Northwestern Mutual Sets Off 2025 Dividend Race
The company is predicting that its payments to policyholder owners will rise 12%.
Northwestern Mutual has started mutual life insurers’ dividend announcement season by predicting that it will pay $8.2 billion in dividends to its policyholder owners in 2025.
Holders of eligible life insurance policies, disability insurance policies and annuities could get 12% more payments next year than they’re on track to get this year.
The dividend scale, or interest rate used in the dividend calculations, will increase to 5.5%, from 5.15%.
“We’re pretty excited,” Todd Jones, the company’s chief financial, said.
This will be the first time Northwestern Mutual will pay more than $8 billion in dividends, he said.
What it means: Life insurers invest mainly in high-grade corporate bonds, mortgage-backed securities and other assets designed to appeal to sophisticated, long-term investors.
Strong life insurance dividends suggest that sophisticated, cautious retirement savers are also doing well.
Dividend increases can also have a direct effect on clients with the policies that get the dividends.
Mutual insurers: Mutual insurance companies are insurers that are owned by some or all of the policyholders.
The context: A year ago, Northwestern Mutual predicted that its divided scale would increase to 5.15% this year, from 5% in 2023, and that dividend payments would increase by 7.4%.
Other insurers announced 2024 dividend payout increases averaging about 10%.
The average increase was down from an average of about 12% in 2023, but it was much higher than in 2022, when insurers feared the COVID-19 death toll could get much worse.
Jones’ views: The Federal Reserve Board has responded to concerns about a cooling economy by starting to pull down the short-term interest rate benchmarks it controls.
The sudden spike in interest rates that the Fed implemented from early 2022 to earlier this year hit commercial real estate investments hard.
But long-term interest rates are still higher than they were a few years ago, and serious problems with Northwestern Mutual’s holdings are still at a moderate level, Jones said.
The overall investment climate “is still rather benign,” Jones said.
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