Registration No. 333-36865
Registration No. 811-03989
UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
FORM N-6 |
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REGISTRATION STATEMENT UNDER THE SECURITIES | ||||||
ACT OF 1933 | / / | |||||
Pre-Effective Amendment No. | / / | |||||
Post-Effective Amendment No. 30 | / X / | |||||
and/or | ||||||
REGISTRATION STATEMENT UNDER THE INVESTMENT | ||||||
COMPANY ACT OF 1940 | / / | |||||
Amendment No. 76 | / X / | |||||
(Check appropriate box or boxes.) | ||||||
NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT | ||||||
(Exact Name of Registrant) | ||||||
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY | ||||||
(Name of Depositor) | ||||||
720 East Wisconsin Avenue, Milwaukee, Wisconsin | 53202 | |||||
(Address of Depositors Principal Executive Offices) | (Zip Code) | |||||
Depositors Telephone Number, including Area Code 414-271-1444 | ||||||
Raymond J. Manista, Senior Vice President, General Counsel and Secretary The Northwestern Mutual Life Insurance Company 720 East Wisconsin Avenue, Milwaukee, Wisconsin 53202 |
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(Name and Address of Agent for Service)
Copy to: Chad E. Fickett, Assistant General Counsel and Assistant Secretary The Northwestern Mutual Life Insurance Company 720 East Wisconsin Avenue Milwaukee, Wisconsin 53202 414-665-1209 |
Approximate Date of Proposed Public Offering Continuous
It is proposed that this filing will become effective (check appropriate space)
immediately upon filing pursuant to paragraph (b) of Rule 485 |
X | on May 1, 2017, pursuant to paragraph (b) of Rule 485 |
60 days after filing pursuant to paragraph (a)(1) of Rule 485 |
on , pursuant to paragraph (a)(1) of Rule 485 |
this post-effective amendment designates a new effective date for a |
previously filed post-effective amendment. |
Title of Securities Being Registered: Interests in the Northwestern Mutual Variable Life Account under flexible premium variable life insurance policies.
Prospectus
May 1, 2017
Variable Executive Life
Issued by The Northwestern Mutual Life Insurance Company
and the Northwestern Mutual Variable Life Account
This prospectus describes a flexible premium Variable Life Insurance Policy (the Policy). You may choose to invest your Net Premiums in up to 30 Divisions of the Northwestern Mutual Variable Life Account (the Separate Account), each of which invests in one of the corresponding Portfolios listed below:
Please note that the Policy and the Portfolios are not guaranteed to achieve their goals
and are not federally insured. The Policy and the Portfolios have not been endorsed by any bank or government agency and are subject to risks, including loss of the principal amount invested.
This Policy is subject to the law of the state in which it is issued. Some of the terms of the Policy may differ from the terms of the Policy delivered in another state because of state specific legal requirements but all material state variations are noted where possible. Other areas where state specific Policy provisions may apply include, but are not limited to:
| certain investment options and certain Policy features; and |
| portfolio transfer rights. |
Please read carefully this prospectus and the accompanying prospectuses for the corresponding Portfolios and keep them for future reference. These prospectuses provide information that you should know before investing in the Policy. No person is authorized to make any representation in connection with the offering of the Policy other than those contained in these prospectuses.
The Securities and Exchange Commission (SEC) has not approved or disapproved the Policy or determined that this prospectus is accurate or complete. It is a criminal offense to state otherwise.
We no longer issue the Policy described in this prospectus. The variable life insurance policies we presently offer are described in separate prospectuses.
Variable Executive Life
| Flexible Premium Variable Life Insurance Policy |
Variable Executive Life Prospectus | 1 |
The following tables describe the fees and expenses that are payable when a Policy is bought, owned, or surrendered. See Charges and Expenses for a more detailed description.
The first table describes the fees and expenses that are payable when you pay premiums, transfer amounts between Divisions, make a withdrawal, change the Specified Amount or change the Death Benefit option.
Charge | When Charge is Deducted | Current Charge | Maximum Guaranteed Charge | |||
Premium Tax Charge | Upon each Premium Payment | 2% of premium1 | 3.6% of the premium (includes both Premium Tax Charge and Federal Deferred Acquisition Cost Charge) | |||
Federal Deferred Acquisition Cost Charge2 | Upon each Premium Payment | 1.00% of premium paid prior to the Policy Anniversary in 2017. 0.85% of subsequent % of premiums1 | ||||
Sales Load | Upon each Premium Payment | Up to 15% of Target Premium for the first Policy Year; up to 6.8% of Target Premium for Policy Years 2-6; up to 3% of Target Premium thereafter and on all premiums in excess of Target Premium3 | Same as current amount | |||
Fee for Transfer of Assets, Withdrawals or Change of Specified Amount | When you make more than 12 transfers of assets among the Separate Account Divisions in a Policy Year, make withdrawals or change the Specified Amount more than once in a Policy Year | Currently waived | $25 | |||
Fee for Change in the Death Benefit Option | Upon a change in the Death Benefit option | Currently waived | $250 | |||
Expedited Delivery Charge4 | When express mail delivery is requested | $15 per delivery (up to $45 for next day, a.m. delivery) | $50 per delivery (up to $75 for next day, a.m. delivery) adjusted for inflation5 |
2 | Variable Executive Life Prospectus |
Charge | When Charge is Deducted | Current Charge | Maximum Guaranteed Charge | |||
Wire Transfer Fee4 | When a wire transfer is requested | $25 per transfer (up to $50 for international wires) | $50 per transfer (up to $100 for international wires) adjusted for inflation5 |
1 | See Information about the PolicyPremiums for more information. |
2 | This charge was previously referred to as the OBRA Expense Charge or Other Premium Expense Charge. Due to a 1990 federal tax law change under the Omnibus Budget Reconciliation Act of 1990 (OBRA), as amended, insurance companies are generally required to capitalize and amortize certain acquisition expenses rather than currently deduct such expenses. Due to this capitalization and amortization, the corporate income tax burden on insurance companies has been affected. The current charge varies based on your Policy Anniversary as indicated in the Table above. This charge compensates us for corporate taxes. |
3 | The Target Premium is a hypothetical annual premium, which varies based on factors including but not limited to the Specified Amount and the Issue Age and sex of the Insured. Increases and decreases in the Specified Amount will be reflected in the Target Premium. Please see Target Premium in the Glossary of Terms. |
4 | This fee may increase over time to cover our administrative or other costs but will not exceed the maximum charge. We may discontinue this service at any time, with or without notice. |
5 | The Maximum Guaranteed Charges are subject to a consumer price index adjustment in order to accommodate future increases in the costs associated with these requests. The maximum charge will equal the Maximum Guaranteed Charge shown above multiplied by the CPI for the fourth month prior to the time of the charge, divided by the CPI for April, 2009. CPI means the Consumer Price Index for All Urban Consumers, United States City Average, All Items, as published by the United States Bureau of Labor Statistics. If the method for determining the CPI is changed, or it is no longer published, it will be replaced by some other index found by the Company to serve the same purpose. |
Periodic Charges (Other than Portfolio Operating Expenses)1
The table below describes the fees and expenses, other than operating expenses for the Portfolios that you will pay periodically during the time that you own the Policy.
Charge | When Charge is Deducted | Current Charge | Maximum Guaranteed Charge | |||
Monthly Policy ChargeCost of Insurance Charge2 | ||||||
Maximum Charge3 | Monthly, on each Monthly Processing Date | $83 (monthly) per $1,000 of net amount at risk | Same as current amount | |||
Minimum Charge4 | Monthly, on each Monthly Processing Date | $0.02 (monthly) per $1,000 of net amount at risk | $0.08 per $1,000 of net amount at risk | |||
Charge for Insured Issue Age 43, sex-neutral basis, Non-Tobacco Guaranteed Issue underwriting classification in the seventeenth Policy Year (varies by Policy Year)5 | Monthly, on each Monthly Processing Date | $0.39 (monthly) per $1,000 of net amount at risk in the seventeenth Policy Year5 | $1 (monthly) per $1,000 of net amount at risk in the seventeenth Policy Year5 | |||
Monthly Policy ChargeMortality and Expense Risk Charge | Monthly, on each Monthly Processing Date | For Policies that have passed their 2017 Policy Anniversary:
0.42% annually (monthly rate of 0.035%) of Policy Value less any Policy Debt for the first ten Policy Years and 0.00% (monthly rate of 0.00000%) thereafter6
For Policies that have not passed their 2017 Policy Anniversary:
0.48% annually (monthly rate of 0.04%) of Policy Value less any Policy Debt for the first ten Policy Years and 0.05% (monthly rate of 0.00417%) thereafter6 |
0.90% annually (monthly rate of 0.075%) of Policy Value, less any Policy Debt | |||
Monthly Policy ChargeAdministrative Charge | Monthly, on each Monthly Processing Date | For Policies that have passed their 2017 Policy Anniversary:
$8 (monthly)
For Policies that have not passed their 2017 Policy Anniversary:
$7 (monthly) |
$15 (monthly) for the first Policy Year; $10 (monthly) thereafter |
Variable Executive Life Prospectus | 3 |
Charge | When Charge is Deducted | Current Charge | Maximum Guaranteed Charge | |||
Charge for Expenses and Taxes Associated with Any Policy Debt7 | Monthly, on each Monthly Processing Date when there is Policy Debt | When the Insured is Attained Age 99 and below:
0.75% annually (monthly rate of 0.0625%) of Policy Debt for the first ten Policy Years; 0.20% annually (monthly rate of 0.01667%) thereafter
When the Insured is Attained Age 100 and above:
0.00% of Policy Debt |
2% annually (monthly rate of 0.16667%) of Policy Debt |
1 | All charges in the table expressed in dollars have been rounded to the nearest dollar, where appropriate, and all amounts that would round to zero have been rounded to the nearest penny or less, as necessary. |
2 | The cost of insurance rates shown in the table may not be representative of the charge that a particular Owner may pay. The cost of insurance charge is determined by multiplying the net amount at risk by the cost of insurance rate. The net amount at risk is the difference between the Death Benefit and the Policy Value. The cost of insurance rate reflects factors including but not limited to the Issue Age, sex and underwriting classification of the Insured, the Policy Date, the Policy Year and the presence of the Cash Value Amendment if this applies. Please request an illustration from your Financial Representative for personalized information, including the particular charges applicable to your Policy. (See Illustrations). |
3 | The maximum Cost of Insurance Charge assumes that the Insured has the following characteristics: Attained Age 100 and substandard underwriting classification. The maximum Cost of Insurance Charge shown may also apply to other combinations of Policy Year and Insured characteristics. |
4 | The minimum Cost of Insurance Charge assumes that the Policy is in the first Policy Year, and that the Insured has the following characteristics: Female, Issue Age 18, Premier Non-Tobacco underwriting classification. The minimum Cost of Insurance Charge shown may also apply to other combinations of Policy Year and Insured characteristics. |
5 | Generally, the cost of insurance rate will increase each Policy Year. The maximum guaranteed Cost of Insurance Charge may vary by state of issue. |
6 | For Policies without the Cash Value Amendment, if the Policy has passed the 2017 Policy Anniversary, the charge for Policy Years eleven and later is 0.00% annually (monthly rate of 0.00000%). If the Policy has not passed the 2017 Policy Anniversary, the charge for Policy Years eleven and later is 0.03% annually (monthly rate of 0.0025%). |
7 | The charge is applied to the Policy Debt. It is in addition to the interest charged on any Policy loan and is deducted from Invested Assets. We add unpaid interest to the amount of the loan. Interest on a Policy loan accrues and is payable on a daily basis at an annual effective rate of 5%. The amount of the Policy loan will be transferred from the Divisions to our General Account and credited on a daily basis with an annual earnings rate equal to the 5% Policy loan interest rate. |
Annual Portfolio Operating Expenses
The table below shows the range (minimum and maximum) of total operating expenses, including investment advisory fees, distribution (12b-1) fees and other expenses of the Portfolios that you may pay periodically during the time you own the Policy. The first line of this table lists expenses that do not reflect fee waivers or expense limits and reimbursements, nor do they reflect short-term trading redemption fees, if any, charged by the Portfolios. The information is based on operations for the year ended December 31, 2016. More details concerning these fees and expenses are contained in the attached prospectuses for the Funds.
Minimum | Maximum | |||||||
Range of Total Annual Portfolio Operating Expenses (expenses include investment advisory
fees, distribution |
0.21 | % | 1.31 | % | ||||
Range of Total Annual Portfolio Operating Expenses After Contractual Fee Waiver or Reimbursement* |
0.21 | % | 1.11 | % |
* | The Range of Total Annual Portfolio Operating Expenses After Contractual Fee Waiver or Reimbursement line in the above table shows the minimum and maximum fees and expenses charged by all of the Portfolios after taking into account contractual fee waiver or reimbursement arrangements in place. Those contractual arrangements are designed to reduce Total Annual Portfolio Operating Expenses for Owners and will continue for at least one year from the date of this prospectus. For more information about which Portfolios currently have such contractual reimbursement or fee waiver arrangements in place, see the prospectuses of the underlying Funds. |
For more information about voluntary fee waivers that may be in place, see the Charges and Expenses section.
4 | Variable Executive Life Prospectus |
Variable Executive Life Prospectus | 5 |
Portfolio | Investment Objective | Sub-adviser (if applicable) | ||
Growth Stock Portfolio | Long-term growth of capital; current income is a secondary objective | The Boston Company Asset Management, LLC | ||
Focused Appreciation Portfolio | Long-term growth of capital | Loomis, Sayles & Company, L.P. | ||
Large Cap Core Stock Portfolio | Long-term growth of capital and income | Fayez Sarofim & Co. | ||
Large Cap Blend Portfolio | Long-term growth of capital and income | Fiduciary Management, Inc. | ||
Index 500 Stock Portfolio | Investment results that approximate the performance of the Standard & Poors 500® Composite Stock Price Index | N/A | ||
Large Company Value Portfolio | Long-term capital growth; income is a secondary objective | American Century Investment Management, Inc. | ||
Domestic Equity Portfolio | Long-term growth of capital and income | Delaware Investments Fund Advisers, a series of Macquarie Investment Management Business Trust | ||
Equity Income Portfolio | Long-term growth of capital and income | T. Rowe Price Associates, Inc. | ||
Mid Cap Growth Stock Portfolio | Long-term growth of capital | William Blair Investment Management, LLC | ||
Index 400 Stock Portfolio | Investment results that approximate the performance of the S&P MidCap 400® Stock Price Index | N/A | ||
Mid Cap Value Portfolio | Long-term capital growth; current income is a secondary objective | American Century Investment Management, Inc. | ||
Small Cap Growth Stock Portfolio | Long-term growth of capital | Wellington Management Company LLP | ||
Index 600 Stock Portfolio | Investment results that approximate the performance of the Standard & Poors SmallCap 600® Index | N/A | ||
Small Cap Value Portfolio | Long-term growth of capital | T. Rowe Price Associates, Inc. | ||
International Growth Portfolio | Long-term growth of capital | FIAM LLC | ||
Research International Core Portfolio | Capital appreciation | Massachusetts Financial Services Company | ||
International Equity Portfolio | Long-term growth of capital; any income realized may be incidental | Templeton Investment Counsel, LLC | ||
Emerging Markets Equity Portfolio | Capital Appreciation | Aberdeen Asset Managers Limited | ||
Government Money Market Portfolio(1) | Maximum current income to the extent consistent with liquidity and stability of capital | BlackRock Advisors, LLC |
6 | Variable Executive Life Prospectus |
Portfolio | Investment Objective | Sub-adviser (if applicable) | ||
Short-Term Bond Portfolio | To provide as high a level of current income as is consistent with prudent investment risk | T. Rowe Price Associates, Inc. | ||
Select Bond Portfolio | To provide as high a level of total return as is consistent with prudent investment risk; a secondary objective is to seek preservation of shareholders capital | Wells Capital Management, Inc. | ||
Long-Term U.S. Government Bond Portfolio | Maximum total return, consistent with preservation of capital and prudent investment management | Pacific Investment Management Company LLC | ||
Inflation Protection Portfolio | Pursue total return using a strategy that seeks to protect against U.S. inflation | American Century Investment Management, Inc. | ||
High Yield Bond Portfolio(2) | High current income and capital appreciation | Federated Investment Management Company | ||
Multi-Sector Bond Portfolio | Maximum total return, consistent with prudent investment management | Pacific Investment Management Company LLC | ||
Balanced Portfolio | To realize as high a level of total return as is consistent with prudent investment risk, through income and capital appreciation | N/A | ||
Asset Allocation Portfolio | To realize as high a level of total return as is consistent with reasonable investment risk | N/A |
(1) | Although the Government Money Market Portfolio seeks to preserve its value at $1.00 per share, it is possible to lose money by investing in the Government Money Market Portfolio. An investment in a money market portfolio is neither insured nor guaranteed by the Federal Deposit Insurance Corporation or any government agency. During extended periods of low interest rates, the yield of a money market portfolio may also become extremely low and possibly negative. |
(2) | High yield bonds are commonly referred to as junk bonds. |
Fidelity® Variable Insurance Products
The Fidelity® VIP Mid Cap Portfolio and the Fidelity® VIP Contrafund® Portfolio are series of Variable Insurance Products Fund III and the Variable Insurance Products Fund II, respectively. The Separate Account buys Service Class 2 shares of the Portfolios, the investment adviser for which is the Fidelity Management & Research Company (FMR). The following affiliates of FMR also assist with foreign investments: Fidelity Management & Research (U.K.) Inc., Fidelity Management & Research (Hong Kong) Limited, and Fidelity Management & Research (Japan) Inc.
Portfolio | Investment Objective | Sub-adviser | ||
VIP Mid Cap Portfolio | Long-term growth of capital | FMR Co., Inc. | ||
VIP Contrafund® Portfolio | Long-term capital appreciation | FMR Co., Inc. |
Neuberger Berman Advisers Management Trust
The Neuberger Berman Advisers Management Trust Socially Responsive Portfolio is a series of the Neuberger Berman Advisers Management Trust. The Separate Account buys Class I shares of the Portfolio, the investment adviser for which is Neuberger Berman Investment Advisers LLC.
Portfolio | Investment Objective | |
Socially Responsive Portfolio | Long-term growth of capital by investing primarily in securities of companies that meet the Portfolios financial criteria and social policy |
The assets of each of the Portfolios comprising the Russell Investment Funds are invested by one or more investment management organizations researched and recommended by Russell Investment Management LLC (RIM). RIM is the investment adviser of the Russell Investment Funds.
Portfolio | Investment Objective | |
U.S. Strategic Equity Fund | Long-term growth of capital | |
U.S. Small Cap Equity Fund | Long-term growth of capital |
Variable Executive Life Prospectus | 7 |
Portfolio | Investment Objective | |
Global Real Estate Securities Fund | Current income and long-term growth of capital | |
International Developed Markets Fund | Long-term growth of capital | |
Strategic Bond Fund | Current income and, as a secondary objective, capital appreciation | |
LifePoints® Variable Target Portfolio Series Moderate Strategy Fund |
Current income and moderate long-term capital appreciation | |
LifePoints® Variable Target Portfolio Series Balanced Strategy Fund |
Above-average long-term capital appreciation and a moderate level of current income | |
LifePoints® Variable Target Portfolio Series Growth Strategy Fund |
High long-term capital appreciation; and as a secondary objective, current income | |
LifePoints® Variable Target Portfolio Series Equity Growth Strategy Fund |
High long-term capital appreciation |
The Commodity Return Strategy Portfolio is a series of Credit Suisse Trust. The Separate Account buys shares of the Portfolio, the investment adviser for which is Credit Suisse Asset Management, LLC.
Portfolio | Investment Objective | |
Commodity Return Strategy Portfolio | Total Return |
8 | Variable Executive Life Prospectus |
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10 | Variable Executive Life Prospectus |
Variable Executive Life Prospectus | 11 |
12 | Variable Executive Life Prospectus |
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14 | Variable Executive Life Prospectus |
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16 | Variable Executive Life Prospectus |
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18 | Variable Executive Life Prospectus |
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20 | Variable Executive Life Prospectus |
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22 | Variable Executive Life Prospectus |
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24 | Variable Executive Life Prospectus |
Variable Executive Life Prospectus | 25 |
26 | Variable Executive Life Prospectus |
Variable Executive Life Prospectus | 27 |
More information about the Separate Account is included in a Statement of Additional Information (SAI), which is dated the same day as this prospectus, is incorporated by reference into this prospectus, and is available free of charge from the Company. To request a free copy of the Separate Accounts SAI, or current annual report, call us toll-free at 1-866-464-3800. Under certain circumstances you or your financial representative may be able to obtain these documents online at www.northwesternmutual.com. Information about the Separate Account (including the SAI) can be reviewed and copied at the Public Reference Room of the SEC in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-202-551-8090. Reports and other information about the Separate Account are available on the SECs Internet site at http://www.sec.gov, or they may be obtained, upon payment of a duplicating fee, by writing the Public Reference Section of the SEC, 100 F Street, NE, Washington, DC 20549-0102.
Your Northwestern Mutual Financial Representative will provide you with illustrations for a Variable Executive Life Policy free of charge upon your request. The illustrations show how the Death Benefit, Policy Value and Cash Value for a Policy would vary based on hypothetical investment results. Your Northwestern Mutual Financial Representative will also respond to other inquiries you may have regarding the Policy, or you may contact Advanced Markets Operations at 1-866-464-3800.
Investment Company Act File No. 811-3989
28 | Variable Executive Life Prospectus |
STATEMENT OF ADDITIONAL INFORMATION
May 1, 2017
VARIABLE EXECUTIVE LIFE
A Flexible Premium Variable Life Insurance Policy (the Policy)
Issued by The Northwestern Mutual Life Insurance Company
and
Northwestern Mutual Variable Life Account
(Account)
We no longer issue the Policy described in this Statement of Additional Information.
The Policies we currently offer are described in separate Prospectuses and
Statements of Additional Information.
This Statement of Additional Information (SAI) is not a prospectus, but supplements, and should be read in conjunction with the prospectus for the Policy identified above and dated the same date as this SAI. The prospectus may be obtained by writing The Northwestern Mutual Life Insurance Company (Northwestern Mutual), 720 East Wisconsin Avenue, Milwaukee, Wisconsin 53202, or by calling telephone number 1-866-464-3800.
B-1
Page | ||||
B-3 | ||||
B-3 | ||||
F-1 | ||||
NM-1 |
B-2
The Policy is offered on a continuous basis exclusively through individuals who, in addition to being life insurance agents of Northwestern Mutual, are registered representatives of Northwestern Mutual Investment Services, LLC (NMIS). NMIS is our wholly-owned company. The principal business address of NMIS is 720 East Wisconsin Avenue, Milwaukee, Wisconsin 53202.
NMIS is the principal underwriter of the Policies for purposes of the federal securities laws. We paid the following amounts to NMIS with respect to sales of variable life insurance policies issued in connection with the Account during each of the last three fiscal years representing commission payments NMIS made to our agents and related benefits. None of these amounts was retained by NMIS and no amounts were paid to other underwriters or broker-dealers. We also paid additional amounts to NMIS in reimbursement for other expenses related to the distribution of variable life insurance policies.
Year |
Amount | |||
2016 | $ | 3,053,234 | ||
2015 | $ | 4,059,098 | ||
2014 | $ | 5,607,850 |
NMIS also provides certain services related to the administration of payment plans under the Policy pursuant to an administrative services contract with Northwestern Mutual. In exchange for these services, NMIS receives compensation to cover the actual costs incurred by NMIS in performing these services.
The consolidated financial statements of Northwestern Mutual as of December 31, 2016 and 2015 and for each of the three years in the period ended December 31, 2016, and the financial statements of Northwestern Mutual Variable Life Account as of December 31, 2016 and for the periods indicated, included in this Statement of Additional Information constituting part of this Registration Statement, have been so included in reliance on the reports of PricewaterhouseCoopers LLP, an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting. The address of PricewaterhouseCoopers LLP is 833 East Michigan Street, Suite 1200, Milwaukee, Wisconsin 53202.
B-3
Annual Report December 31, 2016
Northwestern Mutual Variable Life Account
Financial Statements
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of The Northwestern Mutual Life Insurance Company and
Contract Owners of Northwestern Mutual Variable Life Account
In our opinion, the accompanying statements of assets and liabilities and the related statements of operations and of changes in net assets present fairly, in all material respects, the financial position of Growth Stock Division, Focused Appreciation Division, Large Cap Core Stock Division, Large Cap Blend Division, Index 500 Stock Division, Large Company Value Division, Domestic Equity Division, Equity Income Division, Mid Cap Growth Stock Division, Index 400 Stock Division, Mid Cap Value Division, Small Cap Growth Stock Division, Index 600 Stock Division, Small Cap Value Division, International Growth Division, Research International Core Division, International Equity Division, Emerging Markets Equity Division, Government Money Market Division, Short-Term Bond Division, Select Bond Division, Long-Term U.S. Government Bond Division, Inflation Protection Division, High Yield Bond Division, Multi-Sector Bond Division, Balanced Division, Asset Allocation Division, Fidelity VIP Mid Cap Division, Fidelity VIP Contrafund Division, Neuberger Berman AMT Socially Responsive Division, Russell Multi-Style Equity Division, Russell Aggressive Equity Division, Russell Non-U.S. Division, Russell Core Bond Division, Russell Global Real Estate Securities Division, Russell LifePoints Moderate Strategy Division, Russell LifePoints Balanced Strategy Division, Russell LifePoints Growth Strategy Division, Russell LifePoints Equity Growth Strategy Division and Credit Suisse Trust Commodity Return Strategy Division (constituting the Northwestern Mutual Variable Life Account) as of December 31, 2016, the results of each of their operations for the year then ended, and the changes in each of their net assets for each of the two years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of The Northwestern Mutual Life Insurance Companys 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards 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, which included confirmation of securities as of December 31, 2016 by correspondence with the underlying registered investment companies, provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
Milwaukee, Wisconsin
April 27, 2017
F-1
Northwestern Mutual Variable Life Account
Statements of Assets and Liabilities
December 31, 2016
(in thousands, except accumulation unit values)
Growth Stock |
Focused Appreciation Division |
Large Cap Core Stock Division |
Large Cap Blend Division |
Index 500 Division |
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Assets: |
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Investments, at fair value (1) |
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Northwestern Mutual Series Fund, Inc |
$ | 381,556 | $ | 146,384 | $ | 234,499 | $ | 9,582 | $ | 1,222,114 | ||||||||||
Fidelity Variable Insurance Products Fund |
- | - | - | - | - | |||||||||||||||
Neuberger Berman Advisers Management Trust |
- | - | - | - | - | |||||||||||||||
Russell Investment Funds |
- | - | - | - | - | |||||||||||||||
Credit Suisse Trust |
- | - | - | - | - | |||||||||||||||
Due from Northwestern Mutual Life Insurance Company |
23 | 3 | - | - | 96 | |||||||||||||||
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|
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Total Assets |
381,579 | 146,387 | 234,499 | 9,582 | 1,222,210 | |||||||||||||||
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Liabilities: |
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Due to Northwestern Mutual Life Insurance Company |
- | - | 66 | - | - | |||||||||||||||
Due to Participants |
- | - | - | - | - | |||||||||||||||
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|
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Total Liabilities |
- | - | 66 | - | - | |||||||||||||||
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Total Net Assets |
$ | 381,579 | $ | 146,387 | $ | 234,433 | $ | 9,582 | $ | 1,222,210 | ||||||||||
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Net Assets: |
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Variable Life Policies Issued |
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Before October 11, 1995 |
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Policyowners Equity |
$ | 33,422 | $ | 9,118 | $ | 25,875 | $ | 396 | $ | 164,684 | ||||||||||
Northwestern Mutual Equity |
401 | 88 | 375 | 5 | 1,608 | |||||||||||||||
Variable CompLife Policies Issued Between October 11, 1995 and December 31, 2008 (2) |
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Policyowners Equity |
327,062 | 122,299 | 194,702 | 8,593 | 971,390 | |||||||||||||||
Northwestern Mutual Equity |
6,661 | 2,814 | 4,106 | 174 | 18,374 | |||||||||||||||
Variable Executive Life Policies Issued Between March 2, 1998 and December 31, 2008 (3) |
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Policyowners Equity |
6,206 | 4,169 | 4,251 | 324 | 21,726 | |||||||||||||||
Variable Joint Life Policies Issued Between December 10, 1998 and December 31, 2008 (4) |
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Policyowners Equity |
7,827 | 7,899 | 5,124 | 90 | 44,428 | |||||||||||||||
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Total Net Assets |
$ | 381,579 | $ | 146,387 | $ | 234,433 | $ | 9,582 | $ | 1,222,210 | ||||||||||
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(1) Investments, at cost |
$ | 325,155 | $ | 147,833 | $ | 182,353 | $ | 9,548 | $ | 833,509 | ||||||||||
Mutual Fund Shares Held |
147,833 | 70,343 | 147,021 | 8,922 | 293,003 | |||||||||||||||
(2) Accumulation Unit Value |
$ | 4.251519 | $ | 3.746116 | $ | 3.081784 | $ | 1.739254 | $ | 5.062909 | ||||||||||
Units Outstanding |
78,495 | 33,398 | 64,511 | 5,041 | 195,493 | |||||||||||||||
(3) Accumulation Unit Value |
$ | 59.189518 | $ | 39.992151 | $ | 42.503832 | $ | 15.001832 | $ | 117.092375 | ||||||||||
Units Outstanding |
105 | 104 | 100 | 22 | 186 | |||||||||||||||
(4) Accumulation Unit Value |
$ | 59.189518 | $ | 39.992151 | $ | 42.503832 | $ | 15.001832 | $ | 117.092375 | ||||||||||
Units Outstanding |
132 | 198 | 121 | 6 | 379 |
The Accompanying Notes are an Integral Part of the Financial Statements.
F-2
Northwestern Mutual Variable Life Account
Statements of Assets and Liabilities
December 31, 2016
(in thousands, except accumulation unit values)
Large Company Value Division |
Domestic Equity Division |
Equity Income Division |
Mid Cap Growth Stock Division |
Index 400 Stock Division |
||||||||||||||||
|
|
|||||||||||||||||||
Assets: |
||||||||||||||||||||
Investments, at fair value (1) |
||||||||||||||||||||
Northwestern Mutual Series Fund, Inc |
$ | 12,809 | $ | 203,688 | $ | 122,337 | $ | 435,856 | $ | 321,891 | ||||||||||
Fidelity Variable Insurance Products Fund |
- | - | - | - | - | |||||||||||||||
Neuberger Berman Advisers Management Trust |
- | - | - | - | - | |||||||||||||||
Russell Investment Funds |
- | - | - | - | - | |||||||||||||||
Credit Suisse Trust |
- | - | - | - | - | |||||||||||||||
Due from Northwestern Mutual Life Insurance Company |
- | 35 | 13 | - | 18 | |||||||||||||||
|
|
|||||||||||||||||||
Total Assets |
12,809 | 203,723 | 122,350 | 435,856 | 321,909 | |||||||||||||||
|
|
|||||||||||||||||||
Liabilities: |
||||||||||||||||||||
Due to Northwestern Mutual Life Insurance Company |
- | - | - | 1,184 | - | |||||||||||||||
Due to Participants |
- | - | - | - | - | |||||||||||||||
|
|
|||||||||||||||||||
Total Liabilities |
- | - | - | 1,184 | - | |||||||||||||||
|
|
|||||||||||||||||||
Total Net Assets |
$ | 12,809 | $ | 203,723 | $ | 122,350 | $ | 434,672 | $ | 321,909 | ||||||||||
|
|
|||||||||||||||||||
Net Assets: |
||||||||||||||||||||
Variable Life Policies Issued |
||||||||||||||||||||
Before October 11, 1995 |
||||||||||||||||||||
Policyowners Equity |
$ | 910 | $ | 18,060 | $ | 10,117 | $ | 59,142 | $ | 16,900 | ||||||||||
Northwestern Mutual Equity |
8 | 179 | 114 | 834 | 157 | |||||||||||||||
Variable CompLife Policies Issued Between October 11, 1995 and December 31, 2008 (2) |
||||||||||||||||||||
Policyowners Equity |
11,150 | 169,166 | 102,586 | 355,821 | 280,099 | |||||||||||||||
Northwestern Mutual Equity |
183 | 3,859 | 2,134 | 7,341 | 5,430 | |||||||||||||||
Variable Executive Life Policies Issued Between March 2, 1998 and December 31, 2008 (3) |
||||||||||||||||||||
Policyowners Equity |
- | 5,579 | 3,184 | 5,024 | 9,261 | |||||||||||||||
Variable Joint Life Policies Issued Between December 10, 1998 and December 31, 2008 (4) |
||||||||||||||||||||
Policyowners Equity |
558 | 6,880 | 4,215 | 6,510 | 10,062 | |||||||||||||||
|
|
|||||||||||||||||||
Total Net Assets |
$ | 12,809 | $ | 203,723 | $ | 122,350 | $ | 434,672 | $ | 321,909 | ||||||||||
|
|
|||||||||||||||||||
(1) Investments, at cost |
$ | 13,237 | $ | 139,140 | $ | 94,229 | $ | 449,645 | $ | 252,078 | ||||||||||
Mutual Fund Shares Held |
12,583 | 132,523 | 70,961 | 151,286 | 164,650 | |||||||||||||||
(2) Accumulation Unit Value |
$ | 1.812084 | $ | 2.443831 | $ | 2.841098 | $ | 3.713373 | $ | 4.445732 | ||||||||||
Units Outstanding |
6,254 | 70,801 | 36,859 | 97,799 | 64,228 | |||||||||||||||
(3) Accumulation Unit Value |
$ | 15.379433 | $ | 26.364364 | $ | 30.330455 | $ | 104.283373 | $ | 51.235085 | ||||||||||
Units Outstanding |
- | 212 | 105 | 48 | 181 | |||||||||||||||
(4) Accumulation Unit Value |
$ | 15.379433 | $ | 26.364364 | $ | 30.330455 | $ | 104.283373 | $ | 51.235085 | ||||||||||
Units Outstanding |
36 | 261 | 139 | 62 | 196 |
The Accompanying Notes are an Integral Part of the Financial Statements.
F-3
Northwestern Mutual Variable Life Account
Statements of Assets and Liabilities
December 31, 2016
(in thousands, except accumulation unit values)
Mid Cap Value Division |
Small Cap Growth Stock Division |
Index 600 Stock Division |
Small Cap Value Division |
International Growth Division |
||||||||||||||||
|
|
|||||||||||||||||||
Assets: |
||||||||||||||||||||
Investments, at fair value (1) |
||||||||||||||||||||
Northwestern Mutual Series Fund, Inc |
$ | 74,480 | $ | 262,808 | $ | 30,538 | $ | 199,941 | $ | 83,544 | ||||||||||
Fidelity Variable Insurance Products Fund |
- | - | - | - | - | |||||||||||||||
Neuberger Berman Advisers Management Trust |
- | - | - | - | - | |||||||||||||||
Russell Investment Funds |
- | - | - | - | - | |||||||||||||||
Credit Suisse Trust |
- | - | - | - | - | |||||||||||||||
Due from Northwestern Mutual Life Insurance Company |
6 | 25 | 10 | - | 25 | |||||||||||||||
|
|
|||||||||||||||||||
Total Assets |
74,486 | 262,833 | 30,548 | 199,941 | 83,569 | |||||||||||||||
|
|
|||||||||||||||||||
Liabilities: |
||||||||||||||||||||
Due to Northwestern Mutual Life Insurance Company |
- | - | - | 9 | - | |||||||||||||||
Due to Participants |
- | - | - | - | - | |||||||||||||||
|
|
|||||||||||||||||||
Total Liabilities |
- | - | - | 9 | - | |||||||||||||||
|
|
|||||||||||||||||||
Total Net Assets |
$ | 74,486 | $ | 262,833 | $ | 30,548 | $ | 199,932 | $ | 83,569 | ||||||||||
|
|
|||||||||||||||||||
Net Assets: |
||||||||||||||||||||
Variable Life Policies Issued |
||||||||||||||||||||
Before October 11, 1995 |
||||||||||||||||||||
Policyowners Equity |
$ | 5,294 | $ | 12,043 | $ | 2,681 | $ | 15,038 | $ | 3,791 | ||||||||||
Northwestern Mutual Equity |
49 | 120 | 24 | 140 | 53 | |||||||||||||||
Variable CompLife Policies Issued Between October 11, 1995 and December 31, 2008 (2) |
||||||||||||||||||||
Policyowners Equity |
64,225 | 233,891 | 25,404 | 171,391 | 71,199 | |||||||||||||||
Northwestern Mutual Equity |
1,355 | 5,019 | 450 | 3,771 | 1,711 | |||||||||||||||
Variable Executive Life Policies Issued Between March 2, 1998 and December 31, 2008 (3) |
||||||||||||||||||||
Policyowners Equity |
1,360 | 4,234 | 1,302 | 2,153 | 3,623 | |||||||||||||||
Variable Joint Life Policies Issued Between December 10, 1998 and December 31, 2008 (4) |
||||||||||||||||||||
Policyowners Equity |
2,203 | 7,526 | 687 | 7,439 | 3,192 | |||||||||||||||
|
|
|||||||||||||||||||
Total Net Assets |
$ | 74,486 | $ | 262,833 | $ | 30,548 | $ | 199,932 | $ | 83,569 | ||||||||||
|
|
|||||||||||||||||||
(1) Investments, at cost |
$ | 60,214 | $ | 224,204 | $ | 27,585 | $ | 148,911 | $ | 88,843 | ||||||||||
Mutual Fund Shares Held |
43,127 | 109,778 | 22,455 | 82,586 | 67,321 | |||||||||||||||
(2) Accumulation Unit Value |
$ | 3.666285 | $ | 4.055279 | $ | 1.937744 | $ | 3.959369 | $ | 1.724317 | ||||||||||
Units Outstanding |
17,890 | 58,914 | 13,342 | 44,243 | 42,284 | |||||||||||||||
(3) Accumulation Unit Value |
$ | 39.139970 | $ | 53.557262 | $ | 21.724279 | $ | 42.713658 | $ | 18.601991 | ||||||||||
Units Outstanding |
35 | 79 | 60 | 50 | 195 | |||||||||||||||
(4) Accumulation Unit Value |
$ | 39.139970 | $ | 53.557262 | $ | 21.724279 | $ | 42.713658 | $ | 18.601991 | ||||||||||
Units Outstanding |
56 | 141 | 32 | 174 | 172 |
The Accompanying Notes are an Integral Part of the Financial Statements.
F-4
Northwestern Mutual Variable Life Account
Statements of Assets and Liabilities
December 31, 2016
(in thousands, except accumulation unit values)
Research International Core Division |
International Equity Division |
Emerging Markets Equity Division |
Government Money Market Division |
Short-Term Bond Division |
||||||||||||||||
|
|
|||||||||||||||||||
Assets: |
||||||||||||||||||||
Investments, at fair value (1) |
||||||||||||||||||||
Northwestern Mutual Series Fund, Inc |
$ | 26,529 | $ | 502,271 | $ | 39,220 | $ | 165,450 | $ | 20,401 | ||||||||||
Fidelity Variable Insurance Products Fund |
- | - | - | - | - | |||||||||||||||
Neuberger Berman Advisers Management Trust |
- | - | - | - | - | |||||||||||||||
Russell Investment Funds |
- | - | - | - | - | |||||||||||||||
Credit Suisse Trust |
- | - | - | - | - | |||||||||||||||
Due from Northwestern Mutual Life Insurance Company |
26 | 20 | 11 | - | 4 | |||||||||||||||
|
|
|||||||||||||||||||
Total Assets |
26,555 | 502,291 | 39,231 | 165,450 | 20,405 | |||||||||||||||
|
|
|||||||||||||||||||
Liabilities: |
||||||||||||||||||||
Due to Northwestern Mutual Life Insurance Company |
- | - | - | 38 | - | |||||||||||||||
Due to Participants |
- | - | - | 613 | - | |||||||||||||||
|
|
|||||||||||||||||||
Total Liabilities |
- | - | - | 651 | - | |||||||||||||||
|
|
|||||||||||||||||||
Total Net Assets |
$ | 26,555 | $ | 502,291 | $ | 39,231 | $ | 164,799 | $ | 20,405 | ||||||||||
|
|
|||||||||||||||||||
Net Assets: |
||||||||||||||||||||
Variable Life Policies Issued |
||||||||||||||||||||
Before October 11, 1995 |
||||||||||||||||||||
Policyowners Equity |
$ | 1,441 | $ | 59,514 | $ | 2,005 | $ | 12,134 | $ | 1,987 | ||||||||||
Northwestern Mutual Equity |
31 | 884 | 32 | 201 | 18 | |||||||||||||||
Variable CompLife Policies Issued Between October 11, 1995 and December 31, 2008 (2) |
||||||||||||||||||||
Policyowners Equity |
21,696 | 409,836 | 33,242 | 122,983 | 16,518 | |||||||||||||||
Northwestern Mutual Equity |
455 | 9,013 | 676 | 3,898 | 270 | |||||||||||||||
Variable Executive Life Policies Issued Between March 2, 1998 and December 31, 2008 (3) |
||||||||||||||||||||
Policyowners Equity |
2,161 | 9,324 | 1,511 | 9,512 | 424 | |||||||||||||||
Variable Joint Life Policies Issued Between December 10, 1998 and December 31, 2008 (4) |
||||||||||||||||||||
Policyowners Equity |
771 | 13,720 | 1,765 | 16,071 | 1,188 | |||||||||||||||
|
|
|||||||||||||||||||
Total Net Assets |
$ | 26,555 | $ | 502,291 | $ | 39,231 | $ | 164,799 | $ | 20,405 | ||||||||||
|
|
|||||||||||||||||||
(1) Investments, at cost |
$ | 28,258 | $ | 538,514 | $ | 42,876 | $ | 165,450 | $ | 20,430 | ||||||||||
Mutual Fund Shares Held |
32,234 | 313,332 | 44,978 | 165,450 | 19,749 | |||||||||||||||
(2) Accumulation Unit Value |
$ | 1.038788 | $ | 3.220087 | $ | 0.805449 | $ | 1.527011 | $ | 1.025038 | ||||||||||
Units Outstanding |
21,324 | 130,074 | 42,112 | 83,091 | 16,377 | |||||||||||||||
(3) Accumulation Unit Value |
$ | 9.985604 | $ | 4.983406 | $ | 9.676365 | $ | 41.625993 | $ | 12.481062 | ||||||||||
Units Outstanding |
216 | 1,871 | 156 | 243 | 34 | |||||||||||||||
(4) Accumulation Unit Value |
$ | 9.985604 | $ | 4.983406 | $ | 9.676365 | $ | 41.625993 | $ | 12.481062 | ||||||||||
Units Outstanding |
77 | 2,753 | 182 | 386 | 95 |
The Accompanying Notes are an Integral Part of the Financial Statements.
F-5
Northwestern Mutual Variable Life Account
Statements of Assets and Liabilities
December 31, 2016
(in thousands, except accumulation unit values)
Select Bond Division |
Long-Term U.S. Government Bond Division |
Inflation Protection Division |
High Yield Bond Division |
Multi-Sector Bond Division |
||||||||||||||||
|
|
|||||||||||||||||||
Assets: |
||||||||||||||||||||
Investments, at fair value (1) |
||||||||||||||||||||
Northwestern Mutual Series Fund, Inc |
$ | 249,031 | $ | 9,591 | $ | 8,985 | $ | 110,846 | $ | 32,973 | ||||||||||
Fidelity Variable Insurance Products Fund |
- | - | - | - | - | |||||||||||||||
Neuberger Berman Advisers Management Trust |
- | - | - | - | - | |||||||||||||||
Russell Investment Funds |
- | - | - | - | - | |||||||||||||||
Credit Suisse Trust |
- | - | - | - | - | |||||||||||||||
Due from Northwestern Mutual Life Insurance Company |
87 | 3 | 2 | - | 4 | |||||||||||||||
|
|
|||||||||||||||||||
Total Assets |
249,118 | 9,594 | 8,987 | 110,846 | 32,977 | |||||||||||||||
|
|
|||||||||||||||||||
Liabilities: |
||||||||||||||||||||
Due to Northwestern Mutual Life Insurance Company |
- | - | - | 4 | - | |||||||||||||||
Due to Participants |
- | - | - | - | - | |||||||||||||||
|
|
|||||||||||||||||||
Total Liabilities |
- | - | - | 4 | - | |||||||||||||||
|
|
|||||||||||||||||||
Total Net Assets |
$ | 249,118 | $ | 9,594 | $ | 8,987 | $ | 110,842 | $ | 32,977 | ||||||||||
|
|
|||||||||||||||||||
Net Assets: |
||||||||||||||||||||
Variable Life Policies Issued |
||||||||||||||||||||
Before October 11, 1995 |
||||||||||||||||||||
Policyowners Equity |
$ | 23,819 | $ | 706 | $ | 464 | $ | 7,759 | $ | 1,844 | ||||||||||
Northwestern Mutual Equity |
351 | 13 | 6 | 92 | 19 | |||||||||||||||
Variable CompLife Policies Issued Between October 11, 1995 and December 31, 2008 (2) |
||||||||||||||||||||
Policyowners Equity |
189,812 | 8,662 | 7,233 | 93,678 | 28,783 | |||||||||||||||
Northwestern Mutual Equity |
4,402 | 195 | 146 | 1,966 | 605 | |||||||||||||||
Variable Executive Life Policies Issued Between March 2, 1998 and December 31, 2008 (3) |
||||||||||||||||||||
Policyowners Equity |
20,408 | 18 | 379 | 4,745 | 308 | |||||||||||||||
Variable Joint Life Policies Issued Between December 10, 1998 and December 31, 2008 (4) |
||||||||||||||||||||
Policyowners Equity |
10,326 | - | 759 | 2,602 | 1,418 | |||||||||||||||
|
|
|||||||||||||||||||
Total Net Assets |
$ | 249,118 | $ | 9,594 | $ | 8,987 | $ | 110,842 | $ | 32,977 | ||||||||||
|
|
|||||||||||||||||||
(1) Investments, at cost |
$ | 251,071 | $ | 10,478 | $ | 9,116 | $ | 104,257 | $ | 34,064 | ||||||||||
Mutual Fund Shares Held |
198,273 | 9,083 | 8,273 | 150,198 | 31,433 | |||||||||||||||
(2) Accumulation Unit Value |
$ | 2.742774 | $ | 1.353810 | $ | 1.080563 | $ | 3.737039 | $ | 1.258995 | ||||||||||
Units Outstanding |
70,809 | 6,542 | 6,830 | 25,594 | 23,343 | |||||||||||||||
(3) Accumulation Unit Value |
$ | 219.047810 | $ | 19.104481 | $ | 14.229840 | $ | 49.707921 | $ | 17.327635 | ||||||||||
Units Outstanding |
93 | 1 | 27 | 95 | 18 | |||||||||||||||
(4) Accumulation Unit Value |
$ | 219.047810 | $ | 19.104481 | $ | 14.229840 | $ | 49.707921 | $ | 17.327635 | ||||||||||
Units Outstanding |
47 | - | 53 | 52 | 82 |
The Accompanying Notes are an Integral Part of the Financial Statements.
F-6
Northwestern Mutual Variable Life Account
Statements of Assets and Liabilities
December 31, 2016
(in thousands, except accumulation unit values)
Balanced Division |
Asset Allocation Division |
Fidelity VIP Mid Cap Division |
Fidelity VIP Contrafund Division |
Neuberger Berman AMT Socially Responsive Division |
||||||||||||||||
|
|
|||||||||||||||||||
Assets: |
||||||||||||||||||||
Investments, at fair value (1) |
||||||||||||||||||||
Northwestern Mutual Series Fund, Inc |
$ | 347,361 | $ | 44,894 | $ | - | $ | - | $ | - | ||||||||||
Fidelity Variable Insurance Products Fund |
- | - | 169,968 | 38,208 | - | |||||||||||||||
Neuberger Berman Advisers Management Trust |
- | - | - | - | 4,887 | |||||||||||||||
Russell Investment Funds |
- | - | - | - | - | |||||||||||||||
Credit Suisse Trust |
- | - | - | - | - | |||||||||||||||
Due from Northwestern Mutual Life Insurance Company |
42 | 1 | 17 | 3 | - | |||||||||||||||
|
|
|||||||||||||||||||
Total Assets |
347,403 | 44,895 | 169,985 | 38,211 | 4,887 | |||||||||||||||
|
|
|||||||||||||||||||
Liabilities: |
||||||||||||||||||||
Due to Northwestern Mutual Life Insurance Company |
- | - | - | - | - | |||||||||||||||
Due to Participants |
- | - | - | - | - | |||||||||||||||
|
|
|||||||||||||||||||
Total Liabilities |
- | - | - | - | - | |||||||||||||||
|
|
|||||||||||||||||||
Total Net Assets |
$ | 347,403 | $ | 44,895 | $ | 169,985 | $ | 38,211 | $ | 4,887 | ||||||||||
|
|
|||||||||||||||||||
Net Assets: |
||||||||||||||||||||
Variable Life Policies Issued |
||||||||||||||||||||
Before October 11, 1995 |
||||||||||||||||||||
Policyowners Equity |
$ | 161,182 | $ | 5,986 | $ | 15,122 | $ | 2,737 | $ | 270 | ||||||||||
Northwestern Mutual Equity |
1,523 | 74 | 147 | 28 | 3 | |||||||||||||||
Variable CompLife Policies Issued Between October 11, 1995 and December 31, 2008 (2) |
||||||||||||||||||||
Policyowners Equity |
167,083 | 34,840 | 141,973 | 32,576 | 3,776 | |||||||||||||||
Northwestern Mutual Equity |
3,962 | 816 | 3,273 | 627 | 75 | |||||||||||||||
Variable Executive Life Policies Issued Between March 2, 1998 and December 31, 2008 (3) |
||||||||||||||||||||
Policyowners Equity |
6,843 | 911 | 3,660 | 826 | 221 | |||||||||||||||
Variable Joint Life Policies Issued Between December 10, 1998 and December 31, 2008 (4) |
||||||||||||||||||||
Policyowners Equity |
6,810 | 2,268 | 5,810 | 1,417 | 542 | |||||||||||||||
|
|
|||||||||||||||||||
Total Net Assets |
$ | 347,403 | $ | 44,895 | $ | 169,985 | $ | 38,211 | $ | 4,887 | ||||||||||
|
|
|||||||||||||||||||
(1) Investments, at cost |
$ | 354,915 | $ | 44,004 | $ | 154,986 | $ | 36,641 | $ | 4,542 | ||||||||||
Mutual Fund Shares Held |
248,293 | 40,012 | 5,146 | 1,177 | 217 | |||||||||||||||
(2) Accumulation Unit Value |
$ | 3.512832 | $ | 2.038314 | $ | 4.417776 | $ | 1.658952 | $ | 1.640254 | ||||||||||
Units Outstanding |
48,692 | 17,493 | 32,879 | 20,014 | 2,348 | |||||||||||||||
(3) Accumulation Unit Value |
$ | 193.563662 | $ | 21.988973 | $ | 47.161926 | $ | 18.124509 | $ | 17.797220 | ||||||||||
Units Outstanding |
35 | 41 | 78 | 46 | 12 | |||||||||||||||
(4) Accumulation Unit Value |
$ | 193.563662 | $ | 21.988973 | $ | 47.161926 | $ | 18.124509 | $ | 17.797220 | ||||||||||
Units Outstanding |
35 | 103 | 123 | 78 | 30 |
The Accompanying Notes are an Integral Part of the Financial Statements.
