2010 annual reportSECURITY DEFINED Trusted. Strong. Proven.
Best value highest total cash value rate of return among major insurance companies.* “We remain committed to doing what’s best for our policyowners.” John E. Schlifske n Chairman and Chief Executive Officer Results in brief policyowner dividends policyowner benefits paid Individual life insurance in force total revenue total assets Surplus & asset valuation reserve *According to 20-year actual policy performance information compiled through independent analysis (Blease Research Full Disclosure 2010 Whole Life Edition), Northwestern Mutual’s whole life product provided the highest internal rate of return on policy cash value compared to all other similar products offered by competitors based on $250,000 whole life policy issued in2 1990 to a male age 45 with best class underwriting.
At the close of a year that began with considerable economic uncertainty, I’m pleased to tell you your company delivered an exceptionally strong performance in 2010. We kept a sharp focus on helping you and all policyowners plan for your long-term financial security. We maintained unquestioned financial strength and continued to deliver superior financial value. The year saw Northwestern Mutual again receiving the best possible insurance financial strength ratings from all four major rating agencies. Our total surplus, a key indicator of our financial position, grew $3.4 billion to $17.6 billion. And you saw a powerful confirmation of our financial strength and commitment to you in our approved policyowner dividend payout of nearly $4.9 billion for 2011, the second-largest payout in our history, which includes the largest life insurance payout in the industry. I invite you to look at all of our results, which tell an exciting story of the continuing power of our business model and the relevance of our products and services in all economic environments. In 2010, for example, our policyowners and clients bought more life insurance, individual disability insurance and long-term care insurance than in any year in our history. At a time when many companies struggle simply to remain profitable, we feel fortunate to create billions of dollars of value that we can pass back to our policyowners. We value the trust you place in us as your financial partner and will continue to honor it by delivering exceptional quality on your behalf. I hope you agree that Northwestern Mutual is truly a company for all economic seasons.(in millions) 2010 2009 Change $4,861 $4,715 +3% $6,876 $6,807 +1% $1,242,136 $1,176,845 +6% $23,109 $21,366 +8% $180,038 $167,180 +8% $17,635 $14,246 +24% LEARN MORE ABOUT US: northwesternmutual.com | About Northwestern Mutual 3
Most a partner for dividends all life stages ... We expect to pay nearly early choices allow this couple $4.9 billion in total dividends the flexibility to balance a to policyowners in 2011 — medical practice and family life. and more than twice the Financial security does not come life insurance dividends from some magic formula, say of our closest competitor. paul and Maritoni Shah. rather, it takes hard work, careful planning and, if at all possible, an early start. Trusted. “The plan we’ve put in place suits us. It reflects our beliefs and priorities, and it continues to keep current with our changing lives.” – Paul and Maritoni Shah Manish (Manny) Shah Financial Representative • Princeton, New Jersey WATCH OUR VIDEO ONLINE: northwesternmutual.com | About Northwestern Mutual | Our Company | Annual Report4
Having been raised to plan ahead, Maya and Milan, have choices for college.Paul and Maritoni did start early, buying life anddisability income insurance during their medical their decisions over theresidencies. They chose Northwestern Mutual for years have given them thethese products for several reasons. “One thing that freedom to make otherimpressed us was that the company paid attention choices as well. Even as they expanded their medical practice, Maritonito us at that point in our lives – before we were has been able to scale back her hours tomarried, had steady jobs, or owned any assets,” achieve flexibility for the family.Maritoni recalls. “It led us to believe this was acompany that would grow with us. And we knew Today, working with Financial Representativewe could trust it to be there for us as well.” Manish Shah (who is not related to the Shah family), Paul and Maritoni are enjoyingthe prediction was accurate: the present and feeling confident in theirAs Paul and Maritoni moved on in life, future. “While we know the decisions and theestablishing a medical practice and having responsibility for implementing them rest withchildren, they turned to Northwestern Mutual us, we feel secure knowing thatfor additional personal and business Manny does his homework and makesproducts. For them, the highest recommendations that fit our life andpriority in that mix is saving our circumstances,” Maritoni says.enough so that their children, 5
