Northwestern Mutual Life Insurance Company

Northwestern Mutual Life Insurance Co

Insurance business in modern day has adopted a differential approach to dealing with policy issues and consumer behavior yet some companies like Northwestern Mutual Life retain their original course of actions with clear mission and core values to provide exceptional service to their consumers. The following report is an analysis of such exceptional quality and distinguishable positioning of the company.

Whether one is a business entity, a healthcare organization or an individual living in society, the uncertain encompass great risks. As people are cautionary in nature, they often tend to adopt trends or behaviors that prevent them from becoming prey to such risks. To eliminate risks civilized society such as ours has developed a complex financial system that pays for the damages incur should there be accidents or sudden deaths. Life insurance is thus all about saving money for loved ones in case of sudden deaths and uncertain financial futures. This field has been one of the most controversial and the most sought after as well. As life style changed, so has the insurance pattern. Aside from life, there are insurance for businesses, marine, factories, workers and properties. However, despite this fact life insurance remains one of the most sought after fund savings opportunities for both companies as well as individuals.

Purpose Statement

In the following sections, the author has taken into account Northwestern Mutual Life Insurance and analyzes it from different aspects. The author will offer a historical background of the company and gradually trace its development to modern day. It will offer an overview of the financial status of the company including the kind of policies the company maintains, implemented and discarded. It will also trace the different components of the financial statements such as surplus, assets and liabilities as reported in the financial statement. Then the author will conduct a SWOT analysis to gauge the position of the company in the industry in its external and external environment. The financial analysis will take into account of how the company is operating. Unlike the previous section, in this section the author will analyze the meaning of various ratios in the context of the industry analysis. Then it will offer an overview its marketing strategies how effective it is and what kind of issues the company is facing. Given the above scenario, the author will then offer solutions for the company.

Method

The author will use the company information as the primary source along with management books in this field. A review of the literature of the secondary sources on the industry scenario will offer differential aspects of the company and other companies as well to effectively use it in the analysis sections.

Background

Northwestern Mutual Life Insurance Company is a "premier life insurance company, building financial security for individuals and businesses" according to its official website. The company operates on the basis of policy owners and customers. Some of the strengths that the company would like to credit itself with is the "integrity, financial strength, and building enduring relationships" with which it deals with its customers and other business partners. The company although is divided into different kinds of insurance and financial sub-categories as well but for this paper the researcher will focus on the Mutual Life Insurance division only. [Northwestern Mutual Life Insurance, 2003].

Northwestern offers a wide variety of insurance policies to meet the consumer needs. The success of the company as with any other insurance company lies with the basic strategy of tailoring the policies according to the customers' needs and pockets. This allows customers to maneuver their budget according to anticipated risks as well as the kind of future financial position they want to gain in the future. These life insurances are either term insurance for those who want to have a permanent life instance, a whole life/term meaning a combination of both whole life and term deposits or they could choose to subscribe to a variable life insurance that is entirely on their choice when to terminate. The basic aim is to allow the customers to have flexible options so as to encourage them to remain with the company without having to cancel the insurance totally. The disability income insurance as well as the fixed rate and variable rate annuities product range has been formulated with this aim in mind. [Northwestern Mutual Life Insurance, 2003].

This strategic outlook of the company has been the reason why Northwestern Mutual is considered to be one of the most admired companies in the U.S. According to rating by the Fortune 500 companies Northwestern Mutual ranked 1 for 19 years. This has because of the financial strength, strategic management as well as the company's ability to gauge the requirement of the consumers [Northwestern Mutual Life Insurance, 2003].

