-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VVHpmXf3Q0+CJmyC6zkAMLhPOZqxMkmv4ePiJ4YVEHljQFaPaGFWM/yttMT/UeJh P6vv5fYAXSAj88B4lt02cQ== 0000950124-96-001373.txt : 19960329 0000950124-96-001373.hdr.sgml : 19960329 ACCESSION NUMBER: 0000950124-96-001373 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960328 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NORTHWESTERN MUTUAL LIFE INSURANCE CO CENTRAL INDEX KEY: 0000073076 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 390509570 STATE OF INCORPORATION: WI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 002-64683 FILM NUMBER: 96539782 BUSINESS ADDRESS: STREET 1: 720 E WISCONSIN AVENUE CITY: MILWAUKEE STATE: WI ZIP: 53202 BUSINESS PHONE: 4142711444 MAIL ADDRESS: STREET 1: 720 EAST WISCONSIN AVENUE CITY: MILWAUKEE STATE: WI ZIP: 53202 10-K 1 10-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1995 Commission file numbers 2-64683, 2-94234 and 2-89905. THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY ---------------------------------------------------- (Exact name of Registrant as specified in its Charter) Wisconsin 39-0509570 ------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 720 East Wisconsin Avenue Milwaukee, Wisconsin 53202 ---------------------------------------- ----------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 414/271-1444 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange on Title of each class which registered ------------------- ------------------------- None None ---- ---- Securities registered pursuant to Section 12(g) of the Act: None ---- "Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ." ------ ----- "State the aggregate market value of the voting stock held by non-affiliates of the registrant. The aggregate market value shall be computed by reference to the price at which the stock was sold or the average bid and asked prices of such stock, as of a specified date within 60 days prior to the date of filing. (See definition of affiliate in Rule 405.)" Not Applicable -------------- "Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date." None "DOCUMENTS INCORPORATED BY REFERENCE" None ---- This Form 10-K report contains 66 pages. The Exhibit Index is located on page 46. 2 The Northwestern Mutual Life Insurance Company ---------------------------------------------- Form 10-K --------- PART I ------ Item 1. Business - ------------------ (a) General development of business. There have been no material changes or developments since the beginning of the fiscal year in the business done or intended to be done by the registrant and its subsidiaries. (b) Financial information about industry segments. The registrant is a mutual life insurance company whose principal product is life insurance. The registrant also sells annuity contracts, including variable annuity contracts. (c) Description of business. The Registrant is the seventh largest life insurance company in the United States with total assets in excess of $54 billion on December 31, 1995. The registrant's principal products are life insurance contracts distributed by approximately 5,600 full-time producing agents. Sales of life insurance contracts as a percentage of total sales is as follows: 1995 81.22% 1994 80.60% 1993 82.44% 1992 81.44% 1991 81.11% 1990 82.64% 1989 83.12% 1988 84.18%
As of December 31 1995, the registrant had 3,344 employees. (d) Not applicable. Item 2. Properties - -------------------- The principal properties used in the business are located at 720 East Wisconsin Avenue and 818 East Mason Avenue, Milwaukee, Wisconsin. The properties, which house the registrant's home office, include approximately three and one-half square blocks improved with three office buildings and a parking structure. Title to land and buildings is held in fee. Item 3 is on page 3. 2 3 The Northwestern Mutual Life Insurance Company ---------------------------------------------- Form 10-K --------- Item 3. Legal Proceedings - -------------------------- The Northwestern Mutual Life Insurance Company is engaged in litigation of various kinds, which in its judgement is not of material importance in relation to its total assets. The litigation includes various administrative or judicial proceedings, relating to investments of the Registrant, arising under Federal, State or local provisions that have been enacted or adopted regulating the discharge of materials into the environment or primarily for the purpose of protecting the environment. The Registrant believes that these proceedings, singularly and in the aggregate, are not material. In addition, NML Variable Annuity Accounts A and C are not engaged in any litigation which is considered material to their total assets. Item 4. Submission of Matters to a Vote of Security Holders - ------------------------------------------------------------ (a) Not applicable. The Registrant is a mutual life insurance company and has no stockholders as such. (b) Not applicable. (c) Not applicable. (d) Not applicable. Item 5 is on page 4. 3 4 The Northwestern Mutual Life Insurance Company ---------------------------------------------- Form 10-K --------- PART II ------- Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters - ------------------------------------------------------------------------- (a) Not applicable. The Registrant is a mutual life insurance company and has no equity securities or stockholders as such. (b) Not applicable. (c) Not applicable. Item 6 is on page 5. 4 5 The Northwestern Mutual Life Insurance Company ---------------------------------------------- Form 10-K --------- Item 6. Selected Financial Data 5 - -------------------------------- Results of Operations for NML Variable Annuity Account A for each of the five years ending December 31, follows:
1995 1994 1993 ----------- ------------ ----------- Investment Income Dividend Income from Northwestern Mutual Series Fund, Inc. Index 500 Stock Portfolio . . . . . . . . . . . . . . $ 522,842 $ 2,155,181 $ 256,688 Dividend Income from Northwestern Mutual Series Fund, Inc. Growth Stock Portfolio . . . . . . . . . . . . . . . . 128,854 18,971## NA Dividend Income from Northwestern Mutual Series Fund, Inc. Growth and Income Stock Portfolio . . . . . . . . . . 465,091 53,075## NA Dividend Income from Northwestern Mutual Series Fund, Inc. Aggressive Growth Stock Portfolio . . . . . . . . . . 256,787 248,438 359,370 Dividend Income from Northwestern Mutual Series Fund, Inc. International Equity Portfolio . . . . . . . . . . . . 217,966 853,704 97,043# Dividend Income from Northwestern Mutual Series Fund, Inc. Select Bond Portfolio . . . . . . . . . . . . . . . . 652,667 2,990,731 1,423,472 Dividend Income from Northwestern Mutual Series Fund, Inc. High Yield Bond Portfolio . . . . . . . . . . . . . . 199,805 68,840## NA Dividend Income from Northwestern Mutual Series Fund, Inc. Money Market Portfolio . . . . . . . . . . . . . . . . 1,119,254 708,559 520,596 Dividend Income from Northwestern Mutual Series Fund, Inc. Balanced Portfolio . . . . . . . . . . . . . . . . . . 8,146,698 33,071,685 13,161,961 Dividend Income from Northwestern Mutual Capital Appreciation Stock Fund, Inc. . . . . . . . . . . . . . . . NA NA 976,621** ---------- ------------ ----------- Total Income . . . . . . . . . . . . . . . . . . . . . . . 11,709,964 40,169,184 16,795,751 Annuity Rate and Expense Guarantees . . . . . . . . . . . . 5,072,064 4,466,142 4,074,129 ----------- ------------ ----------- Net Investment Income . . . . . . . . . . . . . . . . . . . $ 6,637,900 $ 35,703,042 $12,721,622 =========== ============ =========== Realized and Unrealized Gain (Loss) on Investments Realized Gain on Investments . . . . . . . . . . . . . . . . $13,141,169 $ 1,687,702 $ 2,347,432 Unrealized Appreciation (Depreciation) of Investments During the Year . . . . . . . . . . . . . . . . . . . . . . 76,916,515 (39,969,923) 14,612,044 ----------- ------------ ----------- Net Gain (Loss) on Investments . . . . . . . . . . . . . . $90,057,684 $(38,282,221) $16,959,476 =========== ============ =========== 1992 1991 ---------- ---------- Investment Income Dividend Income from Northwestern Mutual Series Fund, Inc. Index 500 Stock Portfolio . . . . . . . . . . . . . . $ 191,946 $ 99,756 Dividend Income from Northwestern Mutual Series Fund, Inc. Growth Stock Portfolio . . . . . . . . . . . . . . . . NA NA Dividend Income from Northwestern Mutual Series Fund, Inc. Growth and Income Stock Portfolio . . . . . . . . . . NA NA Dividend Income from Northwestern Mutual Series Fund, Inc. Aggressive Growth Stock Portfolio . . . . . . . . . . 52,183 86,814 Dividend Income from Northwestern Mutual Series Fund, Inc. International Equity Portfolio . . . . . . . . . . . . NA NA Dividend Income from Northwestern Mutual Series Fund, Inc. Select Bond Portfolio . . . . . . . . . . . . . . . . 1,251,161 1,076,427 Dividend Income from Northwestern Mutual Series Fund, Inc. High Yield Bond Portfolio . . . . . . . . . . . . . . NA NA Dividend Income from Northwestern Mutual Series Fund, Inc. Money Market Portfolio . . . . . . . . . . . . . . . . 620,178 1,290,608 Dividend Income from Northwestern Mutual Series Fund, Inc. Balanced Portfolio . . . . . . . . . . . . . . . . . . 9,729,580 10,349,670 Dividend Income from Northwestern Mutual Capital Appreciation Stock Fund, Inc. . . . . . . . . . . . . . . . 714,398 925,808 ---------- ----------- Total Income . . . . . . . . . . . . . . . . . . . . . . . 12,559,446 13,829,083 Annuity Rate and Expense Guarantees . . . . . . . . . . . . 3,496,742 2,992,492 ---------- ----------- Net Investment Income . . . . . . . . . . . . . . . . . . . $9,062,704 $10,836,591 ========== =========== Realized and Unrealized Gain (Loss) on Investments Realized Gain on Investments . . . . . . . . . . . . . . . . $ 858,030 $ 1,722,815 Unrealized Appreciation (Depreciation) of Investments During the Year . . . . . . . . . . . . . . . . . . . . . . 2,977,783 38,016,119 ----------- ----------- Net Gain (Loss) on Investments . . . . . . . . . . . . . . $3,835,813 $39,738,934 ========== ===========
** Represents operations through April 29, 1993. # Commenced operations on April 30, 1993. ## Commenced operations on May 3, 1994. See Notes to Financial Statements on page 22-23. 6 The Northwestern Mutual Life Insurance Company ---------------------------------------------- Form 10-K --------- Item 6. (continued) 6 - -------------------- Changes in Equity for NML Variable Annuity Account A for each of the five years ending December 31, follows:
1995 1994 1993 ----------- ------------ ------------ From Investment Activities Net Investment Income . . . . . . . . . . . . . . . . . . . $ 6,637,900 $ 35,703,042 $ 12,721,622 Net Realized Gain on Investments . . . . . . . . . . . . . . 13,141,169 1,687,702 2,347,432 Net Change in Unrealized Appreciation (Depreciation) of Investments . . . . . . . . . . . . . . . . . . . . . . . 76,916,515 (39,969,923) 14,612,044 ------------ ------------ ------------ Increase (Decrease) in Equity Derived from Investment Activities . . . . . . . . . . . . . . . 96,695,584 (2,579,179) 29,681,098 ------------ ------------ ------------ From Equity Transactions Contract Owners' Net Payments . . . . . . . . . . . . . . . 49,124,853 52,262,816 51,044,522 Annuity Payments . . . . . . . . . . . . . . . . . . . . . . (610,983) (603,158) (522,956) Surrenders and Other (Net) . . . . . . . . . . . . . . . . . (62,309,189) (33,008,630) (33,141,406) ------------- ------------ ------------ Increase (Decrease) in Equity Derived from Equity Transactions . . . . . . . . . . . . . . . . . . . (13,795,319) 18,651,028 17,380,160 ------------- ------------ ------------ Net Increase (Decrease) in Equity . . . . . . . . . . . . . . . . 82,900,265 16,071,849 47,061,258 Equity, Beginning of Year . . . . . . . . . . . . . . . . . . . . 386,921,162 370,849,313 323,788,055 ------------ ------------ ------------ Equity, End of Year . . . . . . . . . . . . . . . . . . . . . . . $469,821,427 $386,921,162 $370,849,313 ============ ============ ============ 1992 1991 ------------- ------------- From Investment Activities Net Investment Income . . . . . . . . . . . . . . . . . . . $ 9,062,704 $ 10,836,591 Net Realized Gain on Investments . . . . . . . . . . . . . . 858,030 1,722,815 Net Change in Unrealized Appreciation (Depreciation) of Investments . . . . . . . . . . . . . . . . . . . . . . . 2,977,783 38,016,119 ------------ ------------ Increase (Decrease) in Equity Derived from Investment Activities . . . . . . . . . . . . . . . 12,898,517 50,575,525 ------------ ------------ From Equity Transactions Contract Owners' Net Payments . . . . . . . . . . . . . . . 48,215,264 34,673,259 Annuity Payments . . . . . . . . . . . . . . . . . . . . . . (497,390) (465,807) Surrenders and Other (Net) . . . . . . . . . . . . . . . . . (27,934,737) (33,085,215) ------------ ------------ Increase (Decrease) in Equity Derived from Equity Transactions . . . . . . . . . . . . . . . . . . . 19,783,137 1,122,237 ------------ ------------ Net Increase (Decrease) in Equity . . . . . . . . . . . . . . . . 32,681,654 51,697,762 Equity, Beginning of Year . . . . . . . . . . . . . . . . . . . . 291,106,401 239,408,639 ------------ ------------ Equity, End of Year . . . . . . . . . . . . . . . . . . . . . . . $323,788,055 $291,106,401 ============ ============
See Notes to Financial Statements on page 22-23. 7 The Northwestern Mutual Life Insurance Company ---------------------------------------------- Form 10-K --------- Item 6. (continued) 7 - -------------------- Total Assets of NML Variable Annuity Account A for each of the five following years at December 31, follows:
1995 1994 1993 ------------ ------------ ------------ Assets Investments at Market Value: Northwestern Mutual Series Fund, Inc. Index 500 Stock Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . $ 62,391,687 $ 43,545,408 $ 43,534,827 Northwestern Mutual Series Fund, Inc. Growth Stock Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . 4,284,669 1,397,703## NA Northwestern Mutual Series Fund, Inc. Growth and Income Stock Portfolio . . . . . . . . . . . . . . . . . . . . . . 7,891,655 3,282,764## NA Northwestern Mutual Series Fund, Inc. Aggressive Growth Stock Portfolio . . . . . . . . . . . . . . . . . . . . . . 56,491,009 36,256,480 22,946,546 Northwestern Mutual Series Fund, Inc. International Equity Portfolio . . . . . . . . . . . . . . . . . . . . . 31,789,148 28,832,978 11,844,559# Northwestern Mutual Series Fund, Inc. Select Bond Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . 25,742,752 22,258,901 24,004,669 Northwestern Mutual Series Fund, Inc. High Yield Bond Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . 2,060,076 1,242,382## NA Northwestern Mutual Series Fund, Inc. Money Market Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . 21,556,895 20,120,832 17,036,899 Northwestern Mutual Series Fund, Inc. Balanced Portfolio . . 257,867,967 230,871,659 252,635,446 Northwestern Mutual Capital Appreciation Stock Fund, Inc. . NA NA 0** Due from NML Insurance Company . . . . . . . . . . . . . . . . . 491,572 179,152 182,546 Due from Sale of Fund Shares . . . . . . . . . . . . . . . . . . 78,037 319,392 418,356 ------------ ------------ ------------ Total Assets . . . . . . . . . . . . . . . . . . . . $470,645,467 $388,307,651 $372,603,848 ============ ============ ============ 1992 1991 ------------ ------------- Assets Investments at Market Value: Northwestern Mutual Series Fund, Inc. Index 500 Stock Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,067,703 $ 3,362,231 Northwestern Mutual Series Fund, Inc. Growth Stock Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . NA NA Northwestern Mutual Series Fund, Inc. Growth and Income Stock Portfolio . . . . . . . . . . . . . . . . . . . . . . NA NA Northwestern Mutual Series Fund, Inc. Aggressive Growth Stock Portfolio . . . . . . . . . . . . . . . . . . . . . . 13,743,522 5,435,234 Northwestern Mutual Series Fund, Inc. International Equity Portfolio . . . . . . . . . . . . . . . . . . . . . NA NA Northwestern Mutual Series Fund, Inc. Select Bond Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . 20,752,581 17,826,526 Northwestern Mutual Series Fund, Inc. High Yield Bond Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . NA NA Northwestern Mutual Series Fund, Inc. Money Market Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . 19,413,335 20,895,404 Northwestern Mutual Series Fund, Inc. Balanced Portfolio . . 233,054,698 213,724,828 Northwestern Mutual Capital Appreciation Stock Fund, Inc. . 30,340,518 30,707,321 Due from NML Insurance Company . . . . . . . . . . . . . . . . . 142,654 134,661 Due from Sale of Fund Shares . . . . . . . . . . . . . . . . . . 243,505 182,113 ------------ ------------ Total Assets . . . . . . . . . . . . . . . . . . . . $324,758,516 $292,268,318 ============ ============
