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Moody's Investors Service Inc.

Moody's Downgrades Northwestern Mutual's Ratings Amidst US Sovereign Credit Concerns

Strategic Insights

— 1 min read

Moody's Ratings has downgraded the long-term insurance financial strength (IFS) rating of The Northwestern Mutual Life Insurance Company (Northwestern Mutual) to Aa1 from Aaa, citing the downgrade of the US Government's rating and the linkage of the company's credit profile with the US government's creditworthiness. The rating action follows the May 16, 2025 downgrade of the US Government's long-term issuer and senior unsecured ratings to Aa1 from Aaa. The downgrade reflects the company's exposure to domestic insurance and financial markets, as well as its investment portfolio's high asset leverage ratio and correlation with the US Government and economy.

Key Takeaways:

  • The downgrade of Northwestern Mutual's ratings is driven by the downgrade of the US Government's rating and the company's linkage with the US government's creditworthiness.
  • The company's strong credit linkages with the US Government exist in factors such as business prospects, investment portfolios, earnings, and capital generation.
  • Northwestern Mutual is exposed to the same macroeconomic pressures and financial market conditions that affect the US Government's creditworthiness.
  • The company's solvency and credit profile is tied to its investment portfolio, given the high asset leverage ratio and the securities it invests in.
  • The rating reflects the company's exceptional intrinsic strengths, including its leading positions and prominent franchise in the US life insurance market and strong distribution networks.
  • The stable outlook reflects the company's very strong business profile, which benefits from leading positions in the US market, diversification by business lines, and relatively low product risk.

Statistics:

  • The downgrade of Northwestern Mutual's IFS rating is to Aa1 from Aaa.
  • The surplus notes ratings are downgraded to Aa3 (hyb) from Aa2 (hyb).
  • The senior secured MTN programs are downgraded to (P)Aa1 from (P)Aaa.
  • The P-1 commercial paper rating of Northwestern Mutual Short Term Funding, LLC is affirmed.
  • The company has statutory assets of $378.3 billion and statutory capital and surplus of $31.8 billion as of December 31, 2024.
  • The company's asset/liability management and liquidity risk stems from the non-interest sensitive nature of its liability mix, dominated by participating whole life (WL) insurance reserves.

Sources:

  • Moody's Rating Methodology: Life Insurers (Published in April 2024, available at https://ratings.moodys.com/rmc-documents/418351)
  • Moody's Ratings
  • The Northwestern Mutual Life Insurance Company

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