F-7
Northwestern Mutual Variable Life Account
Statements of Assets and Liabilities
December 31, 2016
(in thousands, except accumulation unit values)
Russell Multi-Style Equity Division |
Russell Aggressive Equity Division |
Russell Non-U.S. Division |
Russell Core Bond Division |
Russell Global Real Estate Securities Division |
||||||||||||||||
|
|
|||||||||||||||||||
Assets: |
||||||||||||||||||||
Investments, at fair value (1) |
||||||||||||||||||||
Northwestern Mutual Series Fund, Inc |
$ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||
Fidelity Variable Insurance Products Fund |
- | - | - | - | - | |||||||||||||||
Neuberger Berman Advisers Management Trust |
- | - | - | - | - | |||||||||||||||
Russell Investment Funds |
205,054 | 100,419 | 116,128 | 86,289 | 168,651 | |||||||||||||||
Credit Suisse Trust |
- | - | - | - | - | |||||||||||||||
Due from Northwestern Mutual Life Insurance Company |
- | - | 23 | 24 | - | |||||||||||||||
|
|
|||||||||||||||||||
Total Assets |
205,054 | 100,419 | 116,151 | 86,313 | 168,651 | |||||||||||||||
|
|
|||||||||||||||||||
Liabilities: |
||||||||||||||||||||
Due to Northwestern Mutual Life Insurance Company |
68 | 37 | - | - | 4 | |||||||||||||||
Due to Participants |
- | - | - | - | - | |||||||||||||||
|
|
|||||||||||||||||||
Total Liabilities |
68 | 37 | - | - | 4 | |||||||||||||||
|
|
|||||||||||||||||||
Total Net Assets |
$ | 204,986 | $ | 100,382 | $ | 116,151 | $ | 86,313 | $ | 168,647 | ||||||||||
|
|
|||||||||||||||||||
Net Assets: |
||||||||||||||||||||
Variable Life Policies Issued |
||||||||||||||||||||
Before October 11, 1995 |
||||||||||||||||||||
Policyowners Equity |
$ | 9,652 | $ | 6,382 | $ | 7,355 | $ | 5,702 | $ | 9,257 | ||||||||||
Northwestern Mutual Equity |
96 | 59 | 102 | 103 | 104 | |||||||||||||||
Variable CompLife Policies Issued Between October 11, 1995 and December 31, 2008 (2) |
||||||||||||||||||||
Policyowners Equity |
172,813 | 85,782 | 96,104 | 63,671 | 145,377 | |||||||||||||||
Northwestern Mutual Equity |
3,971 | 2,011 | 2,220 | 1,524 | 3,349 | |||||||||||||||
Variable Executive Life Policies Issued Between March 2, 1998 and December 31, 2008 (3) |
||||||||||||||||||||
Policyowners Equity |
10,043 | 3,270 | 6,338 | 11,742 | 4,934 | |||||||||||||||
Variable Joint Life Policies Issued Between December 10, 1998 and December 31, 2008 (4) |
||||||||||||||||||||
Policyowners Equity |
8,411 | 2,878 | 4,032 | 3,571 | 5,626 | |||||||||||||||
|
|
|||||||||||||||||||
Total Net Assets |
$ | 204,986 | $ | 100,382 | $ | 116,151 | $ | 86,313 | $ | 168,647 | ||||||||||
|
|
|||||||||||||||||||
(1) Investments, at cost |
$ | 181,844 | $ | 87,025 | $ | 118,768 | $ | 90,054 | $ | 179,555 | ||||||||||
Mutual Fund Shares Held |
12,005 | 6,602 | 10,415 | 8,526 | 12,047 | |||||||||||||||
(2) Accumulation Unit Value |
$ | 1.797106 | $ | 2.590944 | $ | 1.635824 | $ | 2.224732 | $ | 4.286703 | ||||||||||
Units Outstanding |
98,376 | 33,885 | 60,105 | 29,304 | 34,695 | |||||||||||||||
(3) Accumulation Unit Value |
$ | 20.214494 | $ | 29.891437 | $ | 17.976751 | $ | 23.970161 | $ | 46.124107 | ||||||||||
Units Outstanding |
497 | 109 | 353 | 490 | 107 | |||||||||||||||
(4) Accumulation Unit Value |
$ | 20.214494 | $ | 29.891437 | $ | 17.976751 | $ | 23.970161 | $ | 46.124107 | ||||||||||
Units Outstanding |
416 | 96 | 224 | 149 | 122 |
The Accompanying Notes are an Integral Part of the Financial Statements.
F-8
Northwestern Mutual Variable Life Account
Statements of Assets and Liabilities
December 31, 2016
(in thousands, except accumulation unit values)
Russell LifePoints Moderate Strategy Division |
Russell LifePoints Balanced Strategy Division |
Russell LifePoints Growth Strategy Division |
Russell LifePoints Equity Growth Strategy Division |
Credit Suisse Trust Commodity Return Strategy Division |
||||||||||||||||
|
|
|||||||||||||||||||
Assets: |
||||||||||||||||||||
Investments, at fair value (1) |
||||||||||||||||||||
Northwestern Mutual Series Fund, Inc |
$ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||
Fidelity Variable Insurance Products Fund |
- | - | - | - | - | |||||||||||||||
Neuberger Berman Advisers Management Trust |
- | - | - | - | - | |||||||||||||||
Russell Investment Funds |
5,175 | 18,768 | 19,554 | 10,823 | - | |||||||||||||||
Credit Suisse Trust |
- | - | - | - | 18,979 | |||||||||||||||
Due from Northwestern Mutual Life Insurance Company |
- | 2 | 5 | - | - | |||||||||||||||
|
|
|||||||||||||||||||
Total Assets |
5,175 | 18,770 | 19,559 | 10,823 | 18,979 | |||||||||||||||
|
|
|||||||||||||||||||
Liabilities: |
||||||||||||||||||||
Due to Northwestern Mutual Life Insurance Company |
- | - | - | - | 1 | |||||||||||||||
Due to Participants |
- | - | - | - | - | |||||||||||||||
|
|
|||||||||||||||||||
Total Liabilities |
- | - | - | - | 1 | |||||||||||||||
|
|
|||||||||||||||||||
Total Net Assets |
$ | 5,175 | $ | 18,770 | $ | 19,559 | $ | 10,823 | $ | 18,978 | ||||||||||
|
|
|||||||||||||||||||
Net Assets: |
||||||||||||||||||||
Variable Life Policies Issued |
||||||||||||||||||||
Before October 11, 1995 |
||||||||||||||||||||
Policyowners Equity |
$ | 810 | $ | 4,406 | $ | 3,266 | $ | 1,014 | $ | 541 | ||||||||||
Northwestern Mutual Equity |
7 | 56 | 41 | 13 | 8 | |||||||||||||||
Variable CompLife Policies Issued Between October 11, 1995 and December 31, 2008 (2) |
||||||||||||||||||||
Policyowners Equity |
4,242 | 13,598 | 15,593 | 8,817 | 16,182 | |||||||||||||||
Northwestern Mutual Equity |
85 | 299 | 363 | 205 | 351 | |||||||||||||||
Variable Executive Life Policies Issued Between March 2, 1998 and December 31, 2008 (3) |
||||||||||||||||||||
Policyowners Equity |
30 | 100 | 1 | - | 1,032 | |||||||||||||||
Variable Joint Life Policies Issued Between December 10, 1998 and December 31, 2008 (4) |
||||||||||||||||||||
Policyowners Equity |
1 | 311 | 295 | 774 | 864 | |||||||||||||||
|
|
|||||||||||||||||||
Total Net Assets |
$ | 5,175 | $ | 18,770 | $ | 19,559 | $ | 10,823 | $ | 18,978 | ||||||||||
|
|
|||||||||||||||||||
(1) Investments, at cost |
$ | 5,317 | $ | 19,474 | $ | 19,694 | $ | 10,494 | $ | 23,624 | ||||||||||
Mutual Fund Shares Held |
534 | 1,927 | 2,052 | 1,213 | 4,333 | |||||||||||||||
(2) Accumulation Unit Value |
$ | 1.237730 | $ | 1.290626 | $ | 1.298639 | $ | 1.328754 | $ | 5.316102 | ||||||||||
Units Outstanding |
3,495 | 10,768 | 12,286 | 6,790 | 3,110 | |||||||||||||||
(3) Accumulation Unit Value |
$ | 15.067752 | $ | 14.773443 | $ | 13.860030 | $ | 12.946453 | $ | 4.942479 | ||||||||||
Units Outstanding |
2 | 7 | - | - | 209 | |||||||||||||||
(4) Accumulation Unit Value |
$ | 15.067752 | $ | 14.773443 | $ | 13.860030 | $ | 12.946453 | $ | 4.942479 | ||||||||||
Units Outstanding |
- | 21 | 21 | 60 | 175 |
The Accompanying Notes are an Integral Part of the Financial Statements.
F-9
Northwestern Mutual Variable Life Account
Statements of Operations
For the Year Ended December 31, 2016
(in thousands)
Growth Stock Division |
Focused Appreciation Division |
Large Cap Core Stock |
Large Cap Blend Division |
Index 500 Stock Division |
||||||||||||||||
|
|
|||||||||||||||||||
Income: |
||||||||||||||||||||
Dividend income |
$ | 3,301 | $ | 335 | $ | 4,953 | $ | 98 | $ | 21,212 | ||||||||||
Expenses: |
||||||||||||||||||||
Mortality and expense risk charges |
1,664 | 600 | 997 | 40 | 4,932 | |||||||||||||||
Taxes |
17 | 5 | 13 | - | 79 | |||||||||||||||
|
|
|||||||||||||||||||
Total expenses |
1,681 | 605 | 1,010 | 40 | 5,011 | |||||||||||||||
|
|
|||||||||||||||||||
Net investment income (loss) |
1,620 | (270 | ) | 3,943 | 58 | 16,201 | ||||||||||||||
|
|
|||||||||||||||||||
Realized gain (loss) on investments: |
||||||||||||||||||||
Realized gain (loss) on sale of fund shares |
8,856 | 3,117 | 4,839 | 359 | 15,206 | |||||||||||||||
Realized gain distribution |
37,040 | 39,516 | 4,145 | 718 | 24,119 | |||||||||||||||
|
|
|||||||||||||||||||
Realized gains (losses) |
45,896 | 42,633 | 8,984 | 1,077 | 39,325 | |||||||||||||||
|
|
|||||||||||||||||||
Change in unrealized appreciation/(depreciation) of investments during the period |
(40,014 | ) | (34,783 | ) | 2,919 | 46 | 68,263 | |||||||||||||
|
|
|||||||||||||||||||
Net increase (decrease) in net assets resulting from operations |
$ | 7,502 | $ | 7,580 | $ | 15,846 | $ | 1,181 | $ | 123,789 | ||||||||||
|
|
|||||||||||||||||||
Large Company Value Division |
Domestic Equity Division |
Equity Income Division |
Mid Cap Growth Stock Division |
Index 400 Stock Division |
||||||||||||||||
|
|
|||||||||||||||||||
Income: |
||||||||||||||||||||
Dividend income |
$ | 189 | $ | 3,583 | $ | 2,268 | $ | 809 | $ | 3,377 | ||||||||||
Expenses: |
||||||||||||||||||||
Mortality and expense risk charges |
47 | 818 | 471 | 1,937 | 1,231 | |||||||||||||||
Taxes |
- | 9 | 5 | 31 | 8 | |||||||||||||||
|
|
|||||||||||||||||||
Total expenses |
47 | 827 | 476 | 1,968 | 1,239 | |||||||||||||||
|
|
|||||||||||||||||||
Net investment income (loss) |
142 | 2,756 | 1,792 | (1,159 | ) | 2,138 | ||||||||||||||
|
|
|||||||||||||||||||
Realized gain (loss) on investments: |
||||||||||||||||||||
Realized gain (loss) on sale of fund shares |
(42 | ) | 3,359 | 1,955 | 2,587 | 4,676 | ||||||||||||||
Realized gain distribution |
1,000 | 7,418 | 5,891 | 35,148 | 21,974 | |||||||||||||||
|
|
|||||||||||||||||||
Realized gains (losses) |
958 | 10,777 | 7,846 | 37,735 | 26,650 | |||||||||||||||
|
|
|||||||||||||||||||
Change in unrealized appreciation/(depreciation) of investments during the period |
477 | 12,436 | 9,616 | (35,131 | ) | 25,003 | ||||||||||||||
|
|
|||||||||||||||||||
Net increase (decrease) in net assets resulting from operations |
$ | 1,577 | $ | 25,969 | $ | 19,254 | $ | 1,445 | $ | 53,791 | ||||||||||
|
|
The Accompanying Notes are an Integral Part of the Financial Statements.
F-10
Northwestern Mutual Variable Life Account
Statements of Operations
For the Year Ended December 31, 2016
(in thousands)
Mid Cap Value Division |
Small Cap Growth Stock Division |
Index 600 Stock Division |
Small Cap Value Division |
International Growth Division |
||||||||||||||||
|
|
|||||||||||||||||||
Income: |
||||||||||||||||||||
Dividend income |
$ | 1,091 | $ | 554 | $ | 140 | $ | 1,580 | $ | 989 | ||||||||||
Expenses: |
||||||||||||||||||||
Mortality and expense risk charges |
275 | 1,031 | 102 | 719 | 357 | |||||||||||||||
Taxes |
2 | 6 | 1 | 6 | 2 | |||||||||||||||
|
|
|||||||||||||||||||
Total expenses |
277 | 1,037 | 103 | 725 | 359 | |||||||||||||||
|
|
|||||||||||||||||||
Net investment income (loss) |
814 | (483 | ) | 37 | 855 | 630 | ||||||||||||||
|
|
|||||||||||||||||||
Realized gain (loss) on investments: |
||||||||||||||||||||
Realized gain (loss) on sale of fund shares |
993 | 1,526 | 151 | 3,733 | (1,804 | ) | ||||||||||||||
Realized gain distribution |
4,897 | 24,708 | 1,126 | 21,158 | - | |||||||||||||||
|
|
|||||||||||||||||||
Realized gains (losses) |
5,890 | 26,234 | 1,277 | 24,891 | (1,804 | ) | ||||||||||||||
|
|
|||||||||||||||||||
Change in unrealized appreciation/(depreciation) of investments during the period |
6,614 | 1,743 | 4,539 | 22,755 | (2,196 | ) | ||||||||||||||
|
|
|||||||||||||||||||
Net increase (decrease) in net assets resulting from operations |
$ | 13,318 | $ | 27,494 | $ | 5,853 | $ | 48,501 | $ | (3,370 | ) | |||||||||
|
|
|||||||||||||||||||
Research International Core Division |
International Equity Division |
Emerging Markets Equity Division |
Government Money Market Division |
Short-Term Bond Division |
||||||||||||||||
|
|
|||||||||||||||||||
Income: |
||||||||||||||||||||
Dividend income |
$ | 451 | $ | 10,329 | $ | 268 | $ | 208 | $ | 225 | ||||||||||
Expenses: |
||||||||||||||||||||
Mortality and expense risk charges |
103 | 2,084 | 150 | 635 | 79 | |||||||||||||||
Taxes |
1 | 29 | 1 | 6 | 1 | |||||||||||||||
|
|
|||||||||||||||||||
Total expenses |
104 | 2,113 | 151 | 641 | 80 | |||||||||||||||
|
|
|||||||||||||||||||
Net investment income (loss) |
347 | 8,216 | 117 | (433 | ) | 145 | ||||||||||||||
|
|
|||||||||||||||||||
Realized gain (loss) on investments: |
||||||||||||||||||||
Realized gain (loss) on sale of fund shares |
2 | 3,436 | (993 | ) | - | 48 | ||||||||||||||
Realized gain distribution |
223 | 6,358 | - | 13 | - | |||||||||||||||
|
|
|||||||||||||||||||
Realized gains (losses) |
225 | 9,794 | (993 | ) | 13 | 48 | ||||||||||||||
|
|
|||||||||||||||||||
Change in unrealized appreciation/(depreciation) of investments during the period |
(925 | ) | (6,228 | ) | 3,939 | - | 15 | |||||||||||||
|
|
|||||||||||||||||||
Net increase (decrease) in net assets resulting from operations |
$ | (353 | ) | $ | 11,782 | $ | 3,063 | $ | (420 | ) | $ | 208 | ||||||||
|
|
The Accompanying Notes are an Integral Part of the Financial Statements.
F-11
Northwestern Mutual Variable Life Account
Statements of Operations
For the Year Ended December 31, 2016
(in thousands)
Select Bond Division |
Long-Term U.S. Government Bond Division |
Inflation Protection Division |
High Yield Bond Division |
Multi-Sector Bond Division |
||||||||||||||||
|
|
|||||||||||||||||||
Income: |
||||||||||||||||||||
Dividend income |
$ | 4,894 | $ | 202 | $ | 104 | $ | 5,718 | $ | 1,399 | ||||||||||
Expenses: |
||||||||||||||||||||
Mortality and expense risk charges |
997 | 48 | 33 | 450 | 131 | |||||||||||||||
Taxes |
12 | - | - | 4 | 1 | |||||||||||||||
|
|
|||||||||||||||||||
Total expenses |
1,009 | 48 | 33 | 454 | 132 | |||||||||||||||
|
|
|||||||||||||||||||
Net investment income (loss) |
3,885 | 154 | 71 | 5,264 | 1,267 | |||||||||||||||
|
|
|||||||||||||||||||
Realized gain (loss) on investments: |
||||||||||||||||||||
Realized gain (loss) on sale of fund shares |
776 | 373 | (262 | ) | 153 | (342 | ) | |||||||||||||
Realized gain distribution |
1,357 | 185 | - | - | - | |||||||||||||||
|
|
|||||||||||||||||||
Realized gains (losses) |
2,133 | 558 | (262 | ) | 153 | (342 | ) | |||||||||||||
|
|
|||||||||||||||||||
Change in unrealized appreciation/(depreciation) of investments during the period |
363 | (813 | ) | 513 | 8,628 | 1,983 | ||||||||||||||
|
|
|||||||||||||||||||
Net increase (decrease) in net assets resulting from operations |
$ | 6,381 | $ | (101 | ) | $ | 322 | $ | 14,045 | $ | 2,908 | |||||||||
|
|
|||||||||||||||||||
Balanced Division |
Asset Allocation Division |
Fidelity VIP Mid Cap Division |
Fidelity VIP Contrafund Division |
Neuberger Berman AMT Socially Responsive Division |
||||||||||||||||
|
|
|||||||||||||||||||
Income: |
||||||||||||||||||||
Dividend income |
$ | 7,709 | $ | 1,049 | $ | 509 | $ | 229 | $ | 32 | ||||||||||
Expenses: |
||||||||||||||||||||
Mortality and expense risk charges |
1,552 | 186 | 683 | 157 | 17 | |||||||||||||||
Taxes |
81 | 3 | 7 | 1 | - | |||||||||||||||
|
|
|||||||||||||||||||
Total expenses |
1,633 | 189 | 690 | 158 | 17 | |||||||||||||||
|
|
|||||||||||||||||||
Net investment income (loss) |
6,076 | 860 | (181 | ) | 71 | 15 | ||||||||||||||
|
|
|||||||||||||||||||
Realized gain (loss) on investments: |
||||||||||||||||||||
Realized gain (loss) on sale of fund shares |
(9,605 | ) | 1,029 | (70 | ) | 1,005 | 125 | |||||||||||||
Realized gain distribution |
9,651 | 1,631 | 10,093 | 3,133 | 167 | |||||||||||||||
|
|
|||||||||||||||||||
Realized gains (losses) |
46 | 2,660 | 10,023 | 4,138 | 292 | |||||||||||||||
|
|
|||||||||||||||||||
Change in unrealized appreciation/(depreciation) of investments during the period |
13,568 | (399 | ) | 7,801 | (1,716 | ) | 114 | |||||||||||||
|
|
|||||||||||||||||||
Net increase (decrease) in net assets resulting from operations |
$ | 19,690 | $ | 3,121 | $ | 17,643 | $ | 2,493 | $ | 421 | ||||||||||
|
|
The Accompanying Notes are an Integral Part of the Financial Statements.
F-12
Northwestern Mutual Variable Life Account
Statements of Operations
For the Year Ended December 31, 2016
(in thousands)
Russell Multi-Style Equity Division |
Russell Aggressive Equity Division |
Russell Non-U.S. Division |
Russell Core Bond Division |
Russell Global Real Estate Securities Division |
||||||||||||||||
|
|
|||||||||||||||||||
Income: |
||||||||||||||||||||
Dividend income |
$ | 2,080 | $ | 759 | $ | 3,704 | $ | 1,408 | $ | 7,806 | ||||||||||
Expenses: |
||||||||||||||||||||
Mortality and expense risk charges |
818 | 385 | 471 | 327 | 732 | |||||||||||||||
Taxes |
5 | 3 | 4 | 3 | 5 | |||||||||||||||
|
|
|||||||||||||||||||
Total expenses |
823 | 388 | 475 | 330 | 737 | |||||||||||||||
|
|
|||||||||||||||||||
Net investment income (loss) |
1,257 | 371 | 3,229 | 1,078 | 7,069 | |||||||||||||||
|
|
|||||||||||||||||||
Realized gain (loss) on investments: |
||||||||||||||||||||
Realized gain (loss) on sale of fund shares |
6,026 | (591 | ) | (995 | ) | 820 | (1,047 | ) | ||||||||||||
Realized gain distribution |
12,831 | 49 | - | 2,471 | 5,257 | |||||||||||||||
|
|
|||||||||||||||||||
Realized gains (losses) |
18,857 | (542 | ) | (995 | ) | 3,291 | 4,210 | |||||||||||||
|
|
|||||||||||||||||||
Change in unrealized appreciation/(depreciation) of investments during the period |
(789 | ) | 15,792 | (62 | ) | (2,027 | ) | (6,864 | ) | |||||||||||
|
|
|||||||||||||||||||
Net increase (decrease) in net assets resulting from operations |
$ | 19,325 | $ | 15,621 | $ | 2,172 | $ | 2,342 | $ | 4,415 | ||||||||||
|
|
|||||||||||||||||||
Russell LifePoints Moderate Strategy Division |
Russell LifePoints Balanced Strategy Division |
Russell LifePoints Growth Strategy Division |
Russell LifePoints Equity Growth Strategy Division |
Credit Suisse Strategy |
||||||||||||||||
|
|
|||||||||||||||||||
Income: |
||||||||||||||||||||
Dividend income |
$ | 185 | $ | 602 | $ | 555 | $ | 286 | $ | - | ||||||||||
Expenses: |
||||||||||||||||||||
Mortality and expense risk charges |
23 | 82 | 85 | 40 | 69 | |||||||||||||||
Taxes |
- | 2 | 2 | - | - | |||||||||||||||
|
|
|||||||||||||||||||
Total expenses |
23 | 84 | 87 | 40 | 69 | |||||||||||||||
|
|
|||||||||||||||||||
Net investment income (loss) |
162 | 518 | 468 | 246 | (69 | ) | ||||||||||||||
|
|
|||||||||||||||||||
Realized gain (loss) on investments: |
||||||||||||||||||||
Realized gain (loss) on sale of fund shares |
(68 | ) | 25 | 206 | 53 | (734 | ) | |||||||||||||
Realized gain distribution |
206 | 294 | 1 | - | - | |||||||||||||||
|
|
|||||||||||||||||||
Realized gains (losses) |
138 | 319 | 207 | 53 | (734 | ) | ||||||||||||||
|
|
|||||||||||||||||||
Change in unrealized appreciation/(depreciation) of investments during the period |
90 | 692 | 1,021 | 678 | 2,669 | |||||||||||||||
|
|
|||||||||||||||||||
Net increase (decrease) in net assets resulting from operations |
$ | 390 | $ | 1,529 | $ | 1,696 | $ | 977 | $ | 1,866 | ||||||||||
|
|
The Accompanying Notes are an Integral Part of the Financial Statements.
F-13
Northwestern Mutual Variable Life Account
Statements of Changes in Net Assets
(in thousands)
Growth Stock Division | Focused Appreciation Division |
|||||||||||||||
Year Ended December 31, 2016 |
Year Ended December 31, 2015 |
Year Ended December 31, 2016 |
Year Ended December 31, 2015 |
|||||||||||||
|
|
|
|
|||||||||||||
Operations: |
||||||||||||||||
Net investment income (loss) |
$ | 1,620 | $ | 1,156 | $ | (270 | ) | $ | (566 | ) | ||||||
Net realized gains (losses) |
45,896 | 35,185 | 42,633 | 17,510 | ||||||||||||
Net change in unrealized appreciation/(depreciation) |
(40,014 | ) | (15,204 | ) | (34,783 | ) | (1,126 | ) | ||||||||
|
|
|
|
|||||||||||||
Net increase (decrease) in net assets resulting from operations | 7,502 | 21,137 | 7,580 | 15,818 | ||||||||||||
|
|
|
|
|||||||||||||
Contract Transactions: |
||||||||||||||||
Contract ow ners net payments |
13,339 | 16,403 | 5,361 | 5,461 | ||||||||||||
Policy loans, surrenders and death benefits |
(20,322 | ) | (19,376 | ) | (6,701 | ) | (6,070 | ) | ||||||||
Mortality and other (net) |
(7,996 | ) | (7,916 | ) | (2,967 | ) | (2,737 | ) | ||||||||
Transfers from other divisions or sponsor |
37,564 | 42,591 | 24,168 | 18,610 | ||||||||||||
Transfers to other divisions or sponsor |
(41,210 | ) | (47,062 | ) | (19,714 | ) | (15,217 | ) | ||||||||
|
|
|
|
|||||||||||||
Net increase (decrease) in net assets resulting from contract transactions | (18,625 | ) | (15,360 | ) | 147 | 47 | ||||||||||
|
|
|
|
|||||||||||||
Net increase (decrease) in net assets |
(11,123 | ) | 5,777 | 7,727 | 15,865 | |||||||||||
Net Assets: |
||||||||||||||||
Beginning of period |
392,702 | 386,925 | 138,660 | 122,795 | ||||||||||||
|
|
|
|
|||||||||||||
End of period |
$ | 381,579 | $ | 392,702 | $ | 146,387 | $ | 138,660 | ||||||||
|
|
|
|
|||||||||||||
Units issued during the period |
6,637 | 6,955 | 6,972 | 5,061 | ||||||||||||
Units redeemed during the period |
(10,487 | ) | (10,111 | ) | (7,506 | ) | (5,218 | ) | ||||||||
|
|
|
|
|||||||||||||
Net units issued (redeemed) during period |
(3,850 | ) | (3,156 | ) | (534 | ) | (157 | ) | ||||||||
|
|
|
|
|||||||||||||
Large Cap Core Stock Division | Large Cap Blend Division | |||||||||||||||
Year Ended December 31, 2016 |
Year Ended December 31, 2015 |
Year Ended December 31, 2016 |
Year Ended December 31, 2015 |
|||||||||||||
|
|
|
|
|||||||||||||
Operations: |
||||||||||||||||
Net investment income (loss) |
$ | 3,943 | $ | 3,996 | $ | 58 | $ | 45 | ||||||||
Net realized gains (losses) |
8,984 | 7,077 | 1,077 | 942 | ||||||||||||
Net change in unrealized appreciation/(depreciation) |
2,919 | (19,376 | ) | 46 | (1,289 | ) | ||||||||||
|
|
|
|
|||||||||||||
Net increase (decrease) in net assets resulting from operations | 15,846 | (8,303 | ) | 1,181 | (302 | ) | ||||||||||
|
|
|
|
|||||||||||||
Contract Transactions: |
||||||||||||||||
Contract owners net payments |
9,954 | 10,997 | 345 | 401 | ||||||||||||
Policy loans, surrenders and death benefits |
(11,141 | ) | (11,354 | ) | (391 | ) | (407 | ) | ||||||||
Mortality and other (net) |
(5,363 | ) | (5,092 | ) | (178 | ) | (158 | ) | ||||||||
Transfers from other divisions or sponsor |
20,931 | 22,302 | 2,340 | 3,306 | ||||||||||||
Transfers to other divisions or sponsor |
(24,288 | ) | (24,099 | ) | (2,649 | ) | (2,098 | ) | ||||||||
|
|
|
|
|||||||||||||
Net increase (decrease) in net assets resulting from contract transactions | (9,907 | ) | (7,246 | ) | (533 | ) | 1,044 | |||||||||
|
|
|
|
|||||||||||||
Net increase (decrease) in net assets | 5,939 | (15,549 | ) | 648 | 742 | |||||||||||
Net Assets: |
||||||||||||||||
Beginning of period |
228,494 | 244,043 | 8,934 | 8,192 | ||||||||||||
|
|
|
|
|||||||||||||
End of period |
$ | 234,433 | $ | 228,494 | $ | 9,582 | $ | 8,934 | ||||||||
|
|
|
|
|||||||||||||
Units issued during the period |
6,930 | 6,178 | 1,262 | 2,066 | ||||||||||||
Units redeemed during the period |
(9,324 | ) | (8,346 | ) | (1,607 | ) | (1,332 | ) | ||||||||
|
|
|
|
|||||||||||||
Net units issued (redeemed) during period |
(2,394 | ) | (2,168 | ) | (345 | ) | 734 | |||||||||
|
|
|
|
The Accompanying Notes are an Integral Part of the Financial Statements.
F-14
Northwestern Mutual Variable Life Account
Statements of Changes in Net Assets
(in thousands)
Index 500 Stock Division | Large Company Value Division |
|||||||||||||||
Year Ended December 31, 2016 |
Year Ended December 31, 2015 |
Year Ended December 31, 2016 |
Year Ended December 31, 2015 |
|||||||||||||
|
|
|
|
|||||||||||||
Operations: |
||||||||||||||||
Net investment income (loss) |
$ | 16,201 | $ | 14,059 | $ | 142 | $ | 137 | ||||||||
Net realized gains (losses) |
39,325 | 33,990 | 958 | 1,554 | ||||||||||||
Net change in unrealized appreciation/(depreciation) |
68,263 | (39,564 | ) | 477 | (2,190 | ) | ||||||||||
|
|
|
|
|||||||||||||
Net increase (decrease) in net assets resulting from operations | 123,789 | 8,485 | 1,577 | (499 | ) | |||||||||||
|
|
|
|
|||||||||||||
Contract Transactions: |
||||||||||||||||
Contract owners net payments |
40,344 | 43,263 | 375 | 46 | ||||||||||||
Policy loans, surrenders and death benefits |
(50,095 | ) | (49,812 | ) | (363 | ) | (476 | ) | ||||||||
Mortality and other (net) |
(23,150 | ) | (22,011 | ) | (199 | ) | (195 | ) | ||||||||
Transfers from other divisions or sponsor |
112,605 | 123,814 | 2,778 | 2,935 | ||||||||||||
Transfers to other divisions or sponsor |
(94,494 | ) | (112,923 | ) | (1,884 | ) | (2,752 | ) | ||||||||
|
|
|
|
|||||||||||||
Net increase (decrease) in net assets resulting from contract transactions | (14,790 | ) | (17,669 | ) | 707 | (442 | ) | |||||||||
|
|
|
|
|||||||||||||
Net increase (decrease) in net assets |
108,999 | (9,184 | ) | 2,284 | (941 | ) | ||||||||||
Net Assets: |
||||||||||||||||
Beginning of period |
1,113,211 | 1,122,395 | 10,525 | 11,466 | ||||||||||||
|
|
|
|
|||||||||||||
End of period |
$ | 1,222,210 | $ | 1,113,211 | $ | 12,809 | $ | 10,525 | ||||||||
|
|
|
|
|||||||||||||
Units issued during the period |
19,194 | 19,619 | 1,729 | 1,833 | ||||||||||||
Units redeemed during the period |
(21,574 | ) | (22,012 | ) | (1,316 | ) | (2,125 | ) | ||||||||
|
|
|
|
|||||||||||||
Net units issued (redeemed) during period |
(2,380 | ) | (2,393 | ) | 413 | (292 | ) | |||||||||
|
|
|
|
|||||||||||||
Domestic Equity Division | Equity Income Division | |||||||||||||||
Year Ended December 31, 2016 |
Year Ended December 31, 2015 |
Year Ended December 31, 2016 |
Year Ended December 31, 2015 |
|||||||||||||
|
|
|
|
|||||||||||||
Operations: |
||||||||||||||||
Net investment income (loss) |
$ | 2,756 | $ | 2,593 | $ | 1,792 | $ | 1,472 | ||||||||
Net realized gains (losses) |
10,777 | 2,778 | 7,846 | 5,962 | ||||||||||||
Net change in unrealized appreciation/(depreciation) |
12,436 | (6,299 | ) | 9,616 | (16,053 | ) | ||||||||||
|
|
|
|
|||||||||||||
Net increase (decrease) in net assets resulting from operations | 25,969 | (928 | ) | 19,254 | (8,619 | ) | ||||||||||
|
|
|
|
|||||||||||||
Contract Transactions: |
||||||||||||||||
Contract owners net payments |
6,334 | 7,510 | 4,211 | 4,769 | ||||||||||||
Policy loans, surrenders and death benefits |
(8,607 | ) | (8,549 | ) | (5,023 | ) | (5,561 | ) | ||||||||
Mortality and other (net) |
(3,989 | ) | (3,748 | ) | (2,223 | ) | (2,279 | ) | ||||||||
Transfers from other divisions or sponsor |
20,732 | 17,928 | 32,123 | 40,408 | ||||||||||||
Transfers to other divisions or sponsor |
(20,380 | ) | (19,323 | ) | (35,200 | ) | (42,659 | ) | ||||||||
|
|
|
|
|||||||||||||
Net increase (decrease) in net assets resulting from contract transactions | (5,910 | ) | (6,182 | ) | (6,112 | ) | (5,322 | ) | ||||||||
|
|
|
|
|||||||||||||
Net increase (decrease) in net assets | 20,059 | (7,110 | ) | 13,142 | (13,941 | ) | ||||||||||
Net Assets: |
||||||||||||||||
Beginning of period |
183,664 | 190,774 | 109,208 | 123,149 | ||||||||||||
|
|
|
|
|||||||||||||
End of period |
$ | 203,723 | $ | 183,664 | $ | 122,350 | $ | 109,208 | ||||||||
|
|
|
|
|||||||||||||
Units issued during the period |
10,501 | 8,001 | 5,663 | 5,806 | ||||||||||||
Units redeemed during the period |
(13,180 | ) | (10,092 | ) | (7,532 | ) | (7,530 | ) | ||||||||
|
|
|
|
|||||||||||||
Net units issued (redeemed) during period |
(2,679 | ) | (2,091 | ) | (1,869 | ) | (1,724 | ) | ||||||||
|
|
|
|
The Accompanying Notes are an Integral Part of the Financial Statements.
F-15
Northwestern Mutual Variable Life Account
Statements of Changes in Net Assets
(in thousands)
Mid Cap Growth Stock Division |
Index 400 Stock Division | |||||||||||||||
Year Ended December 31, 2016 |
Year Ended December 31, 2015 |
Year Ended December 31, 2016 |
Year Ended December 31, 2015 |
|||||||||||||
|
|
|
|
|||||||||||||
Operations: |
||||||||||||||||
Net investment income (loss) |
$ | (1,159 | ) | $ | (1,943 | ) | $ | 2,138 | $ | 1,892 | ||||||
Net realized gains (losses) |
37,735 | 48,244 | 26,650 | 23,320 | ||||||||||||
Net change in unrealized appreciation/(depreciation) |
(35,131 | ) | (44,630 | ) | 25,003 | (32,917 | ) | |||||||||
|
|
|
|
|||||||||||||
Net increase (decrease) in net assets resulting from operations | 1,445 | 1,671 | 53,791 | (7,705 | ) | |||||||||||
|
|
|
|
|||||||||||||
Contract Transactions: |
||||||||||||||||
Contract owners net payments |
18,624 | 19,386 | 8,562 | 10,074 | ||||||||||||
Policy loans, surrenders and death benefits |
(23,207 | ) | (23,943 | ) | (13,600 | ) | (14,035 | ) | ||||||||
Mortality and other (net) |
(9,330 | ) | (9,632 | ) | (5,485 | ) | (5,285 | ) | ||||||||
Transfers from other divisions or sponsor |
24,376 | 17,798 | 55,433 | 53,620 | ||||||||||||
Transfers to other divisions or sponsor |
(28,172 | ) | (19,650 | ) | (52,209 | ) | (51,848 | ) | ||||||||
|
|
|
|
|||||||||||||
Net increase (decrease) in net assets resulting from contract transactions | (17,709 | ) | (16,041 | ) | (7,299 | ) | (7,474 | ) | ||||||||
|
|
|
|
|||||||||||||
Net increase (decrease) in net assets |
(16,264 | ) | (14,370 | ) | 46,492 | (15,179 | ) | |||||||||
Net Assets: |
||||||||||||||||
Beginning of period |
450,936 | 465,306 | 275,417 | 290,596 | ||||||||||||
|
|
|
|
|||||||||||||
End of period |
$ | 434,672 | $ | 450,936 | $ | 321,909 | $ | 275,417 | ||||||||
|
|
|
|
|||||||||||||
Units issued during the period |
8,144 | 8,343 | 7,165 | 7,129 | ||||||||||||
Units redeemed during the period |
(11,901 | ) | (11,368 | ) | (9,075 | ) | (8,818 | ) | ||||||||
|
|
|
|
|||||||||||||
Net units issued (redeemed) during period |
(3,757 | ) | (3,025 | ) | (1,910 | ) | (1,689 | ) | ||||||||
|
|
|
|
|||||||||||||
Mid Cap Value Division | Small Cap Growth Stock Division |
|||||||||||||||
Year Ended December 31, 2016 |
Year Ended December 31, 2015 |
Year Ended December 31, 2016 |
Year Ended December 31, 2015 |
|||||||||||||
|
|
|
|
|||||||||||||
Operations: |
||||||||||||||||
Net investment income (loss) |
$ | 814 | $ | 719 | $ | (483 | ) | $ | (850 | ) | ||||||
Net realized gains (losses) |
5,890 | 7,028 | 26,234 | 17,616 | ||||||||||||
Net change in unrealized appreciation/(depreciation) |
6,614 | (8,752 | ) | 1,743 | (16,791 | ) | ||||||||||
|
|
|
|
|||||||||||||
Net increase (decrease) in net assets resulting from operations | 13,318 | (1,005 | ) | 27,494 | (25 | ) | ||||||||||
|
|
|
|
|||||||||||||
Contract Transactions: |
||||||||||||||||
Contract owners net payments |
2,170 | 2,595 | 9,094 | 9,377 | ||||||||||||
Policy loans, surrenders and death benefits |
(2,529 | ) | (3,019 | ) | (11,476 | ) | (13,265 | ) | ||||||||
Mortality and other (net) |
(1,345 | ) | (1,195 | ) | (4,708 | ) | (4,931 | ) | ||||||||
Transfers from other divisions or sponsor |
13,090 | 8,739 | 31,343 | 35,798 | ||||||||||||
Transfers to other divisions or sponsor |
(7,681 | ) | (9,002 | ) | (35,160 | ) | (36,111 | ) | ||||||||
|
|
|
|
|||||||||||||
Net increase (decrease) in net assets resulting from contract transactions | 3,705 | (1,882 | ) | (10,907 | ) | (9,132 | ) | |||||||||
|
|
|
|
|||||||||||||
Net increase (decrease) in net assets | 17,023 | (2,887 | ) | 16,587 | (9,157 | ) | ||||||||||
Net Assets: |
||||||||||||||||
Beginning of period |
57,463 | 60,350 | 246,246 | 255,403 | ||||||||||||
|
|
|
|
|||||||||||||
End of period |
$ | 74,486 | $ | 57,463 | $ | 262,833 | $ | 246,246 | ||||||||
|
|
|
|
|||||||||||||
Units issued during the period |
3,487 | 2,758 | 6,249 | 6,429 | ||||||||||||
Units redeemed during the period |
(2,583 | ) | (3,135 | ) | (8,945 | ) | (8,434 | ) | ||||||||
|
|
|
|
|||||||||||||
Net units issued (redeemed) during period |
904 | (377 | ) | (2,696 | ) | (2,005 | ) | |||||||||
|
|
|
|
The Accompanying Notes are an Integral Part of the Financial Statements.
F-16
Northwestern Mutual Variable Life Account
Statements of Changes in Net Assets
(in thousands)
Index 600 Stock Division | Small Cap Value Division | |||||||||||||||
Year Ended December 31, 2016 |
Year Ended December 31, 2015 |
Year Ended December 31, 2016 |
Year Ended December 31, 2015 |
|||||||||||||
|
|
|
|
|||||||||||||
Operations: |
||||||||||||||||
Net investment income (loss) |
$ | 37 | $ | (91 | ) | $ | 855 | $ | 417 | |||||||
Net realized gains (losses) |
1,277 | 379 | 24,891 | 14,091 | ||||||||||||
Net change in unrealized appreciation/(depreciation) |
4,539 | (841 | ) | 22,755 | (24,363 | ) | ||||||||||
|
|
|
|
|||||||||||||
Net increase (decrease) in net assets resulting from operations | 5,853 | (553 | ) | 48,501 | (9,855 | ) | ||||||||||
|
|
|
|
|||||||||||||
Contract Transactions: |
||||||||||||||||
Contract owners net payments |
784 | 914 | 6,519 | 7,067 | ||||||||||||
Policy loans, surrenders and death benefits |
(979 | ) | (1,019 | ) | (7,329 | ) | (7,296 | ) | ||||||||
Mortality and other (net) |
(454 | ) | (417 | ) | (3,374 | ) | (3,157 | ) | ||||||||
Transfers from other divisions or sponsor |
11,375 | 6,503 | 16,178 | 14,221 | ||||||||||||
Transfers to other divisions or sponsor |
(6,862 | ) | (4,845 | ) | (17,444 | ) | (18,652 | ) | ||||||||
|
|
|
|
|||||||||||||
Net increase (decrease) in net assets resulting from contract transactions | 3,864 | 1,136 | (5,450 | ) | (7,817 | ) | ||||||||||
|
|
|
|
|||||||||||||
Net increase (decrease) in net assets | 9,717 | 583 | 43,051 | (17,672 | ) | |||||||||||
Net Assets: |
||||||||||||||||
Beginning of period |
20,831 | 20,248 | 156,881 | 174,553 | ||||||||||||
|
|
|
|
|||||||||||||
End of period |
$ | 30,548 | $ | 20,831 | $ | 199,932 | $ | 156,881 | ||||||||
|
|
|
|
|||||||||||||
Units issued during the period |
4,422 | 3,326 | 5,511 | 4,699 | ||||||||||||
Units redeemed during the period |
(2,613 | ) | (2,477 | ) | (6,473 | ) | (6,788 | ) | ||||||||
|
|
|
|
|||||||||||||
Net units issued (redeemed) during period | 1,809 | 849 | (962 | ) | (2,089 | ) | ||||||||||
|
|
|
|
|||||||||||||
International Growth Division | Research International Core Division |
|||||||||||||||
Year Ended December 31, 2016 |
Year Ended December 31, 2015 |
Year Ended December 31, 2016 |
Year Ended December 31, 2015 |
|||||||||||||
|
|
|
|
|||||||||||||
Operations: |
||||||||||||||||
Net investment income (loss) |
$ | 630 | $ | 1,164 | $ | 347 | $ | 394 | ||||||||
Net realized gains (losses) |
(1,804 | ) | (285 | ) | 225 | 1,002 | ||||||||||
Net change in unrealized appreciation/(depreciation) |
(2,196 | ) | (2,835 | ) | (925 | ) | (1,884 | ) | ||||||||
|
|
|
|
|||||||||||||
Net increase (decrease) in net assets resulting from operations | (3,370 | ) | (1,956 | ) | (353 | ) | (488 | ) | ||||||||
|
|
|
|
|||||||||||||
Contract Transactions: |
||||||||||||||||
Contract owners net payments |
5,036 | 5,611 | 1,032 | 1,225 | ||||||||||||
Policy loans, surrenders and death benefits |
(4,066 | ) | (4,436 | ) | (1,874 | ) | (1,266 | ) | ||||||||
Mortality and other (net) |
(1,638 | ) | (1,893 | ) | (402 | ) | (453 | ) | ||||||||
Transfers from other divisions or sponsor |
17,106 | 18,435 | 12,781 | 11,213 | ||||||||||||
Transfers to other divisions or sponsor |
(18,406 | ) | (17,657 | ) | (9,133 | ) | (6,587 | ) | ||||||||
|
|
|
|
|||||||||||||
Net increase (decrease) in net assets resulting from contract transactions | (1,968 | ) | 60 | 2,404 | 4,132 | |||||||||||
|
|
|
|
|||||||||||||
Net increase (decrease) in net assets | (5,338 | ) | (1,896 | ) | 2,051 | 3,644 | ||||||||||
Net Assets: |
||||||||||||||||
Beginning of period |
88,907 | 90,803 | 24,504 | 20,860 | ||||||||||||
|
|
|
|
|||||||||||||
End of period |
$ | 83,569 | $ | 88,907 | $ | 26,555 | $ | 24,504 | ||||||||
|
|
|
|
|||||||||||||
Units issued during the period |
9,794 | 6,706 | 5,981 | 7,169 | ||||||||||||
Units redeemed during the period |
(10,987 | ) | (6,501 | ) | (4,747 | ) | (3,315 | ) | ||||||||
|
|
|
|
|||||||||||||
Net units issued (redeemed) during period | (1,193 | ) | 205 | 1,234 | 3,854 | |||||||||||
|
|
|
|
The Accompanying Notes are an Integral Part of the Financial Statements.
F-17
Northwestern Mutual Variable Life Account
Statements of Changes in Net Assets
(in thousands)
International Equity Division |
Emerging Markets Equity Division |
|||||||||||||||
Year Ended December 31, 2016 |
Year Ended December 31, 2015 |
Year Ended December 31, 2016 |
Year Ended December 31, 2015 |
|||||||||||||
|
|
|
|
|||||||||||||
Operations: |
||||||||||||||||
Net investment income (loss) |
$ | 8,216 | $ | 13,562 | $ | 117 | $ | 169 | ||||||||
Net realized gains (losses) |
9,794 | 27,773 | (993 | ) | (160 | ) | ||||||||||
Net change in unrealized appreciation/(depreciation) |
(6,228 | ) | (54,665 | ) | 3,939 | (4,779 | ) | |||||||||
|
|
|
|
|||||||||||||
Net increase (decrease) in net assets resulting from operations | 11,782 | (13,330 | ) | 3,063 | (4,770 | ) | ||||||||||
|
|
|
|
|||||||||||||
Contract Transactions: |
||||||||||||||||
Contract owners net payments |
24,636 | 26,324 | 1,803 | 1,962 | ||||||||||||
Policy loans, surrenders and death benefits |
(22,332 | ) | (25,768 | ) | (1,938 | ) | (1,542 | ) | ||||||||
Mortality and other (net) |
(8,848 | ) | (10,778 | ) | (648 | ) | (511 | ) | ||||||||
Transfers from other divisions or sponsor |
59,573 | 77,759 | 16,062 | 23,591 | ||||||||||||
Transfers to other divisions or sponsor |
(65,166 | ) | (76,679 | ) | (13,867 | ) | (18,817 | ) | ||||||||
|
|
|
|
|||||||||||||
Net increase (decrease) in net assets resulting from contract transactions | (12,137 | ) | (9,142 | ) | 1,412 | 4,683 | ||||||||||
|
|
|
|
|||||||||||||
Net increase (decrease) in net assets | (355 | ) | (22,472 | ) | 4,475 | (87 | ) | |||||||||
Net Assets: |
||||||||||||||||
Beginning of period |
502,646 | 525,118 | 34,756 | 34,843 | ||||||||||||
|
|
|
|
|||||||||||||
End of period |
$ | 502,291 | $ | 502,646 | $ | 39,231 | $ | 34,756 | ||||||||
|
|
|
|
|||||||||||||
Units issued during the period |
38,507 | 27,401 | 11,875 | 13,290 | ||||||||||||
Units redeemed during the period |
(41,698 | ) | (29,331 | ) | (9,272 | ) | (8,367 | ) | ||||||||
|
|
|
|
|||||||||||||
Net units issued (redeemed) during period | (3,191 | ) | (1,930 | ) | 2,603 | 4,923 | ||||||||||
|
|
|
|
|||||||||||||
Government Money Market Division |
Short-Term Bond Division | |||||||||||||||
Year Ended December 31, 2016 |
Year Ended December 31, 2015 |
Year Ended December 31, 2016 |
Year Ended December 31, 2015 |
|||||||||||||
|
|
|
|
|||||||||||||
Operations: |
||||||||||||||||
Net investment income (loss) |
$ | (433 | ) | $ | (601 | ) | $ | 145 | $ | 41 | ||||||
Net realized gains (losses) |
13 | 5 | 48 | 6 | ||||||||||||
Net change in unrealized appreciation/(depreciation) |
- | - | 15 | (15 | ) | |||||||||||
|
|
|
|
|||||||||||||
Net increase (decrease) in net assets resulting from operations | (420 | ) | (596 | ) | 208 | 32 | ||||||||||
|
|
|
|
|||||||||||||
Contract Transactions: |
||||||||||||||||
Contract owners net payments |
54,758 | 60,267 | 78 | 625 | ||||||||||||
Policy loans, surrenders and death benefits |
(31,362 | ) | (24,108 | ) | (1,687 | ) | (1,395 | ) | ||||||||
Mortality and other (net) |
(5,055 | ) | (5,023 | ) | (344 | ) | (272 | ) | ||||||||
Transfers from other divisions or sponsor |
154,738 | 176,151 | 11,068 | 7,831 | ||||||||||||
Transfers to other divisions or sponsor |
(179,008 | ) | (201,367 | ) | (4,660 | ) | (4,471 | ) | ||||||||
|
|
|
|
|||||||||||||
Net increase (decrease) in net assets resulting from contract transactions | (5,929 | ) | 5,920 | 4,455 | 2,318 | |||||||||||
|
|
|
|
|||||||||||||
Net increase (decrease) in net assets | (6,349 | ) | 5,324 | 4,663 | 2,350 | |||||||||||
Net Assets: |
||||||||||||||||
Beginning of period |
171,148 | 165,824 | 15,742 | 13,392 | ||||||||||||
|
|
|
|
|||||||||||||
End of period |
$ | 164,799 | $ | 171,148 | $ | 20,405 | $ | 15,742 | ||||||||
|
|
|
|
|||||||||||||
Units issued during the period |
77,734 | 72,351 | 9,899 | 5,052 | ||||||||||||
Units redeemed during the period |
(73,697 | ) | (72,474 | ) | (5,931 | ) | (3,669 | ) | ||||||||
|
|
|
|
|||||||||||||
Net units issued (redeemed) during period | 4,037 | (123 | ) | 3,968 | 1,383 | |||||||||||
|
|
|
|
The Accompanying Notes are an Integral Part of the Financial Statements.
