Northwestern Mutual posts record surplus, will pay out $5.6 billion in dividends

 Northwestern Mutual Life Insurance Co. said Wednesday it increased its surplus to the highest level in company history in 2018 and expects to pay out a record $5.6 billion in dividends to policy owners.

The Milwaukee-based company said the total surplus, which is an insurer's cushion against the unexpected — and a key measure of its overall financial strength — was more than $26.7 billion, up about 6.1 percent from almost $25.2 billion in 2017.

The expected 2019 dividend payout is nearly $300 million more than last year.

“We exist to help clients achieve financial security, and our company’s financial strength ensures we are well positioned to deliver on our promises for generations to come,” John E. Schlifske, chairman, president and chief executive officer, said in a statement Wednesday. “I’m proud of these results, which show that our wise investment approach and diligent expense management enable us to consistently deliver value to everyone who counts on us.”

Net income dropped to $783 million from about $1 billion a year earlier, but Todd Jones, Northwestern Mutual vice president and controller, said the company’s main focus is on solidifying its surplus and paying dividends to policy owners, not net income.

“Dividends are really what represents value to the policy owners,” he said in an interview. “It’s the return of some of their premium because of our performance. We take what we need from a surplus standpoint and then we pay as much of what’s left over to the policy owners as we can.”

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Jones noted that total investments from the company also rose in 2018, in spite of the long-running low interest rate environment.

“Our investment portfolio increased almost $10 billion during the year to $235 billion, which is another all-time high,” Jones said.

Total revenue rose 1.4 percent to $28.5 billion from $28.1 billion. Premiums increased to about $18 billion from $17.9 billion.

Northwestern Mutual said it paid $4.8 billion in insurance claims to policy owners and their beneficiaries, or 10 percent more than in 2017.

Life insurance in force was up 4 percent, to $1.8 trillion.

Among other highlights of 2018:

• The company introduced its new Planning Experience financial planning tool, software that lets clients see their entire financial picture at any time.  The tool was used to create more than 30,000 financial plans in 2018.
• Northwestern Mutual dramatically reduced underwriting time with an accelerated process for life insurance, enabling the company to approve some applications in one day rather than two to three weeks.
• Northwestern Mutual committed to investments in innovation, including three new venture funds to invest in the “brightest ideas and businesses.” The company also opened the new Northwestern Mutual Data Science Institute with the University of Wisconsin-Milwaukee and Marquette University to advance data science and technology learning to strengthen future talent in Milwaukee.

“Technology is helping our advisers ensure financial planning is an always-on, easily accessible and more efficient experience so more people can enjoy today while preparing for tomorrow,” Schlifske said.