HELPING CLIENTS LIVE LIFE DIFFERENTLY

Transcription

1 YOUR 2016 ANNUAL REPORT HELPING CLIENTS LIVE LIFE DIFFERENTLY Too many Americans are uncertain about their financial future. Northwestern Mutual is changing that. We ve seen the confidence that comes from feeling financially secure like it did for the owners of Bittersweet Pastry Shop in Chicago. And we know that taking action to achieve it enables people to Live Life Differently. As a client, you re already on that path. Bakery owner and client Esther Griego 1

2 TABLE OF CONTENTS A Message from the CEO...3 The Client s Company...4 Financial Results Policyowner Dividends...9 Policyowners Examining Committee Report Planning and Guidance...12 Client Story Living His Dream: A New Career...13 Supporting the Community Years of Strength and Stability...15 You re why we re here. Visit nmannualreport.com for more about what we ve been doing on your behalf: Hear inspiring stories of clients who Live Life Differently. See why we re a company you can count on. Learn how you can control your financial future. Please submit your proxy. It helps us serve you better. It s convenient submit online, by phone or by mail. It takes less than a minute. Access your account online. Visit northwesternmutual.com: Click Log In. Select Personal Insurance & Investments. Click the Register for Online Access button. Complete registration and follow the step-by-step instructions. Northwestern Mutual is the marketing name for The Northwestern Mutual Life Insurance Company and its subsidiaries. Life and disability insurance, annuities, and life insurance with long-term care benefits are issued by The Northwestern Mutual Life Insurance Company, Milwaukee, WI (NM). Long-term care insurance is issued by Northwestern Long Term Care Insurance Company, Milwaukee, WI, (NLTC) a subsidiary of NM. Securities are offered through Northwestern Mutual Investment Services, LLC, (NMIS) a subsidiary of NM, brokerdealer, registered investment adviser, member FINRA and SIPC. Fiduciary and fee-based financial planning services are offered through Northwestern Mutual Wealth Management Company (NMWMC), Milwaukee, WI, a subsidiary of NM and a federal savings bank. Products and services referenced are offered and sold only by appropriately appointed and licensed entities and financial professionals. Not all products and services are available in all states. Copyright 2017 The Northwestern Mutual Life Insurance Company. All Rights Reserved. Northwestern Mutual is the marketing name for The Northwestern Mutual Life Insurance Company and its subsidiaries. 2

3 A MESSAGE FROM THE CEO As CEO of your company, I spend a lot of time looking at numbers. I understand the importance of what our numbers tell the world. Our surplus, dividend payout and many more figures convey the story of a strong and growing company. I also recognize that our numbers tell a story about the essence of our company, which is you our policyowners. Your financial security, and your financial future, is what we re all about. That s why a particular set of numbers have commanded our attention for some time. They come from our annual Planning and Progress Study of Americans attitudes towards money and financial decision making. Here s part of what we found this past year. Our goal is straightforward: to move people from financial anxiety to confidence as they save for the future, and arrive there with control over their choices. We call this financial security. 85 percent of Americans feel financial anxiety today, and the majority say it is getting worse. About 25 percent of Americans think about their finances every single day. Only 20 percent of Americans feel very confident that they will achieve their financial goals. The numbers tell a clear story people are worried about their financial future. And for many, it s seriously impacting their happiness, health, family and career. What do we believe is the solution? Well, at our core, we believe that people should begin with a plan that protects what they have while also growing what they will need. Our goal is straightforward: to move people from financial anxiety to confidence as they save for the future, and arrive there with control over their choices. We call this financial security. We also believe it starts by partnering with a deeply dedicated financial professional who understands you and your situation. It continues with providing you the best and broadest range of proven planning strategies and products, enhanced by the latest digital technology. To do all this we must be financially strong. And that s why it s so meaningful to note that our 2016 financial results were excellent. We reached record totals for revenue and surplus. We also paid you, our policyowners, $5.2 billion in dividends, a higher total than our three closest mutual competitors combined. In short, your company is well positioned to thrive in any foreseeable market or economic environment. We have been and always will be the clients company. You re why we re here. We thank you for your confidence in our company. John E. Schlifske Chairman and Chief Executive Officer 3