F-18
Northwestern Mutual Variable Life Account
Statements of Changes in Net Assets
(in thousands)
Select Bond Division | Long-Term U.S. Government Bond Division |
|||||||||||||||
Year Ended December 31, 2016 |
Year Ended December 31, 2015 |
Year Ended December 31, 2016 |
Year Ended December 31, 2015 |
|||||||||||||
|
|
|
|
|||||||||||||
Operations: |
||||||||||||||||
Net investment income (loss) |
$ | 3,885 | $ | 2,732 | $ | 154 | $ | 138 | ||||||||
Net realized gains (losses) |
2,133 | 1,662 | 558 | 223 | ||||||||||||
Net change in unrealized appreciation/(depreciation) |
363 | (4,036 | ) | (813 | ) | (616 | ) | |||||||||
|
|
|
|
|||||||||||||
Net increase (decrease) in net assets resulting from operations | 6,381 | 358 | (101 | ) | (255 | ) | ||||||||||
|
|
|
|
|||||||||||||
Contract Transactions: |
||||||||||||||||
Contract owners net payments |
10,912 | 12,283 | 438 | 480 | ||||||||||||
Policy loans, surrenders and death benefits |
(15,616 | ) | (15,876 | ) | (884 | ) | (459 | ) | ||||||||
Mortality and other (net) |
(5,078 | ) | (5,017 | ) | (220 | ) | (176 | ) | ||||||||
Transfers from other divisions or sponsor |
182,005 | 152,965 | 6,064 | 5,718 | ||||||||||||
Transfers to other divisions or sponsor |
(172,683 | ) | (150,131 | ) | (3,804 | ) | (4,151 | ) | ||||||||
|
|
|
|
|||||||||||||
Net increase (decrease) in net assets resulting from contract transactions | (460 | ) | (5,776 | ) | 1,594 | 1,412 | ||||||||||
|
|
|
|
|||||||||||||
Net increase (decrease) in net assets | 5,921 | (5,418 | ) | 1,493 | 1,157 | |||||||||||
Net Assets: |
||||||||||||||||
Beginning of period |
243,197 | 248,615 | 8,101 | 6,944 | ||||||||||||
|
|
|
|
|||||||||||||
End of period |
$ | 249,118 | $ | 243,197 | $ | 9,594 | $ | 8,101 | ||||||||
|
|
|
|
|||||||||||||
Units issued during the period |
12,286 | 10,393 | 4,016 | 3,694 | ||||||||||||
Units redeemed during the period |
(11,924 | ) | (10,605 | ) | (3,144 | ) | (2,745 | ) | ||||||||
|
|
|
|
|||||||||||||
Net units issued (redeemed) during period | 362 | (212 | ) | 872 | 949 | |||||||||||
|
|
|
|
|||||||||||||
Inflation Protection Division | High Yield Bond Division | |||||||||||||||
Year Ended December 31, 2016 |
Year Ended December 31, 2015 |
Year Ended December 31, 2016 |
Year Ended December 31, 2015 |
|||||||||||||
|
|
|
|
|||||||||||||
Operations: |
||||||||||||||||
Net investment income (loss) |
$ | 71 | $ | 169 | $ | 5,264 | $ | 4,369 | ||||||||
Net realized gains (losses) |
(262 | ) | (236 | ) | 153 | 45 | ||||||||||
Net change in unrealized appreciation/(depreciation) |
513 | (162 | ) | 8,628 | (6,187 | ) | ||||||||||
|
|
|
|
|||||||||||||
Net increase (decrease) in net assets resulting from operations | 322 | (229 | ) | 14,045 | (1,773 | ) | ||||||||||
|
|
|
|
|||||||||||||
Contract Transactions: |
||||||||||||||||
Contract owners net payments |
150 | 208 | 4,341 | 4,941 | ||||||||||||
Policy loans, surrenders and death benefits |
(705 | ) | (599 | ) | (5,641 | ) | (4,917 | ) | ||||||||
Mortality and other (net) |
(172 | ) | (174 | ) | (2,257 | ) | (2,157 | ) | ||||||||
Transfers from other divisions or sponsor |
5,144 | 3,888 | 23,577 | 21,009 | ||||||||||||
Transfers to other divisions or sponsor |
(3,727 | ) | (3,678 | ) | (24,137 | ) | (22,343 | ) | ||||||||
|
|
|
|
|||||||||||||
Net increase (decrease) in net assets resulting from contract transactions | 690 | (355 | ) | (4,117 | ) | (3,467 | ) | |||||||||
|
|
|
|
|||||||||||||
Net increase (decrease) in net assets |
1,012 | (584 | ) | 9,928 | (5,240 | ) | ||||||||||
Net Assets: |
||||||||||||||||
Beginning of period |
7,975 | 8,559 | 100,914 | 106,154 | ||||||||||||
|
|
|
|
|||||||||||||
End of period |
$ | 8,987 | $ | 7,975 | $ | 110,842 | $ | 100,914 | ||||||||
|
|
|
|
|||||||||||||
Units issued during the period |
3,083 | 1,866 | 3,750 | 3,268 | ||||||||||||
Units redeemed during the period |
(2,545 | ) | (1,830 | ) | (4,572 | ) | (3,935 | ) | ||||||||
|
|
|
|
|||||||||||||
Net units issued (redeemed) during period |
538 | 36 | (822 | ) | (667 | ) | ||||||||||
|
|
|
|
The Accompanying Notes are an Integral Part of the Financial Statements.
F-19
Northwestern Mutual Variable Life Account
Statements of Changes in Net Assets
(in thousands)
Multi-Sector Bond Division | Balanced Division | |||||||||||||||
Year Ended December 31, 2016 |
Year Ended December 31, 2015 |
Year Ended December 31, 2016 |
Year Ended December 31, 2015 |
|||||||||||||
|
|
|
|
|||||||||||||
Operations: |
||||||||||||||||
Net investment income (loss) |
$ | 1,267 | $ | 1,410 | $ | 6,076 | $ | 5,319 | ||||||||
Net realized gains (losses) |
(342 | ) | 380 | 46 | 12,151 | |||||||||||
Net change in unrealized appreciation/(depreciation) |
1,983 | (2,540 | ) | 13,568 | (19,365 | ) | ||||||||||
|
|
|
|
|||||||||||||
Net increase (decrease) in net assets resulting from operations | 2,908 | (750 | ) | 19,690 | (1,895 | ) | ||||||||||
|
|
|
|
|||||||||||||
Contract Transactions: |
||||||||||||||||
Contract owners net payments |
1,216 | 1,593 | 4,356 | 14,683 | ||||||||||||
Policy loans, surrenders and death benefits |
(1,364 | ) | (2,129 | ) | (15,351 | ) | (21,178 | ) | ||||||||
Mortality and other (net) |
(622 | ) | (538 | ) | (8,464 | ) | (8,616 | ) | ||||||||
Transfers from other divisions or sponsor |
10,354 | 7,719 | 72,413 | 73,175 | ||||||||||||
Transfers to other divisions or sponsor |
(7,061 | ) | (4,693 | ) | (70,276 | ) | (71,368 | ) | ||||||||
|
|
|
|
|||||||||||||
Net increase (decrease) in net assets resulting from contract transactions | 2,523 | 1,952 | (17,322 | ) | (13,304 | ) | ||||||||||
|
|
|
|
|||||||||||||
Net increase (decrease) in net assets | 5,431 | 1,202 | 2,368 | (15,199 | ) | |||||||||||
Net Assets: |
||||||||||||||||
Beginning of period |
27,546 | 26,344 | 345,035 | 360,234 | ||||||||||||
|
|
|
|
|||||||||||||
End of period |
$ | 32,977 | $ | 27,546 | $ | 347,403 | $ | 345,035 | ||||||||
|
|
|
|
|||||||||||||
Units issued during the period |
7,965 | 5,904 | 5,471 | 6,049 | ||||||||||||
Units redeemed during the period |
(6,146 | ) | (4,361 | ) | (10,013 | ) | (7,489 | ) | ||||||||
|
|
|
|
|||||||||||||
Net units issued (redeemed) during period | 1,819 | 1,543 | (4,542 | ) | (1,440 | ) | ||||||||||
|
|
|
|
|||||||||||||
Asset Allocation Division | Fidelity VIP Mid Cap Division | |||||||||||||||
Year Ended December 31, 2016 |
Year Ended December 31, 2015 |
Year Ended December 31, 2016 |
Year Ended December 31, 2015 |
|||||||||||||
|
|
|
|
|||||||||||||
Operations: |
||||||||||||||||
Net investment income (loss) |
$ | 860 | $ | 688 | $ | (181 | ) | $ | (309 | ) | ||||||
Net realized gains (losses) |
2,660 | 2,955 | 10,023 | 21,934 | ||||||||||||
Net change in unrealized appreciation/(depreciation) |
(399 | ) | (3,931 | ) | 7,801 | (24,866 | ) | |||||||||
|
|
|
|
|||||||||||||
Net increase (decrease) in net assets resulting from operations | 3,121 | (288 | ) | 17,643 | (3,241 | ) | ||||||||||
|
|
|
|
|||||||||||||
Contract Transactions: |
||||||||||||||||
Contract owners net payments |
1,924 | 2,280 | 6,876 | 7,440 | ||||||||||||
Policy loans, surrenders and death benefits |
(2,252 | ) | (4,065 | ) | (7,350 | ) | (8,788 | ) | ||||||||
Mortality and other (net) |
(1,030 | ) | (1,100 | ) | (3,267 | ) | (3,404 | ) | ||||||||
Transfers from other divisions or sponsor |
2,560 | 4,243 | 19,500 | 23,074 | ||||||||||||
Transfers to other divisions or sponsor |
(3,719 | ) | (4,118 | ) | (26,117 | ) | (27,695 | ) | ||||||||
|
|
|
|
|||||||||||||
Net increase (decrease) in net assets resulting from contract transactions | (2,517 | ) | (2,760 | ) | (10,358 | ) | (9,373 | ) | ||||||||
|
|
|
|
|||||||||||||
Net increase (decrease) in net assets | 604 | (3,048 | ) | 7,285 | (12,614 | ) | ||||||||||
Net Assets: |
||||||||||||||||
Beginning of period |
44,291 | 47,339 | 162,700 | 175,314 | ||||||||||||
|
|
|
|
|||||||||||||
End of period |
$ | 44,895 | $ | 44,291 | $ | 169,985 | $ | 162,700 | ||||||||
|
|
|
|
|||||||||||||
Units issued during the period |
1,947 | 2,342 | 4,476 | 4,032 | ||||||||||||
Units redeemed during the period |
(2,799 | ) | (3,786 | ) | (6,304 | ) | (5,789 | ) | ||||||||
|
|
|
|
|||||||||||||
Net units issued (redeemed) during period | (852 | ) | (1,444 | ) | (1,828 | ) | (1,757 | ) | ||||||||
|
|
|
|
The Accompanying Notes are an Integral Part of the Financial Statements.
F-20
Northwestern Mutual Variable Life Account
Statements of Changes in Net Assets
(in thousands)
Fidelity VIP Contrafund Division | Neuberger Berman AMT Socially Responsive Division |
|||||||||||||||
Year Ended December 31, 2016 |
Year Ended December 31, 2015 |
Year Ended December 31, 2016 |
Year Ended December 31, 2015 |
|||||||||||||
|
|
|
|
|||||||||||||
Operations: |
||||||||||||||||
Net investment income (loss) |
$ | 71 | $ | 158 | $ | 15 | $ | 9 | ||||||||
Net realized gains (losses) |
4,138 | 4,834 | 292 | 626 | ||||||||||||
Net change in unrealized appreciation/(depreciation) |
(1,716 | ) | (5,033 | ) | 114 | (679 | ) | |||||||||
|
|
|
|
|||||||||||||
Net increase (decrease) in net assets resulting from operations | 2,493 | (41 | ) | 421 | (44 | ) | ||||||||||
|
|
|
|
|||||||||||||
Contract Transactions: |
||||||||||||||||
Contract owners net payments |
1,475 | 1,656 | 200 | 206 | ||||||||||||
Policy loans, surrenders and death benefits |
(1,701 | ) | (1,679 | ) | (124 | ) | (107 | ) | ||||||||
Mortality and other (net) |
(680 | ) | (722 | ) | (80 | ) | (78 | ) | ||||||||
Transfers from other divisions or sponsor |
8,026 | 13,698 | 1,270 | 1,389 | ||||||||||||
Transfers to other divisions or sponsor |
(10,959 | ) | (11,112 | ) | (1,314 | ) | (1,442 | ) | ||||||||
|
|
|
|
|||||||||||||
Net increase (decrease) in net assets resulting from contract transactions | (3,839 | ) | 1,841 | (48 | ) | (32 | ) | |||||||||
|
|
|
|
|||||||||||||
Net increase (decrease) in net assets | (1,346 | ) | 1,800 | 373 | (76 | ) | ||||||||||
Net Assets: |
||||||||||||||||
Beginning of period |
39,557 | 37,757 | 4,514 | 4,590 | ||||||||||||
|
|
|
|
|||||||||||||
End of period |
$ | 38,211 | $ | 39,557 | $ | 4,887 | $ | 4,514 | ||||||||
|
|
|
|
|||||||||||||
Units issued during the period |
3,690 | 5,751 | 437 | 533 | ||||||||||||
Units redeemed during the period |
(5,993 | ) | (4,331 | ) | (460 | ) | (515 | ) | ||||||||
|
|
|
|
|||||||||||||
Net units issued (redeemed) during period | (2,303 | ) | 1,420 | (23 | ) | 18 | ||||||||||
|
|
|
|
|||||||||||||
Russell Multi-Style Equity Division |
Russell Aggressive Equity Division |
|||||||||||||||
Year Ended December 31, 2016 |
Year Ended December 31, 2015 |
Year Ended December 31, 2016 |
Year Ended December 31, 2015 |
|||||||||||||
|
|
|
|
|||||||||||||
Operations: |
||||||||||||||||
Net investment income (loss) |
$ | 1,257 | $ | 849 | $ | 371 | $ | 238 | ||||||||
Net realized gains (losses) |
18,857 | 23,353 | (542 | ) | 9,884 | |||||||||||
Net change in unrealized appreciation/(depreciation) |
(789 | ) | (22,709 | ) | 15,792 | (17,635 | ) | |||||||||
|
|
|
|
|||||||||||||
Net increase (decrease) in net assets resulting from operations | 19,325 | 1,493 | 15,621 | (7,513 | ) | |||||||||||
|
|
|
|
|||||||||||||
Contract Transactions: |
||||||||||||||||
Contract owners net payments |
6,896 | 8,097 | 3,857 | 4,308 | ||||||||||||
Policy loans, surrenders and death benefits |
(12,791 | ) | (12,001 | ) | (5,720 | ) | (4,312 | ) | ||||||||
Mortality and other (net) |
(3,830 | ) | (4,032 | ) | (1,906 | ) | (1,972 | ) | ||||||||
Transfers from other divisions or sponsor |
10,247 | 11,818 | 10,569 | 11,034 | ||||||||||||
Transfers to other divisions or sponsor |
(17,959 | ) | (15,639 | ) | (13,778 | ) | (14,511 | ) | ||||||||
|
|
|
|
|||||||||||||
Net increase (decrease) in net assets resulting from contract transactions | (17,437 | ) | (11,757 | ) | (6,978 | ) | (5,453 | ) | ||||||||
|
|
|
|
|||||||||||||
Net increase (decrease) in net assets | 1,888 | (10,264 | ) | 8,643 | (12,966 | ) | ||||||||||
Net Assets: |
||||||||||||||||
Beginning of period |
203,098 | 213,362 | 91,739 | 104,705 | ||||||||||||
|
|
|
|
|||||||||||||
End of period |
$ | 204,986 | $ | 203,098 | $ | 100,382 | $ | 91,739 | ||||||||
|
|
|
|
|||||||||||||
Units issued during the period |
8,644 | 8,880 | 3,574 | 3,775 | ||||||||||||
Units redeemed during the period |
(17,757 | ) | (14,785 | ) | (6,134 | ) | (5,722 | ) | ||||||||
|
|
|
|
|||||||||||||
Net units issued (redeemed) during period | (9,113 | ) | (5,905 | ) | (2,560 | ) | (1,947 | ) | ||||||||
|
|
|
|
The Accompanying Notes are an Integral Part of the Financial Statements.
F-21
Northwestern Mutual Variable Life Account
Statements of Changes in Net Assets
(in thousands)
Russell Non-U.S. Division | Russell Core Bond Division | |||||||||||||||
Year Ended December 31, 2016 |
Year Ended December 31, 2015 |
Year Ended December 31, 2016 |
Year Ended December 31, 2015 |
|||||||||||||
|
|
|
|
|||||||||||||
Operations: |
||||||||||||||||
Net investment income (loss) |
$ | 3,229 | $ | 898 | $ | 1,078 | $ | 1,739 | ||||||||
Net realized gains (losses) |
(995 | ) | 688 | 3,291 | 1,474 | |||||||||||
Net change in unrealized appreciation/(depreciation) |
(62 | ) | (3,565 | ) | (2,027 | ) | (3,624 | ) | ||||||||
|
|
|
|
|||||||||||||
Net increase (decrease) in net assets resulting from operations | 2,172 | (1,979 | ) | 2,342 | (411 | ) | ||||||||||
|
|
|
|
|||||||||||||
Contract Transactions: |
||||||||||||||||
Contract owners net payments |
5,323 | 6,294 | 3,465 | 4,469 | ||||||||||||
Policy loans, surrenders and death benefits |
(6,474 | ) | (6,014 | ) | (4,549 | ) | (5,359 | ) | ||||||||
Mortality and other (net) |
(2,267 | ) | (2,492 | ) | (1,877 | ) | (1,848 | ) | ||||||||
Transfers from other divisions or sponsor |
16,995 | 16,745 | 42,958 | 46,501 | ||||||||||||
Transfers to other divisions or sponsor |
(17,268 | ) | (16,360 | ) | (41,602 | ) | (44,667 | ) | ||||||||
|
|
|
|
|||||||||||||
Net increase (decrease) in net assets resulting from contract transactions | (3,691 | ) | (1,827 | ) | (1,605 | ) | (904 | ) | ||||||||
|
|
|
|
|||||||||||||
Net increase (decrease) in net assets | (1,519 | ) | (3,806 | ) | 737 | (1,315 | ) | |||||||||
Net Assets: |
||||||||||||||||
Beginning of period |
117,670 | 121,476 | 85,576 | 86,891 | ||||||||||||
|
|
|
|
|||||||||||||
End of period |
$ | 116,151 | $ | 117,670 | $ | 86,313 | $ | 85,576 | ||||||||
|
|
|
|
|||||||||||||
Units issued during the period |
8,155 | 8,262 | 9,358 | 6,643 | ||||||||||||
Units redeemed during the period |
(10,276 | ) | (9,113 | ) | (9,358 | ) | (6,812 | ) | ||||||||
|
|
|
|
|||||||||||||
Net units issued (redeemed) during period | (2,121 | ) | (851 | ) | - | (169 | ) | |||||||||
|
|
|
|
|||||||||||||
Russell Global Real Estate Securities Division |
Russell LifePoints Moderate Strategy Division |
|||||||||||||||
Year Ended December 31, 2016 |
Year Ended December 31, 2015 |
Year Ended December 31, 2016 |
Year Ended December 31, 2015 |
|||||||||||||
|
|
|
|
|||||||||||||
Operations: |
||||||||||||||||
Net investment income (loss) |
$ | 7,069 | $ | 2,124 | $ | 162 | $ | 67 | ||||||||
Net realized gains (losses) |
4,210 | 8,457 | 138 | 79 | ||||||||||||
Net change in unrealized appreciation/(depreciation) |
(6,864 | ) | (10,912 | ) | 90 | (214 | ) | |||||||||
|
|
|
|
|||||||||||||
Net increase (decrease) in net assets resulting from operations | 4,415 | (331 | ) | 390 | (68 | ) | ||||||||||
|
|
|
|
|||||||||||||
Contract Transactions: |
||||||||||||||||
Contract owners net payments |
7,302 | 8,210 | (714 | ) | 84 | |||||||||||
Policy loans, surrenders and death benefits |
(10,023 | ) | (7,815 | ) | (392 | ) | (33 | ) | ||||||||
Mortality and other (net) |
(3,457 | ) | (3,496 | ) | (108 | ) | (67 | ) | ||||||||
Transfers from other divisions or sponsor |
25,224 | 27,002 | 2,870 | 668 | ||||||||||||
Transfers to other divisions or sponsor |
(26,974 | ) | (26,784 | ) | (127 | ) | (655 | ) | ||||||||
|
|
|
|
|||||||||||||
Net increase (decrease) in net assets resulting from contract transactions | (7,928 | ) | (2,883 | ) | 1,529 | (3 | ) | |||||||||
|
|
|
|
|||||||||||||
Net increase (decrease) in net assets | (3,513 | ) | (3,214 | ) | 1,919 | (71 | ) | |||||||||
Net Assets: |
||||||||||||||||
Beginning of period |
172,160 | 175,374 | 3,256 | 3,327 | ||||||||||||
|
|
|
|
|||||||||||||
End of period |
$ | 168,647 | $ | 172,160 | $ | 5,175 | $ | 3,256 | ||||||||
|
|
|
|
|||||||||||||
Units issued during the period |
4,868 | 4,691 | 3,351 | 598 | ||||||||||||
Units redeemed during the period |
(6,356 | ) | (4,994 | ) | (2,029 | ) | (352 | ) | ||||||||
|
|
|
|
|||||||||||||
Net units issued (redeemed) during period | (1,488 | ) | (303 | ) | 1,322 | 246 | ||||||||||
|
|
|
|
The Accompanying Notes are an Integral Part of the Financial Statements.
F-22
Northwestern Mutual Variable Life Account
Statements of Changes in Net Assets
(in thousands)
Russell LifePoints Balanced Strategy Division |
Russell LifePoints Growth Strategy Division |
|||||||||||||||
Year Ended December 31, 2016 |
Year Ended December 31, 2015 |
Year Ended December 31, 2016 |
Year Ended December 31, 2015 |
|||||||||||||
|
|
|
|
|||||||||||||
Operations: |
||||||||||||||||
Net investment income (loss) |
$ | 518 | $ | 299 | $ | 468 | $ | 272 | ||||||||
Net realized gains (losses) |
319 | 1,376 | 207 | 1,571 | ||||||||||||
Net change in unrealized appreciation/(depreciation) |
692 | (2,159 | ) | 1,021 | (2,631 | ) | ||||||||||
|
|
|
|
|||||||||||||
Net increase (decrease) in net assets resulting from operations | 1,529 | (484 | ) | 1,696 | (788 | ) | ||||||||||
|
|
|
|
|||||||||||||
Contract Transactions: |
||||||||||||||||
Contract owners net payments |
889 | 265 | 948 | 636 | ||||||||||||
Policy loans, surrenders and death benefits |
(904 | ) | (1,079 | ) | (971 | ) | (1,478 | ) | ||||||||
Mortality and other (net) |
(430 | ) | (390 | ) | (446 | ) | (449 | ) | ||||||||
Transfers from other divisions or sponsor |
2,457 | 3,829 | 717 | 1,557 | ||||||||||||
Transfers to other divisions or sponsor |
(2,277 | ) | (1,752 | ) | (1,421 | ) | (568 | ) | ||||||||
|
|
|
|
|||||||||||||
Net increase (decrease) in net assets resulting from contract transactions | (265 | ) | 873 | (1,173 | ) | (302 | ) | |||||||||
|
|
|
|
|||||||||||||
Net increase (decrease) in net assets | 1,264 | 389 | 523 | (1,090 | ) | |||||||||||
Net Assets: |
||||||||||||||||
Beginning of period |
17,506 | 17,117 | 19,036 | 20,126 | ||||||||||||
|
|
|
|
|||||||||||||
End of period |
$ | 18,770 | $ | 17,506 | $ | 19,559 | $ | 19,036 | ||||||||
|
|
|
|
|||||||||||||
Units issued during the period |
2,206 | 2,777 | 1,411 | 1,846 | ||||||||||||
Units redeemed during the period |
(2,921 | ) | (2,921 | ) | (2,371 | ) | (2,104 | ) | ||||||||
|
|
|
|
|||||||||||||
Net units issued (redeemed) during period | (715 | ) | (144 | ) | (960 | ) | (258 | ) | ||||||||
|
|
|
|
|||||||||||||
Russell LifePoints Equity Growth Strategy Division |
Credit Suisse Trust Commodity Return Strategy Division |
|||||||||||||||
Year Ended December 31, 2016 |
Year Ended December 31, 2015 |
Year Ended December 31, 2016 |
Year Ended December 31, 2015 |
|||||||||||||
|
|
|
|
|||||||||||||
Operations: |
||||||||||||||||
Net investment income (loss) |
$ | 246 | $ | 102 | $ | (69 | ) | $ | (50 | ) | ||||||
Net realized gains (losses) |
53 | 831 | (734 | ) | (412 | ) | ||||||||||
Net change in unrealized appreciation/(depreciation) |
678 | (1,325 | ) | 2,669 | (4,167 | ) | ||||||||||
|
|
|
|
|||||||||||||
Net increase (decrease) in net assets resulting from operations | 977 | (392 | ) | 1,866 | (4,629 | ) | ||||||||||
|
|
|
|
|||||||||||||
Contract Transactions: |
||||||||||||||||
Contract owners net payments |
106 | 510 | 1,168 | 1,175 | ||||||||||||
Policy loans, surrenders and death benefits |
(87 | ) | (337 | ) | (1,014 | ) | (737 | ) | ||||||||
Mortality and other (net) |
(178 | ) | (155 | ) | (335 | ) | (225 | ) | ||||||||
Transfers from other divisions or sponsor |
1,762 | 858 | 8,015 | 8,879 | ||||||||||||
Transfers to other divisions or sponsor |
(581 | ) | (422 | ) | (5,604 | ) | (5,515 | ) | ||||||||
|
|
|
|
|||||||||||||
Net increase (decrease) in net assets resulting from contract transactions | 1,022 | 454 | 2,230 | 3,577 | ||||||||||||
|
|
|
|
|||||||||||||
Net increase (decrease) in net assets | 1,999 | 62 | 4,096 | (1,052 | ) | |||||||||||
Net Assets: |
||||||||||||||||
Beginning of period |
8,824 | 8,762 | 14,882 | 15,934 | ||||||||||||
|
|
|
|
|||||||||||||
End of period |
$ | 10,823 | $ | 8,824 | $ | 18,978 | $ | 14,882 | ||||||||
|
|
|
|
|||||||||||||
Units issued during the period |
1,865 | 1,034 | 2,278 | 1,907 | ||||||||||||
Units redeemed during the period |
(1,015 | ) | (870 | ) | (1,843 | ) | (1,296 | ) | ||||||||
|
|
|
|
|||||||||||||
Net units issued (redeemed) during period | 850 | 164 | 435 | 611 | ||||||||||||
|
|
|
|
The Accompanying Notes are an Integral Part of the Financial Statements.
F-23
Northwestern Mutual Variable Life Account
Notes to Financial Statements
December 31, 2016
1. | Organization |
Northwestern Mutual Variable Life Account (the Account) is registered as a unit investment trust under the Investment Company Act of 1940 and is a segregated asset account of The Northwestern Mutual Life Insurance Company (Northwestern Mutual or sponsor) used to fund variable life insurance policies (the Policies).
All assets of each Division of the Account are invested in shares of the corresponding Portfolio of Northwestern Mutual Series Fund, Inc., Fidelity Variable Insurance Products Fund, Neuberger Berman Advisers Management Trust, Russell Investment Funds and Credit Suisse Trust (collectively known as the Funds). The Funds are open-end investment companies registered under the Investment Company Act of 1940. The financial statements for the Portfolios should be read in conjunction with the financial statements of the Divisions. Each Division of the account indirectly bears exposure to the market credit and liquidity risks of the Portfolio in which it invests.
New sales of the Policies which invest in the Account were discontinued for Variable CompLife, Variable Executive Life, and Variable Joint Life policies in 2008, Variable Life was discontinued in 1995. However, premium payments made by policyowners existing at that date will continue to be recorded by the Account.
On May 1, 2016, the Money Market Division was renamed the Government Money Market Division.
2. | Significant Accounting Policies |
A. | Use of Estimates The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America 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 increases and decreases in net assets for use in estimates. Actual results could differ from those estimates. |
B. | Investment Valuation The shares are valued at the Funds offering and redemption prices per share. As of December 31, 2016, all of the Accounts investments are identified as Level 1 securities for valuation purposes under the Fair Value Measurement Topic of the FASB Accounting Standards Codification. Level 1 securities are valued at fair value as determined by quoted prices in active markets for identical securities. There were no transfers between levels during the year. All changes in fair value are recorded as change in unrealized appreciation/(depreciation) of investments during the period in the statements of operations of the applicable Division. |
C. | Investment Income, Securities Transactions and Policy Dividends Transactions in the Funds shares are accounted for on the trade date. The basis for determining cost on sale of the Funds shares is identified cost. Dividend income and distributions of net realized gains from the Funds are recorded on the exdate of the dividends. Dividends and distributions received are reinvested in additional shares of the respective portfolios of the Funds. The Policies are eligible to receive policy dividends from Northwestern Mutual. Any dividends reinvested in the Account are reflected in Policyowners net payments in the accompanying financial statements. |
D. | Due to Participants Upon notification of death of the policyowner, a liability is recorded and is included in Due to Participants in the accompanying financial statements. This liability is identified as Level 1 for valuation purposes under the Fair Value Measurement Topic of the FASB Accounting Standards Codification. |
E. | Taxes Northwestern Mutual is taxed as a life insurance company under the Internal Revenue Code. The Policies, which are funded in the Account, are taxed as part of the operations of |
F-24
Northwestern Mutual Variable Life Account
Notes to Financial Statements
December 31, 2016
2. | Significant Accounting Policies (continued) |
Northwestern Mutual. The Policies provide that a charge for taxes may be made against the assets of the Account. Currently, for Variable Life policies issued before October 11, 1995, Northwestern Mutual charges the Account at an annual rate of 0.05% of the Accounts net assets and reserves the right to increase, decrease or eliminate the charge for taxes in the future. Currently, for Variable CompLife policies issued on or after October 11, 1995, Variable Executive Life policies issued on or after March 2, 1998, and Variable Joint Life policies issued on or after December 10, 1998, there is no charge being made against the assets of the Account for federal income taxes, but Northwestern Mutual reserves the right to charge for taxes in the future.
F. | Premium Payments For Variable Life and Variable CompLife policies, the Account is credited for the policyowners net annual premiums at the respective policy anniversary dates regardless of when policyowners actually pay their premiums. Northwestern Mutuals equity represents any unpaid portion of net annual premiums. |
3. | Purchases and Sales of Investments |
Purchases and sales of the Funds shares for the year ended December 31, 2016 were as follows: (in thousands)
Division |
Purchases | Sales | ||||||
Growth Stock |
$ | 54,807 | $ | 34,793 | ||||
Focused Appreciation |
57,219 | 17,882 | ||||||
Large Cap Core Stock |
19,854 | 21,678 | ||||||
Large Cap Blend |
2,837 | 2,596 | ||||||
Index 500 Stock |
107,059 | 81,621 | ||||||
Large Company Value |
3,839 | 1,988 | ||||||
Domestic Equity |
23,262 | 19,039 | ||||||
Equity Income |
16,476 | 14,953 | ||||||
Mid Cap Growth Stock |
53,242 | 35,836 | ||||||
Index 400 Stock |
42,094 | 25,274 | ||||||
Mid Cap Value |
15,610 | 6,198 | ||||||
Small Cap Growth Stock |
36,517 | 23,212 | ||||||
Index 600 Stock |
9,183 | 4,171 | ||||||
Small Cap Value |
33,795 | 17,200 | ||||||
International Growth |
8,740 | 10,125 | ||||||
Research International Core |
7,413 | 4,456 | ||||||
International Equity |
43,695 | 41,282 | ||||||
Emerging Markets Equity |
7,271 | 5,726 | ||||||
Government Money Market |
72,417 | 78,111 | ||||||
Short-Term Bond |
10,141 | 5,543 | ||||||
Select Bond |
37,651 | 33,080 | ||||||
Long-Term U.S. Government Bond |
6,557 | 4,664 | ||||||
Inflation Protection |
3,247 | 2,486 | ||||||
High Yield Bond |
14,278 | 13,126 | ||||||
Multi-Sector Bond |
9,994 | 6,280 | ||||||
Balanced |
36,068 | 38,062 | ||||||
Asset Allocation |
5,911 | 5,932 | ||||||
Fidelity VIP Mid Cap |
18,615 | 19,067 | ||||||
Fidelity VIP Contrafund |
7,310 | 7,946 | ||||||
Neuberger Berman AMT Socially Responsive |
751 | 617 | ||||||
Russell Multi-Style Equity |
23,127 | 26,429 | ||||||
Russell Aggressive Equity |
5,852 | 12,370 | ||||||
Russell Non-U.S. |
12,010 | 12,503 | ||||||
Russell Core Bond |
15,924 | 14,073 |
F-25
Northwestern Mutual Variable Life Account
Notes to Financial Statements
December 31, 2016
3. | Purchases and Sales of Investments (continued) |
Division |
Purchases | Sales | ||||||
Russell Global Real Estate Securities |
$ | 22,220 | $ | 17,837 | ||||
Russell LifePoints Moderate Strategy |
4,362 | 2,465 | ||||||
Russell LifePoints Balanced Strategy |
3,980 | 3,432 | ||||||
Russell LifePoints Growth Strategy |
2,075 | 2,785 | ||||||
Russell LifePoints Equity Growth Strategy |
2,598 | 1,332 | ||||||
Credit Suisse Trust Commodity Return Strategy |
4,361 | 2,195 |
4. | Expenses and Related Party Transactions |
A deduction for mortality and expense risks is paid to Northwestern Mutual. Mortality risk is the risk that insureds may not live as long as estimated. Expense risk is the risk that expenses of issuing and administering the Policies may exceed the estimated costs.
For Variable Life and Variable CompLife policies, the deduction is determined daily at an annual rate of 0.50% and 0.45%, respectively, of the net assets of the Account. These charges are reflected as a reduction in invested assets and are included in Mortality and expense risk charges in the accompanying financial statements.
A deduction for the mortality and expense risks for Variable Executive Life policies is determined monthly at an annual rate of 0.48% of the amount invested in the Account for the Policy for the first ten Policy years, and 0.05% thereafter for policies with the Cash Value Amendment, or 0.03% thereafter for the policies without the Cash Value Amendment.
A deduction for the mortality and expense risks for Variable Joint Life policies is determined monthly at an annual rate of 0.00% of the amount invested in the Account. Additional Variable Joint Life mortality and expense risks deductions are determined annually and are paid to Northwestern Mutual for the first ten Policy years based on the age of the insured individuals at the time the policy was issued.
Additional mortality costs are deducted from the Policies annually for Variable Life and Variable CompLife policies, and monthly for Variable Executive Life and Variable Joint Life policies, and are paid to Northwestern Mutual to cover the cost of providing insurance protection. For Variable Life and Variable CompLife policies, this cost is actuarially calculated based upon the insureds age, the 1980 Commissioners Standard Ordinary Mortality Table and the amount of insurance provided under the policy. For Variable Executive Life and Variable Joint Life policies, the cost reflects expected mortality costs based upon actual experience.
Certain deductions are also made from the annual, single or other premiums before amounts are allocated to the Account. These deductions are for sales load, administrative expenses, taxes and a risk charge for the guaranteed minimum death benefit among other charges which are detailed in the Prospectus.
Mortality and expense risks deductions for Variable Executive Life and Variable Joint Life policies, as well as the noted additional mortality costs and other deductions for each of the products are reflected as a reduction in units and are included in Mortality and other in the accompanying financial statements.
F-26
Northwestern Mutual Variable Life Account
Notes to Financial Statements
December 31, 2016
5. | Subsequent Events |
Effective May 1, 2017, the following Divisions will be renamed.
