497 1 d237336d497.htm NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT II (VULP) Northwestern Mutual Variable Life Account II (VULP)
Table of Contents
Variable Universal Life Plus
Issued by The Northwestern Mutual Life Insurance Company and Northwestern Mutual Variable Life Account II
Prospectus May 1, 2022
This prospectus (the "Prospectus") describes an individual flexible premium variable universal life insurance policy (the “Policy”) issued by The Northwestern Mutual Life Insurance Company. The Policy is designed to provide a Life Insurance Benefit upon the death of the Insured and is not suitable for short-term investment. You should consider the Policy in conjunction with other insurance you own. Replacing your existing life insurance with this Policy may not be to your advantage. In addition, it may not be to your advantage to finance the purchase or maintenance of this Policy through a loan or through withdrawals from another policy. Please consult your Financial Representative.
Subject to the limitations discussed in this Prospectus you may choose to invest your Net Premiums in up to 30 Divisions of the Northwestern Mutual Variable Life Account II (the “Separate Account”) as well as a fixed option under certain circumstances. Each Division of the Separate Account invests exclusively in shares of a single series of a Fund (a “Portfolio”). Each Portfolio available as an investment option under the Policy is identified below:
Northwestern Mutual Series Fund, Inc.
- 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
Fidelity® Variable Insurance Products
- VIP Mid Cap Portfolio
- VIP Contrafund® Portfolio
Neuberger Berman Advisers Management Trust
- Sustainable Equity Portfolio
Russell Investment Funds
- U.S. Strategic Equity Fund
- U.S. Small Cap Equity Fund
- Global Real Estate Securities Fund
- International Developed Markets Fund
- Strategic Bond Fund
Russell Investment Funds LifePoints® Variable Target Portfolio Series
- Moderate Strategy Fund
- Balanced Strategy Fund
- Growth Strategy Fund
- Equity Growth Strategy Fund
Credit Suisse Trust
- Commodity Return Strategy Portfolio
Please note that the Policy (including any available fixed option) and the Portfolios are not guaranteed to achieve their goals; are not federally insured; are not bank deposits; and are not endorsed by any bank or government agency.
This Policy is subject to the laws of the state in which the Policy 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 described in this Prospectus. This Policy is not available in the State of New York. Unless clear from their context or otherwise appropriate, all of the capitalized terms used in this Prospectus are defined at the end of this Prospectus in the Glossary of Terms. “Northwestern Mutual,” “Company,” ”we,” “us,” and “our” in this Prospectus mean The Northwestern Mutual Life Insurance Company.
Please carefully read this Prospectus and any accompanying prospectuses for the corresponding Portfolios and keep them for future reference. This Prospectus provides 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 this Prospectus. Our Distributor may limit sales of the Policy to certain government entities and government entity plans.
The Securities and Exchange Commission (“SEC”) has not approved or disapproved the Policy or passed upon the adequacy of this Prospectus. Any representation to the contrary is a criminal offense.
You may cancel your Policy within 10 days of receiving it without paying fees or penalties.
In some states, this cancellation period may be longer. Depending on your state of issue, upon cancellation you will receive either the full amount of your Premium Payment(s) or the Policy’s Contract Fund Value. You should review the Prospectus, or consult with your Financial Representative, for some additional information about the specific cancellation terms that apply.
Additional information about certain investment products, including variable life insurance policies, has been prepared by the SEC’S Staff and is available at Investor.gov.
As permitted by regulations adopted by the SEC, paper copies of your underlying Portfolios’ shareholder reports will no longer be sent by mail unless you specifically request paper copies of the reports from us. Instead, your Portfolio annual and semi-annual reports will be made available on www.nmfundreports.com and you will be notified by mail each time a report is posted and provided with a link to access the report for each Portfolio. If you already elected to receive shareholder reports electronically, you will not be affected by this change, will continue to receive reports electronically and you need not take any action. You may elect to receive shareholder reports (and other communications) electronically by signing up for eDelivery at www.NorthwesternMutual.com/eDelivery. You may elect to receive all future reports in paper free of charge. You can inform us that you wish to continue receiving paper copies of your shareholder reports by calling (866) 910-1232. Your election to receive shareholder reports in paper will apply to all future reports for all Portfolios available under your Policy.
 
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Important Information You Should Consider About the Policy 
 
FEES AND EXPENSES
Cross-Reference(s)
to Location in
Prospectus
Charges for Early
Withdrawals
If you surrender your Policy (or if you change your Policy to Paid-up insurance)
in the first ten Policy Years you will be assessed a surrender charge of up to
50% of the Target Premium.
For example, if you surrender your Policy and your total Target Premium
amount was $100,000, you could pay a surrender charge of up to $50,000.
Withdrawals are subject to a $25 service charge (currently waived) for each
withdrawal request.
Fee and Expense
Tables – Transaction
Fees (Surrender
Charge and
Withdrawal Fee)
Also see
Information About
the Policy – Other
Benefits Available
Under the Policy
(Paid-Up Insurance)
Transaction Charges
In addition to surrender charges and withdrawal charges, you may also be
charged for other transactions, such as certain tax-related charges, a front-end
sales load, charges for transferring between investment options, requesting
more than one illustration in a Policy Year, changes to your Death Benefit
option or Specified Amount, as well as charges for expedited delivery or wire
transfers.
Fee and Expense
Tables – Transaction
Fees
Ongoing Fees and
Expenses
(annual charges)
In addition to the charges above, investment in the Policy is subject to ongoing
fees and expenses, including fees covering the cost of insurance and optional
benefits available under the Policy. These fees are based on information as of
December 31, 2021, may change from year to year, and are generally based on
characteristics of the insured (e.g., age, sex and rating classification). You
should review your Policy specifications page for specific rates applicable under
your Policy.
You bear the expenses associated with the Portfolios available under your
Policy, the range for which is shown in the following table:
Fee and Expense
Tables – Periodic
Charges (Other than
Portfolio Operating
Expenses)
 
Fee and Expense
Tables – Annual
Portfolio Operating
Expenses
Annual Fee
Minimum*
Maximum*
Investment Options
(Portfolio company
fees and expenses)
0.21%
1.28%
* As a percentage of Portfolio assets.
 
RISKS
 
Risk of Loss
You can lose money by investing in the Policy, including loss of principal.
Risks of the Policy –
Investment Risk and
The Funds
Not a Short-Term
Investment
The Policy is not a short-term investment and is not appropriate for you if you
need ready access to cash. Surrender charges apply in the first 10 Policy Years
and the value of your Policy and life insurance benefit will be reduced if you
withdraw money. In addition, short-term investment in the Policy may subject
you to income taxes and tax penalties.
Risks of the Policy
for Long-Term
Protection
Risks Associated
with Investment
Options
Investment in the Policy is subject to the risk of poor investment performance
and can vary depending on the performance of the investment options
(Portfolios) available under the Policy. Each Portfolio (and any fixed account
investment option) will have its own unique risks and you should review these
investment options before making an investment decision.
Risks of the Policy –
Investment Risk
Also see The Funds
and The Fixed
Option (NM
Strength and
Stability Account)
sections
1Variable Universal Life Plus Prospectus
 
RISKS
Cross-Reference(s)
to Location in
Prospectus
Insurance Company
Risks
Investment in the Policy is subject to the risks related to Northwestern Mutual,
and any obligations (including under any fixed account investment options),
guarantees, or benefits are subject to the claims-paying ability of Northwestern
Mutual. More information about Northwestern Mutual, including its financial
strength ratings, is available upon request by calling toll free (866) 464-3800.
Risks of the Policy –
Investment Risk and
the Northwestern
Mutual section.
Policy Lapse
Insufficient premium payments, poor investment results, withdrawals, unpaid
loans, or loan interest may cause your Policy to lapse, meaning you will no
longer have any life insurance coverage and death benefits will not be paid.
After lapse, you may reinstate the Policy subject to certain conditions described
in the Prospectus, including the payment of the minimum payment amount,
required to keep the Policy in force.
Risks of the Policy
–Lapse
Information About
the Policy –
Termination and
Reinstatement
 
RESTRICTIONS
 
Investments
Transfers or allocations to the Government Money Market Division and the
Policy’s fixed option, the NM Strength and Stability Account (the “SAS
Account”), are subject to certain restrictions. We do not permit transfers from
the SAS Account to the Divisions.
Transfers from the Divisions must be in amounts greater than or equal to 1% of
assets in the Divisions, may be subject to charges, and are subject to the
Policy’s short-term and excessive trading policies. These short-term and
excessive trading policies may trigger additional restrictions on your Policy.
Currently, there is no charge when you transfer Contract Fund Value among
Divisions and the SAS Account. However, we reserve the right to charge $25 for
each transfer. You may invest in up to 30 Divisions at a time.
Under certain circumstances Northwestern Mutual reserves the right to
remove a Portfolio or substitute another Portfolio or mutual fund for such
Portfolio.
The Fixed Option
(NM Strength and
Stability Account)
 
Information about
the Policy – Other
Policy Transactions
(Transfers and
Short-Term and
Excessive Trading)
 
Information about
the Policy – Other
Policy Transactions
(Substitution of
Portfolio Shares and
Other Changes)
Optional Benefits
Optional benefits are subject to additional charges and payments made under
these benefits are generally subject to the same transaction fees as other
premium payments but may be treated differently for other purposes (e.g.,
certain death benefit minimums). Optional benefits are not available for all
ages (or may terminate at certain ages) and underwriting classifications. We
may stop offering an optional benefit at any time.
Information about
the Policy – Other
Benefits Available
Under the Policy
 
TAXES
 
Tax Implications
You should consult with a tax professional to determine the tax implications of
an investment in, and payments received under, the Policy. There is no
additional tax benefit if the Policy is purchased through a tax-qualified plan or
individual retirement account (IRA). Withdrawals will generally be subject to
ordinary income tax, and may be subject to tax penalties.
Tax Considerations
 
CONFLICTS OF INTEREST
 
Investment
Professional
Compensation
The Policy is sold exclusively through financial representatives of Northwestern
Mutual’s affiliated broker-dealer, who are compensated with a commission
based on a percentage of premium, and Northwestern Mutual may share
revenue it earns on the Policy with its affiliated broker-dealer. These financial
representatives may have a financial incentive to offer or recommend the
Policy over other investments.
Distribution of the
Policy
 
Also see Charges
and Deductions –
Commissions Paid to
Financial
Representatives
Variable Universal Life Plus Prospectus
2
 
CONFLICTS OF INTEREST
Cross-Reference(s)
to Location in
Prospectus
Exchanges
Some financial representatives may have a financial incentive to offer this
Policy in place of one you already own. You should only exchange an existing
policy if you determine, after comparing the features, fees and risks of both
policies, that it is preferable to purchase this Policy rather than continue to own
the existing policy.
None
Overview of the Policy
What is the Policy, and what is it designed to do?
The Policy is an individual flexible premium variable universal life insurance policy, the purpose of which is primarily to provide life insurance protection (i.e., a death benefit) while providing the long-term accumulation of assets through allocations to a variety of Divisions and/or a fixed account option. The Policy may be appropriate if you have a long-term investment horizon and is not intended for short-term investment, and is therefore not appropriate for people who may need to make early or frequent withdrawals or who intend to engage in frequent trading. You may want to consult your financial or tax advisor.
In exchange for your Premium Payments, upon the death of the Insured, we will pay the Death Benefit to your beneficiary based on one of three death benefit options available under the Policy. Subject to certain limitations, you can change the Death Benefit option you selected. (See “Death Benefit – Changing Death Benefit Options” in the Prosepctus for more information.)
How are Premium Payments treated under the Policy?
As described in more detail in the “Information About the Policy” section of the Prospectus, when you apply for the Policy you must make a minimum initial Premium Payment to put your Policy in force. No insurance will take effect until the minimum initial Premium Payment is made. The minimum initial Premium Payment is based on the Issue Age, underwriting classification and sex of the Insured, the Initial Specified Amount, any optional benefits and, if applicable, the Death Benefit Guarantee Period. For certain Death Benefit Guarantee Periods, a minimum Premium Paymentis required to be paid in the first Policy Year.
After the Policy is issued, you must make sufficient Premium Payments to keep the Policy in force. There is no required schedule or amount of Premium Payments but the investment results of the Divisions to which your Net Premium(s) is allocated will affect the Premium Payments you are required to make to keep your Policy in force. If you elect the Death Benefit Guarantee, your Policy will generally not lapse regardless of the investment performance of the Divisions in which you invest so long as you make the minimum requested payment upon notice that your cumulative premium payments are below the required amount.
When a Premium Payment is received in Good Order at our Home Office after the Policy is in-force, we deduct a premium tax charge, federal deferred acquisition cost charge and sales load to cover taxes and acquisition and distribution expenses, respectively, and the remaining amount, known as the Net Premium(s), is allocated among the Divisions and the SAS Account, according to your current allocation instructions in the Application or supplement to the Application. Depending on the state in which we issue the Policy, we may hold your initial Net Premium in the Government Money Market Division until the later of the day after your right to return the Policy expires and the day we receive notice of delivery of your Policy.
Investments in the Policy’s Divisions are held in the Separate Account which is an account separate from our General Account assets. We have established a segment within the Separate Account to receive and invest Net Premium(s) for the Policy. Currently, the Policy segment is divided into over 40 Separate Account Divisions. Each Division purchases shares in a corresponding Portfolio. Information about each corresponding Portfolio is provided at the back of this document. See APPENDIX A: Portfolios Available under Your Policy.
Net Premium applied and amounts transferred to the SAS Account accrue interest daily at an effective annual rate Northwestern Mutual determines without regard to the investment experience of the General Account. The SAS Account is the sum of two separate balances, a Tier One balance and a Tier Two balance. The Tier One balance credits an annual guaranteed effective interest rate at least as high as the Tier Two balance. Northwestern Mutual guarantees a minimum annual effective interest rate of 1.50% for the Tier One balance and 1.25% for the Tier Two balance. (See “The Fixed Option (NM Strength and Stability Account)” in the Prospectus.)
Payment of insufficient premiums may result in the Policy terminating or lapsing, subject to the Death Benefit Guarantee explained below (if applicable).
Q. What are the primary features and options that the Variable Universal Life Plus Policy offers?
A.
Choice of Death Benefit Options. You may choose among three Death Benefit options, a death benefit based on the Specified Amount (Option A), on the Specified Amount plus Policy Value (Option B) or on the Specified Amount plus
3Variable Universal Life Plus Prospectus
cumulative premiums paid (less any cumulative withdrawals)(Option C). In addition to the three Death Benefit options, there is also a Minimum Death Benefit that may be applied. See the “Death Benefit” section in the Prospectus for more information.
B.
Surrenders and Withdrawals. You may surrender your Policy, and we will pay you its Cash Surrender Value (Policy Value less any Policy Debt and any surrender charge). You may also withdraw a part of the Policy Value. A withdrawal reduces the Policy Value, may reduce the Specified Amount of the Policy and therefore the Death Benefit, may impact the Death Benefit Guarantee, and may increase the risk that the Policy will terminate or lapse. Surrenders and withdrawals are subject to charges and may have adverse tax consequences.
C.
Loans. You may take a loan on the Policy that when added to existing Policy Debt does not exceed the Loan Value of the Policy. The Policy secures the loan. Taking a loan will reduce Cash Surrender Value and the Death Benefit, may impact the Death Benefit Guarantee, may have adverse tax consequences and will increase the risk that your Policy may terminate or lapse.
D.
Transfers. Generally, you may transfer Contract Fund Value among up to 30 Divisions and the SAS Account, subject to certain restrictions on transfers to the Government Money Market Division and the SAS Account. We also offer four asset allocation models and two automated transfer programs: dollar cost averaging and portfolio rebalancing.
E.
Death Benefit Guarantee. During a defined period elected at issue, your Policy will not terminate or lapse, even if the Cash Surrender Value is not enough to pay Monthly Policy Charges, as long as you have made specified minimum Premium Payments. However, even if specified minimum Premium Payments have been made, Policy loans and withdrawals could cause the Policy to terminate.
F.
Collateral Assignment. Subject to our approval, you may generally assign the Policy as collateral for a loan or other obligation.
G.
Tax Treatment. You are generally not taxed on the Policy’s earnings until you withdraw Policy Value from your Policy. This is known as tax deferral.
H.
Additional Benefits. There are additional benefits you may add to your Policy. An additional charge may apply if you elect an additional benefit. The additional benefits available with this Policy are listed in the “Other Benefits Available under the Policy” section of the Prospectus, and include the following:
•
Waiver Benefit: Payment of Selected Monthly Premium Upon Total Disability – Permits an Insured who has become totally disabled to make minimum premium payments equal to or greater than the monthly charges without the Policy lapsing
•
Additional Purchase Benefit – Allows the Owner to purchase additional life insurance policies on the life of the Insured without proof of insurability
•
Death Benefit Guarantee – Allows you to select a Death benefit Guarantee Period during which the Policy is guaranteed not to terminate due to insufficient value in your Policy
•
Death Benefit Guarantee Premium Suspension – Allows for the suspension of required premiums during the Death Benefit Guarantee Period until your next Policy Anniversary
•
Income Plans – In lieu of a lump sum payment, the Death Benefit and surrender proceeds may be payable in monthly (or less frequent) payments over a period of time
•
Exchange for a Fixed Benefit Policy – Allows you to exchange your Policy for a life insurance policy with benefits that do not vary with the investment experience of the underlying Portfolios
•
Paid-up Insurance – Under certain conditions allows the Owner to change the Policy to a policy free of minimum premium payment obligations
•
Dollar Cost Averaging – On a monthly basis, automatically transfers a specific amount from the Government Money Market Division into the other Divisions you have selected
•
Portfolio Rebalancing – Automatically rebalances the Divisions you select (either monthly, quarterly, semi-annually or annually) to maintain your chosen allocations among the Divisions
•
Allocation Models – Models are available that comprise a combination of Divisions representing various asset classes with various levels of risk tolerance
Variable Universal Life Plus Prospectus
4
Fee and Expense Tables
The following tables describe the fees and expenses that are payable when you buy, own, surrender or make withdrawals from the Policy. Please refer to your Policy specifications page for information about the specific fees you will pay each year based on the options you have elected.
Transaction Fees
The table below describes the fees and expenses that are payable at the time that you buy the Policy, make premium payments, surrender the Policy, make withdrawals, transfer assets among investment options, or make certain changes to the Policy. 
Charge
When Charge is Deducted
Amount Deducted
Guaranteed Maximum
Charge
Current Charge
Premium Tax Charge
Upon each Premium
Payment
No maximum — Charges
may increase to reflect
actual costs
2.00% of Premium Payment
Federal Deferred
Acquisition Cost Charge1
Upon each Premium
Payment
0.55% of Premium Payment
Sales Load
Upon each Premium
Payment
Same as current charge
6.95% of premium up to Target Premium2 and
5.60% of premium in excess of Target Premium in
Policy Years 1-10; 3.95% of premium up to Target
Premium and 5.60% of premium in excess of Target
Premium in Policy Years 11-20 and 0.00% beyond
year 20
Surrender Charge3
Upon surrender or
change to paid-up
insurance during the first
ten Policy Years
 
