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).