History

Northwestern Mutual Life Co. is part of a network called the Northwestern Mutual Trust. The company's history can be traced back to 1857 which even then serviced individual insurance needs. For more one century now the company has been engaged in the business of protecting people from financial risks and to help them in financial security issues. The company's motto had been and is still is "do the right thing." Even in 1859 the company faced the biggest challenge when two of the policy owners died, claiming $3,500 but the company's asset had been only $2,000. This has been the reason why the Northwestern Mutual tradition carried on with the philosophy to cater to the policy owners no matter what. The measurement of their business commitment is inherent in every decision they make and in every contract they draw. But most of all, it has been this tradition which has been the reason why today the company has been able to increase its policy owners' dividends to $300 millions for the year 2002 while leading the industry the policy payouts sums up to $3.7 billion for the year 2002. Financial record indicates it has surplus ratio for the year 2001 but most importantly it has high ranking by the top ranking third party agencies.

Such success did not come immediately. Northwestern Mutual was founded in 1857 but its development and success did not come about till it developed an organized mission "first in benefits" in 1888 and later on following the policy of listening to the policy owners in 1907. They learned the lesson that a mission statement is important for the company to become objective in its ambition while record setting as well as empathetic approach to reviews of policy owners usually harbor business relationships. And it has been through the consideration of such factors which took Northwestern Mutual to its next stop: maintaining a financial position despite amidst the 1933 Depression chaos. Having been able to hold their grounds during this event, the company's President Michael Cleary declared: "There never was a time... that the Northwestern Mutual could not have met every demand...with business promptness, in full and without the sacrifice of a dollar of its security." [NWM Website 2003].

From then onward it has literally been history for the company as it continues to base its policies based on the interests of the owners even as America faced many social, political and economical challenges. Some of these include generating the American troops support war funds through the purchase of bonds of $45 million; setting up infrastructure for tutelage for career in insurance; the oil crises during the 1970s and the stock market crash during the 1980s. Despite these events Northwestern Mutual company continued to develop and attain fame for its stability. In 1983 it has been recognized as the most admired company by Fortune; by 1986 the company started to pay out its dividend to policy owners of more than $1 billion and continued to do to date and in the 1990 it erected an 18 story high building to house the Northwestern Mutual campus. The building has been designed with the purpose to initiate information systems to increase business service opportunities and improved quality to the policy owners. Through these efforts it has been able to secure Best Sales Force in 1998 for the second time along with other titles like most admired company, marketing strategies as well as meeting financial needs through diversification. In 2001 the company faced another challenge of meeting the policy owners' demands after the events of September 11 and summing the claims to $124 million.

Mission, vision and core values of the company

Mission and Vision

Northwestern Mutual's success during the 19th century had been because of its effective strategy in creating trust between the company and the policy owners. "Doing the right thing" although had been a very simple statement but it became the core value for the company and carry on the tradition onto the 20th century as well as the 21st century. Today the company is recognized by its mission who states:

The Northwestern Mutual Financial Network is the marketing identity for the company's distribution system. The mission of the Northwestern Mutual Financial Network is to develop enduring relationships with clients by providing expert guidance for a lifetime of financial security. With the help of a network of specialists, financial representatives provide innovative solutions using world-class insurance products and internationally recognized investments." [Official Website 2003].

The mission tells us of what Northwestern Mutual business is all about as it identifies itself as a tool for marketing. That is the company is the marketing strategy. To an extent this is correct as one finds that people tend to trust Northwestern Mutual as compared to other companies. Furthermore the company aims to "develop enduring relationships with clients by providing expert guidance" is inherent in all of its business aspects. From offering advice on which plan to choose to checking out which portfolio to invest in Northwestern Mutual maintains a responsible professional panel for this specific purpose. With specialists and consultants working with the company it is not hard to achieve this mission. [Official Website 2003].

Furthermore the company claims to have offered innovative solutions for its consumers whether they are from the insurance or from the investment segments. Each year the company dedicates its efforts in studying the consumer behavior and tailoring their services and products to cater to their needs as has been done by the company's predecessors. The Northwestern Mutual thus offers an array of service with the specific goal to tailor to the consumers [Official Website 2003]. These services include:

Asset & Income Protection

Personal Planning

Education Funding

Business Planning

Investment Services

Estate Planning

Trust Services

Employee & Executive Benefits

Retirement Solutions

Network" [Official Website 2003].

