Northwestern Mutual

Northwestern Mutual Maintains High Dividend Payout, Financial Strength Despite Market Turmoil

Northwestern Mutual today announced its financial results for 2008, highlighted by more than $4.5 billion in dividends approved for payment to policyowners in 2009. The company expects to remain the industry leader in payment of life insurance dividends. Other highlights for 2008 included maintenance of a strong financial position despite unprecedented market turmoil, continued revenue growth, excellent operating fundamentals across all product lines and another record year for recruiting of new financial representatives.

"Northwestern Mutual entered 2008 with a near-record level of surplus, which enabled us to withstand the tough economic and investment climate that all companies faced," said Edward J. Zore, President and CEO of Northwestern Mutual. "While not immune to the adverse economic environment, we were well-prepared and are in a good position for the future.

"As the difficult market conditions continue, our strong capital base and distinctive business model position us to weather the volatility," Zore added. "Nearly three-quarters of our total insurance premium revenue is generated by the company's large block of whole life insurance, considered the most stable and lowest risk type of product in the industry. We do not make aggressive guarantees, either with universal life insurance or variable annuities. We have no debt on our balance sheet, and our dividend payout reflects our continuing commitment to financial security and long-term value for policyowners. By every measure, Northwestern Mutual remains very sound financially."

  The company highlighted the following from its 2008 financial results:
  --  Dividends approved for payment to participating policyowners in 2009
      are expected to be more than $4.5 billion, including a dividend
      interest rate of 6.5% on most unborrowed permanent life insurance
      funds. The estimated dividend payout includes over $200 million in
      total dividends on individual disability insurance policies, a 29%
      increase over the prior year. Northwestern Long Term Care Insurance
      Company has approved payment of an estimated $9 million in dividends
      to its participating long-term care policyowners in 2009.
  --  The company's capital position remained strong, with a combination of
      surplus and asset valuation reserve (total surplus) of $13.4 billion
      at year-end 2008 and a total surplus ratio of 11.5%. These figures
      included the effect of two permitted accounting practices. The first
      allowed the company to reflect some of the substantial value of
      Russell Investments, its global investment services subsidiary. The
      second change related to the treatment of deferred tax assets affected
      by investments that suffered market declines in 2008. This change
      allowed the company to provide a more realistic valuation of future
      tax benefits. Without the permitted practices, the company's total
      surplus would have been $11.8 billion and its total surplus ratio
      would have been 10.1%, higher than company surplus ratios in all but
      13 of the past 115 years.
  --  During the unprecedented market turmoil, the company's portfolio
      remained diversified and concentrated in high-quality, fixed-income
      investments. The $79.3 billion bond portfolio is comprised of
      corporate, government, residential and commercial mortgage-backed
      securities, with limited exposure to any single industry or issuer and
      with 89% rated as investment-grade at year-end 2008. The company's
      $21.7 billion commercial mortgage loan portfolio, underwritten by the
      company's real estate field offices, is diversified geographically and
      by property type, is well-collateralized, and at the end of 2008 had
      no delinquencies or defaults. Policy loans provide important financial
      flexibility for policyowners and are fully secured by policy cash
      values. The company has maintained strong liquidity, with holdings of
      more than $25 billion in cash equivalents, U.S. Treasuries, or
      government-guaranteed debt. In addition, the company has issued no
      debt or funding agreements.
  --  Total insurance premium revenue, including new and renewal premiums,
      increased 2% to $13.6 billion in 2008, with each insurance product
      line contributing to the overall premium growth. Especially noteworthy
      was the 6% increase in premium sales of the company's flagship
      traditional whole life insurance product. The company's persistency
      rate for life insurance protection in-force remained over 96% during
      2008. In addition, mortality, morbidity and expense fundamentals for
      the insurance businesses were all excellent.
  --  Net investment income increased 4% to $7.8 billion in 2008, as total
      general account investments increased 3% to $135.1 billion after
      mark-to-market adjustments to the reported value of public and private
      common stocks. Separate account assets, which represent the mutual
      fund investments made by variable life and variable annuity
      policyowners, are also marked to market and decreased 32% during 2008
      to $13.4 billion at year-end 2008. The company finished 2008 with
      total assets of more than $155 billion.
  --  Insurance benefits paid to policyowners and their beneficiaries
      increased 10% to $6.1 billion during 2008, and an additional $8.4
      billion of insurance reserves were established for future policy
      benefits. These reserves for future policy benefits, which totaled
      $118 billion at year-end 2008, represent a conservative estimate of
      the company's future benefit obligations to policyowners.
  --  Gains before dividends and taxes of $5.4 billion were down slightly
      from 2007. Net gain from operations, including a tax reserve
      adjustment and a reduction in the dividend interest rate, rose to more
      than $1.1 billion. Net income, reduced by investment write downs of $1
      billion and other realized capital losses, was $483 million, a
      decrease from $1.0 billion for 2007. Like all other investors, the
      company was impacted by the severe deterioration of the financial
      markets, including the demise of several major financial institutions.
  --  Net cash flow attributable to the retail investment business,
      conducted through the company's subsidiaries, was more than $2.8
      billion, an outstanding achievement at a time when the investment
      management industry experienced substantial outflows from retail
      mutual funds.
  --  New Financial Representatives were recruited into the Northwestern
      Mutual Financial Network in record numbers for the second consecutive
      year during 2008 as 2,089 new full-time Financial Representatives
      began their careers with Northwestern Mutual--a 15% increase over
      2007. The Network's internship program has been ranked in Vault Inc.'s
      "Top-Ten" list of best internships in each of the past thirteen years
      (1997-2009), and Northwestern Mutual again ranked in Selling Power
      magazine's annual "America's 50 Best Companies to Sell For" survey
      (Nov./Dec. 2008).

