Northwestern Mutual Reports 2005 Results
Northwestern Mutual announced strong financial results for 2005, with nearly $5 billion in operating gains before dividends and taxes and a record total surplus position at year-end of $12.9 billion. The company expects to again lead its industry in total individual life and disability insurance dividends, with an estimated payout of $4.3 billion for 2006.
"It was an exceptional year -- financially, we've never been stronger," said Northwestern Mutual President and CEO Ed Zore. "Our surplus position reached all-time highs on both an absolute and relative basis, our corporate operations remained extremely efficient and our investment results were excellent. As a mutual company, these exceptional financial results bolster our financial strength and enable us to deliver solid long-term product value to our clients and policyowners."
The company highlighted the following 2005 financial results: -- Total surplus, including asset valuation reserve, increased 12.4 percent to $12.9 billion from $11.5 billion at the end of 2004. The ratio of total surplus to general account insurance reserves at the end of 2005 was 13.8 percent, compared to 13.2 percent at the end of the previous year. -- Gains before dividends and taxes of $4.9 billion rose 10 percent over 2004, a reflection of significant growth in net investment earnings and continued excellent mortality and morbidity experience on its life insurance and disability insurance products, respectively. After dividends and taxes, the company achieved net gains from operations of $614 million in 2005. -- Dividends to participating policyowners of an estimated $4.3 billion have been approved for 2006, including a 7.5 percent dividend interest rate to be credited on most unborrowed life insurance funds. -- Life insurance in force reached $930.5 billion, an increase of more than 7 percent from year-end 2004. -- Consolidated assets under management (Northwestern Mutual statutory assets and Russell Investment Group third party assets under management) reached $288 billion, an increase of 13 percent.
"To maintain our outstanding operating results and financial strength year after year, it's important to focus on the fundamentals," explained Zore, "and in 2005, our fundamentals were excellent." The operating fundamentals cited by Zore, which the company credits as factors responsible for the financial performance in 2005, include:
-- Balanced investment strategy, featuring a high-quality, diversified fixed income and equity portfolio, managed with a view toward superior long-term results. -- Disciplined underwriting, with an emphasis on well-designed products and careful assessment of insurance risk. -- Rigorous expense management, including an emphasis on operating efficiency in its corporate operations. The company's cost structure also benefits from the productivity of its professional, well-trained and efficient career agency distribution system. -- Strong policyowner satisfaction, as evidenced by the company's strong persistency rate of 96.4 percent for life insurance in-force, which is expected to remain among the highest in the industry.
The record surplus position at year-end 2005 was aided by the performance of the company's investment portfolio. Net investment income increased 7 percent to more than $6.5 billion in 2005, attributable to 7 percent growth in invested assets and distributions from partnerships and joint ventures, offset in part by lower book yields on fixed income investments. Investment results also contributed $653 million of net realized and unrealized capital gains to surplus during 2005.
Total insurance premium revenue, including new and renewal premiums, increased to $11.4 billion, up more than 6 percent. New life insurance premium revenue was $1.1 billion for 2005, down 6 percent from 2004 due to a record amount of new single-premium bank-owned life insurance sold in 2004.
Sales growth for other risk protection products was strong during 2005. New premium revenue for the company's Long-Term Care product increased 15 percent to $22 million, while new premium revenue for Disability Income (individual and group DI) increased nearly 7 percent to $155 million.
New premiums and deposits for annuity contracts totaled $997 million, a 26 percent increase over last year. Sales of mutual funds by financial representatives registered with Northwestern Mutual Investment Services, LLC were $6.3 billion, a 12 percent increase over 2004.
The Northwestern Mutual Life Insurance Company, Milwaukee, WI (Northwestern Mutual), the nation's largest direct provider of individual life insurance, according to statistics compiled from A. M. Best data, has always received the best possible insurance financial strength ratings from Standard & Poor's, Fitch Ratings, A. M. Best and Moody's. For 22 years, a FORTUNE magazine survey has named Northwestern Mutual "Most Admired" in its industry. The company has also been recognized as one of the "50 Best Companies to Sell For," by Selling Power magazine (2005).
The company, its subsidiaries and affiliates are also providers of annuities, mutual funds, long-term care insurance, disability income insurance and employee benefit services to the group employee and executive markets. These products and services are distributed through the Northwestern Mutual Financial Network and its financial representatives. Among its affiliated companies are those that comprise the Russell Investment Group, which provide investment management and advisory services; Northwestern Mutual Investment Services, LLC (NMIS), the securities brokerage firm; and Northwestern Mutual Wealth Management Company, a limited purpose federal savings bank and a registered investment adviser. A subsidiary, Northwestern Long Term Care Insurance Company, offers long-term care insurance. Further information on Northwestern Mutual can be found at: http://www.nmfn.com/ .
Summary of Operations and Changes in Surplus (Consolidated statutory basis, in millions)* Year ended December 31: 2005 2004 Premiums $11,363 $10,682 Net investment income 6,543 6,117 Other income 494 511 Total revenue 18,400 17,310 Policyowner benefits 4,577 4,487 Increase in benefit reserves 7,109 6,603 Commissions and expenses 1,774 1,741 Total benefits and expenses 13,460 12,831 Gain before dividends and taxes 4,940 4,479 Policyowner dividends 4,269 3,880 Gain before taxes 671 599 Income tax expense (benefit) 57 (124) Net gain from operations 614 723 Net realized capital gains 310 94 Net income 924 817 Change in net unrealized capital gains 343 645 Change in asset valuation reserve 27 12 Other surplus changes 153 (87) Net increase in surplus $1,447 $1,387 Summary of Financial Position (Consolidated statutory basis, in millions)* December 31: 2005 2004 Bonds and cash $68,023 $63,879 Mortgage loans 18,118 17,240 Policy loans 10,265 9,750 Common and preferred stocks 8,120 7,414 Real estate 1,620 1,619 Other investments 6,935 5,774 Total investments 113,081 105,676 Other assets 4,223 3,963 Separate account assets 15,753 14,318 Total assets $133,057 $123,957 Policy benefit reserves $94,144 $87,588 Policyowner dividends 4,270 3,910 Asset valuation reserve 2,529 2,556 Other liabilities 5,980 6,651 Separate account liabilities 15,753 14,318 Total liabilities 122,676 115,023 Surplus 10,381 8,934 Total liabilities and surplus $133,057 $123,957
* The accompanying financial information is based on accounting practices prescribed or permitted by the Office of the Commissioner of Insurance of the State of Wisconsin ("statutory basis of accounting"). Financial statements prepared on the statutory basis of accounting differ materially from financial statements prepared in accordance with generally accepted accounting principles ("GAAP").
SOURCE: Northwestern Mutual
CONTACT: Jean Towell of Northwestern Mutual, +1-800-323-7033,
Web site: http://www.nmfn.com/
1/26/2006 5:50:00 AM