Northwestern Mutual still sells a lot of life insurance -- it's one of the largest life insurers in the country.
But it sees demand for broader financial planning growing, and so it is busy marketing a menu of other services such as asset and income protection, and investment and financial planning. The $24 billion company is headquartered Milwaukee, and employs about 300 people in Minnesota.
Mark Heurung, a managing partner, discussed business from his office in the Capella Tower in downtown Minneapolis:
QOne of the biggest issues facing the industry is the prolonged low interest rate environment. How is Northwestern Mutual coping with that?
ALike any good investor, we are well diversified. Our $164 billion general account portfolio is invested in both public and private fixed income. We have commercial real estate mortgages that produce steady income and investments in public, private and real estate equities. We are still primarily fixed-income investors so those lower rates affect our investment income, but in 2012 we are paying a dividend interest rate of 5.85 percent on our traditional whole life product.
QWhat effect will it have on the company if it persists beyond 2014?
AAs I said, it puts some pressure on income, although our net investment income was up in 2011 to above $8.4 billion. The thing is, all insurers are dealing with the same investment environment, so it's more a question about how you perform versus the competition. This year, we'll pay our policy owners just about $5 billion in dividends. That's tops in the industry and our life insurance dividend is more than the next three insurers combined will pay.
QThe company has 120 advisers in Minnesota. How many will you add in the next two years?
AThis year alone, Northwestern Mutual's offices in Minneapolis aim to add a combined 94 financial representatives and 206 financial representative interns.
QGive us an idea of the real estate Northwestern Mutual owns in the Twin Cities.
ANationwide we have almost $28 billion invested in equity holdings, buildings we own, and commercial mortgages that we originate. Our real estate investments total about $337 million in the Twin Cities. A few examples of our more prominent local investments are Ameriprise Financial in Minneapolis, Tamarack Village in Woodbury and Park Summit in St. Louis Park.
QInsurance has historically been a state-regulated industry but there's now a growing federal role including the new Federal Insurance Office at the Treasury Department. It aims to improve insurance regulation and is supposed to issue its first report soon. What do you expect to see in the report?
AMy main responsibility here in the Twin Cities is to help our financial representatives do the very best job they can helping our clients prepare financially for the future. We have all the respect in the world for the important consumer protections that come through regulation, but also hope that companies like Northwestern Mutual won't find themselves constrained from helping people.
QThe company recently released the Longevity & Preparedness Study that concludes Americans appear to be "startlingly unprepared financially" to live into their 70s, 80s and 90s. Isn't this sort of scaremongering?
AAmericans are living longer than ever before, and for many, there is a real risk of depleting assets too early. This study reflects the fact that we, as an industry, have a great responsibility to educate our clients about the importance of long-term planning. With many Americans now living as much as 20 or 30 years in retirement, it's more important than ever to have a plan that will ensure your dollars last as long as you do.
QWhat do you see on the mergers and acquisitions horizon?
AThat's probably a better question to ask the gurus at our home office in Milwaukee. I'll say this: Our customers tell us they like the stability and consistency they see in Northwestern Mutual. Some insurers in the past have demutualized; we have not. Many others were merged and submerged. ... When clients walk in my office, the name on the door has existed for 155 years. They know we'll be there 50 or 60 years from now.
QNorthwestern Mutual is a mutual company owned by policyholders, not shareholders. It's a bit of a throwback model since stock companies represent most of the industry now. Does it make it harder to raise money?
AWe love being a mutual company. It's a great business model because the people who own our policies also own the company. There are no outside shareholders, so there is no conflict between doing what is best for our policy owners and doing what is best for Wall Street. I tell people we are really like a giant co-op. Yes, most of our capital needs to be internally generated from our operations, but that hasn't limited us. Despite the turmoil of the past several years, for example, our total surplus capital is more than $18 billion, the highest in our history.
QNorthwestern Mutual owns the Russell 2000 Index of small-cap stocks. Why?
AWe own Russell Investments, which is based in Seattle. It's a subsidiary of ours and one of the world's best-known brands in institutional investing. They publish the Russell 2000 Index. We own Russell as an investment but also leverage some of their products such as mutual funds we offer to our clients.
Jennifer Bjorhus • 612-673-4683
