Detailed Financial Results
Highlights
- Exceptional surplus growth: In 2018, Northwestern Mutual grew its total surplus (including Asset Valuation Reserve, or AVR) by $1.5 billion to $26.7 billion – the highest in company history. Surplus is a critical contributor to the company’s financial strength ratings. Surplus reinforces the company’s ability to fulfill its promises to policyowners.
- Continued focus on product value: Growth in net investment income in particular contributed to a 2018 operating gain before dividends and taxes (OGBDT) of $6.2 billion. OGBDT is the primary source for policyowner dividends.
- Record dividend: The company previously announced an expected total dividend payout of $5.6 billion in 2019, the highest payout in company history.1 Northwestern Mutual leads the industry in both life and disability income insurance dividends paid to policyowners.
- Growth of insurance and investment client assets: Northwestern Mutual provides a wide range of financial services to more than 4.5 million people. Life insurance in force continued its climb with a 4 percent increase to $1.8 trillion. Investment client assets also grew and ended the year at $128 billion.
- Growth in General Account investment portfolio: The portfolio stood at an all-time high of $235 billion at the end of the year, an increase of $9.7 billion since year-end 2017.
- Policyowner benefits: Northwestern Mutual paid $4.8 billion in insurance claims to policyowners and their beneficiaries.
In addition to its financial results, Northwestern Mutual made notable progress in its continued transformation focused on delivering a financial security experience for clients that is unrivaled in the industry. Among the milestones in the past year:
- Introduced our new Planning Experience, which enables clients to see their entire financial picture – both inside and outside Northwestern Mutual – within their financial plan anytime, anywhere. The tool was used to create more than 30,000 financial plans in 2018 and will offer more capabilities in the year to come, including the ability to help clients get a clear picture of permanent life insurance and the living benefits it offers.
- Dramatically reduced underwriting time with an accelerated process for life insurance to approve some applications in one day rather than two to three weeks.
- Committed to investments in innovation, including three new venture funds to invest in the brightest ideas and businesses, as well as opened the new Northwestern Mutual Data Science Institute with the University of Wisconsin-Milwaukee and Marquette University to advance data science and technology learning to strengthen Milwaukee's talent pipeline.
"Technology is helping our advisors ensure financial planning is an always-on, easily accessible and more efficient experience so more people can enjoy today while preparing for tomorrow,” said John E. Schlifske, chairman, president and chief executive officer. “Our financial results are strong, but what’s more important are the values that stand behind them and the trusted relationships and long-term commitment between our advisors, our clients and us."
1Decisions with respect to the determination and allocation of divisible surplus as dividends each year are left to the discretion and sound business judgment of the company's Board of Trustees. There is no guaranteed specific method or formula for the determination or allocation of divisible surplus. Accordingly, the company's approach is subject to change. Neither the existence nor the amount of a dividend is guaranteed on any policy in any given policy year.
Summary of Operations
(Statutory basis, in millions)
| Years ended December 31 | 2018 | 2017 |
| | ||
| Premiums | $18,036 | $17,897 |
| Net investment income | 9,791 | 9,541 |
| Other income | 655 | 649 |
| | ||
| Total revenue | 28,482 | 28,087 |
| | ||
| Policyowner benefits paid | 11,436 | 10,332 |
| Increase in benefit reserves | 7,582 | 8,471 |
| Commissions and expenses | 3,230 | 3,120 |
| | ||
| Total benefits and expenses | 22,248 | 21,923 |
| | ||
| Gain before dividends and taxes | 6,234 | 6,164 |
| | ||
| Policyowner dividends | 5,634 | 5,338 |
| | ||
| Gain before taxes | 600 | 826 |
| Income tax benefit | ( 159 ) | ( 98 ) |
| | ||
| Net gain from operations | 759 | 924 |
| Net realized capital gains (losses) | 24 | 93 |
| | ||
| Net income | $783 | $1,017 |
The summarized financial statement above was prepared on the statutory basis of accounting. Financial statements prepared on the statutory basis of accounting differ materially from financial statements prepared in accordance with generally accepted accounting principles (GAAP).
Summary of Financial Position
(Statutory basis, in millions)
| | December 31, 2018 | December 31, 2017 |
| | ||
| Bonds | $153,713 | $146,945 |
| Mortgage loans | 36,755 | 35,750 |
| Policy loans | 17,693 | 17,421 |
| Common and preferred stocks | 5,574 | 5,870 |
| Real estate | 2,576 | 2,356 |
| Other investments | 17,048 | 14,724 |
| Cash and short-term investments | 1,899 | 2,469 |
| | ||
| Total investments | 235,258 | 225,535 |
| | ||
| Other assets | 7,192 | 7,052 |
| Separate account assets | 29,717 | 32,462 |
| | ||
| Total assets | $272,167 | $265,049 |
| | ||
| Policy benefit reserves | $202,816 | $195,279 |
| Policyowner dividends payable | 5,635 | 5,335 |
| Other liabilities | 7,268 | 6,788 |
| Separate account liabilities | 29,717 | 32,462 |
| | ||
| Liabilities (excluding AVR) | 245,436 | 239,864 |
| | ||
| Asset valuation reserve (AVR) | 4,597 | 4,334 |
| Surplus | 22,134 | 20,851 |
| Surplus and AVR | 26,731 | 25,185 |
| | ||
| Total liabilities and surplus | $272,167 | $265,049 |
The summarized financial statement above was prepared on the statutory basis of accounting. Financial statements prepared on the statutory basis of accounting differ materially from financial statements prepared in accordance with generally accepted accounting principles (GAAP).