** Capital Appreciation Stock Fund was merged into Index 500 Stock Fund on April 30, 1993. # Commenced operations on April 30, 1993. ## Commenced operations on May 3, 1994. See Notes to Financial Statements on page 22-23. 8 The Northwestern Mutual Life Insurance Company ---------------------------------------------- Form 10-K --------- Item 6. (continued) 8 - -------------------- Results of Operations for NML Variable Annuity Account C for each of the five years ending December 31, follows:
1995 1994 1993 ---------- ----------- ---------- Investment Income Dividend Income from Northwestern Mutual Series Fund, Inc. Index 500 Stock Portfolio . . . . . . . . . . . . . . $ 544,553 $ 2,226,240 $ 260,710 Dividend Income from Northwestern Mutual Series Fund, Inc. Growth Stock Portfolio . . . . . . . . . . . . . . . . 59,271 4,518## NA Dividend Income from Northwestern Mutual Series Fund, Inc. Growth and Income Stock Portfolio . . . . . . . . . . 276,923 19,233## NA Dividend Income from Northwestern Mutual Series Fund, Inc. Aggressive Growth Stock Portfolio . . . . . . . . . . 242,583 232,345 342,725 Dividend Income from Northwestern Mutual Series Fund, Inc. International Equity Portfolio . . . . . . . . . . . . 190,138 703,931 26,336# Dividend Income from Northwestern Mutual Series Fund, Inc. Select Bond Portfolio . . . . . . . . . . . . . . . . 395,357 1,874,182 813,051 Dividend Income from Northwestern Mutual Series Fund, Inc. High Yield Bond Portfolio . . . . . . . . . . . . . . 55,220 11,456## NA Dividend Income from Northwestern Mutual Series Fund, Inc. Money Market Portfolio . . . . . . . . . . . . . . . . 494,253 443,639 269,586 Dividend Income from Northwestern Mutual Series Fund, Inc. Balanced Portfolio . . . . . . . . . . . . . . . . . . 4,212,478 17,046,665 6,769,160 Dividend Income from Northwestern Mutual Capital Appreciation Stock Fund, Inc. . . . . . . . . . . . . . . . NA NA 1,078,208** ----------- ----------- ----------- Total Income . . . . . . . . . . . . . . . . . . . . 6,470,776 22,562,209 9,559,776 Annuity Rate and Expense Guarantees . . . . . . . . . . . . 856,764 509,648 235,930 ----------- ----------- ----------- Net Investment Income . . . . . . . . . . . . . . . . . . . $ 5,614,012 $ 22,052,561 $ 9,323,846 =========== ============ =========== Realized and Unrealized Gain (Loss) on Investments Realized Gain on Investments . . . . . . . . . . . . . . . . 9,884,364 $ 5,949,795 $ 3,670,743 Unrealized Appreciation (Depreciation) of Investments During the Year . . . . . . . . . . . . . . . . . . . . . . 53,407,857 (27,055,878) 7,227,689 ----------- ----------- ----------- Net Gain (Loss) on Investments . . . . . . . . . . . . . . . $63,292,221 $(21,106,083) $10,898,432 =========== ============ =========== 1992 1991 --------- --------- Investment Income Dividend Income from Northwestern Mutual Series Fund, Inc. Index 500 Stock Portfolio . . . . . . . . . . . . . . $ 125,787 $ 16,591 Dividend Income from Northwestern Mutual Series Fund, Inc. Growth Stock Portfolio . . . . . . . . . . . . . . . . NA NA Dividend Income from Northwestern Mutual Series Fund, Inc. Growth and Income Stock Portfolio . . . . . . . . . . NA NA Dividend Income from Northwestern Mutual Series Fund, Inc. Aggressive Growth Stock Portfolio . . . . . . . . . . 38,628 10,134 Dividend Income from Northwestern Mutual Series Fund, Inc. International Equity Portfolio . . . . . . . . . . . . NA NA Dividend Income from Northwestern Mutual Series Fund, Inc. Select Bond Portfolio . . . . . . . . . . . . . . . . 670,892 530,129 Dividend Income from Northwestern Mutual Series Fund, Inc. High Yield Bond Portfolio . . . . . . . . . . . . . . NA NA Dividend Income from Northwestern Mutual Series Fund, Inc. Money Market Portfolio . . . . . . . . . . . . . . . . 315,038 553,425 Dividend Income from Northwestern Mutual Series Fund, Inc. Balanced Portfolio . . . . . . . . . . . . . . . . . . 4,909,056 5,208,899 Dividend Income from Northwestern Mutual Capital Appreciation Stock Fund, Inc. . . . . . . . . . . . . . . . 760,962 909,722 ----------- ----------- Total Income . . . . . . . . . . . . . . . . . . . . 6,820,363 7,228,900 Annuity Rate and Expense Guarantees . . . . . . . . . . . . 80,714 34,990 ---------- ----------- Net Investment Income . . . . . . . . . . . . . . . . . . . $6,739,649 $ 7,193,910 ========== =========== Realized and Unrealized Gain (Loss) on Investments Realized Gain on Investments . . . . . . . . . . . . . . . . $ 855,374 $(363,362) Unrealized Appreciation (Depreciation) of Investments During the Year . . . . . . . . . . . . . . . . . . . . . . 1,645,252 23,238,209 ---------- ----------- Net Gain (Loss) on Investments . . . . . . . . . . . . . . . $2,500,626 $22,874,847 ========== ===========
** Represents operations through April 29, 1993. # Commenced operations on April 30, 1993. ## Commenced operations on May 3, 1994. See Notes to Financial Statements on page 31-32. 9 The Northwestern Mutual Life Insurance Company ---------------------------------------------- Form 10-K --------- Item 6. (continued) 9 - -------------------- Changes in Equity for NML Variable Annuity Account C for each of the five years ending December 31, follows:
1995 1994 1993 1992 1991 ----------- ------------ ------------ ----------- ------------- From Investment Activities Net Investment Income . . . . . . . . . . . . $ 5,614,012 $ 22,052,561 $ 9,323,846 $ 6,739,649 $ 7,193,910 Net Realized Gain (Loss) on Investments . . . 9,884,364 5,949,795 3,670,743 855,374 (363,362) Net Change in Unrealized Appreciation (Depreciation) of Investments . . . . . . . 53,407,857 (27,055,878) 7,227,689 1,645,252 23,238,209 ------------ ------------ ------------ ------------ ------------ Increase in Equity Derived from Investment Activities . . . . . . . 68,906,233 946,478 20,222,278 9,240,275 30,068,757 ------------ ------------ ------------ ------------ ------------ From Equity Transactions Contract Owners' Net Payments . . . . . . . . 59,390,267 48,709,729 39,748,661 40,797,216 20,909,006 Surrenders and Other (Net) . . . . . . . . . . 60,872,729 (26,720,946) (22,334,176) (22,756,886) (16,825,018) ------------ ------------ ----------- ----------- ------------ Increase in Equity Derived from Equity Transactions . . . . . . . . . (1,482,462) 21,988,783 17,414,485 18,040,330 4,083,988 ------------- ------------ ---------- ---------- ------------ Net Increase in Equity . . . . . . . . . . . . 67,423,771 22,935,261 37,636,763 27,280,605 34,152,745 Equity, Beginning of Year . . . . . . . . . . . 250,382,267 227,447,006 189,810,243 162,529,638 128,376,893 ------------ ------------ ------------ ------------ ------------ Equity, End of Year . . . . . . . . . . . . . . $317,806,038 $250,382,267 $227,447,006 $189,810,243 $162,529,638 ============ ============ ============ ============ ============
See Notes to Financial Statements on page 31-32. 10 The Northwestern Mutual Life Insurance Company ---------------------------------------------- Form 10-K --------- Item 6. (continued) 10 - -------------------- Total Assets of NML Variable Annuity Account C for each of the five following years at December 31, follows:
1995 1994 1993 ------------ ------------ ------------ Assets Investments at Market Value: Northwestern Mutual Series Fund, Inc. Index 500 Stock Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . $ 64,560,752 $ 45,552,429 $ 45,850,766 Northwestern Mutual Series Fund, Inc. Growth Stock Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . 2,084,697 329,792## NA Northwestern Mutual Series Fund, Inc. Growth and Income Stock Portfolio . . . . . . . . . . . . . . . . . . . . . . 4,888,505 1,159,187## NA Northwestern Mutual Series Fund, Inc. Aggressive Growth Stock Portfolio . . . . . . . . . . . . . . . . . . . . . . 57,421,016 33,266,862 21,836,950 Northwestern Mutual Series Fund, Inc. International Equity Portfolio . . . . . . . . . . . . . . . . . . . . . 30,039,223 24,647,586 3,183,126# Northwestern Mutual Series Fund, Inc. Select Bond Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . 16,281,140 14,262,125 15,071,860 Northwestern Mutual Series Fund, Inc. High Yield Bond Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . 736,774 201,656## NA Northwestern Mutual Series Fund, Inc. Money Market Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . 9,324,692 11,510,121 9,930,082 Northwestern Mutual Series Fund, Inc. Balanced Portfolio . . 132,469,239 119,452,509 131,574,218 Northwestern Mutual Capital Appreciation Stock Fund, Inc. . NA NA 0** Due from NML Insurance Company . . . . . . . . . . . . . . . . 808,493 279,107 35,475 Due from Sale of Fund Shares . . . . . . . . . . . . . . . . . 36 79,226 145,027 ------------ ------------ ------------ Total Assets . . . . . . . . . . . . . . . . . . . $318,614,567 $250,740,600 $227,627,504 ============ ============ ============ 1992 1991 ----------- ------------- Assets Investments at Market Value: Northwestern Mutual Series Fund, Inc. Index 500 Stock Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,456,402 $ 539,852 Northwestern Mutual Series Fund, Inc. Growth Stock Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . NA NA Northwestern Mutual Series Fund, Inc. Growth and Income Stock Portfolio . . . . . . . . . . . . . . . . . . . . . . NA NA Northwestern Mutual Series Fund, Inc. Aggressive Growth Stock Portfolio . . . . . . . . . . . . . . . . . . . . . . 10,964,260 634,028 Northwestern Mutual Series Fund, Inc. International Equity Portfolio . . . . . . . . . . . . . . . . . . . . . NA NA Northwestern Mutual Series Fund, Inc. Select Bond Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . 11,641,722 9,515,803 Northwestern Mutual Series Fund, Inc. High Yield Bond Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . NA NA Northwestern Mutual Series Fund, Inc. Money Market Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . 9,242,596 10,571,328 Northwestern Mutual Series Fund, Inc. Balanced Portfolio . . 118,944,619 108,009,222 Northwestern Mutual Capital Appreciation Stock Fund, Inc. . $33,555,890 $ 33,259,405 Due from NML Insurance Company . . . . . . . . . . . . . . . . 23,303 72,757 Due from Sale of Fund Shares . . . . . . . . . . . . . . . . . 32,679 224,529 ------------ ------------ Total Assets . . . . . . . . . . . . . . . . . . . $189,861,471 $162,826,924 ============ ============
** Capital Appreciation Stock Fund was merged into Index 500 Stock Fund on April 30, 1993. # Commenced operations on April 30, 1993. ## Commenced operations on May 3, 1994. See Notes to Financial Statements on page 31-32. Item 7 is on page 11. 11 The Northwestern Mutual Life Insurance Company ---------------------------------------------- Form 10-K --------- Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - ------------------------------------------------------------------------ (a) Liquidity --------- The assets of the Northwestern Mutual Life Insurance Company Variable Annuity Accounts A and C are invested solely in shares of Northwestern Mutual Series Fund, Inc. Index 500 Stock Portfolio, Northwestern Mutual Series Fund, Inc. Aggressive Growth Stock Portfolio, Northwestern Mutual Series Fund, Inc. International Equity Portfolio, Northwestern Mutual Series Fund, Inc. Select Bond Portfolio, Northwestern Mutual Series Fund, Inc. Money Market Portfolio, Northwestern Mutual Series Fund, Inc. Balanced Portfolio, Northwestern Mutual Series Fund, Inc. Growth Stock Portfolio, Northwestern Mutual Series Fund, Inc. Growth and Income Stock Portfolio, and Northwestern Mutual Series Fund, Inc. High Yield Bond Portfolio (the "Funds"). The Funds are open-end investment companies registered under the Investment Act of 1940. In order to pay annuity benefits and expenses, the Accounts redeem shares in these Funds. The registrant's liquidity is not expected to change in a material way. (b) Capital Resources ----------------- All payments from contract owners of NML Variable Annuity Accounts A and C are invested in shares of the Funds. The capital resources of NML Variable Annuity Accounts A and C are the equity in the respective Accounts. This consists of payments from the contract owners, plus unrealized and realized appreciation on the investment of these payments, plus investment income received from the Funds, minus payment of annuity benefits and expenses. (c) Results of Operations --------------------- NML Variable Annuity Account A ------------------------------ Accumulation Unit Values Contracts Issued Prior to December 17, 1981:
Division 12/31/95 % of Change 12/31/94 % of Change 12/31/93 -------- -------- ----------- -------- ----------- --------- Index 500 Stock . . . . . . $2.042204 36.23% $1.499054 0.44% $1.492479 Growth Stock . . 1.310823 29.85% 1.009479 NA NA Growth and Income Stock . . . . . . 1.298065 30.15% 0.997398 NA NA Aggressive Growth Stock . . 2.813200 38.26% 2.034747 4.62 1.944869 International Equity . . . . . 1.398467 13.72% 1.229716 -0.84 1.240162 Select Bond . . . 6.519655 18.21% 5.515295 -3.56 5.718625 High Yield Bond . 1.188188 15.91% 1.025095 NA NA Money Market . . . . . 2.311989 5.04% 2.201139 3.28 2.131174 Balanced . . . . 4.600659 25.45% 3.667322 -0.76 3.695395
11 12 The Northwestern Mutual Life Insurance Company ---------------------------------------------- Form 10-K --------- Item 7. (Continued) - -------------------- Accumulation Unit Values Contracts Issued On or After December 17, 1981 and before March 31, 1995:
Division 12/31/95 % of Change 12/31/94 % of Change 12/31/93 -------- -------- ----------- -------- ----------- --------- Index 500 Stock . . . . . . $1.991330 35.56% $1.469006 -0.06% $1.469874 Growth Stock . . 1.299976 29.20% 1.006136 0.72# NA Growth and Income Stock . . . . . . 1.287355 29.50% 0.994105 -0.49# NA Aggressive Growth Stock . . 2.743106 37.57% 1.993956 4.10 1.915415 International Equity . . . . . 1.379966 13.16% 1.219510 -1.34 1.236014 Select Bond . . . 6.077689 17.62% 5.167101 -4.04 5.384388 High Yield Bond . 1.178371 15.33% 1.021705 2.17# NA Money Market . . . . . 2.155845 4.51% 2.062740 2.77 2.007152 Balanced . . . . 4.289623 24.83% 3.436463 -1.25 3.480091
Accumulation Unit Values Contracts Issued On or After March 31, 1995: Front Load Version
Division 12/31/95 % of Change 3/31/95 -------- -------- ----------- ------- Index 500 Stock . . . . . . . . . . . . $1.249114 24.91% $1.000000 Growth Stock . . . . . . . . 1.208718 20.87% 1.000000 Growth and Income Stock . . . 1.196596 19.66% 1.000000 Aggressive Growth Stock . . . . . . . . 1.305186 30.52% 1.000000 International Equity . . . . 1.140398 14.04% 1.000000 Select Bond . . . . . . . . . 1.128765 12.88% 1.000000 High Yield Bond . . . . . . . 1.111614 11.16% 1.000000 Money Market . . . . . . . . 1.040089 4.01% 1.000000 Balanced . . . . . . . . . . 1.180953 18.10% 1.000000
# Growth Stock, Growth and Income Stock, and High Yield Bond Divisions began operations on May 3, 1994. The percentage change in unit value reflects performance from May 3, 1994. 12 13 The Northwestern Mutual Life Insurance Company ---------------------------------------------- Form 10-K --------- Accumulation Unit Values Contracts Issued On or After March 31, 1995: Back Load Version
Division 12/31/95 % of Change 3/31/95 -------- -------- ----------- ------- Index 500 Stock . . . . . . . $1.991330 24.12% $1.604306 Growth Stock . . . . . . . . 1.299976 20.11% 1.082329 Growth and Income Stock . . . 1.287355 18.91% 1.082672 Aggressive Growth Stock . . . . . . . . 2.743106 29.69% 2.115045 International Equity . . . . 1.379966 13.32% 1.217764 Select Bond . . . . . . . . . 6.077689 12.16% 5.418578 High Yield Bond . . . . . . . 1.178371 10.46% 1.066782 Money Market . . . . . . . . 2.155845 3.35% 2.085911 Balanced . . . . . . . . . . 4.289623 17.35% 3.655399
Equity: 12/31/95 12/31/94 12/31/93 ------------ ------------ ------------- $469,821,427 $386,921,162 $370,849,313
The change in equity for each period is largely derived from investment activities within the Account: A $29,681,098 increase for the year ended December 31, 1993, a $2,579,179 decrease for the year ended December 31, 1994, and a $96,695,584 increase for the year ended December 31, 1995. Net contributions (surrenders)from contract owners amounted to $17,380,160 for the year ended December 31, 1993, $18,651,028 for the year ended December 31, 1994, and $(13,795,319) for the year ended December 31, 1995. NML Variable Annuity Account C ------------------------------ Accumulation Unit Values Contracts Issued Prior to December 17, 1981 or between April 30, 1984 and December 31, 1991:
Division 12/31/95 % of Change 12/31/94 % of Change 12/31/93 -------- -------- ----------- -------- ----------- --------- Index 500 Stock . . . . . . $22.104982 37.25% $16.105431 1.19% $15.915672 Growth Stock . . 13.271899 30.82% 10.144941 NA NA Growth and Income Stock . . . . . . 13.142782 31.12% 10.023581 NA NA Aggressive Growth Stock . . 27.648691 39.29% 19.849331 5.40 18.831519 International Equity . . . . . 1.426613 14.57% 1.245144 -0.10 1.246391 Select Bond . . . 74.222515 19.10% 62.322013 -2.83 64.139096 High Yield Bond . 12.030416 16.78% 10.301956 NA NA Money Market . . 24.705630 5.82% 23.346279 4.06 22.436170 Balanced . . . . 51.855817 26.39% 41.028821 -0.02 41.035637
13 14 The Northwestern Mutual Life Insurance Company ---------------------------------------------- Form 10-K --------- Item 7. (Continued) - -------------------- Accumulation Unit Values Contracts Issued On or After December 17, 1981 or before May 1, 1984:
Division 12/31/95 % of Change 12/31/94 % of Change 12/31/93 -------- -------- ----------- -------- ----------- --------- Index 500 Stock . . . . . . $21.564611 36.57% $15.790165 0.69% $15.682112 Growth Stock . . 13.162242 30.17% 10.111365 NA NA Growth and Income Stock . . . . . . 13.034162 30.47% 9.990409 NA NA Aggressive Growth Stock . . 26.975930 38.60% 19.463084 4.88 18.557389 International Equity . . . . . 1.407741 14.00% 1.234814 -0.60 1.242224 Select Bond . . . 69.192181 18.50% 58.388451 -3.32 60.391333 High Yield Bond . 11.931003 16.20% 10.267863 NA NA Money Market . . . . . 23.069838 5.30% 21.909448 3.54 21.160586 Balanced . . . . 48.364840 25.76% 38.457844 -0.51 38.656514
Accumulation Unit Values Contracts Issued After December 31, 1991 - Front Load Version:
Division 12/31/95 % of Change 12/31/94 % of Change 12/31/93 -------- -------- ----------- -------- ----------- --------- Index 500 Stock . . . . . . $1.588496 36.37% $1.164877 0.54% $1.158630 Growth Stock . . 1.312966 29.98% 1.010139 1.12# NA Growth and Income Stock . . . . . . 1.300190 30.27% 0.998049 -0.09# NA Aggressive Growth Stock . . 1.776871 38.39% 1.283916 4.72 1.225992 International Equity . . . . . 1.402156 13.83% 1.231747 -0.74 1.240984 Select Bond . . . 1.334934 18.33% 1.128176 -3.46 1.168610 High Yield Bond . 1.190149 16.02% 1.025776 2.58# NA Money Market . . . . . 1.139693 5.14% 1.083976 3.38 1.048486 Balanced . . . . 1.419325 25.57% 1.130270 -0.66 1.137808
# Growth Stock, Growth and Income Stock, and High Yield Bond Divisions began operations on May 3, 1994. The percentage change in unit value reflects performance from May 3, 1994. 14 15 The Northwestern Mutual Life Insurance Company ---------------------------------------------- Form 10-K --------- Item 7. (Continued) - -------------------- Accumulation Unit Values Contracts Issued After December 31, 1991 - Simplified Load Version:
Division 12/31/95 % of Change 12/31/94 % of Change 12/31/93 -------- -------- ----------- -------- ----------- --------- Index 500 Stock . . . . . . $2.031929 35.56% $1.498956 -0.06% $1.499839 Growth Stock . . 1.299976 29.20% 1.006136 0.72# NA Growth and Income Stock . . . . . . 1.287355 29.50% 0.994105 -0.49# NA Aggressive Growth Stock . . 2.753170 37.57% 2.001269 4.10 1.922432 International Equity . . . . . 1.379966 13.16% 1.219510 -1.34 1.236014 Select Bond . . . 6.136911 17.62% 5.217451 -4.04 5.436859 High Yield Bond . 1.178371 15.33% 1.021705 2.17# NA Money Market . . . . . 2.160533 4.51% 2.067227 2.77 2.011515 Balanced . . . . 4.310821 24.83% 3.453452 -1.25 3.497296
# Growth Stock, Growth and Income Stock, and High Yield Bond Divisions began operations on May 3, 1994. The percentage change in unit value reflects performance from May 3, 1994.
