn more about the company’s strategy and aspirations to transform itself for the future. Throughout its 161-year history, Northwestern Mutual has stayed committed to its foundational principles, including its mutual advantage — also known as doing what’s right for clients, taking a long-term view, having a commitment to exclusive distribution, delivering superior product value, and maintaining exceptional financial strength. These enduring values uniquely position the company for continued success.

We wholeheartedly agree with the company’s assessment that the consumer experience of pursuing financial security today is complex, frustrating and mostly ineffective. The company’s vision to make the experience of financial security “remarkable” is how it can do what’s right for clients today and tomorrow. We commend the company for choosing to lead and win on reinventing the client experience of financial security. This is the company’s opportunity. It is clearly embarking on this transformation from a position of strength. Notable markers include: unsurpassed financial strength, the highest financial strength ratings awarded to any U.S. life insurer, a strong surplus position, leading long-term product value, and an expected $5.6 billion dividend payout in 2019, the highest in company history.

We applaud senior leadership for clearly seeing the risk of digital disruption and reorienting the company to address that risk in a profound way with the vision of the “Planning Experience” and the aspiration to be at the center of clients’ financial lives. Clearly a lot of work lies ahead, but the company has given us confidence that it will make the tough decisions necessary to drive closer to its vision.

Pictured at top:   Dan Yoo, Vicki Poponi, Randy Melville, Bob Eck, Lisa Pollina, Tim Murphy

Key Areas of Focus

Notwithstanding the progress made thus far, we believe that the long-term success of the company’s transformation hinges on greater focus on four key areas:

Execution
Culture
Distribution
Technology
Keep reading for a deeper dive on each of our key areas.

Execution

Clearly articulating the company’s transformation execution plan

While led by the client experience, this is an enterprise-wide transformation. A coordinated, clear “master roadmap” of the transformation that encompasses all initiatives — reflecting their sequencing and interdependencies in a coordinated master timeline — is critical. The roadmap will serve as a unifying force to align every part of the company to the crisply articulated goals of transformation and will enable leadership to drive transformation efforts, more effectively monitor progress, and make any necessary speed and course corrections. Further, the master roadmap should help with prioritization, budgeting, resource deployment and consistent communication to all stakeholders.

Culture

Transforming the organizational culture by reframing the “Why”

We encourage leadership to redouble their efforts with a cohesive, consistent and coordinated communications strategy and change management plan, and to be clear about how each area of the company plays a vital role in the company’s transformation. We strongly support the leadership’s aggressive push to modernize the company culture to be more results-oriented and performance-driven, with higher differentiation for top performers. At the same time, we see the need for the cultural transformation to be anchored in something deeper than the opportunity to create a remarkable digital client experience. We urge leadership to consider building an internal narrative that speaks to the whole company transformation, compelled by the external environment and the potential for disruption. The company is on the right path.

Distribution

Strengthening the exclusive distribution system as a competitive advantage through transformative actions

The company’s exclusive distribution is a competitive advantage. We acknowledge the importance of financial advisors and exclusive distribution in the company’s transformation. As evident from the experience in other industries, distribution models are generally an area where disruption could happen more quickly. We applaud the company for its efforts to further strengthen the distribution model by identifying and socializing best practices of high-performing network offices across the system. The launch of several innovative experiments in the field to push the boundaries of the distribution model is also noteworthy. We urge leadership to push forward for broader and faster adoption of these experiments and best practices across all offices. While we commend the company for the progress made in recruitment and retention of men of color, more needs to be done to improve the company’s standing in the recruitment and retention of women, regardless of color. We are very pleased to hear from industry sources that Northwestern Mutual is bucking the trend regarding aging of the financial advisors in the industry. The importance of having a robust millennial recruitment strategy cannot be overstated, particularly as that age group becomes prominent as prospective clients.

Technology

Accelerated adoption of technology in all aspects of the business

We appreciate that focus on the digital client experience is essential, and it doesn’t stop there. We believe that a more aggressive adoption of current technology in all aspects of the company’s business is critical to a successful transformation. We are very pleased to hear that there is a focus on deepening technology talent bench strength, as depth of talent and new skills will be critical to delivering on the company’s ambitious plan. Adopting and perfecting an iterative development approach for transformation is key to understanding and being responsive to fast-changing client and advisor needs.

Call to action

At a time when consumers are left to shoulder responsibility for their financial futures, Northwestern Mutual — with its vision to transform the experience of financial security — is uniquely positioned to do well as a business, delivering value for consumers while doing good for society. Northwestern Mutual can and should help clients make the most of every single day. The work ahead to deliver a remarkable client experience will take time and the aligned effort of both the home office and the field. This may very well be a “crossing the Delaware” moment in the company’s history. We urge the company to continue to take an outside-in view, be bold, and move faster with conviction on its transformation path.

Board Member Bios

Randy Melville

Chair of the 2018 Policyowners’ Examining Committee and senior vice president and general manager of Frito-Lay North America

Tim Murphy

General counsel and chief franchise officer of Mastercard

Vicki Poponi

Vice president, auto sales operations of American Honda Motor Co. Inc.

Bob Eck

President and CEO of Anixter International

Lisa Pollina

Former vice chairman of Royal Bank of Canada for the Americas

Dan Yoo

Former chief operating officer of NerdWallet