How we determine dividends

For Permanent Life Insurance Policies in The
Northwestern Mutual General Account


The Northwestern Mutual Life Insurance Company (Northwestern Mutual) has long been known for its
industry-leading dividends on permanent life insurance policies. As a mutual company, Northwestern Mutual
has no stockholders that share in any profits. Instead, policyowners share in the company's results
by receiving dividends. Through dividends, Northwestern Mutual's goal is to provide policyowners
with world-class insurance protection at the lowest possible cost.


Dividends Provide
a True "Net Cost"

The guaranteed policy values, death benefits, and premiums for Northwestern Mutual's life insurance policies are based on conservative assumptions with regard to investment returns, mortality experience, and expenses. However, the company fully expects its actual performance will be better than those conservative assumptions over the long run. Dividends are paid when Northwestern Mutual's actual experience is better than what was assumed when setting the policy's guaranteed values. While dividends are subject to change and are not guaranteed, Northwestern Mutual has paid them every year since 1872. The ability to pay dividends is a result of efficient operations, careful risk selection, and successful investment management. Through dividends, Northwestern Mutual's goal is to provide policyowners with world-class insurance protection at the lowest possible cost.


Premium and Cash Value

As you can see from the above table, determining a policy's dividend in any given year starts with the guaranteed cash value of the policy at the beginning of the year. To this number, Northwestern Mutual adds the gross annual premium and subtracts a mortality and expense charge, which is based on actual company results. The balance is credited with the current dividend interest rate (4.9% for most policies in 2018) to determine the end-of-year policy. The difference between policy value at the end of the year and the guaranteed cash value at the end of the year equals the dividend, which is paid on the policy anniversary. Dividends and the other calculations shown here are based on the dividend scale interest rate for that particular dividend scale year.


How Northwestern Mutual
Calculates a Dividend

Once the company evaluates its results for the year, it then calculates the dividend payable on each eligible policy. Here's a snapshot of how this second step works.

  • Guaranteed Cash Value (beginning of year 27) $69,543
  • Gross Annual Premium + 1,579
  • Mortality & Expense Charge
    (based on actual company experience)
    - 381
  • Balance (policy value @ beginning of year) $70,741
  • Interest Credit
    (based on actual company experience)
    + 3,466*
  • Policy Value (end of year) $74,207
  • Guaranteed Cash Value (end of current year) - 72,433
  • Dividend (for current policy year) $1,774
* The interest credit ($3,466) is equal to the 2018 Dividend Interest Rate for unborrowed funds for most whole life policies with direct recognition (4.90%) multiplied by the policy value at the beginning of the policy year after mortality & expense charges are taken out ($70,741).


Annual Dividends

Policyowners can use dividends to increase policy values or offset premiums, or they can even take them in cash. The guaranteed cash value used to determine a policy's dividend will vary depending upon how the policy's dividends were used in prior years. When a dividend is used to increase policy values, it becomes part of the guaranteed cash value at the beginning of the following policy year and is used to determine future dividends. When a dividend is taken in cash or used to pay premiums, it does not increase the guaranteed cash value.