Equity: 12/31/95 12/31/94 12/31/93 ------------ ------------- ------------- $317,806,038 $250,382,267 $227,447,006
The change in equity for each period is largely derived from investment activities within the Account: A $20,222,278 increase for the year ended December 31, 1993, a $946,478 increase for the year ended December 31, 1994, and a $68,906,233 increase for the year ended December 31, 1995. Net contributions (surrenders) from contract owners amounted to $17,414,485 for the year ended December 31, 1993, $21,988,786 for the year ended December 31, 1994, and $(1,482,462) for the year ended December 31, 1995. Item 8 is on page 16. 15 16 The Northwestern Mutual Life Insurance Company ---------------------------------------------- Form 10-K --------- Item 8. Financial Statements and Supplementary Data - ---------------------------------------------------- NML VARIABLE ANNUITY ACCOUNT A STATEMENT OF ASSETS AND LIABILITIES
December 31 ----------------------------------------- Assets 1995 1994 ----------------- ----------------- Investments at market value: Northwestern Mutual Series Fund, Inc. Index 500 Stock 1995: 36,232,106 shares (cost $43,680,571) . . . . . . . . $ 62,391,687 1994: 34,368,909 shares (cost $38,780,500) . . . . . . . . $ 43,545,408 Growth Stock 1995: 3,392,454 shares (cost $3,733,506) . . . . . . . . . 4,284,669 1994: 1,399,102 shares (cost $1,416,993) . . . . . . . . . 1,397,703# Growth and Income Stock 1995: 6,516,643 shares (cost $7,030,408) . . . . . . . . . 7,891,655 1994: 3,336,143 shares (cost $3,370,077) . . . . . . . . . 3,282,764# Aggressive Growth Stock 1995: 20,408,602 shares (cost $38,233,857) . . . . . . . . 56,491,009 1994: 18,137,309 shares (cost $31,258,735) . . . . . . . . 36,256,480 International Equity 1995: 23,460,626 shares (cost $28,902,664) . . . . . . . . 31,789,148 1994: 24,209,050 shares (cost $29,098,682) . . . . . . . . 28,832,978 Select Bond 1995: 20,963,153 shares (cost $24,227,622) . . . . . . . . 25,742,752 1994: 21,018,792 shares (cost $24,040,140) . . . . . . . . 22,258,901 High Yield Bond 1995: 2,007,871 shares (cost $2,071,600) . . . . . . . . . 2,060,076 1994: 1,279,487 shares (cost $1,296,099) . . . . . . . . . 1,242,382# Money Market 1995: 21,556,895 shares (cost $21,556,895) . . . . . . . . 21,556,895 1994: 20,120,832 shares (cost $20,120,832) . . . . . . . . 20,120,832 Balanced 1995: 160,765,565 shares (cost $209,057,927) . . . . . . . 257,867,967 1994: 175,835,231 shares (cost $223,762,756) . . . . . . . 230,871,659 ------------ ------------- 470,075,858 387,809,107 Due from Sales of Fund Shares . . . . . . . . . . . . . . . . . . . . . 78,037 319,392 Due from Northwestern Mutual Life Insurance Company . . . . . . . . . . 491,572 179,152 ------------ ------------- Total Assets . . . . . . . . . . . . . . . . . . . . . . . . $470,645,467 $ 388,307,651 ============ ============= Liabilities Due to Participants . . . . . . . . . . . . . . . . . . . . . . . . . . $ 254,431 $ 887,944 Due to Northwestern Mutual Life Insurance Company . . . . . . . . . . . 78,037 319,392 Due from Purchase of Fund Shares . . . . . . . . . . . . . . . . . . . . 491,572 179,153 ------------ ------------- Total Liabilities . . . . . . . . . . . . . . . . . . . . . $ 824,040 $ 1,386,489 ============ =============
# Growth Stock, Growth and Income Stock, and High Yield Bond Portfolios began operations on May 3, 1994. The Accompanying Notes are an Integral Part of the Financial Statements. 16 17 The Northwestern Mutual Life Insurance Company ---------------------------------------------- Form 10-K --------- Item 8. (Continued) - -------------------- NML VARIABLE ANNUITY ACCOUNT A STATEMENT OF ASSETS AND LIABILITIES
December 31 -------------------------------------- Equity 1995 1994 -------------- -------------- Contracts Issued Prior to December 17, 1981: Index 500 Stock Division 1995: 10,111,615 Accumulation Units @ 2.042204 . . . . . . . . $20,649,980 1994: 10,735,943 Accumulation Units @ 1.499054 . . . . . . . . $16,093,758 Annuity Reserves . . . . . . . . . . . . . . . . . . . . . . . . 1,273,520 968,816 ------------ ------------ 21,923,500 17,062,574 ------------ ------------ Growth Stock Division 1995: 1,782 Accumulation Units @ 1.310823 . . . . . . . . . . . 2,336 1994: NA . . . . . . . . . . . . . . . . . . . . . . . . . . . Annuity Reserves . . . . . . . . . . . . . . . . . . . . . . . . 0 ------------ 2,336 ------------ Growth and Income Stock Division 1995: 9,498 Accumulation Units @ 1.298065 . . . . . . . . . . . 12,329 1994: NA . . . . . . . . . . . . . . . . . . . . . . . . . . . Annuity Reserves: . . . . . . . . . . . . . . . . . . . . . . . 29,486 ------------ 41,815 ------------ Aggressive Growth Stock Division 1995: 861,229 Accumulation Units @ 2.813200 . . . . . . . . . . 2,422,811 1994: 805,409 Accumulation Units @ 2.034747 . . . . . . . . . . 1,638,804 Annuity Reserves . . . . . . . . . . . . . . . . . . . . . . . . 74,993 62,282 ------------ ------------ 2,497,804 1,701,086 ------------ ------------ International Equity Division 1995: 1,166,796 Accumulation Units @ 1.398467 . . . . . . . . . 1,631,726 1994: 1,529,309 Accumulation Units @ 1.229716 . . . . . . . . . 1,880,616 Annuity Reserves . . . . . . . . . . . . . . . . . . . . . . . . 2,889 138,516 ------------ ----------- 1,634,615 2,019,132 ------------ ----------- Select Bond Division 1995: 1,172,420 Accumulation Units @ 6.519655 . . . . . . . . . 7,643,772 1994: 1,266,751 Accumulation Units @ 5.515295 . . . . . . . . . 6,986,505 Annuity Reserves . . . . . . . . . . . . . . . . . . . . . . . . 244,850 91,757 ------------ ------------ 7,888,622 7,078,262 ------------ ------------ High Yield Bond Division 1995: 0 Accumulation Units @ 1.188188 . . . . . . . . . . . . . 0 1994: NA . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 ------------ Annuity Reserves . . . . . . . . . . . . . . . . . . . . . . . . 0 ------------ Money Market Division 1995: 1,264,988 Accumulation Units @ 2.311989 . . . . . . . . . 2,924,637 1994: 1,020,911 Accumulation Units @ 2.201139 . . . . . . . . . 2,247,166 Annuity Reserves . . . . . . . . . . . . . . . . . . . . . . . . 63,276 65,330 ------------ ------------ 2,987,913 2,312,496 ------------ ------------ Balanced Division 1995: 5,651,599 Accumulation Units @ 4.600659 . . . . . . . . . 26,001,081 1994: 6,525,821 Accumulation Units @ 3.667322 . . . . . . . . . 23,932,287 Annuity Reserves . . . . . . . . . . . . . . . . . . . . . . . . 1,442,962 1,106,121 ------------ ------------ 27,444,043 25,038,408 ------------ ------------
The Accompanying Notes are an Integral Part of the Financial Statements. 17 18 The Northwestern Mutual Life Insurance Company ---------------------------------------------- Form 10-K --------- Item 8. (Continued) - -------------------- NML VARIABLE ANNUITY ACCOUNT A STATEMENT OF ASSETS AND LIABILITIES
December 31 -------------------------------------- Equity (Cont'd.) 1995 1994 -------------- -------------- Contracts Issued On or After December 17, 1981 and Before March 31, 1995: Index 500 Stock Division 1995: 18,961,291 Accumulation Units @ 1.991330 . . . . . . . . $37,758,187 1994: 17,624,809 Accumulation Units @ 1.469006 . . . . . . . . $25,890,950 Annuity Reserves . . . . . . . . . . . . . . . . . . . . . . . . 1,340,376 408,085 ----------- ----------- 39,098,563 26,299,035 ----------- ----------- Growth Stock Division 1995: 2,970,905 Accumulation Units @ 1.299976 . . . . . . . . . 3,862,105 1994: 1,311,686 Accumulation Units @ 1.006136 . . . . . . . . . 1,319,734# Annuity Reserves . . . . . . . . . . . . . . . . . . . . . . . . 0 0 ----------- ----------- 3,862,105 1,319,734 ----------- ----------- Growth and Income Stock Division 1995: 5,605,215 Accumulation Units @ 1.287355 . . . . . . . . . 7,215,902 1994: 3,129,287 Accumulation Units @ 0.994105 . . . . . . . . 3,110,840# Annuity Reserves: . . . . . . . . . . . . . . . . . . . . . . . 160,662 135,766 ----------- ----------- 7,376,564 3,246,606 ----------- ----------- Aggressive Growth Stock Division 1995: 19,083,707 Accumulation Units @ 2.743106 . . . . . . . . 52,348,631 1994: 17,290,856 Accumulation Units @ 1.993956 . . . . . . . . 34,477,207 Annuity Reserves . . . . . . . . . . . . . . . . . . . . . . . . 167,625 131,188 ----------- ----------- 52,516,256 34,608,395 ----------- ----------- International Equity Division 1995: 21,338,268 Accumulation Units @ 1.379966 . . . . . . . . 29,446,084 1994: 21,538,113 Accumulation Units @ $1.219510 . . . . . . . . 26,265,944 Annuity Reserves . . . . . . . . . . . . . . . . . . . . . . . . 153,834 367,271 ----------- ----------- 29,599,918 26,633,215 ----------- ----------- Select Bond Division 1995: 2,778,441 Accumulation Units @ 6.077689 . . . . . . . . . 16,886,499 1994: 2,923,557 Accumulation Units @ 5.167101 . . . . . . . . . 15,106,314 Annuity Reserves . . . . . . . . . . . . . . . . . . . . . . . . 597,617 74,325 ----------- ----------- 17,484,116 15,180,639 ----------- ----------- High Yield Bond Division 1995: 1,609,770 Accumulation Units @ 1.178371 . . . . . . . . . 1,896,907 1995: 1,215,989 Accumulation Units @ 1.021705 . . . . . . . . . 1,242,382# Annuity Reserves . . . . . . . . . . . . . . . . . . . . . . . . 0 0 ----------- ----------- 1,896,907 1,242,382 ----------- ----------- Money Market Division 1995: 7,896,022 Accumulation Units @ 2.155845 . . . . . . . . . 17,022,599 1994: 8,608,326 Accumulation Units @ 2.062740 . . . . . . . . . 17,756,738 Annuity Reserves . . . . . . . . . . . . . . . . . . . . . . . . 387,730 51,598 ----------- ----------- 17,410,329 17,808,336 ----------- ----------- Balanced Division 1995: 52,575,295 Accumulation Units @ 4.289623 . . . . . . . . 225,528,193 1994: 59,200,252 Accumulation Units @ 3.436463 . . . . . . . . 203,439,477 Annuity Reserves . . . . . . . . . . . . . . . . . . . . . . . . 2,924,538 1,931,385 ----------- ----------- 228,452,731 205,370,862 ----------- -----------
# Growth Stock, Growth and Income Stock, and High Yield Bond Divisions began operations on May 3, 1994. The Accompanying Notes are an Integral Part of the Financial Statements. 18 19 The Northwestern Mutual Life Insurance Company ---------------------------------------------- Form 10-K --------- Item 8. (Continued) - -------------------- NML VARIABLE ANNUITY ACCOUNT A STATEMENT OF ASSETS AND LIABILITIES
December 31 Equity (Cont'd.) 1995 -------------- Contracts Issued On or After March 31, 1995 - Back Load Version: Index 500 Stock Division 1995: 471,752 Accumulation Units @ 1.991330 . . . . . . . . . . $939,414 Annuity Reserves . . . . . . . . . . . . . . . . . . . . . . . . 0 ---------- 939,414 ---------- Growth Stock Division 1995: 227,218 Accumulation Units @ 1.299976 . . . . . . . . . . 295,378 Annuity Reserves . . . . . . . . . . . . . . . . . . . . . . . . 0 ---------- 295,378 ---------- Growth and Income Stock Division 1995: 310,321 Accumulation Units @ 1.287355 . . . . . . . . . . 399,493 Annuity Reserves: . . . . . . . . . . . . . . . . . . . . . . . 0 ---------- 399,493 ---------- Aggressive Growth Stock Division 1995: 407,729 Accumulation Units @ 2.743106 . . . . . . . . . . 1,118,443 Annuity Reserves . . . . . . . . . . . . . . . . . . . . . . . . 0 ---------- 1,118,443 ---------- International Equity Division 1995: 374,986 Accumulation Units @ 1.379966 . . . . . . . . . . 517,469 Annuity Reserves . . . . . . . . . . . . . . . . . . . . . . . . 0 ---------- 517,469 ---------- Select Bond Division 1995: 50,828 Accumulation Units @ 6.077689 . . . . . . . . . . 308,917 Annuity Reserves . . . . . . . . . . . . . . . . . . . . . . . . 0 ---------- 308,917 ---------- High Yield Bond Division 1995: 138,470 Accumulation Units @ 1.178371 . . . . . . . . . . 163,170 Annuity Reserves . . . . . . . . . . . . . . . . . . . . . . . . 0 ---------- 163,170 ---------- Money Market Division 1995: 379,473 Accumulation Units @ 2.155845 . . . . . . . . . . 818,085 Annuity Reserves . . . . . . . . . . . . . . . . . . . . . . . . 0 ---------- 818,085 ---------- Balanced Division 1995: 372,457 Accumulation Units @ 4.289623 . . . . . . . . . . 1,597,701 Annuity Reserves . . . . . . . . . . . . . . . . . . . . . . . . 0 ---------- 1,597,701 ----------
The Accompanying Notes are an Integral Part of the Financial Statements. 19 20 The Northwestern Mutual Life Insurance Company ---------------------------------------------- Form 10-K --------- Item 8. (Continued) - -------------------- NML VARIABLE ANNUITY ACCOUNT A STATEMENT OF ASSETS AND LIABILITIES
December 31 -------------- Equity (Cont'd.) 1995 -------------- Contracts Issued On or After March 31, 1995 - Front Load Version: Index 500 Stock Division 1995: 278,235 Accumulation Units @ 1.249114 . . . . . . . . . . $347,547 Annuity Reserves . . . . . . . . . . . . . . . . . . . . . . . . 0 ------------ 347,547 ------------ Growth Stock Division 1995: 103,292 Accumulation Units @ 1.208718 . . . . . . . . . . 124,851 Annuity Reserves . . . . . . . . . . . . . . . . . . . . . . . . 0 ------------ 124,851 ------------ Growth and Income Stock Division 1995: 114,414 Accumulation Units @ 1.196596 . . . . . . . . . . 136,908 Annuity Reserves: . . . . . . . . . . . . . . . . . . . . . . . 0 ------------ 136,908 ------------ Aggressive Growth Stock Division 1995: 255,895 Accumulation Units @ 1.305186 . . . . . . . . . . 333,991 Annuity Reserves . . . . . . . . . . . . . . . . . . . . . . . . 0 ------------ 333,991 ------------ International Equity Division 1995: 32,573 Accumulation Units @ 1.140398 . . . . . . . . . . 37,146 Annuity Reserves . . . . . . . . . . . . . . . . . . . . . . . . 0 ------------ 37,146 ------------ Select Bond Division 1995: 26,732 Accumulation Units @ 1.128765 . . . . . . . . . . 30,174 Annuity Reserves . . . . . . . . . . . . . . . . . . . . . . . . 0 ------------ 30,174 ------------ High Yield Bond Division 1995: 0 Accumulation Units @ 1.111614 . . . . . . . . . . . . . 0 Annuity Reserves . . . . . . . . . . . . . . . . . . . . . . . . 0 ------------ 0 ------------ Money Market Division 1995: 327,441 Accumulation Units @ 1.040089 . . . . . . . . . . 340,569 Annuity Reserves . . . . . . . . . . . . . . . . . . . . . . . . 0 ------------ 340,569 ------------ Balanced Division 1995: 164,303 Accumulation Units @ 1.180953 . . . . . . . . . . 194,034 Annuity Reserves . . . . . . . . . . . . . . . . . . . . . . . . 0 ------------ 194,034 ------------ Total Equity . . . . . . . . . . . . . . . . . . . . . . . . 469,821,427 ------------ Total Liabilities and Equity . . . . . . . . . . . . . . . . 470,645,467 ============
The Accompanying Notes are an Integral Part of the Financial Statements. 20 21 The Northwestern Mutual Life Insurance Company ---------------------------------------------- Form 10-K --------- Item 8. (continued) - -------------------- NML VARIABLE ANNUITY ACCOUNT A COMBINED STATEMENT OF OPERATIONS AND CHANGES IN EQUITY For the Years Ended December 31