These have been accomplishable with the help of the company's process structure which enable it to achieve its long-term vision. With the help of the representatives and consultants on its panels it is able to develop plans that financially support the company in its objectives and also offer the company opportunities to explore through an array of investment opportunities available in the market. According to the Official Website [2003] the company's purpose is thus to:

Purpose

As a mutual company, Northwestern Mutual exists for the benefit of its policy owners and customers. The company helps clients protect against financial risk and achieve financial security. Participating policy owners share in the surplus of the company through dividends, receiving their insurance at a minimal cost." traditional values

The philosophical aspect of the value of the tradition of stakeholders' precedence has been inherent ever since its first president offered to pay for the claims in 1858. The tradition has been carried on and today the company claim to measure its every business venture decision for the best interest of the policy owners. It claims to follow the following tradition:

Protecting the interests of policy owners and other clients requires a purposeful fairness -- to ensure that policy owners and beneficiaries get what they should get. This tradition has been carefully bred in our tradition. Long before they were popularly defined in the business press, such terms as "high ethical standards" and "integrity" were ingrained in the spirit of Northwestern Mutual." [Official Website 2003].

Ranking by the insurance agencies

Northwestern Mutual ranks number one in its industry for the past 19 years and this year once again it is also considered as a number one once again according to a Fortune survey of most admired companies ["Northwestern Mutual Repeats," 2003]. This indicates that the company is highly respected in its own industry as well as among other companies. Out of the 587 companies surveyed and evaluated to be ranked in this position is a credible achievement. The company's CEO says "This is about as good as it gets. There are a lot of great companies on this list, and for us to be ranked at the top is very special. It reflects our commitment to do what's best for our clients." ["Northwestern Mutual Repeats," 2003]. To be scrutinized by thousands of analysts and experts and having to pass with brilliant colors only indicate that Northwestern Mutual has a formidable reputation in its field. Indeed the company according to the report is known to address almost all aspects of its operations including financial, staffing, corporate governance and effective use of corporate assets along with quality in products and services, management, long-term investments and organizational values.

Current financial data on revenue

The catastrophic events of September 11 left deep marks on the world and no doubt the U.S. industry has also suffered due to it. The airlines industry has had the worse hit but the insurance industry has been no different. Instead perhaps the most hit in terms of financial standing they suffered the worse as with the happening of the event, there has been a sudden shortage of liquidity in the market. And with the drop of financial standing, the insurance companies have to face a great deal of drawbacks in terms of operations, funds for reinvestments as well as for provision to claims. Northwestern Mutual faced the same drawback along with other industries as the company claimed in its Financial Report 2001:

These are uncertain times for our economy. The year 2001 provided a test of Northwestern Mutual's investment strategy and showed us once again the benefits of a well balanced, well diversified portfolio. The fluctuation in the market resulted in varying performance within individual investment sectors." [Ross from Annual Report 2001]

Despite this fact Northwestern Mutual stood the test of time and learned that the "extraordinary circumstances" has only boosted and made them focus on high quality investments and reduce risks exposure for its stakeholders and shareholders. Overall income rose by 3.6% between 2000 and 2001; while managed assets increased by 6.9% equaling to $74 billion. There has also been an increase in the number of policy makers which increased the investment returns by 9.5% paid out in 2002.

Given the above exceptional performance in time of crises, one now then can understand why there has been a staggering increase in the total surplus from $8,194 to $8,926 millions from 2000 to 2001. To complement this Northwestern Mutual according to third party ratings include the following:

Northwestern Mutual has been rated top in the line of service it provides to consumers. Since third party ratings is an accurate measure for the company's relative financial strength or weakness as well as its standing in terms of security it indicates that Northwestern Mutual has performed exceptionally well in its position within the industry compared to other companies. As Moody's Investor Service [2001] declared "Northwestern Mutual's investment strategy focuses on creating a diversified, balanced general account portfolio that will produce good total return in a number of economic environments, as well as maintaining strong liquidity and investment flexibility." However, the ratings on its own does not reflect the performance or stability of the funds invested therefore it must be analyzed from another aspect of the financial report.

