Detailed Financial Results
A Trend of Historic Performance
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.
Executive Vice President and Chief Financial Officer
Summary of operations
(Statutory basis, in millions)
For the years ended December 31
Premiums✕Insurance revenue decreased 2% in 2022 largely due to lower annuity sales.
Net investment income✕Net investment income increased 13%, mainly driven by higher distributions from our subsidiaries. Under statutory accounting principles, subsidiary distributions have no net impact to surplus.
Total revenue✕Total revenue (insurance revenue + net investment income + other income) reached an all-time high of nearly $35 billion.
Policyowner benefits paid
Increase in benefit reserves
Commissions and expenses
Total benefits and expenses
Gain before dividends and taxes✕Operating 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.
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 2022, policyowner dividends increased 5%.While dividends are reviewed annually and not guaranteed, Northwestern Mutual has paid dividends every year since 1872.
Gain (loss) before taxes
Income tax benefit✕2021'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.
Net gain from operations
Net realized capital gains
Summary of financial position
(Statutory basis, in millions)
As of December 31
Common and preferred stocks
Cash and short-term investments
Separate account assets
Policy benefit reserves
Policyowner dividends payable
Separate account liabilities
Liabilities (excluding AVR)
Asset valuation reserve (AVR)
Surplus and AVR✕Surplus 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.
Total liabilities and surplus