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October 28, 2022 at 10:02 AM
What You Need to Know
- The company reported $18 billion in revenue for the first half of the year.
- The 2023 dividend interest rate for most products will be 5%.
- That rate compares with a Social Security COLA of 8.7%.
Northwestern Mutual says it plans to push up total dividend payments to policyholders next year.
The Milwaukee-based life insurer expects to increase the dividend total to $6.8 billion in 2023, or 4.6% more than the $6.5 billion dividend payout for 2022.
The dividend interest rate used in the dividend calculations will hold steady at 5%, according to a discussion of the company’s whole life dividend-setting process.
Northwestern Mutual’s dividend payout total also increased $300 million, from $6.2 billion, between 2021 and 2022.
What It Means
Northwestern Mutual appears to be the first U.S. life insurer to release an announcement about its 2023 dividends.
The 4.6% payout total is less than the 8.7% 2023 Social Security cost-of-living adjustment.
Life insurers will say that their dividend payouts have little or no connection with inflation, or with the Social Security COLA, but clients and other laypeople may make comparisons, anyhow. Forbes, for example, recently ran an article comparing the dividends paid by 10 dividend-paying stocks with the Social Security COLA.
Agents and advisors may have to be prepared with answers for clients who wonder why the policy dividend is different from the inflation rate, or why the policy dividend is different from the Social Security COLA.
Insurance Dividends
A “mutual insurer,” or policyholder-owned insurer, may pay dividends to any policyholders who also participate in the ownership of the company.
The dividend payments to the policy owners are analogous to stock companies’ dividend payments to shareholders. Making the payments is a way for a mutual insurer to share gains with the policyholder owners.