Best ratings Honoring the past We maintain the best possible and looking forward insurance financial strength ratings from all four major to the future ... rating agencies. a policyowner’s family learns first- a.M. Best, Fitch ratings, Moody’s Investors Service and Standard & poor’s. hand the most important reason ratings current as of March 1, 2011. for life insurance. Kim Bray was just 40 years old when she passed away suddenly, leaving behind her husband, tom, and three children: tJ, 13; Sara, 11; and alex, 7. “Today my family and I can say we honor our past, but also look forward to the future. Northwestern Mutual has helped us do both.” – Tom Bray6
WATCH OUR VIDEO ONLINE: northwesternmutual.com | About Northwestern Mutual | Our Company | Annual Report “When we lost Kim, so many explaining what they meant in aspects of our lives were uncertain. real-life terms.” Thanks to our life insurance planning, Today, Tom is remarried to Kellie, however, I was sure of one thing: who has two daughters, Alexandra our family could grieve and Elizabeth. “My policy without worrying about continues to give me leaving our home – the stable peace of mind, knowing and loving environment we had built our family is protected should together,” says Tom. “In addition, I knew something happen to me,” Tom says. I could maintain our standard of living “And Kellie and I are building a with one income, and count on the funds portfolio of insurance and investments needed for the kids’ college educations. that will allow us to enjoy our lives “You buy life insurance hoping something together without worrying about our like this never happens,” he adds, “but financial security.” it’s the most important reason to have it. Tom thinks of himself as a living I’ve seen it come true.” how to make example of His experience makes Tom grateful good choices for today for the work he and Kim did with and tomorrow. He explains, Northwestern Mutual Financial “I’ve lived through one of the worst Representative Pat Kohler. He explains, things that can happen. I want my “Pat did a great job of communicating children to see why it’s so important the features and benefits of all of to prepare for the unknown.” our options and, most importantly,Proven. Patrick J. Kohler, CLU, ChFC Financial Representative • Milwaukee, Wisconsin 7
Lowest expenses ordinary people accomplishing extraordinary things ... Our life expenses are consistently less than our With a solid foundation in place, these industry peers. More of your business partners are living their values premium is used for policy and seizing opportunities. benefits and cash values. Source: lIMra, 2009. they started with a dream and a plan. prepared and calculated by looking to combine their personal the northwestern Mutual life Insurance Company. passions and professional expertise, Marsia Geldert-Murphey and Geri Boyer started their own engineering company, Kaskaskia engineering Group, in 2006.“Financial security means we can fund our passion. It’s given us a solid foundation to make business decisions that reflect our values.” – Marsia Geldert-Murphey8
WATCH OUR VIDEO ONLINE: northwesternmutual.com | About Northwestern Mutual | Our Company | Annual Report“After doing what it took our values and our vision for Kaskaskia to climb the success ladder in ‘safe’ Engineering Group. It works for our jobs, we both – separately – came employees. And it works for our to the conclusion that we wanted families.” more for ourselves and our families,” “Nicole understands our business, how says Marsia. we approach our work as engineersIt wasn’t a decision and entrepreneurs, and our unique valueeither woman took lightly. proposition,” adds Marsia. “She helps“While our families were at different manage us determine how best to stages – my children were young; Geri’s our financial risk with a were in college – we needed to feel price tag we can afford. confident that their financial futures And she has aided us in achieving the were secure,” Marsia adds. flexibility to expand and grow our business when the opportunity arises That was one of the reasons they chose through the cash value we’ve built Wealth Management Advisor Nicole in our permanent life insurance Holland and Northwestern Mutual policies.” to help them achieve financial security.“We knew we needed a company “We have financial security, that was solid, stable and we have financial options,” and dependable, so at concludes Geri. “And those least that part of our world two things allow us to would be free from worry,” live our mission – as a Geri explains.“With company of ordinary Nicole’s help, we put a people accomplishing plan in place that suits us, extraordinary things.” Nicole Holland, CLU Wealth Management Advisor • Belleville, Illinois Wealth Management Advisors offer investment advisory services to the public through Northwestern Mutual Wealth Management Company, a limited purpose federal savings bank. Strong. 9
Most preferred taking care of today and tomorrow ... Northwestern Mutual is the market share leader there is no substitute for being in the sale of individual prepared, assert this firefighter life insurance. and teacher. Source: Snl Financial, 2009. reggie and Vivian Smith are serious about doing good work, and they’re serious about taking good care of their family. It is this value structure that led them to northwestern Mutual Financial representative phillip Washington. “We work hard in jobs we love. And we work hard to teach our children to take care of today and tomorrow. Northwestern Mutual is helping us do just that.” – Reggie and Vivian Smith Trusted. Phillip Washington, Jr. Financial Representative • Dallas, Texas10
