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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 permanent 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 table below, 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 (5.0% for most policies in 2019) 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) $72,629
  • Gross Annual Premium + 1,579
  • Mortality & Expense Charge
    (based on actual company experience)
    - 396
  • Balance (policy value @ beginning of year) $73,812
  • Interest Credit
    (based on actual company experience)
    + 3,691*
  • Policy Value (end of year) $77,503
  • Guaranteed Cash Value (end of current year) - 75,583
  • Dividend (for current policy year) $1,920
* The interest credit ($3,691) is equal to the 2019 Dividend Interest Rate for unborrowed funds for most whole life policies with direct recognition (5.00%) multiplied by the policy value at the beginning of the policy year after mortality & expense charges are taken out ($73,812).

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.


In regard to Northwestern Mutual's dividend payout and dividend interest rate (DIR), comments in this document pertain generally to life insurance policy dividends.

The company's DIR for unborrowed funds for most whole life insurance policies reflects the investment performance of the applicable managed assets net of taxes and any contribution to surplus. This rate is used for the determination of the interest component of a policy's dividend. The rate is applied to unborrowed funds for most whole life insurance policies after mortality and expense charges have been deducted from policy values. Depending on the terms of a particular policy, a different rate may be applied. For example, either a different rate is credited on borrowed funds to reflect individual policy loan activity, or all funds, both borrowed and unborrowed, are credited with a single rate that reflects the average level of borrowing for all similar policies.

The DIR is not the rate of return on a policy and is only one factor for determining the life insurance dividend. The majority of our life insurance dividend payment is a result of our industry-leading persistency, favorable mortality costs and diligent expense management. Decisions with respect to the determination and allocation of divisible surplus are left to the discretion and sound business judgment of the company's Board of Trustees. There is no guaranteed specific method or formula for the determination or allocation of divisible surplus. Accordingly, the company's approach is subject to change. Neither the existence nor the amount of a dividend is guaranteed on any policy in any given policy year. Some policies may not receive any dividends in a particular year or years even while other policies receive dividends.

In its 2019 dividend scale resolution, the Board of Trustees has exercised its discretion to guarantee a minimum amount of dividends to be paid in 2019 to the policyholders as a group. If this guaranteed amount exceeds the aggregate amount of dividends actually paid to individual policyholders in 2019, that excess will be paid out in 2020 pursuant to the 2019 dividend scale resolution. The presence of a guaranteed minimum amount in the 2019 dividend scale resolution does not obligate Northwestern Mutual to declare a dividend in future years or to guarantee any portion of dividends that may be declared in future years.