Financial Results

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Northwestern Mutual’s principal financial goal remains the same in all economic environments: to pay a level of dividends that delivers the highest product value to policyowners while maintaining the company’s superior financial strength and stability.

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Financial Position

Total Company Assets

Total company assets increased 5 percent to $250 billion during 2016. The company’s General Account investment portfolio is well diversified and is primarily allocated to high-quality bonds and commercial mortgage loans. 1 Our investment strategy aims to provide superior returns over the long term while limiting overall credit, market and interest rate risk.

Total Assets in billions

Total Assets Chart

Surplus

Total surplus (including asset valuation reserve) increased $453 million during 2016 to $23.7 billion. While reserves are established to pay future benefits, surplus represents additional funds set aside to protect the company and our policyowners from the unexpected.

At year-end 2016, surplus and asset valuation reserve represented 12.8 percent of General Account insurance reserves, a decrease from 13.2 percent one year earlier. This level of capitalization remains at a very strong level, as evidenced by the financial strength ratings.

Our financial position remains strong, with a surplus ratio of 12.8 percent, assuring that we can keep our promises to policyowners.

Surplus Ratio in percentage

Surplus Chart

Operating Results

Operating results for 2016 reflected continued favorable product fundamentals and investment results. Net income was $818 million for 2016, including net realized capital losses of $210 million. Net realized capital losses reflected impairments of fixed-income and equity investments.

Net investment income increased 1 percent to $9.6 billion, partly due to an increase in distributed earnings from the company’s subsidiaries. That increase was partially offset by a decrease in private portfolio distributions and the impacts of continued low interest rates.

Gain Before Dividends & Taxes in billions

Operating Gain Before Dividends and Taxes Chart

Company Growth

Total Revenue

Total premium revenue was $18 billion for 2016, an increase of 1 percent from 2015. Premium revenue from life insurance increased 1 percent during 2016 and included a 4 percent increase in renewal premiums from in-force policies. Annuity premium decreased 2 percent from 2015, while premium revenue for disability income and long-term care insurance increased 4 percent and 7 percent, respectively.

Premium Revenue in billions

Premium Revenue Graph

Company Value

Policyowner Dividends

Northwestern Mutual is managed for the long-term benefit of our policyowners. This mutual philosophy leads us to pay participating policyowners the highest possible dividends consistent with preserving the long-term strength and security of the company.

Dividends reflect our underlying claims experience, investment performance and expense management.

The dividend scale interest rate on most unborrowed permanent life insurance funds will be 5 percent for 2017.2

In total, dividends to policyowners are estimated to be $5.2 billion in 2017 and are expected to be one of the highest payouts in company history. This includes approximately:

Our favorable claims experience contributes to the majority of our dividend payout. A reduction in total dividends being paid in 2017 resulted largely from the continued challenging, historically low interest rate environment, which significantly impacts the interest component of the payout.

Life insurance policyowners used over 75 percent of dividends paid in 2016 to purchase additional insurance protection, contributing to a 5 percent increase in total life insurance in force, which was $1.7 trillion at year-end 2016.

Superior product value contributes to policyowner satisfaction and loyalty, demonstrated by our persistency rate for life insurance in force, which was greater than 96 percent again during 2016.

Policyowner Dividends in billions

PO Dividend Graph

Total Benefits

Benefits paid to policyowners or their beneficiaries totaled $9.8 billion during 2016, an 8 percent increase from 2015. Paid benefits and the increase in reserves included the offsetting impacts of two large policy surrenders by corporate customers. Reserves for future policy benefits increased by $9.2 billion during 2016 and total reserves ended the year at $186.5 billion.

Total Benefits in billions

Total PO Benefits Graph

Integrated Products

Life Inforce

Individual life insurance in force reached $1.7 trillion during 2016, increasing 5 percent from the prior year.

Life Inforce in billions

Life Inforce Graph

Investment Client Assets

The company’s distinctive planning approach has resulted in tremendous growth in its investment products and services in recent years, including brokerage, advisory, trust and private client services, and business retirement plans. Northwestern Mutual client assets3 under management grew 13 percent during 2016 and ended the year at more than $100 billion.

Investment Client Assets in billions

Investment Client Assets Graph
  1. The vast majority of the company’s managed assets back most of its life, disability income and portfolio income annuity liabilities. For more information about our investments and investment strategies, please see Northwestern Mutual’s Annual Investment Report.
  2. Dividend scale interest rate for unborrowed funds for most traditional permanent life insurance policies with direct recognition. The dividend scale interest rate is not the rate of return on a policy and is only one factor for determining the permanent life insurance dividend.
  3. Investment Products & Services offerings are made available through Northwestern Mutual Investment Services, LLC, the company’s dually registered broker-dealer and investment advisor subsidiary, and through Northwestern Mutual Wealth Management Company, the company’s federally chartered savings bank. Both are wholly owned subsidiaries of Northwestern Mutual.

Northwestern Mutual is the marketing name for The Northwestern Mutual Life Insurance Company and its subsidiaries. Life and disability insurance, annuities, and life insurance with long-term care benefits are issued by The Northwestern Mutual Life Insurance Company, Milwaukee, WI (NM). Long-term care insurance is issued by Northwestern Long Term Care Insurance Company, Milwaukee, WI, (NLTC) a subsidiary of NM. Securities are offered through Northwestern Mutual Investment Services, LLC, (NMIS) a subsidiary of NM, broker-dealer, registered investment adviser, member FINRA and SIPC. Fiduciary and fee-based financial planning services are offered through Northwestern Mutual Wealth Management Company® (NMWMC), Milwaukee, WI, a subsidiary of NM and a federal savings bank. Products and services referenced are offered and sold only by appropriately appointed and licensed entities and financial professionals. Not all products and services are available in all states.