 
Maximum Charge4
 
Same as current charge
50% in Policy Years 1-5 of the Target Premium,
grading down monthly in Policy Years 6-10 to 0%
Minimum Charge5
 
Same as current charge
13% in Policy Years 1-5 of the Target Premium,
grading down monthly in Policy Years 6-10 to 0%
Charge for Insured Issue
Age 35
 
Same as current charge
50% in Policy Years 1-5 of the Target Premium,
grading down monthly in Policy Years 6-10 to 0%
Withdrawal Fee6
Upon withdrawal
$25.00
Currently waived
Transfer Fee6
Upon transfer
$25.00
Currently waived
Change in Death Benefit
Option Fee6
Upon change in Death
Benefit option
$25.00
Currently waived
Change in Specified
Amount Fee6
Upon change in Specified
Amount
$25.00 per change after
first change in a Policy
Year
Currently waived
Request for Additional
Illustration Charge6,7
Upon request for more
than one illustration in a
Policy Year
$25.00 per illustration for
each additional
illustration in a Policy
Year
Currently waived
Expedited Delivery
Charge6,8
When express mail
delivery is requested
$50 per delivery (up to
$75 for next day, a.m.
delivery) adjusted for
inflation9
$15 per delivery (up to $45 for next day, a.m.
delivery)
Wire Transfer Fee6,8
When a wire transfer is
requested
$50 per transfer (up to
$100 for international
wires) adjusted for
inflation9
$25 per transfer (up to $50 for international wires)
1
This charge was previously referred to as the “OBRA Expense Charge” or “Other Premium Expense Charge.” Due to a federal tax law change under the Omnibus Budget Reconciliation Act of 1990, as amended (“OBRA”), 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. This charge compensates us for the additional corporate income tax burden resulting from OBRA.
2
The Target Premium is a hypothetical annual premium which is based on the Specified Amount, Death Benefit option, Death Benefit Guarantee Period, any optional benefits, and characteristics of the Insured, such as factors including but not limited to Issue Age, sex, and underwriting classification. Please see “Target Premium” in the Glossary of Terms.
5Variable Universal Life Plus Prospectus
3
The initial surrender charge percentage varies by Issue Age and remains level between Policy Years one through five, and declines monthly in Policy Years six through ten to zero. The surrender charge shown in the table may not be representative of the charge a particular Owner would pay. For more information on the surrender charge, see “Charges and Deductions – Monthly Policy Charges and Service Charges” in the Prospectus. Your Policy schedule pages will indicate the maximum charge under your Policy.
4
The maximum Surrender Charge assumes that the Insured has the following characteristic: Issue Ages 0-54.
5
The minimum Surrender Charge assumes that the Insured has the following characteristic: Issue Age 75.
6
Fees and charges are deducted from Contract Fund Value (see “Glossary of Terms”).
7
An illustration of the Policy’s future benefits and values is provided once a Policy Year at no charge upon request.
8
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.
9
The Guaranteed Maximum 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 Guaranteed Maximum Charge shown above multiplied by the CPI for the fourth month prior to the time of the charge, divided by the CPI for April, 2018. “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 Northwestern Mutual to serve the same purpose.
Periodic Charges (Other than Portfolio Operating Expenses)1
The table below describes the fees and expenses that you will pay periodically during the time that you own the Policy other than the operating expenses for the Portfolios. Certain charges applicable to your Policy depend on your Policy Year. Please see “Policy Year” in the Glossary of Terms to help you understand how they will affect the charges applicable to your Policy. 
 
 
Amount Deducted
Charge
When Charge is Deducted
Guaranteed Maximum
Charge
Current Charge
Cost of Insurance Charge2
Monthly, on each
Monthly Processing Date
 
 
Maximum Charge3
 
Same as current charge
$83 (monthly) per $1,000 of net amount at risk
Minimum Charge4
 
$0.007 (monthly) per
$1,000 of net amount at
risk
$0.006 (monthly) per $1,000 net amount at risk
Charge for Insured Age
35, Male, Premier Non-
Tobacco underwriting
classification5
 
$0.11 (monthly) per
$1,000 of net amount at
risk in the first Policy Year
(varies by Policy Year)
$0.01 (monthly) per $1,000 of net amount at risk in
the first Policy Year (varies by Policy Year)
Percent of Contract Fund
Value Charge6
Monthly, on each
Monthly Processing Date
All Policy Years: 0.60%
annually (0.05% monthly
rate) of Contract Fund
Value
All amounts in the Divisions: 0.00% annually (0.00%
monthly rate) of Contract Fund Value
SAS Account: 0.23% annually (0.019% monthly rate)
of Contract Fund Value
Administrative Charge
Monthly, on each
Monthly Processing Date
 
 
Maximum Charge7
 
$33 (monthly)
$14 (monthly)
Minimum Charge8
 
$16 (monthly)
$6 (monthly)
Charge for Insured Age
35, Male, Premier Non-
Tobacco underwriting
classification
 
$19 (monthly)
$8 (monthly)
Specified Amount Charge
Monthly, on each
Monthly Processing Date
during the first ten Policy
Years
 
 
Maximum Charge9
 
Same as current charge
1.375% (monthly) of Target Premium during Policy
Years 1-10
Minimum Charge10
 
Same as current charge
1.021% (monthly) of Target Premium during Policy
Years 1-10
Charge for Insured Age
35, Male, Premier Non-
Tobacco underwriting
classification
 
Same as current charge
1.25% (monthly) of Target Premium during Policy
Years 1-10
Variable Universal Life Plus Prospectus
6
 
 
Amount Deducted
Charge
When Charge is Deducted
Guaranteed Maximum
Charge
Current Charge
Death Benefit Guarantee
Charge
Monthly, on each
Monthly Processing Date
when the Death Benefit
Guarantee is in force
$0.02 per $1,000 of
Guaranteed Minimum
Death Benefit
$0.01 per $1,000 of Guaranteed Minimum Death
Benefit
Policy Debt Expense
Charge11
Monthly, on each
Monthly Processing Date
when there is Policy Debt
All Policy Years 2.00%
annually (0.17% monthly
rate) of Policy Debt
0.71% annually (0.0592% monthly rate) of Policy
Debt for Policy Years 1-20
 
0.21% annually (0.0175% monthly rate) of Policy
Debt for Policy Years 21 and above
Underwriting and Issue
Charge12
Monthly, on each
Monthly Processing Date
during the first ten Policy
Years
 
 
Maximum Charge13
 
Same as current charge
$0.026 (monthly) per $1,000 of Initial Specified
Amount
Minimum Charge14
 
Same as current charge
$0.005 (monthly) per $1,000 of Initial Specified
Amount
Charge for Insured Age
35, Male, Premier Non-
Tobacco underwriting
classification
 
Same as current charge
$0.007 (monthly) per $1,000 of Initial Specified
Amount
Payment of Selected
Monthly Premium Upon
Total Disability Benefit
Charge15
Monthly, on each
Monthly Processing Date
 
 
Maximum Charge16
 
The greater of $0.09
(monthly) per $1.00 of
Selected Monthly
Premium, or $0.14
(monthly) per $1.00 of
Specified Monthly
Charges
The greater of $0.03 (monthly) per $1.00 of Selected
Monthly Premium, or $0.05 (monthly) per $1.00 of
Specified Monthly Charges
Minimum Charge17
 
$0.003 (monthly) per
$1.00 of Selected
Monthly Premium
$0.001 (monthly) per $1.00 of Selected Monthly
Premium
Charge for Insured Age
35, Male, Premier Non-
Tobacco underwriting
classification
 
$0.01 per $1.00 of
Selected Monthly
Premium
$0.003 (monthly) per $1.00 of Selected Monthly
Premium
Additional Purchase
Benefit Charge18
Monthly, on each
Monthly Processing Date
 
 
Maximum Charge19
 
$0.14 (monthly) per
$1,000 of additional
purchase benefit amount
$0.03 (monthly) per $1,000 of additional purchase
benefit amount
Minimum Charge20
 
$0.04 (monthly) per
$1,000 of additional
purchase benefit amount
$0.01 (monthly) per $1,000 of additional purchase
benefit amount
Charge for Insured, Issue
Age 0, Male
 
$0.04 (monthly) per
$1,000 of additional
purchase benefit amount
$0.02 (monthly) per $1,000 of additional purchase
benefit
1
The charges described in this table may vary based upon one or more characteristics of the Policy, such as factors including but not limited to: Insured underwriting classification, Issue Age, sex, underwriting amount, Specified Amount, Target Premium, Policy Debt, and Policy Year (see “Charges and Deductions—Monthly Policy Charges and Service Charges” in the Prospectus for more details regarding each charge). Charges may be different if your Policy is “Paid-up” (see “Other Benefits Available Under the Policy— Paid Up Insurance” in the Prospectus). Therefore, the charges shown in the table may not be representative of the charges a particular Owner may pay. Your Policy schedule pages will indicate the Guaranteed Maximum Charge for each periodic charge under your Policy. In addition, where appropriate, all charges in the table expressed in dollars have been rounded to the nearest dollar, and all amounts that would round to zero have been rounded to the nearest penny or less, as necessary. Please request an illustration from your Financial Representative for personalized information, including the particular charges applicable to your Policy. (See “Illustrations” in the Prospectus). Unless otherwise noted, the charges in the table represent the monthly rate. Please see “Policy Anniversary” and “Policy Date” in the Glossary of Terms to help you understand how they will affect the charges applicable to your Policy.
7Variable Universal Life Plus Prospectus
2
The Cost of Insurance Charge will vary based on factors including but not limited to the Insured’s Attained Age, sex, underwriting classification, underwriting amount, and Policy Year. The Cost of Insurance Charges shown in the table may not be representative of the charges a particular Owner may pay. The net amount at risk is the difference between the Death Benefit and the Policy Value.
3
The Maximum Charge for the Cost of Insurance Charge assumes that the Insured has the following characteristic: Attained Age 120. Charges applicable to other combinations of Policy Year and Insured characteristics may be the same as the charge shown for the Maximum Charge for the Cost of Insurance Charge.
4
For the Minimum Charge for the Cost of Insurance Charge, the Current Charge assumes that the Policy is in the first Policy Year, and that the Insured has the following characteristics: Female, Issue Ages 1-10, Premier Non-Tobacco underwriting classification. For the Minimum Charge for the Cost of Insurance Charge, the Guaranteed Maximum Charge assumes that the Insured has the following characteristic: Female, Issue Ages 1-13, Premier Non-Tobacco underwriting classification. Charges applicable to other combinations of Policy Year and Insured characteristics may be the same as the charge shown for the Minimum Charge for the Cost of Insurance Charge.
5
The amount of the Cost of Insurance Charge is determined by multiplying the net amount at risk by the cost of insurance rate (see “Charges and Deductions” in the Prospectus). The net amount at risk is the difference between the Death Benefit (or the Guaranteed Minimum Death Benefit if the Policy is in force under the Death Benefit Guarantee) and the Policy Value. Generally, the cost of insurance rate will increase each Policy Year.
6
For purposes of this charge, the Contract Fund Value is as of the day previous to a Monthly Processing Date plus investment results and interest credited applicable for that Monthly Processing Date. This charge may vary based on the proportionate amount of Contract Fund Value in the NM Strength and Stability Account (see “The Fixed Option” in the Prospectus) and/or different rates may apply to amounts in the Divisions versus amounts in the NM Strength and Stability Account.
7
The Maximum Charge for the Administrative Charge assumes that the Insured has the following characteristics: Issue Age 75, Class 1 to 9 Non-Tobacco/ Occasional Tobacco, Standard Plus Tobacco, and Class 1 to 7 Tobacco underwriting classification.
8
The Minimum Charge for the Administrative Charge assumes that the Insured has the following characteristics: Issue Ages 0-15, Premier, Preferred, and Standard Plus Non-Tobacco and Premier and Preferred Tobacco underwriting classification.
9
For the Maximum Charge for the Specified Amount Charge, the Current Charge and the Guaranteed Maximum Charge assumes that the Insured has the following characteristics: Issue Age 65, Class Preferred, Standard Plus and Class 1 to 7 Tobacco underwriting classification.
10
The Minimum Charge for the Specified Amount Charge, the Current Charge and the Guaranteed Maximum Charge assumes that the Insured has the following characteristics: Issue Age 15, Class Premier, Preferred Non-Tobacco/Occasional Tobacco underwriting.
11
This charge is deducted from Contract Fund Value when there is Policy Debt and is intended to cover the costs associated with loans. This charge, that has a guaranteed maximum rate of 2%, encompasses any loan interest spread, which is the difference between the interest rate charged on policy loan amounts and the interest rate credited on amounts designated as collateral for the loan. The interest rates charged to loan amounts and credited to collateral are adjustable but are subject to a guaranteed maximum difference of 2%. When the insured is at or above Attained Age 100, the current Policy Debt Expense Charge is 0.00%. Please see “Policy Loans” in the Prospectus for more information regarding how the loan interest rate is calculated.
12
The current minimum Specified Amount is $100,000 for Issue Ages 18-75 and $50,000 for Issue Ages 0-17.
13
The Maximum Charge for the Underwriting and Issue Charge assumes that the Insured has the following characteristics: Issue Age 25, Class 1 to 9 Non- Tobacco/Occasional Tobacco, Standard Plus Tobacco, and Class 1 to 7 Tobacco underwriting classification.
14
The Minimum Charge for the Underwriting and Issue Charge assumes that the Insured has the following characteristics: Issue Age 55, Premier, Preferred; and Standard Plus Non-Tobacco/Occasional Tobacco; Premier and Preferred Tobacco underwriting classification.
15
The charges for the Payment of Selected Monthly Premium Upon Total Disability vary based on the Insured’s Attained Age, underwriting classification, and “Selected Monthly Premium,” and may increase from year to year. Selected Monthly Premium is an amount the Owner selects subject to a maximum permitted amount. The charges shown in the table may not be representative of the charges a particular Owner may pay. If selected, the Selected Monthly Premium Benefit provides, during the total disability of the Insured, for the payment of the greater of (1) the Selected Monthly Premium or (2) the amount needed to provide for the payment of the “Specified Monthly Charges” (current Monthly Policy Charges excluding the Monthly Policy Debt Expense Charge and the charge for this benefit). (See “Other Benefits Available Under the Policy—Optional Benefits Available for a Charge” in the Prospectus for more information about this benefit.) The monthly charge for this benefit is the greater of the selected monthly premium rate times the Selected Monthly Premium or the specified monthly charges rate times the Specified Monthly Charges. If this optional benefit is selected, the maximum rates are shown in your Policy.
16
The Maximum Charge for the Payment of Selected Monthly Premium Upon Total Disability Charge assumes that the Insured has the following characteristics: Attained Age 57, standard underwriting classification for Selected Monthly Premium and attained Age 59, standard underwriting classification for Specified Monthly Charges.
17
The Minimum Charge for the Payment of Selected Monthly Premium Upon Total Disability Charge assumes that the Insured has the following characteristics: Attained Ages 0-17, standard underwriting classification. This assumes the amount of the charge determined by the Selected Monthly Premium is greater than the amount of the charge determined by the Specified Monthly Charges.
18
The charges for the Additional Purchase Benefit vary based on the Insured’s gender and Attained Age at the time the benefit is added to the Policy. The charges shown in the table may not be representative of the charges a particular Owner may pay. The maximum Additional Purchase Benefit amount is the lesser of two times the Specified Amount and $200,000.
19
The Current Charge for the Maximum Charge for the Additional Purchase Benefit Charge assumes that the Insured has the following characteristics: Male, Benefit added at Attained Age 13-14. The Guaranteed Maximum Charge for the Additional Purchase Benefit Charge assumes that the Insured has the following characteristics: Benefit added at Attained Age 38 for Male or Female.
20
The Current Charge for the Minimum Charge for the Additional Purchase Benefit Charge assumes that the Insured has the following characteristics: Female, Benefit added at Attained Age 36 and 38. The Guaranteed Maximum Charge for the Minimum Charge of the Additional Purchase Benefit Charge assumes that the Insured has the following characteristic: Male or Female, Benefit added at Attained Age 0.
Annual Portfolio Operating Expenses
The table below shows the range (minimum and maximum) of total operating expenses charged by the Portfolios that you may pay periodically during the time you own your Policy. The table below is based on information as of December 31, 2021 and may change from year to year. A complete list of the Portfolios available under your Policy, including their annual expenses, may be found at the back of this document. 
Variable Universal Life Plus Prospectus
8
 
