Newspaper article THE JOURNAL RECORD

John E. Schlifske Outlines Northwestern Mutual's Strategy for Long- Term Survival during Speech in Tulsa

Newspaper article THE JOURNAL RECORD

John E. Schlifske Outlines Northwestern Mutual's Strategy for Long- Term Survival during Speech in Tulsa

Article excerpt

As the national recession darkened, John E. Schlifske marveled at the number of companies adopting new business strategies to survive the deepening gloom.

His firm, the 153-year-old Northwestern Mutual, maintains four proven tactics that allowed the Milwaukee-based life insurer to boost its internal growth spending by $100 million this year.

"Our business model is tied to our organic growth," Schlifske told a University of Tulsa Friends of Finance audience Tuesday. The key: fundamental financial strength. "Because of that strength, we believe we can grow even in the bad times. We want to thrive when other companies are falling behind."

As the 17th president of Northwestern, set to become chief executive in July, Schlifske paraphrased those four secrets to success as discipline, foresight, memory and confidence. He broke the "tortoise and hare" strategy down this way:

* Achieve and maintain financial strength.

To do this the company pursued a strong balance sheet along with an aggressive investment portfolio policy. At 80 to 85 percent fixed- income, 15 to 20 percent equities, Schlifske said the insurer never traded its long-term strength for short-term gains. Staff commissions followed the same strategy.

The company averaged a 10- to 11-percent surplus ratio to help cover its strong dividend policy in bad times. That allowed Northwestern to pay $4.7 billion to policyholders last year, along with $6.8 billion in benefits.

From its $73 million in Oklahoma premiums with 30,000 policyholders, Northwestern paid $35 million in 2009 dividends and $29 million in benefits.

* Prepare for bad times in good times.

Assuming disasters will strike and economies sour, Schlifske said the company prepared advance steps for potential downturns. Its investment plans involved contingencies for not just one, but two consecutive years of 50-percent stock market declines, which prepared Northwestern for what Schlifske called today's Great Recession.

* Protect your core products, services.

This conservative approach kept Northwestern from following competitors into risky areas during good times. Schlifske said Northwestern maintained a strategy of not buying market share or chasing hot money.

While the strategy sometimes drew criticism for lacking innovation or not keeping pace, Schlifske said it was the price to pay for financial stability. …

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