“Working with Phillip has been firefighter,” explains Vivian, a third-grade an eye-opener in so many ways,” says teacher. “We are extremely aware of how important it is to reduce risk where we can Vivian. “He asks the tough and protect our family’s financial security questions and makes should something happen to one or both of us. us think and talk about Over the years, the cash value of our permanent what’s important to us – life insurance policies has become a bonus.” what we need and want for our children, Jaylon and Jasmine, and ourselves, now and Another bonus has been the comfort in the future. From the beginning, I knew he level they’ve achieved by was someone we could trust, representing a making the right choices company that would earn our trust as well. for their family. “Like most parents, We are proud of the decisions we’ve made we have a lot to manage every day – our jobs, so far to get us to where we are today.” our kids, all kinds of other responsibilities – Those decisions have first and foremost but because we know this part of our lives included having enough life insurance. is well-managed, we don’t have to worry“Reggie has seen a lot in his work as a about it. And that’s worth a lot.” WATCH OUR VIDEO ONLINE: northwesternmutual.com | About Northwestern Mutual | Our Company | Annual Report 11
2010 Financial results TRUSTED. STRONG. PROVEN. Summary of operations (consolidated statutory basis, in millions) Year ended December 31: 2010 2009 premiums $14,252 $13,062 net investment income 8,306 7,772 other income 551 532 these summary Total revenue 23,109 21,366 financial statements policyowner benefits paid 6,876 6,807 are derived from the Increase in benefit reserves 8,332 7,138 company’s audited Commissions and expenses 2,320 2,189 consolidated financial Total benefits and expenses 17,528 16,134 statements, which Gain before dividends and taxes 5,581 5,232 are prepared on the Policyowner dividends 4,861 4,715 statutory basis of accounting. Gain before taxes 720 517 Insurance regulators Income tax expense (benefit) (224) 42 require that financial Net gain from operations 944 475 statements be prepared net realized capital losses (188) (154) on a statutory basis of accounting that differs Net income $756 $321 materially from financial statements prepared in accordance with generally Summary of Financial position accepted accounting (consolidated statutory basis, in millions) principles (Gaap). December 31: 2010 2009 pricewaterhouseCoopers Bonds $96,829 $91,004 llp is the company’s Mortgage loans 21,291 21,024 independent auditor. policy loans 14,472 13,717 Common and preferred stocks 9,170 5,918 the company’s real estate 1,619 1,582 audited consolidated other investments 9,902 8,587 financial statements Cash and short-term investments 1,928 2,610 are available at Total investments 155,211 144,442 northwesternmutual.com or by written request other assets 6,164 6,394 Separate account assets 18,663 16,344 to northwestern Mutual, Corporate Total assets $180,038 $167,180 Communications, room n04, policy benefit reserves $133,066 $125,025 policyowner dividends payable 4,859 4,730 720 e. Wisconsin ave., other liabilities 5,815 6,835 Milwaukee, Wisconsin Separate account liabilities 18,663 16,344 53202. Liabilities (excluding AVR) 162,403 152,934 asset valuation reserve (aVr) 3,250 1,843 Surplus 14,385 12,403 Surplus and AVR 17,635 14,246 Total liabilities and surplus $180,038 $167,180 12
Northwestern Mutual’s basic financial goal remains the same in any economic environment:to pay a level of dividends that delivers the highest product value to policyowners withoutcompromising the company’s superior financial strength and stability.Financial StrengthSubstantial uncertainty in the economy and volatility in the financialmarkets continue to reinforce the value of NorthwesternMutual’s time-tested strategy, including prudent managementof insurance product risk; careful attention to operatingexpenses; and a well-balanced, diversified general accountinvestment portfolio. these fundamental priorities, along withour commitment to mutuality and the financial flexibility of ourparticipating dividends, enable the company to weather evenextreme financial stress – and deliver on our commitment tolong-term financial security for our policyowners and clients.During 2010, surplus and asset valuation reserve (aVr) increased$3.4 billion to $17.6 billion. the increase in total surplus reflectedthe issuance of $1.75 billion of surplus notes in early 2010, StronGmarket appreciation on the equity portfolio and strong operating perForManCeresults. Surplus provides the company with protection againstthe unexpected, while aVr supports our long-term investment our FInanCIalstrategy by cushioning against market volatility. poSItIon remains strong WItHat year-end 2010, surplus and aVr represented 13.3% of general a SurpluSaccount insurance reserves, an increase from 11.4% at year-end ratIo oF2009. this level of surplus is very strong relative to the company’srisk profile and regulatory benchmarks. It also compares favorablyto our historically strong financial position. 13.3% aSSurInG tHatSurplus Ratio tHe CoMpany Can(surplus and AVR as a percentage of general account insurance reserves) Keep ItS proMISeS to polICyoWnerS.15% Surplus AVR12 9 6 3 0 1974 1979 1984 1989 1994 1999 2004 2010 13