Minimum
Maximum
Annual Portfolio Operating Expenses (expenses deducted from Portfolio assets, including management fees,
distribution (12b-1) fees, and other expenses as a percentage of average Portfolio assets)
0.21%
1.28%
Annual Portfolio Operating Expenses After Contractual Fee Waiver or Reimbursement*
0.19%
1.12%
*
The “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 Portfolio Operating Expenses.
For more information about voluntary fee waivers that may be in place, see the “Charges and Deductions” section.
9Variable Universal Life Plus Prospectus
Risks of the Policy
Policy for Long-Term Protection Your Policy is designed to serve your long-term life insurance protection need. It is not suitable for short-term life insurance protection nor for short-term investing. Surrender charges apply in the first 10 Policy Years and the value of your Policy and Life Insurance Benefit will be reduced if you withdraw money. In addition, short-term investment in the Policy may subject you to income taxes and tax penalties.
Investment Risk Policy amounts in the Divisions will fluctuate with the performance of the Portfolios you choose. Amounts you allocate among the Divisions may grow in value, decline in value, or grow less than you expect depending on the investment performance of the corresponding Portfolios. These assets are not guaranteed, and you can lose money. Depending on any Death Benefit Guarantee in effect, you may be required to pay more premiums than originally planned in order to keep the Policy in force.
A comprehensive discussion of the investment objectives and risks of each Portfolio may be found in each Portfolio’s prospectus. There is no assurance that any Portfolio will achieve its stated investment objective. The Policy is not designed for frequent or short-term trading.
Insurance Default Risk Because certain guarantees under the Policy are guaranteed by the Company’s General Account assets, the ability to make good on these guarantees depends on the financial strength and claims-paying ability of the Company. Therefore, guaranteed benefits outside of the Separate Account, including any available fixed options, are subject to the risk of default to the extent the Company is unable to satisfy some or all of these guarantees.
Policy Lapse Insufficient Premium Payments, poor investment results, withdrawals, unpaid loans, or loan interest may cause your Policy to lapse, meaning you will no longer have any life insurance coverage. If, on a Monthly Processing Date, the Cash Surrender Value (which takes into account any applicable surrender charge) is not enough to pay the Monthly Policy Charge, your Policy will enter a 61-day grace period, unless the Death Benefit Guarantee is in effect. If your Policy enters a grace period, we will notify you that the Policy will lapse (terminate without value) at the end of the grace period unless you make a sufficient payment. Your Policy may be reinstated within three years (or longer if required by state law) after it has lapsed, subject to certain conditions.
Policy Loan Risks A Policy loan, whether or not repaid, will affect the value of your Policy over time because the amounts borrowed do not participate in the investment performance of the Divisions; in addition, a charge is deducted from your Contract Fund Value each month while there is Policy Debt. The Life Insurance Benefit is reduced by the amount of any outstanding Policy Debt. If you surrender the Policy or allow it to lapse while Policy Debt is outstanding, the amount of Policy Debt is extinguished by applying the Policy Value to repay it. If the Policy Debt exceeds the cost basis in the contract, we are required to report the extinguishment to you and the IRS on an IRS Form 1099-R. Policy Debt reduces the Cash Surrender Value and increases the risk that your Policy will lapse.
Limitations on Access to Your Values Accessing your Policy’s value may have tax consequences. We will deduct a surrender charge if you surrender your Policy in the first ten Policy Years. Even if your Policy has value it is possible that you will receive no Cash Surrender Value if you surrender the Policy in the first ten Policy Years. You should purchase the Policy only if you have the financial ability to keep it in force for a substantial period of time. You should not purchase the Policy if you intend to surrender all or part of your Policy in the near future. Even if you do not ask to surrender the Policy, surrender charges may play a role in determining whether the Policy will lapse, because surrender charges affect the Cash Surrender Value, which is a measure we use to determine whether your Policy will enter a grace period (and possibly lapse). See “Policy Lapse” above. You may make withdrawals subject to limitations on the amount that may be withdrawn. (See “Withdrawals”). A withdrawal will reduce the Contract Fund Value and Life Insurance Benefit. The minimum amount of a withdrawal is $250.

 
Amounts allocated to the NM Strength and Stability Account cannot be transferred to the Divisions. As a result you should carefully consider whether this option meets your investment needs.
Adverse Tax Consequences Our understanding of the principal tax considerations for the Policy under current tax law is set forth in this Prospectus. A surrender, loan, or withdrawal may have tax consequences. There are areas of some uncertainty under current law, and we do not address the likelihood of future changes in the law or interpretations thereof. Among other risks, your Policy may become a modified endowment contract. A modified endowment contract (“MEC”) is a life insurance contract that is taxed less favorably on lifetime distributions than other life insurance contracts because the contract is considered too investment oriented. Generally, a Policy may be classified as a MEC if cumulative premiums paid during a seven-pay period exceed a “seven-pay” limit defined in the Internal Revenue Code (“Code”). Distributions, including loans, from a Policy classified as a MEC are taxable to the extent of the gain in the Policy and may be subject to a 10% penalty tax if taken before the Owner attains age 59½. Moreover, excessive Policy loans could cause a Policy to terminate with insufficient value to pay the tax due upon termination. Death Benefit proceeds may be subject to state and/or inheritance taxes. (See “Tax Considerations”).
10
Risk of an Increase in Current Fees and Expenses Certain insurance charges are currently assessed at less than their maximum levels. We may increase these current charges in the future up to the guaranteed maximum levels, based on the Company’s emerging experience or future expectations, as determined in its sole discretion, with respect to, but not limited to, mortality, expenses, reinsurance costs, taxes, persistency, capital requirements, reserve requirements, and changes in applicable laws. Although some Funds may have expense limitation agreements, the operating expenses of the Portfolios are not guaranteed and may increase or decrease over time. If fees and expenses are increased, you may need to increase the amount and/or frequency of Premium Payments to keep the Policy in force.
Cybersecurity and Certain Business Continuity Risks The Company has administrative, technical and physical safeguards in place with respect to information security, nevertheless, our variable product business is potentially susceptible to operational and information security risks resulting from a cyber-attack as it is highly dependent upon the effective operation of our computer systems and those of our business partners. These risks include, among other things, the theft, misuse, corruption and destruction of data maintained online or digitally, denial of service on websites and other operational disruption and unauthorized release of confidential customer information. Cyber-attacks affecting us, the Portfolios, intermediaries and other affiliated or third-party service providers may adversely affect us and your Policy Value. For instance, cyber-attacks may interfere with our processing of contract transactions (including the processing of orders through our website, if available, or with the Portfolios), impact our ability to calculate values, cause the release and possible destruction of confidential customer or business information, impede order processing, subject us and/or our service providers and intermediaries to regulatory fines and financial losses and/or cause reputational damage. Cybersecurity risks may also impact the issuers of securities in which the Portfolios invest, which may cause the Portfolios to lose value. The risk of cyber-attacks may be higher during periods of geopolitical turmoil (such as the Russian invasion of Ukraine and the responses by the United States and other governments). There can be no assurance that we or the Portfolios or our service providers will avoid losses affecting your Policy due to cyber-attacks or information security breaches in the future.
Other disruptive events, including (but not limited to) natural or man-made disasters and public health crises or pandemics (such as coronavirus COVID-19), may also adversely affect our ability to conduct business, including if our employees or the employees of intermediaries or other affiliated or third-party service providers are unable to perform their responsibilities as a result of any such event. Such disruptions to our business operations can interfere with issuance or our processing of transactions (including the processing of orders through our website or with the Portfolios), may interfere with our ability to receive, pickup and process mail and messages, impact our ability to calculate values, or cause other operational or system issues. Furthermore, these disruptions may persist even if our employees or the employees of intermediaries or other affiliate or third-party service providers are able to work remotely. These events may also impact the issuers of securities in which the Portfolios invest, which may cause the Portfolios to lose value. There can be no assurance that the Company, the Portfolios or our service providers will avoid losses affecting your Policy due to a disaster or other catastrophe.
Northwestern Mutual
The Northwestern Mutual Life Insurance Company is a mutual life insurance company organized by a special act of the Wisconsin Legislature in 1857. It is licensed to conduct a conventional life insurance business in the District of Columbia and in all states of the United States. Its total assets were over $334 billion as of December 31, 2021. The Home Office of Northwestern Mutual is located at 720 East Wisconsin Avenue, Milwaukee, Wisconsin 53202.
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 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 General Account is exposed to the risks normally associated with the operation of a life insurance company, including insurance pricing, asset liability management and interest rate risk, operational risks, and the investment risks of a portfolio of securities that consists largely, though not exclusively, of fixed-income securities. Some of the risks associated with such a portfolio include interest rate, option, liquidity, and credit risk. The financial statements contained in the Statement of Additional Information include a further discussion of risks inherent within the General Account investments. The assets in the General Account are subject to the claims of the Company’s general creditors.
11Variable Universal Life Plus Prospectus
The Separate Account
We established the Separate Account by action of our Trustees on March 22, 2006, in accordance with the provisions of Wisconsin insurance law. The Separate Account is registered with the SEC as a unit investment trust under the Investment Company Act of 1940 (the “1940 Act”). We own the assets in the Separate Account and we are obligated to pay all benefits under the Policy. We may use the Separate Account to support other variable life insurance policies we issue. We have divided the Separate Account into Divisions, each of which invests in shares of one Portfolio of the Funds.
Subject to any applicable limitations, you may allocate the money you invest under your Policy among the Divisions and any available fixed option described elsewhere in this Prospectus. Each Division corresponds to one of the Portfolios of the Funds. Under Wisconsin law, Separate Account assets are held separate from our other assets and are not part of our General Account. Income, gains, and losses, whether or not realized, from assets allocated to the Separate Account will be credited to or charged against the Separate Account without regard to our other income, gains, or losses. Income, gains, and losses credited to, or charged against, a Division reflect that Division’s own investment performance and not the investment performance of our other assets. We may not use the Separate Account’s assets to pay any of our liabilities other than those arising from the Policies and any other variable life insurance Policies funded by the Separate Account. We may, however, use all of our assets (except those held in certain other separate accounts) to satisfy our obligations under your Policy.
Where permitted by law and subject to any required regulatory approvals or votes by Owners, we reserve the right to:
•
operate the Separate Account or a Division either as a unit investment trust or a management investment company under the 1940 Act, or in any other form permitted by law, if deemed by the Company to be in the best interest of Owners;
•
invest current and future assets of a Division in securities of another Portfolio as a substitute for shares of a Portfolio (or another share class of an existing Portfolio) already purchased or to be purchased;
•
register or deregister the Separate Account under the 1940 Act or change its classification under that Act;
•
create new separate accounts;
•
combine the Separate Account with any other separate account;
•
transfer cash from time to time between the General Account and the Separate Account as deemed necessary or appropriate and consistent with the terms of the Policy, including but not limited to transfers for the deduction of charges and in support of payment options;
•
on behalf of the Company, transfer assets of the Separate Account in excess of reserve requirements (only for accrued fees and charges or any seed capital) applicable to the Policies supported by the Separate Account to the General Account (assets remaining in the Separate Account necessary to fulfill its obligations under the Policy are not subject to claims against or losses in the General Account);
•
transfer the assets and liabilities of the Separate Account to another separate account;
•
add, delete or make changes to the securities and other assets held or purchased by the Separate Account;
•
terminate and/or liquidate the Separate Account;
•
restrict or eliminate any voting rights of Owners or other persons having voting rights as to the Separate Account; and
•
make any changes to the Separate Account to conform with, or required by any change in, federal tax law, the 1940 Act and regulations promulgated thereunder, or any other applicable federal or state laws.
In the event that we take any of these actions, we may make an appropriate endorsement of your Policy and take other actions necessary to comply with applicable law.
The Funds
A variety of investment options are made available under the Policy for allocation. However, the Company does not endorse or recommend any particular option, nor does it provide investment advice. You are responsible for choosing your investment options and should make your choices based on your individual situation and risk tolerances. After making your initial allocation decisions, you should monitor your allocations and periodically review the options you select and the amounts allocated to each to ensure your selections continue to be appropriate. The amounts you invest in a particular Division are not guaranteed and,
Variable Universal Life Plus Prospectus
12
because both principal and any return on the investment are subject to market risk, you can lose money. The amounts invested in any fixed option (see “The Fixed Option” below) can earn interest for specified periods at rates we declare; the principal and interest rate for fixed amounts are guaranteed by the Company and are subject to the claims-paying ability of the Company.
The assets of each Division are invested in a corresponding Portfolio that is a series of one of the following mutual funds: Northwestern Mutual Series Fund, Inc.; Fidelity® Variable Insurance Products; Neuberger Berman Advisers Management Trust; Russell Investment Funds; and Credit Suisse Trust. The Separate Account buys shares of the Portfolios at their respective net asset values without sales charge. The Portfolios are available for investment only by separate accounts supporting variable insurance products and are not publicly traded. Their performance can differ substantially from publicly traded mutual funds with similar names. The specific Portfolios available under your Policy may change from time to time, and not all Portfolios in which assets of the Separate Account are invested may be available under your Policy. Your ability to invest in a Portfolio may be affected by the actions of such Portfolio, such as when a Portfolio closes.
There is no assurance that any of the Portfolios will achieve its stated objective(s). You can find more detailed information about the Portfolios, including its (i) name, (ii) investment objective(s), (iii) investment adviser, (iv) current expenses, and (v) performance, in Appendix A to this Prospectus. Each Portfolio has a prospectus that contains more detailed information about the Portfolio. Read the prospectuses for the Portfolios carefully before investing. You can find these documents online at www.nmprospectus.com, by calling (866) 424-2609 or by sending an email request to vavldocrequest@northwesternmutual.com. Note: A summary prospectus for a Portfolio contains information on its first page about how to obtain a copy of the full Portfolio statutory prospectus. You can also visit www.nmprospectus.com to obtain these documents.
Restrictions on the Government Money Market Division
In addition to any short-term trading or transfer restrictions, after the Initial Allocation Date (see “Allocating Premiums”), there are certain restrictions on investments in the Government Money Market Division that work in conjunction with amounts allocated to the NM Strength & Stability Account fixed option if your Death Benefit guarantee is in effect. (Please see “Restrictions on Amounts in the SAS Account and Government Money Market Division” below.)
Payments We Receive
The Policy makes available both proprietary and non-proprietary Portfolios. The Series Fund is a proprietary Fund that has been included in part because it is managed by a subsidiary of the Company. For non-proprietary Portfolios offered through this Policy, we consider during the selection process whether a Portfolio’s investment adviser or an affiliate will make payments to us or our affiliates. Other factors we consider during the selection process include asset class coverage, management style, sector coverage, the strength of the investment adviser’s or sub-adviser’s reputation and tenure, brand recognition, performance, and the capability and qualification of each investment firm. We review the Portfolios periodically and may remove a Portfolio or limit its availability to new premiums and/or transfers if we determine that the Portfolio no longer meets one or more of the selection criteria, and/or if the Portfolio has not attracted significant allocations from Owners.
We do not provide any investment advice and do not recommend or endorse any particular Portfolio. You bear the risk of any decline in the assets allocated to the Divisions resulting from the performance of the Portfolios you have chosen.
Owners, through their indirect investment in the Portfolios, bear the costs of the investment advisory or management fees that the Portfolios pay to their respective investment advisors (see the Portfolios’ prospectuses for more information). As described above, an investment adviser of a Portfolio, or its affiliates, may make payments to the Company and/or certain of our affiliates. However, the amount of such payments is not determinative as to whether a Portfolio is available through the Policy. These payments may be derived, in whole or in part, from the advisory fee deducted from Portfolio assets. The amount of the compensation is based on a percentage of assets of the Portfolios attributable to the Policies and certain other variable insurance products that the Company issues. The percentages differ and some investment advisers (or other affiliates) may pay more than others. The percentages currently range up to 0.20%. These payments are made for various purposes, including payment of services incurred by the Company and/or its affiliates in promoting and marketing the Policies and Portfolios. The Company and its affiliates may profit from these payments.
While not currently the case, certain Portfolios available under the Policy may adopt a Distribution (and/or Shareholder Servicing) Plan under Rule 12b-1 of the 1940 Act, which is described in more detail in the Portfolios’ prospectuses. The payments, which may be up to 0.25%, would be deducted from assets of the Portfolios and are paid to our distributor, Northwestern Mutual Investment Services, LLC. These payments would decrease such Portfolio’s investment return. We would also consider the receipt of these payments generally to be a positive factor when selecting Portfolios.
13Variable Universal Life Plus Prospectus
Additionally, an investment adviser or sub-adviser of a Portfolio (or of an underlying fund in which a Portfolio invests) or its affiliates may provide the Company with wholesaling services that assist in the distribution of the Policies and may pay the Company and/or certain of our affiliates amounts to participate in sales meetings. These amounts may be significant and may provide the investment adviser or sub-adviser (or their affiliate) with increased access to persons involved in the distribution of the Policies.
The Fixed Option (NM Strength and Stability Account)
The Policy allows you to allocate money to a fixed interest crediting option (the “NM Strength and Stability Account” or “SAS Account”) subject to certain restrictions as discussed below. The principal and interest credited to amounts in the SAS Account are guaranteed by the Company and are subject to the claims-paying ability of the Company. The effective date of a transfer or allocation to the SAS Account is determined in the same manner that the effective date for an investment in the Divisions of the Separate Account is determined (i.e., as of a Valuation Date). Please note that amounts in the SAS Account may not be transferred from the SAS Account to the Divisions. You should carefully consider whether the SAS Account is suitable for you in light of your investment objectives and liquidity needs. You should consult your Financial Representative.
The Company guarantees that amounts transferred or applied to the SAS Account will accrue interest daily at an effective annual rate the Company determines without regard to the investment experience of the General Account. The SAS Account represents the sum total of two separate balances, a Tier One balance and a Tier Two balance. The Tier One balance credits an annual guaranteed effective interest rate at least as high or higher than the Tier Two balance. Net Premiums, loan repayments, withdrawals, and transfers of amounts from the Divisions to the SAS Account that are allocated to the SAS Account are first applied to the Tier Two balance. Any Policy dividend directed to increase Contract Fund Value is applied directly to the Tier One balance (see “Other Policy Provisions – Dividends”). In addition, on the Policy Date and subsequent Monthly Processing Dates, the Company may transfer amounts from the Tier Two balance to the Tier One balance up to a specified percentage of the Tier Two balance determined by the Company. At no time will the annual effective interest rates be less than the guaranteed minimum annual effective interest rate of 1.50% for the Tier One balance and 1.25% for the Tier Two balance. For information about current declared annual effective interest rates in excess of the guaranteed minimums please contact your Financial Representative.
Interests in the SAS Account are not registered under the Securities Act of 1933 and the general account has not been registered as an investment company under the Investment Company Act of 1940. Accordingly, neither the general account nor any interests therein are subject to the provisions of those Acts. The disclosure regarding the SAS Account, however, is subject to certain generally-applicable provisions of the federal securities laws relating to accuracy and completeness of statements made in this Prospectus.
Restrictions on Amounts in the SAS Account and Government Money Market Division
In addition to any short-term trading or transfer restrictions, (see “Transfers” and “Short-Term and Excessive Trading,” respectively), if available under your Policy, there are restrictions on the timing and amounts that can be allocated or transferred to the SAS Account and the Government Money Market Division depending on whether you have an active Death Benefit Guarantee (see “Death Benefit Guarantee”). Special considerations may apply to these restrictions if you have elected the Dollar-Cost Averaging feature (see “Standard Benefits Available at No Charge – Dollar-Cost Averaging” for more information).
If Your Death Benefit Guarantee is Active. After the Initial Allocation Date (see “Allocating Premiums), there are limits on the timing and amounts that can be allocated as premium payments or transferred by the Owner to the SAS Account and/or the Government Money Market Division when the Death Benefit Guarantee is active. While the following may not be representative of the precise restrictions applicable to your Policy, the current restrictions for a representative policy include any or all of the following, separately or in combination:
•
Limits on Amounts. No amount may be allocated or transferred into the SAS Account and/or the Government Money Market Division if such allocation or transfer would cause the sum of the amounts in the SAS Account and the
Variable Universal Life Plus Prospectus
14
Government Money Market Division to exceed the limits described in the Policy. For a representative insured (Issue age 35) those percentages are (please see the “Table of Policy Value Percentage Limits” in your Policy schedule pages for your exact limits): 
Policy Year
Limit %
1
5%
2
5%
3
5%
4
5%
5
5%
6
6%
7
7%
8
8%
9
9%
10
10%
11
11%
12
12%
13
14%
14
16%
15
18%
16
20%
 