4 THE CLIENT S COMPANY Mutual Means We Focus On You Of all the reasons clients value Northwestern Mutual as their partner on the path to financial security, one has special meaning. It s the very structure of the company as a mutual. In fact, we are a pre-eminent example of the power that s built into this form of corporate governance. For 160 years, generations of company leaders have considered every decision in light of one standard: Is this in the best interests of our clients? Our mutual structure means we manage the company in the best interest of you, our clients. We can act differently than public companies, which typically must split their focus between clients and shareholders with profits going to shareholders. The benefits of this business structure are carried out in values like these: Being the clients company. For 160 years, generations of company leaders have considered every decision in light of one standard: Is what we re doing in the best long-term interests of our clients? Taking a long-term view. Being a mutual gives us more freedom to take a longterm investment approach with the assets that back our insurance products, rather than meet the short-sighted expectations of quarterly earnings reports. Building long-term relationships. Our financial representatives and advisors are focused on understanding your goals. That helps you create a plan and take action through a full spectrum of integrated solutions to address risk management, wealth accumulation, and wealth preservation and distribution. They work with you through a distinctive planning process designed to address your unique goals and give you confidence in your financial security. Building and preserving financial strength. We maintain financial strength through careful management of policyowner funds to keep our long-term financial promises. Listening. Key to this goal is how our financial representatives or advisors work with you. And, since 1907, our board of trustees has annually named a Policyowners Examining Committee to produce an independent and unrestricted evaluation of company operations, management and strategic plans. This committee s report is published each year in our annual report. 4

5 FINANCIAL RESULTS Northwestern Mutual s principal financial goal remains the same in all economic environments: to pay a level of dividends that delivers the highest product value to policyowners while maintaining the company s superior financial strength and stability. Financial Position Total Company Assets Total company assets increased 5 percent to $250 billion during The company s General Account investment portfolio is well diversified and is primarily allocated to high-quality bonds and commercial mortgage loans. 1 Our investment strategy aims to provide superior returns over the long term while limiting overall credit, market and interest rate risk. Total assets OTHER ASSETS SEPARATE ACCOUNT ASSETS TOTAL INVESTMENTS Surplus Total surplus (including asset valuation reserve) increased $453 million during 2016 to $23.7 billion. While reserves are established to pay future benefits, surplus represents additional funds set aside to protect the company and our policyowners from the unexpected. Surplus Ratio (in percentage) SURPLUS AVR At year-end 2016, surplus and asset valuation reserve represented 12.8 percent of General Account insurance reserves, a decrease from 13.2 percent one year earlier. This level of capitalization remains at a very strong level, as evidenced by the financial strength ratings. 3 0 Our financial position remains strong, with a surplus ratio of 12.8 percent, assuring that we can keep our promises to policyowners The vast majority of the company s managed assets back most of its life, disability income and portfolio income annuity liabilities. For more information about our investments and investment strategies, please see Northwestern Mutual s Annual Investment Report. 5

6 FINANCIAL RESULTS (continued) Operating Results Operating results for 2016 reflected continued favorable product fundamentals and investment results. Net income was $818 million for 2016, including net realized capital losses of $210 million. Net realized capital losses reflected impairments of fixed-income and equity investments. Net investment income increased 1 percent to $9.6 billion, partly due to an increase in distributed earnings from the company s subsidiaries. That increase was partially offset by a decrease in private portfolio distributions and the impacts of continued low interest rates. Company Growth Total Revenue Total premium revenue was $18 billion for 2016, an increase of 1 percent from Premium revenue from life insurance increased 1 percent during 2016 and included a 4 percent increase in renewal premiums from in-force policies. Annuity premium decreased 2 percent from 2015, while premium revenue for disability income and long-term care insurance increased 4 percent and 7 percent, respectively. Premium revenue ANNUITY DISABILITY/LONG-TERM CARE INSURANCE LIFE INSURANCE Company Value Policyowner Dividends Northwestern Mutual is managed for the long-term benefit of our policyowners. This mutual philosophy leads us to pay participating policyowners the highest possible dividends consistent with preserving the long-term strength and security of the company. Dividends reflect our underlying claims experience, investment performance and expense management. The dividend scale interest rate on most unborrowed permanent life insurance funds will be 5 percent for In total, dividends to policyowners are estimated to be $5.2 billion in 2017 and are expected to be one of the highest payouts in company history. This includes approximately: $4.5 billion in dividends on traditional permanent life insurance $360 million in dividends on individual disability income insurance $165 million in dividends on term life insurance $110 million in dividends on variable life insurance $60 million in dividends on annuities Policyowner Dividends (continued) 2 Dividend scale interest rate for unborrowed funds for most traditional permanent life insurance policies with direct recognition. The dividend scale interest rate is not the rate of return on a policy and is only one factor for determining the permanent life insurance dividend. 6