2010 Financial results Mutuality and policyowner Value northwestern Mutual is managed for the long-term benefit of our policyowners. this mutual perspective requires a balance between participating dividends and long-term financial strength and security. participating dividends reflect our underlying claims experience, expense structure and investment performance. Surplus Ratio (surplus and AVR as a percentage of general account insurance reserves) In total, dividends to policyowners are estimated to be nearly $4.9 billion 200 Total assets in 2011. this represents an increase of about $150 million over the 15% (in billions) 2010 payout and is expected to be theAVR Surplus second-highest payout of 175 dividends in company history. this includes: 12 9 150 n $4.4 billion in dividends on participating permanent 6 life insurance policies; 125 3 n $123 million in dividends on term life insurance policies; 0 100 1974 1979 1984 1989 1994 1999 2004 2010 n $233 million in dividends on individual disability 75 insurance policies; 50 n $11 million in dividends paid to long-term care policyowners through our subsidiary, northwestern long term 25 Care Insurance Company; and 0 n $27 million in dividends on individual fixed and variable 06 07 08 09 10 annuity contracts. Total investments Separate account assets Other assets the dividend scale interest rate on most unborrowed permanent life insurance funds will be 6.00% during 2011, down modestly from 6.15% during 2010. While important, investment performance is only a part of permanent life insurance policyowner value. our favorable claims experience and rigorous approach to expense management account for more than one-half of total dividends to be paid during 2011. Superior product value contributes to policyowner satisfaction and loyalty. our persistencyGeneral account rate for life insurance in force was 96% during 2010. life insurance policyownersinvestments managed used approximately 75% of dividends available during 2010 to purchase additional insurance protection, (excludes policy loans) contributing to a 6% increase in total life insurance in force that totaled $1.2 trillion at year-end 2010. 70% 15% 14 15%
Surplus Ratio (surplus and AVR as a percentage of general account insurance reserves) 200 Total assets Investment results 15% (in billions) Surplus AVR 12 the company’s general account investment portfolio is diversified and 175 largely composed of high-quality, fixed-income assets, appropriate for our 9 investment strategy to provide superior returns over the long term while 150 managing overall credit, market and interest-rate risk. our investment 6 guidelines limit exposure to any single asset class 3or issuer. 125 Surplus Ratio (surplus and AVR as a percentage of general account insurance reserves) the $97 billion bond portfolio represents 69% of our general account 0otal assets 100 managed investments and remains the cornerstone of our investment1984 15% 1974 1979 1989 1994 1999 2004 2010n billions) Surplus AVR strategy. this portfolio of public and private debt remained high-quality 12 and well-diversified by sector, with 90% rated as investment grade at 75 year-end 2010. the company’s $21 billion commercial mortgage loan 9 proven portfolio, underwritten by 6our own real estate professionals, enjoys 50 significant collateral protection and is well-diversified geographically Investment and by property type. 25 3 Strategy 0 equity investments include public and private 1989 1994 stocks, real common 2004 2010 tHe CoMpany’S 1974 1979 1984 1999 estate and other holdings that enhance total portfolio returns in the 0 97 billion 06 07 08 09 10 long term, but for which market values can be volatile. this time-tested Total investments investment strategy is made possible by a strong surplus position Separate account $ and the stable nature of our participating life insurance products. assets Other assets BonD portFolIo northwestern Mutual maintains a very strong liquidity position. at remains the year-end 2010, the company held $25 billion in cash equivalents, u.S. cornerstone treasurys and other highly liquid, government-supported investments. oF our General We enjoy substantial positive operating cash flows, primarily from our aCCount6 07 08 09 10 large and stable block of participating life insurance business and InVeStMent Total investments general account investment portfolio. Separate account StrateGy. assets Other assets In General account total, general account investments generated $1.1 billion in net managed investments realized and unrealized capital gains during 2010, after taxes and required deferrals of interest rate-related gains. these net gains loans) (excludes policy primarily reflected substantial unrealized capital gains generated by the company’s equity portfolio. 70% General account the power of General Account managed investments Managed 15% Investments (excludes policy loans) (excludes policy loans) our portfolio 15% At year-end 2010 70% a Well-BalanCeD anD 70% Bonds & cash DIVerSIFIeD portFolIo 15% Mortgage loans ContrIButeS to tHe 15% 15% Stocks & CoMpany’S exeMplary other equities DIVIDenD reCorD. 15% At year-end 2010 70% Bonds & cash 15% Mortgage loans 15 15% Stocks & other equities