Policy Year
Limit %
17
22%
18
24%
19
26%
20
28%
21
30%
22
32%
23
34%
24
36%
25
38%
26
40%
27
42%
28
44%
29
46%
30
48%
31+
50%
•
Limit on Net Premiums. No Net Premium may be allocated to the SAS Account and/or the Government Money Market Division if such allocation would cause the sum of the Net Premiums allocated to the SAS Account and the Government Money Market Division to exceed the limit described in your Policy schedule pages, currently 50% of Net Premiums paid under the Policy;
•
Limit on Transfers. No transfer may be made to the SAS Account and/or the Government Money Market Division in a Policy Year if such transfer would cause the sum of the amounts transferred to the SAS Account and the Government Money Market Division in that Policy Year to exceed the limit described in your Policy schedule pages, currently 10% of the sum of allocations to the Divisions as of the most recent Policy Anniversary (0% in the Policy Year prior to your first Policy Anniversary – i.e., your first Policy Year); and
•
SAS Account Restriction. No amounts may be allocated or transferred to the SAS Account if the current declared annual effective interest rate for the Tier Two Balance is not greater than the minimum guaranteed annual effective interest rate for the Tier Two balance.
Any Net Premium or amount that you request to be allocated to the SAS Account and/or the Government Money Market Division that does not meet the above restrictions will be allocated to the other Divisions of the Separate Account based on your current allocation instructions. If your allocation instructions are not on file with us, the request will not be considered in Good Order and you or your Financial Representative will be contacted for further instructions. Transfer requests that violate these limits on transfers will generally not be considered in Good Order.
If Your Death Benefit Guarantee is Not Active. After the Initial Allocation Date (see “Allocating Premiums), there are restrictions on the timing and amounts that can be allocated as premium payments or transferred by the Owner to the SAS Account when the Death Benefit Guarantee is not active. While the following may not be representative of the precise restrictions applicable to your Policy, the current restrictions for a representative policy are as follows:
15Variable Universal Life Plus Prospectus
•
Limit on Amounts. No amount may be allocated or transferred into the SAS Account if such allocation or transfer would cause the sum of the amounts in the SAS Account to exceed the limit described in your Policy. For a representative insured (Issue age 35) those percentages are (please see “Table of Policy Value Percentage Limits” in your Policy schedule pages for your exact limits): 
Policy Year
Limit %
1
5%
2
5%
3
5%
4
5%
5
5%
6
6%
7
7%
8
8%
9
9%
10
10%
11
11%
12
12%
13
14%
14
16%
15
18%
16
20%
 