7 FINANCIAL RESULTS (continued) Our favorable claims experience contributes to the majority of our dividend payout. A reduction in total dividends being paid in 2017 resulted largely from the continued challenging, historically low interest rate environment, which significantly impacts the interest component of the payout. Life insurance policyowners used over 75 percent of dividends paid in 2016 to purchase additional insurance protection, contributing to a 5 percent increase in total life insurance in force, which was $1.7 trillion at year-end Superior product value contributes to policyowner satisfaction and loyalty, demonstrated by our persistency rate for life insurance in force, which was greater than 96 percent again during Total Benefits Benefits paid to policyowners or their beneficiaries totaled $9.8 billion during 2016, an 8 percent increase from Paid benefits and the increase in reserves included the offsetting impacts of two large policy surrenders by corporate customers. Reserves for future policy benefits increased by $9.2 billion during 2016 and total reserves ended the year at $186.5 billion. Total Benefits Life Inforce Investment Client Assets 1, Integrated Products Life Inforce Individual life insurance in force reached $1.7 trillion during 2016, increasing 5 percent from the prior year. 1,700 1,600 1,500 1,400 1,300 1,200 1,100 1, Investment Client Assets The company s distinctive planning approach has resulted in tremendous growth in its investment products and services in recent years, including brokerage, advisory, trust and private client services, and business retirement plans. Northwestern Mutual client assets 3 under management grew 13 percent during 2016 and ended the year at more than $100 billion. 3 Investment Products & Services offerings are made available through Northwestern Mutual Investment Services, LLC, the company s dually registered broker-dealer and investment advisor subsidiary, and through Northwestern Mutual Wealth Management Company, the company s federally chartered savings bank. Both are wholly owned subsidiaries of Northwestern Mutual. 7

8 FINANCIAL RESULTS (continued) SUMMARY OF OPERATIONS (CONSOLIDATED STATUTORY BASIS, IN MILLIONS) Years ended Dec. 31: Premiums $17,915 $17,788 Net investment income 9,607 9,467 Other income Total revenue 28,158 27,880 These summary financial statements are derived from the company s audited consolidated financial statements, which are prepared on the statutory basis of accounting. Insurance regulators require financial statements prepared on a statutory basis of accounting, which differ materially from financial statements prepared in accordance with generally accepted accounting principles (GAAP). PricewaterhouseCoopers LLP is the company s independent auditor. The company s audited consolidated financial statements are available at northwesternmutual.com or by written request to: Northwestern Mutual Communications Room N E. Wisconsin Ave. Milwaukee, WI Policyowner benefits paid 9,799 9,043 Increase in benefit reserves 9,166 9,502 Commissions and expenses 3,136 2,932 Total benefits and expenses 22,101 21,477 Gain before dividends and taxes 6,057 6,403 Policyowner dividends 5,205 5,609 Gain before taxes Income tax expense (benefit) (176) (53) Net gain from operations 1, Net realized capital gains (losses) (210) (32) Net income $818 $815 SUMMARY OF FINANCIAL POSITION (CONSOLIDATED STATUTORY BASIS, IN MILLIONS) Dec. 31: 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, ,468 Other assets 8,288 8,273 Separate account assets 28,559 26,731 Total assets $250,441 $238,472 Policy benefit reserves $186,489 $176,928 Policyowner dividends payable 5,205 5,610 Other liabilities 6,515 5,983 Separate account liabilities 28,559 26,731 Liabilities (excluding AVR) 226, ,252 Asset valuation reserve (AVR) 3,447 3,564 Surplus 20,226 19,656 Surplus and AVR 23,673 22,598 Total liabilities and surplus $250,441 $238,472 8