150 62010 Financial results 125 100 3 0 1974 1979 75 50 25 operating results total premium revenue, including both new and renewal premiums, was 0 06 09 10 $14.3 billion for 2010, an07 08 increase of 9% from 2009. premium revenue from life insurance increased 8% during 2010, primarily reflecting a Total investments Separate account $500 million increase in new life insurance premium and continued assets favorable persistency. premium revenue for disability and long-term Other assets care insurance increased 4% and 18% respectively. annuity premium and deposits increased 2% from 2009. Premium revenue (in billions) net investment income was $8.3 billion for 2010, a 7% increase from 2009, including a 6% increase in interest from fixed-income investments. 15 the company also generated growth in investment income from equity- related investments, including higher distributions from private equity and real estate investments. General a 12 managed Benefits paid to policyowners or their beneficiaries totaled $6.9 billion (excludes p during 2010, a 1% increase from 2009. Mortality and other claims 9 experience were very favorable during 2010, a reflection of the company’s careful assessment of insurance risk. reserves for future policy benefits increased by $8.3 billion during 2010 and totaled $133 billion 6 at year-end 2010. operating results for 2010 also reflected our continued commitment to the rigorous management of operating expenses. 15% after provision for taxes and dividends to policyowners, net gain from 3 operations was $944 million for 2010, an increase from $475 million in 2009. net realized capital losses primarily reflected impairment adjustments for investments – offset in large part during 2010 by realized At yea 0 capital gains on the sale of public and private equity investments. 70% B 06 07 08 09 10 Life insurance 15% M Disability/ 15% S o Long-term care Annuity looking ahead While the economic and financial market environment appears to be improving, significant risks and uncertainties remain. Northwestern Mutual remains strong, stable and committed to our promise of financial security to our policyowners and clients. our focus on long-term policyowner value and financial strength will remain constant regardless of the challenges that may lie ahead. 16
executive officers as of March 1, 2011 Management Committee Jefferson V. DeAngelis Raymond J. Manista Senior Vice President General Counsel and Secretary John E. Schlifske Public Markets Chairman and CEO Meridee J. Maynard Joann Eisenhart Senior Vice President Gary A. Poliner Vice President Product Distribution President and Chief Risk Officer Human Resources Kathleen A. Oman Mark G. Doll Christina H. Fiasca Vice President Executive Vice President and Senior Vice President Policyowner Services Chief Investment Officer Agency Services Steven M. Radke Jean M. Maier Timothy J. Gerend Vice President Executive Vice President Vice President Government Relations Enterprise Operations and Technology Compliance/Best Practices David R. Remstad Gregory C. Oberland Kimberley Goode Vice President and Chief Actuary Executive Vice President Vice President Insurance and Investment Products Communications and Corporate Affairs Bethany M. Rodenhuis Vice President Marcia Rimai Karl G. Gouverneur Corporate Planning Executive Vice President Vice President and Chief Administrative Officer Information Systems Timothy G. Schaefer Chief Compliance Officer Chief Information Officer John M. Grogan Todd M. Schoon Senior Vice President Calvin R. Schmidt Executive Vice President Financial Planning and Product Delivery Vice President Agencies Investment Product Operations Thomas C. Guay Executive Officers Vice President David W. Simbro New Business Vice President Sandra L. Botcher Life Product Vice President Gary M. Hewitt Enterprise Risk Assurance Paul J. Steffen Vice President and Treasurer Vice President Michael G. Carter Agencies J. Chris Kelly Vice President and Vice President and Controller Conrad C. York Chief Financial Officer Vice President John L. Kordsmeier Marketing Eric P Christophersen . Vice President Vice President Disability Income Todd O. Zinkgraf Wealth Management Vice President Jeffrey J. Lueken Enterprise Solutions David D. Clark Senior Vice President Senior Vice President Securities Real Estate 17
Board of trustees Trustees as of March 1, 2011 Facundo L. Bacardi 1 David J. Lubar 2, 4 Mary Ellen Stanek 2, 4 Chairman President Managing Director and Bacardi Limited Lubar & Co. Director of Asset Management Coral Gables, Florida Milwaukee, Wisconsin Robert W. Baird & Co. Milwaukee, Wisconsin John N. Balboni 6 Ulice Payne, Jr. 4, 5 Senior Vice President and President and CEO Timothy W. Sullivan 2 Chief Information Officer Addison-Clifton, LLC President & CEO International Paper Company Brookfield, Wisconsin Bucyrus International, Inc. Memphis, Tennessee Milwaukee, Wisconsin Gary A. Poliner 3, 4 David J. Drury 4, 5 S. Scott Voynich 2A, 3 President and Chief Risk Officer President Managing Partner The Northwestern Mutual Life Poblocki Sign Company, LLC Robinson, Grimes & Company, P.C. Insurance Company Milwaukee, Wisconsin Columbus, Georgia Milwaukee, Wisconsin Connie K. Duckworth 4, 5 John E. Schlifske 3A, 4A Barry L. Williams 1 President and