Northwestern Mutual Life Insurance Company -- Moody’s rates Northwestern Mutual’s surplus notes at Aa2 (hyb)
Rating Action:
Moody’s rates Northwestern Mutual’s surplus notes at
Aa2 (hyb)
15 March 2021
New York, March 15, 2021 – Moody's Investors Service, (”Moody's”) has assigned a Aa2 (hyb)
subordinated debt rating to the expected issuance of approximately $750 million of 30-year fixed
rate surplus notes by Northwestern Mutual Life Insurance Company (Northwestern Mutual or NM,
insurance financial strength (IFS) Aaa stable). The proceeds of the surplus notes are expected to be
used for general corporate purposes. The outlook on Northwestern Mutual is stable.
RATINGS RATIONALE
Northwestern Mutual’s Aa2 (hyb) surplus note rating reflects the typical two-notch difference
between an operating company's IFS rating and its surplus note rating, because of the subordination
of surplus notes to policyholder and senior creditor claims. The surplus notes rank pari passu
with the company's existing surplus notes. Following the surplus note issuance, Moody's expects
Northwestern Mutual's adjusted financial leverage metric to remain below 15% (adjusted financial
leverage was 11.5% at year-end 2020), and further enhance capital adequacy.
Moody's noted Northwestern Mutual’s credit profile reflects the company's exceptional business and
financial strength which includes a leading position and strong franchise in its core market with a
significant focus on participating whole life insurance, a very productive distribution network, strong
operating fundamentals reflected by its excellent persistency and favorable mortality experience,
and a robust and resilient balance sheet characterized by consistent investment performance and
solid capital adequacy (its NAIC Risk Based Capital (RBC) ratio was 492% at year-end 2020).
These strengths are tempered by a weaker earnings profile for the rating level, the challenges of
maintaining agency growth, and the possible shift in consumer preferences toward investment-
oriented products over the long-term. In addition, the company has sizable exposures to commercial
real estate-related investments, alternative securities, and below investment-grade bonds, and a
total return focused investment strategy that subjects the company to equity market volatility.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING
According to Moody's, the following could place downward pressure on NM's ratings: 1) a
downgrade of the US government rating; 2) NAIC RBC ratio below 400% (company action level)
for an extended period or a reduction in capital of more than 10% over a 12 month period; 3) a
significant decline in the percentage of participating whole life insurance premiums relative to total
premiums and deposits; 4) production from its career distribution network declining substantially or
loss of its leadership position in life insurance sales over the medium term.
The following rating has been assigned:
Northwestern Mutual Life Insurance Company: surplus note rating at Aa2 (hyb).
The outlook on Northwestern Mutual and its affiliates is unchanged at stable.
The principal methodology used in this rating was Life Insurers Methodology published in
November 2019 and available at
https://www.moodys.com/researchdocumentcontentpage.aspx?
docid=PBC_1187348
. Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
The Northwestern Mutual Life Insurance Company, domiciled in Milwaukee, WI, provides insurance
protection, retirement, and investment products in the United States. As of December 31, 2020, the
company reported approximately $309 billion of statutory assets and statutory capital and surplus of
$25 billion respectively.
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researchdocumentcontentpage.aspx?docid=PBC_79004
.
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