Best's Review



Life Insurance
The Hunt for Solutions

Fritz Nauck’s winding road to insurance included stops in Annapolis and on a famous fast attack submarine before he landed at McKinsey.
  • Jeff Roberts
  • July 2018
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Key Points

Tailwinds: McKinsey’s Fritz Nauck views the next five years as potentially “attractive” ones for the life industry thanks to macro tailwinds and more efficient operations.
Streamlining: In the past 12 to 18 months, life insurers have addressed longer-term issues and focused on core businesses.
Diverse Talent: Nauck’s path to insurance shows the industry needs to think beyond just business school graduates.

The silent depths of the Atlantic hid the submarine’s sleek, black hull.

The USS Dallas lurked far beneath the surface, camouflaged by the dark shadows of the ocean.

Years before Fritz Nauck began guiding life insurers through their strategic dilemmas at McKinsey & Co., he was Lt. Nauck of the U.S. Navy—an officer on the vessel that helped inspire the best-selling novel and blockbuster film, The Hunt for Red October.

Missions would last weeks and even months at a time. Some were secret, kept even from many of the Dallas’ officers. They were reconnaissance missions. Surveillance. Military readiness exercises.

"We’d go all the way from the Caribbean to north of the Arctic Circle," Nauck said. "Sometimes only the captain and maybe one other person knew exactly what we were doing.

"The best way to figure out what’s going on is to look at the temperature of the water that’s coming in. You knew how far north or south you were. When the temperature is 34, 35 degrees, you know you’re far up north."

The former assistant engineer and weapons officer cannot say much more. Large portions of the Dallas’ missions remain classified, the Naval History and Heritage Command confirmed.

But Nauck, 47, traces his time in the cramped confines hundreds of feet below the surface directly to his success in insurance as a senior partner at McKinsey.

Many of the lessons and values he applies with the global management consulting firm were ingrained on the Dallas.

"There is a common arc: A guiding set of core values, team-based problem-solving and driven, hard-working cultures," said Nauck, who served on the submarine from December 1993 to June 1997. "You have it in the culture that you get the reward from seeing the end result, and that’s what makes the work worth it."

Nauck was responsible for the MK 48 torpedoes and Tomahawk missiles the Dallas carried. He oversaw the submarine’s sonar division. And he was cross-trained to operate the nuclear reactor that powered the sub at the center of Tom Clancy’s 1984 novel and the 1990 film adaptation.

Now Nauck provides advice and guidance to insurers, brokers and banks for McKinsey. He specializes in helping CEOs and C-suite executives define core strategies, improve operational performance and conduct mergers and acquisitions and organizational redesigns.

Lately, his work has focused on the life, annuity and retirement space. He also advises property/casualty companies and banks.

"We want to make a difference," said Nauck, a Minnesota native now based in Charlotte, N.C. "In insurance, you can make a difference not only to those companies, but they make a difference in people’s lives. It’s an industry that at times is unfairly maligned."

And Nauck’s personal path to the industry illustrates how desperately needed elite and diverse talent can hail from a variety of places.

The looming talent gap—a perfect storm created by the mass retirement of the baby boomer generation and the industry’s struggle to recruit millennials and the tech savvy—poses an alarming threat. Meanwhile, insurtech disruptors and venture capitalists continue to encroach.

The industry is hunting for a different kind of talent well-versed in technology and data and bringing diversity of thought and culture.

"In life insurance, are we attracting the right younger colleagues and getting them to understand why this is important, not just for our clients but more importantly for society?" Nauck said.

"The penetration of life insurance is way down. A lot of families nowadays go uncovered. That’s often a tragic situation. How do you avoid that?"

This is the kind of question he ponders for McKinsey’s clients. For Nauck, it is service for the greater good, not all that different from his days posted on a legendary submarine.

He just traded Navy whites for a business suit.