1995 1994 1993 -------------- -------------- -------------- Investment Income Dividend Income . . . . . . . . . . . . . . . . . . . . . . . . $ 11,709,964 $ 40,169,184 $ 16,795,751 Annuity Rate and Expense Guarantees . . . . . . . . . . . . . . 5,072,064 4,466,142 4,074,129 ------------ ------------ ------------ Net Investment Income . . . . . . . . . . . . . . . . . . . . . 6,637,900 35,703,042 12,721,622 ------------ ------------ ------------ Realized and Unrealized Gain on Investments Net Realized Gain on Investments . . . . . . . . . . . . . . . . 13,141,169 1,687,702 2,347,432 Unrealized Appreciation (Depreciation) During the Year . . . . . 76,916,515 (39,969,923) 14,612,044 ------------ ----------- ------------ Net Gain (Loss) on Investments . . . . . . . . . . . . . . . . . 90,057,684 (38,282,221) 16,959,476 ------------ ----------- ------------ Increase (Decrease) in Equity Derived from Investment Activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96,695,584 ( 2,579,179) 29,681,098 ------------ ----------- ------------ Equity Transactions Contract Owners' Net Payments . . . . . . . . . . . . . . . . . 49,124,853 52,262,816 51,044,522 Annuity Payments . . . . . . . . . . . . . . . . . . . . . . . . (610,983) (603,158) (522,956) Surrenders and Other (Net) . . . . . . . . . . . . . . . . . . . (62,309,189) (33,008,630) (33,141,406) ------------- ----------- ----------- Increase (Decrease) in Equity Derived from Equity Transactions . . . . (13,795,319) 18,651,028 17,380,160 ------------- ------------ ------------ Net Increase in Equity . . . . . . . . . . . . . . . . . . . . . . . 82,900,265 16,071,849 47,061,258 Equity, Beginning of Year . . . . . . . . . . . . . . . . . . . . . . 386,921,162 370,849,313 323,788,055 ------------ ------------ ------------ Equity, End of Year . . . . . . . . . . . . . . . . . . . . . . . . . $469,821,427 $386,921,162 $370,849,313 ============ ============ ============
The Accompanying Notes are an Integral Part of the Financial Statements. 21 22 The Northwestern Mutual Life Insurance Company ---------------------------------------------- Form 10-K --------- Item 8. (continued) - -------------------- NML VARIABLE ANNUITY ACCOUNT A NOTES TO FINANCIAL STATEMENTS Note 1--NML Variable Annuity Account A (the "Account") is a segregated asset account of The Northwestern Mutual Life Insurance Company ("Northwestern Mutual Life") used to fund variable annuity contracts ("contracts") for HR-10 and corporate pension and profit-sharing plans which qualify for special tax treatment under the Internal Revenue Code. Beginning March 31, 1995, two versions of the contract are offered: Front Load contracts with a sales charge up to 4% of purchase payments and Back Load contracts with a withdrawal charge of 0-8%. Note 2--The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Principal accounting policies are summarized below. Note 3--All assets of each Division of the Account are invested in shares of the corresponding Portfolio of Northwestern Mutual Series Fund, Inc. (the "Fund"). The shares are valued at the Fund's offering and redemption price per share. On May 3, 1994, five new portfolios commenced operations in the Fund: Aggressive Growth Stock Portfolio (formerly Northwestern Mutual Aggressive Growth Stock Fund, Inc.), International Equity Portfolio (formerly Northwestern Mutual International Equity Fund, Inc.), Growth Stock Portfolio, Growth and Income Stock Portfolio and High Yield Bond Portfolio. Additionally, on May 3, 1994, the assets of Northwestern Mutual Life's Variable Annuity funds were merged into the respective portfolio of the Fund in a tax-free exchange of shares. The Fund is an open-end investment company registered under the Investment Company Act of 1940. Note 4--Annuity reserves are based on published annuity tables with age adjustment and benefit payments which reflect actual investment experience. For variable payment plans issued prior to January 1, 1974, annuity reserves are based on the 1955 American Annuity Table with assumed interest rates of 3%, 3 1/2% or 5%. For variable payment plans issued on or after January 1, 1974 and before January 1, 1985, annuity reserves are based on the 1971 Individual Annuity Table with assumed interest rates of 3 1/2% or 5%. For variable payment plans issued on or after January 1, 1985, annuity reserves are based on the 1983 Table a with assumed interest rates of 3 1/2% or 5%. Note 5--Dividend income from the Fund is recorded on the record date of the dividends. Transactions in Fund shares are accounted for on the trade date. The basis for determining cost on sale of Fund shares is identified cost. Purchases and sales of Fund shares for the years ended December 31 by each Division are shown below:
Purchases 1995 1994 1993 --------- ---- ---- ---- Index 500 Stock Division $ 7,998,931 $ 7,554,309 $ 6,134,062 Growth Stock Division 2,702,664 1,651,267 NA Growth & Income Stock Division 4,147,264 3,579,504 NA Aggressive Growth Division 10,658,292 14,415,626 7,893,190 International Equity Division 4,305,567 19,932,991 11,153,221 Select Bond Division 3,837,930 5,853,201 6,544,510 High Yield Bond Division 1,411,373 1,328,717 NA Money Market Division 14,421,123 12,836,216 6,403,121 Balanced Division 14,258,034 42,118,207 29,474,025 Capital Appreciation Stock Division NA NA 2,003,721 Sales ----- Index 500 Stock Division 5,165,148 5,927,056 3,570,219 Growth Stock Division 427,690 236,591 NA Growth & Income Stock Division 576,160 214,192 NA Aggressive Growth Division 5,672,013 2,578,041 1,772,409 International Equity Division 5,324,662 1,723,339 638,412 Select Bond Division 3,928,823 3,922,478 4,086,328 High Yield Bond Division 673,375 32,399 NA Money Market Division 12,987,931 9,752,283 8,779,557 Balanced Division 36,790,058 30,795,275 19,075,952 Capital Appreciation Stock Division NA NA 1,011,862
22 23 The Northwestern Mutual Life Insurance Company ---------------------------------------------- Form 10-K --------- Item 8. (continued) - -------------------- NML VARIABLE ANNUITY ACCOUNT A NOTES TO FINANCIAL STATEMENTS Note 6--On April 30, 1993, Northwestern Mutual Capital Appreciation Stock Fund was merged into the Northwestern Mutual Index 500 Stock Fund in a tax-free exchange of fund shares. 21,689,286 shares of Northwestern Mutual Capital Appreciation Stock Fund, Inc. were exchanged for 22,749,651 shares of Northwestern Mutual Index 500 Stock Fund, Inc. The shares exchanged were valued at $30,719,638 for each Division. Note 7--A deduction for annuity rate and expense guarantees is determined daily and paid to Northwestern Mutual Life as compensation for assuming the risk that annuity payments will continue for longer periods than anticipated because the annuitants as a group live longer than expected, and the risk that the charges made by Northwestern Mutual Life may be insufficient to cover the actual costs incurred in connection with the contracts. For contracts issued on or after March 31, 1995, for the Front Load version and the Back Load version, the deduction for annuity rate and expense guarantees is determined daily at annual rates of 4/10 of 1% and 1 1/4%, respectively, of the net assets of each Division attributable to these contracts and is paid to Northwestern Mutual Life. For these contracts, the rates may be increased or decreased by the Board of Trustees of Northwestern Mutual Life not to exceed 3/4 of 1% and 1 1/2%, respectively. For contracts issued on or after December 17, 1981 and before March 31, 1995, the deduction is at an annual rate of 1 1/4% of the net assets of each Division attributable to these contracts. For these contracts, the rate may be increased or decreased by the Board of Trustees of Northwestern Mutual Life not to exceed a 1 1/2% annual rate. For contracts issued prior to December 17, 1981, the deduction is at an annual rate of 3/4 of 1% of the net assets of each Division attributable to these contracts. For these contracts, the rate may be increased or decreased by the Board of Trustees of Northwestern Mutual Life not to exceed a 1% annual rate. Beginning in 1995, Northwestern Mutual Life paid a dividend to certain contracts. The dividend was reinvested in the Account and has been reflected as a Contract Owners' Net Payment in the accompanying financial statements. Note 8--Northwestern Mutual Life is taxed as a "life insurance company" under the Internal Revenue Code and the operations of the Account form a part of and are taxed with those of Northwestern Mutual Life. Under current law, no federal income taxes are payable with respect to the Account. Accordingly, no provision for any such liability has been made. 23 24 Price Waterhouse LLP Letterhead REPORT OF INDEPENDENT ACCOUNTANTS To The Northwestern Mutual Life Insurance Company and Contract Owners of NML Variable Annuity Account A In our opinion, the statements appearing on pages 16 through 23 present fairly, in all material respects, the financial position of NML Variable Annuity Account A at December 31, 1995 and 1994, and the results of its operations and the changes in its equity for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. These financial statements are the responsibility of The Northwestern Mutual Life Insurance Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. Price Waterhouse LLP Milwaukee, Wisconsin January 24, 1996 24 25 The Northwestern Mutual Life Insurance Company ---------------------------------------------- Form 10-K --------- Item 8. (continued) Financial Statements and Supplementary Data - -------------------------------------------------------------------- NML VARIABLE ANNUITY ACCOUNT C STATEMENT OF ASSETS AND LIABILITIES
December 31 ------------------------------------ 1995 1994 ------------ ------------ Assets Investments at market value: Northwestern Mutual Series Fund, Inc. Index 500 Stock 1995: 37,491,726 shares (cost $46,641,879) . . . . . . . . $64,560,752 1994: 35,952,983 shares (cost $41,897,373) . . . . . . . . $45,552,429 Growth Stock 1995: 1,650,591 shares (cost $1,947,392) . . . . . . . . . 2,084,697 1994: 330,122 shares (cost $332,520) . . . . . . . . . . . 329,792 # Growth and Income Stock 1995: 4,036,751 shares (cost $4,620,194) . . . . . . . . . 4,888,505 1994: 1,178,036 shares (cost $1,173,282) . . . . . . . . . 1,159,187 # Aggressive Growth Stock 1995: 20,744,587 shares (cost $40,636,758) . . . . . . . . 57,421,016 1994: 16,641,752 shares (cost $28,898,872) . . . . . . . . 33,266,862 International Equity 1995: 22,169,169 shares (cost $27,851,615) . . . . . . . . 30,039,223 1994: 20,694,866 shares (cost $25,740,804) . . . . . . . . 24,647,586 Select Bond 1995: 13,258,257 shares (cost $15,437,346) . . . . . . . . 16,281,140 1994: 13,467,540 shares (cost $15,681,682) . . . . . . . . 14,262,125 High Yield Bond 1995: 718,103 shares (cost $760,109) . . . . . . . . . . . 736,774 1994: 207,679 shares (cost $211,313) . . . . . . . . . . . 201,656 # Money Market 1995: 9,324,692 shares (cost $9,324,692) . . . . . . . . . 9,324,692 1994: 11,510,121 shares (cost $11,510,121) . . . . . . . . 11,510,121 Balanced 1995: 82,586,808 shares (cost $113,566,515) . . . . . . . . 132,469,239 1994: 90,976,778 shares (cost $121,324,620) . . . . . . . . 119,452,509 ------------ ----------- 317,806,039 250,382,267 Due from Sales of Fund Shares . . . . . . . . . . . . . . . . . . . . . 36 79,226 Due from Northwestern Mutual Life Insurance Company . . . . . . . . . . 808,493 279,107 ------------ ------------ Total Assets . . . . . . . . . . . . . . . . . . . . . $318,614,568 $250,740,600 ============ ============ Liabilities Due to Northwestern Mutual Life Insurance Company . . . . . . . . . . . $ 36 $ 79,226 Due on Purchase of Fund Shares . . . . . . . . . . . . . . . . . . . . . 808,493 279,107 ------------ ------------ Total Liabilities . . . . . . . . . . . . . . . . . . . $ 808,529 $ 358,333 ============ ============
# Growth Stock, Growth and Income Stock, and High Yield Bond Portfolios began operations on May 3, 1994. The Accompanying Notes are an Integral Part of the Financial Statements. 25 26 The Northwestern Mutual Life Insurance Company ---------------------------------------------- Form 10-K --------- Item 8. (continued) - -------------------- NML VARIABLE ANNUITY ACCOUNT C STATEMENT OF ASSETS AND LIABILITIES
December 31 ------------------------------------ Equity 1995 1994 ------------ ------------ Contracts Issued Before December 17, 1981 or Between April 30, 1984 and December 31, 1991: Index 500 Stock Division 1995: 2,232,985 Accumulation Units @ 22.104982 . . . . . . . . $49,360,095 1994: 2,284,637 Accumulation Units @ 16.105431 . . . . . . . . $36,795,066 Growth Stock Division 1995: 63,881 Accumulation Units @ 13.271899 . . . . . . . . . . 847,822 1994: NA . . . . . . . . . . . . . . . . . . . . . . . . . . . Growth and Income Stock Division 1995: 117,004 Accumulation Units @ 13.142782 . . . . . . . . . 1,537,752 1994: NA . . . . . . . . . . . . . . . . . . . . . . . . . . . Aggressive Growth Stock Division 1995: 1,397,886 Accumulation Units @ 27.648691 . . . . . . . . 38,649,707 1994: 1,239,328 Accumulation Units @ 19.849331 . . . . . . . . 24,599,840 International Equity Division 1995: 14,747,735 Accumulation Units @ 1.426613 . . . . . . . . 21,039,310 1994: 15,153,296 Accumulation Units @ 1.245144 . . . . . . . . 18,868,036 Select Bond Division 1995: 124,163 Accumulation Units @ 74.222515 . . . . . . . . . 9,215,714 1994: 150,232 Accumulation Units @ 62.322013 . . . . . . . . . 9,362,736 High Yield Bond Division 1995: 21,583 Accumulation Units @ 12.030416 . . . . . . . . . . 259,657 1994: NA . . . . . . . . . . . . . . . . . . . . . . . . . . . Money Market Division 1995: 62,209 Accumulation Units @ 24.705630 . . . . . . . . . . 1,536,924 1994: 200,510 Accumulation Units @ 23.346279 . . . . . . . . . 4,681,165 Balanced Division 1995: 1,889,324 Accumulation Units @ 51.855817 . . . . . . . . 97,972,463 1994: 2,327,834 Accumulation Units @ 41.028821 . . . . . . . . 95,508,274
The Accompanying Notes are an Integral Part of the Financial Statements. 26 27 The Northwestern Mutual Life Insurance Company ---------------------------------------------- Form 10-K --------- Item 8. (continued) - -------------------- NML VARIABLE ANNUITY ACCOUNT C STATEMENT OF ASSETS AND LIABILITIES
December 31 ------------------------------------ Equity (Cont'd.) 1995 1994 ------------ ------------ Contracts Issued On or After December 17, 1981 and Before May 1, 1984: Index 500 Stock Division 1995: 49,450 Accumulation Units @ 21.564611 . . . . . . . . . . $1,066,361 1994: 39,104 Accumulation Units @ 15.790165 . . . . . . . . . . $617,454 Aggressive Growth Stock Division 1995: 5,527 Accumulation Units @ 26.975930 . . . . . . . . . . 149,103 1994: 5,528 Accumulation Units @ 19.463084 . . . . . . . . . . 107,594 International Equity Division 1995: 497,710 Accumulation Units @ 1.407741 . . . . . . . . . . 700,647 1994: 500,818 Accumulation Units @ 1.234814 . . . . . . . . . . 618,417 Select Bond Division 1995: 7,287 Accumulation Units @ 69.192181 . . . . . . . . . . 504,224 1994: 6,665 Accumulation Units @ 58.388451 . . . . . . . . . . 389,131 Money Market Division 1995: 14,478 Accumulation Units @ 23.069838 . . . . . . . . . . 334,015 1994: 10,677 Accumulation Units @ 21.909448 . . . . . . . . . . 233,928 Balanced Division 1995: 113,109 Accumulation Units @ 48.364840 . . . . . . . . . 5,470,492 1994: 130,727 Accumulation Units @ 38.457844 . . . . . . . . . 5,027,464 Annuity Reserves . . . . . . . . . . . . . . . . . . . . . . . . 405,494 343,378