9 POLICYOWNER DIVIDENDS Strong operating fundamentals, including careful underwriting and prudent investing, enables us to share the company s success with you through annual dividends. In 2017, we expect to once again lead the industry in total life insurance and disability income insurance dividends. Dividends Over Time 6,000 5,500 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1, $2.3 35% 2% $4.6 41% $5.2 (estimated) 65% 55% 63% 26% 8.50% DSIR* 7.50% DSIR* 5.00% DSIR* DISABILITY INCOME INSURANCE AND ANNUITIES LIFE INSURANCE MORTALITY AND EXPENSE COMPONENTS AND ADDITIONAL BENEFITS LIFE INSURANCE INTEREST COMPONENT *Dividend scale interest rate for unborrowed funds for most traditional permanent life insurance policies with direct recognition. Three separate components support Northwestern Mutual s traditional permanent life insurance dividends: mortality, expenses and interest. The dividend scale interest rate, or DSIR, shown here only reflects the interest component. It does not reflect the mortality and expense components the other approximately two-thirds of our dividend payout. 4% 9% Dividends can be used to increase policy values or offset premiums. Some policyowners even take them in cash. 1 Though our dividend payouts aren t guaranteed, we re proud of our consistent record: We ve made a dividend payout every year since In fact, we ve paid more than $48 billion in dividends in the past 10 years alone. Dividend Payout Expected total dividend payout: $5.2 billion Expected amount of total dividend payout on traditional permanent life insurance: $4.5 billion (about 85 percent) In 2017, we expect to once again lead the industry in total life insurance and disability income insurance dividends. Expected Payouts On Other Products Disability income insurance: $360 million record payout Term life insurance: $165 million record payout Variable life insurance: $110 million Annuities: $60 million record payout Our total life insurance dividend payout is expected to be double our nearest competitor, and our total disability income insurance dividend payout is expected to be more than 10 times larger. What sets Northwestern Mutual apart? Years of high policy retention among clients, low expenses, favorable claims experience and sound long-term investing. 1 IMPORTANT INFORMATION ABOUT DETERMINING DIVIDENDS In regard to Northwestern Mutual s dividend payout and dividend scale interest rate (DSIR), comments in this document pertain generally to life insurance policy dividends. The company s DSIR for unborrowed funds for most traditional permanent life insurance policies reflects the investment performance of the applicable managed assets net of taxes and any contribution to surplus. This rate is used for the determination of the interest component of a policy s dividend. The rate is applied to unborrowed funds for most traditional permanent life insurance policies after mortality and expense charges have been deducted from policy values. Depending on the terms of a particular policy, a different rate may be applied. For example, either a different rate is credited on borrowed funds to reflect individual policy loan activity, or all funds, both borrowed and unborrowed, are credited with a single rate that reflects the average level of borrowing for all similar policies. The DSIR is not the rate of return on a policy and is only one factor for determining the life insurance dividend. The majority of our life insurance dividend payment is a result of our industryleading persistency, favorable mortality costs and diligent expense management. Decisions with respect to the determination and allocation of divisible surplus are left to the discretion and sound business judgment of the company s Board of Trustees. There is no guaranteed specific method or formula for the determination and allocation of divisible surplus. Accordingly, the company s approach is subject to change. Neither the existence nor the amount of a dividend is guaranteed on any policy in any given policy year. Some policies may not receive any dividends in a particular year or years even while other policies receive dividends. In its 2017 dividend scale resolution, the Board of Trustees has exercised its discretion to guarantee a minimum amount of dividends to be paid in 2017 to the policyholders as a group. If this guaranteed amount exceeds the aggregate amount of dividends actually paid to individual policyholders in 2017, that excess will be paid out in 2018 pursuant to the 2017 dividend scale resolution. The presence of a guaranteed minimum amount in the 2017 dividend scale resolution does not obligate Northwestern Mutual to declare a dividend in future years or to guarantee any portion of dividends that may be declared in future years. 9

