Detailed financial results

Exceptional performance in an unforgettably challenging year

As we manage the finances and capital of Northwestern Mutual, we often view what we do as a balancing act. That is because much of our work focuses on allocating capital among a range of priorities, including providing product value today (paying out the most we can in dividends) and tomorrow (ensuring unquestioned financial strength to fulfill our promises). Our success as a mutual company rests in optimizing performance for all generations of policy owners—the ultimate balancing act.

2020 put our balancing act to the test. With its combination of a pandemic and pronounced economic, market and political uncertainty, we haven't seen another year like it. So, let's look at Northwestern Mutual's 2020 financial scorecard and see how we did:

Strong business growth. 
Life insurance sales, retail investment client net cash flows, new clients and new financial professionals all reached record highs in 2020.

Best persistency rate on record. 
97% of existing policyowners retained their policies in 2020, our best persistency rate (a strong indicator of customer satisfaction) on record.

Opportunistic investing. 
Our financial strength and strong liquidity allowed our investment team to go on the offensive when many other companies played defense and sat on the sidelines during the pandemic onset and ensuing economic turmoil.

Covered our benefits commitments through pandemic. 
Partially driven by COVID-19, death benefits paid increased 15% in 2020, and we fulfilled our promise to provide benefits to policyowners and their families in times of need.

Declared record total dividend payout for 2021.1 
The combination of our strong investment results, prudent expense management and preparation for events such as a pandemic allowed us to once again declare a record expected policyowner dividend payout for 2021, which totals $6.2 billion. Not only does that dividend set another company record, but it’s more than our three closest competitors combined.1

Maintained the highest available financial strength ratings for U.S. insurers from all four major rating agencies. 
Even during the pandemic, all four major rating agencies maintained our highest available financial strength ratings and stable outlooks, a combination currently unmatched by any other major U.S. life insurer.2

Surpassed 2019’s record levels with more records. 
In the below summaries of operations and financial position I'd point you to total revenue, total surplus3 and total assets—all are new records along with policyowner dividends. These records were the combined result of the strong growth and management of our business described above.

We firmly believe in sensible strategies that address any environment. A prime example of this is the current prolonged period of historically low interest rates. Given the solvency-focused nature of our business and industry regulations, we are required to maintain a heavy weighting to fixed-income investments (e.g., bonds and mortgage loans) in the company's general account. Declining market interest rates have been a pronounced headwind for our industry for decades—negatively impacting the income available from these fixed-income investments—and rates declined further in 2020 to new historic lows. But we have and will continue to face this reality head on by adjusting our finances and expectations to continue to deliver the industry's best sustainable, long-term product value.

Just as important as the exceptional success Northwestern Mutual had in 2020 is how it proved that our approach to the financial balancing act is working for the company and its policyowners. As we enter 2021, we are prepared, as always, for whatever comes. This prudent financial management is exactly what you'd expect from a company that's achieved long-term success by putting policyowners first for over 160 years. I can confidently say that all of us here are working—still putting policyowners first—toward the next 160.

Todd Jones

Vice President and Controller

Summary of operations

(Statutory basis, in millions)

Years ended December 31

2020

2019

Premiums
Insurance revenue increased 2% in 2020 to a record level. This was driven in part by higher first year/single insurance premiums and in part by higher renewal premium and dividend additions, both of which grow when insurance in–force increases and we maintain high persistency. 2020 was a record year for new life premiums.

$19,323

$19,010

Net investment income
Net investment income was up 9%, driven by higher distributions made from subsidiary entities.

11,078

10,149

Other income

723

696

Total Revenue
Total revenue (insurance revenue + net investment income) reached $31.1B, a company record.

31,124

29,855

Policyowner benefits paid

11,736

11,515

Increase in benefit reserves

8,847

8,668

Commissions and expenses

3,502

3,306

Total benefits and expenses

24,085

23,489

Gain before dividends and taxes
Operating Gain Before Dividends and Taxes (OGBDT), which funds both dividends and surplus, reflects our efficiency, what we've paid and reserved for policyowner benefits relative to premiums, and the performance of our investments.

7,039

6,366

Policyowner dividends
Our goal is to pay the highest possible dividends while maintaining our superior financial strength. In 2020, policyowner dividends increased 4%. * While dividends are reviewed annually and not guaranteed, Northwestern Mutual has paid dividends every year since 1872.

6,235

5,999

Gains before taxes

804

367

Income tax expense (benefit)

277

(199)

Net gain from operations

527

566

Net realized capital (losses) gains
In total, net realized capital gains (losses) before taxes were $2.0 billion in 2020, although the majority of those gains were from fixed–income investments, and such gains are deferred to the interest maintenance reserve and amortized into net investment income over the remaining term to maturity of the sold investment. What remained in realized capital losses on the summary of operations was lower than the prior year due to timing of capital gains on equity securities and a reduction in real estate gains compared to the exceptionally high level in 2019.

(102)

702

Net income

$425

$1,268

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)

Years ended December 31

2020

2019

Bonds

$166,324

$159,760

Mortgage loans

41,568

39,771

Policy loans

17,686

17,829

Common and preferred stocks

5,083

4,677

Real estate

2,959

2,872

Other investments

24,942

20,962

Cash and short-term investments

3,239

2,408

Total investments

261,801

248,279

Other assets

8,519

7,207

Separate account assets

38,447

34,832

Total assets

$308,767

$290,318

Policy benefit reserves

$222,225

$211,100

Policyowner dividends payable

6,220

5,995

Other liabilities

9,556

7,972

Separate account liabilities

38,447

34,832

Liabilities (excluding AVR)

276,448

259,899

Asset valuation reserve (AVR)

7,362

6,203

Surplus

24,957

24,216

Surplus and AVR
Surplus is the amount of capital we hold over and above our policyowner benefit reserves to help weather unforeseen events, like the impacts of the pandemic and the ensuing economic slowdown. It helps to ensure we’ll be here for the long term, paying policyowner benefits while protecting service quality and product value. Surplus also gives us the flexibility to proactively manage the company with a long-term view and pursue higher investment performance without compromising our financial strength. In 2020, we achieved another record total surplus level, ending the year at more than $32 billion.*
*Includes surplus notes and asset valuation reserve.

32,319

30,419

Total liabilities and surplus

$308,767

$290,318

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").