Current Name |
New Name | |
Russell Multi-Style Equity Division |
U.S. Strategic Equity Division | |
Russell Aggressive Equity Division |
U.S. Small Cap Equity Division | |
Russell Non-U.S. Division |
International Developed Markets Division | |
Russell Core Bond Division |
Strategic Bond Division | |
Russell Global Real Estate Securities Division |
Global Real Estate Securities Division | |
Russell LifePoints Moderate Strategy Division |
LifePoints Moderate Strategy Division | |
Russell LifePoints Balanced Strategy Division |
LifePoints Balanced Strategy Division | |
Russell LifePoints Growth Strategy Division |
LifePoints Growth Strategy Division | |
Russell LifePoints Equity Growth Strategy Division |
LifePoints Equity Growth Strategy Division |
F-27
Northwestern Mutual Variable Life Account
Notes to Financial Statements
December 31, 2016
6. | Financial Highlights |
As of the respective period end date: |
For the respective period ended: |
|||||||||||||||||||||||||||||||||||||||||||||||||||
Division | Units Outstanding (000s) |
Unit Value, Lowest to Highest |
Net Assets (000s) |
Dividend Income as a % of Average Net Assets |
Expense Ratio, Lowest to Highest(1) |
Total Return Lowest to Highest(1) |
||||||||||||||||||||||||||||||||||||||||||||||
Growth Stock |
||||||||||||||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/16 |
78,732 | $ | 4.251519 | to | $ | 59.189518 | $ | 381,579 | 0.87 | % | 0.00 | % | to | 0.55 | % | 1.91 | % | to | 2.47 | % | ||||||||||||||||||||||||||||||||
Year Ended 12/31/15 |
82,582 | 4.167790 | to | 57.763945 | 392,702 | 0.74 | 0.00 | to | 0.55 | 5.43 | to | 6.01 | ||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/14 |
85,738 | 3.949121 | to | 54.488126 | 386,925 | 0.59 | 0.00 | to | 0.55 | 8.43 | to | 9.02 | ||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/13 |
88,857 | 3.638539 | to | 49.977915 | 368,165 | 0.68 | 0.00 | to | 0.55 | 35.12 | to | 35.86 | ||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/12 |
92,840 | 2.690097 | to | 36.785012 | 284,588 | 0.57 | 0.00 | to | 0.55 | 12.32 | to | 12.94 | ||||||||||||||||||||||||||||||||||||||||
Focused Appreciation |
||||||||||||||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/16 |
33,700 | $ | 3.746116 | to | $ | 39.992151 | $ | 146,387 | 0.24 | % | 0.00 | % | to | 0.55 | % | 5.30 | % | to | 5.87 | % | ||||||||||||||||||||||||||||||||
Year Ended 12/31/15 |
34,234 | 3.554167 | to | 37.773111 | 138,660 | 0.00 | 0.00 | to | 0.55 | 13.02 | to | 13.64 | ||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/14 |
34,391 | 3.141534 | to | 33.238141 | 122,795 | 0.02 | 0.00 | to | 0.55 | 8.84 | to | 9.43 | ||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/13 |
35,292 | 2.883615 | to | 30.372615 | 116,386 | 0.48 | 0.00 | to | 0.55 | 28.30 | to | 29.01 | ||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/12 |
36,929 | 2.245328 | to | 23.543734 | 96,087 | 0.27 | 0.00 | to | 0.55 | 19.48 | to | 20.14 | ||||||||||||||||||||||||||||||||||||||||
Large Cap Core Stock |
||||||||||||||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/16 |
64,732 | $ | 3.081784 | to | $ | 42.503832 | $ | 234,433 | 2.16 | % | 0.00 | % | to | 0.55 | % | 6.98 | % | to | 7.57 | % | ||||||||||||||||||||||||||||||||
Year Ended 12/31/15 |
67,126 | 2.877770 | to | 39.512372 | 228,494 | 2.14 | 0.00 | to | 0.55 | (3.59 | ) | to | (3.06 | ) | ||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/14 |
69,294 | 2.981972 | to | 40.759702 | 244,043 | 1.49 | 0.00 | to | 0.55 | 7.97 | to | 8.56 | ||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/13 |
71,653 | 2.759081 | to | 37.544148 | 233,882 | 1.15 | 0.00 | to | 0.55 | 27.88 | to | 28.58 | ||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/12 |
75,256 | 2.155410 | to | 29.198468 | 191,903 | 1.20 | 0.00 | to | 0.55 | 11.02 | to | 11.63 | ||||||||||||||||||||||||||||||||||||||||
Large Cap Blend |
||||||||||||||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/16 |
5,069 | $ | 1.739254 | to | $ | 15.001832 | $ | 9,582 | 1.06 | % | 0.00 | % | to | 0.55 | % | 13.36 | % | to | 13.99 | % | ||||||||||||||||||||||||||||||||
Year Ended 12/31/15 |
5,414 | 1.532727 | to | 13.161232 | 8,934 | 0.93 | 0.00 | to | 0.55 | (2.95 | ) | to | (2.42 | ) | ||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/14 |
4,680 | 1.577743 | to | 13.487127 | 8,192 | 0.04 | 0.00 | to | 0.55 | 11.96 | to | 12.58 | ||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/13 |
3,877 | 1.407785 | to | 11.980322 | 6,157 | 0.99 | 0.00 | to | 0.55 | 30.14 | to | 30.86 | ||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/12 |
3,025 | 1.080633 | to | 9.155103 | 3,615 | 0.92 | 0.00 | to | 0.55 | 14.57 | to | 15.20 | ||||||||||||||||||||||||||||||||||||||||
Index 500 Stock |
||||||||||||||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/16 |
196,058 | $ | 5.062909 | to | $ | 117.092375 | $ | 1,222,210 | 1.85 | % | 0.00 | % | to | 0.55 | % | 11.12 | % | to | 11.73 | % | ||||||||||||||||||||||||||||||||
Year Ended 12/31/15 |
198,438 | 4.551560 | to | 104.794845 | 1,113,211 | 1.70 | 0.00 | to | 0.55 | 0.62 | to | 1.17 | ||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/14 |
200,831 | 4.519180 | to | 103.583087 | 1,122,395 | 1.60 | 0.00 | to | 0.55 | 12.84 | to | 13.46 | ||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/13 |
203,612 | 4.001083 | to | 91.297175 | 1,008,802 | 1.82 | 0.00 | to | 0.55 | 31.33 | to | 32.05 | ||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/12 |
207,627 | 3.043500 | to | 69.136117 | 785,534 | 1.77 | 0.00 | to | 0.55 | 15.12 | to | 15.76 | ||||||||||||||||||||||||||||||||||||||||
Large Company Value |
||||||||||||||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/16 |
6,290 | $ | 1.812084 | to | $ | 15.379433 | $ | 12,809 | 1.71 | % | 0.00 | % | to | 0.55 | % | 14.73 | % | to | 15.36 | % | ||||||||||||||||||||||||||||||||
Year Ended 12/31/15 |
5,877 | 1.577867 | to | 13.331635 | 10,525 | 1.62 | 0.00 | to | 0.55 | (4.37 | ) | to | (3.85 | ) | ||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/14 |
6,169 | 1.648404 | to | 13.865219 | 11,466 | 0.00 | 0.00 | to | 0.55 | 12.41 | to | 13.03 | ||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/13 |
4,244 | 1.464939 | to | 12.266796 | 7,585 | 1.75 | 0.00 | to | 0.55 | 30.57 | to | 31.29 | ||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/12 |
2,300 | 1.120811 | to | 9.343226 | 3,112 | 1.90 | 0.00 | to | 0.55 | 15.83 | to | 16.47 | ||||||||||||||||||||||||||||||||||||||||
Domestic Equity |
||||||||||||||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/16 |
71,274 | $ | 2.443831 | to | $ | 26.364364 | $ | 203,723 | 1.86 | % | 0.00 | % | to | 0.55 | % | 14.35 | % | to | 14.98 | % | ||||||||||||||||||||||||||||||||
Year Ended 12/31/15 |
73,953 | 2.135000 | to | 22.929503 | 183,664 | 1.82 | 0.00 | to | 0.55 | (0.64 | ) | to | (0.09 | ) | ||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/14 |
76,044 | 2.146602 | to | 22.950784 | 190,774 | 1.70 | 0.00 | to | 0.55 | 13.25 | to | 13.87 | ||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/13 |
77,733 | 1.893569 | to | 20.154766 | 172,457 | 1.68 | 0.00 | to | 0.55 | 33.29 | to | 34.03 | ||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/12 |
80,040 | 1.419182 | to | 15.037814 | 134,628 | 2.16 | 0.00 | to | 0.55 | 13.72 | to | 14.35 | ||||||||||||||||||||||||||||||||||||||||
Equity Income |
||||||||||||||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/16 |
37,103 | $ | 2.841098 | to | $ | 30.330455 | $ | 122,350 | 2.03 | % | 0.00 | % | to | 0.55 | % | 18.52 | % | to | 19.17 | % | ||||||||||||||||||||||||||||||||
Year Ended 12/31/15 |
38,972 | 2.394831 | to | 25.451821 | 109,208 | 1.69 | 0.00 | to | 0.55 | (7.25 | ) | to | (6.74 | ) | ||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/14 |
40,696 | 2.579506 | to | 27.291728 | 123,149 | 1.23 | 0.00 | to | 0.55 | 6.84 | to | 7.43 | ||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/13 |
41,567 | 2.411872 | to | 25.403806 | 118,079 | 1.36 | 0.00 | to | 0.55 | 29.23 | to | 29.94 | ||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/12 |
41,046 | 1.864547 | to | 19.550985 | 90,300 | 1.53 | 0.00 | to | 0.55 | 16.59 | to | 17.23 |
(1) | Total return includes deductions for management and other expenses; it excludes deductions for sales loads and other charges, which are a reduction in units. The expense ratios further reflect only those expenses which impact total return. For additional information regarding all expenses assessed, refer to the accompanying notes. |
F-28
Northwestern Mutual Variable Life Account
Notes to Financial Statements
December 31, 2016
As of the respective period end date: | For the respective period ended: | |||||||||||||||||||||||||||||||||||||||||||||||||||
Division | Units Outstanding (000s) |
Unit Value, Lowest to Highest |
Net Assets (000s) |
Dividend Income as a % of Average Net Assets |
Expense Ratio, Lowest to Highest(1) |
Total Return Lowest to Highest(1) |
||||||||||||||||||||||||||||||||||||||||||||||
Mid Cap Growth Stock |
||||||||||||||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/16 |
97,909 | $ | 3.713373 | to | $ | 104.283373 | $ | 434,672 | 0.19 | % | 0.00 | % | to | 0.55 | % | 0.28 | % | to | 0.83 | % | ||||||||||||||||||||||||||||||||
Year Ended 12/31/15 |
101,666 | 3.699378 | to | 103.425002 | 450,936 | 0.04 | 0.00 | to | 0.55 | 0.16 | to | 0.71 | ||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/14 |
104,691 | 3.689747 | to | 102.693582 | 465,306 | 0.36 | 0.00 | to | 0.55 | 7.90 | to | 8.49 | ||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/13 |
108,936 | 3.416219 | to | 94.654719 | 448,921 | 0.31 | 0.00 | to | 0.55 | 24.85 | to | 25.53 | ||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/12 |
113,740 | 2.733618 | to | 75.402575 | 374,598 | 0.12 | 0.00 | to | 0.55 | 11.35 | to | 11.97 | ||||||||||||||||||||||||||||||||||||||||
Index 400 Stock |
||||||||||||||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/16 |
64,605 | $ | 4.445732 | to | $ | 51.235085 | $ | 321,909 | 1.15 | % | 0.00 | % | to | 0.55 | % | 19.72 | % | to | 20.38 | % | ||||||||||||||||||||||||||||||||
Year Ended 12/31/15 |
66,515 | 3.709654 | to | 42.560713 | 275,417 | 1.08 | 0.00 | to | 0.55 | (2.92 | ) | to | (2.38 | ) | ||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/14 |
68,204 | 3.817251 | to | 43.598907 | 290,596 | 0.98 | 0.00 | to | 0.55 | 8.82 | to | 9.42 | ||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/13 |
71,379 | 3.504450 | to | 39.846886 | 279,413 | 1.06 | 0.00 | to | 0.55 | 32.44 | to | 33.16 | ||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/12 |
72,346 | 2.643527 | to | 29.923387 | 213,744 | 0.91 | 0.00 | to | 0.55 | 17.00 | to | 17.64 | ||||||||||||||||||||||||||||||||||||||||
Mid Cap Value |
||||||||||||||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/16 |
17,981 | $ | 3.666285 | to | $ | 39.139970 | $ | 74,486 | 1.68 | % | 0.00 | % | to | 0.55 | % | 22.56 | % | to | 23.23 | % | ||||||||||||||||||||||||||||||||
Year Ended 12/31/15 |
17,077 | 2.988550 | to | 31.761925 | 57,463 | 1.64 | 0.00 | to | 0.55 | (1.87 | ) | to | (1.33 | ) | ||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/14 |
17,454 | 3.042400 | to | 32.189353 | 60,350 | 0.99 | 0.00 | to | 0.55 | 16.05 | to | 16.69 | ||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/13 |
17,193 | 2.618947 | to | 27.585004 | 51,336 | 0.96 | 0.00 | to | 0.55 | 29.53 | to | 30.24 | ||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/12 |
17,177 | 2.019864 | to | 21.179677 | 39,331 | 1.34 | 0.00 | to | 0.55 | 15.93 | to | 16.57 | ||||||||||||||||||||||||||||||||||||||||
Small Cap Growth Stock |
||||||||||||||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/16 |
59,134 | $ | 4.055279 | to | $ | 53.557262 | $ | 262,833 | 0.23 | % | 0.00 | % | to | 0.55 | % | 11.64 | % | to | 12.25 | % | ||||||||||||||||||||||||||||||||
Year Ended 12/31/15 |
61,830 | 3.628992 | to | 47.712811 | 246,246 | 0.11 | 0.00 | to | 0.55 | (0.23 | ) | to | 0.32 | |||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/14 |
63,835 | 3.633783 | to | 47.561777 | 255,403 | 0.00 | 0.00 | to | 0.55 | 8.06 | to | 8.66 | ||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/13 |
66,550 | 3.359376 | to | 43.773190 | 246,636 | 0.49 | 0.00 | to | 0.55 | 37.84 | to | 38.60 | ||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/12 |
68,955 | 2.434726 | to | 31.582975 | 185,068 | 0.00 | 0.00 | to | 0.55 | 8.88 | to | 9.48 | ||||||||||||||||||||||||||||||||||||||||
Index 600 Stock |
||||||||||||||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/16 |
13,434 | $ | 1.937744 | to | $ | 21.724279 | $ | 30,548 | 0.58 | % | 0.00 | % | to | 0.55 | % | 25.43 | % | to | 26.12 | % | ||||||||||||||||||||||||||||||||
Year Ended 12/31/15 |
11,625 | 1.543293 | to | 17.224563 | 20,831 | 0.00 | 0.00 | to | 0.55 | (2.88 | ) | to | (2.35 | ) | ||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/14 |
10,776 | 1.587514 | to | 17.638780 | 20,248 | 1.53 | 0.00 | to | 0.55 | 4.76 | to | 5.34 | ||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/13 |
9,373 | 1.513818 | to | 16.744685 | 16,819 | 4.29 | 0.00 | to | 0.55 | 39.90 | to | 40.67 | ||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/12 |
4,910 | 1.081019 | to | 11.903891 | 6,206 | 3.11 | 0.00 | to | 0.55 | 15.16 | to | 15.80 | ||||||||||||||||||||||||||||||||||||||||
Small Cap Value |
||||||||||||||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/16 |
44,467 | $ | 3.959369 | to | $ | 42.713658 | $ | 199,932 | 0.93 | % | 0.00 | % | to | 0.55 | % | 31.67 | % | to | 32.39 | % | ||||||||||||||||||||||||||||||||
Year Ended 12/31/15 |
45,429 | 3.004079 | to | 32.262868 | 156,881 | 0.68 | 0.00 | to | 0.55 | (5.97 | ) | to | (5.45 | ) | ||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/14 |
47,518 | 3.191481 | to | 34.121874 | 174,553 | 0.36 | 0.00 | to | 0.55 | (0.33 | ) | to | 0.22 | |||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/13 |
49,966 | 3.198795 | to | 34.046809 | 184,787 | 1.14 | 0.00 | to | 0.55 | 31.04 | to | 31.76 | ||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/12 |
50,988 | 2.438620 | to | 25.839588 | 143,973 | 0.37 | 0.00 | to | 0.55 | 15.69 | to | 16.33 | ||||||||||||||||||||||||||||||||||||||||
International Growth |
||||||||||||||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/16 |
42,651 | $ | 1.724317 | to | $ | 18.601991 | $ | 83,569 | 1.15 | % | 0.00 | % | to | 0.55 | % | (3.93 | )% | to | (3.41 | )% | ||||||||||||||||||||||||||||||||
Year Ended 12/31/15 |
43,844 | 1.793138 | to | 19.257803 | 88,907 | 1.68 | 0.00 | to | 0.55 | (2.26 | ) | to | (1.73 | ) | ||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/14 |
43,639 | 1.832844 | to | 19.596007 | 90,803 | 1.30 | 0.00 | to | 0.55 | (5.04 | ) | to | (4.52 | ) | ||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/13 |
44,659 | 1.928280 | to | 20.524033 | 98,031 | 1.40 | 0.00 | to | 0.55 | 19.15 | to | 19.81 | ||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/12 |
44,792 | 1.616718 | to | 17.130842 | 82,841 | 1.33 | 0.00 | to | 0.55 | 17.34 | to | 17.99 | ||||||||||||||||||||||||||||||||||||||||
Research International Core |
||||||||||||||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/16 |
21,617 | $ | 1.038788 | to | $ | 9.985604 | $ | 26,555 | 1.77 | % | 0.00 | % | to | 0.55 | % | (1.66 | )% | to | (1.12 | )% | ||||||||||||||||||||||||||||||||
Year Ended 12/31/15 |
20,383 | 1.055308 | to | 10.098885 | 24,504 | 2.05 | 0.00 | to | 0.55 | (1.65 | ) | to | (1.11 | ) | ||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/14 |
16,529 | 1.071981 | to | 10.212438 | 20,860 | 1.45 | 0.00 | to | 0.55 | (7.22 | ) | to | (6.71 | ) | ||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/13 |
14,106 | 1.154295 | to | 10.947312 | 19,169 | 0.13 | 0.00 | to | 0.55 | 18.27 | to | 18.92 | ||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/12 |
10,388 | 0.975017 | to | 9.205651 | 12,233 | 1.72 | 0.00 | to | 0.55 | 16.12 | to | 16.76 |
(1) | Total return includes deductions for management and other expenses; it excludes deductions for sales loads and other charges, which are a reduction in units. The expense ratios further reflect only those expenses which impact total return. For additional information regarding all expenses assessed, refer to the accompanying notes. |
F-29
Northwestern Mutual Variable Life Account
Notes to Financial Statements
December 31, 2016
As of the respective period end date: | For the respective period ended: | |||||||||||||||||||||||||||||||||||||||||||||||||||
Division | Units Outstanding (000s) |
Unit Value, Lowest to Highest |
Net Assets (000s) |
Dividend Income as a % of Average Net Assets |
Expense Ratio, Lowest to Highest(1) |
Total Return Lowest to Highest(1) |
||||||||||||||||||||||||||||||||||||||||||||||
International Equity |
||||||||||||||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/16 |
134,698 | $ | 3.220087 | to | $ | 4.983406 | $ | 502,291 | 2.14 | % | 0.00 | % | to | 0.55 | % | 2.33 | % | to | 2.89 | % | ||||||||||||||||||||||||||||||||
Year Ended 12/31/15 |
137,889 | 3.143590 | to | 4.843231 | 502,646 | 2.95 | 0.00 | to | 0.55 | (2.75 | ) | to | (2.21 | ) | ||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/14 |
139,819 | 3.229216 | to | 4.952849 | 525,118 | 1.91 | 0.00 | to | 0.55 | (9.30 | ) | to | (8.80 | ) | ||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/13 |
143,163 | 3.556947 | to | 5.431053 | 593,256 | 2.19 | 0.00 | to | 0.55 | 20.71 | to | 21.38 | ||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/12 |
147,013 | 2.943691 | to | 4.474566 | 504,481 | 2.59 | 0.00 | to | 0.55 | 20.85 | to | 21.52 | ||||||||||||||||||||||||||||||||||||||||
Emerging Markets Equity |
||||||||||||||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/16 |
42,450 | $ | 0.805449 | to | $ | 9.676365 | $ | 39,231 | 0.72 | % | 0.00 | % | to | 0.55 | % | 8.47 | % | to | 9.06 | % | ||||||||||||||||||||||||||||||||
Year Ended 12/31/15 |
39,847 | 0.741823 | to | 8.872116 | 34,756 | 0.88 | 0.00 | to | 0.55 | (12.72 | ) | to | (12.24 | ) | ||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/14 |
34,924 | 0.849119 | to | 10.109813 | 34,843 | 0.63 | 0.00 | to | 0.55 | (6.76 | ) | to | (6.25 | ) | ||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/13 |
29,027 | 0.909813 | to | 10.783888 | 30,454 | 0.75 | 0.00 | to | 0.55 | (5.67 | ) | to | (5.15 | ) | ||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/12 |
19,140 | 0.963548 | to | 11.369632 | 21,469 | 0.15 | 0.00 | to | 0.55 | 18.18 | to | 18.83 | ||||||||||||||||||||||||||||||||||||||||
Government Money Market |
||||||||||||||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/16 |
83,720 | $ | 1.527011 | to | $ | 41.625993 | $ | 164,799 | 0.12 | % | 0.00 | % | to | 0.55 | % | (0.42 | )% | to | 0.13 | % | ||||||||||||||||||||||||||||||||
Year Ended 12/31/15 |
79,683 | 1.531914 | to | 41.572750 | 171,148 | 0.01 | 0.00 | to | 0.55 | (0.54 | ) | to | 0.01 | |||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/14 |
79,806 | 1.538686 | to | 41.568533 | 165,824 | 0.07 | 0.00 | to | 0.55 | (0.48 | ) | to | 0.07 | |||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/13 |
82,246 | 1.544536 | to | 41.539003 | 170,166 | 0.10 | 0.00 | to | 0.55 | (0.45 | ) | to | 0.10 | |||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/12 |
84,564 | 1.549943 | to | 41.497953 | 169,940 | 0.14 | 0.00 | to | 0.55 | (0.41 | ) | to | 0.15 | |||||||||||||||||||||||||||||||||||||||
Short-Term Bond |
||||||||||||||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/16 |
16,506 | $ | 1.025038 | to | $ | 12.481062 | $ | 20,405 | 1.19 | % | 0.00 | % | to | 0.55 | % | 1.12 | % | to | 1.67 | % | ||||||||||||||||||||||||||||||||
Year Ended 12/31/15 |
12,538 | 1.012734 | to | 12.275717 | 15,742 | 0.71 | 0.00 | to | 0.55 | 0.17 | to | 0.72 | ||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/14 |
11,155 | 1.010036 | to | 12.188479 | 13,392 | 0.60 | 0.00 | to | 0.55 | (0.17 | ) | to | 0.38 | |||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/13 |
9,076 | 1.010673 | to | 12.142453 | 10,582 | 0.17 | 0.00 | to | 0.55 | 0.00 | (2) | to | 0.55 | |||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/12 |
5,895 | 1.009629 | to | 12.076410 | 6,960 | 1.43 | 0.00 | to | 0.55 | 1.51 | to | 2.07 | ||||||||||||||||||||||||||||||||||||||||
Select Bond |
||||||||||||||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/16 |
70,949 | $ | 2.742774 | to | $ | 219.047810 | $ | 249,118 | 1.94 | % | 0.00 | % | to | 0.55 | % | 2.49 | % | to | 3.06 | % | ||||||||||||||||||||||||||||||||
Year Ended 12/31/15 |
70,587 | 2.673382 | to | 212.549665 | 243,197 | 1.50 | 0.00 | to | 0.55 | (0.02 | ) | to | 0.53 | |||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/14 |
70,799 | 2.671248 | to | 211.428447 | 248,615 | 2.02 | 0.00 | to | 0.55 | 4.99 | to | 5.56 | ||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/13 |
73,536 | 2.541856 | to | 200.286369 | 244,742 | 2.31 | 0.00 | to | 0.55 | (2.69 | ) | to | (2.16 | ) | ||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/12 |
78,962 | 2.609587 | to | 204.702189 | 268,074 | 2.69 | 0.00 | to | 0.55 | 4.39 | to | 4.96 | ||||||||||||||||||||||||||||||||||||||||
Long-Term U.S. Government Bond |
||||||||||||||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/16 |
6,543 | $ | 1.353810 | to | $ | 19.104481 | $ | 9,594 | 1.87 | % | 0.00 | % | to | 0.55 | % | 0.54 | % | to | 1.09 | % | ||||||||||||||||||||||||||||||||
Year Ended 12/31/15 |
5,671 | 1.345254 | to | 18.898765 | 8,101 | 2.11 | 0.00 | to | 0.55 | (2.01 | ) | to | (1.47 | ) | ||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/14 |
4,722 | 1.371509 | to | 19.181310 | 6,944 | 2.01 | 0.00 | to | 0.55 | 23.05 | to | 23.73 | ||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/13 |
3,977 | 1.113443 | to | 15.502339 | 4,876 | 0.02 | 0.00 | to | 0.55 | (13.75 | ) | to | (13.27 | ) | ||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/12 |
4,651 | 1.289646 | to | 17.875038 | 7,933 | 1.85 | 0.00 | to | 0.55 | 3.18 | to | 3.75 | ||||||||||||||||||||||||||||||||||||||||
Inflation Protection |
||||||||||||||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/16 |
6,910 | $ | 1.080563 | to | $ | 14.229840 | $ | 8,987 | 1.23 | % | 0.00 | % | to | 0.55 | % | 4.11 | % | to | 4.68 | % | ||||||||||||||||||||||||||||||||
Year Ended 12/31/15 |
6,372 | 1.036853 | to | 13.593038 | 7,975 | 2.34 | 0.00 | to | 0.55 | (2.74 | ) | to | (2.20 | ) | ||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/14 |
6,336 | 1.065002 | to | 13.899486 | 8,559 | 0.52 | 0.00 | to | 0.55 | 2.57 | to | 3.14 | ||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/13 |
6,697 | 1.037245 | to | 13.476716 | 8,588 | 1.08 | 0.00 | to | 0.55 | (8.83 | ) | to | (8.33 | ) | ||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/12 |
7,780 | 1.136621 | to | 14.701699 | 10,670 | 2.68 | 0.00 | to | 0.55 | 6.76 | to | 7.35 | ||||||||||||||||||||||||||||||||||||||||
High Yield Bond |
||||||||||||||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/16 |
25,741 | $ | 3.737039 | to | $ | 49.707921 | $ | 110,842 | 5.33 | % | 0.00 | % | to | 0.55 | % | 13.97 | % | to | 14.60 | % | ||||||||||||||||||||||||||||||||
Year Ended 12/31/15 |
26,563 | 3.275752 | to | 43.377037 | 100,914 | 4.53 | 0.00 | to | 0.55 | (1.90 | ) | to | (1.36 | ) | ||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/14 |
27,230 | 3.335950 | to | 43.976216 | 106,154 | 5.04 | 0.00 | to | 0.55 | 0.62 | to | 1.18 | ||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/13 |
27,674 | 3.312039 | to | 43.465300 | 107,038 | 5.57 | 0.00 | to | 0.55 | 5.26 | to | 5.84 | ||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/12 |
28,781 | 3.143457 | to | 41.068270 | 106,270 | 6.24 | 0.00 | to | 0.55 | 13.26 | to | 13.89 |
(1) | Total return includes deductions for management and other expenses; it excludes deductions for sales loads and other charges, which are a reduction in units. The expense ratios further reflect only those expenses which impact total return. For additional information regarding all expenses assessed, refer to the accompanying notes. |
(2) | Ratio is less than 0.005% |
F-30
Northwestern Mutual Variable Life Account
Notes to Financial Statements
December 31, 2016
As of the respective period end date: | For the respective period ended: | |||||||||||||||||||||||||||||||||||||||||||||||||||
Division | Units Outstanding (000s) |
Unit Value, Lowest to Highest |
Net Assets (000s) |
Dividend Income as a % of Average Net Assets |
Expense Ratio, Lowest to Highest(1) |
Total Return Lowest to Highest(1) |
||||||||||||||||||||||||||||||||||||||||||||||
Multi-Sector Bond |
||||||||||||||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/16 |
23,443 | $ | 1.258995 | to | $ | 17.327635 | $ | 32,977 | 4.53 | % | 0.00 | % | to | 0.55 | % | 10.48 | % | to | 11.09 | % | ||||||||||||||||||||||||||||||||
Year Ended 12/31/15 |
21,624 | 1.138400 | to | 15.597729 | 27,546 | 5.58 | 0.00 | to | 0.55 | (2.76 | ) | to | (2.22 | ) | ||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/14 |
20,081 | 1.169486 | to | 15.951947 | 26,344 | 2.65 | 0.00 | to | 0.55 | 2.68 | to | 3.25 | ||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/13 |
17,326 | 1.137785 | to | 15.449941 | 21,918 | 3.56 | 0.00 | to | 0.55 | (2.12 | ) | to | (1.58 | ) | ||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/12 |
14,697 | 1.161278 | to | 15.698283 | 18,872 | 0.46 | 0.00 | to | 0.55 | 14.31 | to | 14.94 | ||||||||||||||||||||||||||||||||||||||||
Balanced |
||||||||||||||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/16 |
48,762 | $ | 3.512832 | to | $ | 193.563662 | $ | 347,403 | 2.26 | % | 0.00 | % | to | 0.55 | % | 6.00 | % | to | 6.58 | % | ||||||||||||||||||||||||||||||||
Year Ended 12/31/15 |
53,304 | 3.310708 | to | 181.609174 | 345,035 | 1.97 | 0.00 | to | 0.55 | (0.67 | ) | to | (0.12 | ) | ||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/14 |
54,744 | 3.329658 | to | 181.830315 | 360,234 | 2.31 | 0.00 | to | 0.55 | 4.99 | to | 5.56 | ||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/13 |
55,407 | 3.168393 | to | 172.248875 | 354,026 | 3.38 | 0.00 | to | 0.55 | 11.47 | to | 12.08 | ||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/12 |
57,330 | 2.839508 | to | 153.677764 | 331,081 | 0.23 | 0.00 | to | 0.55 | 9.09 | to | 9.69 | ||||||||||||||||||||||||||||||||||||||||
Asset Allocation |
||||||||||||||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/16 |
17,637 | $ | 2.038314 | to | $ | 21.988973 | $ | 44,895 | 2.37 | % | 0.00 | % | to | 0.55 | % | 7.20 | % | to | 7.79 | % | ||||||||||||||||||||||||||||||||
Year Ended 12/31/15 |
18,489 | 1.899554 | to | 20.400265 | 44,291 | 1.92 | 0.00 | to | 0.55 | (0.97 | ) | to | (0.43 | ) | ||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/14 |
19,933 | 1.916252 | to | 20.487411 | 47,339 | 2.15 | 0.00 | to | 0.55 | 4.57 | to | 5.15 | ||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/13 |
19,334 | 1.830603 | to | 19.484028 | 44,834 | 3.32 | 0.00 | to | 0.55 | 16.03 | to | 16.67 | ||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/12 |
20,120 | 1.576122 | to | 16.700324 | 39,573 | 0.23 | 0.00 | to | 0.55 | 10.41 | to | 11.02 | ||||||||||||||||||||||||||||||||||||||||
Fidelity VIP Mid Cap |
||||||||||||||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/16 |
33,080 | $ | 4.417776 | to | $ | 47.161926 | $ | 169,985 | 0.32 | % | 0.00 | % | to | 0.55 | % | 11.31 | % | to | 11.92 | % | ||||||||||||||||||||||||||||||||
Year Ended 12/31/15 |
34,908 | 3.964922 | to | 42.137819 | 162,700 | 0.25 | 0.00 | to | 0.55 | (2.17 | ) | to | (1.63 | ) | ||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/14 |
36,665 | 4.048702 | to | 42.835362 | 175,314 | 0.02 | 0.00 | to | 0.55 | 5.45 | to | 6.03 | ||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/13 |
37,534 | 3.835558 | to | 40.398542 | 169,449 | 0.28 | 0.00 | to | 0.55 | 35.13 | to | 35.87 | ||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/12 |
38,312 | 2.835677 | to | 29.733518 | 128,384 | 0.39 | 0.00 | to | 0.55 | 13.93 | to | 14.56 | ||||||||||||||||||||||||||||||||||||||||
Fidelity VIP Contrafund |
||||||||||||||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/16 |
20,138 | $ | 1.658952 | to | $ | 18.124509 | $ | 38,211 | 0.62 | % | 0.00 | % | to | 0.55 | % | 7.14 | % | to | 7.73 | % | ||||||||||||||||||||||||||||||||
Year Ended 12/31/15 |
22,441 | 1.546836 | to | 16.824006 | 39,557 | 0.82 | 0.00 | to | 0.55 | (0.13 | ) | to | 0.42 | |||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/14 |
21,021 | 1.547371 | to | 16.754369 | 37,757 | 0.78 | 0.00 | to | 0.55 | 11.04 | to | 11.65 | ||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/13 |
19,719 | 1.392090 | to | 15.005573 | 31,545 | 0.90 | 0.00 | to | 0.55 | 30.24 | to | 30.95 | ||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/12 |
16,353 | 1.067828 | to | 11.458810 | 20,234 | 1.49 | 0.00 | to | 0.55 | 15.50 | to | 16.14 | ||||||||||||||||||||||||||||||||||||||||
Neuberger Berman AMT Socially Responsive |
||||||||||||||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/16 |
2,390 | $ | 1.640254 | to | $ | 17.797220 | $ | 4,887 | 0.71 | % | 0.00 | % | to | 0.55 | % | 9.26 | % | to | 9.86 | % | ||||||||||||||||||||||||||||||||
Year Ended 12/31/15 |
2,413 | 1.499733 | to | 16.199640 | 4,514 | 0.57 | 0.00 | to | 0.55 | (1.01 | ) | to | (0.46 | ) | ||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/14 |
2,395 | 1.513495 | to | 16.275087 | 4,590 | 0.37 | 0.00 | to | 0.55 | 9.78 | to | 10.38 | ||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/13 |
2,403 | 1.377320 | to | 14.744385 | 4,648 | 0.79 | 0.00 | to | 0.55 | 36.85 | to | 37.60 | ||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/12 |
1,241 | 1.005443 | to | 10.715212 | 1,683 | 0.25 | 0.00 | to | 0.55 | 10.37 | to | 10.98 | ||||||||||||||||||||||||||||||||||||||||
Russell Multi-Style Equity |
||||||||||||||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/16 |
99,289 | $ | 1.797106 | to | $ | 20.214494 | $ | 204,986 | 1.04 | % | 0.00 | % | to | 0.55 | % | 10.03 | % | to | 10.64 | % | ||||||||||||||||||||||||||||||||
Year Ended 12/31/15 |
108,402 | 1.631656 | to | 18.271298 | 203,098 | 0.82 | 0.00 | to | 0.55 | 0.55 | to | 1.11 | ||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/14 |
114,307 | 1.621079 | to | 18.071559 | 213,362 | 1.16 | 0.00 | to | 0.55 | 11.09 | to | 11.70 | ||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/13 |
119,343 | 1.457823 | to | 16.178812 | 201,588 | 1.21 | 0.00 | to | 0.55 | 32.19 | to | 32.92 | ||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/12 |
126,018 | 1.101694 | to | 12.171877 | 162,081 | 1.12 | 0.00 | to | 0.55 | 15.05 | to | 15.69 | ||||||||||||||||||||||||||||||||||||||||
Russell Aggressive Equity |
||||||||||||||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/16 |
34,090 | $ | 2.590944 | to | $ | 29.891437 | $ | 100,382 | 0.83 | % | 0.00 | % | to | 0.55 | % | 18.01 | % | to | 18.66 | % | ||||||||||||||||||||||||||||||||
Year Ended 12/31/15 |
36,650 | 2.193357 | to | 25.191084 | 91,739 | 0.67 | 0.00 | to | 0.55 | (7.69 | ) | to | (7.19 | ) | ||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/14 |
38,597 | 2.373801 | to | 27.141282 | 104,705 | 0.25 | 0.00 | to | 0.55 | 1.00 | to | 1.56 | ||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/13 |
40,543 | 2.347887 | to | 26.724835 | 109,257 | 0.43 | 0.00 | to | 0.55 | 39.24 | to | 40.00 | ||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/12 |
41,973 | 1.684569 | to | 19.088862 | 80,738 | 1.07 | 0.00 | to | 0.55 | 15.20 | to | 15.84 |
(1) | Total return includes deductions for management and other expenses; it excludes deductions for sales loads and other charges, which are a reduction in units. The expense ratios further reflect only those expenses which impact total return. For additional information regarding all expenses assessed, refer to the accompanying notes. |
F-31
Northwestern Mutual Variable Life Account
Notes to Financial Statements
December 31, 2016
As of the respective period end date: | For the respective period ended: | |||||||||||||||||||||||||||||||||||||||||||||||||||
Division | Units Outstanding (000s) |
Unit Value, Lowest to Highest |
Net Assets (000s) |
Dividend Income as a % of Average Net Assets |
Expense Ratio, Lowest to Highest(1) |
Total Return Lowest to Highest(1) |
||||||||||||||||||||||||||||||||||||||||||||||
Russell Non-U.S. |
|
|||||||||||||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/16 |
60,682 | $ | 1.635824 | to | $ | 17.976751 | $ | 116,151 | 3.23 | % | 0.00 | % | to | 0.55 | % | 1.80 | % | to | 2.36 | % | ||||||||||||||||||||||||||||||||
Year Ended 12/31/15 |
62,803 | 1.605290 | to | 17.562157 | 117,670 | 1.15 | 0.00 | to | 0.55 | (1.85 | ) | to | (1.31 | ) | ||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/14 |
63,654 | 1.633987 | to | 17.795979 | 121,476 | 1.95 | 0.00 | to | 0.55 | (4.97 | ) | to | (4.45 | ) | ||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/13 |
65,876 | 1.717753 | to | 18.624500 | 134,161 | 2.00 | 0.00 | to | 0.55 | 21.24 | to | 21.91 | ||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/12 |
68,417 | 1.415380 | to | 15.277391 | 115,667 | 1.77 | 0.00 | to | 0.55 | 19.16 | to | 19.81 | ||||||||||||||||||||||||||||||||||||||||
Russell Core Bond |
|
|||||||||||||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/16 |
29,943 | $ | 2.224732 | to | $ | 23.970161 | $ | 86,313 | 1.59 | % | 0.00 | % | to | 0.55 | % | 2.54 | % | to | 3.10 | % | ||||||||||||||||||||||||||||||||
Year Ended 12/31/15 |
29,943 | 2.167486 | to | 23.248775 | 85,576 | 2.39 | 0.00 | to | 0.55 | (0.69 | ) | to | (0.14 | ) | ||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/14 |
30,112 | 2.180310 | to | 23.281628 | 86,877 | 1.55 | 0.00 | to | 0.55 | 4.88 | to | 5.45 | ||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/13 |
31,407 | 2.076847 | to | 22.077570 | 86,009 | 1.44 | 0.00 | to | 0.55 | (1.99 | ) | to | (1.45 | ) | ||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/12 |
34,681 | 2.116915 | to | 22.402721 | 99,933 | 2.33 | 0.00 | to | 0.55 | 7.78 | to | 8.38 | ||||||||||||||||||||||||||||||||||||||||
Russell Global Real Estate Securities |
|
|||||||||||||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/16 |
34,924 | $ | 4.286703 | to | $ | 46.124107 | $ | 168,647 | 4.49 | % | 0.00 | % | to | 0.55 | % | 2.46 | % | to | 3.02 | % | ||||||||||||||||||||||||||||||||
Year Ended 12/31/15 |
36,412 | 4.179747 | to | 44.771967 | 172,160 | 1.64 | 0.00 | to | 0.55 | (0.30 | ) | to | 0.25 | |||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/14 |
36,715 | 4.188148 | to | 44.660949 | 175,388 | 3.26 | 0.00 | to | 0.55 | 14.12 | to | 14.75 | ||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/13 |
37,321 | 3.666253 | to | 38.920595 | 157,271 | 4.00 | 0.00 | to | 0.55 | 3.08 | to | 3.65 | ||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/12 |
37,370 | 3.553123 | to | 37.550773 | 152,571 | 5.00 | 0.00 | to | 0.55 | 26.86 | to | 27.56 | ||||||||||||||||||||||||||||||||||||||||
Russell LifePoints Moderate Strategy |
|
|||||||||||||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/16 |
3,497 | $ | 1.237730 | to | $ | 15.067752 | $ | 5,175 | 3.65 | % | 0.00 | % | to | 0.55 | % | 7.16 | % | to | 7.75 | % | ||||||||||||||||||||||||||||||||
Year Ended 12/31/15 |
2,175 | 1.153913 | to | 13.984420 | 3,256 | 2.55 | 0.00 | to | 0.55 | (2.24 | ) | to | (1.71 | ) | ||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/14 |
1,929 | 1.179226 | to | 14.227181 | 3,327 | 3.33 | 0.00 | to | 0.55 | 4.28 | to | 4.85 | ||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/13 |
1,516 | 1.129701 | to | 13.568584 | 2,151 | 1.69 | 0.00 | to | 0.55 | 6.20 | to | 6.79 | ||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/12 |
1,505 | 1.062654 | to | 12.706153 | 2,139 | 3.29 | 0.00 | to | 0.55 | 10.46 | to | 11.07 | ||||||||||||||||||||||||||||||||||||||||
Russell LifePoints Balanced Strategy |
|
|||||||||||||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/16 |
10,796 | $ | 1.290626 | to | $ | 14.773443 | $ | 18,770 | 3.30 | % | 0.00 | % | to | 0.55 | % | 8.46 | % | to | 9.05 | % | ||||||||||||||||||||||||||||||||
Year Ended 12/31/15 |
11,511 | 1.188804 | to | 13.546956 | 17,506 | 2.20 | 0.00 | to | 0.55 | (2.84 | ) | to | (2.30 | ) | ||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/14 |
11,655 | 1.222287 | to | 13.866173 | 17,117 | 2.98 | 0.00 | to | 0.55 | 4.04 | to | 4.61 | ||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/13 |
9,944 | 1.173673 | to | 13.255096 | 14,726 | 2.18 | 0.00 | to | 0.55 | 11.81 | to | 12.43 | ||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/12 |
7,167 | 1.048620 | to | 11.789785 | 9,673 | 2.60 | 0.00 | to | 0.55 | 12.34 | to | 12.96 | ||||||||||||||||||||||||||||||||||||||||
Russell LifePoints Growth Strategy |
|
|||||||||||||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/16 |
12,307 | $ | 1.298639 | to | $ | 13.860030 | $ | 19,559 | 2.92 | % | 0.00 | % | to | 0.55 | % | 9.13 | % | to | 9.73 | % | ||||||||||||||||||||||||||||||||
Year Ended 12/31/15 |
13,267 | 1.188862 | to | 12.631574 | 19,036 | 1.81 | 0.00 | to | 0.55 | (3.84 | ) | to | (3.31 | ) | ||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/14 |
13,525 | 1.235139 | to | 13.064429 | 20,126 | 3.03 | 0.00 | to | 0.55 | 3.19 | to | 3.76 | ||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/13 |
11,741 | 1.195791 | to | 12.591524 | 16,736 | 2.32 | 0.00 | to | 0.55 | 15.92 | to | 16.56 | ||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/12 |
9,304 | 1.030529 | to | 10.802768 | 11,345 | 2.26 | 0.00 | to | 0.55 | 13.59 | to | 14.22 | ||||||||||||||||||||||||||||||||||||||||
Russell LifePoints Equity Growth Strategy |
|
|||||||||||||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/16 |
6,850 | $ | 1.328754 | to | $ | 12.946453 | $ | 10,823 | 2.95 | % | 0.00 | % | to | 0.55 | % | 10.24 | % | to | 10.85 | % | ||||||||||||||||||||||||||||||||
Year Ended 12/31/15 |
6,000 | 1.204105 | to | 11.679451 | 8,824 | 1.53 | 0.00 | to | 0.55 | (4.40 | ) | to | (3.87 | ) | ||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/14 |
5,836 | 1.258221 | to | 12.149681 | 8,762 | 3.29 | 0.00 | to | 0.55 | 2.92 | to | 3.48 | ||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/13 |
5,628 | 1.221337 | to | 11.740704 | 8,224 | 2.59 | 0.00 | to | 0.55 | 19.16 | to | 19.81 | ||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/12 |
4,213 | 1.023971 | to | 9.799317 | 5,371 | 1.87 | 0.00 | to | 0.55 | 15.04 | to | 15.68 | ||||||||||||||||||||||||||||||||||||||||
Credit Suisse Trust Commodity Return Strategy |
|
|||||||||||||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/16 |
3,494 | $ | 4.942479 | to | $ | 5.316102 | $ | 18,978 | 0.00 | % | 0.00 | % | to | 0.55 | % | 11.41 | % | to | 12.02 | % | ||||||||||||||||||||||||||||||||
Year Ended 12/31/15 |
3,059 | 4.412123 | to | 4.767003 | 14,882 | 0.00 | 0.00 | to | 0.55 | (25.44 | ) | to | (25.03 | ) | ||||||||||||||||||||||||||||||||||||||
Year Ended 12/31/14 |
2,448 | 5.885213 | to | 6.387246 | 15,934 | 0.00 | 0.00 | to | 0.55 | (17.39 | ) | to | (16.94 | ) | ||||||||||||||||||||||||||||||||||||||
Period Ended 12/31/13 (3) |
1,964 | 7.085099 | to | 7.724122 | 15,565 | 0.00 | 0.00 | to | 0.55 | 1.72 | to | 1.79 |
(1) | Total return includes deductions for management and other expenses; it excludes deductions for sales loads and other charges, which are a reduction in units. The expense ratios further reflect only those expenses which impact total return. For additional information regarding all expenses assessed, refer to the accompanying notes. Returns are not annualized for periods less than one year. |
(3) | Division commenced operations on November 15, 2013. |
F-32
The Northwestern Mutual
Life Insurance Company
Consolidated Financial Statements
December 31, 2016, 2015 and 2014
NM-1
Report of Independent Auditors
To the Board of Trustees of
The Northwestern Mutual Life Insurance Company
We have audited the accompanying consolidated statutory financial statements of The Northwestern Mutual Life Insurance Company and its wholly-owned subsidiary, Northwestern Long Term Care Insurance Company (together, the Company), which comprise the consolidated statutory statements of financial position as of December 31, 2016 and 2015, and the related consolidated statutory statements of operations and changes in surplus, and of cash flows for each of the three years ended December 31, 2016.
Managements Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the accounting practices prescribed or permitted by the Office of the Commissioner of Insurance of the State of Wisconsin. Management is also responsible for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditors Responsibility
Our responsibility is to express an opinion on the consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Companys preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Companys internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Basis for Adverse Opinion on U.S. Generally Accepted Accounting Principles
As described in Note 1 to the consolidated financial statements, the consolidated financial statements are prepared by the Company on the basis of the accounting practices prescribed or permitted by the Office of the Commissioner of Insurance of the State of Wisconsin, which is a basis of accounting other than accounting principles generally accepted in the United States of America.
PricewaterhouseCoopers LLP, 833 E. Michigan St., Ste. 1200, Milwaukee, WI 53202
T: (414) 212 1600, F: (414) 212 1880, www.pwc.com/us
NM-2
The effects on the consolidated financial statements of the variances between the statutory basis of accounting described in Note 1 and accounting principles generally accepted in the United States of America, although not reasonably determinable, are presumed to be material.
Adverse Opinion on U.S. Generally Accepted Accounting Principles
In our opinion, because of the significance of the matter discussed in the Basis for Adverse Opinion on U.S. Generally Accepted Accounting Principles paragraph, the consolidated financial statements referred to above do not present fairly, in accordance with accounting principles generally accepted in the United States of America, the financial position of the Company as of December 31, 2016 and 2015, or the results of their operations or their cash flows for each of the three years ended December 31, 2016.
Opinion on Statutory Basis of Accounting
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2016 and 2015, and the results of their operations and their cash flows for each of the three years ended December 31, 2016, in accordance with the accounting practices prescribed or permitted by the Office of the Commissioner of Insurance of the State of Wisconsin described in Note 1.
February 20, 2017
NM-3
The Northwestern Mutual Life Insurance Company
Consolidated Statements of Financial Position
(in millions)
December 31, | ||||||||
2016 | 2015 | |||||||
Assets: |
||||||||
Bonds |
$ | 139,859 | $ | 133,449 | ||||
Mortgage loans |
34,175 | 32,236 | ||||||
Policy loans |
17,150 | 17,146 | ||||||
Common and preferred stocks |
4,173 | 3,886 | ||||||
Real estate |
2,468 | 1,999 | ||||||
Other investments |
13,463 | 13,292 | ||||||
Cash and short-term investments |
2,306 | 1,460 | ||||||
|
|
|
|
|||||
Total investments |
213,594 | 203,468 | ||||||
Due and accrued investment income |
1,883 | 1,906 | ||||||
Net deferred tax assets |
3,191 | 3,288 | ||||||
Deferred premium and other assets |
3,214 | 3,079 | ||||||
Separate account assets |
28,559 | 26,731 | ||||||
|
|
|
|
|||||
Total assets |
$ | 250,441 | $ | 238,472 | ||||
|
|
|
|
|||||
Liabilities and surplus: |
||||||||
Reserves for policy benefits |
$ | 186,489 | $ | 176,928 | ||||
Policyowner dividends payable |
5,205 | 5,610 | ||||||
Interest maintenance reserve |
793 | 664 | ||||||
Asset valuation reserve |
3,447 | 3,564 | ||||||
Income taxes payable |
154 | 101 | ||||||
Other liabilities |
5,568 | 5,218 | ||||||
Separate account liabilities |
28,559 | 26,731 | ||||||
|
|
|
|
|||||
Total liabilities |
230,215 | 218,816 | ||||||
Surplus: |
||||||||
Surplus notes |
1,750 | 1,750 | ||||||
Unassigned surplus |
18,476 | 17,906 | ||||||
|
|
|
|
|||||
Total surplus |
20,226 | 19,656 | ||||||
|
|
|
|
|||||
Total liabilities and surplus |
$ | 250,441 | $ | 238,472 | ||||
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
NM-4
The Northwestern Mutual Life Insurance Company
Consolidated Statements of Operations
(in millions)
For the years ended | ||||||||||||
December 31, | ||||||||||||
2016 | 2015 | 2014 | ||||||||||
Revenue: |
||||||||||||
Premiums |
$ | 17,915 | $ | 17,788 | $ | 17,001 | ||||||
Net investment income |
9,607 | 9,467 | 9,104 | |||||||||
Other income |
636 | 625 | 602 | |||||||||
|
|
|
|
|
|
|||||||
Total revenue |
28,158 | 27,880 | 26,707 | |||||||||
|
|
|
|
|
|
|||||||
Benefits and expenses: |
||||||||||||
Benefit payments to policyowners and beneficiaries |
9,799 | 9,043 | 8,396 | |||||||||
Net additions to policy benefit reserves |
9,284 | 9,352 | 8,910 | |||||||||
Net transfers to (from) separate accounts |
(118 | ) | 150 | 501 | ||||||||
|
|
|
|
|
|
|||||||
Total benefits |
18,965 | 18,545 | 17,807 | |||||||||
Commissions and operating expenses |
3,136 | 2,932 | 2,831 | |||||||||
|
|
|
|
|
|
|||||||
Total benefits and expenses |
22,101 | 21,477 | 20,638 | |||||||||
|
|
|
|
|
|
|||||||
Gain from operations before dividends and taxes |
6,057 | 6,403 | 6,069 | |||||||||
Policyowner dividends |
5,205 | 5,609 | 5,511 | |||||||||
|
|
|
|
|
|
|||||||
Gain from operations before taxes |
852 | 794 | 558 | |||||||||
Income tax expense (benefit) |
(176 | ) | (53 | ) | 22 | |||||||
|
|
|
|
|
|
|||||||
Net gain from operations |
1,028 | 847 | 536 | |||||||||
Net realized capital gains (losses) |
(210 | ) | (32 | ) | 143 | |||||||
|
|
|
|
|
|
|||||||
Net income |
$ | 818 | $ | 815 | $ | 679 | ||||||
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
NM-5
The Northwestern Mutual Life Insurance Company
Consolidated Statements of Changes in Surplus
(in millions)
For the years ended | ||||||||||||
December 31, | ||||||||||||
2016 | 2015 | 2014 | ||||||||||
Beginning of year balance |
$ | 19,656 | $ | 19,054 | $ | 17,199 | ||||||
Net income |
818 | 815 | 679 | |||||||||
Change in net unrealized capital gains and losses |
(335 | ) | (248 | ) | 1,246 | |||||||
Change in net deferred tax assets |
6 | 86 | 271 | |||||||||
Change in nonadmitted assets and other |
(36 | ) | (31 | ) | (155 | ) | ||||||
Change in asset valuation reserve |
117 | (20 | ) | (186 | ) | |||||||
|
|
|
|
|
|
|||||||
Net increase in surplus |
570 | 602 | 1,855 | |||||||||
|
|
|
|
|
|
|||||||
End of year balance |
$ | 20,226 | $ | 19,656 | $ | 19,054 | ||||||
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
NM-6
The Northwestern Mutual Life Insurance Company
Consolidated Statements of Cash Flows
(in millions)
For the years ended | ||||||||||||
December 31, | ||||||||||||
2016 | 2015 | 2014 | ||||||||||
Cash flows from operating activities: |
||||||||||||
Premiums and other income received |
$ | 12,704 | $ | 12,658 | $ | 12,700 | ||||||
Investment income received |
9,121 | 8,670 | 9,014 | |||||||||
Benefit and dividend payments to policyowners and beneficiaries |
(8,784 | ) | (8,164 | ) | (8,742 | ) | ||||||
Net transfers (to) from separate accounts |
121 | (152 | ) | (492 | ) | |||||||
Commissions, expenses and taxes paid |
(2,618 | ) | (2,834 | ) | (3,247 | ) | ||||||
|
|
|
|
|
|
|||||||
Net cash provided by operating activities |
10,544 | 10,178 | 9,233 | |||||||||
|
|
|
|
|
|
|||||||
Cash flows from investing activities: |
||||||||||||
Proceeds from investments sold or matured: |
||||||||||||
Bonds |
45,189 | 37,276 | 33,516 | |||||||||
Common and preferred stocks |
3,548 | 2,084 | 2,898 | |||||||||
Mortgage loans |
3,023 | 1,924 | 1,501 | |||||||||
Real estate |
238 | 209 | 76 | |||||||||
Other investments |
1,574 | 1,893 | 1,676 | |||||||||
|
|
|
|
|
|
|||||||
Subtotal proceeds from investments |
53,572 | 43,386 | 39,667 | |||||||||
|
|
|
|
|
|
|||||||
Cost of investments acquired: |
||||||||||||
Bonds |
(51,048 | ) | (42,801 | ) | (38,857 | ) | ||||||
Common and preferred stocks |
(3,540 | ) | (2,478 | ) | (3,394 | ) | ||||||
Mortgage loans |
(5,040 | ) | (5,031 | ) | (4,008 | ) | ||||||
Real estate |
(592 | ) | (356 | ) | (187 | ) | ||||||
Other investments |
(2,676 | ) | (3,465 | ) | (2,002 | ) | ||||||
|
|
|
|
|
|
|||||||
Subtotal cost of investments acquired |
(62,896 | ) | (54,131 | ) | (48,448 | ) | ||||||
|
|
|
|
|
|
|||||||
Net inflows (outflows) of policy loans |
253 | 3 | (450 | ) | ||||||||
|
|
|
|
|
|
|||||||
Net cash applied to investing activities |
(9,071 | ) | (10,742 | ) | (9,231 | ) | ||||||
|
|
|
|
|
|
|||||||
Cash flows from financing and miscellaneous sources: |
||||||||||||
Net inflows (outflows) on deposit-type contracts |
(222 | ) | (297 | ) | 56 | |||||||
Other cash provided (applied) |
(405 | ) | (267 | ) | 268 | |||||||
|
|
|
|
|
|
|||||||
Net cash provided by (applied to) financing and miscellaneous sources |
(627 | ) | (564 | ) | 324 | |||||||
|
|
|
|
|
|
|||||||
Net increase (decrease) in cash and short-term investments |
846 | (1,128 | ) | 326 | ||||||||
Cash and short-term investments, beginning of year |
1,460 | 2,588 | 2,262 | |||||||||
|
|
|
|
|
|
|||||||
Cash and short-term investments, end of year |
$ | 2,306 | $ | 1,460 | $ | 2,588 | ||||||
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
NM-7
The Northwestern Mutual Life Insurance Company
Consolidated Statements of Cash Flows (supplemental)
(in millions)
For the years ended December 31, |
||||||||||||
2016 | 2015 | 2014 | ||||||||||
Supplemental disclosures of cash flow information |
||||||||||||
Non-cash operating, investing and financing and miscellaneous sources not included in the consolidated statements of cash flows: | ||||||||||||
Operating:1 |
||||||||||||
Dividends used to pay premiums and loans |
$ | 5,428 | $ | 5,305 | ||||||||
Capitalized interest and payment in-kind investment income |
727 | 845 | ||||||||||
Employee benefit and compensation plan expenses |
196 | 154 | ||||||||||
Other policyowner contract activity |
188 | 167 | ||||||||||
Investing: |
||||||||||||
Bond forward commitments |
- | 6,225 | $ | 12,590 | ||||||||
Bond refinancings and exchanges |
1,985 | 1,757 | 1,713 | |||||||||
Asset transfers with affiliated entities |
935 | 365 | 344 | |||||||||
Mortgage loan refinancings and transfers |
918 | 914 | 889 | |||||||||
Net policy loan activity 1 |
342 | 355 | ||||||||||
Net premium loan activity 1 |
94 | 140 | ||||||||||
Other invested asset exchanges |
78 | 131 | 37 | |||||||||
Common stock exchanges |
33 | 171 | 61 | |||||||||
Real estate asset exchanges |
7 | - | - | |||||||||
Financing and Miscellaneous: |
||||||||||||
Deposit-type contract deposits and interest credited 1 |
512 | 389 |
1 | Revisions to Statement of Statutory Accounting Principle No. 69, Statement of Cash Flows require additional reporting and disclosure of non-cash activity related to operations effective for the years ended December 31, 2016 and 2015. |
The accompanying notes are an integral part of these consolidated financial statements.
NM-8
The Northwestern Mutual Life Insurance Company
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
1. | Basis of Presentation |
The accompanying consolidated statutory financial statements include the accounts of The Northwestern Mutual Life Insurance Company (NM) and its wholly-owned subsidiary, Northwestern Long Term Care Insurance Company (NLTC and together the Company). All intercompany balances and transactions have been eliminated. The Company offers life, annuity, disability and long-term care insurance products to the personal, business and estate markets throughout the United States of America.
These financial statements were prepared in accordance with accounting practices prescribed or permitted by the Office of the Commissioner of Insurance of the State of Wisconsin (statutory basis of accounting), which are based on the Accounting Practices and Procedures Manual of the National Association of Insurance Commissioners (NAIC). Financial statements prepared on the statutory basis of accounting differ from financial statements prepared in accordance with generally accepted accounting principles (GAAP), primarily because on a GAAP basis: (1) certain policy acquisition costs are deferred and amortized, (2) most bond and preferred stock investments are reported at fair value, (3) policy benefit reserves are established using different actuarial methods and assumptions, (4) deposit-type contracts, for which premiums, benefits and reserve changes are not included in revenue or benefits as reported in the statements of operations, are defined differently, (5) majority-owned, non-insurance subsidiaries are consolidated, (6) changes in deferred taxes are reported as a component of net income, (7) no deferral of realized investment gains and losses is permitted and (8) nonadmitted assets, required for the statutory basis of accounting, are included in total assets. The effects on the Companys financial statements attributable to the differences between the statutory basis of accounting and GAAP are material.
Reclassifications
Certain amounts in prior year financial statement balances and footnote disclosures have been reclassified to conform to the current year presentation.
2. | Summary of Significant Accounting Policies |
The preparation of financial statements in accordance with the statutory basis of accounting requires the Company to make estimates or assumptions about the future 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 annual periods presented. Actual future results could differ from these estimates and assumptions.
Investments
See Notes 3, 4 and 14 regarding the statement value and fair value of the Companys investments in bonds, mortgage loans, common and preferred stocks, real estate and other investments, including derivative instruments.
Policy Loans
Policy loans represent amounts borrowed from the Company by life insurance and annuity policyowners, secured by the cash value of the related policies, and are reported at the unpaid principal balance. Policy loans earn interest at either a fixed rate or at a variable rate based on an election that is made by the policyowner when applying for their policy. If a variable rate is elected, the rate will be reset annually. Some policies with a fixed rate loan provision permit the Company, at its discretion, to set the interest rate below that specified by the policy. Annual interest rates on policy loans ranged from 3.30% to 8.00% for loans outstanding at December 31, 2016. Policy loans have no stated maturity date, with repayment of principal and interest during
NM-9
The Northwestern Mutual Life Insurance Company
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
the insureds life made at the discretion of the policyowner. If the policyowner does not make loan repayments, the unpaid interest will capitalize and the loan balance will be repaid either 1) from the death benefit; or 2) from the cash value if the policy lapses or is surrendered before the insureds death.
Policyowner dividends available on the portion of life insurance cash values that serve as collateral for policy loans are generally determined using the direct recognition method, whereby dividends on the loaned portion of such policies are calculated with reference to the interest rate charged on the policy loan. The Company considers the unpaid principal balance of policy loans to approximate fair value.
Cash and Short-term Investments
Short-term investments include securities that had maturities of one year or less at purchase, primarily money market funds and short-term commercial paper. These investments are reported at amortized cost, which approximates fair value.
Separate Accounts
Separate account assets and related reserve liabilities represent the segregation of balances attributable to variable life insurance and variable annuity products, as well as a group annuity separate account used to fund certain of the Companys employee and financial representative benefit plan obligations. All separate account assets are legally insulated from claims by the Companys general account policyowners and creditors. Variable product policyowners bear the investment performance risk associated with these products. Separate account assets related to variable products are invested at the direction of the policyowner in a variety of mutual fund options. Variable annuity policyowners also have the option to invest in stated-rate investment options through the Companys general account. Separate account assets are generally reported at fair value primarily based on quoted market prices for the underlying investment securities. See Note 7 and Note 14 for more information regarding the Companys separate accounts and Note 8 for more information regarding the Companys employee and financial representative benefit plans.
Reserves for Policy Benefits
Reserves for policy benefits generally represent the net present value of future policy benefits less future policy premiums, calculated using actuarial methods, mortality and morbidity experience tables and valuation interest rates prescribed or permitted by the Office of the Commissioner of Insurance of the State of Wisconsin (OCI). These actuarial tables and methods include assumptions regarding future mortality and morbidity experience. Actual future experience could differ from the assumptions used to make these reserve estimates. See Note 5 and Note 14 for more information regarding the Companys reserves for policy benefits.
Policyowner Dividends
All life, disability and long-term care insurance policies and certain annuity policies issued by the Company are participating. Annually, the Companys Board of Trustees approves dividends payable on participating policies during the subsequent fiscal year, which are accrued and charged to operations when approved. Depending on the type of policy they own, participating policyowners generally have the option to receive their dividends in cash, use them to reduce future premiums due, use them to purchase additional insurance benefits, use them to repay policy loans or leave them on deposit with the Company to accumulate interest. Dividends used by policyowners to purchase additional insurance benefits or pay renewal premiums are reported as premiums in the consolidated statements of operations but are not included in premiums received or benefit and dividend payments to policyowners and beneficiaries in the consolidated statements of cash flows. The Companys annual approval and declaration of policyowner dividends includes
NM-10
The Northwestern Mutual Life Insurance Company
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
a guarantee of a minimum aggregate amount of dividends to be paid to policyowners as a group in the subsequent calendar year. If this guaranteed amount is greater than the aggregate of actual dividends paid to policyowners in the subsequent year, the difference is paid in the immediately succeeding calendar year.
Interest Maintenance Reserve
The Company is required to maintain an interest maintenance reserve (IMR). The IMR is used to defer realized capital gains and losses, net of any income tax, on fixed income investments and derivatives that are attributable to changes in market interest rates, including both changes in risk-free market interest rates and market credit spreads. Net realized capital gains and losses deferred to the IMR are amortized into net investment income over the estimated remaining term to maturity of the investment sold or the asset/liability hedged by an interest rate-related derivative instrument.