Chairman and CEO Retired Managing General Partner Chairman of the Board The Northwestern Mutual Williams Pacific Ventures, Inc. ARZU Life Insurance Company San Francisco, California Lake Forest, Illinois Milwaukee, Wisconsin David A. Erne 2, 3, 4 Benjamin F. Wilson 6 Of Counsel H. Mason Sizemore, Jr. 6 Managing Principal Reinhart, Boerner, Van Deuren, S.C. Retired President & COO Beveridge & Diamond, P.C. Milwaukee, Wisconsin The Seattle Times Washington, D.C. Seattle, Washington James P. Hackett 3, 6A Edward J. Zore 1, 4 President and CEO Peter M. Sommerhauser 3, 4, 5A Retired Chairman Steelcase, Inc. Attorney The Northwestern Mutual Grand Rapids, Michigan Godfrey & Kahn, S.C. Life Insurance Company Milwaukee, Wisconsin Milwaukee, Wisconsin Hans Helmerich 5 President and CEO Helmerich & Payne, Inc. Tulsa, Oklahoma Committee affiliation key: Dale E. Jones 1 1 Agency and Marketing Vice Chairman 2 Audit Heidrick & Struggles 3 Executive Washington, D.C. 4 Finance 5 Human Resources, Nominating and Corporate Governance Margery Kraus 1A, 3 6 Operations and Technology President and CEO A Chair APCO Worldwide Washington, D.C.18
2010 Policyowners’ Examining Committee Report Every year for more than 100 the Company’s mission is years, Northwestern Mutual has invited timeless: It must be there to fulfill a committee of policyowners to assess the its promises to every generation. While Company’s strengths, opportunities and the Company is an industry leader today, strategies and to challenge management in we encourage it to maintain its strength new ways. This demonstrates the essence and vitality by continuing to grow. As a of a mutual company: namely,an practical matter, future growth will enable organization operated for Northwestern Mutual to take further advantage of scale to enhance its position as the benefit of those who the industry’s low-cost leader and continue collectively own it – the to invest in relevant products and services. policyowners. As members of the 2010 Policyowners’ Examining Committee, We were pleased to learn that Northwestern we were pleased and privileged to spend Mutual continues to implement a growth five days in the home office meeting with strategy while maintaining an unmatched senior management, field representatives position of financial strength in its industry. and emerging company leaders. All of Led by an experienced management team, them shared candid, informative insights northwestern Mutual has a and responded to our inquiries with well-defined corporate strategy transparency. We felt their passion for our to deepen client relationships, grow its Company and its mission to help clients distribution system and broaden its reach achieve their financial security goals. in the marketplace. continued on page 20 >> A principle of mutuality is that Northwestern Mutual serves generations of clients – past, current and future. Pictured left to right: Ralph A. Weber, a founding member of trial law firm Gass Weber Mullins, Milwaukee, Wisconsin; Sidney Dillard, head of the Corporate Investment Banking Division, loop Capital Markets, Chicago, Illinois; P. Russell Hardin (chair), president of the robert W. Woodruff Foundation, atlanta, Georgia; Timothy J. Wallen, Chief executive officer and principal, naI MlG Commercial, Brookfield, Wisconsin; Randall Schilling, president and Chief executive officer of Candlestiq, St. Charles, Missouri. 19
Deepen Client relationships the Company, the distribution system’s Northwestern Mutual has evolved from vitality is critical. To foster growth of the its roots as a life insurance company to field, the Company has implemented new become a financial security provider. Today, incentives for network office leaders to the Company addresses clients’ changing recruit and develop promising talent over financial security needs over a lifetime by the next ten years. This effort is showing offering relationship-based, expert guidance early signs of success. through its exclusive network of financial As the Company assists the network office representatives and top-quality insurance leadership in this endeavor, we encourage and investment products. The Company’s it to be intentional about recruiting and investment in developing and maintaining a retaining women and people of color in top-quality, proprietary financial planning order to broaden the reach and impact of its tool is strong evidence of its commitment to relationship-based network. The Company’s holistic financial security. unique and award-winning college internship In the past year, the home office took steps program offers an excellent opportunity to to strengthen its alignment with the field. introduce Northwestern Mutual to a wide The Company created a department to range of candidates. integrate financial planning and product sales Broaden reach in and streamlined its support of the field to better the Marketplace meet the needs of financial representatives Central to the Company’s mission is the and clients. We look forward to monitoring belief that every life matters. To carry out how these and related initiatives increase the its mission, the Company needs to broaden productivity of veteran financial representatives. its reach in an ever-changing marketplace In addition, the Company increased its efforts and