To get a picture of the firm's standing and reason why it has been successful, the researcher notes in the Investment section Northwestern Mutual section claims to have maintained "investment objective is to generate competitive total returns, including both current income and capital appreciation, while preserving the company's exceptional financial strength." [Annual Report 2001].

Financial analysis

Total invested assets increased by 6.8% in 2001 while fixed income 9%. The firm's management consider policies that would continue to selective investment strategies especially in under valued equity opportunities while keeping in view of the quality of fixed investments in tact. As a result of this policy the management believes that is why it has been able to secure $5.5 billion in investment earnings while net realized and unrealized capital losses minimized to $539 million. Perhaps the most important factor in the report has been that the company has strategize and successfully targeted the fixed income investment target market. As a result of which it has been able to secure 47% of this sector and which also is responsible for contribution to the total managed assets as well. Within this bracket are the mortgage loans which constitute 25% of the fixed investment income. The reason being that the destruction borne out of the event of September 11 has driven people to shift elsewhere as well as buy new homes; tenant who were single secured loans for ensuring their homes as well as commercial estates which needed the loans to rebuilds buildings and properties. The policy to follow this investment pattern has been highly successful and as a result the company is witnessing high returns on investments and anticipates to have even higher in the future as these loans are self generating income. Contributing to this increase in this pool of financial resource is the strategy to diversify the products and services. Preferred bonds as well as common stocks along with equity investments all contributed greatly to the pool of resources. In this regard the financial report indicated that the company's equity account for 16% of the total managed assets for the year 2001. The reason being that the Northwestern Mutual equities have been cleverly strategize to diversify enough to encompass high return equity rates. The income of which has been used for the pay out of the dividends. Public common stock constitutes 33% of the total equity investments while the private equity equal 27%. As a result of this almost equal division of the equity investment, the risk has also been distributed so that much of the capital invested in this segment is secure in its returns. Furthermore, the company has selected high return equities like direct oil and gas investments, tax advantaged ones which reduces the volatility beta rate for investment thereby offering stable investment portfolio for the venture capitalists.

Marketing analysis

According to a report by Northwestern Mutual, Americans are not aware of the financial future [2003]. There is little savings to date and people are not clear what kind of plans they should adopt in order to secure their future. In fact the report surveyed and noted that out of the 1000 Americans adults participated 79% are under the impression that they are comfortable and satisfied with the plans they have chosen even though they are unaware of the problems that they are facing. these include how to save more, make the best of the current bills or even plan to save additionally. The retirement goals are perhaps the only goals that they have yet they are not prepared to sacrifice dollar amount to achieve these goals. Moreover, the report notes that there is a growing optimism among the Americans that they are financially stable as Meridee Maynard, vice president at Northwestern Mutual. "While Americans realize the importance of planning and maintaining sound money management behaviors, there is a disconnect when it comes to behavior thus the term money 'maladies.'" She adds: "People need to understand their own financial 'misbehaviors' in order to take the proper corrective action." [American Dream or Financial Fantasy, 2003].

Furthermore, it has also been seen that the overall financial scenario is much deteriorated as the majority of the Americans are under impression that they are involved in planning and savings and are prepared for the uncertain future. There is no clear prioritizing in their income. American Dream or Financial Fantasy [2003] report notes that: "A look at how Americans prioritize their monthly income, however, reveals a glaring contradiction. Fully one-fifth of respondents report than more than 75% of their monthly income is immediately consumed each month, with an additional 10% of the average household monthly income targeted for short-term goals such as new clothes, a TV or a trip. Yet, one-fourth (23%) of Americans do not save anything at all on a monthly basis for long-term goals such as retirement or a child's education." This shows that as soon as the consumers get their monthly income they are immediately converted into expenditures. Although there is nothing much that they can do in the midst of the recession but nevertheless it is in anticipation of such recession, that often other nations of the world to save for "the rainy days."