The Accompanying Notes are an Integral Part of the Financial Statements. 27 28 The Northwestern Mutual Life Insurance Company ---------------------------------------------- Form 10-K --------- Item 8. (continued) - -------------------- NML VARIABLE ANNUITY ACCOUNT C STATEMENT OF ASSETS AND LIABILITIES
December 31 ------------------------------------ 1995 1994 ------------ ------------ Equity (cont'd) Contracts Issued On or After December 31, 1991 Front Load Version: Index 500 Stock Division 1995: 2,399,586 Accumulation Units @ 1.588496 . . . . . . . . . $3,811,733 1994: 1,918,074 Accumulation Units @ 1.164877 . . . . . . . . . $2,234,320 Growth Stock Division 1995: 361,207 Accumulation Units @ 1.312966 . . . . . . . . . . 474,252 1994: 149,268 Accumulation Units @ 1.010139 . . . . . . . . . . 150,781# Growth and Income Stock Division 1995: 861,211 Accumulation Units @ 1.300190 . . . . . . . . . . 1,119,738 1994: 418,974 Accumulation Units @ 0.998049 . . . . . . . . . . 418,156# Aggressive Growth Stock Division 1995: 2,242,402 Accumulation Units @ 1.776871 . . . . . . . . . 3,984,459 1994: 1,206,187 Accumulation Units @ 1.283916 . . . . . . . . . 1,548,643 International Equity Division 1995: 2,009,228 Accumulation Units @ 1.402156 . . . . . . . . . 2,817,251 1994: 1,453,091 Accumulation Units @ 1.231747 . . . . . . . . . 1,789,840 Select Bond Division 1995: 1,800,898 Accumulation Units @ 1.334934 . . . . . . . . . 2,404,080 1994: 1,668,091 Accumulation Units @ 1.128176 . . . . . . . . . 1,881,900 High Yield Bond Division 1995: 90,184 Accumulation Units @ 1.190149 . . . . . . . . . . 107,332 1994: 47,321 Accumulation Units @ 1.025776 . . . . . . . . . . 48,541# Money Market Division 1995: 2,956,017 Accumulation Units @ 1.139693 . . . . . . . . . 3,368,952 1994: 3,313,061 Accumulation Units @ 1.083976 . . . . . . . . . 3,591,279 Balanced Division 1995: 5,275,308 Accumulation Units @ 1.419325 . . . . . . . . . 7,487,377 1994: 3,879,218 Accumulation Units @ 1.130270 . . . . . . . . . 4,384,564
# Growth Stock, Growth and Income Stock, and High Yield Bond Divisions began operations on May 3, 1994. The Accompanying Notes are an Integral Part of the Financial Statements. 28 29 The Northwestern Mutual Life Insurance Company ---------------------------------------------- Form 10-K --------- Item 8. (continued) - -------------------- NML VARIABLE ANNUITY ACCOUNT C STATEMENT OF ASSETS AND LIABILITIES
December 31 ------------------------------------ 1995 1994 ------------ ------------ Equity (cont'd) Contracts Issued On or After December 31, 1991 Simplified Load Version: Index 500 Stock Division 1995: 5,080,179 Accumulation Units @ 2.031929 . . . . . . . . . $10,322,562 1994: 3,939,802 Accumulation Units @ 1.498956 . . . . . . . . . $5,905,590 Growth Stock Division 1995: 586,644 Accumulation Units @ 1.299976 . . . . . . . . . . 762,622 1994: 177,918 Accumulation Units @ 1.006136 . . . . . . . . . . 179,010# Growth and Income Stock Division 1995: 1,733,022 Accumulation Units @ 1.287355 . . . . . . . . . 2,231,015 1994: 745,425 Accumulation Units @ 0.994105 . . . . . . . . . . 741,031# Aggressive Growth Stock Division 1995: 5,316,689 Accumulation Units @ 2.753170 . . . . . . . . . 14,637,748 1994: 3,503,170 Accumulation Units @ 2.001269 . . . . . . . . . 7,010,785 International Equity Division 1995: 3,972,573 Accumulation Units @ 1.379966 . . . . . . . . . 5,482,016 1994: 2,764,466 Accumulation Units @ 1.219510 . . . . . . . . . 3,371,293 Select Bond Division 1995: 677,396 Accumulation Units @ 6.136911 . . . . . . . . . . 4,157,122 1994: 503,763 Accumulation Units @ 5.217451 . . . . . . . . . . 2,628,358 High Yield Bond Division 1995: 313,810 Accumulation Units @ 1.178371 . . . . . . . . . . 369,785 1994: 149,862 Accumulation Units @ 1.021705 . . . . . . . . . . 153,115# Money Market Division 1995: 1,890,645 Accumulation Units @ 2.160533 . . . . . . . . . 4,084,801 1994: 1,453,033 Accumulation Units @ 2.067227 . . . . . . . . . 3,003,750 Balanced Division 1995: 4,902,410 Accumulation Units @ 4.310821 . . . . . . . . . 21,133,413 1994: 4,108,593 Accumulation Units @ 3.453452 . . . . . . . . . 14,188,828 ------------ ------------ Total Equity . . . . . . . . . . . . . . . . . . . . . $317,806,038 $250,382,267 ------------ ------------ Total Liabilities and Equity . . . . . . . . . . . . . $318,614,567 $250,740,600 ============ ============
# Growth Stock, Growth and Income Stock, and High Yield Bond Divisions began operations on May 3, 1994. The Accompanying Notes are an Integral Part of the Financial Statements. 29 30 The Northwestern Mutual Life Insurance Company ---------------------------------------------- Form 10-K --------- Item 8. (continued) - -------------------- NML VARIABLE ANNUITY ACCOUNT C COMBINED STATEMENT OF OPERATIONS AND CHANGES IN EQUITY For the Years Ended December 31
1995 1994 1993 ------------ ------------ ------------ Investment Income Dividend Income . . . . . . . . . . . . . . . . . . . . . . . . $ 6,470,776 $22,562,209 $ 9,559,776 Annuity Rate and Expense Guarantees . . . . . . . . . . . . . . 856,764 509,648 235,930 ------------ ------------ ------------ Net Investment Income . . . . . . . . . . . . . . . . . . . . . 5,614,012 22,052,561 9,323,846 ------------ ------------ ------------ Realized and Unrealized Gain (Loss) on Investments Net Realized Gain (Loss) on Investments . . . . . . . . . . . . 9,884,364 5,949,795 3,670,743 Unrealized Appreciation (Depreciation) During the Year . . . . . 53,407,857 (27,055,878) 7,227,689 ------------ ------------ ------------ Net Gain (Loss) on Investments . . . . . . . . . . . . . . . . . 63,292,221 (21,106,083) 10,898,432 ------------ ------------ ------------ Increase in Equity Derived from Investment Activity . . . . . . . . . 68,906,233 946,478 20,222,278 ------------ ------------ ------------ Equity Transactions Contract Owners' Net Payments . . . . . . . . . . . . . . . . . 59,390,267 48,709,729 39,748,661 Surrenders and Other (Net) . . . . . . . . . . . . . . . . . . . (60,872,729) (26,720,946) (22,334,176) ------------ ------------ ------------ Increase (Decrease) in Equity Derived from Equity Transactions . . . (1,482,462) 21,988,783 17,414,485 ------------ ------------ ------------ Net Increase in Equity . . . . . . . . . . . . . . . . . . . . . . . 67,423,771 22,935,261 37,636,763 Equity, Beginning of Year . . . . . . . . . . . . . . . . . . . . . . 250,382,267 227,447,006 189,810,243 ------------ ------------ ------------ Equity, End of Year . . . . . . . . . . . . . . . . . . . . . . . . . $317,806,038 $250,382,267 $227,447,006 ============ ============ ============
The Accompanying Notes are an Integral Part of the Financial Statements. 30 31 The Northwestern Mutual Life Insurance Company ---------------------------------------------- Form 10-K --------- Item 8. (continued) - -------------------- NML VARIABLE ANNUITY ACCOUNT C NOTES TO FINANCIAL STATEMENTS Note 1--NML Variable Annuity Account C (the "Account") is a segregated asset account of The Northwestern Mutual Life Insurance Company ("Northwestern Mutual Life" or "Sponsor") used to fund variable annuity contracts ("contracts") for HR-10 and corporate pension and profit- sharing plans which qualify for special tax treatment under the Internal Revenue Code. Beginning December 31, 1991, two versions of the contract are offered: Front Load contracts with a sales charge up to 4.5% of purchase payments and Simplified Load contracts with an installation fee of $750. Note 2--The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Principal accounting policies are summarized below. Note 3--All assets of each Division of the Account are invested in shares of the corresponding Portfolio of Northwestern Mutual Series Fund, Inc. (the "Fund"). The shares are valued at the Fund's offering and redemption price per share. On May 3, 1994, five new portfolios commenced operations in the Fund: Aggressive Growth Stock Portfolio (formerly Northwestern Mutual Aggressive Growth Stock Fund,Inc.), International Equity Portfolio (formerly Northwestern Mutual International Equity Fund, Inc.), Growth Stock Portfolio, Growth and Income Stock Portfolio and High Yield Bond Portfolio. Additionally, on May 3, 1994, the assets of Northwestern Mutual Life's Variable Annuity funds were merged into the respective portfolio of the Fund in a tax-free exchange of shares. The Fund is an open-end investment company registered under the Investment Company Act of 1940. Note 4--Annuity reserves are based on published annuity tables with age adjustment and benefit payments which reflect actual investment experience. Annuity reserves are based on the 1983 Table a with assumed interest rates of 3 1/2% or 5%. Note 5--Dividend income from the Fund is recorded on the record date of the dividends. Transactions in Fund shares are accounted for on the trade date. The basis for determining cost on sale of Fund shares is identified cost. Purchases and sales of Fund shares for the years ended December 31 by each Division are shown below:
Purchases 1995 1994 1993 - --------- ---- ---- ---- Index 500 Stock Division $ 9,719,794 $ 8,659,996 $ 8,132,392 Growth Stock Division 1,794,866 356,487 NA Growth & Income Stock Division 3,709,640 1,282,402 NA Aggressive Growth Division 15,956,497 12,289,757 9,865,453 International Equity Division 6,724,373 23,854,689 3,261,907 Select Bond Division 4,302,192 5,219,278 5,594,498 High Yield Bond Division 632,095 303,059 NA Money Market Division 10,821,340 11,074,834 6,175,684 Balanced Division 17,257,735 31,432,161 24,388,391 Capital Appreciation Stock Division NA NA 2,415,405 Sales - ----- Index 500 Stock Division 7,360,855 7,244,819 $ 4,442,482 Growth Stock Division 213,213 24,577 NA Growth & Income Stock Division 310,894 108,587 NA Aggressive Growth Division 6,866,522 2,229,844 1,795,174 International Equity Division 4,899,939 1,132,149 420,640 Select Bond Division 4,475,998 3,718,654 2,558,763 High Yield Bond Division 87,219 91,658 NA Money Market Division 13,008,176 9,494,795 5,488,198 Balanced Division 29,565,575 26,386,243 16,478,266 Capital Appreciation Stock Division NA NA 1,907,126
31 32 The Northwestern Mutual Life Insurance Company ---------------------------------------------- Form 10-K --------- Item 8. (continued) - -------------------- NML VARIABLE ANNUITY ACCOUNT C NOTES TO FINANCIAL STATEMENTS Note 6--On April 30, 1993, Northwestern Mutual Capital Appreciation Stock Fund was merged into the Northwestern Mutual Index 500 Stock Fund in a tax-free exchange of fund shares. 23,586,477 shares of Northwestern Mutual Capital Appreciation Stock Fund, Inc. were exchanged for 24,739,593 shares of Northwestern Mutual Index 500 Stock Fund, Inc. The shares exchanged were valued at $33,406,725 for each Division. Note 7--A deduction for annuity rate and expense guarantees is determined daily and paid to Northwestern Mutual Life as compensation for assuming the risk that annuity payments will continue for longer periods than anticipated because the annuitants as a group live longer than expected and the risk that the charges made by Northwestern Mutual Life may be insufficient to cover the actual costs incurred in connection with the contracts. Generally, for contracts issued on or after December 31, 1991, for the Front Load Version and the Simplified Load Version, the deduction for annuity rate and expense guarantees is determined daily at annual rates of 6.5/10 of 1% and 1 1/4%, respectively, of the net assets of each Division attributable to these contracts and is paid to Northwestern Mutual Life. For these contracts, the rates may be increased or decreased by the Board of Trustees of Northwestern Mutual Life not to exceed 1% and 1 1/2% annual rates, respectively. Generally, the deduction for contracts issued before December 17, 1981 or between April 30, 1984 and December 31, 1991 as provided for in the contracts has been waived by the Board of Trustees of Northwestern Mutual Life. For these contracts, the rate may be determined by the Board of Trustees of Northwestern Mutual Life not to exceed a 1/4 of 1% annual rate. For contracts issued on or after December 17, 1981, and before May 1, 1984, the deduction is determined daily at an annual rate of 1/2 of 1% of the net assets of each Division attributable to these contracts and is paid to Northwestern Mutual Life. For these contracts, the rate may be increased or decreased by the Board of Trustees of Northwestern Mutual Life not to exceed a 3/4 of 1% annual rate. Note 8--Northwestern Mutual Life is taxed as a "life insurance company" under the Internal Revenue Code and the operations of the Account form a part of and are taxed with those of Northwestern Mutual Life. Under current law, no federal income taxes are payable with respect to the Account. Accordingly, no provision for any such liability has been made. Item 9 is on page 34. 32 33 [PRICE WATERHOUSE LLP LOGO] REPORT OF INDEPENDENT ACCOUNTANTS To The Northwestern Mutual Life Insurance Company and Contract Owners of NML Variable Annuity Account C In our opinion, the statements appearing on pages 25 through 32 present fairly, in all material respects, the financial position of NML Variable Annuity Account C at December 31, 1995 and 1994, and the results of its operations and the changes in its equity for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. These financial statements are the responsibility of The Northwestern Mutual Life Insurance Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. PRICE WATERHOUSE LLP Milwaukee, Wisconsin January 24, 1996 33 34 The Northwestern Mutual Life Insurance Company ---------------------------------------------- Form 10-K --------- Item 9. Disagreements on Accounting and Financial Disclosure - ------------------------------------------------------------- Not applicable. Item 10 is on page 35. 34 35 The Northwestern Mutual Life Insurance Company 35 ---------------------------------------------- Form 10-K --------- PART III -------- Item 10. Directors and Executive Officers of the Registrant - ------------------------------------------------------------ (a) The following information as of March 1, 1996 is provided with respect to each director, including persons chosen to become directors, of the Registrant. The Registrant uses the title of Trustee to denote the directors.
