Milwaukee-based
Northwestern Mutual plans to once again pay out a record amount in dividends next year with policy holders set to receive $6.8 billion, the company announced Wednesday.
The 2023 dividend total continues a steady upward march of the company's payouts in recent years, from $5.3 billion in
2018, $5.6 billion in
2019, $6 billion in
2020, $6.2 billion in
2021 and $6.5 billion
this year.
“Our annual dividend is a demonstration of the company’s superior financial strength, strong investment performance, disciplined underwriting and sound financial management, which enables us to deliver exceptional value to our policyowners while ensuring we can keep our promises to them,” said John Schlifske, chairman, president, and chief executive officer at Northwestern Mutual.
The company also said this year’s payout will be its highest in Northwestern Mutual history in whole life insurance, term insurance, disability income insurance and annuities.
Determining the annual dividend payout is a nearly yearlong process, said Jason Klawonn, vice president and chief actuary at Northwestern Mutual. It starts with analysis in the actuarial department before Klawonn makes a recommendation to the company’s leaders and the board of trustees ultimately make a decision.
Factors that go into the decision include items like mortality and morbidity experience, expenses, investment performance, and persistency or the rate at which business stays on the books, Klawonn said.
“One of the things we like to do in the dividend process is we don't like to overreact to just what we're seeing for a particular year,” he said. “We want to keep up over time with how experience evolves, but we don't want to overreact to volatility.”
Klawonn noted that while the COVID-19 pandemic led to an increase in mortality experience, taking a longer-range view muted the impact of the increase in the company’s analysis.
Increasing volatility and uncertainty in the economy could also complicate the picture.
“We're always trying to ultimately balance two things,” Klawonn said. “One is we want to pay out the most we can today, because that is our way of ensuring product relevance that they have today, it drives our persistency, it drives a lot of good things for us. It's paying out the most we can today while maintaining the unquestioned financial strength that we have. And that's the tension.”
He said navigating the tension amidst an uncertain outlook is ultimately a matter of judgment.
“We do take into account our future outlook, but we never want to get to heavy handed with that, we never want to let that number sway the decision because again, it is a balancing act,” Klawonn said. “The policy owners have contributed to our success, they deserve a good portion of that to ensure that we continue to treat them equitably year, after year, after year, but we also always have to make sure the financial strength is there because the most important thing we have to do is make sure we're there tomorrow at claim time.”