According to the survey:

one fourth do not save anything at all on a monthly basis for long-term goals such as retirement or a child's education half respondents admit to not paying off their credit cards in full each month while most believe in diversification, 53% invest individual stocks compared to 42% holding mutual funds.

81% of respondents say that high monthly expenses are obstacles to saving and almost 90% say keeping money accessible is also an obstacle." [Northwestern Mutual Financial Network: Money Maladies Survey Findings Report, 2003].

In this regards analysts have also indicated that there are families out there who are living without any kind of safety net such as emergency coverage, medical insurance, and provision for disabilities or even money for college of their children or for retirements. This has a great impact on companies like Northwestern Mutual as it means that the consumers are not interested in savings and there is least motivation to extract a fraction of their budget for this purpose. This highly uninterested market has little to offer in terms consumer base. Since the insurance business require long-term commitments, demotivated consumers offer nothing but opportunities to be skeptic about the products that companies come out with. That is the reason why that flexibility in products, packages, variety, catering to all age groups should be the main focus for insurance companies. The monthly basis deposits for instance is a good package to encourage the consumers to save for their retirements yet people are not interested. [American Dream or Financial Fantasy, 2003].

This is a dangerous budget cycle because it leaves most families with little or no safety net to cover emergencies, medical disabilities or major future expenses such as college tuition or retirement," says Maynard. "Northwestern Mutual is hoping to persuade consumers that with a few simple steps, they can begin to take control of their financial futures and have more freedom to choose the type of lifestyle we all dream about."[American Dream or Financial Fantasy, 2003].

Alternately, experts suggest that interesting short-term plans should be offered to the individuals by increasing their contribution and still allow them to save within a few months. In this plan all the individual has to do is to sign up for a plan that would be over in a few months. The company then is charged high rates for keeping the funds. The consumer can then benefit from the returns in a few months. There are some drawbacks in this model though. First of all a company like Northwestern Mutual can greatly benefit from this strategy as it has a multitude of products to integrate this scheme into. however, its popularity will diminish as more and more saving consumers subscribe to it increasing the risk rate for the insurance company. Secondly, the motivation to save for a few months is a temporary solution whereas the insurance industry is run on long-term commitment and the consumers' ability to continue to contribute to the funds. For example college tuition schemes, retirement schemes etc. all take about 20-30 years to mature with least rate of returns. this is because the consumers had no motivation to use the money they want to save. However, the current market is not following this tradition thereby short-term savings and temporary fixes are not the actual cure for reviving the markets [American Dream or Financial Fantasy, 2003].. Perhaps the reason for this low morale and uninterested in savings can be best explained by Professor Mark Schug, Director of the University of Wisconsin-Milwaukee Center for Economic Education, who observes and says that:

In addition to the ABCs, parents need to teach their kids about basic money management," says Schug. "Economic education has become an essential part of learning, and Northwestern Mutual's findings confirm the critical role of parents in modeling positive behaviors including budgeting, investing and long-term planning." [American Dream or Financial Fantasy, 2003].

Studying the pattern of retirements one observe from the report that the American market views their future as optimistic and on an average they consider their retirement would be around 61 years or younger. The average age of life expectancy is estimated at 83 years leaving the insurance companies to field 22 years of fund dispatch to the consumers. Hence, if Americans are not willing to save at an early age there are chances that many of them will have to live without the funds in their old age. Worse most Americans are dependent on social security which is also the reason why they are less willing to invest in the private sectors. They are expected to live within the monthly income bracket of $28,000 for a year after retirement but the social security are less likely able to offer them such luxury. Despite this fact one observe that the consumers are not prepared to plan for their retirements. 34% of the population require the current savings to use for their daily needs. They even spend the income tax refunds that come their way. [American Dream or Financial Fantasy, 2003].