Policy Year
Limit %
17
22%
18
24%
19
26%
20
28%
21
30%
22
32%
23
34%
24
36%
25
38%
26
40%
27
42%
28
44%
29
46%
30
48%
31+
50%
•
Limit on Net Premiums. No Net Premium may be allocated to the SAS Account if such allocation would cause the sum of the Net Premiums allocated to the SAS Account to exceed the limit described in your Policy schedule pages, currently 50% of Net Premiums paid under the Policy;
•
Limit on Transfers.  No transfer may be made to the SAS Account in a Policy Year if such transfer would cause the sum of the amounts transferred to the SAS Account in that Policy Year to exceed the limit described in your Policy schedule pages, currently 10% of the sum of allocations to the Divisions as of the most recent Policy Anniversary (0% in the Policy Year prior to your first Policy Anniversary – i.e., your first Policy Year); and
•
SAS Account Restriction. No amounts may be allocated or transferred to the SAS Account if the current declared annual effective interest rate for the Tier Two Balance is not greater than the minimum guaranteed annual effective interest rate for the Tier Two balance.
Any Net Premium or amount that you request to be allocated to the SAS Account that does not meet the above restrictions will be allocated to the other Divisions of the Separate Account based on your current allocation instructions. If your allocation instructions are not on file with us, the request will not be considered in Good Order and you or your Financial Representative will be contacted for further instructions. Transfer requests that violate these limits on transfers will generally not be considered in Good Order.
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16
Information About the Policy
Purchasing a Policy
When you purchase your Policy, you enter into a contract with us. Your Policy, together with your Application (including all underwriting questionnaires or supplements) and any amendments, endorsements, riders and optional benefits, is the entire contract. To purchase a Policy, you must submit the Application and, in most cases (see “When Insurance Coverage Takes Effect” below), an initial Premium Payment, to us through a Northwestern Mutual Financial Representative. Generally, the Policy is available for Insureds between Issue Ages 0-75. We must receive evidence of insurability that satisfies our underwriting standards before we will issue a Policy. We reserve the right to reject an Application if it does not meet our underwriting or administrative requirements or for any reason permitted by law.
Although we do not anticipate delays in our receipt and processing of Applications or Premium Payments, we may experience such delays to the extent Applications, underwriting information and Premium Payments to our Home Office are not received on a timely basis. Such delays could result in delays in the issuance of Policies and the allocation of Premium Payments under existing Policies.
Specified Amount
Your Policy’s initial amount of insurance coverage is its Initial Specified Amount. You select the Specified Amount when you apply for the Policy, subject to a minimum and our insurability and other underwriting requirements. The Specified Amount must be at least $100,000 for Issue Ages 18-75 and $50,000 for Issue Ages 0-17. We reserve the right to modify the minimum Specified Amount and underwriting requirements at any time.
You may decrease the Specified Amount while the Policy is in force, generally upon written request and subject to our approval. We will not permit a decrease if such decrease results in a Specified Amount less than the minimum Specified Amount we would require for issuance of a new Policy at the time of the change. You may not increase the Specified Amount after initial purchase. A change in the Specified Amount will be effective on a Monthly Processing Date upon receipt of a written request in Good Order at our Home Office. If the request is received before the close of trading (typically, 4:00 p.m. Eastern Time) on the NYSE on a Monthly Processing Date, the change in Specified Amount will be effective on that date. If the request is not received on a Monthly Processing Date, or on or after the close of trading on the NYSE on a Monthly Processing Date, the change in Specified Amount will be effective on the next Monthly Processing Date. If your request is not in Good Order, either we or your Financial Representative may notify you in writing, by telephone or by email in an effort to conform your request to our then-current requirements. We reserve the right to charge for more than one change to the Specified Amount in a Policy Year. We will deduct any such charge from the Contract Fund Value. (See “Charges and Expenses”).
The Insured is assigned an underwriting classification which we use to calculate cost of insurance and other charges. Most insurance companies use similar risk classification criteria. We normally use the medical or paramedical underwriting method to assign underwriting classifications, which may require a medical examination and is based on information provided in the application, which may include, among other things, financial information or the amount of insurance applied for. We may also, however, use other forms or methods of underwriting if we think it is appropriate. A modified underwriting process may be used to automate and expedite underwriting for qualified applicants. This process is based on our traditional underwriting criteria and may or may not use the same information as traditional medical underwriting. Under any of these underwriting methods, it is possible that applicants may be subject to higher rates or fees as a result of higher anticipated mortality experience over time.
When Insurance Coverage Takes Effect
Generally, we will accept the Policy Application and issue a Policy if we determine that the Insured meets our underwriting and administrative requirements. If a Premium Payment is paid with your Application, insurance coverage becomes effective (provided that the Insured is found to be insurable) on the Date of Issue, which is the last to occur of (1) the date the Application is signed, (2) the date of the medical history questionnaire, or (3) the date of the paramedical examination or medical examination, if required. If a Premium Payment is first made at the time of Policy delivery, there is no insurance coverage prior to Policy delivery.
Your Policy Date is the date we use to determine the Issue Age of the Insured, which is used to determine the cost of insurance rates. The Policy Date also is the date used to establish Policy Years. Generally, the Policy Date is the Date of Issue. However, with our approval and subject to state insurance law limitations, we may backdate your Policy Date up to six months or future date it up to 30 days from the Date of Issue under normal circumstances. Backdating may lower your cost of insurance rate, but you will be assessed Monthly Policy Charges retroactive to the Policy Date you select. Future dating is sometimes requested to permit multiple insurance policies to have the same Monthly Processing Date to facilitate administration. We may future date your Policy Date up to 120 days if the Insured’s underwriting classification is different than requested on the Application.
17Variable Universal Life Plus Prospectus
Modifying your Policy Date may require adjustments to your first Premium Payment relating to the Monthly Policy Charges for the period between the Date of Issue and the Policy Date and is subject to any current restrictions on available investment and/or fixed account options. Both the Date of Issue and the Policy Date may be found in your Policy schedule pages.
Right to Return Policy
You may generally return the Policy for a refund within 10 days for any reason or thirty (30) days for replacements (or for different periods as required by state law) after you receive it by returning the Policy to us at our Home Office or to your Financial Representative. Unless state law requires otherwise, the amount of your refund will equal the sum of (a) your Policy’s Contract Fund Value on the date we receive your returned Policy or a written cancellation request at our Home Office plus (b) any previously deducted Premium charges, Monthly Policy Charge and Service Charges (See Appendix B for more information regarding the Right to Return rights in your state of issue.) In the event applicable state law requires us to return the full amount of your premium payment, we will do so. (See “Allocating Premiums” and “Initial Allocation Date” below for more information regarding your initial Premium Payment and how we apply it to the Separate Account.)
Ownership Rights
As Owner of the Policy, you make the decisions about the Policy and Policy benefits while it is in force, without the consent of any beneficiary. If the Policy has more than one Owner, decisions with respect to the Policy and its benefits may be exercised only with the consent and authorization of all Owners. Generally, only Owners are entitled to important information about the Policy. Other persons, such as beneficiaries or payors, are entitled to only limited information.
To transfer ownership of the Policy to another person, the Owner must provide us written notification of the transfer and must supply any required information about the new Owner Company in a manner acceptable to the. We will not be responsible to the new Owner for any payment or other action taken by us until the written notification of the transfer is received by us at our Home Office. The transfer of ownership will then be effective as of the date the transfer form was signed. We may require you to send the Policy to our Home Office for endorsement to reflect the transfer of ownership. If the Owner is not the Insured, the Owner may name or change a successor Owner, who will become the new Owner upon the Owner’s death upon written notification similar in manner to transfers in ownership.
Modifying the Policy
Any Policy change that you request is subject to our then current insurability and processing requirements. Processing requirements may include, for example, completion of certain forms and satisfying certain evidentiary requirements.
If the Policy is changed or modified, we may make appropriate endorsements to the Policy, and we may require you to send your Policy to our Home Office for endorsement. Any modification or waiver of our rights or requirements under the Policy must be in writing and signed by an officer of the Company. No agent or other person may bind us by waiving or changing any provision contained in the Policy.
Upon notice to you, we may modify the Policy:
•
to conform the Policy, our operations, or the Separate Account’s operations to the requirements of any law (including any regulation issued by a government agency) to which the Policy, the Company, or the Separate Account is subject;
•
to ensure continued qualification of the Policy as a life insurance contract under the federal tax laws; or
•
to reflect a change in the Separate Account’s operation.
Premium Payments
A minimum initial Premium Payment is required to put your Policy in force. No insurance will take effect until the minimum initial Premium Payment is made. The minimum initial Premium Payment is based on the Issue Age, underwriting classification and sex of the Insured, the Initial Specified Amount, any optional benefits and, if applicable, the Death Benefit Guarantee Period. For certain Death Benefit Guarantee Periods, a minimum Premium Payment is required to be paid in the first Policy Year.
Although you must make sufficient Premium Payments to keep the Policy in force, after we issue the Policy there is no required schedule or amount of Premium Payments. However, if you elect a Death Benefit Guarantee, a minimum Premium Payment is required to meet the Death Benefit Guarantee Test. (See “Death Benefit Guarantee”). Unless the Death Benefit Guarantee is available to keep your Policy from terminating, investment results of the Divisions to which your Net Premium is allocated will
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18
affect the Premium Payments you are required to make to keep your Policy in force. There are limits on your investments into the Government Money Market Fund and/or the SAS Account (see “Restrictions on Amounts in the SAS Account and Government Money Market Division”).
You may send Premium Payments to our Home Office or to a payment center designated by us. All payments must be made in U.S. Dollars payable through a U.S. financial institution. We accept Premium Payments by check or electronic funds transfer (“EFT”). We do not accept third-party checks at the Home Office as part of the initial Premium Payment. We generally will not accept cash, money orders, traveler’s checks or “starter” checks; however, in limited circumstances, we may accept some cash equivalents in accord with our anti-money laundering procedures. If you make a Premium Payment with a check or bank draft and, for whatever reason, it is later returned unpaid or uncollected, or if a Premium Payment by EFT is reversed, we reserve the right to reverse the transaction. We also reserve the right to recover any resulting losses incurred by us by withdrawing a sufficient amount of Policy Value.
We accept Premium Payments via our website if eligible. Electronic payments via our website must be made in accordance with our current procedures. However, we are not required to accept electronic payments, and we will not be responsible for losses resulting from transactions based on unauthorized electronic payments, provided we follow procedures reasonably designed to verify the authenticity of electronic payments. For more information on electronic payments see “Owner Inquiries.” We reserve the right to limit, modify, suspend or terminate the ability to make payments via our website at any time.
After the In Force Date (See “Allocating Premiums to the Separate Account” below), Net Premiums are placed in the Divisions and any available fixed option on the date we receive your Premium Payment in Good Order at our Home Office and are credited as of the date of receipt. Premiums received before the close of trading (typically, 4:00 p.m. Eastern Time) on the NYSE on a Valuation Date are deemed to be received and credited on that Valuation Date. If received on or after the close of trading on a Valuation Date, or a day other than a Valuation Date, they are deemed to be received and credited on the next Valuation Date. If your payment is not in Good Order, either we or your Financial Representative will notify you in writing, by telephone or by email in an effort to conform your payment to our then-current requirements. Although we do not anticipate delays in our receipt and processing premiums, we may experience such delays to the extent premiums are not received at our Home Office on a timely basis. Such delays could result in delays in the allocation of premiums. (See “Allocating Premiums”).
You may not make any Premium Payments after the Policy Anniversary nearest the Insured’s 121st birthday. You may not make additional Premium Payments of less than $25. A Premium Payment that would either exceed cumulative premiums illustrated in the Application or increase the Policy’s Death Benefit more than it increases the Policy Value will be accepted only if: the insurance in force, as increased, will be within our issue limits; our insurability requirements are met; and the Premium Payment is received prior to the Policy Anniversary nearest the Insured’s 85th birthday.
We have the right to limit or refund a Premium Payment or make distributions from the Policy as necessary to continue to qualify the Policy as life insurance under federal tax law, including the classification of your Policy as a modified endowment contract. We may accept a premium at the direction of the Owner, however, even if it would cause the Policy to be classified as a modified endowment contract. (See “Tax Considerations”). If we receive a Premium Payment before its due date in circumstances where allocating such Premium to your Policy could result in your Policy failing to qualify as life insurance or being classified as a modified endowment contract, or where the Premium Payment was intended to be applied as of its due date, depending on you or your Financial Representative’s instructions we may hold the Premium or partial Premium Payment in a non-interest bearing account until its due date, at which time we will allocate your payment to the Divisions or any available fixed option according to then-current allocation instructions. Excess payment amounts are applied once instructions are received in Good Order.
If there is Policy Debt, payments received at our Home Office, or to a payment center designated by us, will be treated as payments to reduce Policy Debt unless designated as Premium Payments. (See “Policy Loans”).
If mandated under applicable law, we may be required to reject a Premium Payment. We may also be required to provide information about you and your account to government regulators.
Allocating Premiums
When you apply for a Policy, you must instruct us in the Application or supplement to the Application to allocate your Net Premium to one or more Divisions of the Separate Account and, if applicable, the NM Strength and Stability Account. Net Premiums are premiums less deductions from premiums, such as premium expense charges. (See “Charges and Deductions—
Premium Expense Charge”). You may invest in up to 30 Divisions at a time.
If your initial Premium Payment is submitted with your Application, we will place the Premium Payment in our General Account, and the Net Premium will remain in our General Account until the In Force Date. We may credit the Net Premium with interest while it remains in the General Account. We may change the rate of interest we credit initial Net Premiums held in our General Account at any time and at our sole discretion, but the rate will not be less than 0%. For more information, please call (866) 464-3800. On the In Force Date, we will transfer and credit the initial Net Premium and accrued interest to the Government Money
19Variable Universal Life Plus Prospectus
Market Division of the Separate Account except in certain limited circumstances (see “Initial Allocation Date” below). If the In Force Date is not a Valuation Date, then we will transfer and credit the initial Net Premium and accrued interest on the next Valuation Date. Short-term premium charges, for any term insurance coverage provided from the Issue Date to the Policy Date, are deducted from the initial Premium Payment if applicable.
If payment is not made with your Application, we will transfer and credit the initial Net Premium to the Government Money Market Division of the Separate Account on the Valuation Date we receive it in Good Order at our Home Office. If payments are received before the close of trading (typically, 4:00 p.m. Eastern Time) on the NYSE on a Valuation Date, they will be transferred and credited to the Government Money Market Division on that date. If the payment is received on or after the close of trading on a Valuation Date, or on a day other than a Valuation Date, they will be transferred and credited to the Government Money Market Division on the next Valuation Date. If your payment is not in Good Order, either we or your Financial Representative will notify you in writing, by telephone or by email in an effort to conform your payment to our then-current requirements.
The date on which we allocate your initial Net Premium among the Divisions and/or the SAS Account in accordance with your instructions is referred to as the “Initial Allocation Date.” After the In Force Date and prior to the Initial Allocation Date, we transfer and credit Net Premiums to the Government Money Market Division of the Separate Account. The Initial Allocation Date is shown in the Policy schedule pages.
Initial Allocation Date Your Initial Allocation Date is determined by a series of rules.
•
First, if you have requested a Policy Date that is later than the date your Policy is approved, your Initial Allocation Date will not be earlier than the future Policy Date you requested.
•
Second, in states where the right to return policy law requires us to refund your entire initial Premium Payment, your Initial Allocation Date will be the latest of the day we receive your initial Premium Payment, the day after your right to return the Policy expires and the day we receive notice of delivery of your Policy.
•
Third, in states where the right to return policy law permits us to base your refund on the value of assets in the Divisions, if your initial Premium Payment is submitted with your Application and your Policy is issued as applied for, your Initial Allocation Date will be the In Force Date; if we issue your Policy other than as applied for, your Initial Allocation Date will be the day we receive notification of Policy delivery in the Home Office. If your initial Premium Payment is not submitted with your Application, your Initial Allocation Date will be the later of the day we receive notification of Policy delivery or the day we receive your initial Premium Payment.
The initial allocation instructions we receive from you will remain in effect for subsequent Net Premiums until we receive your request to change them. You may change your allocation for future Net Premiums at any time subject to the restrictions noted in this Prospectus. The change will be effective on the Valuation Date on or next following the date we receive your request in Good Order at our Home Office. Requests received before the close of trading (typically, 4:00 p.m. Eastern Time) on the NYSE on a Valuation Date are deemed to be received and effective on that Valuation Date. If received on or after the close of trading on a Valuation Date, or a day other than a Valuation Date, requests are deemed to be received and effective on the next Valuation Date. If your request is not in Good Order, we will continue to credit Net Premiums to your Policy according to the allocation instructions then in effect and either we or your Financial Representative will notify you in writing, by telephone or by email in an effort to conform your request with our then-current requirements.
In order to take full advantage of these features, you should carefully consider, on a continuing basis, which options are best suited to your long-term investment needs. Investment returns from amounts allocated to the Divisions will vary with the investment performance of the Divisions and will be reduced by Policy charges. You bear the entire investment risk for amounts you allocate to the Divisions. You should periodically review your allocation instructions in light of market conditions and your overall life insurance and financial objectives. Your Financial Representative may provide us with instructions on your behalf involving the allocation of amounts among available Divisions and/or the SAS Account, subject to our rules and requirements, including the restrictions on Transfers, Short Term Trading and other restrictions specific to the Government Money Market Division and/or the SAS Account noted in this Prospectus (see “Restrictions on Investments in the SAS Account”).
You may request allocation changes in writing (including via facsimile or, under limited circumstances, by email) or by calling (866) 464-3800. Where allowable by applicable law, a Policy Owner’s Financial Representative may provide us with allocation changes on behalf of a Policy Owner subject to our current procedures, rules and requirements. You may also submit allocation instructions via the Internet at www.northwesternmutual.com (“Electronic Instructions”) in accordance with our then-current Internet procedures provided you have properly authorized us to accept Electronic Instructions in advance of your request. For more information see “Owner Inquiries.” Please note that we are not required to accept Electronic Instructions and we will not be responsible for losses resulting from transactions based on unauthorized Electronic Instructions, provided we follow procedures reasonably designed to verify the authenticity of Electronic Instructions. We reserve the right to limit, modify, suspend or terminate the ability to make requests via Electronic Instructions.
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Determination of Values
The Contract Fund Value is the sum of amounts in the Divisions (also known as the Investment Account) and the SAS Account. At no time does the Contract Fund Value include Policy Debt. The Policy Value is the Contract Fund Value plus any Policy Debt. On the Policy Date, the Contract Fund Value is equal to the Net Premium less the Monthly Policy Charge. On any day after the Policy Date, the Contract Fund Value is equal to what it was on the previous Valuation Date plus any of these items applicable for the current Valuation Date:
•
any increase attributable to the portion of amounts in the Divisions that experience a positive rate of return for the current Valuation Period;
•
any increase due to interest credited to the portion of amounts in the SAS Account since the previous Valuation Period;
•
any additional Net Premium;
•
any loan repayment and accrued loan interest payment; and
•
any dividends directed to increase Contract Fund Value;
minus any of the following items applicable to the current Valuation Date:
•
any decrease attributable to the portion of amounts in the Divisions that experience a negative rate of return for the current Valuation Period;
•
the Monthly Policy Charge;
•
any Policy loans;
•
any withdrawals; and
•
any other applicable service fees or changes, reduction in Specified Amount and transfers.
Death Benefit
Life Insurance Benefit As long as your Policy is in force, we will pay the Life Insurance Benefit to your beneficiary or beneficiaries once we receive at our Home Office satisfactory proof of the Insured's death. We will pay the Life Insurance Benefit either in a lump sum or, at your option or the option of your beneficiary, by establishing a fixed Income Plan in the beneficiary’s name. (See “Other Benefits Available Under the Policy—Income Plans”). 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.
Subject to applicable provisions of the policy (e.g., misstatements), the amount of the Life Insurance Benefit will be:
•
the Death Benefit, or the Guaranteed Minimum Death Benefit if the Policy is in force under the Death Benefit Guarantee; minus
•
the amount of any Policy Debt; minus
•
the amount of any adjustments to the Life Insurance Benefit where (i) the Death Benefit Guarantee is keeping the Policy in force and the Insured dies during the Death Benefit Guarantee Grace Period or (ii) the Insured dies during a Policy Grace Period. (See “Death Benefit Guarantee Grace Period” and “Termination and Reinstatement”).
These amounts will be determined as of the date of the Insured's death. Even though the Owner does not have the right to take any Policy loans or withdrawals after the date of the Insured's death, any Policy loans or withdrawals that are taken after the date of the Insured's death will be deducted from the Life Insurance Benefit.
We will pay the Life Insurance Benefit to the beneficiary if he or she survives the Insured and is alive on the date of payment. (See “Other Policy Provisions—Naming a Beneficiary”). If no Income Plan is elected, we will pay interest on the Life Insurance Benefit from the date of the Insured’s death based on rates declared by the Company or as required by applicable state law. The investment performance of the Portfolios, as well as the charges and expenses under your Policy, may decrease your Death Benefit.
The Company will usually mail the proceeds of your Life Insurance Benefit within seven days after we receive all satisfactory proof of death at our Home Office. However, we may postpone payment after proof of death whenever the NYSE is closed or restricted (other than on customary weekend and holidays) or if the SEC permits such a delay by rule, order or declaration. During any such postponement, proceeds will be held in our General account and are subject to the claims of our creditors.
21Variable Universal Life Plus Prospectus
Death Benefit Options The Death Benefit before the Policy Anniversary nearest the Insured’s 121st birthday is determined by the Death Benefit option in effect at the time of the Insured’s death. The Death Benefit on and after the Policy Anniversary nearest the Insured’s 121st birthday will be equal to the Policy Value. If you select the Death Benefit Guarantee option with a lifetime period and the guarantee has not previously terminated, then the Death Benefit on and after the Policy Anniversary nearest the Insured’s 121st birthday will be the greater of the Policy Value or the Guaranteed Minimum Death Benefit.
The Policy provides for three Death Benefit options:
•
Option A—the greater of the Specified Amount or the Minimum Death Benefit;
•
Option B—the greater of the Specified Amount plus Policy Value or the Minimum Death Benefit; or
•
Option C—the greater of the Specified Amount plus Cumulative Premiums minus Cumulative Withdrawals or the Minimum Death Benefit.
All three death benefit options may not be available in all states. We calculate the amount available under the applicable Death Benefit option as of the date of the Insured’s death. You must elect a Death Benefit option at issue or your application will be deemed not in Good Order, in which case either we or your Financial Representative may notify you in an effort to conform your application to our then-current requirements.
The option you choose on your Application will generally depend on whether you prefer an increasing Death Benefit or a larger Policy Value, but in each case the Death Benefit will be at least the Minimum Death Benefit required for your Policy to qualify as life insurance under the Code. For purposes of Option C, cumulative Premium Payments do not include amounts credited to the Policy under the Payment of Selected Monthly Premium Upon Total Disability.
Minimum Death Benefit The Minimum Death Benefit is the amount required by federal tax law to maintain the Policy as a life insurance contract. Under any of the Death Benefit options, we will increase the Death Benefit if necessary to satisfy this requirement.
A Policy must satisfy one of two testing methods to qualify as life insurance for federal income tax purposes. You may choose either the Guideline Premium/Cash Value Corridor Test or the Cash Value Accumulation Test. Both tests require the Policy’s Death Benefit to equal or exceed a defined relationship to, or multiple of, the Policy Value. You make the choice of testing methods when you purchase a Policy and it cannot be changed.
For the Guideline Premium/Cash Value Corridor Test the minimum multiples of Death Benefit to the Policy Value are shown in the following table.
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Guideline Premium/Cash Value—Corridor Test Multiples 
Attained Age
Policy Value %
Attained Age
Policy Value %
40 or under
250
61
128
41
243
62
126
42
236
63
124
43
229
64
122
44
222
65
120
45
215
66
119
46
209
67
118
47
203
68
117
48
197
69
116
49
191
70
116
50
185
71
113
51
178
72
111
52
171
73
109
53
164
74
107
54
157
75-90
105
55
150
91
104
56
146
92
103
57
142
93
102
58
138
94
101
59
134
95 or over
100
60
130
 