Asset Valuation Reserve
The Company is required to maintain an asset valuation reserve (AVR). The AVR represents a reserve for invested asset valuation using a formula prescribed by the NAIC. The AVR is intended to protect surplus by absorbing declines in the value of the Companys investments that are not related to changes in interest rates. Increases or decreases in the AVR are reported as direct adjustments to surplus in the consolidated statements of changes in surplus.
Premium Revenue
Most life insurance premiums are recognized as revenue at the beginning of each respective policy year. Universal life insurance and annuity premiums are recognized as revenue when received. Considerations received on supplementary annuity contracts without life contingencies are deposit-type transactions and are excluded from revenue in the consolidated statements of operations. Disability and long-term care insurance premiums are recognized as revenue when due. Premium revenue is reported net of ceded reinsurance. See Note 9 for more information regarding the Companys use of reinsurance.
Net Investment Income
Net investment income primarily represents interest, dividends and prepayment fees received or accrued on bonds, mortgage loans, common and preferred stocks, policy loans and other investments. Net investment income also includes dividends and distributions paid to the Company from the accumulated earnings of joint ventures, partnerships and unconsolidated non-insurance subsidiaries. Net investment income is reduced by investment management expenses, real estate depreciation, interest costs associated with securities lending and interest expense related to the Companys surplus notes. See Note 3 for more information regarding net investment income and securities lending and Note 13 for more information regarding the Companys surplus notes.
Other Income
Other income primarily represents ceded reinsurance expense allowances and various insurance policy charges. Ceded reinsurance expense allowances are recognized as revenue when due. See Note 9 for more information regarding the Companys use of reinsurance.
Benefit Payments to Policyowners and Beneficiaries
Benefit payments to policyowners and beneficiaries include death, surrender, disability and long-term care benefits, as well as matured endowments and payments on supplementary annuity contracts that include life contingencies. Benefit payments on supplementary annuity contracts without life contingencies are deposit-type transactions and excluded from benefits in the
NM-11
The Northwestern Mutual Life Insurance Company
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
consolidated statements of operations. Benefit payments are reported net of ceded reinsurance recoveries. See Note 9 for more information regarding the Companys use of reinsurance.
Commissions and Operating Expenses
Commissions and other operating costs, including costs of acquiring new insurance policies, are generally charged to expense as incurred.
Information Technology Equipment and Software
The cost of information technology (IT) equipment and operating system software is generally capitalized and depreciated over three years using the straight-line method. Non-operating system software is generally capitalized and depreciated over a maximum of five years using the straight-line method. IT equipment and operating software assets of $43 million and $34 million at December 31, 2016 and 2015, respectively, are included in other assets in the consolidated statements of financial position and are net of accumulated depreciation of $326 million and $303 million, respectively. Non-operating software costs, net of accumulated depreciation, are nonadmitted assets and thereby excluded from assets and surplus in the consolidated statements of financial position. These amounts were $209 million and $175 million at December 31, 2016 and 2015, respectively. Depreciation expense for IT equipment and software totaled $91 million, $80 million and $74 million for the years ended December 31, 2016, 2015 and 2014, respectively.
Furniture, Fixtures and Equipment
The cost of furniture, fixtures and equipment, including leasehold improvements, is generally capitalized and depreciated over the useful life of the assets using the straight-line method. Furniture, fixtures and equipment, net of accumulated depreciation, are nonadmitted assets and thereby excluded from assets and surplus in the consolidated statements of financial position. These amounts were $56 million and $65 million at December 31, 2016 and 2015, respectively. Depreciation expense for furniture, fixtures and equipment totaled $8 million for each of the years ended December 31, 2016, 2015 and 2014.
Investment Capital Gains and Losses
Realized capital gains and losses are recognized based upon specific identification of investments sold. Realized capital losses also include valuation adjustments for impairment of bonds, mortgage loans, common and preferred stocks, real estate and other investments that have experienced a decline in fair value that the Company considers to be other-than-temporary. Realized capital gains and losses, as reported in the consolidated statements of operations, are net of any capital gains tax (or benefit) and exclude any deferrals to the IMR of interest rate-related capital gains or losses. See Note 3 for more information regarding realized capital gains and losses, including other-than-temporary valuation adjustments.
Unrealized capital gains and losses include changes in the fair value of common and preferred stocks, other equity investments and currency translation adjustments on foreign-denominated bonds and are reported net of any related changes in deferred taxes. Changes in the Companys equity method share of the accumulated earnings of joint ventures, partnerships and unconsolidated non-insurance subsidiaries are also reported as changes in unrealized capital gains and losses. Changes in unrealized capital gains and losses are reported in the consolidated statements of changes in surplus. See Note 3 for more information regarding unrealized capital gains and losses.
Nonadmitted Assets
Certain assets are designated as nonadmitted on the statutory basis of accounting. Such assets, principally related to defined benefit pension funding, amounts advanced to or due from the Companys financial representatives, furniture, fixtures, equipment and non-operating software
NM-12
The Northwestern Mutual Life Insurance Company
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
(net of accumulated depreciation), deferred tax assets in excess of statutory limits and certain equity-method investments for which audits are not performed are excluded from assets and surplus in the consolidated statements of financial position. Changes in nonadmitted assets are reported as a direct adjustment to surplus in the consolidated statements of changes in surplus.
Foreign Currency Translation
All of the Companys insurance operations are conducted in the United States of America on a U.S. dollar-denominated basis. The Company invests in bond, mortgage loan, equity and other investments that are denominated in a foreign currency. Investments denominated in a foreign currency are translated to U.S. dollars at each reporting date using then-current foreign currency exchange rates. Translation gains or losses relating to fluctuations in market exchange rates are reported as a change in net unrealized capital gains and losses until the related investment security is sold or matures, at which time a realized capital gain or loss is reported. Transactions denominated in a foreign currency, such as receipt of foreign-denominated interest or dividends, are translated to U.S. dollars based on the actual exchange rate at the time of the transaction. See Note 4 for more information regarding the Companys use of derivatives to mitigate exposure to fluctuations in foreign currency exchange rates.
Subsequent Events
The Company has evaluated events subsequent to December 31, 2016 through February 20, 2017, the date these consolidated financial statements were available to be issued. Based on this evaluation, it is the Companys opinion that no events subsequent to December 31, 2016 have occurred that are material to the Companys financial position at that date or the results of its operations for the year then ended.
3. | Investments |
Bonds
The Securities Valuation Office (SVO) of the NAIC Investment Analysis Office evaluates the credit quality of the Companys bond investments and issues related credit ratings. Bonds rated at 1 (highest quality), 2 (high quality), 3 (medium quality), 4 (low quality) or 5 (lower quality) are reported in the financial statements at amortized cost. Bonds rated 6 (lowest quality) are reported at the lower of amortized cost or fair value. The interest method is used to amortize any purchase premium or discount, including estimates of future prepayments that are obtained from independent sources. Prepayment assumptions are updated at least annually, with the retrospective method used to adjust net investment income for changes in the estimated yield to maturity.
The disclosure of fair value for bonds is primarily based on independent pricing services or internally-developed pricing models utilizing observable market data. See Note 14 for more information regarding the fair value of the Companys investments in bonds.
NM-13
The Northwestern Mutual Life Insurance Company
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
Statement value and fair value of bonds at December 31, 2016 and 2015, summarized by asset categories required in the NAIC Annual Statement, were as follows:
December 31, 2016 |
Reconciliation to Fair Value | |||||||||||||||
Gross | Gross | |||||||||||||||
Statement | Unrealized | Unrealized | Fair | |||||||||||||
Value | Gains | Losses | Value | |||||||||||||
(in millions) | ||||||||||||||||
U.S. Government |
$ | 5,572 | $ | 317 | $ | (39 | ) | $ | 5,850 | |||||||
States, territories and possessions |
661 | 116 | (7 | ) | 770 | |||||||||||
Special revenue and assessments |
34,783 | 686 | (440 | ) | 35,029 | |||||||||||
All foreign governments |
935 | 24 | (21 | ) | 938 | |||||||||||
Hybrid securities |
342 | 20 | (23 | ) | 339 | |||||||||||
SVO identified funds |
17 | 1 | - | 18 | ||||||||||||
Industrial and miscellaneous |
97,549 | 3,627 | (1,270 | ) | 99,906 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total bonds |
$ | 139,859 | $ | 4,791 | $ | (1,800 | ) | $ | 142,850 | |||||||
|
|
|
|
|
|
|
|
December 31, 2015 |
Reconciliation to Fair Value | |||||||||||||||
Gross | Gross | |||||||||||||||
Statement | Unrealized | Unrealized | Fair | |||||||||||||
Value | Gains | Losses | Value | |||||||||||||
(in millions) | ||||||||||||||||
U.S. Government |
$ | 4,237 | $ | 584 | $ | (14 | ) | $ | 4,807 | |||||||
States, territories and possessions |
689 | 108 | (2 | ) | 795 | |||||||||||
Special revenue and assessments |
30,578 | 902 | (190 | ) | 31,290 | |||||||||||
All foreign governments |
586 | 39 | (14 | ) | 611 | |||||||||||
Hybrid securities |
403 | 20 | (30 | ) | 393 | |||||||||||
SVO identified funds |
- | - | - | - | ||||||||||||
Industrial and miscellaneous |
96,956 | 3,272 | (2,587 | ) | 97,641 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total bonds |
$ | 133,449 | $ | 4,925 | $ | (2,837 | ) | $ | 135,537 | |||||||
|
|
|
|
|
|
|
|
Bonds classified by the NAIC as special revenue and assessments primarily consist of U.S. Government agency-issued residential mortgage-backed securities and municipal bonds issued by political subdivisions to finance specific public projects. Bonds classified as industrial and miscellaneous consist primarily of notes issued by public and private corporate entities and structured securities not issued by U.S. Government agencies.
NM-14
The Northwestern Mutual Life Insurance Company
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
Statement value of bonds by SVO rating category at December 31, 2016 and 2015 was as follows:
December 31, 2016 |
SVO Rating | |||||||||||||||||||||||||||
1 | 2 | 3 | 4 | 5 | 6 | Total | ||||||||||||||||||||||
(in millions) | ||||||||||||||||||||||||||||
U.S. Government |
$ | 5,572 | $ | - | $ | - | $ | - | $ | - | $ | - | $ | 5,572 | ||||||||||||||
States, territories and possessions |
575 | 86 | - | - | - | - | 661 | |||||||||||||||||||||
Special revenue and assessments |
34,695 | 88 | - | - | - | - | 34,783 | |||||||||||||||||||||
All foreign governments |
313 | 574 | 42 | 6 | - | - | 935 | |||||||||||||||||||||
Hybrid securities |
116 | 62 | 164 | - | - | - | 342 | |||||||||||||||||||||
SVO identified funds |
- | - | - | 17 | - | - | 17 | |||||||||||||||||||||
Industrial and miscellaneous |
43,813 | 39,717 | 5,918 | 5,761 | 2,092 | 248 | 97,549 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total bonds |
$ | 85,084 | $ | 40,527 | $ | 6,124 | $ | 5,784 | $ | 2,092 | $ | 248 | $ | 139,859 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015 |
SVO Rating | |||||||||||||||||||||||||||
1 | 2 | 3 | 4 | 5 | 6 | Total | ||||||||||||||||||||||
(in millions) | ||||||||||||||||||||||||||||
U.S. Government |
$ | 4,237 | $ | - | $ | - | $ | - | $ | - | $ | - | $ | 4,237 | ||||||||||||||
States, territories and possessions |
602 | 87 | - | - | - | - | 689 | |||||||||||||||||||||
Special revenue and assessments |
30,528 | 50 | - | - | - | - | 30,578 | |||||||||||||||||||||
All foreign governments |
274 | 299 | 13 | - | - | - | 586 | |||||||||||||||||||||
Hybrid securities |
190 | 61 | 152 | - | - | - | 403 | |||||||||||||||||||||
SVO identified funds |
- | - | - | - | - | - | - | |||||||||||||||||||||
Industrial and miscellaneous |
42,567 | 40,923 | 6,281 | 5,591 | 1,577 | 17 | 96,956 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total bonds |
$ | 78,398 | $ | 41,420 | $ | 6,446 | $ | 5,591 | $ | 1,577 | $ | 17 | $ | 133,449 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Based on statement value, 90% of the Companys bond portfolio was rated either 1 or 2 (i.e., rated as investment grade) by the SVO at each of December 31, 2016 and 2015.
NM-15
The Northwestern Mutual Life Insurance Company
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
The Companys bond investments include structured securities which include a significant concentration in residential mortgage-backed securities issued by U.S. Government agencies. Statement value and fair value of structured securities at December 31, 2016 and 2015, aggregated by investment grade or below investment grade (i.e., rated 3, 4, 5 or 6 by the SVO), were as follows:
December 31, 2016 |
Investment Grade | Below Investment Grade | Total | |||||||||||||||||||||
Statement Value |
Fair Value | Statement Value |
Fair Value | Statement Value |
Fair Value | |||||||||||||||||||
(in millions) | ||||||||||||||||||||||||
Residential mortgage-backed: |
||||||||||||||||||||||||
U.S. Government agencies |
$ | 32,540 | $ | 32,485 | $ | - | $ | - | $ | 32,540 | $ | 32,485 | ||||||||||||
Other prime |
409 | 409 | 3 | 3 | 412 | 412 | ||||||||||||||||||
Other below-prime |
173 | 172 | 10 | 12 | 183 | 184 | ||||||||||||||||||
Commercial mortgage-backed: |
||||||||||||||||||||||||
U.S. Government agencies |
245 | 257 | - | - | 245 | 257 | ||||||||||||||||||
Conduit |
2,101 | 2,114 | 29 | 22 | 2,130 | 2,136 | ||||||||||||||||||
Re-REMIC |
141 | 144 | 2 | 3 | 143 | 147 | ||||||||||||||||||
Other commercial mortgage-backed |
36 | 38 | - | - | 36 | 38 | ||||||||||||||||||
Other asset-backed |
6,081 | 6,177 | 167 | 165 | 6,248 | 6,342 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total structured securities |
$ | 41,726 | $ | 41,796 | $ | 211 | $ | 205 | $ | 41,937 | $ | 42,001 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015 |
Investment Grade | Below Investment Grade | Total | |||||||||||||||||||||
Statement Value |
Fair Value | Statement Value |
Fair Value | Statement Value |
Fair Value | |||||||||||||||||||
(in millions) | ||||||||||||||||||||||||
Residential mortgage-backed: |
||||||||||||||||||||||||
U.S. Government agencies |
$ | 28,220 | $ | 28,580 | $ | - | $ | - | $ | 28,220 | $ | 28,580 | ||||||||||||
Other prime |
549 | 551 | 1 | 1 | 550 | 552 | ||||||||||||||||||
Other below-prime |
73 | 74 | 13 | 15 | 86 | 89 | ||||||||||||||||||
Commercial mortgage-backed: |
||||||||||||||||||||||||
U.S. Government agencies |
239 | 254 | - | - | 239 | 254 | ||||||||||||||||||
Conduit |
2,026 | 2,030 | 15 | 14 | 2,041 | 2,044 | ||||||||||||||||||
Re-REMIC |
326 | 333 | 2 | 4 | 328 | 337 | ||||||||||||||||||
Other commercial mortgage-backed |
49 | 53 | 1 | 1 | 50 | 54 | ||||||||||||||||||
Other asset-backed |
5,402 | 5,492 | 142 | 142 | 5,544 | 5,634 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total structured securities |
$ | 36,884 | $ | 37,367 | $ | 174 | $ | 177 | $ | 37,058 | $ | 37,544 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Based on statement value, over 99% of the Companys structured securities portfolio was rated as investment grade at each of December 31, 2016 and 2015.
The Companys bond portfolio includes securities that are classified as structured notes, as defined by the Purposes and Procedures Manual of the NAIC Investment Analysis Office. At December 31, 2016, the Companys structured note investments included one treasury inflation protected (TIP) security and twenty-six securities with rate provisions that qualify as structured notes. At December 31, 2016, the TIP security had a statement value and fair value of $128 million and
NM-16
The Northwestern Mutual Life Insurance Company
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
$125 million, respectively, while the remaining structured note investments had an aggregate statement value and fair value of $341 million and $332 million, respectively. At December 31, 2015, the Companys structured note investments included one TIP security and fifteen securities with rate provisions that qualify as structured notes. At December 31, 2015, the TIP security had a statement value and fair value of $89 million and $121 million, respectively, while the remaining structured note investments had an aggregate statement value and fair value of $173 million and $165 million, respectively. None of these securities have provisions linked to real estate prices, indices or asset values.
Statement value and fair value of bonds and short-term investments by contractual maturity at December 31, 2016 are summarized below. Actual maturities may differ from contractual maturities because certain borrowers have the right to call or prepay obligations with or without call or prepayment fees.
Statement Value |
Fair Value |
|||||||
(in millions) | ||||||||
Due in one year or less |
$ | 6,375 | $ | 6,430 | ||||
Due after one year through five years |
31,037 | 32,030 | ||||||
Due after five years through ten years |
40,766 | 41,239 | ||||||
Due after ten years |
63,875 | 65,345 | ||||||
|
|
|
|
|||||
Total |
$ | 142,053 | $ | 145,044 | ||||
|
|
|
|
Mortgage Loans
Mortgage loans consist solely of commercial mortgage loans underwritten and originated by the Company and are reported at the unpaid principal balance, less any valuation adjustments or unamortized commitment or origination fees. Such fees are generally deferred upon receipt and amortized into net investment income over the life of the loan using the interest method. Affiliated mortgage loan investments were $130 million and $126 million at December 31, 2016 and 2015, respectively.
The statement value of mortgage loans by collateral property type and geographic location at December 31, 2016 and 2015 was as follows:
December 31, 2016 | United States of America | |||||||||||||||||||||||
East | Midwest | South | West | Canada | Total | |||||||||||||||||||
(in millions) | ||||||||||||||||||||||||
Apartment |
$ | 3,928 | $ | 930 | $ | 2,181 | $ | 4,902 | $ | - | $ | 11,941 | ||||||||||||
Office |
3,874 | 978 | 1,704 | 3,524 | - | 10,080 | ||||||||||||||||||
Retail |
3,042 | 603 | 2,264 | 1,992 | - | 7,901 | ||||||||||||||||||
Warehouse/Industrial |
247 | 249 | 644 | 1,060 | 198 | 2,398 | ||||||||||||||||||
Other |
350 | 189 | 655 | 661 | - | 1,855 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total |
$ | 11,441 | $ | 2,949 | $ | 7,448 | $ | 12,139 | $ | 198 | $ | 34,175 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
NM-17
The Northwestern Mutual Life Insurance Company
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
December 31, 2015 | United States of America | |||||||||||||||||||||||
East | Midwest | South | West | Canada | Total | |||||||||||||||||||
(in millions) | ||||||||||||||||||||||||
Apartment |
$ | 3,175 | $ | 598 | $ | 2,150 | $ | 4,104 | $ | - | $ | 10,027 | ||||||||||||
Office |
3,282 | 1,038 | 1,815 | 3,816 | - | 9,951 | ||||||||||||||||||
Retail |
3,246 | 779 | 2,177 | 2,035 | - | 8,237 | ||||||||||||||||||
Warehouse/Industrial |
427 | 301 | 570 | 1,107 | 204 | 2,609 | ||||||||||||||||||
Other |
389 | 186 | 533 | 304 | - | 1,412 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total |
$ | 10,519 | $ | 2,902 | $ | 7,245 | $ | 11,366 | $ | 204 | $ | 32,236 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
The statement value of mortgage loans by contractual maturity at December 31, 2016 is summarized below. Actual maturities may differ from contractual maturities because certain borrowers have the right to prepay obligations with or without prepayment fees.
Statement Value |
||||
(in millions) | ||||
Due in one year or less |
$ | 1,088 | ||
Due after one year through two years |
2,391 | |||
Due after two years through five years |
6,027 | |||
Due after five years through eight years |
11,111 | |||
Due after eight years |
13,558 | |||
|
|
|||
Total |
$ | 34,175 | ||
|
|
All mortgage loans were current on contractual interest and principal payments at each of December 31, 2016 and 2015. The maximum and minimum interest rates for mortgage loans originated during 2016 were 6.00% and 2.48%, respectively, while these rates during 2015 were 6.70% and 2.65%, respectively. The aggregate weighted-average ratio of amounts loaned to the fair value of collateral (loan-to-value ratio) for mortgage loans originated or refinanced during 2016 and 2015 was 59% and 60%, respectively, with a maximum of 100% for any single loan during each of 2016 and 2015. Loans with a 100% loan-to-value (LTV) ratio at origination are made on a very limited basis and generally represent construction loans on build-to-suit properties. These loans are expected to be refinanced with conventional mortgage loans having a LTV ratio between 50% and 70% upon completion of construction. At each of December 31, 2016 and 2015, the aggregate weighted-average LTV ratio for the mortgage loan portfolio was 53%.
NM-18
The Northwestern Mutual Life Insurance Company
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
LTV ratios are commonly used to assess the credit quality of commercial mortgage loans. A lower LTV ratio generally indicates a higher quality loan. The statement value of mortgage loans by collateral property type and LTV ratio at December 31, 2016 and 2015 was as follows:
December 31, 2016 |
< 51% | 51%-70% | 71%-90% | > 90% | Total | |||||||||||||||
(in millions) | ||||||||||||||||||||
Apartment |
$ | 3,991 | $ | 7,631 | $ | 211 | $ | 108 | $ | 11,941 | ||||||||||
Office |
4,611 | 4,996 | 310 | 163 | 10,080 | |||||||||||||||
Retail |
4,117 | 3,483 | 301 | - | 7,901 | |||||||||||||||
Warehouse/Industrial |
879 | 1,184 | 250 | 85 | 2,398 | |||||||||||||||
Other |
389 | 1,430 | 15 | 21 | 1,855 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
$ | 13,987 | $ | 18,724 | $ | 1,087 | $ | 377 | $ | 34,175 | ||||||||||
|
|
|
|
|
|
|
|
|
|
December 31, 2015 |
< 51% | 51%-70% | 71%-90% | > 90% | Total | |||||||||||||||
(in millions) | ||||||||||||||||||||
Apartment |
$ | 4,322 | $ | 5,499 | $ | 205 | $ | 1 | $ | 10,027 | ||||||||||
Office |
4,143 | 5,329 | 304 | 175 | 9,951 | |||||||||||||||
Retail |
4,232 | 3,767 | 224 | 14 | 8,237 | |||||||||||||||
Warehouse/Industrial |
938 | 1,251 | 312 | 108 | 2,609 | |||||||||||||||
Other |
232 | 1,003 | 108 | 69 | 1,412 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
$ | 13,867 | $ | 16,849 | $ | 1,153 | $ | 367 | $ | 32,236 | ||||||||||
|
|
|
|
|
|
|
|
|
|
The aggregate statement value of mortgage loans with LTV ratios in excess of 100% was $12 million and $60 million at December 31, 2016 and 2015, respectively.
The fair value of the collateral securing each commercial mortgage loan is updated at least annually by the Company. More frequent updates are performed if deemed necessary due to changes in market capitalization rates, borrower financial strength and/or property operating performance. Fair value of the collateral is estimated using the income capitalization approach based on stabilized property income and market capitalization rates. Stabilized property income is derived from actual property financial statements adjusted for non-recurring items, normalized market vacancy and lease rollover, among other factors. Other collateral, such as excess land and additional capital required to maintain property income, is also factored into fair value estimates. Both private market transactions and public market alternatives are considered in determining appropriate market capitalization rates. See Note 14 for more information regarding the fair value of the Companys investments in mortgage loans.
In the normal course of business, the Company may refinance or otherwise modify the terms of an existing mortgage loan, typically in reaction to a request by the borrower. These modifications can include a partial repayment of outstanding loan principal, changes to interest rates, extensions of loan maturity and/or changes to loan covenants. When such modifications are made, the statutory basis of accounting requires that the new terms of the loan be evaluated to determine whether the modification qualifies as a troubled debt restructuring. If new terms are extended to a borrower that are less favorable to the Company than those currently being offered to new borrowers under similar circumstances in an arms-length transaction, a realized capital loss is reported for the estimated amount of the economic concessions made and the reported value of the mortgage loan is reduced. The Company recognized no capital losses related to troubled debt restructuring of mortgage loans for the years ended December 31, 2016, 2015 and 2014,
NM-19
The Northwestern Mutual Life Insurance Company
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
respectively. At December 31, 2016 and 2015, the Company had $26 million and $28 million, respectively, of principal outstanding on mortgage loans that were considered restructured.
In circumstances where the Company has deemed it probable that it will be unable to collect all contractual principal and interest on a mortgage loan, a valuation allowance is established to reduce the statement value of the mortgage loan to its net realizable value. Changes to mortgage loan valuation allowances are reported as a change in net unrealized capital gains and losses in the consolidated statements of changes in surplus. If the Company later determines that the decline in value is other-than-temporary, a realized capital loss is reported, and any temporary valuation allowance is reversed. The Company had no mortgage loan valuation allowance at each of December 31, 2016 and 2015.
During 2016, the Company had one foreclosed mortgage loan with a statement value of $76 million that was moved into the real estate portfolio at a statement value of $76 million.
Common and Preferred Stocks
Common stocks are generally reported at fair value, with $3,968 million and $3,705 million included in the consolidated statements of financial position at December 31, 2016 and 2015, respectively. The fair value for publicly-traded common stocks is primarily based on quoted market prices. For private common stocks without quoted market prices, fair value is primarily determined using a sponsor valuation or market comparables approach. The equity method is generally used to report investments in common stock of unconsolidated non-insurance subsidiaries. See Note 14 for more information regarding the fair value of the Companys investments in common stock.
Preferred stocks rated 1, 2 or 3 by the SVO are reported at amortized cost. Preferred stocks rated 4, 5 or 6 by the SVO are reported at the lower of amortized cost or fair value. At December 31, 2016 and 2015, the consolidated statements of financial position included $205 million and $181 million, respectively, of preferred stocks. The fair value for preferred stocks is primarily determined using a sponsor valuation or market comparables approach. See Note 14 for more information regarding the fair value of the Companys investments in preferred stock.
Real Estate
Real estate investments are reported at cost, less any encumbrances and accumulated depreciation of buildings and other improvements. Depreciation of real estate investments is recorded using a straight-line method over the estimated useful lives of the improvements. Fair value of real estate is estimated primarily based on the capitalization of stabilized net operating income.
The statement value of real estate investments by property type and U.S. geographic location at December 31, 2016 and 2015 was as follows:
December 31, 2016 |
East | Midwest | South | West | Total | |||||||||||||||
(in millions) | ||||||||||||||||||||
Apartment |
$ | 295 | $ | 28 | $ | 233 | $ | 523 | $ | 1,079 | ||||||||||
Office |
15 | 727 | 218 | 40 | 1,000 | |||||||||||||||
Warehouse/Industrial |
104 | 30 | - | 186 | 320 | |||||||||||||||
Other |
27 | - | 13 | 29 | 69 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
$ | 441 | $ | 785 | $ | 464 | $ | 778 | $ | 2,468 | ||||||||||
|
|
|
|
|
|
|
|
|
|
NM-20
The Northwestern Mutual Life Insurance Company
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
December 31, 2015 |
East | Midwest | South | West | Total | |||||||||||||||
(in millions) | ||||||||||||||||||||
Apartment |
$ | 313 | $ | 26 | $ | 235 | $ | 319 | $ | 893 | ||||||||||
Office |
64 | 536 | 153 | 40 | 793 | |||||||||||||||
Warehouse/Industrial |
38 | 30 | - | 188 | 256 | |||||||||||||||
Other |
27 | - | - | 30 | 57 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
$ | 442 | $ | 592 | $ | 388 | $ | 577 | $ | 1,999 | ||||||||||
|
|
|
|
|
|
|
|
|
|
The Companys home office properties are included above (Office/Midwest) and had an aggregate statement value of $671 million and $441 million at December 31, 2016 and 2015, respectively. The Companys other investments in real estate are held for the production of income.
Other Investments
Other investments primarily represent investments that are made through ownership interests in partnerships, joint ventures (JVs) and limited liability companies (LLCs). In some cases, these ownership interests are held directly by the Company, while in other cases these investments are held indirectly through wholly-owned non-insurance investment holding companies organized as LLCs. The aggregate statement value of other investments held indirectly through non-insurance investment holding companies was $7.1 billion and $7.5 billion at December 31, 2016 and 2015, respectively. Whether held directly by the Company or indirectly through its investment holding companies, securities or real estate partnerships, JVs, and LLCs are reported in the consolidated statements of financial position using the equity method of accounting based on the Companys share of the underlying entities audited GAAP-basis equity.
The statement value of other investments held directly or indirectly by the Company at December 31, 2016 and 2015 was as follows:
December 31, | ||||||||
2016 | 2015 | |||||||
(in millions) | ||||||||
Securities partnerships and LLCs |
$ | 4,457 | $ | 4,299 | ||||
Bonds |
3,308 | 3,914 | ||||||
Real estate JVs, partnerships and LLCs |
1,489 | 1,675 | ||||||
Common and preferred stocks |
1,008 | 1,024 | ||||||
Derivative instruments |
781 | 469 | ||||||
Real estate |
712 | 747 | ||||||
Low income housing tax credit properties |
534 | 485 | ||||||
Cash and short-term investments |
371 | 215 | ||||||
Leveraged leases |
158 | 162 | ||||||
Other assets, net |
645 | 302 | ||||||
|
|
|
|
|||||
Total |
$ | 13,463 | $ | 13,292 | ||||
|
|
|
|
For securities partnerships and LLCs, bonds, common and preferred stocks, cash and short-term investments and derivative instruments, the underlying entity generally reports these investments at fair value. For real estate related investments (including JVs, partnerships and LLCs), tax credit properties and leveraged leases, the underlying entity generally reports these investments at cost, reduced where appropriate by depreciation or amortization. Tax credit properties had 13 years of
NM-21
The Northwestern Mutual Life Insurance Company
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
unexpired credits at each of December 31, 2016 and 2015. The required holding period for tax credit properties is 15 years. The amount of tax credits and other tax benefits recognized during 2016 and 2015 were $108 million and $111 million, respectively. See Note 10 for more information regarding the Companys use of tax credits.
See Note 4 for more information regarding the Companys use of derivatives.
Investments in Subsidiaries, Controlled and Affiliated Entities
The Companys investments in subsidiaries, controlled and affiliated entities (SCAs) are reported in the consolidated statements of financial position using the equity method of accounting based on the Companys share of the underlying entities audited GAAP-basis equity. At December 31, 2016 and 2015, the value of wholly-owned SCA investments were as follows:
December 31, 2016 | December 31, 2015 | |||||||||||||||||||||||
Investment in SCA |
Nonadmitted Asset |
Statement Value |
Investment in SCA |
Nonadmitted Asset |
Statement Value |
|||||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||||||
NM Wealth Management Company |
$ | 140 | $ | - | $ | 140 | $ | 133 | $ | - | $ | 133 | ||||||||||||
NM Capital, Limited |
2 | 2 | - | 2 | 2 | - | ||||||||||||||||||
Bradford, Inc. |
1 | 1 | - | 1 | 1 | - | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total common stock SCAs 1 |
143 | 3 | 140 | 136 | 3 | 133 | ||||||||||||||||||
NML Securities Holdings, LLC |
4,039 | - | 4,039 | 4,186 | - | 4,186 | ||||||||||||||||||
NM Investment Holdings, LLC |
1,455 | - | 1,455 | 1,643 | - | 1,643 | ||||||||||||||||||
NML Real Estate Holdings, LLC |
1,033 | - | 1,033 | 1,113 | - | 1,113 | ||||||||||||||||||
NM Pebble Valley, LLC |
207 | - | 207 | 211 | - | 211 | ||||||||||||||||||
NM Planning, LLC |
204 | - | 204 | 260 | - | 260 | ||||||||||||||||||
NM Investment Services, LLC |
73 | - | 73 | 85 | - | 85 | ||||||||||||||||||
NM GP Holdings, LLC |
58 | 7 | 51 | 48 | 2 | 46 | ||||||||||||||||||
NM Investment Management Company, LLC |
41 | 41 | - | 27 | 27 | - | ||||||||||||||||||
Mason Street Advisors, LLC |
25 | 25 | - | 24 | 24 | - | ||||||||||||||||||
GRO-SUB, LLC |
1 | 1 | - | - | - | - | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total other investment SCAs 2 |
7,136 | 74 | 7,062 | 7,597 | 53 | 7,544 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total investments in SCAs |
$ | 7,279 | $ | 77 | $ | 7,202 | $ | 7,733 | $ | 56 | $ | 7,677 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
1 Reported in common and preferred stocks in the consolidated statements of financial position.
2 Reported in other investments in the consolidated statements of financial position.
Investment filings for all common stock SCAs were submitted to the NAIC during 2016. In all cases, the NAIC accepted the statement value.
NM-22
The Northwestern Mutual Life Insurance Company
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
Net Investment Income
The sources of net investment income for the years ended December 31, 2016, 2015 and 2014 were as follows:
For the years ended December 31, | ||||||||||||
2016 | 2015 | 2014 | ||||||||||
(in millions) | ||||||||||||
Bonds |
$ | 5,699 | $ | 5,760 | $ | 5,641 | ||||||
Mortgage loans |
1,592 | 1,535 | 1,471 | |||||||||
Policy loans |
1,160 | 1,155 | 1,121 | |||||||||
Common and preferred stocks |
138 | 133 | 128 | |||||||||
Real estate |
277 | 230 | 196 | |||||||||
Other investments |
1,273 | 1,063 | 847 | |||||||||
Amortization of IMR |
154 | 211 | 275 | |||||||||
|
|
|
|
|
|
|||||||
Gross investment income |
10,293 | 10,087 | 9,679 | |||||||||
Less: investment expenses |
686 | 620 | 575 | |||||||||
|
|
|
|
|
|
|||||||
Net investment income |
$ | 9,607 | $ | 9,467 | $ | 9,104 | ||||||
|
|
|
|
|
|
Accrued investment income more than ninety days past due is a nonadmitted asset. Changes in the nonadmitted amount are reported as direct adjustments to surplus in the consolidated statements of changes in surplus. Accrued investment income that is ultimately deemed uncollectible is included as a reduction of net investment income in the period that such determination is made.
Realized Capital Gains and Losses
Realized capital gains and losses for the years ended December 31, 2016, 2015 and 2014 were as follows:
For the year ended December 31, 2016 |
For the year ended December 31, 2015 |
For the year ended December 31, 2014 |
||||||||||||||||||||||||||||||||||
Realized Gains |
Realized Losses |
Net Realized Gains (Losses) |
Realized Gains |
Realized Losses |
Net Realized Gains (Losses) |
Realized Gains |
Realized Losses |
Net Realized Gains (Losses) |
||||||||||||||||||||||||||||
(in millions) | (in millions) |
|
(in millions) |
| ||||||||||||||||||||||||||||||||
Bonds |
$ | 1,373 | $ | (1,109 | ) | $ | 264 | $ | 560 | $ | (870 | ) | $ | (310 | ) | $ | 735 | $ | (326 | ) | $ | 409 | ||||||||||||||
Common and preferred stocks |
304 | (357 | ) | (53 | ) | 229 | (273 | ) | (44 | ) | 391 | (98 | ) | 293 | ||||||||||||||||||||||
Mortgage loans |
- | (3 | ) | (3 | ) | - | (2 | ) | (2 | ) | 9 | (3 | ) | 6 | ||||||||||||||||||||||
Real estate |
96 | (53 | ) | 43 | 123 | (1 | ) | 122 | 23 | (1 | ) | 22 | ||||||||||||||||||||||||
Other investments |
580 | (722 | ) | (142 | ) | 579 | (523 | ) | 56 | 220 | (492 | ) | (272 | ) | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Subtotal |
$ | 2,353 | $ | (2,244 | ) | 109 | $ | 1,491 | $ | (1,669 | ) | (178 | ) | $ | 1,378 | $ | (920 | ) | 458 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
Less: IMR net gains/(losses) before taxes |
436 | (258 | ) | 192 | ||||||||||||||||||||||||||||||||
Less: Capital gains tax (benefit)/expense |
|
(117 | ) | 112 | 123 | |||||||||||||||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||||||||||||||
Net realized capital gains/(losses) |
$ | (210 | ) | $ | (32 | ) | $ | 143 | ||||||||||||||||||||||||||||
|
|
|
|
|
|
NM-23
The Northwestern Mutual Life Insurance Company
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
Realized capital gains and losses are generally the result of normal investment trading activity. Proceeds from the sale of bonds totaled $32 billion, $25 billion, and $24 billion for the years ended December 31, 2016, 2015 and 2014, respectively.
On a quarterly basis, the Company performs a review of bonds, mortgage loans, common and preferred stocks, real estate and other investments to identify investments that have experienced a decline in fair value that is considered to be other-than-temporary. Factors considered include the duration and extent to which fair value was less than cost, the financial condition and near-term financial prospects of the issuer and the Companys ability and intent to hold the investment for a period of time sufficient to allow for an anticipated recovery in value. If the decline in an investments fair value is considered to be other-than-temporary, the statement value of the investment is generally written down to fair value and a realized capital loss is reported.
For fixed income investments, the review focuses on the issuers ability to remit all contractual interest and principal payments and the Companys ability and intent to hold the investment until the earlier of a recovery in value or maturity. The Companys intent and ability to hold an investment takes into consideration broad portfolio management parameters such as expected net cash flows and liquidity targets, asset/liability duration management and issuer and industry sector credit exposures. Mortgage loans considered to have experienced an other-than-temporary decline in value are written down to net realizable value based on the appraised value of the collateral property.
For equity securities, greater weight and consideration is given to the duration and extent of the decline in fair value and the likelihood that the fair value of the security will recover in the foreseeable future. A real estate equity investment is evaluated for an other-than-temporary valuation adjustment when the fair value of the property is lower than its depreciated cost.
For real estate and other investments that represent ownership interests in partnerships, JVs and LLCs, the review focuses on the likelihood that the Company will ultimately recover its initial investment, adjusted for its share of subsequent net earnings and/or distributions. The Companys review of securities partnerships will generally defer to GAAP-basis impairment reviews performed by the general partner absent compelling evidence of a permanent impairment of the Companys partnership interest.
NM-24
The Northwestern Mutual Life Insurance Company
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
Realized capital losses related to declines in fair value of investments that were considered to be other-than-temporary for the years ended December 31, 2016, 2015 and 2014 were as follows:
For the years ended December 31, | ||||||||||||
2016 | 2015 | 2014 | ||||||||||
Bonds, common and preferred stocks: |
(in millions) | |||||||||||
Structured securities |
$ | (54 | ) | $ | - | $ | (1 | ) | ||||
Financial services |
(17 | ) | (4 | ) | (4 | ) | ||||||
Consumer discretionary |
(14 | ) | (36 | ) | (51 | ) | ||||||
Industrials |
(9 | ) | (7 | ) | (1 | ) | ||||||
Energy |
(20 | ) | (48 | ) | - | |||||||
Basic materials |
(39 | ) | - | - | ||||||||
Other |
- | (1 | ) | (3 | ) | |||||||
|
|
|
|
|
|
|||||||
Subtotal |
(153 | ) | (96 | ) | (60 | ) | ||||||
Real estate |
(52 | ) | - | - | ||||||||
Other investments: |
||||||||||||
Real estate JVs |
(4 | ) | (12 | ) | (40 | ) | ||||||
Securities partnerships |
(61 | ) | (40 | ) | - | |||||||
Energy and transportation |
(5 | ) | - | - | ||||||||
|
|
|
|
|
|
|||||||
Subtotal |
(70 | ) | (52 | ) | (40 | ) | ||||||
|
|
|
|
|
|
|||||||
Total |
$ | (275 | ) | $ | (148 | ) | $ | (100 | ) | |||
|
|
|
|
|
|
In addition to the realized capital losses above, $60 million, $16 million and $41 million of other-than-temporary valuation adjustments were recorded by the Companys unconsolidated non-insurance subsidiaries for the years ended December 31, 2016, 2015 and 2014, respectively. The decline in the Companys equity in these subsidiaries resulting from these valuation adjustments is reported in changes in net unrealized capital gains and losses in the consolidated statements of changes in surplus.
At December 31, 2016, the Company continued to hold structured securities with aggregate statement values and fair values of $20 million and $30 million, respectively, for which other-than-temporary valuation adjustments had been recognized. Other-than-temporary valuation adjustments on loan-backed and structured securities for the years ended December 31, 2016, 2015 and 2014, including the circumstances of the adjustment, were as follows:
For the years ended December 31, | ||||||||||||
2016 | 2015 | 2014 | ||||||||||
(in millions) | ||||||||||||
Intent to sell |
$ | - | $ | - | $ | - | ||||||
Present value of cash flows expected to be collected is less than amortized cost basis |
(54 | ) | (1 | ) | (1 | ) | ||||||
|
|
|
|
|
|
|||||||
Total |
$ | (54 | ) | $ | (1 | ) | $ | (1 | ) | |||
|
|
|
|
|
|
NM-25
The Northwestern Mutual Life Insurance Company
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
Unrealized Capital Gains and Losses
Changes in net unrealized capital gains and losses for the years ended December 31, 2016, 2015 and 2014 were as follows:
For the years ended December 31, | ||||||||||||
2016 | 2015 | 2014 | ||||||||||
(in millions) | ||||||||||||
Bonds |
$ | (313 | ) | $ | (173 | ) | $ | (194 | ) | |||
Common and preferred stocks |
344 | (181 | ) | (84 | ) | |||||||
Mortgage loans |
9 | (38 | ) | (13 | ) | |||||||
Other investments |
(272 | ) | - | 1,507 | ||||||||
|
|
|
|
|
|
|||||||
Subtotal |
(232 | ) | (392 | ) | 1,216 | |||||||
Change in deferred taxes |
(103 | ) | 144 | 30 | ||||||||
|
|
|
|
|
|
|||||||
Change in net unrealized capital gains and losses |
$ | (335 | ) | $ | (248 | ) | $ | 1,246 | ||||
|
|
|
|
|
|
Unrealized capital gains and losses include changes in the fair value of common and preferred stocks and other investments and currency translation adjustments on foreign-denominated bonds and mortgage loans. Other changes in the Companys equity-method share of the undistributed earnings of partnerships, JVs, LLCs and unconsolidated non-insurance subsidiaries are also reported as changes in unrealized capital gains and losses. Unrealized capital gains and losses reported in other investments for the year ended December 31, 2014 included an after tax gain of $1.1 billion from the sale of its investment in Frank Russell Company (Russell) as the Companys common stock investment in Russell was held by a subsidiary at the time of the sale. See Note 11 for more information regarding the sale of Russell. Changes in net unrealized capital gains and losses for the years ended December 31, 2016, 2015 and 2014 included the reversal of previously unrealized capital gains of $(787) million, $(371) million and $(312) million, respectively, related to distributions of accumulated net earnings made to the Company from unconsolidated non-insurance subsidiaries. The Companys share of the earnings or losses of these subsidiaries is reported as a change in unrealized capital gains and losses when earned under the equity method of accounting. If net earnings are distributed to the Company in the form of dividends, net investment income is recognized in the amount of the distribution and the previously unrealized net capital gains are reversed.
The amortized cost and fair value of bonds and common and preferred stocks for which fair value declined and remained below cost at December 31, 2016 and 2015 were as follows:
December 31, 2016 | ||||||||||||||||||||||||
Decline For Less Than 12 Months | Decline For Greater Than 12 Months | |||||||||||||||||||||||
Amortized Cost |
Fair Value |
Difference | Amortized Cost |
Fair Value | Difference | |||||||||||||||||||
(in millions) | ||||||||||||||||||||||||
Bonds |
$ | 51,965 | $ | 50,361 | $ | (1,604 | ) | $ | 6,004 | $ | 5,206 | $ | (798 | ) | ||||||||||
Common and preferred stocks |
667 | 636 | (31 | ) | 87 | 73 | (14 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total |
$ | 52,632 | $ | 50,997 | $ | (1,635 | ) | $ | 6,091 | $ | 5,279 | $ | (812 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
NM-26
The Northwestern Mutual Life Insurance Company
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
December 31, 2015 | ||||||||||||||||||||||||
Decline For Less Than 12 Months | Decline For Greater Than 12 Months | |||||||||||||||||||||||
Amortized Cost |
Fair Value |
Difference | Amortized Cost |
Fair Value | Difference | |||||||||||||||||||
(in millions) | ||||||||||||||||||||||||
Bonds |
$ | 51,486 | $ | 49,279 | $ | (2,207 | ) | $ | 7,946 | $ | 7,008 | $ | (938 | ) | ||||||||||
Common and preferred stocks |
1,309 | 1,090 | (219 | ) | 186 | 145 | (41 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total |
$ | 52,795 | $ | 50,369 | $ | (2,426 | ) | $ | 8,132 | $ | 7,153 | $ | (979 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
All of these bonds were current on contractual interest and principal payments at December 31, 2016. Based on the results of the impairment review process described above, the Company considers these declines in fair value to be temporary based on current facts and circumstances.
At December 31, 2016 and 2015, unrealized capital losses on structured securities in a loss position for greater than 12 months were $52 million and $127 million, respectively, while unrealized capital losses on structured securities in a loss position for less than 12 months were $440 million and $151 million, respectively.
For securities without a full SVO credit analysis performed, the statutory basis of accounting allows the Company to assign a NAIC designation of 5* to such securities for reporting purposes. At December 31, 2016 and 2015, the statement and fair values of NAIC 5* securities were as follows:
December 31, | ||||||||||||||||||||||||
2016 | 2015 | |||||||||||||||||||||||
Number of Securities |
Statement Value |
Fair Value |
Number of Securities |
Statement Value |
Fair Value | |||||||||||||||||||
(in millions) | ||||||||||||||||||||||||
Bonds |
26 | $ | 537 | $ | 519 | 18 | $ | 514 | $ | 501 | ||||||||||||||
Loan-backed and structured securities |
4 | - | - | 3 | - | 1 | ||||||||||||||||||
Preferred stock |
4 | 55 | 55 | 4 | 31 | 31 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total |
34 | $ | 592 | $ | 574 | 25 | $ | 545 | $ | 533 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Securities Lending
The Company participates in securities lending programs whereby general account investment securities are loaned to third parties, primarily major brokerage firms. These lending programs are intended to enhance the yield of the Companys investment portfolio.
At December 31, 2016 and 2015, the aggregate statement value of general account loaned securities was $930 million and $1,035 million, respectively, while the aggregate fair value of these loaned securities was $921 million and $1,024 million, respectively. All of the securities on loan at December 31, 2016 and 2015 were bonds and were loaned with open terms. There were no securities on loan within the separate accounts at either December 31, 2016 or 2015.
The Company manages counterparty and other risks associated with its securities lending program by adhering to guidelines that require counterparties to provide the Company with cash or other high-quality collateral of no less than 102% of the market value of the securities on loan plus accrued interest and by setting conservative standards for the Companys reinvestment of cash
NM-27
The Northwestern Mutual Life Insurance Company
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
collateral received. At December 31, 2016 and 2015, reinvested securities lending collateral held by the Company was $949 million and $1,056 million, respectively, which is reported at amortized cost.
The amortized cost, fair value and remaining term to maturity of reinvested securities lending collateral held by the Company at December 31, 2016 and 2015 were as follows:
December 31, | ||||||||||||||||
2016 | 2015 | |||||||||||||||
Amortized Cost | Fair Value | Amortized Cost | Fair Value | |||||||||||||
(in millions) | ||||||||||||||||
30 days or less |
$ | 443 | $ | 443 | $ | 455 | $ | 455 | ||||||||
31-60 days |
101 | 101 | 56 | 56 | ||||||||||||
61-90 days |
24 | 24 | 42 | 42 | ||||||||||||
91-120 days |
19 | 19 | 33 | 33 | ||||||||||||
121-180 days |
144 | 144 | 120 | 120 | ||||||||||||
181-365 days |
188 | 189 | 93 | 93 | ||||||||||||
1-2 years |
30 | 30 | 257 | 257 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 949 | $ | 950 | $ | 1,056 | $ | 1,056 | ||||||||
|
|
|
|
|
|
|
|
At December 31, 2016, the consolidated statement of financial position included $305 million in bonds and $644 million in cash and short-term investments related to the collateral assets summarized above. At December 31, 2015, the consolidated statement of financial position included $603 million in bonds and $453 million in cash and short-term investments related to these collateral assets.
Restricted Assets
Certain of the Companys investments are either pledged as collateral or are otherwise held beyond the exclusive control of the Company (restricted assets). These restrictions are generally the result of collateral support agreements with counterparties in connection with securities lending and derivative transactions or cash held by a qualified intermediary (QI) to facilitate potential purchases of replacement real estate properties in tax-free exchange transactions.
At December 31, 2016 and 2015, collateral held by counterparties was primarily in the form of cash, short-term investments and bonds, including U.S. Government securities. See Note 4 for more information regarding the Companys derivative portfolio.
The statement value of restricted assets at December 31, 2016 and 2015, summarized by type of restriction, was as follows:
December 31, | ||||||||
2016 | 2015 | |||||||
(in millions) | ||||||||
Securities lending |
$ | 930 | $ | 1,035 | ||||
Cash on deposit with QI |
- | 129 | ||||||
Derivative transactions |
101 | 71 | ||||||
Securities on deposit with states |
6 | 7 | ||||||
|
|
|
|
|||||
Total restricted assets |
$ | 1,037 | $ | 1,242 | ||||
|
|
|
|
NM-28
The Northwestern Mutual Life Insurance Company
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
Collateral Assets Received
The statement value and fair values of collateral received at December 31, 2016 and 2015 were as follows:
December 31, | December 31, | |||||||||||||||
2016 | 2015 | |||||||||||||||
Statement Value |
Fair Value |
Statement Value |
Fair Value |
|||||||||||||
(in millions) | ||||||||||||||||
Security lending collateral |
$ | 939 | $ | 939 | $ | 1,047 | $ | 1,047 | ||||||||
Derivative collateral |
644 | 644 | 270 | 270 | ||||||||||||
Mortgage loan escrow |
72 | 72 | 97 | 97 | ||||||||||||
Real estate escrow and security deposits |
7 | 7 | 8 | 8 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total collateral assets |
$ | 1,662 | $ | 1,662 | $ | 1,422 | $ | 1,422 | ||||||||
|
|
|
|
|
|
|
|
At December 31, 2016 and 2015, derivative collateral received included $10 million and $11 million, respectively, related to separate accounts and the obligation to return this collateral is reported in separate account liabilities in the consolidated statements of financial position. The obligation to return all other collateral received is reported as other liabilities in the consolidated statements of financial position.
4. | Derivative Financial Instruments |
The Company enters into derivative transactions, generally to mitigate the risk to its assets, liabilities and surplus from fluctuations in interest rates, foreign currency exchange rates, credit conditions and other market risks. Derivatives may be exchange traded, cleared, or executed in the over-the-counter market. A majority of the Companys over-the-counter derivatives are bilateral contracts between two counterparties. The Companys remaining over-the-counter derivatives are cleared and settled through central clearing exchanges.