Although education is the main concern for the government, it has been observed that only 45% of the parents of young children have set aside some sort of saving for their children while 35% do not plan and the rest are dependent on their future incomes to extricate them out from this financial dilemma. The lack of planning along with growing children is gradually taking over the income share which is another reason why they are not able to set aside savings.

SWOT analysis

Strengths

Northwestern Mutual no doubt holds a top position in the industry and with the infrastructure that it has established for itself, will continue to do so in the future. With a highly capable CEO Edward J. Zore, the 16th President of the company, Northwestern Mutual does not anticipate any pressure of competition from the external environment as it is very much assured of its internal structure.

One of the most important aspects of Northwestern Mutual is the fact that the company formalizes the process of strategies through regular research and development. Reports on current consumer status, internal human resources, policies that should be adopted and new products that should be launched all are included in this process of innovation and development. For example during the 1990s the company anticipated the importance of setting up an IT infrastructure and how it would enable the organization to effectively deliver service and improve its quality performance. The exclusive decision has resulted in the IT building and later on the online system of communication. This not only enabled the company's employees interact forming a community but also able to support the customer service support system where expert advices are given to the customers on a regular basis. The idea is thus clear - communication with the goal to achieve quality performance.

Similarly, the standing of a company in an insurance industry is judged by the asset base, the surplus and the industry ratings. Northwestern Mutual holds top position in all of the above as it carefully select products and services that cater to the immediate needs of the consumers without compromising its existing customers. By maintaining risk adverse portfolio, it holds a positive position against the drawbacks which other insurance company's faces. Meaning it has been observed that the company has remained adamant in following its carefully devised strategy to maintain managed assets equitable to its liability. The surplus that results from returns of investments is then disbursed to the policy owners therefore Northwestern Mutual maintains a budget cycle without having to borrow or compromise the interests of its policy owners.

Furthermore, the academic aspect of the company is also a positive point as it trains and tutor the students to enter into the insurance career. This is highly imperative in a field where extensive knowledge of the market as well as the product's intricacies given the consumer's preference and choice is concerned. A misunderstanding with a client can cost a company's repute. By training these students Northwestern ensures that its future pool of human resources are well versed in the company's business.

Weaknesses

One aspect that the author feels that could be considered a weakness in the structure of the company is the fact that it goes against the flow of the industry. This introvert attitude of the company which focuses on the internal company issues and events tend to exclude the company from participating in healthy competition. Much of the focus of the mission and vision is to build on the internal asset base, strengthen the infrastructure and its people as well as policy owners. However, this attitude is not healthy for the development of the company given the view that the world is becoming more diversified and globalize where openness to change and reengineering steps are crucial for growth. The company thus is weak in this regard as the infrastructure caters to the internal customers whereas the external customers are befitting merely as a result of these efforts. The objective of the company to achieve long-term growth has been achieved successfully because, Northwestern has followed the strategy of stagnation. This should not be a typical approach for a number one ranking company.

Opportunities

Jeanne Lee [2002] in her article in Business 2.0 predicted that the financial and insurance industry is going through a rough time as more and more companies are plunging into the uncertain investment environment. According to her policy owners are no longer sure of what kind of plans they want today more than they did during the 1990s. The uncertainty in the financial market has been under scrutiny by the federal government while the consumers are seeing a trend where they are disinclined to invest in any elaborate long-term plans. Yet most of the companies in the insurance industry are producing more and more goods and services for the long-term. There are more long-term policies and term policies than there are short-term ones. Northwestern Mutual which has been conducting consumer behavior analysis showed in their reports that there are a significant percentage of the population who are already engaged in long-term plans while the rest are not interested in it. This is because they are not sure they want to invest in private insurance companies when they can get the same benefit from Medicaid and Medicare. In its latest endeavors, Northwestern Mutual is tailoring its product and services to cater to this group of individuals. There are opportunities which exist for the company to explore as there are great demand for short-term insurance but few companies that are offering such a service. These groups could be young adults, career oriented individuals mainly constituting of the age group between 20 and 60 years.

