Detailed Financial Results Overview

2022 was not without its challenges, including steep market declines, accelerating inflation and more. Our year-end results prove that we continue to thrive irrespective of the broader economic environment. We knew it would be difficult to repeat 2021's best-ever business performance, but 2022 was another exceptional year. A single great year can yield records, but multiple years of historic performance constitute a trend, and this is a great trend for your company.

Northwestern Mutual has achieved consistently strong business fundamentals, and that success includes persistency—satisfied policyowners who stay with us year after year—together with record sales and impressive investment results. The company has strong liquidity, including cash flow of nearly $1.9 billion every month, which we invest in our general account portfolio. Plus, we ended 2022 with record surplus of more than $37 billion.1 Our diligent expense management has enabled us to sustain unsurpassed financial strength and provide exceptional product performance to all of you—our policyowners—in the form of annual dividends, which are expected to reach $6.8 billion2 in 2023.

With an insurance contract, we're making promises many years into the future. So, one can't overstate the value of having both superior financial strength and significant liquidity.

On top of this favorable momentum, we can now add the tailwind, not seen in decades, of rising interest rates. The Federal Reserve has increased rates throughout 2022. Over time, higher rates mean higher returns for the high-quality fixed-income investments that make up over 80% of our general account assets. This points to even more policyowner value and continued strong surplus in the future.

Northwestern Mutual's financial position is the foundation for our business's continuing health and growth. Our strategy is working and we're solving for more and more of our clients' needs. Our highly productive and exclusive advisors3—the company's crown jewel—are empowering all of you to confront today's pronounced uncertainty with confidence. While many companies are content to survive through economic challenges, we expect to thrive through them—a bar we've cleared time and time again. We do this with a deep sense of mission—to serve your interests—so thank you for making what we do possible.

Todd Jones

Executive Vice President and Chief Financial Officer

Summary of operations

(Statutory basis, in millions)

For the years ended December 31

2022

2021

PremiumsInsurance revenue decreased 2% in 2022 largely due to lower annuity sales.

$22,288

$22,771

Net investment incomeNet investment income increased 13%, mainly driven by higher distributions from our subsidiaries. Under statutory accounting principles, subsidiary distributions have no net impact to surplus.

11,768

10,447

Other income

840

814

Total revenueTotal revenue (insurance revenue + net investment income + other income) reached an all-time high of nearly $35 billion.

34,896

34,032

Policyowner benefits paid

11,707

12,022

Increase in benefit reserves

11,734

11,931

Commissions and expenses

4,158

4,048

Total benefits and expenses

27,599

28,001

Gain before dividends and taxesOperating 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 total revenue. Increased subsidiary distributions resulting in higher net investment income were the main driver for why OGBDT was higher compared to 2021.

7,297

6,031

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 2022, policyowner dividends increased 5%.While dividends are reviewed annually and not guaranteed, Northwestern Mutual has paid dividends every year since 1872.

6,833

6,522

Gain (loss) before taxes

464

(491)

Income tax benefit2021's income tax benefit was atypical because it included one-time tax changes that were significantly offset by a reduction in deferred tax assets (included in other assets) in the summary of financial position, resulting in a net $84 million increase in total surplus. Under statutory accounting principles, taxes paid and accrued are captured in many different financial statement lines including capital gains and net investment income.

(160)

(1,166)

Net gain from operations

624

675

Net realized capital gains

288

303

Net income

$912

$978

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

2022

2021

Bonds

$187,268

$179,121

Mortgage loans

51,798

47,844

Policy loans

17,653

17,208

Common and preferred stocks

2,539

4,242

Real estate

2,906

3,113

Other investments

30,108

29,184

Cash and short-term investments

4,476

3,786

Total investments

296,748

284,498

Other assets

9,361

7,773

Separate account assets

34,281

42,383

Total assets

$340,390

$334,654

Policy benefit reserves

$242,443

$230,034

Deposit funds

10,987

8,303

Policyowner dividends payable

6,820

6,505

Other liabilities

8,798

10,413

Separate account liabilities

34,281

42,383

Liabilities (excluding AVR)

303,329

297,638

Asset valuation reserve (AVR)

7,176

7,733

Surplus

29,885

29,283

Surplus and AVRSurplus is the amount of capital we hold over and above our policyowner benefit reserves to cover the unexpected. When challenges arise, a healthy surplus level helps ensure we'll be here for the long term, paying policyowner benefits and preserving product value. It also gives us the flexibility to proactively manage the company with a long-term view and take advantage of potentially higher-yielding investments while maintaining the industry's highest financial strength ratings. Even with the largest equity market declines since 2008, the company continues to be financially strong, with total surplus – including surplus and the asset valuation reserve – of more than $37 billion.

37,061

37,016

Total liabilities and surplus

$340,390

$334,654

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").