"He liked the mission," said Mike Pritula, a former McKinsey senior partner who now serves as the president of risk modeling and analytics firm RMS. "He was quite aware of the power of the industry to do good, particularly on the consumer side, which is where we started.

"And he just saw this was an industry that was protecting people and repairing their lives after an unfortunate event."

Mike Pritula

"He liked the mission. He was quite aware of the power of the industry to do good, particularly on the consumer side, which is where we started."

Bullish View

When insurers need help, they call Nauck.

When they need to recalibrate their strategic vision. When they are mulling an organizational restructuring. When they are struggling with a disappointing unit or face a complex decision.

"Sometimes it’s advice, which is views on what they should do in a specific situation," said Nauck, wearing tortoise shell glasses and a blue suit. "Sometimes it’s recommendations: What do I do—A, B or C?

"And sometimes it’s counseling, involving things that are maybe a little closer to things they are doing."

Nauck is sitting in a bistro across Sixth Avenue from Bryant Park in midtown Manhattan. And over black coffee on a rainy morning, he’s handicapping the life, annuity and retirement industry in a rapidly changing landscape.

Insurers are weathering the digital revolution. Regulatory volatility. Prolonged low interest rates. Shrinking penetration.

Nauck and McKinsey help those insurers ask the right questions—and then answer them.

"For a competitor of the future, what are our distinctive advantages?" Nauck said. "What are the things they want to control internally versus things that others are going to do better, cheaper and faster?"

However, the climate finally may be changing after a difficult decade following the financial crisis. Nauck, who celebrated his 20th anniversary with McKinsey in June, sees a benign environment on the horizon.

His view may even "be a bit bullish" given life insurers have begun to address "fundamental, longer-term questions" in the past 12 to 18 months, he said.

Many have streamlined their operations, focusing on core businesses and efficiency while shedding capital intensive, volatile products.

Meanwhile, tax reform and rising interest rates—the 10-year Treasury yield reached 3.13% in May, its highest mark since 2011—have provided tailwinds not seen "in a long time."

"You could see a pivot back to life and annuities for most consumers if this gradual rise to a normalized rate environment continues and annuities and life products with guaranteed returns actually become economical again," Nauck said.

"That combined with a better risk stance relative to long-term care and other products that were underwritten 10 years ago, with more efficient operations through automation and digitization, could lead to a pretty attractive next five years."

The tailwinds also will help life insurers address pressing needs such as recruiting elite talent and enhancing omnichannel distribution.

"It’s not to say that the larger insurers won’t exist, but certainly the trend is to focus on how to provide distinctive value to core customers," Nauck said.

He talks about the industry in terms of the mission and service. Serving his clients. Serving the government in 2012, when he addressed the U.S.’s shrinking position in global markets with the Federal Advisory Committee on Insurance.

And even serving the students at St. John’s University, where for the past 18 months he has sat on the board of overseers for its School of Risk Management, Insurance and Actuarial Science.

"You need a thoughtful person like Fritz, and you need a lot of them," said board chair Brandon Sweitzer, a former president of Marsh Inc. and CEO of Guy Carpenter. "They really provide a lot of time and availability to the students and the faculty."

Nauck’s wide spectrum of knowledge begins with insurance and banking, but hardly ends there.

In an hour of conversation, he also covers baseball, legendary University of Chicago football coach Amos Alonzo Stagg and even the reliability and pinpoint accuracy of Tomahawk missiles.

Fritz Nauck

"You could see a pivot back to life and annuities for most consumers if this gradual rise to a normalized rate environment continues and annuities and life products with guaranteed returns actually become economical again."

Tough Guy

There was no plan.

There was no fateful decision, no singular defining moment that led Nauck to McKinsey and insurance.

It was, well, random.

"It’s easy with 20/20 hindsight to say, ‘That was a great plan and it all worked out,’"Nauck said. "But there are probably 10 individual decisions over the course of the last 30 years that led here."