10 POLICYOWNERS EXAMINING COMMITEE REPORT LEFT TO RIGHT: Derrik Deyhimi, founder and chief executive officer of Iconixx; Bethany R. Smith, senior vice president of finance and chief financial officer of Capital District Physicians Health Plan, Inc.; John E. Schlifske, chairman and chief executive officer of Northwestern Mutual; Jaime A. Montemayor, 2016 POEC chair and retired senior vice president and chief information officer for PepsiCo.; Nicole Arnaboldi, vice chairman of asset management and head of direct equity partners business of Credit Suisse; Alfred Chip Johnson, chairman and chief executive officer of Modulant, Inc. Since 1907, a group of three to five policyowners has been given unrestricted access to the company to independently evaluate its operations, management and strategic plans. Each year, the committee s findings are published in the Annual Report. Below is the 2016 report that has been reviewed and approved in full. Transforming to meet clients changing needs from a position of strength We appreciate the extraordinary opportunity to serve on the Policyowners Examining Committee at a time when Northwestern Mutual is pursuing its new vision to earn its place at the center of clients financial lives through a comprehensive planning experience. This experience brings together a trusted financial professional, engaging technology and exceptional insurance and investment products. We congratulate the company for embarking on this transformative vision from a position of strength. Its industryleading financial performance, product value, brand reputation, client loyalty, superior competitive position and strong leadership team uniquely position the company for continued success. What truly sets Northwestern Mutual apart is the deeply held and singularly unifying value of always putting us, the clients, first. That belief is at the core of the company s vision and strategy. Through our interaction with the company s senior management, we have witnessed their support for the new vision and strategy, and the great progress that has been made. Leadership has had the courage to make difficult decisions that are driving the company forward while maintaining its financial strength and without jeopardizing the many other qualities that have made the company strong for nearly 160 years. We appreciate that the company is anticipating the changing needs of its clients and taking action now. Continued success depends on further deepening connections with clients While the company has made tremendous progress, in order to fully achieve its strategic vision, Northwestern Mutual must continue to develop deeper and more intimate connections with its clients by focusing on five key areas: 1. Consistent articulation of the company s evolving value proposition, which includes the integrated insurance and investments protect and grow approach to financial security; 2. A broader view of the client, which will further evolve the strategy; 3. Best-in-class digital capabilities, which open new opportunities to proactively reach out and connect with clients in the manner they want to be engaged; Next-generation distribution capabilities, by proactively promoting widespread adoption by financial representatives of both full-service financial planning and digital tools; and 5. An agile corporate culture that enables innovation and transformation, which accelerates the speed of change. A consistent articulation of the company s evolving value proposition We strongly support the company s integrated strategy to be at the center of its clients financial lives through a comprehensive financial planning experience that brings together insurance and investments products to protect and grow. As the company continues to evolve its strategy, we challenge leadership to continue to think critically about what products and services are necessary to deliver on the new value proposition. Across the enterprise, we witnessed the unshakable tenet of doing the right thing and putting clients first.

11 POLICYOWNERS EXAMINING COMMITEE REPORT (continued) A broader view of the client, which will further evolve the strategy We also challenge the company and the field to broaden its view of the client. We suggest seeing clients as their entire household, or inner circle, not just as individual policyowners. We believe that broadening the view of the client and focusing on important life events within that inner circle will provide greater opportunity to build multigenerational client relationships. The company is making significant strides in its strategic digital capabilities We applaud the company for appreciating the critical importance of digital capabilities to meet growing consumer expectations. We recognize and acknowledge the company s acquisition of online personal financial planning and education leader LearnVest as a big, bold, visible step toward developing industry-leading digital capabilities and improving the client experience. We urge leadership to push forward to create a preeminent digital client experience. We agree that a state-of-the-art digital platform is critical to deepening the company s relationship with its clients and enabling representatives in the field to deliver a more consistent client experience. We see these digital capabilities as a key way to grow and support the field. We also see a significant opportunity in the digital marketing and social media spaces particularly when used in conjunction with data and analytics to enable the company and representatives to better understand clients and their inner circles. Efforts must continue to deliver the integrated experience to all clients While we commend the company for making necessary strategic changes from a position of strength, we acknowledge that driving change within a highly successful, independent field force of financial professionals can be challenging. We firmly believe that all clients would greatly benefit from an integrated experience that includes comprehensive financial planning and access to the full offering of products and services, delivered through We firmly believe that all clients would greatly benefit from an integrated experience that includes comprehensive financial planning and access to the full offering of products and services, delivered through a dedicated financial representative and robust digital resources. a dedicated financial representative and robust digital resources. We see an opportunity in ensuring that more financial representatives bring the full suite of products and services to clients as conceived in this new vision. We urge leadership to continue partnering with the field to test different training and reward models to align with the new strategy. We appreciate that some members of the independent field force may be reluctant to alter their already successful traditional business model. Therefore, we agree with the company s approach of aggressively training new recruits to take advantage of the new integrated model, facilitating experienced financial representatives transition to the new model, and continuing to support the traditional model. The importance of field leaders and veteran representatives visibly supporting adoption of the new integrated model cannot be overstated. Clients first is the core value that will see the company through this transition period We believe that shifting from a home office or field focus to a clients first mindset will help Northwestern Mutual more effectively 11 manage the unprecedented magnitude and pace of change. Across the enterprise, we witnessed the unshakable tenet of doing the right thing and putting clients first. While the company is tackling the challenges that come with transformation, this core value can bring the entire enterprise together around a common theme. We urge leadership to leverage those champions in the home office and field who are agile, forward thinking and changeready to help others who are struggling. And while the strategy requires change, leadership must continue to reinforce the why and remain mindful of preserving the values that are essential to the company s identity and success. The company is on the precipice of a milestone year: 2017 marks the 160th anniversary of the company, the 110th year since the inception of the Policyowners Examining Committee, and the 25th anniversary of the Northwestern Mutual Foundation. We encourage the company to see these milestones as opportunities to both celebrate the company s past and emphasize the ongoing need for change. A call to action to the field: Take full advantage of all that Northwestern Mutual provides to deliver financial security to your clients Because the company cannot achieve its strategy without a growing and vibrant field force, we want to close our report with a call to action to the field: We encourage you to adopt and leverage the many tools and capabilities that the company is creating to help you build stronger, deeper relationships with us as clients and our inner circles. We are looking to you to help the company execute its strategy by adopting and promoting an integrated, planning-based approach that addresses both risk and wealth accumulation so that all of your clients have access to the full value of their relationship with Northwestern Mutual and you, their trusted financial professional. - Report submitted Jan. 12, 2017

