mutual advantage. - Northwestern Mutual

10
“As it happens,
Northwestern, the master
of loyalty, is also famous
for its careful cost management
… yet all of
Northwestern’s savings
would not sustain superior
production if they weren’t
reinvested in the delivery
of superior value to
customers and agents,
earning their loyalty in
the process.”
- Frederick Reichheld,
“The Loyalty Effect,” 1996
“A commandment that
flows from our credo is
a policy of aggressive
fairness. We treat all of
our policyowners with
the same thorough
respect.”
- Donald J. Schuenke,
President and CEO,
Northwestern Mutual, 1988
“Our company has
embraced mutuality for
143 years. But ironically,
today, as more and more
companies abandon the
mutual form, the advantage
of mutuality is finally
getting its rightful
attention. We like being
a mutual company.”
- James D. Ericson,
President and CEO,
Northwestern Mutual, 2000
Excellent Persistency
The third contributor to policyowner value is
persistency, the degree to which policyowners
keep what they have purchased. A low lapse
rate leads to better mortality results,
better cash flow for investments, and a larger
base over which to spread expenses. The latest
available data shows Northwestern’s annual
life insurance lapse rate to be almost half the
industry average.
The company also regards its leadership
position in persistency as important to the
consumer for two reasons. First, it is perhaps
the truest measure of customer satisfaction—
people voting with their dollars, so to speak.
And secondly, persistency is an indicator that
the products were properly bought—and
properly sold—in the first place. People keep
the policies in force for the simple reason that
the products are filling a real need.
Lapse Ratio by Amount Combining
New Business & Inforce Business
Company* 2000 2002 2004
Northwestern Mutual 4.5% 4.0% 3.9%
American Express 6.4 4.4 4.3
Prudential 6.8 7.8 5.0
Mass Mutual 5.9 5.4 5.1
New York Life 7.0 6.5 5.7
Lincoln National 10.0 8.7 5.7
Principal 6.4 6.8 6.0
Manulife Financial(1) 5.8 6.4 6.3
State Farm 8.1 7.6 6.7
Met Life & Affiliates (2) 8.2 8.2 6.8
Pacific Life 4.8 7.7 7.2
Guardian 6.2 6.4 7.5
Jefferson-Pilot 8.8 9.0 7.7
AXA Financial (3) 7.3 7.9 7.8
AEGON 8.1 7.9 8.9
Industry Average 8.6 8.6 7.1
* Family data
(1) Primary Companies – John Hancock, John Hancock USA
(2) Primary Companies – New England, General American,
Metropolitan Life
(3) Primary Companies – Equitable, MONY
Source: A.M. Best Company, prepared and calculated by
The Northwestern Mutual Life Insurance Company, Milwaukee, WI.