A.M. Best Affirms Ratings of Northwestern Mutual and Affirms Debt Rating of Frank Russell Company

Business Wire,  Feb 23, 2007  

Tags: A.M. Best Co.

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OLDWICK, N.J. -- A.M. Best Co. has affirmed the financial strength rating of A++ (Superior) of The Northwestern Mutual Life Insurance Company (Northwestern Mutual) and its subsidiary, Northwestern Long-Term Care Insurance Company (NLTC) (both of Milwaukee, WI). Concurrently, A.M. Best affirmed the issuer credit rating (ICR) of "aaa" of Northwestern Mutual and assigned an ICR of "aaa" to NLTC. A.M. Best has also affirmed the debt rating of "aaa" on $350 million 5.625% senior unsecured notes of its subsidiary, Frank Russell Company (Russell) (Tacoma, WA). Principal and interest payments on these securities are unconditionally guaranteed by Northwestern Mutual. The outlook for all ratings is stable.

These ratings are a reflection of Northwestern Mutual's sizable and mature individual life insurance franchise, conservative operating profile, strong operating performance and superior risk-adjusted capitalization. The ratings also recognize the loyalty and productivity of the Northwestern Mutual Financial Network, its exclusive distribution system, as well as the competitive advantages derived from historically favorable investment, expense, persistency and mortality experience in its core business lines. Additionally, Russell continues to experience favorable growth in revenues, operating earnings and assets under management, enabling it to provide sufficient stand-alone debt service coverage, notwithstanding the guarantee afforded it by Northwestern Mutual. Furthermore, Northwestern Mutual's financial leverage is expected to remain in the low single digits, consistent with its conservative approach to balance sheet management.

Partially offsetting these positive rating factors is the potential impact on future sales growth due to the company's strategy of relying on relatively simple, low risk life insurance and annuity products, which offer few of today's popular secondary guarantee/living benefit features. However, A.M. Best notes that despite its risk averse product strategy, Northwestern Mutual's recent sales have exceeded industry averages. Furthermore, regardless of a recent increase in the recruitment level of financial representatives, Northwestern Mutual may be challenged to continue to increase the number of sales professionals over the long term. A.M. Best notes that concerns over the company's ability to grow its career distribution system in the face of declining industry-wide fundamentals for affiliated agent channels are heightened by its lack of distribution diversification. Nevertheless, relative to its peers, Northwestern Mutual's financial representative productivity and retention rates remain quite favorable.

For Best's Debt Ratings, all other Best's Ratings, an overview of the rating process and rating methodologies, please visit www.ambest.com/ratings.

Founded in 1899, A.M. Best Company is a full-service credit rating organization dedicated to serving the financial services industries, including the banking and insurance sectors. For more information, visit www.ambest.com.

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