It's no secret that dramatic events in the financial markets placed tremendous pressure on financial companies in the fourth quarter of 2008. I want to assure you that your company was prepared to withstand the market downturn and is in very good position to adapt to the challenges ahead in this tough economy.
For financial security companies entrusted to help people reach their long-term goals, the most critical element to examine today is financial strength. Northwestern Mutual's financial position remains strong.
We entered 2008 with the second-highest capital position in our history. As equity values fell, many of our equity investments declined in value, but our diversified general account portfolio increased in size and remained concentrated in high-quality, fixed-income assets. At year end 2008, our surplus-to-reserves ratio of 11.5% was still high by historical standards — higher, in fact, than company surplus ratios in all but 13 of our 152 years. We also approved a policyowner dividend payout of more than $4.5 billion for 2009, a total that will again lead the life insurance industry.
In Northwestern Mutual's long history, we've navigated a variety of economic and financial conditions. In that time, our distinctive business model has set our company apart and gives us an advantage in the current environment. For example:
- We don't carry debt or other forms of financial leverage on our balance sheet.
- Our product mix is different from other companies in our industry. Our large block of stable, participating life insurance gives us sufficient margins to withstand significant market stresses and helps us continue to deliver the best long-term value to you.
- We're careful about embedding high-risk options, such as aggressive performance guarantees, in our insurance products and annuities because those guarantees can backfire in rough environments.
- We have substantial operating cash flow because of your high level of policy loyalty to your company. We call it "persistency."
Last year Northwestern Mutual's strength among financial security companies helped us achieve a new record for recruiting financial representatives. More than 2,000 new representatives joined our field force in 2008 in recognition of the advantage that our business model and financial security commitment offer to clients in these difficult times.
With increased uncertainty in the financial markets and heightened sensitivity toward financial risks, we know that now, more than ever, you need to feel confident about your financial future. Northwestern Mutual stands strong to meet your needs. We want you and all policyowners and clients to be confident that your trust in us is well-placed.