 
For the Cash Value Accumulation Test, the minimum multiples of Death Benefit to the Policy Value are calculated using net single premiums based on the Attained Age of the Insured, the Policy’s underwriting classification and an interest rate that is the greater of the rate or rates guaranteed at issue under the Policy or the applicable accumulation test interest rate as defined in Internal Revenue Code section 7702 (currently 2%). An adjustment to the net single premium is made for certain kinds of optional benefits, if any.
Generally, the Guideline Premium/Cash Value Corridor Test has lower minimum multiples than the Cash Value Accumulation Test. This means that, given the same Policy Value, the minimum Death Benefit permissible by federal income tax law may be greater under the Cash Value Accumulation test than under the Guideline Premium/Cash Value Corridor Test. The Guideline Premium/Cash Value Corridor Test limits the amount of Premium Payment that may be paid in each Policy Year. Generally, the Cash Value Accumulation Test has no such annual limitation and, therefore, may allow more Premium Payments to be paid during the early Policy Years.
Changing Death Benefit Options You may change the Death Benefit option at any time while the Policy is in force, upon written request and subject to our approval. Death Benefit option changes are subject to our insurability requirements and issue limits. In addition, we will not permit a change if it is not allowed in your state or if it would result in either (i) your Policy being disqualified as a life insurance contract under federal tax law, or (ii) a Specified Amount less than the minimum Specified Amount we require for issuance of a new Policy at the time of the change. A Death Benefit option change may affect the Policy Value and Specified Amount, and also result in changes to, or termination of, the Death Benefit Guarantee. The Cost of Insurance Charge will increase if a change results in a larger net amount at risk. (See “Monthly Policy Charges and Service Charges”). A Death Benefit option change results in the same net amount at risk at the time of the change, but may result in a larger net amount at risk over time than had the change not occurred. For example, a change from Death Benefit Option A to Option B should result in moving from a net amount at risk that would decline over time (assuming increasing Policy Value) to a net amount at risk that would remain level over time. Changing the Death Benefit option may have tax consequences. (See “Tax Considerations”).
If your request is received in Good Order at our Home Office before the close of trading (typically, 4:00 p.m. Eastern Time) on the NYSE on a Monthly Processing Date, a change in the Death Benefit option will be effective on that date. If the written request is not received on a Monthly Processing Date, or is received on or after the close of trading on a Monthly Processing Date, it will be effective on the next Monthly Processing Date. We reserve the right to charge for a Death Benefit option change (See “Charges and Deduction—Monthly Policy Charges and Service Charges”).
Death Benefit Guarantee The Policy offers an optional Death Benefit Guarantee Period elected at issue. Your Policy may also be eligible for Death Benefit Guarantee Premium Suspension. See “Other Benefits Available Under the Policy” for more information about these benefits.
23Variable Universal Life Plus Prospectus
Other Benefits Available Under the Policy
In addition to the standard death benefits associated with your Policy, other standard and/or optional benefits may also be available to you. The following table(s) summarize information about those benefits. If applicable, information about the fees associated with each benefit included in the table may be found in the Fee and Expense Tables. 
Name of Benefit
Purpose
Is Benefit Standard or
Optional
Brief Description of
Limitations/Restrictions
Waiver Benefit: Payment of
Selected Monthly Premium
Upon Total Disability
Permits an Insured who has become totally
disabled to make minimum premium payments
equal to or greater than monthly charges without
the Policy lapsing
Optional
•Not available for all
ages or
underwriting
classifications
•The disability must
result from an
accident or
sickness and must
last for at least six
months
•There is a charge
for this benefit
Additional Purchase Benefit
Allows the Owner to purchase additional life
insurance policies on the life of the Insured without
proof of insurability
Optional
•Not available for all
ages or
underwriting
classifications
•There is a charge
for this benefit
Death Benefit Guarantee
Allows you to select a Death Benefit Guarantee
Period during which the Policy is guaranteed not to
terminate due to insufficient value in your Policy
Optional
•Must be elected at
issue
•Monthly charges
will reduce the
value in your Policy
during the
guarantee period,
which may
eventually result in
termination
•There is a charge
for this benefit
Death Benefit Guarantee
Premium Suspension
Allows for the suspension of required premiums
during the Death Benefit Guarantee Period until
your next Policy Anniversary
Standard (with Death
Benefit Guarantee)
•May expire earlier
than your next
Policy Anniversary
under certain
circumstances (i.e.,
“retest events”)
Income Plans
In lieu of a lump sum, the Death Benefit and
surrender proceeds may be payable in a monthly
(or less frequent) payments over a period of time
Standard
•Must be selected
by Owner
•Payments are
subject to fixed
rates and not
investment
performance of the
Portfolios
•For death benefit
proceeds, must be
selected while the
Insured is living or
within 60 days
after the death of
the Insured
Variable Universal Life Plus Prospectus
24
Name of Benefit
Purpose
Is Benefit Standard or
Optional
Brief Description of
Limitations/Restrictions
Exchange for a Fixed Benefit
Policy
Allows you to exchange your Policy for a life
insurance policy with benefits that do not vary with
the investment experience of the underlying
Portfolios
Standard
•Requires premium
payments be paid
•There may be a
cost associated
with exchange
•Exchange may have
tax consequences
Paid-up Insurance
Under certain conditions allows the Owner to
change the Policy to a policy free of minimum
premium payment obligations
Standard
•Must be selected
by Owner
•Election is
irrevocable
•Policy Debt and
charges continue
•When in force as
Paid-up insurance,
no additional
premium is allowed
on the Policy, your
Death Benefit
option will be
irrevocably
changed and you
may not add
optional benefits to
the Policy
Dollar Cost Averaging
On a monthly basis, automatically transfers a
specific amount from the Government Money
Market Division into the other Divisions you have
selected
Standard
•Must be selected
by Owner
•The SAS Account is
not included in
dollar cost
averaging
Portfolio Rebalancing
Automatically rebalances the Divisions you select
(either monthly, quarterly, semi-annually or
annually) to maintain your chosen allocations
among the Divisions
Standard
•Must be selected
by Owner
•The SAS Account is
not included in
portfolio
rebalancing
Asset Allocation Models
Allocation models are available that comprise a
combination of Divisions representing various asset
classes with various levels of risk tolerance.
Standard
•Must be selected
by Owner
•Only one model is
available at a time
•Models are “static”
and therefore the
Owner must make
an affirmative
election to change
models
•Available models
may change in the
future
 
Optional Benefits Available for a Charge
There are currently three optional benefits available for purchase under the Policy:
(1)
the Waiver Benefit: Payment of Selected Monthly Premium Upon Total Disability (“Selected Monthly Premium Benefit”);
(2)
the Additional Purchase Benefit; and
25Variable Universal Life Plus Prospectus
(3)
the Death Benefit Guarantee
The Selected Monthly Premium Benefit may be elected at any time while the Insured is between Attained Ages 0 and 59. The Additional Purchase Benefit may be elected while the Insured is between Attained Ages 0 and 40. If the Owner seeks to add an optional benefit after the Policy has been issued, the addition of the benefit will be subject to the Company’s then-current underwriting standards. These optional benefits are not available for all Attained Ages and underwriting classifications. The Death Benefit Guarantee must be elected at issue.
If you select one or more of these optional benefits, a charge for the benefit will be added to the Monthly Policy Charge. (See “Periodic Charges Other than Fund Operating Expenses”). Any such charge will continue to be assessed as long as the benefit remains in force, except that charges for the Selected Monthly Premium Benefit will be waived when the Insured is totally disabled, subject to the terms and conditions of the benefit. Once the Policy has been issued, the optional benefits above (other than the Death Benefit Guarantee) may be added to the Policy, subject to the Company’s insurability requirements and other rules. If the written request to terminate the optional benefits (other than the Death Benefit Guarantee) is received in Good Order at our Home Office before the close of trading (typically, 4:00 p.m. Eastern Time) on the NYSE on a Monthly Processing Date, the request will be effective on that date. If the request is not received on a Monthly Processing Date, or is received on or after the close of trading on the NYSE, it will be effective on the next Monthly Processing Date. If your request is not in Good Order, either we or your Financial Representative will notify you in writing, by telephone or by email in an effort to conform your request to our then-current requirements.
Selected Monthly Premium Benefit Subject to applicable terms and conditions, the Selected Monthly Premium Benefit provides for the payment of the greater of (1) a premium amount selected by the Owner subject to Company limitations (e.g. the range of dollar amounts which at a minimum maintain the Policy or at a maximum reach the Company’s then-current Premium waiver limits), or (2) the premium amount required to cover the current Monthly Policy Charges (other than the Monthly Policy Debt Expense Charge) that come due during the total disability of the Insured, if the total disability is due to accident or sickness and it begins on or before the Policy Anniversary nearest the Insured’s 60th birthday. If the total disability begins after the Policy Anniversary nearest the Insured’s 60th birthday, the benefit provides for the payment of the greater of (1) premium amount selected by the Owner subject to Company limitations, or (2) the premium amount required to cover the current Monthly Policy Charges (other than the Monthly Policy Debt Expense Charge) that come due during the total disability of the Insured until the Policy Anniversary nearest the Insured’s 65th birthday.
A total disability is one which prevents the Insured from engaging in an occupation. For the first 24 months of total disability, an occupation is the one that the Insured has at the time the Insured becomes disabled. After 24 months, an occupation is one for which the Insured is qualified by education, training or experience. To be covered, the total disability must begin while the benefit is in force; the total disability must result from an accident or sickness; and the total disability must last for at least six consecutive months. The Company will determine the existence of total disability based on the proof of claim submitted and other information gathered by the Company. This Optional Benefit is not available to be added to the Policy if, on the date the Optional Benefit is requested, the Insured is totally disabled, or, as noted above, the Attained Age or underwriting classification of the Insured is outside the range within which the Company offers these Optional Benefits, or should these Optional Benefits become unavailable in your state of issue.
The Selected Monthly Premium Benefit terminates on the earliest of: (1) the Policy Anniversary that is nearest the 65th birthday of the Insured unless the Insured became totally disabled prior to the Policy Anniversary that is nearest the 60th birthday of the Insured; (2) when the Policy terminates; (3) when the Policy becomes Paid-Up insurance; or (4) when the Owner’s written request to terminate the benefit is received at our Home Office.
The amounts paid under the Selected Monthly Premium Benefits are treated as Premium Payments subject to the terms of the Policy, except that if the Policy has Death Benefit Option C, then the amounts paid under these benefits will not be included in the cumulative Premium Payments that are used in the calculation of the Death Benefit. The amounts paid under this benefit are subject to the same transaction fees as any other Premium Payment. (See “Charges and Deductions—Premium Expense Charges”).
Example: John Doe, age 57, lost his right hand in a car accident and became totally disabled from his job as a roof tiler. John’s policy has a Selected Monthly Premium Benefit with a selected monthly premium amount of $7,000. Afterward, on a particular monthly processing date, John’s monthly policy charges total $5,000. John’s Selected Monthly Premium Benefit will pay $7,000 into the policy on that monthly processing date.
Additional Purchase Benefit Subject to the terms and conditions of the benefit, the Additional Purchase Benefit gives the Owner the right to purchase additional life insurance policies on the life of the Insured up to Attained Age 40 at specified dates without proof of insurability. This optional benefit terminates on the Policy Anniversary nearest the 40th birthday of the Insured. It will terminate earlier: (1) when the Policy terminates; (2) when the Policy becomes Paid-Up insurance; (3) on the use of the final purchase right under the benefit; or (4) when the Owner’s written request to terminate the benefit is received at our Home Office.
Variable Universal Life Plus Prospectus
26
Example: Jane Doe, age 28, is the owner and insured of her policy and decides she wants an additional $50,000 of life insurance. Jane purchases her policy without the Company requiring evidence of insurability.
Death Benefit Guarantee The Policy offers a Death Benefit Guarantee Period elected at issue. The Death Benefit Guarantee Period is optional and is elected on the application and established at issue by the applicant. A Death Benefit option change may result in changes to, or termination of, the Death Benefit Guarantee. There is a charge for the Death Benefit Guarantee (see “Fee and Expense Tables–Periodic Charges” and “Charges and Deductions–Monthly Policy Charges and Service Charges”). The Death Benefit Guarantee Period is shown on the Policy schedule pages. The Death Benefit Guarantee is available to protect the Policy from terminating during the Death Benefit Guarantee Period so long as the Death Benefit Guarantee Test is met. (See “Death Benefit Guarantee Test”). The Death Benefit Guarantee keeps the Policy in force when the Policy does not have enough Cash Surrender Value to pay the current Monthly Policy Charge and the Policy would otherwise terminate without value. (See “Termination and Reinstatement”). Please note that certain allocation or transfer restrictions may be affected by whether or not your Death Benefit Guarantee is active. (See “The Fixed Option-Restrictions on Amounts in the SAS Account and Government Money Market Division.”)
When the Policy does not have sufficient Cash Surrender Value to pay the current Monthly Policy Charge and is being kept in force by the Death Benefit Guarantee, the Monthly Policy Charges will first reduce the Contract Fund Value, if any, to zero and will then accumulate as due and unpaid. Then, when you make a Premium Payment, we will deduct accumulated due and unpaid Monthly Policy Charges from Contract Fund Value. At the end of the Death Benefit Guarantee Period, if the Cash Surrender Value is less than the current Monthly Policy Charges, the Policy will enter the Policy Grace Period and an additional Premium Payment will be required to keep the Policy in force. (See “Termination and Reinstatement”).
If the Policy is being kept in force by the Death Benefit Guarantee when the Insured dies, the gross amount of death proceeds will be the Guaranteed Minimum Death Benefit (“GMDB”) regardless of the Death Benefit option in effect. On the Date of Issue the GMDB equals the Specified Amount. After the Date of Issue, if there is a Policy change that changes the Specified Amount, including a Death Benefit option change, then the GMDB will equal the lessor of the current GMDB or the new Specified Amount.
During the Death Benefit Guarantee Period, the Death Benefit Guarantee keeps the Policy from terminating, provided that the Death Benefit Guarantee Test is met. Unless the Death Benefit Guarantee was previously terminated, the Death Benefit Guarantee Test will be performed on each Monthly Processing Date during the Death Benefit Guarantee Period or until the Policy Anniversary nearest the Insured’s 121st birthday, if sooner. If the Death Benefit Guarantee Test is not met on a Monthly Processing Date, the Death Benefit Guarantee will enter a Death Benefit Guarantee Grace Period. The Death Benefit Guarantee Test is met provided that:
(1)
on the current Monthly Processing Date, (a) is greater than or equal to (b) where:
(a)
is the cumulative Premium Payments minus the sum of the following:
•
the cumulative withdrawals; and
•
principal loan balance (See “Policy Loans”); and
 
