1. W
ITH the credit and housing mar-
kets in turmoil, insurance was,
until recently, an overlooked
piece of the financial picture. That
changed when the government shored up
the American International Group, the na-
tion’s largest insurance company, with an
$85 billion emergency loan two weeks ago.
Edward J. Zore runs Northwestern Mu-
tual, the largest direct provider of indi-
vidual life insurance in the country with
3.3 million policy owners and more than
$1 trillion of insurance in force. Mr. Zore
recently discussed the changes that
might be afoot in the industry, his compa-
ny’s traditional approach to business and
why he resists becoming a publicly
owned company.
Q. With the announcement of the federal
bailout of A.I.G., how is the insurance in-
dustry holding up?
A. The insurance industry is holding up
very, very well. Our company had less
than one-half of 1 percent of assets ex-
posed to subprime markets at year-end.
As the hedge funds were liquidating their
subprime mortgages and the banks were
trying to raise capital, the industry was in
a positive cash flow position and was
there to provide support to the market
back in March.
Q. Has there has been any fallout for your
company or any of your competitors?
A. There has been no fallout for our com-
pany. I think we look better in the mar-
ketplace when people are looking at op-
tions in the life insurance industry either
as a place of employment or to place their
money to buy a product.
I don’t think we will have any negative
reverberations due directly to A.I.G.
A.I.G. has brought the industry to the at-
tention of the federal government and the
regulators. The industry has been lobby-
ing for a federal regulator. Right now,
we’re regulated by 50 states. I think what
will happen with the A.I.G. takeover by
the government is that it will force them
to focus on the industry, realize we’re
part of the financial fabric and need a
voice in Washington. We will be part of a
new regulatory regime.
Q. A.I.G. is going to put some of its prop-
erties up for sale. Are you going to buy
something?
A. We’re always interested in looking for
bargains, but I do not believe A.I.G. has a
business unit that would fit with North-
western Mutual. We’re not going to be in
the mix.
Q. As the credit markets weakened and
interest rates fell, to what extent have
you seen renewed interest in whole life
policies as forced savings?
A. Whole life insurance sales are up
about 5 percent for the first eight
months of the year. Our current divi-
dend rate on unborrowed cash values is
7.5 percent, which looks pretty good in
today’s environment.
Q. Have A.I.G.’s troubles reordered
your priorities? Do you have a more im-
mediate concern for your company and
the industry than you did a couple of
weeks ago?
A. No. The A.I.G. issue is part of a bigger
systemic problem that the financial in-
dustry and the economy face. It has to do
with the deleveraging that has started to
occur and will be occurring for some
time. As a financial institution, we are
more cautious because the risks are high-
er out there.
Q. As the population ages, some seniors
are selling life insurance policies to raise
cash. The Life Insurance Settlement As-
sociation estimates that $12 billion to $15
billion in death benefits changed hands in
2007. Companies like Goldman Sachs and
JPMorgan are reported to have invested
in these products. Why all the attention
now? And what’s your take on where this
is headed?
A. Life settlement transactions involve
selling existing life policies to unrelated
parties for more than their cash value or,
if they have no cash value, for some value
— usually policies with face amounts
over $250,000 owned by people who are at
least 65 years old or have life expectan-
cies that range from 2 to 12 or 15 years.
It’s a market that is growing.
It’s bad business if somebody owns a
policy on your life who has an interest in
your death and gets a financial reward if
you die. Because of demographics, the
settlement market is a market that’s
here. I think it should be regulated so that
life insurance isn’t used by speculators.
SATURDAY, OCTOBER 4, 2008Business Day
REPRINTED
WITH
PERMISSION
A Life Insurer Projects Calm
During the Storm
By AMY ZIPKIN
EDWARD J. ZORE
SATURDAY INTERVIEW

2. Q. For a century you’ve had a Policyown-
ers’ Examining Committee and you give
its members free rein every year to ex-
amine your operations and write a report.
How do you choose the committee? What
insights do policyholders provide that
consultants might not or you might not do
for yourself?
A. We find these people through refer-
ences from our field representatives and
we find them on our own. They might be
chief executives of organizations,
lawyers, consultants or business owners.
We bring them in for a week and give
them free rein to learn more about the
company, make some assessments of
what we do and give us some ideas.
When they are here they are committing
probably 15 hours a day to do the job. We
pay them $17,500 plus expenses for seven
days. We get great consulting at a reason-
ably good price and we end up getting pro-
fessionals in different parts of the country
that appreciate the company even more.
Q. You’ve resisted moving from a mu-
tual company collectively owned by
policy owners to a stock company
owned by shareholders. Why has this
been important to you?
A. We’re a triple-A-rated company. I don’t
have to worry about meeting the ideals of
a Wall Street analyst or some hedge fund
manager who has a 60-day time horizon. I
don’t have to worry about short-sellers.
Our investment portfolio is very well bal-
anced, very well diversified. It’s a portfo-
lio I could not have as a stock company.
The earnings effect of what we have would
be less predictable than what would be re-
quired by stockholders. So we couldn’t do
what we do. We have no intention to be-
come a stock company.
(#17761) Copyright © 2008 by The New York Times Company. Reprinted with permission.
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Reprinted for use by The Northwestern Mutual Life Insurance Company - Milwaukee, WI. Policy Dividends and underlying interest
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