Derivatives that are designated as hedges for accounting purposes and meet the qualifications for statutory hedge accounting are reported on a basis consistent with the asset or liability being hedged (i.e., at amortized cost or fair value). Derivatives that are used to mitigate risk but are not designated as hedges for accounting purposes or otherwise do not meet the qualifications for statutory hedge accounting are reported at fair value.
To qualify for hedge accounting, the hedge relationship must be designated and formally documented at inception. This documentation details the risk management objective and strategy for the hedge, the derivative used in the hedge and the methodology for assessing hedge effectiveness. The hedge must also be highly effective, with an assessment of its effectiveness performed both at inception and on an ongoing basis over the life of the hedge.
In addition to hedging, the Company may use derivatives for the purpose of investment replication. A replication is a derivative transaction that, when entered into in conjunction with other cash market investments, replicates the risk and reward characteristics of otherwise permissible investment positions. Derivatives used as part of a replication are reported on a basis consistent with the investment position being replicated (i.e., at amortized cost or fair value).
NM-29
The Northwestern Mutual Life Insurance Company
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
The Company may also use derivatives for income generation purposes. These instruments are reported on a basis consistent with the accounting treatment that would be used for the covering asset or underlying interest to which the derivative relates (i.e., at amortized cost or fair value). The premium received by the Company at the inception of the contract is deferred until the contract matures or is exercised by the counterparty or amortized over the life of the contract if the term of the derivative is greater than one year.
The fair value of derivative instruments is based on quoted market prices when available. In the absence of quoted market prices, fair value is estimated using industry-standard models utilizing market observable inputs.
Derivative transactions expose the Company to the risk that a counterparty may not be able to fulfill its obligations under the contract. The Company manages this risk by dealing only with counterparties that maintain a minimum credit rating, by performing ongoing review of counterparties credit standing and by adhering to established limits for credit exposure to any single counterparty. The Company also utilizes collateral support arrangements that require the daily exchange of collateral assets if counterparty credit exposure exceeds certain limits. The Company does not offset the statement values for derivatives executed with the same counterparty, even if a master netting arrangement is in place. The Company also does not offset the right to claim collateral against the obligation to return such collateral.
The Company held $644 million and $270 million of cash collateral under its derivative collateral support arrangements at December 31, 2016 and 2015, respectively, including $10 million and $11 million, respectively, of derivative collateral related to the separate accounts. The collateral held in the general account is reported as cash and short-term investments in the consolidated statements of financial position, while the Companys obligation to return the collateral is reported as other liabilities. The collateral asset and related liability for collateral held by the separate accounts is reported in the separate account assets and liabilities, respectively, in the consolidated statements of financial position. The Company also held bond collateral with a fair value of $31 million and $252 million at December 31, 2016 and 2015, respectively. Bonds held as collateral are not reported in the consolidated statements of financial position.
The Company posted $65 million and $41 million of bond collateral under futures agreements at December 31, 2016 and 2015, respectively, including $21 million and $12 million, respectively, of derivative collateral related to the separate accounts. The Company also posted $36 million and $23 million of bond collateral and $1 million and $7 million of cash collateral related to cleared derivative contracts at December 31, 2016 and 2015, respectively. Bonds posted as collateral are reported as bonds and cash posted as collateral is reported as a receivable included in other investments in the consolidated statements of financial position.
The Company has no embedded credit derivatives that expose it to the possibility of being required to make future payments.
Hedging - Designated as Hedging Instruments
The Company designates and accounts for the following derivative types as cash flow hedges, with the related derivative instrument reported at amortized cost in the consolidated statements of financial position. No component of these derivatives economic gain or loss was excluded from the assessment of hedge effectiveness. For the years ended December 31, 2016, 2015 and 2014, no derivatives ceased to qualify for cash flow hedge accounting.
Interest rate floors are used to mitigate the asset/liability management risk of a significant and sustained decrease in interest rates for certain of the Companys insurance products. Interest rate floors entitle the Company to receive payments from a counterparty if market interest rates decline below a specified level. Amounts received on these contracts are reported as net investment income.
NM-30
The Northwestern Mutual Life Insurance Company
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
Interest rate swaps are used to mitigate interest rate risk for investments in variable interest rate and fixed interest rate bonds over a period of up to 18 years. Interest rate swaps obligate the Company and a counterparty to exchange amounts based on the difference between a variable interest rate index and a specified fixed rate of interest applied to the notional amount of the contract. Amounts received or paid on these contracts are reported as net investment income.
Foreign currency swaps are used to mitigate the foreign exchange risk for investments in bonds and mortgage loans denominated in foreign currencies over a period of up to thirty years. Foreign currency swaps obligate the Company and a counterparty to exchange the foreign currency-denominated interest and principal payments receivable on foreign bonds and mortgage loans for U.S. dollar-denominated payments based on currency exchange rates specified at trade inception. Foreign exchange gains or losses on these contracts are reported as a change in unrealized capital gains or losses until the maturity or termination of the contract, at which time a realized capital gain or loss is recognized. Amounts received or paid on these contracts are reported as net investment income.
Hedging - Not Designated as Hedging Instruments
The Company enters into other derivative transactions that mitigate economic risks but are not designated as a hedge for accounting purposes or otherwise do not qualify for statutory hedge accounting. These instruments are reported in the consolidated statements of financial position at fair value. Changes in the fair value of these instruments are reported as a change in unrealized capital gains or losses until the maturity or termination of the contract, at which time a realized capital gain or loss is recognized.
Interest rate caps and floors are used to mitigate the asset/liability management risk of a significant and sustained increase or decrease in interest rates for certain of the Companys insurance and annuity products. Interest rate caps and floors entitle the Company to receive payments from a counterparty if market interest rates rise above or decline below a specified level. Amounts received on these contracts are reported as net investment income.
Interest rate swaps are used to mitigate interest rate risk for investments in variable interest rate and fixed interest rate bonds over a period of up to ten years. Interest rate swaps obligate the Company and a counterparty to exchange amounts based on the difference between a variable interest rate index and a specified fixed rate of interest applied to the notional amount of the contract. Amounts received or paid on these contracts are reported as net investment income.
Swaptions are used to mitigate the asset/liability management risk of a significant and sustained increase in interest rates for certain of the Companys insurance products. Swaptions provide the Company an option to enter into an interest rate swap with a counterparty on specified terms.
Fixed income futures are used to mitigate interest rate risk for investments in portfolios of fixed income securities. Fixed income futures obligate the Company to sell to or buy from a counterparty a specified number of contracts at a specified price at a future date.
Fixed income forwards are used to gain exposure to the investment risk and return of mortgage-backed securities by utilizing to-be-announced (TBA) forward contracts. The Company also uses TBA forward contracts to hedge interest rate risk and participate in the mortgage-backed securities market in an efficient and cost effective way. Additionally, pursuant to the Companys mortgage dollar roll program, TBAs or mortgage-backed securities are transferred to counterparties with a corresponding agreement to repurchase them at a future date. These transactions do not qualify as secured borrowings and are accounted for as derivatives.
NM-31
The Northwestern Mutual Life Insurance Company
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
Foreign currency forwards are used to mitigate the foreign exchange risk for investments in bonds denominated in foreign currencies or common stock or other equity investments in companies operating in foreign countries. Foreign currency forwards obligate the Company to pay to or receive from a counterparty a specified amount of a foreign currency at a future date.
Equity and fixed income total return swaps are used to mitigate market risk for investments in portfolios of common stocks, other equity securities, and fixed income investments. Total return swaps obligate the Company and a counterparty to exchange amounts based on the difference between the return on a specified security, basket of securities or index and a specified short-term funding rate, typically London Interbank Offered Rate (LIBOR) plus or minus a spread, applied to the notional amount of the contract.
Equity index futures are used to mitigate market risk for investments in portfolios of common stock. Equity index futures obligate the Company to pay to or receive from a counterparty an amount based on a specified equity market index as of a future date applied to the notional amount of the contract.
Purchased credit default swaps are used to mitigate the credit risk for investments in bonds issued by specific bond issuers. Credit default swaps provide the Company an option to put a specific bond to a counterparty at par in the event of a credit event encountered by the bond issuer. A credit event is generally defined as a bankruptcy, failure to make required payments or acceleration of issuer obligations under the terms of the bond.
Income Generation
Equity options are used to generate income in exchange for potential future gains on a specific common stock owned by the Company. For written call options the Company receives a cash premium at the inception of the contract, and the counterparty has the right (but not the obligation) to purchase the underlying security from the Company at a specified price at any time during the term of the contract. For purchased put options the Company pays a cash premium at the inception of the contract and has the right (but not the obligation) to sell the underlying security at a specified price at any time during the term of the contract. Equity options are reported at fair value, with changes in fair value reported as a change in unrealized capital gains or losses until the contracts mature or are exercised, at which time a realized capital gain or loss is recognized. The Company did not have any open equity option contracts as of December 31, 2016 and 2015.
Investment Replications
Equity total return swap replications are used in conjunction with the purchase of cash market instruments to replicate investments in portfolios of common stocks and other equity securities. Equity total return swaps obligate the Company and a counterparty to exchange amounts based on the difference between the return on a specified security, basket of securities or index and a specified short-term funding rate, typically LIBOR plus or minus a spread, applied to the notional amount of the contract. Equity total return swaps are reported at fair value, with changes in fair value reported as a change in unrealized capital gains or losses until the maturity or termination of the contract, at which time a realized capital gain or loss is recognized. The Company did not have any open equity total return contracts during 2016 and 2015.
NM-32
The Northwestern Mutual Life Insurance Company
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
The effects of the Companys use of derivative instruments on the consolidated statements of financial position at December 31, 2016 and 2015 were as follows:
December 31, 2016 | ||||||||||||||||||||
Notional | Statement Value | Fair Value | ||||||||||||||||||
Amount | Assets | Liabilities | Assets | Liabilities | ||||||||||||||||
(in millions) | ||||||||||||||||||||
Derivatives designated as hedging instruments: |
||||||||||||||||||||
Interest rate contracts: |
||||||||||||||||||||
Interest rate floors |
$ | 600 | $ | 5 | $ | - | $ | 52 | $ | - | ||||||||||
Interest rate swaps |
77 | - | - | 2 | - | |||||||||||||||
Foreign exchange contracts: |
||||||||||||||||||||
Foreign currency swaps |
4,712 | 639 | (5 | ) | 524 | (51 | ) | |||||||||||||
Derivatives not designated as hedging instruments: |
||||||||||||||||||||
Interest rate contracts: |
||||||||||||||||||||
Interest rate caps |
555 | 11 | - | 11 | - | |||||||||||||||
Interest rate floors |
200 | 18 | - | 18 | - | |||||||||||||||
Interest rate swaps |
800 | 1 | (1 | ) | 1 | (1 | ) | |||||||||||||
Swaptions |
3,240 | 82 | - | 82 | - | |||||||||||||||
Fixed income futures |
994 | - | - | - | - | |||||||||||||||
Fixed income forwards |
946 | 6 | (1 | ) | 6 | (1 | ) | |||||||||||||
Foreign exchange contracts: |
||||||||||||||||||||
Foreign currency forwards |
666 | 19 | (6 | ) | 19 | (6 | ) | |||||||||||||
Equity contracts: |
||||||||||||||||||||
Equity total return swaps |
84 | - | (1 | ) | - | (1 | ) | |||||||||||||
Equity index futures |
97 | - | - | - | - | |||||||||||||||
Fixed contracts: |
||||||||||||||||||||
Fixed income total return swaps |
50 | - | - | - | - | |||||||||||||||
Credit contracts: |
||||||||||||||||||||
Purchased credit default swaps |
73 | - | - | - | - | |||||||||||||||
Income generation: |
||||||||||||||||||||
Equity options |
- | - | - | - | - | |||||||||||||||
Investment replications: |
||||||||||||||||||||
Equity contracts: |
||||||||||||||||||||
Equity total return swaps |
- | - | - | - | - | |||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Total derivatives |
$ | 781 | $ | (14 | ) | $ | 715 | $ | (60 | ) | ||||||||||
|
|
|
|
|
|
|
|
NM-33
The Northwestern Mutual Life Insurance Company
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
December 31, 2015 | ||||||||||||||||||||
Notional | Statement Value | Fair Value | ||||||||||||||||||
Amount | Assets | Liabilities | Assets | Liabilities | ||||||||||||||||
(in millions) | ||||||||||||||||||||
Derivatives designated as hedging instruments: |
||||||||||||||||||||
Interest rate contracts: |
||||||||||||||||||||
Interest rate floors |
$ | 775 | $ | 6 | $ | - | $ | 67 | $ | - | ||||||||||
Interest rate swaps |
77 | - | - | 5 | - | |||||||||||||||
Foreign exchange contracts: |
||||||||||||||||||||
Foreign currency swaps |
3,070 | 360 | (1 | ) | 377 | (3 | ) | |||||||||||||
Derivatives not designated as hedging instruments: |
||||||||||||||||||||
Interest rate contracts: |
||||||||||||||||||||
Interest rate caps |
330 | 7 | - | 7 | - | |||||||||||||||
Interest rate floors |
200 | 17 | - | 17 | - | |||||||||||||||
Interest rate swaps |
800 | - | (7 | ) | - | (7 | ) | |||||||||||||
Swaptions |
3,146 | 67 | - | 67 | - | |||||||||||||||
Fixed income futures |
1,900 | - | - | - | - | |||||||||||||||
Fixed income forwards |
129 | - | - | - | - | |||||||||||||||
Foreign exchange contracts: |
||||||||||||||||||||
Foreign currency forwards |
793 | 10 | (7 | ) | 10 | (7 | ) | |||||||||||||
Equity contracts: |
||||||||||||||||||||
Equity total return swaps |
658 | 2 | (11 | ) | 2 | (11 | ) | |||||||||||||
Equity index futures |
187 | - | - | - | - | |||||||||||||||
Fixed contracts: |
||||||||||||||||||||
Fixed income total return swaps |
- | - | - | - | - | |||||||||||||||
Credit contracts: |
||||||||||||||||||||
Purchased credit default swaps |
103 | - | - | - | - | |||||||||||||||
Income generation: |
||||||||||||||||||||
Equity options |
- | - | - | - | - | |||||||||||||||
Investment replications: |
||||||||||||||||||||
Equity contracts: |
||||||||||||||||||||
Equity total return swaps |
- | - | - | - | - | |||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Total derivatives |
$ | 469 | $ | (26 | ) | $ | 552 | $ | (28 | ) | ||||||||||
|
|
|
|
|
|
|
|
The notional amounts shown above are used to denominate the derivative contracts and do not represent amounts exchanged between the Company and the derivative counterparties. Derivative instruments are reported as other investments or other liabilities in the consolidated statements of financial position.
NM-34
The Northwestern Mutual Life Insurance Company
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
The effects of the Companys use of derivative instruments on the consolidated statements of operations and changes in surplus for the years ended December 31, 2016, 2015 and 2014 were as follows:
For the year ended December 31, 2016 | ||||||||||||
Change in Net Unrealized Capital Gains (Losses) |
Net Realized Capital Gains (Losses) |
Net Investment Income | ||||||||||
(in millions) | ||||||||||||
Derivatives designated as hedging instruments: |
||||||||||||
Interest rate contracts: |
||||||||||||
Interest rate floors |
$ | - | $ | - | $ | 16 | ||||||
Interest rate swaps |
- | - | 3 | |||||||||
Foreign exchange contracts: |
||||||||||||
Foreign currency swaps |
277 | 29 | 50 | |||||||||
Derivatives not designated as hedging instruments: |
||||||||||||
Interest rate contracts: |
||||||||||||
Interest rate caps |
2 | - | (1 | ) | ||||||||
Interest rate floors |
1 | - | - | |||||||||
Interest rate swaps |
7 | - | (12 | ) | ||||||||
Swaptions |
16 | (1 | ) | (9 | ) | |||||||
Fixed income futures |
- | (4 | ) | - | ||||||||
Fixed income forwards |
5 | (5 | ) | - | ||||||||
Foreign exchange contracts: |
||||||||||||
Foreign currency forwards |
10 | (7 | ) | - | ||||||||
Equity contracts: |
||||||||||||
Equity total return swaps |
7 | (37 | ) | - | ||||||||
Equity index futures |
(1 | ) | 13 | - | ||||||||
Fixed contracts: |
||||||||||||
Fixed income total return swaps |
- | - | 2 | |||||||||
Credit contracts: |
||||||||||||
Purchased credit default swaps |
- | - | - | |||||||||
Income generation: |
||||||||||||
Equity options |
- | (2 | ) | - | ||||||||
Investment replications: |
||||||||||||
Equity contracts: |
||||||||||||
Equity total return swaps |
- | - | - | |||||||||
|
|
|
|
|
|
|||||||
Total derivatives |
$ | 324 | $ | (14 | ) | $ | 49 | |||||
|
|
|
|
|
|
NM-35
The Northwestern Mutual Life Insurance Company
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
For the year ended December 31, 2015 | ||||||||||||
Change in Net Unrealized Capital Gains (Losses) |
Net Realized Capital Gains (Losses) |
Net Investment Income | ||||||||||
(in millions) | ||||||||||||
Derivatives designated as hedging instruments: |
||||||||||||
Interest rate contracts: |
||||||||||||
Interest rate floors |
$ | - | $ | - | $ | 23 | ||||||
Interest rate swaps |
- | - | 4 | |||||||||
Foreign exchange contracts: |
||||||||||||
Foreign currency swaps |
209 | 2 | 31 | |||||||||
Derivatives not designated as hedging instruments: |
||||||||||||
Interest rate contracts: |
||||||||||||
Interest rate caps |
(1 | ) | - | (1 | ) | |||||||
Interest rate floors |
1 | - | - | |||||||||
Interest rate swaps |
(2 | ) | (10 | ) | (5 | ) | ||||||
Swaptions |
(9 | ) | - | (9 | ) | |||||||
Fixed income futures |
54 | (7 | ) | - | ||||||||
Fixed income forwards |
- | 2 | - | |||||||||
Foreign exchange contracts: |
||||||||||||
Foreign currency forwards |
(66 | ) | 126 | - | ||||||||
Equity contracts: |
||||||||||||
Equity total return swaps |
(8 | ) | 5 | - | ||||||||
Equity index futures |
2 | 4 | - | |||||||||
Fixed contracts: |
||||||||||||
Fixed income total return swaps |
- | - | - | |||||||||
Credit contracts: |
||||||||||||
Purchased credit default swaps |
1 | - | (1 | ) | ||||||||
Income generation: |
||||||||||||
Equity options |
- | (1 | ) | - | ||||||||
Investment replications: |
||||||||||||
Equity contracts: |
||||||||||||
Equity total return swaps |
- | - | - | |||||||||
|
|
|
|
|
|
|||||||
Total derivatives |
$ | 181 | $ | 121 | $ | 42 | ||||||
|
|
|
|
|
|
NM-36
The Northwestern Mutual Life Insurance Company
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
For the year ended December 31, 2014 | ||||||||||||
Change in Net Unrealized Capital Gains (Losses) |
Net Realized Capital Gains (Losses) |
Net Investment Income | ||||||||||
(in millions) | ||||||||||||
Derivatives designated as hedging instruments: |
||||||||||||
Interest rate contracts: |
||||||||||||
Interest rate floors |
$ | - | $ | - | $ | 27 | ||||||
Interest rate swaps |
- | - | 3 | |||||||||
Foreign exchange contracts: |
||||||||||||
Foreign currency swaps |
200 | (13 | ) | 12 | ||||||||
Derivatives not designated as hedging instruments: |
||||||||||||
Interest rate contracts: |
||||||||||||
Interest rate caps |
- | - | - | |||||||||
Interest rate floors |
10 | - | - | |||||||||
Interest rate swaps |
(5 | ) | - | (1 | ) | |||||||
Swaptions |
(67 | ) | - | (8 | ) | |||||||
Fixed income futures |
(56 | ) | (220 | ) | - | |||||||
Fixed income forwards |
- | - | - | |||||||||
Foreign exchange contracts: |
||||||||||||
Foreign currency forwards |
90 | 13 | - | |||||||||
Equity contracts: |
||||||||||||
Equity total return swaps |
(2 | ) | (14 | ) | - | |||||||
Equity index futures |
(2 | ) | 4 | - | ||||||||
Fixed contracts: |
||||||||||||
Fixed income total return swaps |
- | - | - | |||||||||
Credit contracts: |
||||||||||||
Purchased credit default swaps |
- | - | (1 | ) | ||||||||
Income generation: |
||||||||||||
Equity options |
- | - | - | |||||||||
Investment replications: |
||||||||||||
Equity contracts: |
||||||||||||
Equity total return swaps |
1 | 13 | - | |||||||||
|
|
|
|
|
|
|||||||
Total derivatives |
$ | 169 | $ | (217 | ) | $ | 32 | |||||
|
|
|
|
|
|
NM-37
The Northwestern Mutual Life Insurance Company
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
5. | Reserves for Policy Benefits |
General account reserves for policy benefits at December 31, 2016 and 2015 were as follows:
December 31, | ||||||||
2016 | 2015 | |||||||
(in millions) | ||||||||
Life insurance reserves |
$ | 164,505 | $ | 156,888 | ||||
Annuity reserves |
8,589 | 7,604 | ||||||
Deposit funds |
3,054 | 2,764 | ||||||
Disability and long-term care unpaid claims and claim reserves |
4,753 | 4,668 | ||||||
Disability and long-term care active life reserves |
5,588 | 5,004 | ||||||
|
|
|
|
|||||
Total reserves for policy benefits |
$ | 186,489 | $ | 176,928 | ||||
|
|
|
|
See Note 9 for more information regarding the Companys use of reinsurance and the related impact on policy benefit reserves.
Life Insurance Reserves
Life insurance reserves on substantially all policies issued since 1978 are based on the Commissioners Reserve Valuation Method (CRVM) using the 1958, 1980 or 2001 CSO mortality tables with valuation interest rates ranging from 3.50% to 5.50%. Other life insurance reserves are primarily based on the net level premium method, using various mortality tables at interest rates ranging from 2.00% to 4.50%. As of December 31, 2016, the Company had $1.7 trillion of total life insurance in force, including $15.4 billion of life insurance in force for which gross premiums were less than net premiums according to the standard valuation methods and assumptions prescribed by the OCI. Gross premiums are calculated using mortality tables that reflect both the Companys actual experience and the potential transfer of risk to reinsurers. Net premiums are determined in the calculation of statutory reserves, which must be based on industry-standard mortality tables.
Tabular cost has been determined from the basic data for the calculation of policy reserves. Tabular cost less actual reserves released has been determined from the basic data for the calculation of reserves and reserves released. Tabular interest has been determined from the basic data for the calculation of policy reserves. Tabular interest on funds not involving life contingencies is calculated as the product of the valuation interest rate times the mean of the amount of funds subject to such rate held at the beginning and end of the year of valuation.
Additional premiums are charged for substandard lives on policies issued after January 1, 1956. Net level premium or CRVM mean reserves for these policies are based on multiples of mortality tables or one-half the net flat or other extra mortality charge. The Company waives deduction of fractional premiums upon death of an insured and returns any portion of the final premium beyond the date of death. Cash values are not promised in excess of the legally computed reserves.
Annuity Reserves and Deposit Funds
Deferred annuity reserves on policies issued since 1985 are primarily based on the Commissioners Annuity Reserve Valuation Method (CARVM) using the Annuity 2000 or 2012 Individual Annuity Reserve mortality tables with valuation interest rates ranging from 3.50% to 6.25%. Other deferred annuity reserves are based on policy value, with additional reserves held to
NM-38
The Northwestern Mutual Life Insurance Company
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
reflect guarantees under these contracts. Immediate annuity reserves on policies issued since 1985 are based on the present value of expected benefit payments using either the 1983 Individual Annuity a, Annuity 2000 or 2012 Individual Annuity Reserve mortality tables with valuation interest rates ranging from 3.50% to 7.50%. Changes in future policy benefit reserves on supplementary contracts and immediate annuities without life contingencies are deposit-type transactions and are excluded from net additions to policy benefit reserves in the consolidated statements of operations.
Deposit funds primarily represent reserves for supplementary annuity contracts without life contingencies and amounts left on deposit with the Company by beneficiaries or policyowners. Beneficiaries of the Companys life insurance policies can choose to receive their death benefit in a single lump sum payment or through a payment plan consisting of a series of scheduled payments. If the beneficiary does not affirmatively choose a payment plan, the proceeds are automatically paid to the beneficiary in a single lump sum.
Prior to November 1, 2013, beneficiaries of the Companys life insurance policies also could choose to receive their death benefit by deposit of the proceeds (if $20,000 or more) into an interest-bearing retained asset account (Northwestern Access Fund). Funds held on behalf of Northwestern Access Fund account holders are segmented in the Companys general account and are invested primarily in short-term, liquid investments and high quality corporate bonds. Northwestern Access Fund accounts are credited with interest at short-term market rates, with certain accounts subject to guaranteed minimum crediting rates. The total reserve liability for Northwestern Access Fund account balances held by the Company was $403 million and $449 million at December 31, 2016 and 2015, respectively. Accounts were credited with interest at annual rates ranging from 0.06% to 3.50% and 0.01% to 3.50% during 2016 and 2015, respectively.
At December 31, 2016 and 2015, the withdrawal characteristics of the Companys general account and separate account annuity reserves and deposit funds were as follows:
December 31, | ||||||||||||||||||||||||
General Account | Separate Accounts | Total | ||||||||||||||||||||||
2016 | 2015 | 2016 | 2015 | 2016 | 2015 | |||||||||||||||||||
(in millions) | ||||||||||||||||||||||||
Subject to discretionary withdrawal |
||||||||||||||||||||||||
- with market value adjustment |
$ | 372 | $ | 449 | $ | - | $ | - | $ | 372 | $ | 449 | ||||||||||||
- at book value less surrender charge of 5% or more |
139 | 218 | - | - | 139 | 218 | ||||||||||||||||||
- at fair value |
- | - | 17,162 | 16,058 | 17,162 | 16,058 | ||||||||||||||||||
- at book value without adjustment |
4,939 | 4,634 | - | - | 4,939 | 4,634 | ||||||||||||||||||
Not subject to discretionary withdrawal |
6,193 | 5,067 | 4,800 | 4,440 | 10,993 | 9,507 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total annuity reserves and deposit funds |
$ | 11,643 | $ | 10,368 | $ | 21,962 | $ | 20,498 | $ | 33,605 | $ | 30,866 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Disability and Long-Term Care Reserves
Unpaid claims and claim reserves for disability policies are based on the present value of expected benefit payments, primarily using the 1985 Commissioners Individual Disability Table A (CIDA) modified for Company experience, with valuation interest rates ranging from 3.00% to 5.50%. Unpaid claims and claim reserves for long-term care policies are based on the present
NM-39
The Northwestern Mutual Life Insurance Company
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
value of expected benefit payments using industry-based morbidity experience with valuation interest rates ranging from 3.50% to 4.50%.
Reserves for unpaid claims, losses and loss adjustment expenses on disability and long-term care policies were $4.8 billion and $4.7 billion at December 31, 2016 and 2015, respectively. Changes in these reserves for the years ended December 31, 2016 and 2015 were as follows:
For the years ended December 31, |
||||||||
2016 | 2015 | |||||||
(in millions) | ||||||||
Balance at January 1 |
$ | 4,668 | $ | 4,667 | ||||
Incurred related to: |
||||||||
Current year |
742 | 703 | ||||||
Prior years |
(25 | ) | (82 | ) | ||||
|
|
|
|
|||||
Total incurred |
717 | 621 | ||||||
|
|
|
|
|||||
Paid related to: |
||||||||
Current year |
(32 | ) | (30 | ) | ||||
Prior years |
(600 | ) | (590 | ) | ||||
|
|
|
|
|||||
Total paid |
(632 | ) | (620 | ) | ||||
|
|
|
|
|||||
Balance at December 31 |
$ | 4,753 | $ | 4,668 | ||||
|
|
|
|
Changes in reserves for incurred claims related to prior years are generally the result of differences between assumed claim experience at the time reserves were originally estimated and subsequent actual claim experience.
Active life reserves for disability policies issued prior to 1987 are based on the net level premium method, using the 1964 Commissioners Disability Table for morbidity with valuation interest rates ranging from 3.00% to 4.00%. Active life reserves for disability policies issued between 1987 and 2016 are primarily based on the two-year preliminary term method using the 1985 CIDA for morbidity, while policies issued beginning in late 2016 use the 2013 Individual Disability Income Valuation Table for morbidity. Policies issued between 1987 and 2012 are based on a valuation interest rate of 4.00% while those issued after 2012 are based on a valuation interest rate of 3.50%. Active life reserves are mean reserves for disability policies issued through 2000 and mid-terminal plus unearned premium reserves for policies issued after 2000.
Active life reserves for long-term care policies consist of mid-terminal reserves and unearned premiums. Mid-terminal reserves are based on the one-year preliminary term method and industry-based morbidity experience. For policies issued prior to March 2002, reserves are based on a 4.00% valuation interest rate and total terminations based on the 1983 Individual Annuity Mortality table without lapses. For policies issued since March 2002, minimum reserves are based on valuation interest rates ranging from 3.50% to 4.50% and total terminations based on the 1994 Group Annuity Mortality table with lapses. For policies issued from March 2002 through September 2010, a separate calculation is performed using valuation interest rates ranging from 4.87% to 5.60% and assuming no lapses. Reserves from the separate calculation are compared in the aggregate to the minimum reserves as calculated above and the greater of the two is reported.
NM-40
The Northwestern Mutual Life Insurance Company
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
For long-term care reserve valuations prior to 2012, the Company utilized the 1983 Individual Annuity Mortality table, the 1983 Group Annuity Mortality table, or the 1994 Group Annuity Mortality table for the calculation of minimum reserves for policies. At January 1, 2012, use of the 1983 Group Annuity Mortality table to calculate minimum reserves for policies issued from March 2002 through 2004 was replaced with a calculation using only the 1994 Group Annuity Mortality table and assumptions regarding interest rates and claim costs were adjusted to reflect more recent expectations.
Additional Actuarial Reserves
Each year, the Company must perform asset adequacy testing (AAT) to demonstrate that reserves make adequate provision for the anticipated cash flows required by contractual obligations and related expenses, in light of assets held for the reserves. Asset adequacy testing is performed in accordance with presently accepted actuarial standards and must include assumptions necessary to determine the adequacy of reserves under moderately adverse conditions. At December 31, 2016 and 2015, reserves required as a result of AAT were as follows:
December 31, | ||||||||
2016 | 2015 | |||||||
(in millions) | ||||||||
Long-term care insurance |
$ | 265 | $ | 265 | ||||
Annuities and deposit funds |
100 | 100 | ||||||
Life insurance |
2 | 2 | ||||||
|
|
|
|
|||||
Total reserves |
$ | 367 | $ | 367 | ||||
|
|
|
|
Statutory Minimum Reserves
The Company has the option to establish reserves for policy benefits using a standard of valuation that produces higher reserves than those calculated according to the minimum standard provided in the statutory regulations. For contracts issued January 1, 2001 and later, excess reserves over the statutory minimums were $403 million and $337 million at December 31, 2016 and 2015, respectively.
6. | Premium and Annuity Considerations Deferred and Uncollected |
Gross deferred and uncollected insurance premiums represent life insurance premiums due to be received from policyowners through the next respective policy anniversary dates. Net deferred and uncollected premiums represent only the portion of gross premiums related to mortality charges and interest and are reported in deferred premium and other assets in the consolidated statements of financial position.
Deferred and uncollected premiums at December 31, 2016 and 2015 were as follows:
December 31, 2016 | December 31, 2015 | |||||||||||||||
Gross | Net | Gross | Net | |||||||||||||
(in millions) | ||||||||||||||||
Ordinary new business |
$ | 257 | $ | 98 | $ | 237 | $ | 88 | ||||||||
Ordinary renewal |
2,557 | 2,082 | 2,450 | 1,998 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total deferred and uncollected premiums |
$ | 2,814 | $ | 2,180 | $ | 2,687 | $ | 2,086 | ||||||||
|
|
|
|
|
|
|
|
NM-41
The Northwestern Mutual Life Insurance Company
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
7. | Separate Accounts |
Separate account liabilities by withdrawal characteristic at December 31, 2016 and 2015 were as follows:
Variable Life | Variable Annuities | Total | ||||||||||||||||||||||
December 31, | ||||||||||||||||||||||||
2016 | 2015 | 2016 | 2015 | 2016 | 2015 | |||||||||||||||||||
(in millions) | ||||||||||||||||||||||||
Subject to discretionary withdrawal |
$ | 6,504 | $ | 6,123 | $ | 17,162 | $ | 16,058 | $ | 23,666 | $ | 22,181 | ||||||||||||
Not subject to discretionary withdrawal |
- | - | 4,800 | 4,440 | 4,800 | 4,440 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total separate account reserves |
$ | 6,504 | $ | 6,123 | $ | 21,962 | $ | 20,498 | 28,466 | 26,621 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||
Non-policy liabilities |
93 | 110 | ||||||||||||||||||||||
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|
|
|||||||||||||||||||||
Total separate account liabilities |
$ | 28,559 | $ | 26,731 | ||||||||||||||||||||
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|
|
While separate account liability values are not guaranteed by the Company, variable annuity and variable life insurance products do include guaranteed minimum death benefits (GMDB) underwritten by the Company. The maximum potential cost of these guarantees at December 31, 2016 and 2015 was $49 million and $162 million, respectively, which represents the aggregate difference between guaranteed values and otherwise available values for all variable products for which the guaranteed value was greater at the respective reporting dates. These benefits are only available upon the death of the annuitant or insured, and reserves for these benefits are based upon NAIC-prescribed actuarial methods that take into account, among other factors, the likelihood of death based on standard mortality tables. General account reserves for policy benefits included $13 million and $14 million attributable to GMDB at December 31, 2016 and 2015, respectively.
Premiums and other considerations received from variable annuity and variable life insurance policyowners were $1.6 billion, $1.9 billion and $2.0 billion for the years ended December 31, 2016, 2015 and 2014, respectively. These amounts are reported as premiums in the consolidated statements of operations. The subsequent transfer of these premiums to the separate accounts, net of amounts received from the separate accounts to provide for policy benefit payments to variable product policyowners, is reported as net transfers to separate accounts in the consolidated statements of operations.
Following are amounts reported as transfers to and from separate accounts in the summary of operations of the Companys Separate Account Annual Statement, which agree with the amounts reported as net transfers to/(from) separate accounts in the consolidated statements of operations for the years ended December 31, 2016, 2015 and 2014.
For the years ended December 31, | ||||||||||||
2016 | 2015 | 2014 | ||||||||||
(in millions) | ||||||||||||
From Separate Account Annual Statement: |
||||||||||||
Transfers to separate accounts |
$ | 1,714 | $ | 1,946 | $ | 2,176 | ||||||
Transfers from separate accounts |
(1,832 | ) | (1,796 | ) | (1,675 | ) | ||||||
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|||||||
Net transfers to (from) separate accounts |
$ | (118 | ) | $ | 150 | $ | 501 | |||||
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NM-42
The Northwestern Mutual Life Insurance Company
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
8. | Employee and Financial Representative Benefit Plans |
The Company provides defined pension benefits for all eligible employees and financial representatives. This includes sponsorship of noncontributory defined benefit pension plans that are qualified under the terms of the Employee Retirement Income Security Act (ERISA) and the Internal Revenue Code (Code), as well as nonqualified plans that provide benefits to certain participants in excess of limits set by ERISA and the Code for the qualified plans. The Companys funding policy for the qualified plans is to make annual contributions that are no less than the minimum amount needed to comply with the requirements of ERISA and no greater than the maximum amount deductible for federal income tax purposes. The Company made no contributions to the qualified retirement plans during either of the years ended December 31, 2016 and 2015 and does not expect to make a contribution to the plans during 2017.
The Companys defined benefit pension plans for employees contains two different benefit formulas a formula based on the final average pay of the participant that was frozen as of December 31, 2013 and one that awards cash balance credits based on each participants age and years of service that became effective on January 1, 2014. Benefits accrued under the final average pay formula remain available to participants upon retirement. Accumulated cash balance credits earn interest based on market rates and are subject to a minimum crediting rate.
In addition to defined pension benefits, the Company provides certain health care and life insurance benefits (postretirement benefits) to retired employees, retired financial representatives and their eligible dependents. Participants are eligible for retirement health care coverage if they meet eligibility requirements for age and length of service and were either active or retired as of December, 31, 2013. Employees or financial representatives hired or contracted after that date are not eligible for coverage under the postretirement health plans.
The Company amended the employee postretirement health plan during 2016 to transition Medicare-eligible retirees and their dependents to health care options provided under an independent third-party health care marketplace (marketplace). Retirees and dependents that are not yet Medicare-eligible retain the historical health care benefits offered by the Company. Medicare-eligible retirees and dependents are provided with a pre-funded retiree health reimbursement account and access to third-party advisors to purchase health benefits through the marketplace. Non-Medicare-eligible retirees and dependents are provided premium assistance based on the retirees years of service with the Company. The Company pays the entire cost of retiree life insurance coverage.
Benefit Plan Assets
Aggregate plan assets of the defined benefit pension plans and postretirement benefit plans at December 31, 2016 and 2015, and changes in these assets for the years then ended, were as follows:
Defined Benefit Plans | Postretirement Benefit Plans | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
(in millions) | ||||||||||||||||
Fair value of plan assets at January 1 |
$ | 4,144 | $ | 4,251 | $ | 72 | $ | 77 | ||||||||
Changes in plan assets: |
||||||||||||||||
Actual return on plan assets |
426 | (4 | ) | 7 | - | |||||||||||
Actual plan benefits paid |
(111 | ) | (103 | ) | (4 | ) | (5 | ) | ||||||||
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Fair value of plan assets at December 31 |
$ | 4,459 | $ | 4,144 | $ | 75 | $ | 72 | ||||||||
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NM-43
The Northwestern Mutual Life Insurance Company
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
Plan assets consist of group annuity contracts issued by the Company that are funded by a Group Annuity Separate Account, which primarily invests in a diversified portfolio of public and private common stocks and corporate, government and mortgage-backed debt securities. The overall investment objective of the plans is to maximize long-term total rate of return, consistent with prudent standards for investment and asset/liability risk management and in accordance with ERISA requirements. Plan investments are managed with a long-term perspective and for the sole benefit of the plans participants.
Plan asset allocations are rebalanced regularly to maintain holdings within desired asset allocation ranges and to reposition the portfolio based upon perceived market opportunities and risks. Diversification, both by and within asset classes, is a primary risk management consideration. Assets are invested across various asset classes, sectors, industries and geographies. The measurement date for plan assets was December 31 of the respective period with the fair value of plan assets primarily based on quoted market prices.
The target asset allocations and the actual allocation of the plans investments based on fair value at December 31, 2016 and 2015 were as follows:
Target | Actual | |||||||||||||||||
Allocation | Allocation | |||||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||||
Bonds |
49% | 49% | 50% | 48% | ||||||||||||||
Equity investments |
50% | 50% | 48% | 49% | ||||||||||||||
Other investments |
1% | 1% | 2% | 3% | ||||||||||||||
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Total assets |
100% | 100% | 100% | 100% | ||||||||||||||
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At each of December 31, 2016 and 2015, other investments were comprised of cash and short-term investments.
Benefit Plan Obligations
Aggregate projected benefit obligations (PBOs) of the defined benefit pension plans and postretirement benefit plans at December 31, 2016 and 2015 and changes in these obligations for the years then ended were as follows:
Defined Benefit Plans | Postretirement Benefit Plans | |||||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||||
(in millions) | ||||||||||||||||||
Projected benefit obligation at January 1 |
$ | 4,588 | $ | 4,609 | $ | 811 | $ | 825 | ||||||||||
Changes in benefit obligation: |
||||||||||||||||||
Service cost of benefits earned |
120 | 117 | 22 | 25 | ||||||||||||||
Interest cost on projected obligations |
194 | 181 | 30 | 30 | ||||||||||||||
Projected gross plan benefits paid |
(128 | ) | (117 | ) | (25 | ) | (26 | ) | ||||||||||
Projected Medicare Part D reimbursement |
- | - | 2 | 2 | ||||||||||||||
Experience (gains)/losses |
93 | (202 | ) | (13 | ) | (45 | ) | |||||||||||
Plan amendments and other |
12 | - | (99 | ) | - | |||||||||||||
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Projected benefit obligation at December 31 |
$ | 4,879 | $ | 4,588 | $ | 728 | $ | 811 | ||||||||||
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NM-44
The Northwestern Mutual Life Insurance Company
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
The PBO represents the estimated net present value of estimated future benefit obligations. For defined benefit plans, PBO includes assumptions for future compensation increases for active participants. The accumulated benefit obligation (ABO) is similar to the PBO, but is based only on current compensation with no assumption of future compensation increases. The aggregate ABO for the defined benefit plans was $4.6 billion and $4.3 billion for the years ended December 31, 2016 and 2015, respectively. Experience (gains)/losses for the years ended December 31, 2016 and 2015 primarily reflect the impact of changes in the PBO discount rate and adjustments to mortality assumptions.
Benefit Plan Assumptions
The assumptions used in estimating the projected benefit obligations at December 31, 2016 and 2015 and the net periodic benefit cost for the years ended December 31, 2016, 2015 and 2014 were as follows:
Defined Benefit Plans |
Postretirement Benefit Plans |
|||||||||||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||||||||||
Projected benefit obligation: |
||||||||||||||||||||||||
Discount rate |
4.10% | 4.30% | 4.10% | 4.30% | ||||||||||||||||||||
Annual increase in compensation |
3.75% | 3.75% | 3.75% | 3.75% | ||||||||||||||||||||
Defined Benefit Plans | Postretirement Benefit Plans | |||||||||||||||||||||||
2016 | 2015 | 2014 | 2016 | 2015 | 2014 | |||||||||||||||||||
Net periodic benefit cost: |
||||||||||||||||||||||||
Discount rate |
4.30% | 4.00% | 5.00% | 4.30% | 4.00% | 5.00% | ||||||||||||||||||
Annual increase in compensation |
3.75% | 3.75% | 3.75% | 3.75% | 3.75% | 3.75% | ||||||||||||||||||
Long-term rate of return on plan assets |
6.50% | 6.50% | 6.50% | 6.50% | 6.50% | 6.50% |
The expected long-term rate of return on plan assets is estimated in consideration of historical financial market performance, third-party capital market expectations and the long-term target asset allocation.
The PBO for postretirement benefits at December 31, 2016 assumed an annual increase in future retiree medical costs of 6.5%, grading down to 5.0% over three years and remaining level thereafter. At December 31, 2015, the comparable assumption was for an annual increase in future retiree medical costs of 7.0% grading down to 5.0% over four years and remaining level thereafter. A greater increase in the assumed health care cost trend of 1.0% in each year would increase the accumulated postretirement benefit obligation at December 31, 2016 by $3 million and net periodic postretirement benefit expense for the year ended December 31, 2016 by $0.1 million. A decrease in the assumed health care cost trend of 1.0% in each year would reduce the accumulated postretirement benefit obligation as of December 31, 2016 and net periodic postretirement benefit expense for the year ended December 31, 2016 by the same amounts. Effective January 1, 2019, the Companys exposure to medical inflation will be limited to a maximum annual increase of 3% with any annual increase in excess of that rate passed on to the plans participants in the form of increased premiums.
During 2010, the Patient Protection and Affordable Care Act (PPACA) and the Health Care and Education Reconciliation Act of 2010, which amended certain provisions of the PPACA, were enacted. These laws created an excise tax beginning in 2018, the effective date of which was delayed until 2020 by new legislation passed in 2015, on health care plans that have an aggregate
NM-45
The Northwestern Mutual Life Insurance Company
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
value to the participants greater than a threshold amount. Recent changes to the Companys postretirement health care plans are expected to keep the aggregate value of the plans below the excise tax threshold. The new laws also revoked the non-taxable status of the prescription drug subsidies offered to companies that maintain retiree health plans that are actuarially equivalent to the Medicare Part D benefit.
Benefit Plan Funded Status
Following is an aggregate reconciliation of the funded status of the plans to the related financial statement liabilities reported by the Company at December 31, 2016 and 2015.
Defined Benefit Plans |
Postretirement Benefit Plans |
|||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
(in millions) | ||||||||||||||||
Fair value of plan assets |
$ | 4,459 | $ | 4,144 | $ | 75 | $ | 72 | ||||||||
Projected benefit obligation |
4,879 | 4,588 | 728 | 811 | ||||||||||||
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Funded status |
(420 | ) | (444 | ) | (653 | ) | (739 | ) | ||||||||
Unrecognized prior service costs/(credits) |
- | - | - | 19 | ||||||||||||
Nonadmitted asset |
(504 | ) | (415 | ) | - | - | ||||||||||
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Financial statement liability |
$ | (924 | ) | $ | (859 | ) | $ | (653 | ) | $ | (720 | ) | ||||
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The PBO for defined benefit plans above included $924 million and $859 million related to nonqualified, unfunded plans at December 31, 2016 and 2015, respectively. In the aggregate, the fair value of qualified defined benefit plan assets represented 113% and 111% of the projected benefit obligations of these plans at December 31, 2016 and 2015, respectively.
NM-46
The Northwestern Mutual Life Insurance Company
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
Statutory accounting guidance requires that changes in plan funded status be recognized immediately as a direct adjustment to surplus, subject to limitations such as admissibility of net pension assets. These adjustments are included in changes in nonadmitted assets and other in the consolidated statements of changes in surplus. Aggregate defined benefit pension and postretirement plan surplus impacts were as follows for the years ended December 31, 2016 and 2015:
Defined | Postretirement | |||||||||||||||||||||||
Benefit Plans | Benefit Plans | Total | ||||||||||||||||||||||
2016 | 2015 | 2016 | 2015 | 2016 | 2015 | |||||||||||||||||||
(in millions) | ||||||||||||||||||||||||
Changes in plan assets and benefit obligations recognized in surplus: |
||||||||||||||||||||||||
Net experience gains/(losses) |
$ | 56 | $ | (87 | ) | $ | 16 | $ | 40 | $ | 72 | $ | (47 | ) | ||||||||||
Prior service (costs)/credits |
(2 | ) | (1 | ) | 83 | (56 | ) | 81 | (57 | ) | ||||||||||||||
Amounts amortized from surplus into net periodic benefit cost: |
||||||||||||||||||||||||
Net experience losses |
$ | 66 | $ | 64 | $ | 4 | $ | 3 | $ | 70 | $ | 67 | ||||||||||||
Prior service costs/(credits) |
(25 | ) | (14 | ) | 6 | 12 | (19 | ) | (2 | ) | ||||||||||||||
Initial net asset |
(24 | ) | (40 | ) | - | - | (24 | ) | (40 | ) |
Net experience gains/(losses) primarily reflect the impacts of any changes to plan assumptions (e.g., discount rate and mortality assumptions) that are applied to the calculation of PBO estimates. Total defined benefit pension and postretirement plan net experience gains/(losses) recognized in surplus but not yet amortized into net periodic benefit cost were $(1.3) billion and $(0.1) billion at December 31, 2016, respectively, and $(1.4) billion and $(0.1) billion at December 31, 2015, respectively.
Total defined benefit and postretirement plan prior service (costs)/credits recognized in surplus but not yet amortized into net periodic benefit cost were $250 million and $(65) million at December 31, 2016, respectively, and $277 million and $(154) million at December 31, 2015, respectively. The total initial net asset recognized in surplus but not yet amortized into net periodic benefit cost was $323 million and $347 million at December 31, 2016 and 2015, respectively.
Benefit Plan Costs
The components of net periodic benefit cost for the years ended December 31, 2016, 2015 and 2014 were as follows:
Defined Benefit Plans | Postretirement Benefit Plans | |||||||||||||||||||||||
2016 | 2015 | 2014 | 2016 | 2015 | 2014 | |||||||||||||||||||
(in millions) | ||||||||||||||||||||||||
Components of net periodic benefit cost: |
||||||||||||||||||||||||
Service cost of benefits earned |
$ | 120 | $ | 117 | $ | 93 | $ | 22 | $ | 25 | $ | 19 | ||||||||||||
Interest cost on projected obligations |
194 | 181 | 180 | 30 | 30 | 31 | ||||||||||||||||||
Amortization of experience losses |
66 | 64 | 25 | 4 | 3 | 1 | ||||||||||||||||||
Amortization of prior service costs/(credits) |
(25 | ) | (14 | ) | (14 | ) | 6 | 12 | 12 | |||||||||||||||
Amortization of initial net asset |
(24 | ) | (40 | ) | (17 | ) | - | - | - | |||||||||||||||
Other |
9 | - | - | 3 | - | - | ||||||||||||||||||
Expected return on plan assets |
(266 | ) | (273 | ) | (251 | ) | (4 | ) | (5 | ) | (5 | ) | ||||||||||||
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Net periodic benefit cost |
$ | 74 | $ | 35 | $ | 16 | $ | 61 | $ | 65 | $ | 58 | ||||||||||||
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NM-47
The Northwestern Mutual Life Insurance Company
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
The Company expects to increase/(decrease) periodic benefit costs through the amortization of $54 million, $(25) million and $(3) million of defined benefit plan net experience losses, prior service credits and initial assets, respectively, into net periodic benefit cost during 2017. Amortization of postretirement plan net experience losses of $4 million and prior service costs of $5 million are also expected to increase net periodic benefit cost during 2017.
The expected benefit payments by the defined benefit plans and the postretirement benefit plans for the years 2017 through 2026 are as follows:
Defined Benefit Plans |
Postretirement Benefit Plans |
|||||||
(in millions) | ||||||||
2017 |
$ | 139 | $ | 24 | ||||
2018 |
157 | 25 | ||||||
2019 |
169 | 26 | ||||||
2020 |
179 | 27 | ||||||
2021 |
187 | 28 | ||||||
2022-2026 |
1,063 | 157 | ||||||
|
|
|
|
|||||
Total |
$ | 1,894 | $ | 287 | ||||
|
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|
|
The Company sponsors a contributory 401(k) plan for eligible employees, for which the Company provides a matching contribution, and a noncontributory defined contribution plan for financial representatives. In addition, the Company sponsors nonqualified plans that provide related benefits to certain participants in excess of limits set by ERISA for qualified defined contribution plans. For the years ended December 31, 2016, 2015 and 2014, the Company expensed total contributions to these plans of $48 million, $45 million and $43 million, respectively.
9. | Reinsurance |
The Company limits its exposure to life insurance death benefits by ceding coverage to various reinsurers. The Company discontinued its participation in a life insurance catastrophic risk sharing pool during 2014.
The Company cedes 60% of the morbidity risk on group disability policies. The Company ceased reinsuring new individual disability policies in 1999 and new long-term care policies in 2002 but maintained a portion of the reinsurance ceded on policies issued prior to those dates.