The Northwestern Mutual Life Insurance Company - Milwaukee, WI (Northwestern Mutual) has helped clients achieve financial security for more than 150 years. As a mutual company with over $1 trillion of life insurance protection in force, Northwestern Mutual seeks to share its gains with policyowners and deliver consistent and dependable value to clients over time.

Northwestern Mutual is an industry leader in total individual life insurance and disability insurance dividends paid to participating policyowners. Though dividends are not guaranteed, are reviewed annually and are subject to change, the company has paid life insurance dividend every year since 1872. For 25 years Northwestern Mutual has been "America's Most Admired" life insurance company according to the March 17, 2008 issue FORTUNE® magazine survey.

Northwestern Mutual and its subsidiaries offer a holistic approach to financial security solutions including: life insurance, long-term care insurance, disability insurance, annuities, investment products, and advisory products and services. Subsidiaries include Northwestern Mutual Investment Services, LLC, broker-dealer, registered investment advisor, member FINRA and SIPC; the Northwestern Mutual Wealth Management Company, limited purpose federal savings bank; and Northwestern Long Term Care Insurance Company; and Russell Investment Group.

                             Summary of Operations

                (Consolidated statutory basis, in millions)
  Year ended December 31:                 2008              2007

  Premiums                              $13,551           $13,242
  Net investment income                   7,835             7,568
  Other income                              537               545
                                            ---               ---

  Total revenue                          21,923            21,355
                                         ------            ------

  Policyowner benefits paid               6,071             5,544
  Increase in benefit reserves            8,389             8,388
  Commissions and expenses                2,070             2,009
                                          -----             -----
  Total benefits and expenses            16,530            15,941
                                         ------            ------

  Gain before dividends and taxes         5,393             5,414

  Policyowner dividends                   4,547             5,012
                                          -----             -----

  Gain before taxes                         846               402
  Income tax expense (benefit)             (304)               21
                                           -----            -----

  Net gain from operations                1,150               381
  Net realized capital gains (losses)      (667)              619
                                          -----               ---

  Net income                               $483            $1,000
                                         ======            ======

                      Summary of Financial Position
                (Consolidated statutory basis, in millions)

  December 31:                            2008              2007

  Bonds                                 $79,314           $76,842
  Mortgage loans                         21,677            20,833
  Policy loans                           12,884            11,797
  Common and preferred stocks             5,744             9,525
  Real estate                             1,528             1,499
  Other investments                       9,185             8,749
  Cash and short-term investments         4,807             2,547
                                          -----             -----

  Total investments                     135,139           131,792

  Other assets                            6,628             5,051
  Separate account assets                13,387            19,704
                                         ------            ------

  Total assets                         $155,154          $156,547
                                         ======            ======

  Policy benefit reserves              $117,954          $109,573
  Policyowner dividends payable           4,555             5,024
  Other liabilities                       5,834             6,453
  Separate account liabilities           13,387            19,704
                                         ------            ------

  Liabilities (excluding AVR)           141,730           140,754
  Asset valuation reserve (AVR)           1,023             3,687
  Surplus                                12,401            12,106
                                         ------            ------
  Surplus and AVR                        13,424            15,793
                                         ------            ------

  Total liabilities and surplus        $155,154          $156,547
                                       ========          ========

  Northwestern Mutual's Historical Surplus Ratio (Image):


The accompanying financial information is based 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").

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SOURCE: Northwestern Mutual

CONTACT: Jean Towell of Northwestern Mutual, 1-800-323-7033,

2/27/2009 10:59:00 AM