(b)
is the cumulative Death Benefit Guarantee Premiums for the current Monthly Processing Date;
AND
(2)
the Death Benefit Guarantee Test has been met on all prior Monthly Processing Dates, and has not previously been terminated due to a loan or withdrawal causing the test to not be met.
The Death Benefit Guarantee Test will be deemed to have been met on all prior Monthly Processing Dates during a Death Benefit Guarantee Grace Period if the required payment is paid prior to the expiration of the Death Benefit Guarantee Grace Period.
Termination of Death Benefit Guarantee For Failure to Meet the Death Benefit Guarantee Test If on a Monthly Processing Date the Death Benefit Guarantee Test is not met, you will have 61 days to make an additional payment to keep the Death Benefit Guarantee, provided the Death Benefit Guarantee Period is not already scheduled to expire during that 61-day period. The Death Benefit Guarantee Grace Period will begin on the date we send you written notice of the amount of payment you must make. The minimum payment that you must make will be the amount necessary to meet the Death Benefit Guarantee Test at the end of the Death Benefit Guarantee Grace Period.
The Death Benefit Guarantee will continue during the Death Benefit Guarantee Grace Period, terminating at the end of such period if you do not make the required payment. If you do not make the required payment, you will not be able to reinstate the Death Benefit Guarantee.
27Variable Universal Life Plus Prospectus
When the Death Benefit Guarantee terminates, the Policy will still remain in force provided the Cash Surrender Value on the Monthly Processing Date is greater than the Monthly Policy Charges. If, however, this requirement is not met, the Policy will enter the Policy Grace Period, during which time you may still avoid termination of your Policy provided you make sufficient payments to keep your Policy in force. (See “Termination and Reinstatement”).
If the Insured dies during the Death Benefit Guarantee Grace Period and the Death Benefit Guarantee is keeping the Policy in force, we will deduct from the Life Insurance Benefit the amount of the payment required to meet the Death Benefit Guarantee Test as of the last Monthly Processing Date preceding or on the date of death of the Insured.
Example: John Doe elected a ten-year Death Benefit Guarantee Period when he purchased his policy and has met his Death Benefit Guarantee Test every month. On a monthly processing date in the eighth year, John’s policy has the following characteristics:
Cash Surrender Value = $80
Monthly Policy Charges = $100
Cumulative Premiums to date = $20,000
Cumulative Withdrawals to date = $1,000
Principal Loan Balance = $0
Cumulative Monthly Death Benefit Guarantee Premiums = $18,000
John’s policy does not have enough cash surrender value to cover monthly policy charges and would normally enter the policy grace period and eventually terminate. However, John’s policy does not enter the policy grace period because his cumulative premium amount (less withdrawals and loans) ($20,000 - $1,000 = $19,000) is greater than his cumulative monthly Death Benefit Guarantee Premium amount ($18,000), which was an amount determined when John purchased the policy. Amounts needed to cover the outstanding charges are deducted from the value of John’s policy.
Death Benefit Guarantee Premium Suspension Your Policy may be eligible for Death Benefit Guarantee Premium Suspension as indicated on your Policy schedule pages. Death Benefit Guarantee Premium Suspension is tested on the month prior to your next Policy Anniversary. It sets the Death Benefit Guarantee Monthly Premium to zero beginning on the next Monthly Processing Date until the next Policy Anniversary (or earlier if a “Retest Event” occurs), so long as the Death Benefit Guarantee is active (and not in a Death Benefit Grace Period) and the Contract Fund Value is in excess of the amounts indicated on the Table of Amounts for Determining Death Benefit Guarantee Premium Suspension (“Premium Suspension Table”) for a particular Monthly Processing Date shown in your Policy. A Retest Event is defined as a withdrawal, a Policy loan, a failure to pay accrued loan interest when due, or a change by the Owner to the terms of the Policy that could result in an increase in the Company’s risk under the Policy. If a Retest Event occurs, the Death Benefit Guarantee Premium Suspension will continue so long as immediately after the Retest Event the Death Benefit Guarantee Test is met and the Contract Fund Value is greater than or equal to the amount shown in the Premium Suspension Table for the Monthly Processing Date adjusted proportionately for any reduction to the Guaranteed Minimum Death Benefit resulting from the Retest Event.
Example: Jane Doe elected a ten-year Death Benefit Guarantee Period when she purchased her policy and has met her Death Benefit Guarantee Test every month. On the monthly processing date prior to her eighth policy anniversary, Jane’s policy had the following characteristics:
Cumulative Premiums to date = $50,000
Cumulative Monthly Death Benefit Guarantee Premiums = $20,000
Contract Fund Value = $90,000
Death Benefit Guarantee Premium Suspension Amount = $85,000
Because the Contract Fund Value of Jane’s policy is greater than the Death Benefit Guarantee premium suspension amount shown in her policy, her policy passes the Death Benefit Guarantee Premium Suspension test and her monthly Death Benefit Guarantee premium amount is reduced to $0, meaning she will continue to pass the monthly Death Benefit Guarantee test until the earlier of her next Policy Anniversary or a Retest Event.
Standard Benefits Available At No Charge
Income Plans Upon the death of the Insured, if an Income Plan was not previously elected by you and in lieu of a lump sum or other payment agreed to by the Company, the beneficiary may elect to receive his or her share (or name and change beneficiaries –see “Other Policy Provisions – Naming a Beneficiary”) of the Life Insurance Benefit by either of the fixed Income Plan options noted below. Payments under a fixed Income Plan option are not affected by the investment performance of the Divisions after the date of surrender or the date of the Insured’s death. Nothing in this section shall be construed to otherwise contradict the order of payment of the Life Insurance Benefit as described in the Policy, designated by you or under applicable law.
Variable Universal Life Plus Prospectus
28
Payments under fixed Income Plan options will be based on rates declared by the Company on the effective date of the Income Plan. The monthly income payment rates applicable to life Income Plans are based on interest rates applicable to amounts as of the date of death of the Insured according to the Policy as well as additional interest at a rate of 10% annually beginning 31 calendar days after the latest of (a) proof of the date of death is received by the Company, (b) the Company has all the information it needs to determine liability and the appropriate payees, or (c) any legal impediments (e.g., court guardian or executor actions) are properly satisfied. There is no additional charge for electing an Income Plan option. We may offer additional Income Plans.
•
Single Life Income We will make monthly payments for the selected certain period. The options for the certain period are zero years (i.e., no certain period), ten years, or twenty years. If the payee lives longer than the certain period, payments will continue for his or her life. In cases where a ten or twenty year certain period is elected, if the payee dies before the end of the certain period, the balance of the certain period payments will be paid to the Income Plan beneficiaries your beneficiary designates. Where a certain period of zero years was selected and the Income Plan beneficiary dies before the first scheduled payment, then no payments will be paid.
•
Joint and Survivor Life Income We will make monthly payments for a 10-year certain period, and thereafter for as long as either of the individuals upon whose lives income payments are based is living. If both payees die before the end of the certain period, the balance of the certain period payments will be paid to the Income Plan beneficiaries or to beneficiaries your beneficiary designates.
In general, the monthly payments under a joint and survivor life Income Plan will be lower than, but may be payable for a longer period than, a single life Income Plan.
The Owner may elect an Income Plan for each beneficiary’s share of the Life Insurance Benefit:
•
while the Insured is living; or
•
during the first 60 days after the death of the Insured, if the Insured at the time of his or her death was not the Owner. An election made during that 60-day period may not be revoked.
An Owner may make or change Income Plan elections by contacting the Home Office or an authorized Financial Representative may provide us with an election on behalf of a Policy Owner subject to our current procedures, rules and requirements.
Subject to the Owner’s rights, and upon providing any information that we may require, a direct or contingent beneficiary may elect an Income Plan for his or her share of the Life Insurance Benefit and/or name his or her own beneficiary for the Income Plan value, if any, remaining on his or her death. If no such Income Plan beneficiary is named, then the Income Plan beneficiary for the remaining value, if any, shall be the estate of the deceased direct or contingent beneficiary. Income Plan beneficiaries may continue to receive payments of the remaining value under the terms of the Income Plan in effect on the death of the direct or contingent beneficiary.
Withdrawal  The remaining value, if any, in an Income Plan may be withdrawn in a lump sum upon the death of all individuals upon whose lives income payments are based. The withdrawal value will be the present value of any unpaid payments for the remaining certain period. The present value will be based on the rate of interest used to determine the amount of the payments.
Limitations  If a trust is named as a beneficiary and no qualified trustee claims the Life Insurance Benefit within one year after the claim is determined to be payable, payment of the Life Insurance Benefit will be paid as though the trust had not been named as a beneficiary. The Company is not responsible for actions taken by the trustee and will not be charged with notice of any change of trustee unless written evidence of the change is received at the Home Office.
Payment Frequency Upon written request, we will make payments once every 3, 6, or 12 months instead of each month.
Example: John Doe was the owner and insured of a policy and had elected a single life income plan for a ten-year certain period. Upon his death, in lieu of paying life insurance proceeds from the policy to his wife Jane, his beneficiary, in a lump sum, the Company made reduced amounts of monthly payments to her spread out over that time period while the remaining balance earned interest.
Exchange for a Fixed Benefit Policy Depending on your state of issue, we may allow you to exchange your Policy for a life insurance policy with benefits that do not vary with the investment experience of the Separate Account (“Fixed Benefit Policy”) at any time within the period allowed by your state provided premiums are paid. We reserve the right to require evidence of insurability. Depending on the timing and the individual circumstances surrounding the exchange, the Fixed Benefit Policy will be on the life of the same Insured and will have a Death Benefit at least as great as the initial Death Benefit of your Policy (assuming no decrease in Specified Amount prior to the exchange). The exchange may be subject to an equitable cash adjustment, which will recognize the investment performance of the Policy through the effective date of the exchange and may have tax consequences. An exchange will be effective when we receive a proper written request, as well as the Policy, and any amount due on the exchange.
29Variable Universal Life Plus Prospectus
In addition, irrespective of your state of issue, you may exchange a Policy for a Fixed Benefit Policy if, at any time, a Fund changes its investment adviser, if there is a material change in the investment policies of a Portfolio that was approved by Owners, or the Portfolio is substituted for another portfolio (see “Other Policy Transactions-Substitution of Portfolio Shares and Other Changes”). There may be a cost associated with the exchange. You will be given notice of any such change and will have 60 days to make the exchange.
Example: John Doe lives in California and is the owner and insured of a a variable universal life plus policy. Twelve months after the policy is issued, John decides he would rather own a policy that is not subject to the investment experience of the underlying portfolios in which the separate account divisions that support his policy invest, and would rather own a policy that earns a fixed rate of interest. Subject to the Company’s requirements, John has up to six more months to exchange his variable policy for a fixed policy without the Company requiring evidence of insurability.
Paid-up Insurance Upon written request to the Company, you may change your Policy to Paid-up insurance. Your election to convert to Paid-up insurance is irrevocable. To convert your Policy, the Cash Surrender Value must be at least $1,000 and the Policy must have been in force for at least 18 months from the Policy Date. This feature is not available for policies issued in certain states where the Guideline Premium/Cash Value Corridor Test (see “Minimum Death benefit”) was elected at issue. See Appendix B for more information about whether your state of issue affects the availability of Paid-up insurance.
If the request is received in Good Order at our Home Office before the close of trading (typically, 4:00 p.m. Eastern Time) on the NYSE on a Monthly Processing Date, the effective date of change to Paid-Up insurance will be that date. If the request is not received on a Monthly Processing Date, or on or after the close of trading on the NYSE on a Monthly Processing Date, the change will be effective on the next Monthly Processing Date. If your request is not in Good Order, either we or your Financial Representative will notify you in writing, by telephone or by email in an effort to conform your request to our then-current requirements.
On the date the Policy is changed to Paid-Up insurance, we deduct any applicable surrender charge and we transfer the Contract Fund Value to the Company’s General Account. Any outstanding Policy Debt continues. The Specified Amount will be changed to the Paid-up Specified Amount. The Paid-up Specified Amount is calculated as the Policy Value (after deducting the surrender charge and any withdrawals as of the date of the change) divided by the factor for the Paid-up insurance option shown on the Policy schedule pages. The Death Benefit option will be changed to Option A, and any Death Benefit Guarantee and any optional benefits will be terminated. The definition of life insurance will be changed to the Cash Value Accumulation Test (please see “Death Benefit – Minimum Death Benefit” for more information).
After the transfer, the Policy Value will equal the Contract Fund Value plus any Policy Debt except that Policy Value (excluding loans) will not be less than the Paid-Up Specified Amount multiplied by the factor for the Paid-up insurance shown on the Policy schedule pages (“Guaranteed Minimum Paid-Up Policy Value”).
When the Policy is in force as Paid-up insurance, you will not be permitted to make additional Premium Payments, change Death Benefit options or the Specified Amount, or add optional benefits to the Policy. Subject to certain restrictions, you are permitted to make withdrawals and loan repayments and take out additional loans. Loans and withdrawals reduce the Contract Fund Value and may increase the chance the Policy will terminate without value. A withdrawal can be requested by the Owner (see “Surrender and Withdrawals of Policy Value”). Withdrawals may reduce the Paid-up Specified Amount.
The Contract Fund Value will earn interest at an annual effective rate determined by the Company that may change no more frequently than once a year and at no time will the annual effective interest rate be less than the minimum Paid-up Minimum Guaranteed Annual Effective Interest Rate shown in the Policy schedule pages. On any day after the effective date, the Contract Fund Value is equal to the Contract Fund Value at the end of the previous day plus any of the following items applicable for the current day:
•
interest;
•
any loan repayment and accrued loan interest payment made; and
•
any Policy dividend directed to increase the Policy Value;
minus any of the following items applicable to the Contract Fund Value for the current day:
•
a Monthly Policy Charge;
•
Policy loans;
•
withdrawals; and
•
service charges.
When the Policy is in force as Paid-Up insurance, the Monthly Policy Charge consists of the Monthly Policy Debt Expense Charge and the Monthly Cost of Insurance Charge. These charges may be reduced in order to ensure the Policy Value is not less than the Guaranteed Minimum Paid-Up Policy Value.
Variable Universal Life Plus Prospectus
30
Example: Jane Doe is the owner and insured of a variable universal life plus policy with an Additional Purchase Benefit rider and a Death Benefit Guarantee that has been in force for three years. Her policy has the following characteristics as of a monthly processing date:
Cash Surrender Value = $200,000
Specified Amount = $500,000
Factor for Paid-up Option in the current policy month (from the policy schedule pages) = 0.8
Jane decides she would rather own a paid-up policy that will earn a fixed rate of interest and will not require additional premium payments. Because Jane’s policy has the required minimum amount of cash surrender value and has been in force long enough, she is able to convert her policy to a paid-up policy. Her new policy, however, will not have any benefits and the specified amount of her death benefit will be reduced to her policy value divided by the factor set form in her policy at issue, in this case reducing her specified amount from $500,000 to $250,000 (i.e., $200,000 / 0.8 = $250,000).
Dollar-Cost Averaging With Dollar-Cost Averaging (“DCA”), you can arrange to have a designated amount of money (either a fixed dollar amount or a fractional amount) automatically transferred monthly in allowable amounts from the Government Money Market Division into other Division(s) you have chosen. Transfers will end either when the amount in the Government Money Market Division is depleted or when you submit a request to our Home Office to stop such transfers, whichever is earlier. You may request changes in writing (including via facsimile or, under limited circumstances, by email) or by calling (866) 464-3800. Where allowable by applicable law, a Policy Owner’s Financial Representative may provide us with rebalancing requests on behalf of a Policy Owner subject to our current procedures, rules and requirements. You may also submit changes via the Internet at www.northwesternmutual.com (“Electronic Instructions”) in accordance with our then-current Internet procedures provided you have properly authorized us to accept Electronic Instructions in advance of your request. There is no charge for DCA. We reserve the right to modify or terminate the DCA Plan at any time. The special restrictions placed on the Government Money Market Division (see “Restrictions on Amounts in the SAS Account and Government Money Market Division) do not apply when you elect the DCA features.
DCA does not ensure a profit or protect against loss in a declining market. Carefully consider your willingness to continue Premium Payments during periods of declining markets. You should consult your Financial Representative before deciding whether to elect DCA.
Portfolio Rebalancing Over time, portfolio rebalancing helps you maintain your allocations among the Divisions. If you elect portfolio rebalancing, amounts invested in the Divisions are periodically rebalanced in accordance with our procedures, to return your allocation to the percentages you specify. Portfolio rebalancing may reduce amounts allocated to better performing Divisions. Please note that the SAS Account is not included in portfolio rebalancing.
You may choose to rebalance monthly, quarterly, semi-annually or annually. We do not charge a transfer fee for portfolio rebalancing. Subject to any limitations imposed by our short-term and excessive trading policies and procedures, you may elect portfolio rebalancing and modify or terminate your election at any time by submitting a request to our Home Office. You may request changes in writing (including via facsimile or, under limited circumstances, by email) or by calling (866) 464-3800. Where allowable by applicable law, a Policy Owner’s Financial Representative may provide us with rebalancing requests on behalf of a Policy Owner subject to our current procedures, rules and requirements. You may also submit changes via the Internet at www.northwesternmutual.com (“Electronic Instructions”) in accordance with our then-current Internet procedures provided you have properly authorized us to accept Electronic Instructions in advance of your request. If you make transfers through our website, your portfolio rebalancing will end and you will need to make a new election if you want portfolio rebalancing to continue. We may modify, limit, suspend, or discontinue this feature at any time.
Asset Allocation Models The Company currently makes available allocation models at no extra charge for amounts invested in the Divisions. An Owner can select only one model at a time. Each of the four models currently available (Moderately Conservative, Balanced, Aggressive, Very Aggressive) is comprised of a combination of Divisions that hold Portfolios representing various asset classes with various levels of risk tolerance. Generally, the four models can be characterized as follows: 
Moderately Conservative
This combination of Divisions has Portfolios that generally invest in
fixed income securities and a mix of equity securities with a majority
emphasis on fixed income investments in order to preserve
principal, provide liquidity and income and to seek modest growth.
Balanced
This combination of Divisions has Portfolios that generally invest in a
mix of fixed income and equity securities in order to preserve
principal and pursue sustained long-term growth without the
volatility of high- risk investments.
Aggressive
This combination of Divisions has Portfolios that generally invest in a
mix of equity securities and some fixed income securities in order to
primarily pursue long-term growth while willing to accept the
volatility associated with high-risk investments.
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Very Aggressive
This combination of Divisions has Portfolios that invest in almost
entirely in a variety of equity securities in order to achieve higher
potential growth while assuming the risks and higher volatility
associated with these securities.
An Owner may only select a model which is currently available. Any investment allocations outside of an Owner’s original model must be made by the Owner, and will not be made by the Company. The Company does not provide investment advice regarding whether a model should be revised or whether it remains appropriate to invest in accordance with any particular model due to performance, a change in an Owner’s investment needs or for other reasons. If an Owner wishes to remove Portfolios from an Owner’s model and/or change allocations to a current model, the Owner may do so by notifying us in writing, contacting their Financial Representative or by calling (866) 464-3800. There will be no automatic rebalancing to these models unless the Owner chooses the automatic rebalancing option. Please note that investment in a model does not eliminate the risk of loss and it does not protect against losses in a declining market. An Owner should contact their Financial Representative for more information about available allocation models (including the specific asset mixes of available models) and whether investment in a model is appropriate for them. Models may not be available for Policies with allocated amounts to the SAS Account.