Nauck went to Annapolis hoping to be a fighter pilot, "a Top Gun." There was just one problem. He wears glasses.

"So that was out," he said with a laugh.

He majored in math, and as his 1992 graduation neared, one of his professors suggested he look into submarines.

"I never thought of submarines before," he said.

So he studied with the Nuclear Power Training Unit and attended the Naval Submarine School.

He then served on the Dallas, based out of Groton, Connecticut. His final naval assignment came as a refueling officer, switching out nuclear reactors on land.

Nauck decided if he wasn’t going to remain at sea, his naval career would come to an end.

"That was one of a few reasons to get out and go to business school," Nauck said.

He was advised that the University of Chicago would be a great fit. And while earning his MBA there, he heard of McKinsey.

Nauck started in financial services, and Pritula sold him on working in insurance.

"I would like to say I did things that attracted him, but I think it was more that I was attracted to him by his qualities," Pritula said. "If you spend just a couple of hours with Fritz, you want to work with him. You just warm to him quickly. He’s a talented guy, but also a genuine guy with ethics and moral standards."

Nauck has an easy manner. But there’s a fighter beneath that royal blue tie and glasses.

He boxed for three years at the academy, moving up from 119 pounds to 132 by the time he finished. He admits to weighing a bit more now.

"I won our Plebe Summer Boxing Smoker," Nauck said. "It’s a cool thing because it’s probably 5,000 people. If you win that, you’re off to a pretty good start as a plebe."

He tugs his nose left then right to show how flexible it is. He can take a punch.

"He’s a nuclear engineer, a former officer on a nuclear submarine. He’s used to working in difficult circumstances," Pritula said. "He’s a very smart guy, and he’s a very tough guy.

"But he’s had life experiences that give him empathy as to the work he’s doing with insurers."

Land & Sea

Days and nights blurred on the Dallas with the absence of natural light.

Quarters were cramped with 140 sailors squeezing into the 362-foot submarine. But Nauck never felt claustrophobic.

"I knew every crevice of that ship," he said of the $900 million sub, which never actually appeared in The Hunt for Red October—the USS Houston played the role of its sister boat in some scenes because the Dallas was out at sea during filming.

The Los Angeles-class fast attack submarine was designed to seek and destroy enemy subs and surface ships, escort U.S. carrier groups and launch precision-guided Tomahawk missile strikes.

Downtime was precious. Like all Navy submariners at the time, Nauck’s days were divided into three six-hour shifts. Six hours on watch. Six hours training and performing maintenance. And six hours for sleep.

"Sleep comes at a premium," Nauck said. "My personal rule was, if I had 20 minutes, that was enough to fit in a nap."

It prepared him for the long days he puts in for McKinsey. For every minute Nauck meets with clients, he spends more than 10 in preparation.

"Generally, I block a couple hours a week just for thinking time," he said. "Not time to answer emails or do reading, but just think on different topics."

Nauck’s main duty is to understand what companies are trying to accomplish, what they’re unable to do on their own and how they can enhance their financials, strategy and client service.

But meetings can be challenging when they take unexpected turns, rendering his prep irrelevant.

"Strategy is about making decisions under uncertainty," Nauck said. "All you know is things are changing faster and faster."

He is on the road two to three days a week meeting clients, he estimates. But even that grueling travel schedule is nothing compared to life on a sub.

His years on the Dallas coincided with a rapidly transforming world. The Cold War was over, and the U.S. Navy had to navigate its complexities.

The Dallas participated in the Libyan assault in 1986 and the Gulf War in 1991 before it was decommissioned in April after 36 years of service. Nauck declined to address any heated situations during his tenure.

Then, like now, it was all about service for him.

"You have to have a mission or a purpose," Nauck said. "You have to believe you’re doing something important. It really felt we had that. You’re working with folks to deliver that mission, do it quietly and keep a good sense of humor. Otherwise, what’s the point?"

(Jeff Roberts is a senior associate editor. He can be reached at

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