Maybe a Mutual Life Insurer Is Different: Idea File

Northwestern Mutual has been a mutual insurer — meaning that it’s owned by its policyholders — since it was founded, back in 1857.

Since then, the company has survived several swings of the life insurance company structure popularity pendulum, to and from preferences for mutual insurers, publicly traded insurers, and ordinary privately held companies.

In recent years, Northwestern Mutual also has attracted attention by emphasizing a focus on holistic planning before it was hot. The company’s advisors have helped clients with overall needs analysis, life insurance, disability insurance and long-term care planning, as well as retirement planning, and its consumer surveys have focused on issues such as consumer spending and debt as well as on concerns that can be managed with insurance.

Northwestern Mutual has supported the Life Insurance Awareness Month campaigns through support of LIMRA.

John Schlifske, Northwestern Mutual’s CEO since 2010, recently answered questions about how he sees the U.S. life insurance and financial services landscape through a Life Insurance Awareness Month email interview. Here’s an edited version of the exchange.

How do the big mutual life insurers differ from other big life insurers?

As a mutual company, we solely exist for the benefit of our policyowners. That means we are focused on delivering strong results for them today while making decisions and leading the company in ways that will benefit them for years to come. Having a mutual structure allows us to maintain this pure focus on doing what is right for our policyowners and putting their interests first.

In the past five years, more than 20 of our competitors — predominantly public insurance companies — have made dramatic changes to their businesses. Some have discontinued sales of individual insurance and annuity product lines or sold off blocks of business, while others have taken steps toward consolidation, made shifts to their distribution models, and even ended their permanent life insurance offerings. In almost all cases, these decisions have been made to maximize value for the companies’ shareholders — not their policyowners.

As a specific example, we have seen companies emphasize spread-based products because they’re less capital-intensive. That’s an approach that answers to expectations from shareholders in a stock company.

But, as a mutual company, we have maintained our focus on the products that we think our policyowners need to become financially secure — including a full suite of permanent life insurance which are more capital intensive to provide. In this environment, we continue to see strong demand for these products,  which is evident in our business results. Our life insurance sales are pacing 48% ahead of last year (which was our previous all-time record).

Further, we deliver on our mutuality in a number of ways — including the way we manage Northwestern Mutual to deliver value to our policyowners. We continue to deliver exceptional financial results, including our $6.2 billion dividend payout for 2021. We also maintain the highest financial strength ratings in our industry, ensuring our policyowners know we will be here for generations to come.

How is operating as a mutual life insurer different from operating as a public company today?

In this environment, which has been marked by volatility and uncertainty, our policyowners can have the confidence that we are solely running the company for their benefit with a long-term view. This is apparent in the way we make decisions and lead the company so our policyowners are positioned to benefit in all economic seasons. For example, during the market volatility in early 2020, we were able to make significant investments when markets were down. As markets rebounded, it resulted in very strong gains for our policyowners.

That kind of long-term thinking is where mutual companies shine because we can focus on a longer time horizon instead of worrying about how it will affect our next quarterly earnings. Time and again the strategy works, and our overall financial results prove a long-term focus is significantly better. Last year we announced a record $6.2 billion dividend payout and increased both our surplus and surplus ratio, which are two key measures of our strength.

Ultimately, mutuality is more than just a legal structure — it’s how we run our business and ensure every policyowner is treated equitably over the course of generations. Everything we do is focused on driving policyowner value, and all our economic gains are for their benefit.

The other area where our long-term management approach benefits our policyowners is that we continue to invest in building the future of the company even through volatility.

Early in the pandemic, we made the decision to continue investing in technology, products, and more — maintaining a commitment to the multi-year strategy we have for the company. We were able to do this because our focus is on building for the long-term, and as a result we’re now in the midst of the rollout of a new proprietary digital financial planning tool that will benefit our advisors and our clients.

All of this has a material and positive effect on how we build trust with our policyowners. This is an important measure for us that we track regularly, and it’s particularly important in a time of fear and uncertainty.