Term Paper: Northwestern Mutual Life Insurance Co

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SAMPLE EXCERPT:

[. . .] With the help of a network of specialists, financial representatives provide innovative solutions using world-class insurance products and internationally recognized investments." [Official Website 2003].

The mission tells us of what Northwestern Mutual business is all about as it identifies itself as a tool for marketing. That is the company is the marketing strategy. To an extent this is correct as one finds that people tend to trust Northwestern Mutual as compared to other companies. Furthermore the company aims to "develop enduring relationships with clients by providing expert guidance" is inherent in all of its business aspects. From offering advice on which plan to choose to checking out which portfolio to invest in Northwestern Mutual maintains a responsible professional panel for this specific purpose. With specialists and consultants working with the company it is not hard to achieve this mission. [Official Website 2003].

Furthermore the company claims to have offered innovative solutions for its consumers whether they are from the insurance or from the investment segments. Each year the company dedicates its efforts in studying the consumer behavior and tailoring their services and products to cater to their needs as has been done by the company's predecessors. The Northwestern Mutual thus offers an array of service with the specific goal to tailor to the consumers [Official Website 2003]. These services include:

Asset & Income Protection

Personal Planning

Education Funding

Business Planning

Investment Services

Estate Planning

Trust Services

Employee & Executive Benefits

Retirement Solutions

Network" [Official Website 2003].

These have been accomplishable with the help of the company's process structure which enable it to achieve its long-term vision. With the help of the representatives and consultants on its panels it is able to develop plans that financially support the company in its objectives and also offer the company opportunities to explore through an array of investment opportunities available in the market. According to the Official Website [2003] the company's purpose is thus to:

Purpose

As a mutual company, Northwestern Mutual exists for the benefit of its policy owners and customers. The company helps clients protect against financial risk and achieve financial security. Participating policy owners share in the surplus of the company through dividends, receiving their insurance at a minimal cost." traditional values

The philosophical aspect of the value of the tradition of stakeholders' precedence has been inherent ever since its first president offered to pay for the claims in 1858. The tradition has been carried on and today the company claim to measure its every business venture decision for the best interest of the policy owners. It claims to follow the following tradition:

Protecting the interests of policy owners and other clients requires a purposeful fairness -- to ensure that policy owners and beneficiaries get what they should get. This tradition has been carefully bred in our tradition. Long before they were popularly defined in the business press, such terms as "high ethical standards" and "integrity" were ingrained in the spirit of Northwestern Mutual." [Official Website 2003].

Ranking by the insurance agencies

Northwestern Mutual ranks number one in its industry for the past 19 years and this year once again it is also considered as a number one once again according to a Fortune survey of most admired companies ["Northwestern Mutual Repeats," 2003]. This indicates that the company is highly respected in its own industry as well as among other companies. Out of the 587 companies surveyed and evaluated to be ranked in this position is a credible achievement. The company's CEO says "This is about as good as it gets. There are a lot of great companies on this list, and for us to be ranked at the top is very special. It reflects our commitment to do what's best for our clients." ["Northwestern Mutual Repeats," 2003]. To be scrutinized by thousands of analysts and experts and having to pass with brilliant colors only indicate that Northwestern Mutual has a formidable reputation in its field. Indeed the company according to the report is known to address almost all aspects of its operations including financial, staffing, corporate governance and effective use of corporate assets along with quality in products and services, management, long-term investments and organizational values.

Current financial data on revenue

The catastrophic events of September 11 left deep marks on the world and no doubt the U.S. industry has also suffered due to it. The airlines industry has had the worse hit but the insurance industry has been no different. Instead perhaps the most hit in terms of financial standing they suffered the worse as with the happening of the event, there has been a sudden shortage of liquidity in the market. And with the drop of financial standing, the insurance companies have to face a great deal of drawbacks in terms of operations, funds for reinvestments as well as for provision to claims. Northwestern Mutual faced the same drawback along with other industries as the company claimed in its Financial Report 2001:

These are uncertain times for our economy. The year 2001 provided a test of Northwestern Mutual's investment strategy and showed us once again the benefits of a well balanced, well diversified portfolio. The fluctuation in the market resulted in varying performance within individual investment sectors." [Ross from Annual Report 2001]

Despite this fact Northwestern Mutual stood the test of time and learned that the "extraordinary circumstances" has only boosted and made them focus on high quality investments and reduce risks exposure for its stakeholders and shareholders. Overall income rose by 3.6% between 2000 and 2001; while managed assets increased by 6.9% equaling to $74 billion. There has also been an increase in the number of policy makers which increased the investment returns by 9.5% paid out in 2002.

Given the above exceptional performance in time of crises, one now then can understand why there has been a staggering increase in the total surplus from $8,194 to $8,926 millions from 2000 to 2001. To complement this Northwestern Mutual according to third party ratings include the following:

Northwestern Mutual has been rated top in the line of service it provides to consumers. Since third party ratings is an accurate measure for the company's relative financial strength or weakness as well as its standing in terms of security it indicates that Northwestern Mutual has performed exceptionally well in its position within the industry compared to other companies. As Moody's Investor Service [2001] declared "Northwestern Mutual's investment strategy focuses on creating a diversified, balanced general account portfolio that will produce good total return in a number of economic environments, as well as maintaining strong liquidity and investment flexibility." However, the ratings on its own does not reflect the performance or stability of the funds invested therefore it must be analyzed from another aspect of the financial report.

To get a picture of the firm's standing and reason why it has been successful, the researcher notes in the Investment section Northwestern Mutual section claims to have maintained "investment objective is to generate competitive total returns, including both current income and capital appreciation, while preserving the company's exceptional financial strength." [Annual Report 2001].

Financial analysis

Total invested assets increased by 6.8% in 2001 while fixed income 9%. The firm's management consider policies that would continue to selective investment strategies especially in under valued equity opportunities while keeping in view of the quality of fixed investments in tact. As a result of this policy the management believes that is why it has been able to secure $5.5 billion in investment earnings while net realized and unrealized capital losses minimized to $539 million. Perhaps the most important factor in the report has been that the company has strategize and successfully targeted the fixed income investment target market. As a result of which it has been able to secure 47% of this sector and which also is responsible for contribution to the total managed assets as well. Within this bracket are the mortgage loans which constitute 25% of the fixed investment income. The reason being that the destruction borne out of the event of September 11 has driven people to shift elsewhere as well as buy new homes; tenant who were single secured loans for ensuring their homes as well as commercial estates which needed the loans to rebuilds buildings and properties. The policy to follow this investment pattern has been highly successful and as a result the company is witnessing high returns on investments and anticipates to have even higher in the future as these loans are self generating income. Contributing to this increase in this pool of financial resource is the strategy to diversify the products and services. Preferred bonds as well as common stocks along with equity investments all contributed greatly to the pool of resources. In this regard the financial report indicated that the company's equity account for 16% of the total managed assets for the year 2001. The reason being that… [END OF PREVIEW]

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Northwestern Mutual Life Insurance Co.  (2003, April 7).  Retrieved April 24, 2019, from https://www.essaytown.com/subjects/paper/northwestern-mutual-life-insurance/6952659

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