12 PLANNING AND GUIDANCE Working with a financial professional who understands your entire financial picture and goals. Putting a plan in place that is comprehensive, smart and achievable. These steps can turn anxiety into confidence about the future. And it s extraordinary how much financial confidence would positively affect Americans currently experiencing that anxiety. A majority say financial certainty would positively impact their career and their ability to pursue dreams, passions and interests in short, it would enable them to Live Life Differently. It s why Northwestern Mutual clients take advantage of our financial planning process, designed to help you create a lifetime of financial security. Achieving Financial Security: Guidance The United States is a nation of the financially anxious. IDENTIFY GOALS Our financial professionals will work with you to: Identify your goals. First, we ll make sure we understand what s important to you and your loved ones, where you are today and where you want to be in the future. REVIEW RISK MANAGEMENT FINANCIAL SECURITY WEALTH ACCUMULATION WEALTH PRESERVATION & DISTRIBUTION PERSONALIZED PLAN Develop your personalized plan. We ll analyze your financial situation and develop recommendations that can help you and your family achieve financial security. Implement your strategies. After we decide on the right strategy, we ll put it to work with proven products and quality solutions. IMPLEMENTATION We ll work with you to put a personalized plan in place and adjust it over time to stay on track. Review your plan. Throughout life, even small changes can impact your financial plan. We ll help you adjust your plan as needed to stay on track. 12

13 CLIENT STORY LIVING HIS DREAM: A NEW CAREER Mike Fruscione Charlotte, N.C. Mike Fruscione was contemplating a career change. Not at age 25, when exploring is expected, but in his 30s. Mike s a husband and father, and already an MBA. The Wall Street career was going well. Leaving a good job and heading to school seemed like pushing the rewind button. Exchanging a Wall Street salary for six hours of medical school lectures a day is a radical step. Mike did it anyway. I had wanted to be a doctor since high school, when my dad was diagnosed with and, sadly, soon died from cancer, Mike recalls. I tried to pursue that passion by volunteering in the community, but it wasn t enough. When I got into my 30s, I finally decided I was too young to spend the next 20 to 30 years doing something that was not my calling. But exchanging a Wall Street salary for six hours of medical school lectures a day is a radical step. So, Mike did his homework. Feeling confident that his family would be finanically secure while he attended med school was paramount. If the math didn t work, Mike s plan would be over before it began. Mike s dad was a big believer in financial planning, and his son had learned by example. Mike and Wealth Management Advisor Kevin Luchetta have been working together for years, preparing for the future, even back when they didn t know what that future might be. Now the future had arrived, and smart insurance and investment choices made from the start in Mike s plan meant finances would not block the way. Mike headed to medical school. My Dad, an Italian immigrant, sacrificed for us and taught us important lessons, says Mike, now a general surgery resident. His most important financial advice was to be smart with money. He worked hard, and we had fun and splurged when we could, but we were always aware of the importance of safeguarding our financial security. And, thanks to Kevin s guidance, I have been able to make fulfilling Mike is pursuing his dream of being a surgeon while providing for his family. choices and still give my family the life they deserve, he adds. As my life and goals have evolved, our conversations have changed, too. Kevin has helped me achieve the confidence to pursue my dreams. 13

