Northwestern Mutual

Northwestern Mutual Reports 2005 Results

Northwestern Mutual announced strong financial results for 2005, with nearly $5 billion in operating gains before dividends and taxes and a record total surplus position at year-end of $12.9 billion. The company expects to again lead its industry in total individual life and disability insurance dividends, with an estimated payout of $4.3 billion for 2006.

"It was an exceptional year -- financially, we've never been stronger," said Northwestern Mutual President and CEO Ed Zore. "Our surplus position reached all-time highs on both an absolute and relative basis, our corporate operations remained extremely efficient and our investment results were excellent. As a mutual company, these exceptional financial results bolster our financial strength and enable us to deliver solid long-term product value to our clients and policyowners."

  The company highlighted the following 2005 financial results:

  -- Total surplus, including asset valuation reserve, increased
     12.4 percent to $12.9 billion from $11.5 billion at the end of 2004.
     The ratio of total surplus to general account insurance reserves at the
     end of 2005 was 13.8 percent, compared to 13.2 percent at the end of
     the previous year.

  -- Gains before dividends and taxes of $4.9 billion rose 10 percent over
     2004, a reflection of significant growth in net investment earnings and
     continued excellent mortality and morbidity experience on its life
     insurance and disability insurance products, respectively. After
     dividends and taxes, the company achieved net gains from operations of
     $614 million in 2005.

  -- Dividends to participating policyowners of an estimated $4.3 billion
     have been approved for 2006, including a 7.5 percent dividend interest
     rate to be credited on most unborrowed life insurance funds.

  -- Life insurance in force reached $930.5 billion, an increase of more
     than 7 percent from year-end 2004.

  -- Consolidated assets under management (Northwestern Mutual statutory
     assets and Russell Investment Group third party assets under
     management) reached $288 billion, an increase of 13 percent.

"To maintain our outstanding operating results and financial strength year after year, it's important to focus on the fundamentals," explained Zore, "and in 2005, our fundamentals were excellent." The operating fundamentals cited by Zore, which the company credits as factors responsible for the financial performance in 2005, include:

  -- Balanced investment strategy, featuring a high-quality, diversified
     fixed income and equity portfolio, managed with a view toward superior
     long-term results.

  -- Disciplined underwriting, with an emphasis on well-designed products
     and careful assessment of insurance risk.

  -- Rigorous expense management, including an emphasis on operating
     efficiency in its corporate operations.  The company's cost structure
     also benefits from the productivity of its professional, well-trained
     and efficient career agency distribution system.

  -- Strong policyowner satisfaction, as evidenced by the company's strong
     persistency rate of 96.4 percent for life insurance in-force, which is
     expected to remain among the highest in the industry.

The record surplus position at year-end 2005 was aided by the performance of the company's investment portfolio. Net investment income increased 7 percent to more than $6.5 billion in 2005, attributable to 7 percent growth in invested assets and distributions from partnerships and joint ventures, offset in part by lower book yields on fixed income investments. Investment results also contributed $653 million of net realized and unrealized capital gains to surplus during 2005.

Total insurance premium revenue, including new and renewal premiums, increased to $11.4 billion, up more than 6 percent. New life insurance premium revenue was $1.1 billion for 2005, down 6 percent from 2004 due to a record amount of new single-premium bank-owned life insurance sold in 2004.

Sales growth for other risk protection products was strong during 2005. New premium revenue for the company's Long-Term Care product increased 15 percent to $22 million, while new premium revenue for Disability Income (individual and group DI) increased nearly 7 percent to $155 million.

New premiums and deposits for annuity contracts totaled $997 million, a 26 percent increase over last year. Sales of mutual funds by financial representatives registered with Northwestern Mutual Investment Services, LLC were $6.3 billion, a 12 percent increase over 2004.

The Northwestern Mutual Life Insurance Company, Milwaukee, WI (Northwestern Mutual), the nation's largest direct provider of individual life insurance, according to statistics compiled from A. M. Best data, has always received the best possible insurance financial strength ratings from Standard & Poor's, Fitch Ratings, A. M. Best and Moody's. For 22 years, a FORTUNE magazine survey has named Northwestern Mutual "Most Admired" in its industry. The company has also been recognized as one of the "50 Best Companies to Sell For," by Selling Power magazine (2005).

The company, its subsidiaries and affiliates are also providers of annuities, mutual funds, long-term care insurance, disability income insurance and employee benefit services to the group employee and executive markets. These products and services are distributed through the Northwestern Mutual Financial Network and its financial representatives. Among its affiliated companies are those that comprise the Russell Investment Group, which provide investment management and advisory services; Northwestern Mutual Investment Services, LLC (NMIS), the securities brokerage firm; and Northwestern Mutual Wealth Management Company, a limited purpose federal savings bank and a registered investment adviser. A subsidiary, Northwestern Long Term Care Insurance Company, offers long-term care insurance. Further information on Northwestern Mutual can be found at: .

               Summary of Operations and Changes in Surplus
               (Consolidated statutory basis, in millions)*

  Year ended December 31:                             2005           2004

  Premiums                                         $11,363        $10,682
  Net investment income                              6,543          6,117
  Other income                                         494            511
  Total revenue                                     18,400         17,310

  Policyowner benefits                               4,577          4,487
  Increase in benefit reserves                       7,109          6,603
  Commissions and expenses                           1,774          1,741
  Total benefits and expenses                       13,460         12,831

  Gain before dividends and taxes                    4,940          4,479

  Policyowner dividends                              4,269          3,880

  Gain before taxes                                    671            599
  Income tax expense (benefit)                          57           (124)

  Net gain from operations                             614            723
  Net realized capital gains                           310             94

  Net income                                           924            817

  Change in net unrealized capital gains               343            645
  Change in asset valuation reserve                     27             12
  Other surplus changes                                153            (87)

  Net increase in surplus                           $1,447         $1,387

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

  December 31:                                        2005           2004

  Bonds and cash                                   $68,023        $63,879
  Mortgage loans                                    18,118         17,240
  Policy loans                                      10,265          9,750
  Common and preferred stocks                        8,120          7,414
  Real estate                                        1,620          1,619
  Other investments                                  6,935          5,774
  Total investments                                113,081        105,676

  Other assets                                       4,223          3,963
  Separate account assets                           15,753         14,318
  Total assets                                    $133,057       $123,957

  Policy benefit reserves                          $94,144        $87,588
  Policyowner dividends                              4,270          3,910
  Asset valuation reserve                            2,529          2,556
  Other liabilities                                  5,980          6,651
  Separate account liabilities                      15,753         14,318
  Total liabilities                                122,676        115,023

  Surplus                                           10,381          8,934
  Total liabilities and surplus                   $133,057       $123,957

* The accompanying financial information is based on accounting practices prescribed or permitted by the Office of the Commissioner of Insurance of the State of Wisconsin ("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").

SOURCE: Northwestern Mutual

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

Web site:

1/26/2006 5:50:00 AM