YEAR EXPIRATION OF TERM TRUSTEE AGE ELECTED OF OFFICE OTHER POSITIONS PRESENTLY HELD WITH REGISTRANT ------- --- ------- ------------------- ----------------------------------------------- R. Quintus Anderson 65 1984 May 1999 Chairman, Audit Committee Edward E. Barr 59 1991 May 1999 Member, Human Resources Committee Gordon T. Beaham, III 64 1988 May 1997 Member, Audit Committee Frank H. Bertsch 70 1979 May 1998 Member, Insurance Product and Marketing Committee Robert C. Buchanan 55 1991 May 1999 Member, Executive and Finance Committees Robert E. Carlson 60 1989 May 1998 Executive Vice President; Member, Executive Committee George A. Dickerman 57 1994 May 1996 (1) Member, Insurance Product and Marketing Committee Thomas I. Dolan 68 1986 May 1996 (1) Member, Human Resources Committee Pierre S. DuPont 61 1985 May 1998 Member, Insurance Product and Marketing Committee James D. Ericson 60 1989 May 1996 (1) President and C.E.O.; Member, Human Resources and Insurance Product & Marketing Committees; Chairman, Executive and Finance Committees J. E. Gallegos 60 1985 May 1996 (1) Member, Audit Committee Patricia Albjerg Graham 61 1980 May 1996 (1) Member, Human Resources Committee Richard H. Holton 69 1972 May 1996 * Member, Insurance Product and Marketing Committee Stephen F. Keller 57 1984 May 1999 Member, Audit Committee J. Thomas Lewis 59 1978 May 1998 Chairman, Human Resources Committee Fred G. Luber 70 1983 May 1997 * Member, Executive and Finance Committees
(1) Candidate proposed for re-election by the Board of Trustees for the election to be held at the May 1996 meeting of policyholders. If re-elected, these Trustees' terms will expire in May of 2000. * Retiring on May 22, 1996. 36 The Northwestern Mutual Life Insurance Company 36 ---------------------------------------------- Form 10-K ---------
YEAR EXPIRATION OF TERM TRUSTEE AGE ELECTED OF OFFICE OTHER POSITIONS PRESENTLY HELD WITH REGISTRANT ------- --- ------- ------------------- ---------------------------------------------- Daniel F. McKeithan, Jr. 60 1988 May 1999 Member, Executive, Finance, and Human Resources Committees Guy A. Osborn 60 1994 May 1997 Member, Executive and Finance Committees Donald J. Schuenke 67 1980 May 1998 Member, Executive and Finance and Committees H. Mason Sizemore, Jr. 54 1993 May 1999 Member, Insurance Product and Marketing Committee Harold B. Smith 62 1973 May 1996 (1) Member, Insurance Product & Marketing Committee Sherwood H. Smith, Jr. 59 1992 May 1998 Chairman, Insurance Product & Marketing Committee John E. Steuri 56 1994 May 1999 Member, Human Resources Committee John J. Stollenwerk 56 1993 May 1997 Member, Executive and Finance Committees Barry L. Williams 51 1987 May 1997 Member, Human Resources Committee Kathryn D. Wriston 57 1986 May 1997 Member, Audit Committee
(1) Candidate proposed for re-election by the Board of Trustees for the election to be held at the May 1996 meeting of policyholders. If re-elected, these Trustees' terms will expire in May of 2000. 37 The Northwestern Mutual Life Insurance Company ---------------------------------------------- Form 10-K --------- Item 10. (continued) - --------------------- (b) The following information as of March 1, 1996 is provided with respect to each Executive Officer of the Registrant.
NAME AGE POSITION ---- --- -------- James D. Ericson 60 President and Chief Executive Officer, Trustee Robert E. Carlson 60 Executive Vice President (Agencies and Marketing), Trustee Peter W. Bruce 50 Executive Vice President (Operations and Administration) Frederic H. Sweet 52 Senior Vice President (Government Relations) Dennis Tamcsin 57 Senior Vice President (Agencies) James W. Ehrenstrom 59 Senior Vice President Walt J. Wojcik 56 Senior Vice President (Information Systems) Edward J. Zore 50 Executive Vice President (Finance and Investments) Mason G. Ross 52 Senior Vice President (Securities) Richard L. Hall 50 Senior Vice President (Marketing) John M. Bremer 48 Senior Vice President, General Counsel and Secretary Mark G. Doll 46 Senior Vice President (Public Markets) William C. Koenig 48 Senior Vice President and Chief Actuary Gary E. Long 51 Vice President and Controller Deborah A. Beck 48 Senior Vice President (Insurance Operations) Donald L. Mellish 57 Vice President (Field Financial Services) Barbara F. Piehler 45 Vice President (Policyowner Services) James F. Reiskytl 58 Vice President (Tax and Financial Planning) Leonard F. Stecklein 49 Vice President (Agency Services) Virgil L. Renne, Jr. 44 Vice President (Employer Product Marketing) Martha M. Valerio 49 Vice President (Corporate Development) W. Ward White 56 Vice President (Communications) Thomas E. Dyer 50 Vice President (New Business) Steven T. Catlett 46 Vice President (Corporate Services) Gregory C. Oberland 38 Vice President (Policy Benefits) Meridee J. Maynard 40 Vice President (Compliance and Sales Practices) Susan A. Lueger 42 Vice President (Human Resources) William H. Beckley 48 Vice President (Agencies) Ralph A. Pelton 64 Vice President (Real Estate)
All of the Executive Officers, except Susan A. Lueger, have been associated with the Registrant, although not necessarily in their present positions, for more than five years. Susan A. Lueger has been Vice President of NML since May, 1994; Vice President of Human Resources at Wisconsin Electric Power Company 1992-1994; prior thereto with WEPC in the following positions: Assistant Vice President-Human Resources 1/92 to 11/92; Director-Human Resources 5/91 to 1/92; Manager-Compensation & Benefits Division 7/90 to 5/91; Project Specialist-Employment and Training Division 2/88 to 7/90. 37 38 The Northwestern Mutual Life Insurance Company 38 ---------------------------------------------- Form 10-K --------- Item 10. (continued) - --------------------- Term of office for all Executive Officers is one year expiring May 31, 1996. (c) Not applicable (d) No one of the Executive Officers or Trustees is related to any other to the best of our knowledge. (e) Business experience and directorships of Trustees are as follows:
PRINCIPAL OCCUPATION TRUSTEE DURING PAST FIVE YEARS DIRECTORSHIPS ----------------------------------------------------------------------------------------------------------------------------- R. Quintus Anderson Chairman, The Aarque Companies, Jamestown, New York. Cold Metal Products Company, Inc. Oneida, Ltd. Edward E. Barr President and Chief Executive Officer, Sun Chemical First Union Corporation Corporation, Fort Lee, New Jersey. United Water Resources Gordon T. Beaham, III Chairman and President, Faultless Starch/Bon Ami Company, Kansas City, Missouri, since 1987. Prior thereto, President and Chief Executive Officer. Frank H. Bertsch Chairman of the Executive Committee, Flexsteel Industries, Cy Care Systems, Inc. Inc., Dubuque, Iowa, since July 1990. Prior thereto, Flexsteel Industries, Inc. Chairman and Chief Executive Officer. Robert C. Buchanan President and Chief Executive Officer, Fox Valley Brady, W. H., Company Corporation, Appleton, Wisconsin. Firstar Corporation Robert E. Carlson Executive Vice President of NML since 1987. Senior Vice President 1982-1987. Prior thereto, Vice President- Research, Life Insurance Marketing and Research Association, Farmington, Connecticut. George A. Dickerman President, Spalding Sports Worldwide, Chicopee, Bay Banks Inc. Massachusetts, since 1981. Thomas I. Dolan Retired Chairman, A. O. Smith Corp., Milwaukee, Wisconsin, A. O. Smith Corporation since 1992. Chairman, 1989-1992; Chairman and Chief Executive Officer 1984-1989; prior thereto President. Pierre S. Du Pont Attorney, Richards, Layton & Finger, Wilmington, Delaware, Louisiana-Pacific Corporation since 1985; prior thereto, Governor of Delaware. Pet Incorporated Whitman Corporation
39 The Northwestern Mutual Life Insurance Company 39 ---------------------------------------------- Form 10-K ---------
PRINCIPAL OCCUPATION TRUSTEE DURING PAST FIVE YEARS DIRECTORSHIPS ------------------------------------------------------------------------------------------------------------------------ James D. Ericson President and Chief Executive Officer of NML since 10-1-93. MGIC Investment Corporation President and Chief Operating Officer 1991-1993. President 1990-1991; Executive Vice President 1987-1990; prior thereto, Senior Vice President-Investments 1980-1987. J. E. Gallegos Attorney, Gallegos Law Firm, Santa Fe, New Mexico since 1988; prior thereto, Chairman of the Board, Enviromed Inc., Santa Fe, New Mexico, since 1987; prior thereto, President, Jones, Gallegos, Snead & Wertheim, P.A., Santa Fe, New Mexico. Patricia Albjerg Graham President, Spencer Foundation, Chicago, Illinois, since 1991; and Professor of the History of American Education, Harvard University, Cambridge, Massachusetts, since 1974. Dean of the Graduate School of Education at Harvard 1982- 1991. Richard H. Holton Professor Emeritus, Haas School of Business, University of California, Berkeley, California, since 1991. Prior thereto, Professor (1975-1991). Stephen F. Keller Chairman, The Santa Anita Companies, since 1993. Chairman, Santa Anita Realty Enterprises, Inc. Santa Anita Realty Enterprises; and President, Santa Anita Santa Anita Operating Company Operating Company, Arcadia, California, 1992-1993. President and C.O.O., The Santa Anita Companies, Arcadia, California, 7/91 to 1/92. Attorney, Fulbright & Jaworski, Los Angeles, California, 1/91 to 7/91. Attorney, Seidler, Amdec Securities, Inc., Los Angeles, California 1987-1991. Prior thereto, Attorney, Lillick McHose & Charles, Los Angeles, California. J. Thomas Lewis Attorney, Monroe & Lemann, New Orleans, Louisiana. Fred G. Luber Chairman of the Board, Super Steel Products Corp., Milwaukee, Wisconsin, since 1993. Prior thereto, Chairman and Chief Executive Officer. Daniel F. McKeithan, Jr. President, Tamarack Petroleum Co. Inc., Milwaukee, Firstar Corporation Wisconsin, since 1982. Marcus Corporation WICOR Corporation Guy A. Osborn Chairman and Chief Executive Officer, Universal Foods Firstar Corporation Corp., Milwaukee, Wisconsin, since 1990. Prior thereto, Firstar Bank Milwaukee Chief Executive Officer 1988-1990. Fleming Cos. Universal Foods Corporation WICOR Wisconsin Gas Company
40 The Northwestern Mutual Life Insurance Company 40 ---------------------------------------------- Form 10-K ---------
PRINCIPAL OCCUPATION TRUSTEE DURING PAST FIVE YEARS DIRECTORSHIPS ------------------------------------------------------------------------------------------------------------------------ Donald J. Schuenke Retired Chairman of NML since 2-1-94. Chairman of the A. O. Smith Corporation Board of NML 10-1-93 to 1-31-94. Chairman and Chief Badger Meter, Inc. Executive Officer 1990-1993. President and Chief Executive Federal Home Loan Mortgage Officer 1983-1990; President and Chief Operating Officer Corporation (Freddie Mac) 1981-1983; President 1980-1981; prior thereto, Senior Vice Northern Telecom, Ltd. President-Investments. H. Mason Sizemore, Jr. President and Chief Operating Officer, The Seattle Times, Seattle, WA since 1985. Harold B. Smith Chairman, Executive Committee, Illinois Tool Works Inc., Grainger, W. W., Inc. Glenview, Illinois since 1982; Vice Chairman, 1981; prior Illinois Tool Works Inc. thereto, President. Northern Trust Corporation Sherwood H. Smith, Jr. Chairman and Chief Executive Officer, Carolina Power & Carolina Power & Light Co. Light Company, Raleigh, North Carolina, since 9/92. Prior Northern Telecom Ltd. thereto, Chairman/President and CEO 1980-1992; President Springs Industries, Inc. and CEO 1979-1980; President 1976-1979. Wachovia Corporation John E. Steuri Chairman and CEO *ALLTEL Information Services, Inc., Little Alltel Corporation Rock, Arkansas, since 1989. National Computer Systems John J. Stollenwerk President and Owner, Allen-Edmonds Shoe Corporation, Port Badger Meter, Inc. Washington, WI since 1980. Eastbay Corporation Firstar Bank Milwaukee N.A. Koss Corporation Barry L. Williams President and Chief Executive Officer, Williams Pacific American President Companies Ventures, Inc., San Francisco, California, since 1/1993. Pacific Gas & Electric Prior thereto: President 1987-1992; President and Chief Simpson Manufacturing Company Executive Officer, C. N. Flagg Power, Inc., Meriden, Tenera L.P. Connecticut 1988-1992. Prior thereto, Managing Principal, Bechtel Investments, Inc. and Sequoia Investments, Inc., San Francisco, California. Kathryn D. Wriston Director of various corporations. Santa Fe Energy Resources Stanley Works, The
* Note: Prior to 2/15/95, this company was known as Systematics Information Services, Inc. 41 The Northwestern Mutual Life Insurance Company ---------------------------------------------- Form 10-K --------- Item 10. (continued) (f) To the best of the Registrant's knowledge, none of the Registrant's Executive Officers or Trustees have been involved in any of the items required to be reported in response to Item 401(f) of Regulation S-K. (g) Not applicable. Item 11 is on page 42. 41 42 The Northwestern Mutual Life Insurance Company ---------------------------------------------- Form 10-K --------- Item 11. Executive Compensation - --------------------------------- Not applicable. NML Variable Annuity Accounts A and C have no directors or executive officers, the Executive Officers and Trustees of The Northwestern Mutual Life Insurance Company spend no substantial portion of their time on matters relating to NML Variable Annuity Accounts A and C, and the amounts of compensation received by the Executive Officers and Trustees of The Northwestern Mutual Life Insurance Company have no bearing on the values associated with variable annuity contracts issued in connection with Northwestern Mutual Variable Annuity Accounts A and C. 42 43 The Northwestern Mutual Life Insurance Company ---------------------------------------------- Form 10-K --------- Item 12. Security Ownership of Certain Beneficial Owners and Management - ------------------------------------------------------------------------ (a) Not applicable. The Registrant is a mutual life insurance company and has no stockholders as such. (b) Not applicable. (c) Not applicable. Item 13 is on page 44. 43 44 The Northwestern Mutual Life Insurance Company ---------------------------------------------- Form 10-K --------- Item 13. Certain Relationships and Related Transactions - --------------------------------------------------------------- (a) (1) The Registrant's second-tier subsidiary, Northwestern Mutual Investment Services, Inc.("NMIS"), serves as the investment adviser to Northwestern Mutual Series Fund, Inc. (the "Fund"), a series company registered as an open-end management company under the Investment Company Act of 1940 and consisting of nine portfolios; and the Registrant is a party to an investment advisory agreement with each of these portfolios: the Index 500 Stock Portfolio, the Select Bond Portfolio, the Money Market Portfolio, the Balanced Portfolio, the Growth and Income Stock Portfolio, the Growth Stock Portfolio, the Aggressive Growth Stock Portfolio, the High Yield Bond Portfolio and the International Equity Portfolio. The investment advisory agreements with each portfolio were renewed during the fiscal year. Various Trustees and Officers of the Registrant serve as directors and officers of the Fund and may be deemed to have a direct or indirect material interest in the existence of the investment advisory agreements. (2) Various Trustees and Officers of the Registrant have securities accounts with Robert W. Baird and Co. Incorporated ("Baird") and effected transactions through such accounts during the fiscal year. Baird is a regional broker-dealer firm and a member of the New York Stock Exchange. Baird is a majority-owned indirect subsidiary of the Registrant. 44 45 The Northwestern Mutual Life Insurance Company ---------------------------------------------- Form 10-K --------- Item 13. (continued) - --------------------- (b) The Registrant, during 1995, retained the law firm of Monroe & Lemann, of which J. Thomas Lewis, a Trustee of the Registrant, is a member. The firm was retained to perform certain legal services for the Registrant. (c) Loans are made to Trustees and Officers in accordance with the provisions of insurance policies which they may own. Such loans are made in the ordinary course of business and are administered solely according to the terms of the policy. (d) Not applicable. The Registrant was not organized within the past five years. Item 14 is on page 46. 45 46 The Northwestern Mutual Life Insurance Company ---------------------------------------------- Form 10-K ---------
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K Page - -------- ---------------------------------------------------------------- ---- (a) Financial Statements and Exhibits 16 (1) NML Variable Annuity Account A (in Part II, Item 8) Statement of Assets and Liabilities, December 31, 1995 and 1994 Combined Statement of Operations and Changes in Equity, for years ended December 31, 1995, 1994 and 1993 Notes to Financial Statements Report of Independent Accountants (2) NML Variable Annuity Account C (in Part II, Item 8) 25 Statement of Assets and Liabilities, December 31, 1995 and 1994 Combined Statement of Operations and Changes in Equity, for years ended December 31, 1995, 1994 and 1993 Notes to Financial Statements Report of Independent Accountants (3) The Northwestern Mutual Life Insurance Company 47 Attached are: Report of Independent Accountants Consolidated Statement of Financial Position, December 31, 1995 and 1994 Consolidated Summary of Operations, for years ended December 31, 1995, 1994 and 1993 Consolidated Statement of General Contingency Reserve, for years ended December 31, 1995, 1994 and 1993 Consolidated Statement of Cash Flows, for years ended December 31, 1995, 1994 and 1993 Notes to Consolidated Financial Statements (b) No reports on Form 8-K have been filed during the last quarter of the year ended December 31, 1995. (c) Compensation amounts deferred in 1995 are included as Exhibit I. 60 Financial Statements of majority owned subsidiaries of the Registrant not consolidated have been omitted because, considered in the aggregate as a single subsidiary, they do not constitute a significant subsidiary. (d) Not applicable.
