Detailed financial results
a year of new highs
As the numbers show, your company is strong. As Northwestern Mutual's Vice President and Controller, and as a policyowner, the figures you see below in the summary of operations and financial position give me tremendous confidence in the current position of this company. As of the end of 2019, we'd broken six company financial records: revenue; total assets in the company's investment portfolio; surplus1; life insurance sales2; client investment assets; and our anticipated total dividend payout.3,4
Operating gain before dividends and taxes (OGBDT), listed in the summary of operations below, supported record-breaking highs in both dividends and surplus.
Our $6 billion anticipated total dividend payout is the highest Northwestern Mutual has ever paid. Not only that, it's the highest in the industry and more than our three closest competitors combined.
And the growth you see in surplus—funds set aside to ensure we remain strong even through severe economic challenges—leaves us with our highest ever total surplus and asset valuation reserve (AVR), demonstrating our unmatched financial strength. In fact, no other U.S. life insurer currently has our combination of the highest possible financial strength ratings and stable outlook from all four major ratings agencies.5
The combination of record total dividend payout and surplus reflects our deep, longstanding commitment to both policyowner value and financial strength, upheld by the actions we take with our finances. This prudent financial management is exactly what you'd expect from a company that's achieved long-term success by putting policyowners first for 160 years. I can confidently say that all of us here are working—still putting policyowners first—towards the next 160.
Todd Jones
Vice President and Controller
Summary of Operations
(Statutory basis, in millions)
| Years ended December 31 | 2019 | 2018 |
| Premiums | $19,010 | $18,036 |
| Net investment incomeNet investment income was also up 4%, despite interest rates declining to near all-time lows in 2019. | 10,149 | 9,791 |
| Other income | 696 | 655 |
| Total revenueTotal revenue (insurance revenue + net investment income) reached $29.9B, a company record. | 29,855 | 28,482 |
| Policyowner benefits paid | 11,515 | 11,436 |
| Increase in benefit reserves | 8,668 | 7,582 |
| Commissions and expenses | 3,306 | 3,230 |
| Total benefits and expenses | 23,489 | 22,248 |
| Gain before dividends and taxesIn 2019, operating gain before dividends and taxes (OGBDT) increased 2%. OGBDT is the amount left over from revenue to fund dividends and surplus after policyowner benefits and expenses have been paid. This reflects our efficiency, what we've paid and reserved for benefits, and the performance of our investments. | 6,366 | 6,234 |
| Policyowner dividendsIn 2019, policyowner dividends increased 6%. Our goal is to pay the highest possible dividends while sustaining our unsurpassed financial strength. | 5,999 | 5,634 |
| Gain before taxes | 367 | 600 |
| Income tax benefit | (199) | (159) |
| Net gain from operations | 566 | 759 |
| Net realized capital gains (losses)Realized capital gains were strong primarily due to the sale of select, well-performing real estate investments. | 702 | 24 |
| Net income | $1,268 | $783 |
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, 2019 | December 31, 2018 |
| Bonds | $159,760 | $153,713 |
| Mortgage loans | 39,771 | 36,755 |
| Policy loans | 17,829 | 17,693 |
| Common and preferred stocks | 4,677 | 5,574 |
| Real estate | 2,872 | 2,576 |
| Other investments | 20,962 | 17,048 |
| Cash and short-term investments | 2,408 | 1,899 |
| Total investments | 248,279 | 235,258 |
| Other assets | 7,207 | 7,192 |
| Separate account assets | 34,832 | 29,717 |
| Total assets | $290,318 | $272,167 |
| Policy benefit reserves | $211,100 | $202,816 |
| Policyowner dividends payable | 5,995 | 5,635 |
| Other liabilities | 7,972 | 7,268 |
| Separate account liabilities | 34,832 | 29,717 |
| Liabilities (excluding AVR) | 259,899 | 245,436 |
| Asset valuation reserve (AVR) | 6,203 | 4,597 |
| Surplus | 24,216 | 22,134 |
| Surplus and AVRWe achieved record surplus growth in 2019, which ended the year at $30.4 billion.* Surplus is the amount we hold above our policyowner benefit reserves to cover the unexpected, including especially challenging periods. A strong surplus means you can have confidence that we will remain financially strong through all economic environments. It also gives us the flexibility to invest for greater potential return for policyowners while sustaining unsurpassed financial strength. | 30,419 | 26,731 |
| Total liabilities and surplus | $290,318 | $272,167 |
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).
1 Includes surplus notes and asset valuation reserve.
2 Source: Q3 2019 LIMRA U.S. Retail Individual Life Insurance Sales Report
3 Total dividend payout based on announced estimates. Actual payout is not yet known.
4 While dividends are reviewed annually and not guaranteed, Northwestern Mutual has paid dividends every year since 1872.
5Ratings are for The Northwestern Mutual Life Insurance Company and Northwestern Long Term Care Insurance Company, as of the most recent review and report by each ratings agency. Ratings are as of 09/19 (Moody's Investors Service), 05/19 (A.M. Best Company), 10/19 (Fitch Ratings), 12/19 (S&P Global Ratings). Ratings are subject to change.