Effective October 1, 2014, NM and NLTC entered into an affiliated reinsurance agreement. Under this agreement, NLTC ceded 100% of the net risks associated with its in-force long-term care policies and future issuances of long-term care policies to NM. All impacts of this transaction were eliminated upon consolidation of the two entities in these financial statements.
Amounts in the consolidated financial statements are reported net of the impact of reinsurance. Reserves for policy benefits at December 31, 2016 and 2015 were reported net of ceded reserves of $1.8 billion and $1.7 billion, respectively. The Company has reinsured all risks disclosed in the consolidated financial statements under Actuarial Guideline 48.
NM-48
The Northwestern Mutual Life Insurance Company
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
The effects of reinsurance on premium revenue and total benefits for the years ended December 31, 2016, 2015 and 2014 were as follows:
For the years ended December 31, | ||||||||||||
2016 | 2015 | 2014 | ||||||||||
(in millions) | ||||||||||||
Direct premium revenue |
$ | 18,838 | $ | 18,704 | $ | 17,894 | ||||||
Premiums ceded |
(923 | ) | (916 | ) | (893 | ) | ||||||
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|||||||
Premium revenue |
$ | 17,915 | $ | 17,788 | $ | 17,001 | ||||||
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Direct benefit expense |
$ | 19,659 | $ | 19,205 | $ | 18,425 | ||||||
Benefits ceded |
(694 | ) | (660 | ) | (618 | ) | ||||||
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|||||||
Total benefits |
$ | 18,965 | $ | 18,545 | $ | 17,807 | ||||||
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In addition, the Company received $152 million, $160 million and $161 million in allowances from reinsurers for reimbursement of commissions and other expenses on ceded business for the years ended December 31, 2016, 2015 and 2014, respectively. These amounts are reported in other income in the consolidated statements of operations.
Reinsurance contracts do not relieve the Company from its obligations to policyowners. Failure of reinsurers to honor their obligations could result in losses to the Company. The Company mitigates this counterparty risk by dealing only with reinsurers that meet its financial strength standards while adhering to concentration limits for counterparty exposure to any single reinsurer. Most significant reinsurance treaties contain financial protection provisions that take effect if a reinsurers credit rating falls below a prescribed level. There were no reinsurance recoverables at December 31, 2016 and 2015 that were considered by the Company to be uncollectible.
10. | Income Taxes |
The Company files a consolidated federal income tax return including the following subsidiaries:
Northwestern Mutual Investment Services, LLC |
Bradford, Inc. and subsidiaries | |
NML Real Estate Holdings, LLC and subsidiaries |
Mason Street Advisors, LLC | |
NML Securities Holdings, LLC and subsidiaries |
NM GP Holdings, LLC and subsidiaries | |
Northwestern Mutual MU TLD Registry, LLC |
NM Pebble Valley, LLC | |
Northwestern Mutual Wealth Management Company |
Northwestern Mutual Registry, LLC | |
NM Investment Holdings, LLC |
NM Planning, LLC and subsidiaries | |
NM Investment Management Company, LLC |
GRO, LLC and GRO-SUB, LLC |
The Company collects from or refunds to these subsidiaries their share of consolidated federal income taxes determined pursuant to written tax-sharing agreements, which generally require that these subsidiaries determine their share of consolidated tax payments or refunds as if each subsidiary filed a separate federal income tax return on a stand-alone basis.
NM-49
The Northwestern Mutual Life Insurance Company
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
The components of current income tax expense (benefit) in the consolidated statements of operations for the years ended December 31, 2016, 2015 and 2014 related to ordinary taxable income or loss were as follows:
For the years ended December 31, | ||||||||||||
2016 | 2015 | 2014 | ||||||||||
(in millions) | ||||||||||||
Tax payable on ordinary income |
$ | (10 | ) | $ | 69 | $ | 200 | |||||
Low income housing tax credits |
(108 | ) | (111 | ) | (107 | ) | ||||||
Other tax credits |
(37 | ) | (21 | ) | (35 | ) | ||||||
Increase (decrease) in contingent tax liabilities |
(21 | ) | 10 | (36 | ) | |||||||
|
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|
|
|
|||||||
Total current tax expense (benefit) |
$ | (176 | ) | $ | (53 | ) | $ | 22 | ||||
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|
|
In addition to current income tax expense (benefit) related to ordinary taxable income or loss as summarized above, the Company is subject to federal income tax on capital gains and losses that generally result from investment transactions. Investment capital gains and losses resulting from changes in market interest rates or credit spreads are deferred to the IMR net of any related tax expense or benefit. Current tax expense (benefit) of $153 million, $(90) million and $86 million was included in net IMR deferrals for the years ended December 31, 2016, 2015 and 2014, respectively. In addition, net realized capital gains and losses as reported in the consolidated statements of operations included current tax expense (benefit) of $(117) million, $112 million and $123 million for the years ended December 31, 2016, 2015 and 2014, respectively.
The table below shows how the Companys income tax expense (benefit) for the years ended December 31, 2016, 2015 and 2014 differs from the amount obtained by applying the statutory rate of 35% to net gain from operations after dividends to policyowners and before federal income taxes:
For the years ended December 31, | ||||||||||||
2016 | 2015 | 2014 | ||||||||||
(in millions) | ||||||||||||
Provision computed at statutory rate |
$ | 336 | $ | 211 | $ | 390 | ||||||
Adjustments to the statutory rate: |
||||||||||||
Subsidiary distributions |
(269 | ) | (122 | ) | (98 | ) | ||||||
Tax credits |
(145 | ) | (132 | ) | (142 | ) | ||||||
Amortization of IMR |
(54 | ) | (74 | ) | (115 | ) | ||||||
Dividends received deduction |
(33 | ) | (32 | ) | (37 | ) | ||||||
Employee benefits |
(15 | ) | (24 | ) | (24 | ) | ||||||
Deferred adjustments |
12 | 9 | (82 | ) | ||||||||
Other |
22 | 43 | 68 | |||||||||
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|
|
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Total statutory income tax expense (benefit) |
$ | (146 | ) | $ | (121 | ) | $ | (40 | ) | |||
|
|
|
|
|
|
|||||||
Federal income tax expense (benefit) reported on consolidated statements of operations |
$ | (176 | ) | $ | (53 | ) | $ | 22 | ||||
Capital gains tax expense, net of IMR transfers |
36 | 22 | 209 | |||||||||
Change in net deferred tax assets |
(6 | ) | (90 | ) | (271 | ) | ||||||
|
|
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|
|
|
|||||||
Total statutory income tax expense (benefit) |
$ | (146 | ) | $ | (121 | ) | $ | (40 | ) | |||
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|
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NM-50
The Northwestern Mutual Life Insurance Company
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
During the year, the Company may make payments or receive refunds from the Internal Revenue Service (IRS) for federal income taxes that are applicable to current or previous tax years. The Company made or received net income tax payments/(refunds) of $(50) million, $505 million and $480 million to the IRS during the years ended December 31, 2016, 2015 and 2014, respectively.
Federal income taxes available for recoupment in the case of future tax losses are limited to amounts reported on previous tax returns. Total federal income taxes paid for tax years 2016, 2015 and 2014 that are available for recoupment are $40 million, $211 million and $598 million, respectively.
Federal income tax returns for 2009 and prior years are closed as to further assessment of tax. Income taxes payable in the consolidated statements of financial position represents an estimate of taxes payable, including additional taxes that may become due with respect to tax years that remained open to examination by the IRS (contingent tax liabilities) at the respective reporting date.
Changes in contingent tax liabilities for the years ended December 31, 2016 and 2015 were as follows:
For the years ended December 31, | ||||||||
2016 | 2015 | |||||||
(in millions) | ||||||||
Balance at beginning of year |
$ | 441 | $ | 431 | ||||
Additions for tax positions of prior years |
- | 10 | ||||||
Reductions for tax positions of prior years |
(21 | ) | - | |||||
|
|
|
|
|||||
Balance at end of year |
$ | 420 | $ | 441 | ||||
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|
Included in contingent tax liabilities at December 31, 2016 and 2015 were $372 million and $403 million, respectively, of tax positions for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of the deductions. Because of the impact of deferred taxes for amounts other than interest, the timing of the ultimate deduction would not affect the effective tax rate in future periods. Also included in the December 31, 2016 balance are $22 million of tax positions for which the ultimate deductibility is not certain. The ultimate resolution of these tax positions could have an impact on the effective tax rate in future periods.
A more likely than not standard is applied for financial statement recognition of contingent tax liabilities, whereby a liability is recorded only if the Company believes that there is a greater than 50% likelihood that the related tax position will not be sustained upon examination. In cases where liability recognition is appropriate, a best estimate of the ultimate tax liability is made. If this estimate represents 50% or less of the total amount of the tax contingency, the best estimate is established as a liability. If this best estimate represents more than 50% of the total tax contingency, the total amount is established as a liability. Changes in contingent tax liabilities are included in tax expense in the year that such determination is made by the Company.
The Company reports interest accrued or released related to contingent tax liabilities in current income tax expense. For the years ended December 31, 2016, 2015 and 2014, the Company recognized $3 million, $1 million and $(15) million, respectively, of interest-related tax expense (benefit). Contingent tax liabilities included $26 million and $23 million for the payment of interest at December 31, 2016 and 2015, respectively.
NM-51
The Northwestern Mutual Life Insurance Company
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
Deferred tax assets and liabilities represent the future tax recoveries or obligations associated with the accumulation of temporary differences between the tax and financial statement bases of the Companys assets and liabilities. The statutory basis of accounting limits the amount of gross deferred tax assets that can be admitted to surplus to those for which ultimate recoverability can be demonstrated. This limit is based on a calculation that considers available tax loss carryback and carryforward capacity, the expected timing of reversal for accumulated temporary differences, gross deferred tax liabilities and the level of Company surplus. The components of net deferred tax assets reported in the consolidated statements of financial position at December 31, 2016 and 2015 were as follows:
December 31, | ||||||||||||
2016 | 2015 | Change | ||||||||||
(in millions) | ||||||||||||
Deferred tax assets: |
||||||||||||
Policy acquisition costs |
$ | 1,287 | $ | 1,243 | $ | 44 | ||||||
Investments |
525 | 446 | 79 | |||||||||
Policy benefit liabilities |
2,186 | 2,225 | (39 | ) | ||||||||
Benefit plan obligations |
878 | 864 | 14 | |||||||||
Other |
123 | 112 | 11 | |||||||||
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|||||||
Gross deferred tax assets |
4,999 | 4,890 | 109 | |||||||||
Nonadmitted deferred tax assets |
(9 | ) | (9 | ) | - | |||||||
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Gross admitted deferred tax assets |
4,990 | 4,881 | 109 | |||||||||
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Deferred tax liabilities: |
||||||||||||
Investments |
998 | 792 | 206 | |||||||||
Other |
801 | 801 | - | |||||||||
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|||||||
Gross deferred tax liabilities |
1,799 | 1,593 | 206 | |||||||||
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Net deferred tax assets |
$ | 3,191 | $ | 3,288 | $ | (97 | ) | |||||
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Changes in deferred tax assets and liabilities related to unrealized capital gains and losses on investments are included in changes in net unrealized capital gains and losses in the consolidated statements of changes in surplus. Other net changes in deferred tax assets and liabilities are reported as direct adjustments to surplus in the consolidated statements of changes in surplus.
All gross deferred tax liabilities have been recognized at December 31, 2016 and 2015. The Company did not employ tax planning strategies in its valuation allowance assessment or deferred tax asset admissibility calculations at either December 31, 2016 or 2015.
Both NM and NLTC exceeded the minimum risk-based capital (RBC) level of 300%, which is necessary to apply the maximum admissibility thresholds, based on authorized control level RBC computed without net deferred tax assets at December 31, 2016 and 2015 and expects to exceed this minimum during 2017.
NM-52
The Northwestern Mutual Life Insurance Company
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
Significant components of the calculation of net admitted deferred tax assets at December 31, 2016 and 2015 were as follows (in millions):
December 31, 2016 | December 31, 2015 | Change | ||||||||||||||||||||||||||||||||||
Ordinary | Capital | Total | Ordinary | Capital | Total | Ordinary | Capital | Total | ||||||||||||||||||||||||||||
Gross deferred tax assets |
$ | 4,474 | $ | 525 | $ | 4,999 | $ | 4,444 | $ | 446 | $ | 4,890 | $ | 30 | $ | 79 | $ | 109 | ||||||||||||||||||
Statutory valuation allowance adjustment |
- | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||
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Adjusted gross deferred tax assets |
4,474 | 525 | 4,999 | 4,444 | 446 | 4,890 | 30 | 79 | 109 | |||||||||||||||||||||||||||
Deferred tax assets nonadmitted |
9 | - | 9 | 9 | - | 9 | (0 | ) | - | (0 | ) | |||||||||||||||||||||||||
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Subtotal net admitted deferred tax asset |
4,465 | 525 | 4,990 | 4,435 | 446 | 4,881 | 30 | 79 | 109 | |||||||||||||||||||||||||||
Deferred tax liabilities |
801 | 998 | 1,799 | 801 | 792 | 1,593 | 0 | 206 | 206 | |||||||||||||||||||||||||||
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|||||||||||||||||||
Net admitted deferred tax asset/(liability) |
$ | 3,664 | $ | (473 | ) | $ | 3,191 | $ | 3,634 | $ | (346 | ) | $ | 3,288 | $ | 30 | $ | (127 | ) | $ | (97 | ) | ||||||||||||||
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December 31, 2016 | December 31, 2015 | Change | ||||||||||||||||||||||||||||||||||
Ordinary | Capital | Total | Ordinary | Capital | Total | Ordinary | Capital | Total | ||||||||||||||||||||||||||||
Federal income taxes paid in prior years recoverable through loss carrybacks |
$ | 1,146 | $ | 308 | $ | 1,454 | $ | 1,393 | $ | 320 | $ | 1,713 | $ | (247 | ) | $ | (12 | ) | $ | (259 | ) | |||||||||||||||
Adjusted gross deferred tax assets expected to be realized (excluding the amount of deferred tax assets above) after application of the threshold limitation (lesser of a. or b. below) |
1,903 | 1,903 | 1,858 | - | 1,858 | 45 | - | 45 | ||||||||||||||||||||||||||||
Adjusted gross deferred tax assets (excluding the amount of deferred tax assets offset by gross deferred tax liabilities) |
1,417 | 217 | 1,633 | 1,184 | 126 | 1,310 | 233 | 91 | 323 | |||||||||||||||||||||||||||
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Total deferred tax assets admitted as the result of application of SSAP No. 101 |
$ | 4,465 | $ | 525 | $ | 4,990 | $ | 4,435 | $ | 446 | $ | 4,881 | $ | 30 | $ | 79 | $ | 109 | ||||||||||||||||||
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a. Adjusted gross deferred tax assets expected to be realized following the balance sheet date |
$ | 1,903 | $ | 1,858 | $ | 45 | ||||||||||||||||||||||||||||||
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b. Adjusted gross deferred tax assets allowed per limitation threshold |
$ | 2,563 | $ | 2,464 | $ | 99 | ||||||||||||||||||||||||||||||
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11. | Frank Russell Company |
On December 2, 2014, the Company sold its entire investment in Russell common and preferred stock to a third party. Prior to this sale, the Company, through a wholly-owned non-insurance subsidiary, was the majority shareholder of Russell, a worldwide provider of investment products and services. Upon the sale, the Companys wholly-owned subsidiary reported an after-tax gain of $1.1 billion from the sale of its common stock investment in Russell, which was reported by the Company as an unrealized capital gain in the consolidated statements of changes in surplus for the year ended December 31, 2014. For the year ended December 31, 2015, the Company recorded an additional $54 million after-tax gain upon final settlement of amounts held in escrow. Of this amount, $50 million was reported as an unrealized capital gain in the consolidated statements of changes in surplus with the remainder reported as a realized capital gain in the consolidated statements of operations.
NM-53
The Northwestern Mutual Life Insurance Company
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
12. | Commitments and Contingencies |
Commitments
In the normal course of its investment activities, the Company makes commitments to fund private equity investments, real estate, mortgage loans and other investments. These forward commitments aggregated to $6.4 billion and $5.7 billion at December 31, 2016 and 2015, respectively, and were extended at market rates and terms.
Contingencies
The Company is engaged in various legal actions in the normal course of its insurance and investment operations. The status of these legal actions is actively monitored by the Company. If the Company believes, based on available information, that an adverse outcome upon resolution of a given legal action is probable and the amount of that adverse outcome is reasonably estimable, a loss is recognized and a related liability reported. Legal actions are subject to inherent uncertainties, and future events could change the Companys assessment of the probability or estimated amount of potential losses from pending or threatened legal actions. Based on available information, it is the opinion of the Company that the ultimate resolution of pending or threatened legal actions, both individually and in the aggregate, will not result in losses that would have a material effect on the Companys financial position at December 31, 2016.
Guarantees
In the normal course of business, the Company makes guarantees to third parties on behalf of wholly-owned subsidiaries (e.g., debt guarantees) and financial representatives (e.g., the guarantee of office lease payments), or directly to financial representatives (e.g., future minimum compensation payments). If the financial representatives are not able to meet their obligations or these minimum compensation thresholds are not otherwise met, the Company would be required to make payments to fulfill its guarantees. For certain of these guarantees, the Company has the right to pursue recovery of payments made under the agreements. The terms of these guarantees range from less than one year to twenty-three years at December 31, 2016.
Following is a summary of the guarantees provided by the Company that were outstanding at December 31, 2016 and 2015, including both the maximum potential exposure under the guarantees and the financial statement liability reported based on fair value of the guarantees.
December 31, 2016 | December 31, 2015 | |||||||||||||||
Nature of guarantee |
Maximum potential amount of future payments |
Financial statement liability |
Maximum potential amount of future payments |
Financial statement liability |
||||||||||||
(in millions) | (in millions) | |||||||||||||||
Guarantees of future minimum compensation - financial representatives |
$ | 123 | $ | 1 | $ | 150 | $ | 1 | ||||||||
Guarantees of real estate obligations |
335 | 3 | 385 | 4 | ||||||||||||
Guarantees issued on behalf of wholly-owned subsidiaries |
21 | - | 25 | - | ||||||||||||
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Total guarantees |
$ | 479 | $ | 4 | $ | 560 | $ | 5 | ||||||||
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NM-54
The Northwestern Mutual Life Insurance Company
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
No material payments have been required under these guarantees to date, and the Company believes the probability that it will be required to perform under these guarantees in the future is remote. Performance under these guarantees would require the Company to recognize additional operating expense or increase the amount of its equity investment in the affiliate or subsidiary on behalf of which the guarantee was made.
13. | Surplus Notes |
On March 26, 2010, the Company issued surplus notes (notes) with a principal balance of $1.75 billion, bearing interest at 6.063% and having a maturity date of March 30, 2040. The notes were issued at par and distributed pursuant to Rule 144A under the Securities Act of 1933, as amended. Interest on the notes is payable semi-annually on March 30 and September 30, subject to approval by the OCI. The statutory basis of accounting requires that the Company only recognize interest expense on the notes when and to the extent that the OCI has approved the semi-annual interest payment. The Company paid and recognized $106 million in interest expense on the notes for each of the years ended December 31, 2016, 2015 and 2014, which is reported as a reduction of net investment income in the consolidated statements of operations. A total of $691 million in interest has been paid on the notes from their issuance through December 31, 2016.
The notes are unsecured and subordinated to all present and future indebtedness, policy claims and other creditor claims of the Company. The notes do not repay principal prior to maturity and principal payment at maturity is subject to the prior approval of the OCI. The notes are not redeemable at the option of any note holder. The notes are redeemable, in whole or in part, at the option of the Company at any time, subject to the prior approval of the OCI, at a make whole redemption price equal to the greater of the principal amount of the notes to be redeemed or the sum of the present value of the remaining scheduled payments of principal and interest on the notes to be redeemed, excluding accrued interest as of the date on which the notes are to be redeemed, discounted on a semi-annual basis at a defined U.S. Treasury rate plus 0.25%.
No affiliates of the Company hold any portion of the notes. The notes are generally held of record at the Depositary Trust Company by bank custodians on behalf of investors. The largest holder of the notes was Nippon Life Insurance Company of Japan, which held $250 million in face amount of notes at each of December 31, 2016 and 2015.
14. | Fair Value of Financial Instruments |
Certain of the Companys assets and liabilities are considered financial instruments as defined by Statement of Statutory Principles No. 100, Fair Value Measurements (SSAP 100). The Companys estimation of fair value for financial instruments uses a hierarchy that, where possible, makes use of quoted market prices from active and transparent markets for assets that are identical to those being valued, typically obtained from independent pricing services (level 1). In the absence of quoted market prices for identical assets, fair value is estimated by these pricing services using relevant and observable market-based inputs for substantially similar securities (level 2). Financial instruments for which no quoted market prices or observable inputs are available are generally valued using internally-developed pricing models or indicative (i.e., non-binding) quotes from independent securities brokers (level 3).
The Company actively monitors fair value estimates received from independent pricing services at each financial reporting date, including analysis of valuation changes for individual securities compared to overall market trends and validation on an exception basis with internally-developed pricing models. The Company also performs periodic reviews of the information sources, inputs and methods used by its independent pricing services, including an evaluation of their control
NM-55
The Northwestern Mutual Life Insurance Company
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
processes. Where necessary, the Company will challenge third-party valuations or methods and require more observable inputs or different methodologies.
For financial instruments included in the scope of SSAP 100, the statement value and fair value at December 31, 2016 and 2015 were as follows:
December 31, 2016 | ||||||||||||||||||||
Statement Value |
Fair Value |
Quoted prices in active markets for identical assets (level 1) |
Significant observable inputs (level 2) |
Significant unobservable inputs (level 3) |
||||||||||||||||
(in millions) | ||||||||||||||||||||
General account investment assets: |
||||||||||||||||||||
Bonds |
$ | 139,859 | $ | 142,850 | $ | 4,430 | $ | 132,249 | $ | 6,171 | ||||||||||
Mortgage loans |
34,175 | 35,103 | - | - | 35,103 | |||||||||||||||
Policy loans |
17,150 | 17,150 | - | - | 17,150 | |||||||||||||||
Common and preferred stocks |
4,034 | 4,050 | 3,367 | 48 | 635 | |||||||||||||||
Derivative assets |
781 | 715 | - | 715 | - | |||||||||||||||
Surplus note investments |
160 | 203 | - | 203 | - | |||||||||||||||
Cash and short-term investments |
2,306 | 2,306 | 508 | 1,798 | - | |||||||||||||||
Separate account assets |
28,559 | 28,559 | 25,851 | 2,339 | 369 | |||||||||||||||
General account liabilities: |
||||||||||||||||||||
Investment-type insurance reserves |
$ | 5,357 | $ | 5,238 | $ | - | $ | - | $ | 5,238 | ||||||||||
Liabilities for securities lending |
939 | 939 | - | 939 | - | |||||||||||||||
Derivative liabilities |
14 | 60 | - | 60 | - | |||||||||||||||
Separate account liabilities |
28,559 | 28,559 | 25,851 | 2,339 | 369 |
December 31, 2015 | ||||||||||||||||||||
Statement Value |
Fair Value |
Quoted prices in active markets for identical assets (level 1) |
Significant observable inputs (level 2) |
Significant unobservable inputs (level 3) |
||||||||||||||||
(in millions) | ||||||||||||||||||||
General account investment assets: |
||||||||||||||||||||
Bonds |
$ | 133,449 | $ | 135,537 | $ | 2,894 | $ | 128,973 | $ | 3,670 | ||||||||||
Mortgage loans |
32,236 | 33,617 | - | - | 33,617 | |||||||||||||||
Policy loans |
17,146 | 17,146 | - | - | 17,146 | |||||||||||||||
Common and preferred stocks |
3,753 | 3,769 | 3,173 | 50 | 546 | |||||||||||||||
Derivative assets |
469 | 552 | - | 552 | - | |||||||||||||||
Surplus note investments |
160 | 199 | - | 165 | 34 | |||||||||||||||
Cash and short-term investments |
1,460 | 1,460 | 486 | 974 | - | |||||||||||||||
Separate account assets |
26,731 | 26,731 | 24,275 | 2,100 | 356 | |||||||||||||||
General account liabilities: |
||||||||||||||||||||
Investment-type insurance reserves |
$ | 5,209 | $ | 5,021 | $ | - | $ | - | $ | 5,021 | ||||||||||
Liabilities for securities lending |
1,047 | 1,047 | - | 1,047 | - | |||||||||||||||
Derivative liabilities |
26 | 28 | - | 28 | - | |||||||||||||||
Separate account liabilities |
26,731 | 26,731 | 24,275 | 2,100 | 356 |
NM-56
The Northwestern Mutual Life Insurance Company
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
Bonds
Bonds classified as level 1 financial instruments are generally limited to U.S. Treasury securities. Most bonds, including U.S. and foreign public and private corporate bonds, municipal bonds and structured securities, are classified as level 2 financial instruments and are valued based on prices obtained from independent pricing services or internally-developed pricing models using observable inputs. Typical market-observable inputs include benchmark yields, reported trades, issuer spreads, bids, offers, benchmark securities, estimated cash flows and prepayment speeds. Level 3 bonds are typically privately-placed and relatively illiquid, with fair value based on non-binding broker quotes or internally-developed pricing models utilizing unobservable inputs. See Note 3 for more information regarding the Companys investments in bonds.
Mortgage Loans
Mortgage loans consist solely of commercial mortgage loans underwritten and originated by the Company. Fair value of these loans is estimated using a discounted cash flow approach based on market interest rates for commercial mortgage debt with comparable credit risk and maturity. See Note 3 for more information regarding the Companys investments in mortgage loans.
Policy Loans
See Note 2 for information regarding policy loans, for which the Company considers the unpaid principal balance to approximate fair value.
Common and Preferred Stock
Common and preferred stocks classified as level 1 financial instruments are limited to those actively traded on a U.S. or foreign stock exchange. Level 2 securities are stocks for which market quotes are available but are not considered to be actively traded. Common and preferred stocks classified as level 3 are generally privately-placed with fair value primarily based on a sponsor valuation or market comparables approach utilizing unobservable inputs. See Note 3 for more information regarding the Companys investments in common and preferred stocks.
Derivative Instruments
The Companys derivative investments are generally traded in over-the-counter markets with fair value estimated using industry-standard models with market-observable inputs such as swap yield curves, LIBOR basis curves, foreign currency spot rates, foreign currency basis curves, option volatilities and credit spreads. See Note 4 for more information regarding the Companys derivative investments.
Cash and Short-term Investments
Cash and short-term investments include cash deposit balances, money market funds, short-term commercial paper and other highly-liquid debt instruments, for which the Company considers amortized cost to approximate fair value.
Separate Account Assets and Liabilities
See Note 2 and Note 7 for information regarding the Companys separate accounts, for which fair value is primarily based on quoted market prices for the related common stocks, preferred stocks, bonds, derivative instruments and other investments. Separate account assets classified as level 3 financial instruments are primarily securities partnership investments that are valued based on the Companys underlying equity in the partnerships, which the Company considers to approximate fair value.
General Account Insurance Reserves
The Companys general account insurance liabilities defined as financial instruments under SSAP 100 are limited to investment-type products such as fixed-rate annuity policies, supplementary
NM-57
The Northwestern Mutual Life Insurance Company
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
contracts without life contingencies and amounts left on deposit. The fair value of investment-type insurance reserves is estimated based on future cash flows discounted at market interest rates for similar instruments with comparable maturities.
Securities Lending Liabilities
See Note 3 for information regarding securities lending activity, for which the Company considers the liability to return collateral to approximate the fair value of collateral originally received.
Assets and Liabilities Reported at Fair Value
The following tables summarize assets and liabilities measured and reported at fair value in the consolidated statements of financial position at December 31, 2016 and 2015.
December 31, 2016 | ||||||||||||||||
Quoted prices in active markets for identical assets (level 1) |
Significant observable inputs (level 2) |
Significant unobservable inputs (level 3) |
Total | |||||||||||||
(in millions) | ||||||||||||||||
General account: |
||||||||||||||||
Common and preferred stocks |
$ | 3,366 | $ | 1 | $ | 522 | $ | 3,889 | ||||||||
Bonds |
- | - | 45 | 45 | ||||||||||||
Derivative assets |
- | 137 | - | 137 | ||||||||||||
Derivative liabilities |
- | (9 | ) | - | (9 | ) | ||||||||||
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Total general account |
$ | 3,366 | $ | 129 | $ | 567 | $ | 4,062 | ||||||||
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Separate accounts: |
||||||||||||||||
Mutual fund investments |
$ | 23,951 | $ | - | $ | - | $ | 23,951 | ||||||||
Other benefit plan assets/liabilities |
47 | 24 | 3 | 74 | ||||||||||||
Pension and postretirement assets: |
||||||||||||||||
Bonds |
206 | 2,068 | 81 | 2,355 | ||||||||||||
Common and preferred stock |
1,581 | 1 | 27 | 1,609 | ||||||||||||
Cash and short-term securities |
61 | 233 | - | 294 | ||||||||||||
Other assets/liabilities |
5 | 13 | 258 | 276 | ||||||||||||
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|
|
|||||||||
Subtotal pension and postretirement assets |
1,853 | 2,315 | 366 | 4,534 | ||||||||||||
|
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|
|
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|
|
|||||||||
Total separate accounts |
$ | 25,851 | $ | 2,339 | $ | 369 | $ | 28,559 | ||||||||
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|
NM-58
The Northwestern Mutual Life Insurance Company
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
December 31, 2015 | ||||||||||||||||
Quoted prices in active markets for identical assets (level 1) |
Significant observable inputs (level 2) |
Significant unobservable inputs (level 3) |
Total | |||||||||||||
(in millions) | ||||||||||||||||
General account: |
||||||||||||||||
Common and preferred stocks |
$ | 3,172 | $ | 1 | $ | 432 | $ | 3,605 | ||||||||
Bonds |
- | 23 | 9 | 32 | ||||||||||||
Derivative assets |
- | 103 | - | 103 | ||||||||||||
Derivative liabilities |
- | (25 | ) | - | (25 | ) | ||||||||||
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|
|
|
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|
|
|||||||||
Total general account |
$ | 3,172 | $ | 102 | $ | 441 | $ | 3,715 | ||||||||
|
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|
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|
|
|
|||||||||
Separate accounts: |
||||||||||||||||
Mutual fund investments |
$ | 22,432 | $ | - | $ | - | $ | 22,432 | ||||||||
Other benefit plan assets/liabilities |
58 | 23 | 2 | 83 | ||||||||||||
Pension and postretirement assets: |
||||||||||||||||
Bonds |
171 | 1,774 | 69 | 2,014 | ||||||||||||
Common and preferred stock |
1,595 | 3 | 20 | 1,618 | ||||||||||||
Cash and short-term securities |
14 | 289 | - | 303 | ||||||||||||
Other assets/liabilities |
5 | 11 | 265 | 281 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Subtotal pension and postretirement assets |
1,785 | 2,077 | 354 | 4,216 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total separate accounts |
$ | 24,275 | $ | 2,100 | $ | 356 | $ | 26,731 | ||||||||
|
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The Company may reclassify assets reported at fair value between levels of the fair value hierarchy if appropriate based on changes in the quality of valuation inputs available during a reporting period. There were no material asset transfers between level 1 and level 2 or between level 2 and level 3 during the years ended December 31, 2016 or 2015.
NM-59
The Northwestern Mutual Life Insurance Company
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
The following tables summarize the changes in fair value of level 3 financial instruments for the years ended December 31, 2016 and 2015.
Separate account pension and postretirement1 | ||||||||||||||||||||||||||||
For the year ended December 31, 2016 |
General account common and preferred stock |
General account bonds |
Separate account other benefit plan assets1 |
Bonds | Common and preferred stocks |
Other assets/liabilties |
Total | |||||||||||||||||||||
(in millions) | ||||||||||||||||||||||||||||
Fair value, beginning of period |
$ | 432 | $ | 9 | $ | 2 | $ | 69 | $ | 20 | $ | 265 | $ | 797 | ||||||||||||||
Realized gains/(losses) |
39 | (6 | ) | 1 | (1 | ) | 1 | 36 | 70 | |||||||||||||||||||
Unrealized gains/(losses) |
13 | 4 | - | 2 | 2 | (16 | ) | 5 | ||||||||||||||||||||
Issuances |
- | - | - | - | - | - | - | |||||||||||||||||||||
Purchases |
129 | - | 1 | 34 | 7 | 58 | 229 | |||||||||||||||||||||
Sales |
(83 | ) | (12 | ) | (1 | ) | (23 | ) | (3 | ) | (85 | ) | (207 | ) | ||||||||||||||
Settlements |
- | - | - | - | - | - | - | |||||||||||||||||||||
Net discount/premium |
- | - | - | - | - | - | - | |||||||||||||||||||||
Transfers into level 3 |
- | 50 | - | - | - | - | 50 | |||||||||||||||||||||
Transfers out of level 3 |
(8 | ) | - | - | - | - | - | (8 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Fair value, end of period |
$ | 522 | $ | 45 | $ | 3 | $ | 81 | $ | 27 | $ | 258 | $ | 936 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 Changes in separate account invested asset fair values have no impact on consolidated surplus
Separate account pension and postretirement1 | ||||||||||||||||||||||||||||
For the year ended December 31, 2015 |
General account common and preferred stock |
General account bonds |
Separate account other benefit plan assets1 |
Bonds | Common and preferred stocks |
Other assets/liabilties |
Total | |||||||||||||||||||||
(in millions) | ||||||||||||||||||||||||||||
Fair value, beginning of period |
$ | 443 | $ | - | $ | 3 | $ | 74 | $ | 20 | $ | 276 | $ | 816 | ||||||||||||||
Realized gains/(losses) |
59 | (18 | ) | - | - | 6 | 67 | 114 | ||||||||||||||||||||
Unrealized gains/(losses) |
(17 | ) | - | - | (5 | ) | 1 | (22 | ) | (43 | ) | |||||||||||||||||
Issuances |
- | - | - | - | - | - | - | |||||||||||||||||||||
Purchases |
51 | - | - | 15 | 4 | 61 | 131 | |||||||||||||||||||||
Sales |
(111 | ) | - | (1 | ) | (3 | ) | (6 | ) | (117 | ) | (238 | ) | |||||||||||||||
Settlements |
(26 | ) | - | - | (22 | ) | (4 | ) | - | (52 | ) | |||||||||||||||||
Net discount/premium |
- | - | - | 1 | - | - | 1 | |||||||||||||||||||||
Transfers into level 3 |
33 | 27 | - | 9 | - | - | 69 | |||||||||||||||||||||
Transfers out of level 3 |
- | - | - | - | (1 | ) | - | (1 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Fair value, end of period |
$ | 432 | $ | 9 | $ | 2 | $ | 69 | $ | 20 | $ | 265 | $ | 797 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 Changes in separate account invested asset fair values have no impact on consolidated surplus
NM-60
The Northwestern Mutual Life Insurance Company
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
The fair values of level 3 financial instruments are sensitive to changes in significant unobservable inputs. The following table presents certain quantitative information about the unobservable inputs used to estimate fair value measurement for bonds and privately-placed common and preferred stocks classified as level 3 financial instruments at December 31, 2016.
Fair value (in millions) |
Valuation techniques |
Significant unobservable inputs |
Range | Weighted average |
||||||||||||||
Bonds |
$ 126 | Broker quotes | Quoted prices 1 | 30.00 | 104.56 | 90.49 | ||||||||||||
Discounted cash flows | Credit spreads 2 | 146.01 | 1,123.73 | 709.71 | ||||||||||||||
Common and preferred stocks |
$ 549 | Sponsor valuations | EBITDA multiples | 4.05 X | 13.22 X | 11.25 X | ||||||||||||
Market comparables | EBITDA multiples 3 | 3.74 X | 18.54 X | 9.34 X | ||||||||||||||
Sponsor valuations | Book value multiples | 1.00 X | 1.49 X | 1.27 X |
1 - Presented as a price per hundred dollars of par
2 - Presented in basis points
3 - Includes transaction multiples
Level 3 bonds are valued using a combination of discounted cash flows and indicative quotes from independent securities brokers based on market comparable companies. The most significant unobservable input in the discounted cash flow analysis is the discount rate. This rate is estimated based upon a risk-free market interest rate (U.S. Treasury with comparable maturity) plus a credit spread adjustment based on the estimated credit rating of the issuer. In general, issuers with lower credit ratings have higher credit spreads. A decrease in the credit spread adjustment would increase the fair value of the investment as the future expected cash flows are discounted at a lower rate. The opposite impact would occur if credit spread adjustments increase.
Level 3 privately-placed common and preferred stocks are primarily valued using a private equity sponsor valuation or market comparables approach. Both approaches rely on the use of multiples that are based on industry-specific comparable companies. Multiples are derived from the relationship of an entitys fair value to its book value or earnings before interest, taxes, depreciation and amortization (EBITDA). EBITDA is normalized for company-specific differences in capital structure, taxation and fixed asset accounting. An increase in the multiple would result in an increase in the fair value of the investment. The opposite impact would occur if the multiple decreased.
NM-61
PART C
OTHER INFORMATION
Item 26. Exhibits
Exhibit | Description | Filed Herewith/Incorporated Herein By Reference To | ||
(a)(1) | Resolution of the Board of Trustees of The Northwestern Mutual Life Insurance Company amending Northwestern Mutual Variable Life Account Operating Authority | Exhibit (a)(1) to Form N-6 Post-Effective Amendment No. 30 for Northwestern Mutual Variable Life Account, File No. 2-89972, filed February 21, 2006 | ||
(a)(2) | Resolution of Board of Trustees of The Northwestern Mutual Life Insurance Company establishing the Account | Exhibit A(1) to Form S-6 Registration Statement for Northwestern Mutual Variable Life Account, File No. 333-36865, filed October 1, 1997 | ||
(b) | Not Applicable | |||
(c) | Distribution Agreement Between The Northwestern Life Insurance Company and Northwestern Mutual Investment Services, LLC, dated May 1, 2006 | Exhibit (c) to Form N-6 Registration Statement for Northwestern Mutual Variable Life Account II, File No. 333-136124, filed July 28, 2006 | ||
(d)(1) | Flexible Premium Variable Life Insurance Policy, RR.VEL. (0398), including Policy amendments Form of Notice of short-term cancellation right |
Exhibits A(5)(a), A(5)(b), and A(5)(c) to Form S-6 Post-Effective Amendment No. 6 for Northwestern Mutual Variable Life Account, File No. 333-36865, filed May 31, 2001 | ||
(d)(2) | Variable Life Insurance Policy, RR.VEL, Flexible Premium, including Amendment to Flexible Premium Variable Life (sex-neutral) | Exhibit A(5)(a) to Form S-6 Registration Statement for Northwestern Mutual Variable Life Account, File No. 333-36865, filed October 1, 1997 | ||
(d)(3) | Variable Life Insurance Policy, RR.VEL, Flexible Premium, including Amendment to Flexible Premium Variable Life (sex-distinct) | Exhibit A(5)(b) to Form S-6 Registration Statement for Northwestern Mutual Variable Life Account, File No. 333-36865, filed October 1, 1997 | ||
(e) | Form of Life Insurance Application 90-1 L.I.(0198) WISCONSIN and Application Supplement (1003) | Exhibit (e) to Form N-6 Post-Effective Amendment No. 11 for Northwestern Mutual Variable Life Account, File No. 333-36865, filed April 28, 2005 | ||
(f)(1) | Restated Articles of Incorporation of The Northwestern Mutual Life Insurance Company (adopted July 26, 1972) | Exhibit A(6)(a) to Form S-6 Post-Effective Amendment No. 18 for Northwestern Mutual Variable Life Account, File No. 2-89972, filed April 26, 1996 | ||
(f)(2) | Amended By-Laws of The Northwestern Mutual Life Insurance Company dated December 4, 2002 | Exhibit (f) to Form N-6 Post-Effective Amendment No. 8 for Northwestern Mutual Variable Life Account, File No. 333-36865, filed February 28, 2003 | ||
(g) | Form of Reinsurance Agreement | Exhibit (g) to Form N-6 Post-Effective Amendment No. 8 for Northwestern Mutual Variable Life Account, File No. 333-36865, field February 28, 2003 | ||
(h)(a)(1) | Participation Agreement dated March 16, 1999 Among Russell Insurance Funds, Russell Fund Distributors, Inc. and The Northwestern Mutual Life Insurance Company | Exhibit (b)(8)(a) to Form N-4 Post-Effective Amendment No. 66 for NML Variable Annuity Account B, File No. 2-29240, filed April 28, 2005 | ||
(h)(a)(2) | Amendment No. 1 dated August 7, 2000 to the Participation Agreement dated March 16, 1999 Among Russell Insurance Funds, Russell Fund Distributors, Inc. and The Northwestern Mutual Life Insurance Company | Exhibit (h)1(a)(2) to Form N-6 Registration Statement for Northwestern Mutual Variable Life Account II, File No. 333-136124, filed July 28, 2006 | ||
(h)(a)(3) | Amendment No. 2 dated October 13, 2006 to Participation Agreements dated March 16, 1999 and August 7, 2000, respectively, by and among The Northwestern Mutual Life Insurance Company, Russell Investment Funds, f/k/a Russell Insurance Funds, and Russell Fund Distributors, Inc. | Exhibit (h)1(a)(3) to Form N-6 Pre-Effective Amendment No. 1, for Northwestern Mutual Variable Life Account II, File No. 333-136124, filed December 13, 2006 |
C-1
(h)(a)(4) | Amendment No. 3 dated August 29, 2007 to Participation Agreements dated March 16, 1999, August 7, 2000, and October 13, 2006, respectively, by and among The Northwestern Mutual Life Insurance Company, Russell Investment Funds, f/k/a Russell Insurance Funds, and Russell Fund Distributors, Inc. | Exhibit (h)(a)(4) to Form N-6 Post-Effective Amendment No. 41 for Northwestern Mutual Variable Life Account, File No. 002-89972, filed on April 25, 2013 | ||
(h)(b)(1) | Participation Agreement dated May 1, 2003 among Variable Insurance Products Funds, Fidelity Distributors Corporation and The Northwestern Mutual Life Insurance Company | Exhibit (b)(8)(b) to Form N-4 Post-Effective Amendment No. 66 for NML Variable Annuity Account B, File No. 2-29240, filed April 28, 2005 | ||
(h)(b)(2) | Amendment No. 1 dated October 18, 2006 to Participation Agreement dated May 1, 2003, by and among The Northwestern Mutual Life Insurance Company, Fidelity Distributors Corporation, and each of Variable Insurance Products Fund, Variable Insurance Products Fund II, and Variable Insurance Products Fund III | Exhibit (h)1(b)(2) to Form N-6 Pre-Effective Amendment No. 1, for Northwestern Mutual Variable Life Account II, File No. 333-136124, filed December 13, 2006 | ||
(h)(b)(3) | Participation Agreement dated April 30, 2007 among Neuberger Berman Advisers Management Trust, Neuberger Berman Management Inc., and The Northwestern Mutual Life Insurance Company | Exhibit (h)(e) to Form N-6 Post-Effective Amendment No. 39 for Northwestern Mutual Variable Life Account, File No. 2-89972, filed April 30, 2012 | ||
(h)(b)(4) | Participation Agreement dated September 27, 2013 among Credit Suisse Trust, Credit Suisse Asset Management, LLC, Credit Suisse Securities (USA) LLC, and The Northwestern Mutual Life Insurance Company | Exhibit (h)(b)(4) to Form N-6 Post-Effective Amendment No. 10 for Northwestern Mutual Variable Life Account II, File No. 333-136124, filed on October 1, 2013 | ||
(h)(b)(5) | Form of Amendment to Participation Agreement Regarding Rule 498 | Exhibit (h)(b)(5) to Form N-6 Post-Effective Amendment No. 10 for Northwestern Mutual Variable Life Account II, File No. 333-136124, filed on October 1, 2013 | ||
(h)(c)(1) | Administrative Service Fee Agreement dated February 28, 1999 between The Northwestern Mutual Life Insurance Company and Frank Russell Company | Exhibit (b)(8)(c) to Form N-4 Post-Effective Amendment No. 66 for NML Variable Annuity Account B, File No. 2-29240, filed April 28, 2005 | ||
(h)(c)(2) | Service Agreement dated May 1, 2003 between Fidelity Investments Institutional Operations Company, Inc. and The Northwestern Mutual Life Insurance Company | Exhibit (b)(8)(c)(2) to Form N-4 Pre-Effective Amendment No. 1 for NML Variable Annuity Account A, File No. 333-133380, filed August 8, 2006 | ||
(h)(c)(3) | Amendment dated August 1, 2004 to the Service Agreement dated May 1, 2003 between Fidelity Investments Institutional Operations Company, Inc. and The Northwestern Mutual Life Insurance Company | Exhibit (b)(8)(c)(3) to Form N-4 Pre-Effective Amendment No. 1 for NML Variable Annuity Account A, File No. 333-133380, filed August 8, 2006 | ||
(h)(c)(4) | Form of Administrative Services Agreement | Exhibit (h)(c)(2) to Form N-6 Post-Effective Amendment No. 39 for Northwestern Mutual Variable Life Account, File No. 2-89972, filed April 30, 2012 | ||
(i) | Not Applicable | |||
(j)(a) | Agreement entered into on February 13, 1984 among Northwestern Mutual Variable Life Account, The Northwestern Mutual Life Insurance Company and NML Equity Services, Inc. (n/k/a Northwestern Mutual Investment Services, LLC) | Exhibit A(8) to Form S-6 Registration Statement for Northwestern Mutual Variable Life Account, File No. 333-36865, filed October 1, 1997 | ||
(j)(b) | Shareholder Information Agreement dated April 13, 2007 among Russell Investment Management Company on behalf of Russell Investment Funds and The Northwestern Mutual Life Insurance Company | Exhibit (j)(b) to Form N-6 Post-Effective Amendment No. 39 for Northwestern Mutual Variable Life Account, File No. 2-89972, filed April 30, 2012 |
C-2
(j)(c) | Amendment No. 1 dated October 20, 2008 to Shareholder Information Agreement dated April 13, 2007 among Russell Fund Services Company on behalf of Russell Investment Funds and The Northwestern Mutual Life Insurance Company | Exhibit (j)(c) to Form N-6 Post-Effective Amendment No. 39 for Northwestern Mutual Variable Life Account, File No. 2-89972, filed April 30, 2012 | ||
(j)(d) | Shareholder Information Agreement dated April 13, 2007 among Fidelity Distributors Corporation on behalf of Fidelity® Variable Insurance Products Fund and The Northwestern Mutual Life Insurance Company | Exhibit (j)(d) to Form N-6 Post-Effective Amendment No. 39 for Northwestern Mutual Variable Life Account, File No. 2-89972, filed April 30, 2012 | ||
(j)(e) | Shareholder Information Agreement dated April 16, 2007 among Northwestern Mutual Series Fund, Inc. and The Northwestern Mutual Life Insurance Company | Exhibit (j)(e) to Form N-6 Post-Effective Amendment No. 39 for Northwestern Mutual Variable Life Account, File No. 2-89972, filed April 30, 2012 | ||
(j)(f) | Shareholder Information Agreement dated October 16, 2007 among Neuberger Berman Management Inc. and The Northwestern Mutual Life Insurance Company | Exhibit (j)(f) to Form N-6 Post-Effective Amendment No. 39 for Northwestern Mutual Variable Life Account, File No. 2-89972, filed April 30, 2012 | ||
(j)(g) | Shareholder Information Agreement dated September 27, 2013 among Credit Suisse Securities (USA) LLC and The Northwestern Mutual Life Insurance Company | Exhibit (j)(f) to Form N-6 Post-Effective Amendment No. 10 for Northwestern Mutual Variable Life Account II, File No. 333-136124, filed on October 1, 2013 | ||
(j)(h) | Power of Attorney | Exhibit (j)(g) to Form N-6 Post-Effective Amendment No. 29, for Northwestern Mutual Variable Life Account, File No. 333-36865, filed on February 17, 2017 | ||
(j)(i) | NMIS/NM Annuity Operations Admin Agreement | Exhibit (b)(8)(i) to Form N-4 Post-Effective Amendment No. 19 for NML Variable Annuity Account A, File No. 333-72913, filed April 22, 2008 | ||
(k) | Opinion and Consent of Raymond J. Manista, Esq. dated April 28, 2017 | Filed herewith | ||
(l) | Not Applicable | |||
(m) | Not Applicable | |||
(n) | Consent of PricewaterhouseCoopers LLP dated April 27, 2017 | Filed herewith | ||
(o) | Not Applicable | |||
(p) | Not Applicable | |||
(q) | Memorandum Describing Issuance, Transfer and Redemption Procedures | Filed herewith |
Item 27. Directors and Officers of the Depositor
The following lists include all of the Trustees, executive officers and other officers of The Northwestern Mutual Life Insurance Company without regard to their activities relating to variable life insurance policies or their authority to act or their status as officers as that term is used for certain purposes of the federal securities laws and rules thereunder.
