Northwestern Mutual Life Insurance Co. said Wednesday it posted record revenue and beefed up its surplus – an insurer’s cushion against the unexpected – in 2016 despite a low-interest rate environment that is putting financial pressure on insurance companies. Mutual life insurance.
The Milwaukee-based company said it expects to pay policy owner dividends of $5.2 billion in 2017, down from 2016’s payout of about $5.6 billion, but still the best in the industry.
Northwestern Mutual also said it continued to solidify its role as a financial security company instead of only a life insurer, providing financial representatives and clients digital tools about investments and other elements of a more-complete personal finance picture.
The company posted record total revenue of $28.2 billion, up about 1% from $27.9 billion in 2015. At the same time, total assets grew 5% to $250.4 billion from $238.5 billion a year earlier. Net income was $818 million, compared with $815 million in 2015.
Northwestern Mutual’s surplus and asset valuation reserve, a key measure of an insurer’s financial strength, increased to almost $23.7 billion – an all-time high -- from $23.2 billion.
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The company said it received the highest financial strength ratings awarded to any U.S. life insurer by the four major rating agencies.
Northwestern Mutual noted it has surpassed $100 billion of client assets under management for investment products and services, a 13% increase over 2015 that reflects the firm’s growing role as a financial adviser.
“Our 2016 business results underscore that our long-term, ‘whole picture’ approach to financial security is working for clients,” John E. Schlifske, chairman and chief executive, said in a statement. “People are seeking guidance and simplicity. They increasingly value our distinctive combination of a deep, trusted relationship with our financial representatives and advisers, our superior products and solutions, and industry-leading financial strength.”
Company controller Todd Jones said Northwestern Mutual, now in its 160th year, and other insurers face challenges from the long-running low-interest rate climate. Low interest rates make it more difficult for insurers to grow earnings because insurance companies invest premiums from policy owners mostly in relatively safe investments tied to rates.
“But even with that, we continue to grow,” Jones said in an interview.
Northwestern Mutual, one of the area’s largest employers with a 2016 workforce of about 5,900 at its Milwaukee and Franklin campuses, said in September it expected to eliminate hundreds of jobs as it dealt with low interest rates that have made it harder to increase earnings.
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Betsy Hoylman, a company spokeswoman, said some jobs will be eliminated in 2017, with employees hearing more from their department leaders in the first quarter.
“As we shared last year, we are transforming our company to meet our clients’ changing needs while managing expenses carefully to maintain our financial strength,” Hoylman said. “While some positions will be eliminated this year, we are also hiring for the skills we need. These are necessary choices that we are making to continue to grow and meet our clients’ needs for years to come.”
While managing operating costs, the company has said it is planning for the future with construction of its $450 million, 32-story Tower and Commons skyscraper in downtown Milwaukee. Schlifske has said office tower will provide the kind of facility the company needs to be able to draw “knowledge workers” who can keep Northwestern Mutual at the top of its industry over time. Hoylman said construction is on schedule.
“It’s completely enclosed in glass, our name is on the building, and the yellow tower crane has been removed,” she said. “Crews are now focusing on landscaping the grounds and completing the interiors. Flooring, finishes, fixtures and furnishings all must be in place by our occupancy goal of fall 2017.”
She said construction of Northwestern Mutual’s nearby $100 million, 33-floor residential tower also is on schedule, with trucks arriving daily to pour the concrete core. That building is scheduled to open in 2018.
An earlier version of this article incorrectly said Northwestern Mutual's 2016 dividend payout was $5.6 million.
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