14 SUPPORTING THE COMMUNITY We feel fortunate that the work we do every single day builds stronger and better communities. The mission of the Northwestern Mutual Foundation is to improve the lives of children and families in need through financial support and volunteerism in collaboration with community partners. Since its inception more than 25 years ago, we have given more than $300 million to communities where our employees, financial representatives and advisors live and work. Together with our partners we re accelerating the search for cures for childhood cancer, improving education, impacting neighborhoods and enhancing our hometown by ensuring it is a great destination. Building Hope Northwestern Mutual Financial Representatives support causes in their communities across the country. Building Stronger Communities Fighting childhood cancer Northwestern Mutual employees support Alex s Lemonade Stand Foundation. Doing Good for a Brighter Future In virtually every community we serve, you ll find our financial representatives and advisors volunteering their time and talent to vital services and organizations. Since 1995, we ve recognized nearly 400 of our financial professionals as Community Service Award winners and donated nearly $5 million to nonprofits on their behalf. Northwestern Mutual employees give their time and talent to their hometown community. Fighting Childhood Cancer We bring hope to thousands of children and families through our national philanthropic program to fight childhood cancer. With the help of our employees, financial representatives and advisors, Northwestern Mutual has contributed more than $14 million to fund more than 160,000 hours of research and provide crucial support to families whose children are fighting cancer. We see a future in which children and families can move beyond the fears of cancer and find happiness because all kids deserve a chance to just be kids. 14 Our employees are a force for good, donating their time and talent as well as their financial support to charities and causes that matter to them and our community. In 2016, more than 1,500 home office employees volunteered more than 37,000 hours in southeastern Wisconsin. Northwestern Mutual is among the largest corporate donors to the United Way of Milwaukee & Waukesha County and the United Performing Arts Fund.

15 160 YEARS OF STRENGTH AND STABILITY Unsurpassed Value and Strength Year after year, we ve maintained our record of unsurpassed financial strength. Aaa HIGHEST Moody s Investors Service A++ HIGHEST A.M. Best Company AAA HIGHEST Fitch Ratings AA+ SECOND HIGHEST Standard & Poor s We expect Northwestern Mutual Life Insurance Co. and its subsidiary, Northwestern Long Term Care Insurance Co., to maintain its extremely strong competitive position while maintaining extremely strong capital and exceptional liquidity. S&P Global Ratings, June 2016 Recognized by FORTUNE as one of the World s Most Admired companies based on responses from industry executives, directors and analysts worldwide. FORTUNE, February 2017 Northwestern Mutual Investment Services (NMIS) has been recognized as a top 10 biggest independent broker-dealer in the financial services industry by Financial Planning magazine. Financial Planning Magazine, August 2016 Leading in Digital Innovation We re on the path to delivering a distinctive digital experience that combines expert advisors and engaging technology. Awarded 2016 Eye on Innovation Prize for Most Innovative Digital Business Model in Financial Services by Gartner, Inc. Gartner, October 2016 Ratings are for The Northwestern Mutual Life Insurance Company and Northwestern Long Term Care Insurance Company, as of the most recent review and report by each rating agency. Northwestern Mutual s ratings: A.M. Best Company A++ (highest), 5/2016; Fitch Ratings AAA (highest), 11/2016; Moody s Investors Service Aaa (highest), 1/2017; Standard & Poor s AA+ (second highest), 6/2016. Ratings are subject to change. Northwestern Mutual is the marketing name for The Northwestern Mutual Life Insurance Company (NM), Milwaukee, WI (life and disability insurance, annuities and life insurance with long-term care benefits) and its subsidiaries (0417) 15