46 47 THE NORTHWESTERN MUTUAL LIFE - ---------------------------- INSURANCE COMPANY - ----------------- CONSOLIDATED FINANCIAL STATEMENTS - --------------------------------- DECEMBER 31, 1995, 1994 AND 1993 - -------------------------------- 48 REPORT OF INDEPENDENT ACCOUNTANTS --------------------------------- To the Board of Trustees and Policyowners of The Northwestern Mutual Life Insurance Company In our opinion, the accompanying consolidated statement of financial position and the related consolidated summary of operations, statement of general contingency reserve and statement of cash flows present fairly, in all material respects, the financial position of The Northwestern Mutual Life Insurance Company and its subsidiary at December 31, 1995 and 1994, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles (practices prescribed or permitted by insurance regulatory authorities - see Note 1). These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. Price Waterhouse LLP January 24, 1996 49 THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY ---------------------------------------------- CONSOLIDATED STATEMENT OF FINANCIAL POSITION -------------------------------------------- (In millions)
ASSETS ------ December 31, -------------------------------- 1995 1994 ------------- ------------- Bonds United States Government $ 3,282 $ 3,501 Industrial and other 22,236 19,232 ------------- ------------- 25,518 22,733 ------------- ------------- Stocks Common 2,894 2,192 Unconsolidated subsidiaries 531 504 Preferred 546 511 ------------- ------------- 3,971 3,207 ------------- ------------- Mortgage loans 8,429 7,099 Real estate Investment 1,294 1,072 Home office 135 141 ------------- ------------- 1,429 1,213 ------------- ------------- Loans on policies 6,476 6,144 Other investments 1,341 1,301 Cash and temporary investments 544 803 Due and accrued investment income 721 650 ------------- ------------- Total invested assets 48,429 43,150 ------------- ------------- Separate account business 5,000 3,806 Other assets 1,447 1,156 ------------- ------------- Total Assets $ 54,876 $ 48,112 ============= ============= LIABILITIES AND RESERVES - -------------------------- Liability for policy benefits Insurance and annuity reserves $ 39,545 $ 36,124 Policy benefits left for future payments 972 866 Premium deposits 427 419 Policy benefits in process of payment 137 138 Policyowner dividends payable 2,115 1,950 ------------- ------------- 43,196 39,497 ------------- ------------- Other liabilities Interest maintenance reserve 281 11 Income taxes 895 561 Miscellaneous 1,336 822 ------------- ------------- 2,512 1,394 ------------- ------------- Separate account business 5,000 3,806 ------------- ------------- Asset valuation reserve 1,382 1,190 ------------- ------------- Total liabilities and asset valuation reserve 52,090 45,887 ------------- ------------- General contingency reserve 2,786 2,225 ------------- ------------- Total Liabilities and Contingency Reserves $ 54,876 $ 48,112 ============= =============
The accompanying notes are an integral part of the financial statements. 50 THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY ---------------------------------------------- CONSOLIDATED SUMMARY OF OPERATIONS ---------------------------------- (In millions)
For the year ended December 31, --------------------------------------------- 1995 1994 1993 ---------- ---------- ----------- Income Premiums $ 6,196 $ 5,743 $ 5,295 Net investment income 3,673 3,106 2,913 Policy benefits left with Company and other income 733 636 570 ---------- ---------- ----------- Total income 10,602 9,485 8,778 ---------- ---------- ----------- Disposition of income Costs Agents' compensation 508 492 487 Other insurance costs 398 334 361 Premium and other taxes or assessments 120 120 116 ---------- ---------- ----------- 1,026 946 964 ---------- ---------- ----------- Benefits to policyowners and beneficiaries Death benefits 655 609 526 Matured endowments 48 54 44 Annuity benefits 92 94 85 Disability benefits 174 151 126 Surrender benefits 1,375 904 837 Payments from policy benefits left with Company 590 568 498 Net transfers to separate accounts 236 344 302 Net additions to policy reserves 3,506 3,313 3,078 ---------- ---------- ----------- 6,676 6,037 5,496 ---------- ---------- ----------- Total disposition of income 7,702 6,983 6,460 ---------- ---------- ----------- Savings from operations before income taxes and dividends 2,900 2,502 2,318 Income tax expense 467 281 208 ---------- ---------- ----------- Savings from operations before dividends 2,433 2,221 2,110 Policyowner dividends 2,111 1,942 1,780 ---------- ---------- ----------- Net savings from operations 322 279 330 Net realized capital gains, less tax expense of $98, $85 and $82, respectively 137 119 180 ---------- ---------- ----------- Contribution to general contingency reserve from operations $ 459 $ 398 $ 510 ========== ========== ===========
The accompanying notes are an integral part of the financial statements. 51 THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY ---------------------------------------------- CONSOLIDATED STATEMENT OF GENERAL CONTINGENCY RESERVE ----------------------------------------------------- (In millions)
For the year ended December 31, --------------------------------------------- 1995 1994 1993 ---------- ---------- ----------- Beginning of year balance $ 2,225 $ 2,030 $ 1,850 Contribution to general contingency reserve from operations 459 398 510 Net unrealized capital gains (losses) 373 (242) (89) Change in asset valuation reserve (192) 37 (157) Other - net (79) 2 (84) ---------- ---------- ----------- End of year balance $ 2,786 $ 2,225 $ 2,030 ========== ========== ===========
The accompanying notes are an integral part of the financial statements. 52 THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY ---------------------------------------------- CONSOLIDATED STATEMENT OF CASH FLOWS ------------------------------------ (In millions)
For the year ended December 31, --------------------------------------------- 1995 1994 1993 ---------- ---------- ----------- Cash flows from operating activities Insurance premiums, annuities and other considerations $ 6,864 $ 6,299 $ 5,777 Net investment income received 3,480 3,013 2,813 Net loans on policies (331) (297) (143) Benefits paid to policyholders and beneficiaries (2,939) (2,357) (2,116) Net transfers to separate accounts (236) (344) (302) Policyowner dividends paid (1,945) (1,777) (1,759) Expenses and taxes (1,279) (1,033) (1,135) Other - net 381 89 (81) ---------- ---------- ----------- Net cash provided by operating activities 3,995 3,593 3,054 Cash flows from investing activities Proceeds from investments sold or matured Bonds 25,317 27,096 20,221 Stocks 2,465 1,469 1,122 Mortgage loans 431 512 394 Real estate 48 164 43 Other invested assets 149 213 132 Capital gain (tax) benefit (85) 28 (124) ---------- ---------- ----------- 28,325 29,482 21,788 Cost of investments acquired Bonds 27,596 29,674 22,393 Stocks 2,562 1,606 1,288 Mortgage loans 1,883 1,356 970 Real estate 202 6 46 Other invested assets 336 413 152 ---------- ---------- ----------- 32,579 33,055 24,849 Net cash used in investing activities (4,254) (3,573) (3,061) ---------- ---------- ----------- Net (decrease) increase in cash and temporary investments (259) 20 (7) Cash and temporary investments, beginning of year 803 783 790 ---------- ---------- ----------- Cash and temporary investments, end of year $ 544 $ 803 $ 783 ========== ========== ===========
The accompanying notes are an integral part of the financial statements. 53 THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY ---------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ DECEMBER 31, 1995, 1994 AND 1993 -------------------------------- NOTE 1 - PRINCIPAL ACCOUNTING POLICIES - -------------------------------------- The accompanying consolidated financial statements include the accounts of The Northwestern Mutual Life Insurance Company (the "Company") and its wholly-owned life insurance subsidiary. The Company offers life, annuity and disability income products to the personal, business, estate and tax-qualified markets. The consolidated financial statements have been prepared using accounting policies prescribed or permitted by the Insurance Departments of the states in which the Company and its subsidiary are domiciled. These policies are considered generally accepted accounting principles for mutual life insurance companies. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. In April 1993, the Financial Accounting Standards Board issued Interpretation No. 40, "Applicability of Generally Accepted Accounting Principles to Mutual Life Insurance and Other Enterprises," which establishes a different definition of generally accepted accounting principles for mutual life insurance companies. Under the Interpretation, financial statements of mutual life insurance companies for periods beginning after December 15, 1995 which are prepared on the basis of statutory accounting will no longer be characterized as in conformity with generally accepted accounting principles. In order to continue to present financial statements in accordance with generally accepted accounting principles for general purpose distribution in 1996, the Company is considering presenting its financial statements in accordance with the requirements of the Interpretation. Management believes that financial statements prepared on this basis would result in an increase to its general contingency reserve. The effects of this change in accounting basis would be reported retroactively through restatement beginning with the earliest year presented. Investments - ----------- The Company's investments are valued on the following bases: Bonds - Amortized cost using the interest method; loan-backed and structured securities are amortized using estimated prepayment rates and the prospective adjustment method. Common Stocks - Market value Preferred Stocks - Cost Unconsolidated Subsidiaries - Equity in subsidiaries' net assets Mortgage Loans - Amortized cost Investment Real Estate - Lower of cost, less depreciation and encumbrances, or estimated net realizable value Home Office Real Estate - Cost, less depreciation Loans on Policies - Cost Other Investments - Joint Ventures - Lower of equity in or market value of ventures' net assets
Separate Account Business - ------------------------- This business consists of annuities funded by specific assets held in separate accounts. The assets in these accounts are carried at market value. The policy values reflect the investment performance of the respective accounts. Insurance, Annuity and Disability Income Reserves - ------------------------------------------------- Life insurance reserves on substantially all policies issued since 1978 are based on the Commissioner's Reserve Valuation Method with interest rates ranging from 3-1/2% to 5-1/2%. Other policy reserves are based primarily on the net level premium method employing various mortality tables at interest rates ranging from 2% to 4-1/2%. Deferred annuity reserves on policies issued since 1985 are valued using the Commissioner's Annuity Reserve Valuation Method with interest rates ranging from 3-1/2% to 6-1/4%. Other deferred annuity reserves are based on the contract value. Immediate annuity reserves are present values of expected benefit payments at interest rates ranging from 3-1/2% to 7-1/2%. Active life reserves for disability income ("DI") policies issued since 1987 are primarily based on the two-year preliminary term method using a 4% interest rate and the 1985 Commissioner's Individual Disability Table A ("CIDA") for morbidity. Previous DI business used the net level premium method, using a 3% or 4% interest rate and the 1964 Commissioner's Disability Table for morbidity. Disabled life reserves for DI policies are based on the present values of expected benefit payments using primarily the 1985 CIDA (modified for Company experience in first two years of disability) with interest rates ranging from 3% to 5 1/2%. Use of these actuarial tables and methods involves estimation of future mortality and morbidity based on past experience. Actual future experience could differ from these estimates. Interest Maintenance Reserve - ---------------------------- The Company is required to maintain an interest maintenance reserve ("IMR"). The IMR establishes a reserve for realized gains and losses, net of tax, resulting from changes in interest rates on short and long-term fixed income investments. Net realized gains and losses charged to the IMR are amortized into investment income over the approximate remaining life of the investment sold. Asset Valuation Reserve - ----------------------- 54 - 2 - The Company is also required to maintain an asset valuation reserve ("AVR"). The AVR establishes a reserve for certain invested assets held by the Company. In the aggregate, AVR was 82% and 84% of the allowable maximum at December 31, 1995 and 1994, respectively. Premium Income - -------------- Life insurance premiums are recognized as income at the beginning of each policy year. Reinsurance - ----------- In the normal course of business, the Company seeks to limit its exposure to loss on any single insured and to recover a portion of benefits paid by ceding business to other insurance enterprises or reinsurers under excess coverage and co-insurance contracts. As of December 31, 1995 and 1994, total life insurance inforce approximated $380 billion and $347 billion, respectively, of which approximately $113 billion and $104 billion, respectively, comprised principally of term insurance, had been ceded to various reinsurers. The Company retains a maximum of $10 million of coverage per individual life. Operating Costs - --------------- Operating costs, including costs of acquiring new policies, are charged to operations as incurred. Income Taxes - ------------ Provisions for income taxes are based on current income tax returns without recognition of deferred taxes due to timing differences. The portion of the federal income tax based on mutual life insurance company equity is reflected as a component of income tax expense, including related adjustments for prior years. The Company files a consolidated life-nonlife federal income tax return. Federal income tax returns for years through 1988 are closed as to further assessment of taxes. Adequate provision has been made in the financial statements for any additional taxes which may become due with respect to the open years. The Company's effective tax rate on savings from operations before income tax expense (after dividends) in 1995, 1994 and 1993 was approximately 60%, 50% and 39%, respectively. Two significant factors cause the Company's effective rate to exceed the federal corporate rate of 35%. First, the Company pays a tax that is assessed only on mutual life insurance companies, which is an amount that purports to equate a portion of policyholder dividends with nondeductible dividends paid to shareholders of stock companies. Second, the Company must capitalize and amortize (as opposed to immediately deducting) an amount deemed to represent the cost of acquiring new business ("DAC tax"). Policyowner Dividends - --------------------- Dividends payable in the following year on participating policies are charged to current operations. All life insurance policies issued by the Company are participating. NOTE 2 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS - -------------------------------------------------------------- The following summarizes the bases used by the Company in estimating its fair value disclosures for financial instruments: Bonds and preferred stocks - Fair values are based upon quoted market prices, if available. For securities not actively traded, fair values are estimated using independent pricing services or internally developed pricing models. Mortgage loans - Fair values are derived by discounting the future estimated cash flows using current interest rates for debt securities with similar credit risk and maturities, or utilizing net realizable values. Loans on policies - The carrying amount reported in the statement of financial position approximates fair value since loans on policies reduce the amount payable at death or at surrender of the contract. Cash and temporary investments and due and accrued investment income - The carrying amounts reported in the statement of financial position approximate fair value. Annuity reserves (without mortality/morbidity features) - Fair values are derived by discounting the future estimated cash flows using current interest rates with similar maturities. Other deposit liabilities - The carrying amounts reported in the statement of financial position approximate fair value. NOTE 3 - INVESTMENTS - -------------------- Net Investment Income - --------------------- The Company's net investment income for the years ended December 31, 1995, 1994 and 1993 consists of the following:
1995 1994 1993 --------- --------- ---------- (In millions) Interest, dividends, rents, equity in unconsolidated subsidiaries' earnings and joint venture income $ 3,952 $ 3,395 $ 3,215 Less: Investment expenses and depreciation (279) (289) (302) --------- --------- ----------
55 - 3 - Net investment income $ 3,673 $ 3,106 $ 2,913 ========= ========= ==========
Realized Gains and Losses - ------------------------- During 1995, 1994 and 1993, the Company, in its normal course of business, sold certain invested assets realizing gains and losses before transfer to the IMR and capital gains tax from such sales as follows:
For the year ended For the year ended For the year ended December 31, 1995 December 31, 1994 December 31, 1993 ---------------------------- ------------------------------ ------------------------------- Net Net Net Realized Realized Realized Realized Realized Gains Realized Realized Gains Realized Realized Gains Gains Losses (Losses) Gains Losses (Losses) Gains Losses (Losses) -------- -------- -------- --------- -------- --------- --------- -------- --------- (In millions) Bonds $ 576 $ (130) $ 446 $ 171 $ (535) $ (364) $ 438 $ (133) $ 305 Stocks 574 (429) 145 499 (291) 208 297 (36) 261 Mortgage loans 2 (32) (30) - (37) (37) 1 (12) (11) Real estate 14 (3) 11 16 (7) 9 13 (2) 11 Other invested assets 188 (95) 93 110 (98) 12 100 (54) 46 -------- -------- -------- -------- ------- -------- -------- ------- -------- $ 1,354 $ (689) $ 665 $ 796 $ (968) $ (172) $ 849 $ (237) $ 612 ======== ======== ======== ======== ======= ======== ======== ======= ========
Debt Securities - --------------- Debt securities consist of all bonds, fixed maturity preferred stocks and short term fixed income investments. The statement values, which principally represent amortized cost, and estimated market values of the Company's debt securities at December 31, 1995 and 1994 are as follows:
December 31, 1995 Reconciliation to Estimated Market Value - ----------------- ------------------------------------------------- Gross Gross Estimated Statement Unrealized Unrealized Market Value Appreciation Depreciation Value ---------- --------------- -------------- -------------- (In millions) US Government and political obligations $ 3,267 $ 296 $ (1) $ 3,562 Mortgage-backed securities 6,734 336 (12) 7,058 Corporate and other debt securities 15,999 1,250 (47) 17,202 ---------- --------------- -------------- -------------- 26,000 1,882 (60) 27,822 Preferred stocks 108 3 (2) 109 ---------- --------------- -------------- -------------- Total $ 26,108 $ 1,885 $ (62) $ 27,931 ========== =============== ============== ============== December 31, 1994 Reconciliation to Estimated Market Value - ----------------- ------------------------------------------------- Gross Gross Estimated Statement Unrealized Unrealized Market Value Appreciation Depreciation Value ---------- --------------- -------------- -------------- (In millions) US Government and political obligations $ 3,334 $ 61 $ (41) $ 3,354 Mortgage-backed securities 5,652 53 (321) 5,384 Corporate and other debt securities 14,488 203 (515) 14,176 ---------- --------------- -------------- -------------- 23,474 317 (877) 22,914 Preferred stocks 71 1 (7) 65 ---------- --------------- -------------- -------------- Total $ 23,545 $ 318 $ (884) $ 22,979 ========== =============== ============== ==============
56 - 4 - The amortized cost and estimated market value of debt securities at December 31, 1995 and 1994, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