access underserved markets. We define to deliver client service and communications in these as both geographic and demographic a manner that reflects the client’s perspective markets where the Company’s penetration and complements the field-client relationship. is below its national average or where the In today’s technology-driven environment, we additional market growth opportunity, in encourage the Company to continue to invest absolute size, is significant. We note that in technology, including electronic statements Northwestern Mutual has implemented and online and mobile client interfaces, to meet pilot programs to develop effective the growing expectations of clients for real-time strategies for penetrating underserved information about their financial security. markets. We encourage the Company to expand upon and accelerate efforts to Grow the Distribution System deliver financial security to a broader array To deliver financial security to more people, of clients. We believe a presence in these the Company is working to increase the markets positions the Company for long- number of financial representatives in term growth that reflects the changing its exclusive distribution system. Widely demographics of our country. recognized as a competitive advantage to continued on page 21 >>20
The Company’s recent efforts to raise will be fundamental to the Company’s long-brand awareness help lay a foundation to term financial strength and future growth.increase its visibility and broaden its reach Management actively evaluates the ongoingto more clients. We note the opportunity and potential changes to the regulatoryto build on the Company’s presence in structure in which the Company operates.the marketplace and amplify its impact As the political and regulatory environmentby taking a strategic approach to the changes, we are confident that managementNorthwestern Mutual Foundation’s will remain vigilant to identify potentialinvestments in the communities it serves. risks and advocate for sensible regulationsManagement and tax policy.We have the highest level of confidence in Call to actionthe management of the Company. We applaud Northwestern Mutual has differentiated itselfnew Chairman and CEO John Schlifske as a company intent on delivering financialand his leadership team for their focus on security to its clients through one-on-oneleadership development, accountability and relationships between financial representativesalignment of compensation with performance and their clients employing a comprehensivethroughout the organization. planning process. Be assertive in achievingOne of the things that impresses us most is your own financial security. Ask your financialmanagement’s execution of a comprehensive representative how Northwestern Mutual cangrowth strategy while maintaining the help you realize your financial security goalsfundamentals of the business. Management through the actions you take today.views the Company’s enduring financial As policyowners, we all can play a part instrength and mutual values as guardrails helping our Company deliver financial securitythat guide how the Company should grow. to more people. The next time your financialManagement’s discipline is evident in the representative asks you for a referral, considerCompany’s current managed expense budget, it your opportunity to introduce otherswhich is lower than managed expenses at the to our exceptional Company.end of 2007. Continued expense discipline report submitted December 1, 2010. 21
NORTHWESTERN MUTUAL REPORTiNG FRAUD Northwestern Mutual helps clients protect against Every year, insurance fraud costs companies and consumers financial risk and achieve financial security. The company, billions of dollars. What can policyowners do to help the its subsidiaries and affiliates offer life, disability and company’s anti-fraud efforts? The company’s website has long-term care insurance, investment products, advisory information on this topic. To report fraud, e-mail antifraud@ services and trust services that address client needs northwesternmutual.com or call toll-free 1-877-607-2485. for financial protection, wealth accumulation, estate preservation and asset distribution. Headquartered in CLiENT-REPRESENTATiVE RELATiONSHiPS Milwaukee, Wisconsin, the mutual company has nearly This report contains profiles of certain Northwestern Mutual 4 million policyowners and investment customers. It clients, their personal financial needs and how Northwestern expects to continue as the leading U.S. company in Mutual and its affiliated companies met their needs. total life insurance dividends paid to policyowners. The personal financial needs and results of the clients shown in SUBSiDiARiES this report may not reflect the experience of other clients. Please QuietCare® long-term care insurance is offered through discuss your personal financial situation with your Northwestern Northwestern Long Term Care Insurance Company, Mutual financial representative before purchasing any product or Milwaukee, Wisconsin. Strategic Employee Benefit Services™ service. Please keep in mind that working with a Northwestern is a nationwide group marketing program providing Mutual financial representative or any other financial services specialized services in the employee benefit