Northwestern Mutual expects its annual dividend payments to reach $7.3 billion in 2024, the highest in the Milwaukee-based company’s 166-year history.
The expected payout includes $6.1 billion for policyowners in whole life insurance, $550 million for those with disability insurance and $240 million for those with annuities. Policyowners can choose to apply the dividend to their policy’s cash value or death benefit, to reduce their premium or to receive it as a cash payment.
“Next year’s historic dividend demonstrates once again our unflinching focus on returning value to policyowners and guiding their journey toward greater financial security,” said John Schlifske, chairman, president and chief executive officer of Northwestern Mutual.
Jason Klawonn, vice president and chief actuary at Northwestern Mutual, said one driver of the company’s continued increases in dividend is its overall growth. He also noted the company is increasing the dividend interest rate from 5% to 5.15% next year.
“That’s because of the overall performance of our diversified portfolio,” he said.
Northwestern Mutual has seen steady growth in its dividend from $5.3 billion in 2018, $5.6 billion in 2019, $6 billion in 2020, $6.2 billion in 2021, $6.5 billion in 2022 and $6.8 billion in the current year.
Klawonn emphasized that Northwestern Mutual aims for its dividend process to lead to “an orderly payout of our success.”
“We don’t like to, because we have a pandemic one year, all of the sudden jack up our mortality charges only to turn around a year later or two years later to have it reverse, things of that nature,” he said. “Whether it’s our mortality experience, whether it’s our investment experience, there is this sense of trying to smooth that volatility out to still be reflective of trends, because we do want to pay out our experience over time, but part of what our field force, part of what our policy owners appreciate, is sort of that stability, sort of that smoothness of performance.”
Growth in equities markets from 2019 through 2021 helped the company build its surplus and capital position, helping to fund growth in the dividend while last year saw challenges in equities.
“We really are in a position, because of our strength to take those spikes, those ups and downs, and take them away from our clients and manage it in-house for their benefit,” Klawonn said.
He also noted the company is starting to see some of the benefits of higher interest rates as older bonds mature and funds are reinvested at higher rates or the same happens with new money coming in through business growth.
While there may be uncertainty about the direction of the economy moving forward, Klawonn said Northwestern Mutual benefits from a business model that requires it to look beyond the next quarter or year.
“We’re really making decisions that need to hold water over decades and decades,” he said.
Looking at just the first half of this year, the company has seen its total revenue decrease around 0.27% to $17.79 billion. An increase in net investment income was offset by a decrease in revenue from premiums.
Total benefits and expenses, on the other hand, increased 0.62% to $14.14 billion.
In 2022, Northwestern Mutual’s total revenue grew 2.5% to $34.9 billion.
Klawonn described the first half results for this year as solid and stable, but noted dividend decisions are based on a longer period of time.
“I wouldn’t look at a six-month period, I wouldn’t look at a 12-month period, it really is how is this evolving over longer periods of time,” he said.