Furthermore Lee also reports how individuals are interested in policies that allows the flexibility of tax qualified and non-tax qualified policies as most people prefer to have tax qualified. "With this policy, a portion of your premium (it depends on your age) counts as an unreimbursed medical expense, which is partially deductible if your total unreimbursed medical expenses exceed 7.5% of your adjusted gross income. Benefits are tax-free if they are less than the cost of care or no more than $210 a day." [Lee 2002]. While the non-tax qualified are more restricted in their features as it requires the health care professionals to follow paper work procedures for care of at least 90 days and such mandates. In this regards Northwestern Mutual could devise packages that cater to the health care facilities that are being offered by the Medicaid and Medicare only.

Threats

The element which could create the opportunities can also prove threatening for the company as well. The insurance industry is segmented almost equally by the public sector and the private sector. The main concern is that the public sector has proven to be as diversified and effective in providing plans for the general consumers as much as the private sectors. Therefore any new entrants that come into the current industry scenario is ward off. The old players like Northwestern Mutual on the other hand had been greatly affected by the dominance of the Medicare and Medicaid. Care like nursing care and homes; medicinal facilities as well as recovery through these two public run organizations have secured the majority of the population. The private sectors are therefore offered only partial market opportunities and it is through this partial market that Northwestern Mutual and the like that has to explore. This kind of limits the market base to the chosen few who can afford it or those who prefer to have no hassle of long documentation procedures. Hence, the chances of losing clients is high thereby putting more emphasis on service and product variation to attract new clients. Gradually the market for insurance will shrink.

Viro analysis

According to Barney [2001] the Viro Analysis places the company in a competitive position and analyzes whether it is equipped with dealing with the external environment or not. Based on this model there are four major factors that needs to be considered. These are Cost leadership, product differentiation, tacit collusion, and alliances.

Cost leadership

Northwestern Mutual insurance is considered to be one of the best insurance companies not only because of its sound financial standing but also because it utilizes cost leadership. According to Lee [2002] a policy introduced by Northwestern Mutual can be gauged by the payout and the premium rate. She writes:

For around $3,300 a year, you could purchase a Northwestern Mutual policy at age 50 that pays out for six years at $150 a day, with inflation protection; in 20 years it would pay out $870,000 -- enough to cover about six years in a nursing home, factoring in inflation. If you invest that same $3,300 a year, assuming a conservative 5% return, you'd end up with $118,000 in 20 years." [Lee 2002]. This shows that Northwestern Mutual anticipates the competitive edge it needs to maintain in order to remain at par with the State's health care facilities. This cost leadership has been one of the reasons why that individuals who prefer private insurance turn to Northwestern Mutual for cheaper pay rate yet acquire higher returns on maturity.

Product differentiation

Similarly, Northwestern Mutual has always been careful in its product diversification strategy. Currently it offers products including policies, equity investments, bonds, consultancy, and long and short-term investments as well as provide families with advice on estate liquidity, professional money management, retirement income and tax reduction strategies etc. These side products and services complement the mainstream of its products which are the policies. However, Northwestern Mutual is very much aware of the drawback of being Mutually funded as it largely depend on its financial pool to fund for the policies. Yet Northwestern Mutual following the tradition of age old maintain that this tradition has kept the company afloat even in the hardest of times. Despite the limitation the company has been able to differentiate services and products within the product category by offering side services thereby in this sense they are offering product differentiation to a certain extent [Official Website 2003].