TEXT-Fitch affirms Northwestern Mutual Life Insurance 'AAA' IFS

Thu Dec 20, 2012 5:57pm EST

Dec 20 - Fitch Ratings has affirmed the 'AAA' Insurer Financial Strength
(IFS) ratings of The Northwestern Mutual Life Insurance Co. (NM) and
Northwestern Long Term Care Insurance Co. (NLTC), collectively referred to as
Northwestern. Fitch also affirms NM's 'AA+' Issuer Default Rating (IDR) and 'AA'
surplus note rating. The Rating Outlook is Stable.

Fitch's ratings reflect Northwestern's very strong competitive position in the
U.S. individual life insurance market, exceptionally strong balance sheet
fundamentals, and stable earnings profile. Fitch considers Northwestern's key
competitive advantages to include its successful distribution system, large and
stable block of traditional life insurance, and focus on expense control.

Northwestern's extremely strong balance sheet fundamentals reflect the company's
very strong risk-based capital position, modest financial leverage, excellent
liquidity, and relatively low-risk liability profile. Total adjusted statutory
capital (TAC) increased to $22.2 billion or 7% at Sept. 30, 2012 due to strong
positive statutory operating earnings, and positive contributions from both net
unrealized and realized investment gains. Fitch estimates Northwestern's risk
based capital was approximately 506% at Sept. 30, 2012. NM had surplus notes to
TAC of approximately 7.9% and a total financial commitment ratio (TFC) of less
than 0.2 times (x) at Sept. 30, 2012.

Northwestern's business concentration in the sale of traditional cash value life
insurance through a career distribution system gives the company very favorable
credit characteristics (e.g. long-duration liabilities, limited guarantees,
predictable earnings performance) that enhance NM's risk profile and earnings.
At the same time, this same concentration exposes NM to changes in the
regulatory, legal, economic, and tax environment that may affect demand for cash
value life insurance.

Fitch believes Northwestern's stable, long-duration participating liabilities,
very strong statutory capital position, and flexibility in adjusting policyowner
dividend rates provide cushion to withstand changes in its asset risks and the
negative credit market effects of a less severe change in the sovereign ratings
of the U.S. government. However, a more material change in sovereign ratings
could lead to ratings changes.

Northwestern's net realized after-tax investment gains were $377 million in the
first nine months of 2012 compared to losses of $30 million in 2011 and $188
million in 2010. The improvement reflects gross realized gains from the sale of
the Russell Investment Center in Seattle and equity investments. Fitch believes
the continuing low interest rate environment has the potential to affect
Northwestern's earnings and capital but it is less of a concern than for other
insurers given Northwestern's smaller exposure to interest sensitive insurance
and annuity products.

NLTC is a wholly owned stock subsidiary of NM, and its financial strength rating
reflects the strength of the entire Northwestern organization, as well as the
explicit capital support agreement between NM and NLTC.

Key rating drivers that could lead to a downgrade include gross investment
losses exceeding $1 billion for 2012 or in 2013, a decline to a sustained RBC
ratio less than 400%, an increase in financial leverage above 15%, and a
downgrade of the current 'AAA' U.S. sovereign ratings below 'AA+'.

Fitch affirms the following ratings with a Stable Outlook:

Northwestern Mutual Life Insurance Company
--Long-term IDR at 'AA+';
--6.063% surplus note due 2040 at 'AA';
--IFS at 'AAA'.

Northwestern Long Term Care Insurance Company
--IFS at 'AAA'.

Additional information is available at 'www.fitchratings.com'. The ratings above
were solicited by, or on behalf of, the issuer, and therefore, Fitch has been
compensated for the provision of the ratings.

Applicable Criteria and Related Research:
--'Insurance Rating Methodology' (Oct. 18, 2012).

Applicable Criteria and Related Research:
Insurance Rating Methodology - Amended