TRUSTEES As of February 1, 2017
Name | Address | |||
John N. Balboni | Senior Vice President & CIO International Paper 6400 Poplar Avenue Memphis, TN 38197 | |||
Nicholas E. Brathwaite | Founding Partner Riverwood Capital 70 Willow Road, Suite 100 Menlo Park, CA 94025 |
C-3
David J. Drury | Owner and CEO Poblocki Sign Company LLC 922 South 70th Street Milwaukee, WI 53214 | |||
Connie K. Duckworth | President & Chairman of the Board ARZU 77 Stone Gate Lane Lake Forest, IL 60045 | |||
James P. Hackett | President & CEO Steelcase, Inc. 901 - 44th Street Grand Rapids, MI 49508 | |||
P. Russell Hardin | President Robert W. Woodruff Foundation 191 Peachtree Street NE, Suite 3540 Atlanta, GA 30303 | |||
Hans Helmerich | President & CEO Helmerich & Payne, Inc. 1437 S. Boulder Avenue Tulsa, OK 74119-3609 | |||
Dale E. Jones | Vice Chairman Heidrick & Struggles 2001 Pennsylvania Avenue, NW Suite 800 Washington, DC 20006 | |||
David J. Lubar | President Lubar & Co. 700 N. Water Street Suite 1200 Milwaukee, WI 53202 | |||
Anne M. Paradis | CEO MicroTek, Inc. 2070 Westover Road Chicopee, MA 01022 | |||
Ulice Payne, Jr. | President & CEO Addison-Clifton, LLC 13555 Bishops Court Suite 245 Brookfield, WI 53005 | |||
John E. Schlifske | Chairman & CEO Northwestern Mutual 720 E. Wisconsin Avenue Milwaukee, WI 53202 | |||
Mary Ellen Stanek | Managing Director & Chief Investment Officer Baird Advisors Robert W. Baird & Co. President-Baird Funds Inc. 777 E. Wisconsin Avenue 21st Floor Milwaukee, WI 53202 |
C-4
S. Scott Voynich | Managing Partner Robinson, Grimes & Company, PC 5637 Whitesville Road (31904) P. O. Box 4299 (31914) Columbus, GA | |||
Ralph A. Weber | Founding Member Gass, Weber, Mullins, LLC 309 North Water Street Suite 700 Milwaukee, WI 53202 | |||
Benjamin F. Wilson | Managing Principal Beveridge & Diamond, P.C. 1350 I Street, NW Suite 700 Washington, DC 20005 |
EXECUTIVE OFFICERS As of February 1, 2017
John E. Schlifske | Chairman of the Board & Chief Executive Officer | |
Leslie Barbi | Senior Vice President (Public Investments) | |
Rebekah B. Barsch | Vice President (Planning and Sales) | |
Blaise C. Beaulier | Vice President (Enterprise Projects & Support) | |
Sandra L. Botcher | Vice President (Campus & Event Experiences) | |
Michael G. Carter | Executive Vice President & Chief Financial Officer | |
Eric P. Christophersen | Vice President (Strategic Philanthropy & Community Relations) | |
Sheldon I. Cuffie | Vice President & Chief Information Security Officer | |
Joann M. Eisenhart | Senior Vice President (Human Resources) | |
Timothy J. Gerend | Senior Vice President (Distribution Growth & Development) | |
Kimberley Goode | Vice President (Communications & Corporate Affairs) | |
Karl G. Gouverneur | Vice President & Chief Technology Officer | |
John M. Grogan | Senior Vice President (Insurance and Investment Products) | |
Thomas C. Guay | Vice President (Risk Selection Strategy) | |
Meg E. Jansky | Vice President Field Integration | |
Ronald P. Joelson | Executive Vice President & Chief Investment Officer | |
Todd Jones | Vice President & Controller | |
Jeffrey J. Lueken | Senior Vice President (Private Securities) | |
Stephanie A. Lyons | Vice President Enterprise Risk Assurance | |
Raymond J. Manista | Senior Vice President, General Counsel & Secretary | |
John W. McTigue | Chief Distribution Advisor | |
Christian W. Mitchell | Vice President (Wealth Management) | |
Gregory C. Oberland | President | |
Rebecca L. Porter | Vice President (Corporate Strategy) | |
Steven M. Radke | Vice President (Government Relations) | |
David R. Remstad | Senior Vice President & Chief Actuary | |
Bethany M. Rodenhuis | Senior Vice President (Distribution Strategy and Finance) | |
Tammy M. Roou | Vice President & Chief Risk Officer | |
Timothy G. Schaefer | Executive Vice President (Client & Digital Experience) | |
Calvin R. Schmidt | Senior Vice President (Integrated Customer Operations) | |
Sarah R. Schneider | Vice President (New Business) | |
Sarah E. Schott | Vice President (Enterprise Compliance) | |
David W. Simbro | Senior Vice President (Life & Annuity Product) | |
Steve P. Sperka | Vice President (Field Rewards) | |
David G. Stoeffel | Vice President (Wealth Platform & Partners) | |
Steven J. Stribling | Vice President (Disability Income) | |
Alexa Von Tobel | Vice President (Client Experience) |
C-5
Kamilah D. Williams-Kemp | Vice President (Long Term Care) | |
Conrad C. York | Vice President (Marketing) | |
Thomas D. Zale | Vice President (Real Estate) | |
Todd O. Zinkgraf | Vice President (Enterprise Solutions) |
OTHER OFFICERS As of December 1, 2016
Employee
|
Title
| |
Gregory A. Gurlik | Senior Actuary | |
James R. Lodermeier | VP-Actuary | |
Ted A. Matchulat | Director-Product Compliance | |
Chris G. Trost | VP-Corporate Actuary | |
Paul W. Skalecki | VP-Actuary | |
Mark J. Gmach | Regional VP | |
Laila V. Hick | VP-Agency Development | |
Jason R. Handal | Regional VP | |
Arthur J. Mees | Regional VP | |
Timothy Nelson | Regional VP | |
Michael E. Pritzl | VP-Managing Director Relations | |
John C. Roberts | VP-Targeted Office Support | |
Anne A. Frigo | Director-Insurance Product Compliance | |
Ricky J. Frank | Director-Systems | |
Robert J. Johnson | Director-Compliance | |
Gregory S. Leslie | Director-Variable Product Compliance | |
Randy M. Pavlick | VP-Managed Investments Compliance | |
Jeffrey P. Schloemer | Director-Compliance | |
Rebecca Villegas | Director-Compliance | |
Kevin J. Abitz | Director-Corporate Reporting | |
Lisa M. Belli-Fuchs | Director-Reporting & Systems Administration | |
Barbara E. Courtney | Director-Mutual Fund Accounting | |
Michelle A. Hinze | Director-Accounting Operations | |
Todd C. Kuzminski | Director-Investment Accounting | |
K. David Nunley | VP-Tax | |
David E. Willert | Director-Federal Tax | |
Rick T. Zehner | VP-Research & Special Projects | |
Mark McNulty | Director-Field Distribution Policies & Administration | |
Daniel A. Riedl | VP-Field Distribution Policies & Administration | |
David A. Eurich | Director-Field Training | |
Joanne M. Migliaccio | Director-Contract, License & Registration | |
Sarah L. N. Koenig | Director-Horizontal Growth | |
Cindy S. Prater | Director-Practice Management | |
Arleen J. Llewellyn | Director-FR Engagement & Selection | |
Paul J. Steffen | VP-Agency Development | |
Michael R. Fasciotti | Director-Field Real Estate | |
Richard P. Snyder | Director-Field Compensation | |
Brenda J. Antkowski | Director-Field Integration | |
Paula B. Asen | Director-Field Integration | |
Kevin J. Konopa | Director-Field Integration |
C-6
Employee
|
Title
| |
Karen A. Molloy | VP-Treasurer | |
Deborah A. Schultz | VP-Financial Management | |
Pency P. Byhardt | Vice President-Annuity Operations | |
Don P. Gehrke | Director-Retail Investment Operations | |
Dennis P. Goyette | Director-Annuity Customer Service | |
Linda A. Schaefer | Director-Document Shared Services | |
Lori A. Torner | Director-Retail Investment Operations | |
Karla J. Adams | Director-Investment Risk Management | |
James A. Brewer | Director-Investment Planning | |
David A. Escamilla | Director-Investment Information | |
Donald Forecki | Director-Investment Operations, Asst. Secretary | |
Lisa A. Cadotte | VP-Investment Risk Management | |
Thomas K. Anderson | Asst. General Counsel & Asst. Secretary | |
Mark J. Backe | VP-Insurance & Operations Counsel & Asst. Secretary | |
Joanne M. Breese-Jaeck | Asst. General Counsel & Asst. Secretary | |
Christopher W. Brownell | Asst. General Counsel & Asst. Secretary | |
Michael S. Bula | Asst. General Counsel & Asst. Secretary | |
Thomas B. Christenson | Asst. General Counsel & Asst. Secretary | |
Michael J. Conmey | Asst. General Counsel & Asst. Secretary | |
Mark S. Diestelmeier | Asst. General Counsel & Asst. Secretary | |
John E. Dunn | VP & Investment Products & Services Counsel & Asst. Secretary | |
Bradley L. Eull | Asst. General Counsel & Asst. Secretary | |
Chad E. Fickett | Asst. General Counsel & Asst. Secretary | |
James C. Frasher | Asst. General Counsel & Asst. Secretary | |
John D. Gatmaitan | Asst. General Counsel & Asst. Secretary | |
Sheila M. Gavin | Asst. General Counsel & Asst. Secretary | |
Chris K. Gawart | VP & Tax Counsel & Asst. Secretary | |
Katherine T. Hartman | Asst. General Counsel & Asst. Secretary | |
Matthew D. Heinke | Asst. General Counsel & Asst. Secretary | |
David B. Kennedy | Asst. General Counsel & Asst. Secretary | |
Steven J. LaFore | Asst. General Counsel & Asst. Secretary | |
Lisa A. Leister | Asst. General Counsel & Asst. Secretary | |
Kim W. Lunn | Asst. General Counsel & Asst. Secretary | |
Michael J. Mazza | Asst. General Counsel & Asst. Secretary | |
Andrew J. McLean | Asst. General Counsel & Asst. Secretary | |
Lesli H. McLinden | Asst. General Counsel & Asst. Secretary | |
Christopher J. Menting | Assoc. General Counsel-Enterprise Governance & Asst. Secretary | |
William C. Pickering | Asst. General Counsel & Asst. Secretary | |
Nora M. Platt | Asst. General Counsel & Asst. Secretary | |
Zhibin Ren | Asst. General Counsel & Asst. Secretary | |
Peter K. Richardson | Asst. General Counsel & Asst. Secretary | |
Rodd Schneider | VP & Litigation and Distribution Counsel & Asst. Secretary | |
John M. Thompson | Asst. General Counsel & Asst. Secretary | |
John W. Warren | Asst. General Counsel & Asst. Secretary | |
Terry R. Young | Asst. General Counsel & Asst. Secretary | |
Michael W. Zielinski | Asst. General Counsel & Asst. Secretary | |
Gregory A. Jaeck | Director-Annuity & Income Markets | |
Jason T. Klawonn | VP-Advanced Markets | |
William Brian Henning | Director-Competitive Intelligence | |
Jane Ann Schiltz | Director-LP Planning & Project Support | |
Steven J. Stribling | VP-Life Product Development |
C-7
Employee
|
Title
| |
Thomas R. Anderson | Director-Advanced Planning | |
Candace M. Damon | Director-Strategic Productivity | |
Angela M. DiCastri | Director-Retirement Markets | |
Ruthann M. Driscoll | Director-Advanced Planning | |
Kenneth P. Elbert | Director-Advanced Planning | |
Matthew K. Fleming | Director-Planning & Investments Support | |
Stephen J. Frankl | Director-Planning & Sales | |
William F. Grady, IV | Director-Advanced Planning | |
Terence J. Holahan | Director-Planning & Sales Education & Development | |
Emily J. Holbrook | Director-Young Personal Market | |
Patrick J. Horning | Director-Advanced Planning | |
William R. Hughes | Director-Advanced Planning | |
Martha M. Kendler | Director-Closely Held Business Market | |
Amy Kiiskila | Director-Advanced Planning | |
Shawn P. Mauser | Director-Network Office Productivity | |
John E. Muth | Director-Advanced Planning | |
Elizabeth Ridley | VP-Market Strategy & Training | |
Andrew J. Smalley | Director-Sales Promotion & Integration | |
Michael C. Soyka | Director-Planning & Sales | |
William H. Taylor | VP-Financial Planning & Sales Support | |
Janine L. Wagner | Director-Planning & Insurance Support | |
Stephanie Wilcox | Director-Planning & Sales Admin/Integration | |
Brian D. Wilson | VP-National Sales | |
Peter T. Petersen | VP-Client & Digital Experience | |
Jeffrey B. Williams | VP-NMIS and WMC Chief Compliance Officer | |
James LeMere | Director-Policyowner Services | |
Travis T. Piotrowski | VP-Policyowner Services | |
Sandra K. Scott | Director-Life Benefits | |
Carol A. Stilwell | Director-Policyowner Services | |
Gina Tolzman | Director-Policyowner Services | |
Mark J. McLennon | VP-IPS Business Development |
The business addresses for all of the executive officers and other officers is 720 East Wisconsin Avenue, Milwaukee, Wisconsin 53202.
Item 28. Persons Controlled By or Under Common Control with the Depositor or Registrant
The subsidiaries of The Northwestern Mutual Life Insurance Company (Northwestern Mutual), as of February 1, 2017 are shown below. In addition to the subsidiaries shown below, the following separate investment accounts (which include the Registrant) may be deemed to be either controlled by, or under common control with, Northwestern Mutual:
1. | NML Variable Annuity Account A |
2. | NML Variable Annuity Account B |
3. | NML Variable Annuity Account C |
4. | Northwestern Mutual Variable Life Account |
5. | Northwestern Mutual Variable Life Account II |
Northwestern Mutual Series Fund, Inc. (the Funds), shown below as a subsidiary of Northwestern Mutual, is an investment company, registered under the Investment Company Act of 1940, offering shares to the separate accounts identified above; and the shares of the Funds held in connection with certain of the accounts are voted by Northwestern Mutual in accordance with voting instructions obtained from the persons who own, or are receiving payments under, variable annuity contracts or variable life insurance policies issued in connection with the separate accounts, or in the same proportions as the shares which are so voted.
C-8
NORTHWESTERN MUTUAL CORPORATE STRUCTURE(1) (as of February 1, 2017)
|
||||||||
Legal Entity Name | Domestic Jurisdiction | Owner % | ||||||
Operating Subsidiaries |
||||||||
Northwestern Mutual Capital Limited(2) |
United Kingdom | 100.00 | ||||||
Mason Street Advisors, LLC(2) |
Delaware | 100.00 | ||||||
Northwestern Long Term Care Insurance Company(2) |
Wisconsin | 100.00 | ||||||
Northwestern Mutual Investment Management Company, LLC(2) |
Delaware | 100.00 | ||||||
Northwestern Mutual Investment Services, LLC(2) |
Wisconsin | 100.00 | ||||||
Northwestern Mutual Wealth Management Company(2) |
United States | 100.00 | ||||||
LearnVest Inc. (2) |
Delaware | 100.00 | ||||||
LearnVest Planning Services, LLC(2) |
Delaware | 100.00 | ||||||
All Other Subsidiaries |
||||||||
1838938 Alberta Ltd. |
Canada | 100.00 | ||||||
31 Ogden, LLC(2) |
Delaware | 100.00 | ||||||
3412 Exchange, LLC(2) |
Delaware | 100.00 | ||||||
777 North Van Buren Apartments, LLC(2) |
Delaware | 100.00 | ||||||
777 North Van Buren Condominium Association, Inc.(2) |
Delaware | 100.00 | ||||||
777 North Van Buren Parking, LLC(2) |
Delaware | 100.00 | ||||||
777 North Van Buren Retail, LLC(2) |
Delaware | 100.00 | ||||||
AFE Brentwood Park, LLC(2) |
Delaware | 100.00 | ||||||
Amber, LLC(2) |
Delaware | 100.00 | ||||||
AMLI at Perimeter Gardens, LLC(2) |
Delaware | 100.00 | ||||||
Arbor Lake Village Apartments Limited Liability Company(2) |
Delaware | 100.00 | ||||||
Artisan Garden Apartments, LLC(2) |
Delaware | 100.00 | ||||||
Baraboo, Inc.(2) |
Delaware | 100.00 | ||||||
Bayridge, LLC(2) |
Delaware | 100.00 | ||||||
Bishop Square, LLC(2) |
Delaware | 100.00 | ||||||
Bradford, Inc.(2) |
Delaware | 100.00 | ||||||
Bradford II SPE, Inc.(2) |
Delaware | 100.00 | ||||||
Bradford Master Association Inc. (2) |
North Carolina | 100.00 | ||||||
Burgundy, LLC(2) |
Delaware | 100.00 | ||||||
C Land Fund, LLC(2) |
Delaware | 100.00 | ||||||
Chateau, LLC(2) |
Delaware | 100.00 | ||||||
Chelsea Ventures, LLC(2) |
Maryland | 100.00 | ||||||
Coral, Inc.(2) |
Delaware | 100.00 | ||||||
Cortona Holdings, LLC(2) |
Delaware | 100.00 | ||||||
Crosland Denver Highway 16, LLC(2) |
North Carolina | 100.00 | ||||||
Crosland Greens, LLC(2) |
North Carolina | 100.00 | ||||||
CWS Lemmon Resources, LP(2) |
Delaware | 100.00 | ||||||
Dortmund, LLC(2) |
Delaware | 100.00 | ||||||
Fairfield West Deer Park LLC(2) |
Delaware | 100.00 | ||||||
FB #2, LLC(2) |
Maryland | 100.00 | ||||||
GRO, LLC(2) |
Delaware | 100.00 | ||||||
GRO-SUB, LLC(2) |
Delaware | 100.00 | ||||||
Hamptons PBG, L.P. (2) |
Delaware | 100.00 | ||||||
Hazel, Inc.(2) |
Delaware | 100.00 | ||||||
Higgins, Inc.(2) |
Delaware | 100.00 | ||||||
Hobby, Inc.(2) |
Delaware | 100.00 | ||||||
Hollenberg 1, Inc.(2) |
Delaware | 100.00 | ||||||
Juleen, LLC(2) |
Delaware | 100.00 | ||||||
Klode, Inc.(2) |
Delaware | 100.00 |
C-9
NORTHWESTERN MUTUAL CORPORATE STRUCTURE(1) (as of February 1, 2017)
| ||||
Kristiana International Sales, Inc.(2) |
U.S. Virgin Islands | 100.00 | ||
Logan, Inc.(2) |
Delaware | 100.00 | ||
Maroon, Inc.(2) |
Delaware | 100.00 | ||
Mason & Marshall, Inc.(2) |
Delaware | 100.00 | ||
Millbrook Apartments Associates L.L.C.(2) |
Virginia | 100.00 | ||
Model Portfolios, LLC(2) |
Delaware | 100.00 | ||
Nicolet, Inc.(2) |
Delaware | 100.00 | ||
NM BSA, LLC(2) |
Delaware | 100.00 | ||
NM Cancer Center GP, LLC(2) |
Delaware | 100.00 | ||
NM DFW Lewisville, LLC(2) |
Delaware | 100.00 | ||
NM Gen, LLC(2) |
Delaware | 100.00 | ||
NM GP Holdings, LLC(2) |
Delaware | 100.00 | ||
NM Harrisburg, Inc.(2) |
Pennsylvania | 100.00 | ||
NM Imperial, LLC(2) |
Delaware | 100.00 | ||
NM Investment Holdings, LLC.(2) |
Delaware | 100.00 | ||
NM Lion, LLC(2) |
Delaware | 100.00 | ||
NM Majestic Holdings, LLC(2) |
Delaware | 100.00 | ||
NM Neptune, LLC(2) |
Delaware | 100.00 | ||
NM Pebble Valley LLC(2) |
Delaware | 100.00 | ||
NM Planning, LLC(2) |
Delaware | 100.00 | ||
NM RE Funds, LLC(2) |
Delaware | 100.00 | ||
NM Regal, LLC(2) |
Delaware | 100.00 | ||
NM Twin Creeks GP, LLC(2) |
Delaware | 100.00 | ||
NM-Hemlock, LLC(2) |
Delaware | 100.00 | ||
NM-Pulse, LLC(2) |
Delaware | 100.00 | ||
NM-Skye, LLC(2) |
Delaware | 100.00 | ||
NML Clubs Associated, Inc.(2) |
Wisconsin | 100.00 | ||
NML Development Corporation(2) |
Delaware | 100.00 | ||
NML Real Estate Holdings, LLC(2) |
Wisconsin | 100.00 | ||
NML Securities Holdings, LLC(2) |
Wisconsin | 100.00 | ||
NMRM Holdings, LLC(2) |
Delaware | 100.00 | ||
North Van Buren, Inc.(2) |
Delaware | 100.00 | ||
Northwestern Ellis Company(2) |
Nova Scotia | 100.00 | ||
Northwestern Mutual Capital GP, LLC(2) |
Delaware | 100.00 | ||
Northwestern Mutual Capital GP II, LLC(2) |
Delaware | 100.00 | ||
Northwestern Mutual Capital GP III, LLC(2) |
Delaware | 100.00 | ||
Northwestern Mutual Capital GP IV, LLC(2) |
Delaware | 100.00 | ||
Northwestern Mutual Capital Mezzanine Fund II, LP(2) |
Delaware | 100.00 | ||
Northwestern Mutual Capital Mezzanine Fund III, LP(2) |
Delaware | 100.00 | ||
Northwestern Mutual Capital Mezzanine Fund IV, LP(2) |
Delaware | 100.00 | ||
Northwestern Mutual Capital Strategic Equity Fund II, LP(2) |
Delaware | 100.00 | ||
Northwestern Mutual Capital Strategic Equity Fund III, LP(2) |
Delaware | 100.00 | ||
Northwestern Mutual Capital Strategic Equity Fund IV, LP(2) |
Delaware | 100.00 | ||
Northwestern Mutual MU TLD Registry, LLC(2) |
Delaware | 100.00 | ||
Northwestern Mutual Registry, LLC(2) |
Delaware | 100.00 | ||
Northwestern Mutual Series Fund, Inc.(3) |
Maryland | 100.00 | ||
NorthWoods Phase I, LLC |
Delaware | 100.00 | ||
NWM ZOM GP, LLC(2) |
Delaware | 100.00 | ||
Olive, Inc.(2) |
Delaware | 100.00 | ||
Osprey Links Golf Course, LLC(2) |
Delaware | 100.00 |
C-10
NORTHWESTERN MUTUAL CORPORATE STRUCTURE(1) (as of February 1, 2017)
| ||||
Osprey Links, LLC(2) |
Delaware | 100.00 | ||
Park Ridge Corporate Center, LLC(2) |
Delaware | 100.00 | ||
Piedmont Center, 1-4 LLC(2) |
Delaware | 100.00 | ||
Piedmont Center, 15 LLC(2) |
Delaware | 100.00 | ||
Plantation Oaks MHC-NM, LLC(2) |
Delaware | 100.00 | ||
Promenade at Clifton LLC(2) |
Delaware | 100.00 | ||
RE Corp.(2) |
Delaware | 100.00 | ||
Regina International Sales, Inc.(2) |
U.S. Virgin Islands | 100.00 | ||
Russet, Inc.(2) |
Delaware | 100.00 | ||
Scotty, LLC(2) |
Delaware | 100.00 | ||
Solar Resources, Inc.(2) |
Wisconsin | 100.00 | ||
Stadium and Arena Management, Inc.(2) |
Delaware | 100.00 | ||
Tapestry Condominium Owners Association, Inc. (2) |
Tennessee | 100.00 | ||
Trade Street Associates I, LLC(2) |
Delaware | 100.00 | ||
Tupelo, Inc.(2) |
Delaware | 100.00 | ||
Two Con Holdings, LLC(2) |
Delaware | 100.00 | ||
Two Con SPE, LLC(2) |
Delaware | 100.00 | ||
Two Con, LLC(2) |
Delaware | 100.00 | ||
Ventura Lakes MHC-NM, LLC(2) |
Delaware | 100.00 | ||
Walden OC, LLC(2) |
Delaware | 100.00 | ||
Warren Corporate Center, LLC(2) |
Delaware | 100.00 | ||
West Huron Joint Venture(2) |
Washington | 100.00 | ||
White Oaks, Inc.(2) |
Delaware | 100.00 | ||
Windwood Drive Ann Arbor, LLC(2) |
Delaware | 100.00 |
(1) | Certain subsidiaries are omitted on the basis that, considered in the aggregate at year end 2016, they did not constitute a significant subsidiary as defined by Regulation S-X. Certain investment partnerships and limited liability companies that hold real estate assets of The Northwestern Mutual Life Insurance Company are not represented. |
(2) | Subsidiary included in the consolidated financial statements. |
(3) | Northwestern Mutual Series Fund, Inc. consists of 27 series of capital stock, each a separate investment portfolio (the Portfolios). The Portfolios consist of: Growth Stock Portfolio, Focused Appreciation Portfolio, Large Cap Core Stock Portfolio, Large Cap Blend Portfolio, Index 500 Stock Portfolio, Large Company Value Portfolio, Domestic Equity Portfolio, Equity Income Portfolio, Mid Cap Growth Stock Portfolio, Index 400 Stock Portfolio, Mid Cap Value Portfolio, Small Cap Growth Stock Portfolio, Index 600 Stock Portfolio, Small Cap Value Portfolio, International Growth Portfolio, Research International Core Portfolio, International Equity Portfolio, Emerging Markets Equity Portfolio, Government Money Market Portfolio, Short-Term Bond Portfolio, Select Bond Portfolio, Long-Term U.S. Government Bond Portfolio, Inflation Protection Portfolio, High Yield Bond Portfolio, Multi-Sector Bond Portfolio, Balanced Portfolio, Asset Allocation Portfolio. |
Item 29. Indemnification
(a) That portion of the By-laws of the Depositor, Northwestern Mutual, relating to indemnification of Trustees and officers is set forth in full in Article VII of the By-laws of Northwestern Mutual, amended by resolution and previously filed as Exhibit A(6)(b) to the registration statement of Northwestern Mutual Variable Life Account (File No. 333-59103) on July 15, 1998.
C-11
(b) Section 10 of the Distribution Agreement dated May 1, 2006 between Northwestern Mutual and Northwestern Mutual Investment Services, LLC (NMIS) provides substantially as follows:
B. Indemnification by Company. The Company agrees to indemnify, defend and hold harmless NMIS, its successors and assigns, and their respective officers, directors, and employees (together referred to as NMIS Related Persons), from any and all joint or several losses, claims, damages or liabilities (including any reasonable investigative, legal and other expenses incurred in connection with, and any amounts paid in settlement of, any action, suit or proceeding or any claim asserted), to which NMIS and/or any NMIS Related Persons may become subject, under any law, regulation or NASD rule, at common law or otherwise, that arises out of or are based upon (i) any breach of this Agreement by the Company and (ii) any untrue statement of or omission to state a material fact (except for information supplied by or on behalf of NMIS or for which NMIS is responsible) contained in any Registration Statement, Contract prospectus, SAI or supplement thereto or in any Marketing Material.
This indemnification shall be in addition to any liability that the Company may otherwise have; provided, however, that no person shall be entitled to indemnification pursuant to this provision for any loss, claim, damage or liability due to the willful misfeasance, bad faith or gross negligence or reckless disregard of duty by the person seeking indemnification.
C. Indemnification by NMIS. NMIS agrees to indemnify, defend and hold harmless the Company, its successors and assigns, and their respective officers, trustees or directors, and employees (together referred to as Company Related Persons), from any and all joint or several losses, claims, damages or liabilities (including any reasonable investigative, legal and other expenses incurred in connection with, and any amounts paid in settlement of, any action, suit or proceeding or any claim asserted), to which the Company and/or any Company Related Persons may become subject, under any law, regulation or NASD rule, at common law or otherwise, that arises out of or are based upon (i) any breach of this Agreement by NMIS and (ii) any untrue statement of or omission to state a material fact (except for information supplied by or on behalf of the Company or for which the Company is responsible) contained in any Registration Statement, Contract prospectus, SAI or supplement thereto or in any Marketing Material, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon information furnished in writing by NMIS to the Company specifically for use in the preparation of the aforesaid material.
This indemnification shall be in addition to any liability that NMIS may otherwise have; provided however, that no person shall be entitled to indemnification pursuant to this provision for any loss, claim, damage or liability due to the willful misfeasance, bad faith or gross negligence or reckless disregard of duty by the person seeking indemnification.
D. Indemnification Generally. Any person seeking indemnification under this section shall promptly notify the indemnifying party in writing after receiving notice of the commencement of any action as to which a claim for indemnification will be made; provided, however, that failure to so notify the indemnifying party shall not relieve such party from any liability which it may have to such person otherwise than on account of this section.
The indemnifying party shall be entitled to participate in the defense of the indemnified person but such participation will not relieve such indemnifying party of the obligation to reimburse the indemnified party for reasonable legal and other expenses incurred by such party in defending himself, herself or itself.
Item 30. Principal Underwriters
(a) NMIS is the principal underwriter of the securities of the Registrant. NMIS is also the principal underwriter for the NML Variable Annuity Account A (811-21887), the NML Variable Annuity Account B (811-1668), the NML Variable Annuity Account C (811-21886), and the Northwestern Mutual Variable Life Account II (811-21933).
(b) As of February 1, 2017, the directors and officers of NMIS are as follows:
Name | Position | |
Rebekah B. Barsch | Vice President, Planning and Sales | |
Pency P. Byhardt | Vice President, Annuity Operations | |
Michael G. Carter | NMIS Board Director |
C-12
Linda C. Donahue | NMIS Anti-Money Laundering (AML) Officer | |
Bradley L. Eull | Secretary | |
Don P. Gehrke | Director, Retail Investment Operations | |
Timothy J. Gerend | NMIS Board Director and Senior Vice President, Distribution Growth and Development | |
John M. Grogan | NMIS Board Director and Senior Vice President, Insurance and Investment Products | |
David P. Harley | Director, Investment Services | |
Ronald P. Joelson | NMIS Board Director | |
Jennifer W. Murphy | Director, NMIS Home Office Supervision/Administration | |
Jeffrey J. Niehaus | Director Strategy Planning and Partnerships | |
Gregory C. Oberland | Executive Officer, Distribution Growth and Development, Sales and Marketing | |
Jennifer OLeary | Treasurer and Financial and Operations Principal | |
Travis T. Piotrowski | Vice President, Policyowner Services | |
Daniel A. Riedl | Vice President, Chief Operating Officer | |
Bethany M. Rodenhuis | Senior Vice President, Distribution Strategy and Finance | |
Calvin R. Schmidt | NMIS Board Director and Senior Vice President, Integrated Operations | |
Sarah R. Schneider | Vice President, New Business | |
Sarah E. Schott | Vice President, Enterprise Compliance | |
David W. Simbro | Senior Vice President, Life and Annuity Product | |
Todd W. Smasal | Director, Human Resources | |
David G. Stoeffel | NMIS Board Director, President and Chief Executive Officer | |
Susan Limbach | Assistant Treasurer | |
Kellen A. Thiel | Director, Investment Products | |
Jeffrey B. Williams | Vice President, NMIS Compliance, and Chief Compliance Officer | |
Brian D. Wilson | Vice President, National Sales | |
Terry Young | Assistant Secretary |
The address for each director and officer of NMIS is 611 East Wisconsin Avenue, Milwaukee, Wisconsin 53202.
(c) NMIS, the principal underwriter, received $3,053,234 of commissions and other compensation, directly or indirectly, from Registrant during the last fiscal year.
Item 31. Location of Accounts and Records
All accounts, books or other documents required to be maintained in connection with the Registrants operations are maintained in the physical possession of Northwestern Mutual at 720 East Wisconsin Avenue, Milwaukee, Wisconsin 53202.
Item 32. Management Services
There are no management-related service contracts, other than those referred to in Part A or Part B of this Registration Statement, under which management-related services are provided to the Registrant and pursuant to which total payments of $5,000 or more were made during any of the last three fiscal years.
Item 33. Fee Representation
The Northwestern Mutual Life Insurance Company hereby represents that the fees and charges deducted under the variable life insurance policies which are the subject of this registration statement, in the aggregate, are reasonable in relation to the services rendered, the expenses expected to be incurred, and the risks assumed by the insurance company under the policies.
C-13
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, and the Investment Company Act of 1940, the Registrant, Northwestern Mutual Variable Life Account, certifies that it meets all of the requirements for effectiveness of this Amended Registration pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused this Amended Registration Statement to be signed on its behalf, in the City of Milwaukee, and State of Wisconsin, on the 28th day of April, 2017.
NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT (Registrant) |
By | THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY (Depositor) |
Attest: | /s/ RAYMOND J. MANISTA |
By: | /s/ JOHN E. SCHLIFSKE | |||
Raymond J. Manista, | John E. Schlifske, | |||||
Senior Vice President, General Counsel and Secretary |
Chairman and Chief Executive Officer |
Pursuant to the requirements of the Securities Act of 1933, this Amended Registration Statement has been signed by the Depositor on the 28th day of April, 2017.
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY (Depositor) |
Attest: | /s/ RAYMOND J. MANISTA |
By: | /s/ JOHN E. SCHLIFSKE | |||
Raymond J. Manista, | John E. Schlifske, | |||||
Senior Vice President, General Counsel and Secretary |
Chairman and Chief Executive Officer |
Pursuant to the requirements of the Securities Act of 1933, this Amended Registration Statement has been signed below by the following persons in the capacities with the Depositor and on the dates indicated:
Signature | Title | |||
Chairman, Trustee and | ||||
/s/ JOHN E. SCHLIFSKE |
Chief Executive Officer; | |||
John E. Schlifske | Principal Executive Officer | |||
Executive Vice President and | ||||
/s/ MICHAEL G. CARTER |
Chief Financial Officer; | |||
Michael G. Carter | Principal Financial Officer | |||
/s/ TODD JONES |
Vice President and Controller; | |||
Todd Jones | Principal Accounting Officer |
C-14
/s/ John N. Balboni* |
Trustee | |||
John N. Balboni | ||||
/s/ Nicholas E. Brathwaite* |
Trustee | |||
Nicholas E. Brathwaite | ||||
/s/ David J. Drury* |
Trustee | |||
David J. Drury | ||||
/s/ Connie K. Duckworth* |
Trustee | |||
Connie K. Duckworth | ||||
/s/ James P. Hackett* |
Trustee | |||
James P. Hackett | ||||
/s/ P. Russell Hardin* |
Trustee | |||
P. Russell Hardin | ||||
/s/ Hans Helmerich* |
Trustee | |||
Hans Helmerich | ||||
/s/ Dale E. Jones* |
Trustee | |||
Dale E. Jones | ||||
/s/ David J. Lubar* |
Trustee | |||
David J. Lubar | ||||
/s/ Anne M. Paradis* |
Trustee | |||
Anne M. Paradis | ||||
/s/ Ulice Payne, Jr.* |
Trustee | |||
Ulice Payne, Jr. | ||||
/s/ John E. Schlifske* |
Trustee | |||
John E. Schlifske | ||||
/s/ Mary Ellen Stanek* |
Trustee | |||
Mary Ellen Stanek | ||||
/s/ S. Scott Voynich* |
Trustee | |||
S. Scott Voynich | ||||
/s/ Ralph A. Weber* |
Trustee | |||
Ralph A. Weber | ||||
/s/ Benjamin F. Wilson* |
Trustee | |||
Benjamin F. Wilson |
*By: | /s/ JOHN E. SCHLIFSKE | |||
John E. Schlifske, Attorney in fact, pursuant to the Power of Attorney filed February 17, 2017. |
Each of the signatures is affixed as of April 28, 2017.
C-15
EXHIBIT INDEX
EXHIBITS FILED WITH FORM N-6
POST-EFFECTIVE AMENDMENT NO. 30 TO
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
FOR
NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT
Exhibit | Description | |||||||
(k) | Opinion and Consent of Raymond J. Manista, Esq. dated April 28, 2017 |
Filed herewith | ||||||
(n) | Consent of PricewaterhouseCoopers LLP dated April 27, 2017 |
Filed herewith |
C-16
Exhibit (k)
April 28, 2017
The Board of Trustees
The Northwestern Mutual Life
Insurance Company
720 E. Wisconsin Avenue
Milwaukee, WI 53202
To The Board Of Trustees:
In my capacity as General Counsel of The Northwestern Mutual Life Insurance Company (the Company), I have reviewed the establishment of The Northwestern Mutual Variable Life Account (the Account), on November 23, 1983, by the Companys Board of Trustees, as a separate account for assets applicable to certain variable life insurance policies, pursuant to the provisions of Section 206.385 of the Wisconsin Statutes of 1965, as amended.
Company attorneys under my general supervision have prepared the Post-Effective Amendment No. 30 to the Registration Statement on Form N-6 (1933 Act File No. 333-36865) filed by the Company and the Account with the Securities & Exchange Commission under the Securities Act of 1933 for the registration of certain variable life insurance policies issued with respect to the Account.
I have made such examination of the law and examined such corporate records and such of the documents as in my judgment are necessary and appropriate to enable me to render the following opinion that:
(1) The Company has been duly organized under the laws in the State of Wisconsin and is a validly existing mutual life insurance company.
(2) The Account has been duly created and is validly existing as a separate account pursuant to the aforesaid provisions of Wisconsin law.
The Board of Trustees
April 28, 2017
Page 2
(3) The assets held in the Account equal to the reserves and other contract liabilities with respect to the Account will not be chargeable with liabilities arising out of any other business the Company may conduct.
(4) The variable life insurance policies, when issued in accordance with the prospectus contained in the aforesaid registration statement and upon compliance with applicable local law, will be legal and binding obligations of The Northwestern Mutual Life Insurance Company in accordance with their terms.
I hereby consent to the filing of this opinion as an exhibit to the Registration Statement.
Very truly yours, |
/s/ RAYMOND J. MANISTA |
Raymond J. Manista |
Senior Vice President General Counsel and Secretary |
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the use in this Post-Effective Amendment No. 30 to the Registration Statement on Form N-6 (Registration Statement) of our report dated February 20, 2017, relating to the consolidated statutory financial statements of The Northwestern Mutual Life Insurance Company, and of our report dated April 27, 2017, relating to the financial statements of Northwestern Mutual Variable Life Account, which appear in such Registration Statement. We also consent to the references to us under the heading Experts in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
Milwaukee, Wisconsin
April 27, 2017
Chad E. Fickett Assistant General Counsel and Assistant Secretary
720 East Wisconsin Avenue Milwaukee, WI 53202-4797 414 665 1209 office 414 625 5151 fax chadfickett@northwesternmutual.com |
VIA EDGAR
April 28, 2017
Securities and Exchange Commission
Division of Investment Management
Securities and Exchange Commission
100 F Street, N.E.
Washington, DC 20549-8629
Re: | Northwestern Mutual Variable Life Account |
Variable Executive Life File Nos. 333-36865; 811-03989
Variable Joint Life File Nos. 333-59103; 811-03989
EDGAR CIK 0000742277, and
Northwestern Mutual Variable Life Account II |
Custom Variable Universal Life File Nos. 333-136124; 811-21933
Executive Variable Universal Life File Nos. 333-136305; 811-21933
Survivorship Variable Universal Life File Nos. 333-136308; 811-21933
EDGAR CIK 0001359314
Post-Effective Amendments to Registration Statements on Form N-6 |
Dear Commissioners:
On behalf of The Northwestern Mutual Life Insurance Company (the Company), and Northwestern Mutual Variable Life Account and Northwestern Mutual Variable Life Account II (the Accounts), we are submitting herewith the following Securities Act of 1933 Post-Effective Amendments (PEAs), and the following Amendments under the Investment Company Act of 1940, to the Registration Statements on Form N-6 identified above:
PEA No. | Amendment No. | |||||||||
Northwestern Mutual Variable Life Account |
||||||||||
Variable Executive Life |
30 | 76 | ||||||||
Variable Joint Life |
30 | 77 | ||||||||
Northwestern Mutual Variable Life Account II |
||||||||||
Custom Variable Universal Life |
16 | 52 | ||||||||
Executive Variable Universal Life |
17 | 53 | ||||||||
Survivorship Variable Universal Life |
16 | 54 |
Securities and Exchange Commission
April 28, 2017
Page 2
The PEAs and Amendments are being filed pursuant to paragraph (b) of Rule 485 under the 1933 Act primarily for purposes of responding to comments received from Mr. Keith Gregory of the SEC Staff on March 31, 2017 on the Accounts registration statements (as well as any subsequent conversations), updating certain financial information and making routine and other clarifying changes. Our intention is that the PEAs and Amendments noted above will become effective on May 1, 2017, in accordance with the provisions of paragraph (b) of Rule 485. As required by paragraph (b)(4) of Rule 485, the undersigned represents that the PEAs noted above do not contain disclosures which would render them ineligible to become effective pursuant to paragraph (b) of the Rule.
The following is a summary of the SEC Staffs comments and our proposed responses.
GENERAL
Please note that we generally gave the registration statements a limited review of the marked text in the SVUL registration statement; we note representations in the transmittal letter that the changes were limited to changes disclosed in the transmittal letter and highlighted in the marked documents provided.
1. | COMMENT: Please confirm supplementally that changes made in response to comments will be made to all prospectuses filed by the registrant with the applicable separate account. |
RESPONSE: The Company confirms that changes made in response to comments have been made, where appropriate and applicable, to the registration statements of all policies named herein.
COVER PAGE
2. | COMMENT: Please revise applicable disclosure regarding state variations to state that all material state variations are disclosed in the prospectus or in an appendix to the prospectus. |
RESPONSE: The Company has added the requested disclosure.
3. | COMMENT: Please confirm supplementally that all material state variations are disclosed in the prospectus and not the SAI, and please revise the prospectus as applicable, including where a rider may not be available in a particular state. |
RESPONSE: The Company confirms that all material state variations are disclosed in the applicable prospectus and, if necessary, has revised disclosure for specificity regarding the availability of riders in a particular state.
4. | COMMENT: Please confirm supplementally that all investment options that be been offered by the Policy prior to May 1, 2017 and which policy owners are still invested are reflected on the list of investment options on the cover and, if any such investment option is no longer offered, please list such option and indicated the dates on which the option was offered. |
RESPONSE: The Company confirms that the current list of funds is a complete and accurate list of all underlying funds held by any Policy owner.
Securities and Exchange Commission
April 28, 2017
Page 3
FEE & EXPENSE TABLES Transaction Fees
5. | COMMENT: For clarity, please consider revising the current charge disclosure in plain English in the table to provide clarity in circumstances where policy fees depend on policy anniversary. Please consider using date ranges and/or non-defined terms where appropriate. |
RESPONSE: The Company has generally revised disclosure as noted below for clarity in circumstances where a particular policy owners fee depends on when he or she passes their policy anniversary in 2017:
Your current charge depends on the Policy Date of your Policy. |
Is the Policy Date on your Policy prior to January 1, 2017? |
If your answer is No your current charge is 0.85% of Premium Payments. |
If your answer is Yes please answer the following question. |
Have you passed your 2017 Policy Anniversary? |
If your answer is Yes your current charge is 0.85% of Premium Payments. |
If your answer is No your current charge is 1% of Premium Payments. Once you reach your 2017 Policy Anniversary your current charge will be 0.85% of subsequent Premium Payments.
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The Company believes that using defined terms is the best way to convey the information without adding further complexity. However, for clarity the Company has added a general footnote and/or disclosure where appropriate that reads: Please see Policy Anniversary and Policy Date in the Glossary of Terms to understand how it will affect the charges applicable to your Policy.
FEE & EXPENSE TABLES Periodic Charges (Other than Portfolio Operating Expenses)
6. | COMMENT: In footnotes 1 and 2, as appropriate, please revise applicable disclosure to include information about how a policy owner may obtain more information about their specific fees in accordance with Instruction 3(b) to Item 3 of Form N-6. |
RESPONSE: Please note that footnote 2 indicates that a policy owner should request an illustration for personalized information. However, for clarity, the Company has revised this disclosure to read, Please request an illustration from your financial representative for personalized information, including the particular charges applicable to your Policy. In addition, the company has added similar disclosure to footnote 1 as appropriate.
7. | COMMENT: Please make note of Instruction 1(a) of Form N-6 and revise table disclosures accordingly. |
Securities and Exchange Commission
April 28, 2017
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RESPONSE: In response, the Company has revised the applicable disclosure and rounded all dollar figures to the nearest dollar unless in the view of the Company doing so would materially misstate, or have the potential to materially misstate, fees paid by policy owners (e.g., generally those cases where rounding would produce amounts equal to $0.00 for fees smaller than $0.50). Per the Staffs request in prior years, for amounts lower than $0.01 the Company has rounded all figures to the first non-zero numeric digit.
8. | COMMENT: We note that the minimum and maximum charges for different periodic charges assume different characteristics. Please supplementally explain why the maximum figures in the tables do not assume the same characteristics and revise disclosure if appropriate. |
RESPONSE: Please note that the Company does not read Form N-6 in such a manner as to require that all periodic fees disclose charges for the same characteristic policy owner and not all charges vary by the same policy/insured characteristics. In addition, some charges do not apply to all policies (e.g., optional benefit charges). Finally, depending on the duration of the policy, some charges may reach their guaranteed maximum charge at a point where other charges no longer apply.
9. | COMMENT: Please explain why the characteristics for the maximum cost of insurance charge in footnote #3 refers to one male and one female while the minimum cost of insurance charge in footnote #4 refers to two females. |
RESPONSE: Please see Registrants response to comment #8 above. In addition, please note that the maximum Cost of Insurance charge of $83 (monthly) per $1,000 of net amount at risk equates to $1,000 (annually) per net amount at risk. This is the maximum charge at Attained Age 120 of the younger insured when both Insureds have a substandard risk classification. Footnote #3 assumes one male and one female because this is the most common gender combination for a survivorship policy. However, the same maximum charge would still apply if we altered the footnote to be based on two males or two females. To address this, we also state in the footnote, The maximum Cost of Insurance Charge shown may also apply to other combinations of Policy Year and Insured characteristics.
By contrast, the minimum Cost of Insurance charge in footnote #4 is based on two females, Premier Non-Tobacco risk classification, both Issue Age 20. A different (slightly higher) Cost of Insurance Charge would apply if this were switched to one male and one female, so this latter combination of Insured characteristics is not the minimum charge.
INFORMATION ABOUT THE POLICY Right to Return Policy
10. | COMMENT: It is unclear whether you invest assets in the government money market fund during the free look period for states that require a return of premium. If so, please disclose that information in this section. |
RESPONSE: Please see the Companys response to Comment #11 below.
Securities and Exchange Commission
April 28, 2017
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11. | COMMENT: Please revise applicable disclosure to read as follows: |
Unless state law requires
otherwise, the amount of your refund will equal the sum of (a) the Invested Assets (the sum of all amounts in the Divisions) under your Policy on the date we receive your returned Policy or a written cancellation request at our Home Office plus
(b) any previously deducted Premium Expense Charge, Monthly Policy Charge and Service Charges. In the event applicable state law requires us to return the full amount of your premium payment, we will do so. return the
greater of the full amount of your premium or the sum of (a) the Invested Assets in the government money market division on the date we receive your returned Policy or a written cancellation request at our Home Office plus (b) any
previously deducted Premium Expense Charge, Monthly Policy Charge and Service Charges.
RESPONSE: The Company respectfully declines to comply with the Commission Staff comment. The Company notes that paragraph (b)(13)(viii) of Rule 6e-3(T) under the Investment Company Act of 1940 allows life insurance company issuers of flexible premium variable life insurance policies, such as the Company, to refund premium payments upon a policy owners exercise of the state prescribed free look right, rather than cash value plus charges previously deducted, for policies issued in states that require the return of premium payments upon exercise of such right. In the release amending Rule 6e-3(T) dated March 30, 1987 (the 1987 Release), the Commission, in addressing the relief provided by paragraph (b)(13)(viii), indicated that it would be appropriate for life insurers, consistent with bearing the investment risk associated with returning premium payments upon a policy owners exercise of the free look right, to require the allocation of premium payments to a money market sub-account for the duration of the free look period. See SEC Rel. No. IC-15651 at n. 87. The Company, along with other life insurance company issuers of flexible premium variable life insurance policies, have developed and administered their free look allocation and refund procedures in reliance upon the relief provided by paragraph (b)(13)(viii) of Rule 6e-3(T) and the related guidance provided by the Commission in the 1987 Release.
The Company notes that life insurance company issuers of variable annuity contracts frequently implement refund procedures that provide for the return of the greater of contract value plus charges previously deducted or premium payments where the company allocates premium payments under the contract to a money market sub-account for the duration of the free look period as a condition for reliance upon SEC no-action letter authority. See MONY America Variable Account A (pub. avail. Oct. 26, 1988); LBVIP Variable Annuity Account I (pub. avail. Jan. 22, 1988); Fidelity Investments Variable Annuity Account I (pub. avail. Dec. 8, 1987). That practice is consistent with the Commission Staffs recommendation. The Company notes, however, that life insurance company issuers of variable annuity contracts must rely on such no-action letter authority since they are ineligible to rely upon on the relief provided by paragraph (b)(13)(viii) of Rule 6e-3(T) and the related Commission guidance in the 1987 Release.
Please note, however, that the Company has added a cross reference for the reader as follows: (See Allocating Premiums to the Separate Account for more information regarding your initial premium payment.)
Securities and Exchange Commission
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DEATH BENEFIT Life Insurance Benefit
12. | COMMENT: In the first paragraph, please add disclosure indicating that payments from your general account are backed by your financial strength. |
RESPONSE: The Company responds by noting that the requested disclosure can generally be found in the Northwestern Mutual section, relevant parts of which read (emphasis added for illustration):
General Account assets are used to guarantee the payment of certain benefits under the Policy, including death benefits. To the extent that we are required to pay you amounts under these benefits that are in addition to Invested Assets in the Separate Account, such amounts will come from General Account assets. Thus, Owners must look to the strength of the Company and its General Account with regard to guarantees under the Policy The assets in the General Account are subject to the claims of the Companys general creditors.
For clarity, the Company has generally revised disclosure to included disclosure in this regard provided in the section noted above:
Payments under these plans are from our General Account, and are subject to the claims of our creditors. Owners must look to the
financial strength of the Company and its General Account with regard to guarantees under the Policy. Please see the Northwestern Mutual section for more information regarding our General Account and
guarantees under your Policy.
CHARGES AND DEDUCTIONS
13. | COMMENT: In the second paragraph of the Premium Expense Charges sub-section please consider disclosing the date the federal tax law changed. |
RESPONSE: Registrant has added the date reference.
14. | COMMENT: For clarity, please consider revising the current charge disclosure in plain English in the narrative disclosure to provide clarity in circumstances where policy fees depend on policy anniversary. Please consider using bullet points and/or non-defined terms where appropriate. |
RESPONSE: The Company has generally revised disclosure (e.g., as noted below) for clarity in circumstances where a particular policy owners fee depends on when he or she passes their policy anniversary in 2017:
This charge depends on your Policy Date and your Policy Anniversary (see Glossary of Terms). We make a charge of 0.85% against each Premium Payment to compensate us for the additional corporate tax burden for Policies:
| with a Policy Date after December 31, 2016; or |
| with a Policy Date prior to January 1, 2017 that have passed their 2017 Policy Anniversary. |
Securities and Exchange Commission
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For Policies with a Policy Date prior to January 1, 2017 that have not passed their 2017 Policy Anniversary, we currently make a charge of 1.00% against each Premium Payment paid prior to the Policy Anniversary in 2017. After your Policy Anniversary in 2017, we will make a charge of 0.85% against subsequent Premium Payments.
With respect to defined terms, the Company still believes they are the most useful way to convey the information without adding further complexity. As noted above, however, we have added a reference to the Glossary for clarity.
STATEMENT OF ADDITIONAL INFORMATION
15. | COMMENT: Please provide any missing information required by Items 16 and 21(a) of Form N-6 as appropriate. |
RESPONSE: The Company has provided all required information with this PEA. Please note that in some cases information may be either inapplicable or, pursuant to the general instructions, not included to avoid duplication of information provided in the prospectus.
* * *
We believe that the PEAs and Amendments are complete and respond to all SEC Staff comments. If you have any questions regarding this letter or the enclosed, please contact me at (414) 665-1209. We greatly appreciate the Staffs efforts in assisting the Accounts with this filing.
Please call the undersigned with any questions or comments about this filing.
Very truly yours, |
/s/ Chad E. Fickett |
Chad E. Fickett |
Assistant General Counsel and Assistant Secretary |
Enclosures