December 31, 1995 December 31, 1994 ------------------------------ ----------------------------- Estimated Estimated Statement Market Statement Market Value Value Value Value ------------- ----------- ------------ ------------ (In millions) Due in one year or less $ 977 $ 979 $ 1,102 $ 1,100 Due after one year through five years 3,658 3,879 4,491 4,444 Due after five years through ten years 6,879 7,347 5,787 5,711 Due after ten years 7,860 8,668 6,513 6,340 ------------- ----------- ------------ ------------ 19,374 20,873 17,893 17,595 Mortgage-backed securities 6,734 7,058 5,652 5,384 ------------- ----------- ------------ ------------ $ 26,108 $ 27,931 $ 23,545 $ 22,979 ============= =========== ============ ============
The fair value of perpetual preferred stocks as of December 31, 1995 and 1994 approximates $578 million and $440 million, respectively, compared to the statement values of $439 million and $440 million, respectively. 57 - 5 - Mortgage Loans - -------------- As of December 31, 1995 and 1994, the mortgage loan portfolio was distributed as follows:
December 31, 1995 December 31, 1994 ---------------------------- ------------------------------ % of % of Geographic Location Statement Value Total Statement Value Total ------------------- ------------------ ------- ------------------ -------- (In millions) (In millions) Middle Atlantic $ 945 11.2% $ 738 10.4% South Atlantic 2,346 27.8 1,943 27.4 North Central 1,560 18.5 1,289 18.2 South Central 1,018 12.1 921 13.0 Pacific Northwest 454 5.4 355 5.0 Pacific 1,803 21.4 1,531 21.5 Canada 303 3.6 322 4.5 ---------- ------- --------- -------- $ 8,429 100.0% $ 7,099 100.0% ========== ======= ========= ======== Property Type ------------- Retail $ 2,897 34.4% $ 2,475 34.9% Office Building 2,677 31.8 2,176 30.6 Residential 1,804 21.4 1,526 21.5 Commercial 792 9.4 745 10.5 Other 259 3.0 177 2.5 ---------- ------- --------- -------- $ 8,429 100.0% $ 7,099 100.0% ========== ======= ========= ========
The fair value of mortgage loans as of December 31, 1995 and 1994 approximates $8,983 million and $6,879 million, respectively. Decreases in current interest rates were a major reason for the increase in fair value relative to statement value in 1995. Affiliates - ---------- The Company has a 19.87% investment in MGIC Investment Corporation ("MGIC"), an affiliate. At December 31, 1995, the Company's investment in MGIC (11.7 million shares) exceeded the statement value by $420 million. In July 1995, the Company entered into a forward contract with a brokerage firm to deliver 4.4 million to 5.4 million shares of MGIC (or cash) in August 1998 for a price determined by the market value of the MGIC shares at that time in exchange for a fixed cash payment of $247 million ($48 per share). The Company's objective in entering into the forward contract is to hedge against depreciation in the value of its MGIC holdings during the contract period below the initial spot price of $48, while partially participating in appreciation, if any, during the forward contract's duration. Real Estate - ----------- For real estate and joint venture properties acquired subsequent to December 1990, the Company calculates depreciation using the straight-line method in accordance with guidelines established by the National Association of Insurance Commissioners. For properties acquired prior to December 1990, the Company calculates depreciation using either the straight-line method or the constant-yield method. Home office real estate is depreciated using the straight-line method. At December 31, 1995 and 1994, investment real estate includes $175 million and $146 million, respectively, of real estate acquired through foreclosure. In 1995, the Company recorded writedowns of $8 million and $28 million for the excess of carrying value over fair value of certain real estate investments and mortgage loans, respectively. Valuation allowances for real estate and mortgage loans with fair values that are less than statement values are adequately covered by normal AVR reserves and by a $90 million special investment reserve established by the Company for real estate, mortgage loans and other invested assets. Derivative Financial Instruments - -------------------------------- The Company's current utilization of derivative financial instruments is limited. Most of the Company's derivative transactions are used to reduce or modify risks of volatility related to currency or interest rate movements. These hedging strategies use forwards, futures and swaps. At December 31, 1995 and 1994, the Company held foreign currency forward contracts with a notional value of $889 million and $605 million, respectively, as a partial hedge against foreign currency exposure of foreign denominated investments. Changes in the market value of these contracts offset currency gains and losses on the hedged investments. The capital gains or losses are unrealized before contract settlement and realized on settlement. These currency hedges and the MGIC forward contract described above represent most of the 58 - 6 - Company's derivative positions. The effect of derivative transactions is not significant to the Company's results from operations or financial position. NOTE 4 - ANNUITIES AND OTHER DEPOSIT LIABILITIES - ------------------------------------------------ The fair value of annuities and other deposit liabilities as of December 31, 1995 and 1994 are as follows:
December 31, 1995 December 31, 1994 ---------------------------- ------------------------------- Statement Fair Statement Fair Value Value Value Value --------------- --------- ---------------- ---------- (In millions) Annuities $ 2,631 $ 2,437 $ 2,474 $ 2,203 Other deposit liabilities 783 783 727 727
NOTE 5 - BENEFIT PLANS - ---------------------- The Company maintains non-contributory defined benefit retirement plans for all eligible employees and agents as well as a 401(k) plan for eligible employees and a non-contributory defined contribution plan for all full-time agents. These plans are funded currently and plan assets of $1,152 million at December 31, 1995 are primarily included in the separate accounts of the Company. In 1995, the Company made a contribution of $13 million to the employee retirement plan; as of January 1, 1995, the most recent actuarial valuation date available, the defined benefit plans were fully funded. In addition to pension benefits, the Company provides certain health care and life insurance benefits ("postretirement benefits") for retired employees. Substantially all employees may become eligible for these benefits if they reach retirement age while working for the Company. Postretirement benefit expenses, which includes the expected cost of postretirement benefits for newly eligible and vested employees and interest costs, were $7 million, $7 million and $9 million for the years ended December 31, 1995, 1994 and 1993, respectively. At December 31, 1995 and 1994, the unfunded postretirement benefit obligation for retirees and other fully eligible or vested employees was $49 million and $47 million, respectively. The estimated postretirement benefit obligation for active non-vested employees was $46 million and $44 million at December 31, 1995 and 1994, respectively. The discount rate used to determine the postretirement benefit obligation was 7% and the health care cost trend rate was 12% in 1995, declining by 1% per year to an ultimate rate of 5% over 7 years. If the health care cost trend rate assumptions were increased by 1%, the postretirement benefit obligation as of December 31, 1995 would be increased by $6 million. At December 31, 1995 and 1994, plan assets attributable to postretirement health care benefits totaled $31 million and $25 million, respectively. NOTE 6 - REINSURANCE - -------------------- The amounts shown in the accompanying consolidated financial statements are net of reinsurance activity. The effect of reinsurance on premiums and benefits for the years ended December 31, 1995, 1994 and 1993 are as follows (in millions):
1995 1994 1993 ----------- ----------- ---------- Direct premiums $ 6,452 $ 5,977 $ 5,508 Reinsurance ceded (256) (234) (213) ---------- ---------- ---------- Net premiums $ 6,196 $ 5,743 $ 5,295 ========== ========== ========== Benefits to policyholders and beneficiaries $ 6,818 $ 6,178 $ 5,600 Reinsurance recoveries (142) (141) (104) ---------- ---------- ---------- Net benefits to policyholders and beneficiaries $ 6,676 $ 6,037 $ 5,496 ========== ========== ==========
In addition, during 1995, 1994 and 1993, the Company received credits of $67 million, $63 million and $59 million, respectively, from reinsurers representing reimbursements of commissions and other expenses. These credits are included in other income in the consolidated summary of operations. Reinsurance contracts do not relieve the Company from its obligations to policyholders. Failure of reinsurers to honor their obligations could result in losses to the Company; consequently, allowances are established for amounts deemed uncollectible. The Company evaluates the financial condition of its reinsurers and monitors concentrations of credit risk arising from similar geographic regions, activities, or economic characteristics of the reinsurers to minimize its exposure to significant losses from reinsurer insolvencies. NOTE 7 - CONTINGENCIES - ---------------------- In the normal course of business, the Company enters into transactions to reduce its exposure to fluctuations in interest rates and market volatility. These instruments may involve credit risk and may also be subject to risk of loss due to interest rate fluctuations. 59 - 7 - The Company has guaranteed certain obligations of its affiliates. These guarantees totaled approximately $126 million and $83 million at December 31, 1995 and 1994, respectively, and are generally supported by the underlying net asset values of the affiliates. The Company is engaged in various legal actions in the normal course of its investment and insurance operations. In the opinion of management, any losses resulting from such actions would not have a material effect on the Company's financial condition. 60 The Northwestern Mutual Life Insurance Company ---------------------------------------------- Form 10-K --------- EXHIBIT I Reference is made to a form of deferred compensation agreement filed as Exhibit B-2 with Form 10-K for 1970 and The Northwestern Mutual Employee Savings Plan filed as Exhibit II for 1985. Pursuant to such contracts the following amounts were deferred in 1995: Executive Officers ------------------ James D. Ericson 218,740 Robert E. Carlson 169,740 Walt J. Wojcik 171,915 Mason G. Ross 70,400 Frederic H. Sweet 19,080 James F. Reiskytl 21,900 Richard L. Hall 31,590 Madonna M. Hostetter 14,640 Gary E. Long 53,202 Donald L. Mellish 104,563 Deborah A. Beck 37,740 Edward J. Zore 74,740 Dennis Tamcsin 50,740 Peter W. Bruce 53,740 Mark G. Doll 50,240 John M. Bremer 94,740 James W. Ehrenstrom 63,650 William C. Koenig 18,360 Leonard F. Stecklein 76,740 Martha M. Valerio 82,628 Virgil Renne, Jr. 16,900 W. Ward White 56,650 Barbara F. Piehler 79,110 Casey J. Sylla 14,191 Thomas E. Dyer 37,380 Steven T. Catlett 13,399 Gregory C. Oberland 13,740 Susan A. Lueger 32,105 Ralph A. Pelton 154,688 Meridee J. Maynard 62,402 William H. Beckley 4,568 Trustees -------- Stephen F. Keller 37,500 R. Quintus Anderson 41,500 Jake E. Gallegos 40,000 Patricia Albjerg Graham 40,750 Richard H. Holton 40,000 Robert C. Buchanan 34,900 Edward E. Barr 34,500 Sherwood H. Smith, Jr. 40,750 John J. Stollenwerk 69,400 Herman M. Sizemore 40,000 George A. Dickerman 40,000 John E. Steuri 41,000 $2,464,521 ==========
60 61 The Northwestern Mutual Life Insurance Company ---------------------------------------------- Form 10-K --------- SIGNATURES Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY (Registrant) By James D. Ericson --------------------------------------------- James D. Ericson President and Chief Executive Officer By Gary E. Long --------------------------------------------- Gary E. Long Vice President and Controller Date: March 20, 1996 -------------- Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Title ----- James D. Ericson Trustee, President and Chief Executive Officer -------------------------------------------------- James D. Ericson
Dated March 20, 1996 61 62 The Northwestern Mutual Life Insurance Company ---------------------------------------------- Form 10-K --------- SIGNATURES (continued) R. QUINTUS ANDERSON* Trustee - ------------------------------------------ R. Quintus Anderson EDWARD E. BARR Trustee - ------------------------------------------ Edward E. Barr GORDON T. BEAHAM, III* Trustee - ------------------------------------------ Gordon T. Beaham, III FRANK H. BERTSCH* Trustee - ------------------------------------------ Frank H. Bertsch ROBERT C. BUCHANAN* Trustee - ------------------------------------------ Robert C. Buchanan ROBERT E. CARLSON* Trustee - ------------------------------------------ Robert E. Carlson GEORGE A. DICKERMAN* Trustee - ------------------------------------------ George A. Dickerman THOMAS I. DOLAN* Trustee - ------------------------------------------ Thomas I. Dolan PIERRE S. DU PONT, IV* Trustee Dated March 20, 1996 - ------------------------------------------ Pierre S. Du Pont, IV JAMES D. ERICSON* Trustee - ------------------------------------------ James D. Ericson J. E. GALLEGOS* Trustee - ------------------------------------------ J. E. Gallegos PATRICIA ALBJERG GRAHAM* Trustee - ------------------------------------------ Patricia Albjerg Graham
62 63 The Northwestern Mutual Life Insurance Company ---------------------------------------------- Form 10-K --------- SIGNATURES (continued) RICHARD H. HOLTON* Trustee - ------------------------------------------ Richard H. Holton STEPHEN F. KELLER* Trustee - ------------------------------------------ Stephen F. Keller J. THOMAS LEWIS* Trustee - ------------------------------------------ J. Thomas Lewis FRED G. LUBER* Trustee - ------------------------------------------ Fred G. Luber DANIEL F. McKEITHAN, JR.* Trustee - ------------------------------------------ Daniel F. McKeithan, Jr. GUY A. OSBORN Trustee - ------------------------------------------ Guy A. Osborn DONALD J. SCHUENKE* Trustee Dated March 20, 1996 - ------------------------------------------ Donald J. Schuenke H. MASON SIZEMORE, JR. Trustee - ------------------------------------------ H. Mason Sizemore, Jr. HAROLD B. SMITH* Trustee - ------------------------------------------ Harold B. Smith SHERWOOD H. SMITH, JR.* Trustee - ------------------------------------------ Sherwood H. Smith, Jr. JOHN J. STOLLENWERK* Trustee - ------------------------------------------ John J. Stollenwerk BARRY L. WILLIAMS* Trustee - ------------------------------------------ Barry L. Williams KATHRYN D. WRISTON* Trustee - ------------------------------------------ Kathryn D. Wriston *By JAMES D. ERICSON* -------------------------------------- James D. Ericson, Attorney in fact, pursuant to the Power of Attorney attached hereto
63 EX-24 2 POWER OF ATTORNEY 1 The Northwestern Mutual Life Insurance Company ---------------------------------------------- Form 10-K --------- POWER OF ATTORNEY The undersigned Trustees of THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY hereby constitute and appoint James D. Ericson and Robert E. Carlson, or either of them, their true and lawful attorneys and agents to sign the names of the undersigned Trustees to (1) the registration statement or statements to be filed under the Securities Act of 1933 and to any instrument or document filed as part thereof or in connection therewith or in any way related thereto, and any and all amendments thereto in connection with variable contracts issued or sold by The Northwestern Mutual Life Insurance Company or any separate account credited therein and (2) the Form 10-K Annual Report or Reports of The Northwestern Mutual Life Insurance Company and/or its separate accounts for its or their fiscal year ended December 31, 1995 to be filed under the Securities Exchange Act of 1934 and to any instrument or document filed as part thereof or in connection therewith or in any way related thereto, and any and all amendments thereto. "Variable contracts" as used herein means any contracts providing for benefits or values which may vary according to the investment experience of any separate account maintained by The Northwestern Mutual Life Insurance Company, including variable annuity contracts and variable life insurance policies. Each of the undersigned hereby ratifies and confirms all that said attorneys and agents shall do or cause to be done by virtue hereof. IN WITNESS WHEREOF, each of the undersigned has subscribed these presents this 26th day of July, 1995. R. QUINTUS ANDERSON Trustee ----------------------------------------------------------- R. Quintus Anderson Trustee ----------------------------------------------------------- Edward E. Barr GORDON T. BEAHAM III Trustee ----------------------------------------------------------- Gordon T. Beaham III FRANK H. BERTSCH Trustee ----------------------------------------------------------- Frank H. Bertsch ROBERT C. BUCHANAN Trustee ----------------------------------------------------------- Robert C. Buchanan 64 2 The Northwestern Mutual Life Insurance Company ---------------------------------------------- Form 10-K --------- ----------------------------------------------------------- Robert E. Carlson GEORGE A. DICKERMAN Trustee ----------------------------------------------------------- George A. Dickerman THOMAS I. DOLAN Trustee ----------------------------------------------------------- Thomas I. Dolan PIERRE S. du PONT IV Trustee ----------------------------------------------------------- Pierre S. du Pont IV JAMES D. ERICSON Trustee ----------------------------------------------------------- James D. Ericson J. E. GALLEGOS Trustee ----------------------------------------------------------- J. E. Gallegos PATRICIA ALBJERG GRAHAM Trustee ----------------------------------------------------------- Patricia Albjerg Graham RICHARD H. HOLTON Trustee ----------------------------------------------------------- Richard H. Holton STEPHEN F. KELLER Trustee ----------------------------------------------------------- Stephen F. Keller J. THOMAS LEWIS Trustee ----------------------------------------------------------- J. Thomas Lewis FRED G. LUBER Trustee ----------------------------------------------------------- Fred G. Luber 65 3 The Northwestern Mutual Life Insurance Company ---------------------------------------------- Form 10-K --------- DANIEL F. McKEITHAN, JR. Trustee ----------------------------------------------------------- Daniel F. McKeithan, Jr. GUY A. OSBORN Trustee ----------------------------------------------------------- Guy A. Osborn DONALD J. SCHUENKE Trustee ----------------------------------------------------------- Donald J. Schuenke H. MASON SIZEMORE, JR. Trustee ----------------------------------------------------------- H. Mason Sizemore, Jr. HAROLD B. SMITH Trustee ----------------------------------------------------------- Harold B. Smith SHERWOOD H. SMITH, JR. Trustee ----------------------------------------------------------- Sherwood H. Smith, Jr. JOHN E. STEURI Trustee ----------------------------------------------------------- John E. Steuri JOHN J. STOLLENWERK Trustee ----------------------------------------------------------- John J. Stollenwerk BARRY L. WILLIAMS Trustee ----------------------------------------------------------- Barry L. Williams KATHRYN D. WRISTON Trustee ----------------------------------------------------------- Kathryn D. Wriston 66 EX-27.1 3 FDS
6 This schedule contains summary financial information extracted from Northwestern Mutual Life Variable Annuity Account A, December 31, 1995 Financial Statements and is qualified in its entirety by reference to such 10K filing. 01 ACCOUNT A 12-MOS DEC-31-1995 JAN-01-1995 DEC-31-1995 378,495,050 470,075,858 569,609 0 0 470,645,467 491,572 0 332,468 824,040 469,821,427 0 157,094,960 154,727,019 0 0 0 0 0 469,821,427 11,709,964 0 0 5,072,064 6,637,900 13,141,169 76,916,515 96,695,584 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
EX-27.2 4 FDS
6 This schedule contains summary financial information extracted from Northwestern Mutual Life Variable Annuity Account C, December 31, 1995 Financial Statements and is qualified in its entirety by reference to such 10K filing. 02 ACCOUNT C 12-MOS DEC-31-1995 JAN-01-1995 DEC-31-1995 260,786,501 317,806,036 808,529 0 0 318,614,567 808,493 0 36 808,529 317,806,038 0 63,813,740 53,448,673 0 0 0 0 0 317,806,038 6,470,776 0 0 856,764 5,614,012 9,884,364 53,407,857 68,906,233 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
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