Detailed Financial Results
Best year of business performance in Northwestern Mutual's history
Detailed Financial Results Overview
Despite the uncertainty and volatility created by the pandemic and broader economic challenges, 2021 produced our best year of business performance yet. Much of this success owes to our ongoing ability to optimize performance for all generations of policyowners—the ultimate balancing act. Striking this balance requires us to allocate 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 2021 performance proves that our long-term strategy and how we're managing the business along the way are working, continuing to earn the trust of existing policyowners while also attracting new clients.
Strong business growth.
Life insurance sales exceeded records set in 2020 by 52 percent with permanent life insurance reaching new highs. Retail investment client net cash flows and new clients also reached record highs in 2021.
Best persistency rate on record.
97 percent of existing policyowners maintained their life insurance coverage in 2021, our best life persistency rate (a key measure of customer satisfaction) on record.
Strong investment results.
Significant gains on private equity investments and prepayment fees drove higher net investment income which was offset by $1 billion of lower distributions from our subsidiaries in 2021 compared to 2020. Subsidiary distributions have no impact on surplus and were the main driver for lower operating gain before dividends and taxes compared to 2020.
Meeting benefits commitments through the ongoing pandemic.
Partially driven by COVID–19, death benefits paid increased 15 percent in 2021, and we continued to fulfill our promise to provide benefits to policyowners and their families in times of need.
Declared record total dividend payout for 2022.1
The combination of record surplus growth and prudent financial management allowed us to once again declare a record expected policyowner dividend payout for 2022, totaling $6.5 billion. Not only does that dividend set another company record, but it's more than our three closest competitors combined.
Northwestern Mutual remains a significant taxpayer, on average paying more than $1 billion yearly in taxes, including over $1 billion incurred for 2021.
Under statutory accounting, the income tax line on the summary of operations only shows part of the full impact of taxes on the financials and was substantially offset by a reduction in deferred tax assets (included in other assets) in the summary of financial position.
We have further strengthened our financial position in 2021.
Total surplus and asset valuation reserve (AVR) grew $4.7 billion primarily due to significant capital gains from favorable equity market performance resulting in a record-level of surplus and AVR over $37 billion.
Awarded the highest available financial strength ratings for U.S. life insurers from all four major rating agencies.
We yet again earned the highest available financial strength ratings awarded to any U.S. life insurer with a stable outlook by all of the four major rating agencies (A.M. Best, Fitch, Moody's and S&P).2
Surpassed 2020's record levels with even higher records.
In the below summaries of operations and financial position, I'd point you to total revenue, total surplus and AVR and total assets—all are new records along with policyowner dividends. These records were the combined result of the strong growth and prudent management of our business described above.
As we enter 2022, we are prepared, as always, for whatever comes. Our prudent financial management is exactly what you'd expect from a company that's achieved long-term success by putting policyowners first for 165 years. I can confidently say that all of us here are working—still putting policyowners first—toward the next 165 years.
Todd Jones
Vice President and Controller
Summary of operations
(Statutory basis, in millions)
Years ended December 31
2021
2020
Premiums
$22,771
$19,323
Net investment income✕Net investment income decreased 6%, mainly driven by lower distributions from our subsidiary entities. Under statutory accounting, subsidiary distributions have no net impact to surplus.
10,447
11,078
Other income
814
723
Total revenue✕Total revenue (insurance revenue + net investment income) reached $34 billion, a company record.
34,032
31,124
Policyowner benefits paid
12,022
11,736
Increase in benefit reserves
11,931
8,847
Commissions and expenses
4,048
3,502
Total benefits and expenses
28,001
24,085
Gain before dividends and taxes✕Gain Before Dividends and Taxes (OGBDT) funds both dividends and surplus. It reflects our performance and is what's left after we've paid and reserved for policyowner benefits relative to premiums and includes the performance of our investments. Subsidiary distributions were the main driver for why operating gain before dividends and taxes was lower compared to 2020.
6,031
7,039
Policyowner dividends✕Our objective continues to be to pay the highest possible dividends consistent with maintaining unquestionable long-term financial strength in a manner guided by mutuality. In 2021, policyowner dividends increased 5%. While dividends are reviewed annually and not guaranteed, Northwestern Mutual has paid dividends every year since 1872.
6,522
6,235
(Loss) gain before taxes
(491)
804
Income tax (benefit) expense†✕The 2021 income tax benefit is substantially offset by a reduction in deferred tax assets (included in other assets) in the summary of financial position.
(1,166)
277
Net gain from operations
675
527
Net realized capital gains (losses)
303
(102)
Net income
$978
$425
† Income tax benefit substantially offset by a reduction in deferred tax assets (included in other assets) in the summary of financial position.
The summarized financial statements above were 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)
As of December 31
2021
2020
Bonds
$179,121
$166,324
Mortgage loans
47,844
41,568
Policy loans
17,208
17,686
Common and preferred stocks
4,242
5,083
Real estate
3,113
2,959
Other investments
29,184
24,942
Cash and short-term investments
3,786
3,239
Total investments
284,498
261,801
Other assets
7,773
8,519
Separate account assets
42,383
38,447
Total assets
$334,654
$308,767
Policy benefit reserves
$230,034
$217,365
Deposit funds
8,303
4,860
Policyowner dividends payable
6,505
6,220
Other liabilities
10,413
9,556
Separate account liabilities
42,383
38,447
Liabilities (excluding AVR)
297,638
276,448
Asset valuation reserve (AVR)
7,733
7,362
Surplus
29,283
24,957
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 COVID-19 pandemic. Given the macro-economic environment, a strong surplus helps to ensure we'll be here for the long term, paying policyowner benefits while preserving 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 2021, we continued to build financial strength resulting in total surplus — including surplus notes and asset valuation reserve —of more than $37 billion.
37,016
32,319
Total liabilities and surplus
$334,654
$308,767
The summarized financial statements above were 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").