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

PremiumsInsurance revenue increased 18% in 2021 to a record level. This was driven by record life insurance sales of nearly $1.6 billion, up 52% over 2020, the second time in history surpassing the $1 billion mark.

$22,771

$19,323

Net investment incomeNet 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 revenueTotal 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 taxesGain 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 dividendsOur 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) expenseThe 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 AVRSurplus 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").