arena. provider is not a guarantee as to future investment success. Securities are offered through Northwestern Mutual investment Services, LLC (NMiS), Suite 600, ENTERPRiSE RiSK MANAGEMENT 611 E. Wisconsin Ave., Milwaukee, Wisconsin, 53202, Northwestern Mutual has a strong risk management culture 1-866-664-7737. NMIS, a registered investment adviser, that is vigilant in identifying and managing risks — whether broker-dealer and member of FINRA and SIPC, is a wholly financial, operational, strategic or environmental — that owned company of Northwestern Mutual. Northwestern could impact the strength and security of your company. Mutual Wealth Management Company, a wholly owned We apply risk models, experience and judgment as part of a company of Northwestern Mutual, is a limited purpose well-coordinated structure to identify, evaluate, address and federal savings bank authorized to offer a range of financial monitor current and emerging risks. This structure assures planning, trust, fiduciary, investment advisory and investment accountability for scrutinizing risks, defining tolerance levels management products and services. Russell Investment and managing risks within those levels. Group is a Washington, USA, corporation, which operates through subsidiaries worldwide and is a subsidiary of Cross-functional senior management committees have been The Northwestern Mutual Life Insurance Company. established to review risks related to our business. They are central to our internal system of checks and balances. MORE ABOUT DiViDENDS These committees work in partnership with the President Decisions with respect to the determination and and Chief Risk Officer, who facilitates consistent direction allocation of divisible surplus are left to the discretion and communication between various risk management and sound business judgment of the company’s Board functions in the company and reports directly to the Chief of Trustees. There is no guaranteed specific method or Executive Officer. The company’s Board of Trustees oversees formula for the determination and allocation of divisible all risk management efforts. surplus. Accordingly, the company’s approach is subject As a financial security company, we believe that managing to change. Neither the existence nor the amount of a risks lies at the heart of our business and is deeply rooted dividend is guaranteed on any policy in any given policy in the more than 150-year-old culture that guides our year. Some policies may not receive any dividends in a employees and financial representatives. particular year or years even while other policies receive dividends. In its 2011 dividend scale resolution, the ANNUAL MEETiNG Board of Trustees has exercised its discretion to guarantee 8 A.M., MAY 25, 2011 a minimum amount of dividends to be paid in 2011 to The Annual Meeting of Policyowners of The Northwestern the policyholders as a group. If this guaranteed amount Mutual Life Insurance Company will be held at 8 a.m., exceeds the aggregate amount of dividends actually Wednesday, May 25, 2011, at the company’s Milwaukee paid to individual policyholders in 2011, that excess will campus, 720 E. Wisconsin Ave., Milwaukee, Wisconsin. be paid out in 2012 pursuant to the 2011 dividend scale resolution. The presence of a guaranteed minimum amount HAVE A QUESTiON? in the 2011 dividend scale resolution does not obligate For policy inquiries or general information, go to Northwestern Mutual to declare a dividend in future years northwesternmutual.com. For billing and payment inquiries, or to guarantee any portion of dividends that may be call 1-800-388-8123. The company’s general phone declared in future years. number is (414) 271-1444.22
Trusted. Strong.Security Defined ...Since 1857, northwestern Mutual’s financial strength and stabilityhave backed our promise to be there for our clients when theirfinancial security is tested. We remain steadfastly guided by ourmission to build enduring relationships with clients founded onsound guidance and expert solutions that meet a lifetime of needs.today – as we have throughout our 154-year history – we continueto deliver consistent long-term value, while maintaining exceptionalfinancial strength, helping our clients achieve a secure financial future. Proven. 23
WORLD’SMOST ADMIRED YOUR VOTE is importantNorthwestern Mutual is the “World’sMost Admired” life insurance company Please sign and returnaccording to executives, directors and the proxy in the envelopeanalysts in FORTUNE® magazine’s provided in this package. Maintaining a strong system2011 annual survey. of corporate governance is fundamental to our success.MOST DIVIDENDSWe expect to pay nearly $4.9 billionin total dividends to policyownersin 2011 — and more than twicethe life insurance dividends of ourclosest competitor.HIGHEST CUSTOMERSATISFACTIONNorthwestern Mutual leads the industrywith the highest customer satisfactionscore among U.S. life insurers.The American Customer Satisfaction Index,fourth-quarter 2010 report Follow us on Facebook facebook.com/northwesternmutual Get news updates on Twitter twitter.com/nm_news the northwestern Mutual Scan this code with Life Insurance Company • Milwaukee, WI your smart phone to www.northwesternmutual.com see more of our life 90-0073-01 (0311) stories on Facebook.