Available models may change from time to time, but you must make an affirmative election to change models. The Company reserves the right to modify, suspend, or terminate any asset allocation model at any time without affecting an Owner’s current allocation, except in limited circumstances involving a Substitution (see “Substitution of Portfolio Shares and Other Changes” below for more information regarding the substitution of a Portfolio) or the elimination of a Portfolio as an investment option under the Policy pursuant to other applicable SEC regulatory guidance. In that case, allocations in a Portfolio within a model (Original Portfolio) will be transferred to a different Portfolio if the Original Portfolio becomes no longer available (e.g., a substitution, merger, or liquidation), in which case the Company will send written notice in advance of such event. If an Owner is invested in a model that is no longer offered and initiates a change outside of the original model allocations, the Owner will not be able to select the original model (see “Transfers” above for more information about how to change portfolio allocations).
Please note that investment according to an allocation model may result in an increase in assets allocated to Portfolios managed by an investment adviser affiliated with the Company, and therefore a corresponding increase in Portfolio management fees collected by such adviser and may present a conflict of interest.
Surrender and Withdrawals
Surrender You may surrender your Policy for the Cash Surrender Value at any time while the Insured is alive and the Policy is in force. Where allowable by applicable law, a Policy Owner’s Financial Representative may provide us with surrender instructions on behalf of a Policy Owner subject to our current procedures, rules and requirements. The Cash Surrender Value will change daily in response to the investment performance of the Divisions in which you are invested. We determine the Cash Surrender Value on the date your request for surrender is effective. Requests for surrenders will be effective on the Valuation Date on or next following the date we receive your request in Good Order at our Home Office. Requests received before the close of trading (typically, 4:00 p.m. Eastern Time) on the NYSE on a Valuation Date are deemed to be received and effective on that Valuation Date. If received on or after the close of trading on a Valuation Date, or a day other than a Valuation Date, requests are deemed to be received and effective on the next Valuation Date. If your request is not in Good Order, either we or your Financial Representative may notify you in writing, by telephone or by email in an effort to conform your request to our then-current requirements.
We do not guarantee any minimum Cash Surrender Value. We may require you to return your Policy to our Home Office when you request a surrender of the Policy. We will pay surrender proceeds in a lump sum or under an Income Plan option you select. (See “Other Benefits Available Under the Policy—Income Plans”). A surrender charge will apply to surrenders during the first ten Policy Years (see “Charges and Deductions”) and a surrender may have tax consequences (see “Tax Considerations”).
Withdrawals  Upon written request received at our Home Office at any time while the Insured is alive (up to his or her 121st birthday) and the Policy is in force, you may make a withdrawal, subject to the Company’s right to assess a charge in an amount up to $25 per withdrawal (currently waived). Where allowable by applicable law, a Policy Owner’s Financial Representative may provide us with withdrawal instructions on behalf of a Policy Owner subject to our current procedures, rules and requirements. You may make no more than four withdrawals in a Policy Year. Each withdrawal must be at least $250, and you may not withdraw an amount that would:
•
reduce the Loan Value (net of any applicable service charge) to less than the Policy Debt;
•
for a Policy with Death Benefit Option A, withdraw an amount which would reduce the Specified Amount to less than the minimum Specified Amount required for issuance of a Policy at the time of withdrawal, unless this Policy is in force under Paid-up insurance (see “Other Benefits Available Under the Policy—Paid-up Insurance”); or
•
reduce the Cash Surrender Value to less than the sum of three times the most recent Monthly Policy Charge.
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A withdrawal may also have tax consequences. (See “Tax Considerations”). A withdrawal may also decrease the Specified Amount used to determine the Death Benefit. Specifically, unless the Policy is in force under Paid-up insurance, if Death Benefit Option A is in effect at the time of withdrawal, the Specified Amount will be reduced by the amount withdrawn less the excess, if any, of the result of (a) divided by (b) where:
(a)
is the Policy Value immediately prior to the withdrawal; and
(b)
is the Specified Amount divided by the Minimum Death Benefit Percentage (shown in the Policy schedule pages) applicable at the time of the withdrawal.
Written requests for withdrawals will be processed and effective on the Valuation Date on or next following the date we receive your request in Good Order at our Home Office. Requests received before the close of trading (typically, 4:00 p.m. Eastern Time) on the NYSE on a Valuation Date are deemed to be received and effective on that Valuation Date. If received on or after the close of trading on a Valuation Date, or a day other than a Valuation Date, requests are deemed to be received and effective on the next Valuation Date. If your request is not in Good Order, either we or your Financial Representative will notify you in writing, by telephone or by email in an effort to conform your request to our then-current requirements. On the Valuation Date on which a withdrawal from the Policy Value is effective, Contract Fund Value will be reduced by the amount of the withdrawal and any applicable charges. The amount of the withdrawal must be allocated first among the Divisions in proportion to the amounts in each Division, with any excess amount allocated to amounts in the SAS Account (first from the Tier Two Balance, then the Tier One Balance).
Policy Loans
At any time while the Insured is alive and the Policy is in force, using the Policy as security, you may submit a request for a loan that is secured by the Contract Fund Value. The loan must be in an amount that, when added to existing Policy Debt, is not greater than your Loan Value. You may increase the risk that your Policy will lapse (terminate with no value) if you take a loan. A Policy loan or unpaid interest may have tax consequences. (See “Tax Considerations”). Loan requests can be made in writing (including via facsimile, or under limited circumstances, by email). Eligible Owners may also submit loan requests by calling (866) 464-3800. Where allowable by applicable law, a Policy Owner’s Financial Representative may provide us with policy loan instructions on behalf of a Policy Owner subject to our current procedures, rules and requirements. They will be processed based on the date and time they are received in the Home Office. Requests will be effective on the Valuation Date or on the next date we receive your request in Good Order at our Home Office. Requests received before the close of trading (typically, 4:00 p.m. Eastern Time) on the NYSE on a Valuation Date are deemed to be received and effective on that Valuation Date. If received on or after the close of trading on a Valuation Date, or a day other than a Valuation Date, requests are deemed to be received and effective on the next Valuation Date. If your request is not in Good Order, either we or your Financial Representative will notify you in writing, by telephone or by email in an effort to conform your request to our then-current requirements.
We charge interest on Policy loan amounts. We also credit you with interest on amounts we set aside as collateral for those amounts. The loan rates are adjustable. The annual loan interest rate (Annual Market Loan Rate on Policy Loans) applied to loan amounts is set by the Company every January 1st. The maximum rate shall not exceed the greater of the minimum guaranteed annual effective interest rate for the SAS Account Tier One Balance plus 1% (or 2.5%) or the Moody's Corporate Bond Yield Averages-Monthly Average Corporates rate for the immediately preceding October (or substantially similar average established by the insurance supervisory official of the state of issue). The Company will not change the rate unless the maximum rate of interest is 0.5% or more above or below the then-current loan interest rate. The Company will give notice of the initial loan interest rate in effect at the time a Policy loan is made and if there is a change in loan interest rate no later than 30 days before the January 1st on which the change takes effect. Your state of issue may provide for a maximum guaranteed rate (see Appendix B for more details). This Policy will not terminate during a Policy Year as the sole result of an increase in the loan interest rate during such Policy Year.
Interest is due and payable on each Policy Anniversary. If interest is not paid when due, we will add accrued and unpaid interest to the principal loan balance, which consists of outstanding loans and interest added to principal. Policy Debt reduces the Cash Surrender Value and the amount payable on death, and may cause the Policy to lapse, subject to the terms of any applicable Death Benefit Guarantee and Grace Period. (See “Termination and Reinstatement”).
As collateral for a Policy loan, the Company will take an amount equal to the loan from the Separate Account Divisions in proportion to the amounts in the Divisions first, with any excess deducted from the SAS Account (first from the Tier One Balance, then the Tier Two Balance). Borrowed amounts from the Divisions will not participate in the Separate Account’s investment results while the loan is outstanding. We will also deduct a Policy Debt Expense Charge on each Monthly Processing Date while there is Policy Debt. The Monthly Policy Debt Expense Charge is included in the Monthly Policy Charge. (See “Charges and Deductions—Monthly Policy Charges and Service Charges”). A Policy loan, even if you repay it, may have a permanent effect on the Policy Value, Contract Fund Value, the Cash Surrender Value, and the Death Benefit because loan amounts from the Divisions do not participate in the Separate Account’s investment results while the loan is outstanding. We deduct any Policy Debt from the Policy Value upon surrender and from the Life Insurance Benefit payable on the Insured’s death.
33Variable Universal Life Plus Prospectus
You may repay a Policy loan, including any accrued interest outstanding, in whole or in part, at any time while the Insured is alive and the Policy is in force. Upon each such payment, we will transfer an amount equal to the payment amount from our General Account first to the SAS Account Tier Two Balance, if any collateral was taken out of the SAS Account. Any payment made in excess of the collateral taken from the SAS Account will be applied to the Divisions of the Separate Account and/or SAS Account in accordance with the Premium Payment allocation instructions then in effect. We will credit those payments when we receive them in our Home Office. If we receive your payment before the close of trading on the NYSE on a Valuation Date, we will process your payment as of that Valuation Date. If we receive your payment on or after the close of trading on a Valuation Date, or on a day that is not a Valuation Date, we will process your payment as of the next Valuation Date. Loan repayments are not subject to transaction fees.
If there is Policy Debt, payments received at our Home Office will be treated as payments to reduce Policy Debt unless designated as Premium Payments.
Termination and Reinstatement
Unless the Death Benefit Guarantee is in effect, if the Cash Surrender Value is less than the Monthly Policy Charge on any Monthly Processing Date, your Policy will enter into the Policy Grace Period, a 61 day period. At the end of the Policy Grace Period, the Policy will terminate (or lapse) with no value and your insurance coverage will end, unless you submit a payment to keep the Policy in force. The Policy Grace Period begins on the date that we send you a notice. The notice will indicate the minimum payment amount required to keep the Policy in force and the date by which you must make the payment. The payment must equal an amount that will cover all Monthly Policy Charges that were due and unpaid before the end of the Policy Grace Period and premium to cover Monthly Policy Charges for three months. Upon receipt of the payment, we will allocate the Net Premium, to the Divisions and/or the SAS Account, based on your allocation instructions then in effect subject to any applicable restrictions. We will also deduct any accumulated due and unpaid Monthly Policy Charges. Payments received in Good Order at our Home Office before the close of trading (typically, 4:00 p.m. Eastern Time) on the NYSE on a Valuation Date are deemed to be received and credited on that Valuation Date. If they are received after the close of trading on a Valuation Date, or on a day other than a Valuation Date, they are deemed to be received and credited on the next Valuation Date. If your payment is not in Good Order, either we or your Financial Representative will notify you in writing, by telephone or by email in an effort to conform your payment to our then-current requirements. If the Insured dies during the Policy Grace Period, we will deduct any Monthly Policy Charges due and unpaid from the Life Insurance Benefit.
After your Policy has terminated, you may reinstate it within three years (or longer if required under state law) following the termination date, subject to our approval, satisfaction of our current underwriting requirements and provided you make at least the minimum payment (see above). To reinstate the Policy, you must make a payment equal to an amount that will cover all Monthly Policy Charges that were due and unpaid before the end of the Policy Grace Period and premium to cover Monthly Policy Charges for three months. If we approve the Application for reinstatement, and the Application was received in Good Order at our Home Office before the close of trading (typically, 4:00 p.m. Eastern Time) on the NYSE on a Monthly Processing Date, the effective date of the reinstated Policy will be that date. If the Application is not received on a Monthly Processing Date, or was received on or after the close of trading on the NYSE on a Monthly Processing Date, the reinstated Policy will be effective on the next Monthly Processing Date. If your request is not in Good Order, either we or your Financial Representative will notify you in writing, by telephone or by email in an effort to conform your request to our then-current requirements. Any Policy Debt that was outstanding when the Policy terminated will also be reinstated.
On the effective date of the reinstatement, the Policy Value will be equal to the sum of:
•
the Net Premium paid upon reinstatement; and
•
any Policy Debt on the termination date;
minus the sum of:
•
all Monthly Policy Charges due and unpaid prior to the expiration of the Policy Grace Period; and
•
the Monthly Policy Charge due on the reinstatement effective date.
Please note that Net Premium paid upon reinstatement will not include any interest from the date of the lapse.
Upon reinstatement, your Policy Date will not change and your Death Benefit option will remain the same as of the date of lapse. Your Cash Surrender Value will equal the new Policy Value (see above) minus any Policy Debt. Therefore, fees and charges that vary by Policy year will take into account the period of time your Policy was terminated. If a surrender charge was assessed at the time of lapse, the Policy Value when a Policy is reinstated will include a credit for such surrender charge. The same surrender charge schedule in your Policy will apply upon reinstatement. On the later of the effective date of the reinstatement or the date we approve the Application for reinstatement, subject to applicable restrictions we will allocate the Policy Value less any Policy Debt among Divisions and/or the SAS Account based on the allocation instructions then in effect, if such date is a Valuation Date. If such date is not a Valuation Date, then we will allocate this amount on the next Valuation Date.
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For a discussion of the tax effects associated with termination and reinstatement of a Policy, see “Tax Considerations.”
COVID-19  Please note that the state in which your Policy was issued or delivered may require or provide for a longer Policy grace period, allow for the deferral of premium payments, provide for greater allowances to exercise certain contractual rights or benefits, or impose restrictions against Policy lapse or termination in recognition of financial hardships posed by the COVID-19 crisis, and the Company may offer additional accommodations beyond minimum state requirements as appropriate. Additional extensions of your Policy's grace period, deferrals of premium payments, greater allowances to exercise certain contractual rights and/or restrictions on Policy lapse may apply in the future but are not guaranteed. Please contact the Company at (866) 464-3800 for further information.
Other Policy Transactions
Transfers  Subject to the limitations on short-term and excessive trading discussed below, you may transfer between and among the Divisions and/or any available fixed option, so long as you are invested in no more than 30 Divisions at a time. Currently, transfer requests involving the Government Money Market Division and the SAS Account are subject to special restrictions (see “Restrictions on Amounts in the SAS Account and Government Money Market Division).
Transfer requests will be effective on the Valuation Date on or next following the date we receive your request in Good Order at our Home Office. Requests received before the close of trading (typically, 4:00 p.m. Eastern Time) on the NYSE on a Valuation Date are deemed to be received and effective on that Valuation Date. If received on or after the close of trading on a Valuation Date, or a day other than a Valuation Date, requests are deemed to be received and effective on the next Valuation Date. If your request is not in Good Order, either we or your Financial Representative will notify you in writing, by telephone or by email in an effort to conform your request to our then-current requirements.
In order to take full advantage of these features, you should carefully consider, on a continuing basis, which options are best suited to your long-term investment needs. Although no fee is currently charged, we reserve the right where allowed by state law to charge a transfer fee of $25. We would deduct this charge from Contract Fund Value. See “Charges and Deductions” for more information. In addition, certain Portfolios in which the Divisions invest may impose redemption fees. These fees are described in the Portfolios’ prospectuses. Where allowed by state law, the Company reserves the right to impose a minimum and/or maximum size on transfer amounts. Transfer requests from the Divisions must be in amounts greater than or equal to 1% of assets in the Divisions or the request will not be processed. Your Financial Representative may provide us with instructions on your behalf involving the transfers, subject to our rules and requirements and any restrictions noted in this Prospectus.
You may request transfers in writing (including via facsimile or, under limited circumstances, by email) or by calling Advanced Markets Operations at 1-866-464-3800. Where allowable by applicable law, a Policy Owner’s Financial Representative may provide us with transfer instructions on behalf of a Policy Owner subject to our current procedures, rules and requirements. You may also submit transfer instructions via the Internet at www.northwesternmutual.com in accordance with our then-current Internet procedures provided you have properly authorized us to accept Electronic Instructions in advance of your request. For more information see “Owner Inquiries.” Please note that we are not required to accept Electronic Instructions and we will not be responsible for losses resulting from transactions based on unauthorized Electronic Instructions, provided we follow procedures reasonably designed to verify the authenticity of Electronic Instructions. We reserve the right to limit, modify, suspend or terminate the ability to make transfers via Electronic Instructions.
Short-Term and Excessive Trading Short-term and excessive trading (sometimes referred to as “market timing”) may present risks to a Portfolio’s long-term investors, such as Owners and other persons who may have material rights under the Policy (e.g., beneficiaries), because it can, among other things, disrupt Portfolio investment strategies, increase Portfolio transaction and administrative costs, require higher than normal levels of cash reserves to fund unusually large or unexpected redemptions, and adversely affect investment performance. These risks may be greater for Portfolios that invest in securities that may be more vulnerable to arbitrage trading including foreign securities and thinly traded securities, such as small cap stocks and non-investment grade bonds. These types of trading activities also may dilute the value of long-term investors’ interests in a Portfolio if it calculates its net asset value using closing prices that are no longer accurate. Accordingly, we discourage market timing activities.
To deter short-term and excessive trading, we have adopted and implemented policies and procedures which are designed to control abusive trading practices. We seek to apply these policies and procedures uniformly to all Owners, except to the extent we are prevented from doing so under applicable state or federal law or regulation. Any exceptions must be either expressly permitted by our policies and procedures or subject to an approval process described in them. Because exceptions are permitted, it is possible that investors may be treated differently and, as a result, some may be allowed to engage in trading activity that might be viewed as market timing.
Among the steps we have taken to reduce the frequency and effect of these practices are monitoring trading activity and imposing trading restrictions, including the prohibition of more than twelve transfers among Divisions under a single Policy during a Policy Year. Multiple transfers with the same effective date made by the same Owner will be counted as a single
35Variable Universal Life Plus Prospectus
transfer for purposes of applying the twelve transfer limitation. Further, a Policy Owner who is identified as having made a transfer in and out of the same Division, excluding the Government Money Market Division, (“round trip transfer”) in an amount in excess of $10,000 within fourteen calendar days will be restricted from making additional transfers if a total of three round trips are made within that same Policy Year or two round trip transfers are made within any subsequent year. The restriction will last until the next Policy Anniversary and the Policy Owner will be sent a letter informing him or her of the restriction. An Owner who is identified as having made one round trip transfer within thirty calendar days aggregating more than one percent (1%) of the total assets of the Portfolio underlying a Division, excluding the Government Money Market Division and the Divisions corresponding to the Portfolios of the Russell Investment Funds LifePoints® Variable Target Portfolio Series, will be restricted from making additional transfers if a total of two round trips are made within that same Policy Year or one round trip transfer is made within any subsequent year. The restriction will last until the next Policy Anniversary and the Policy Owner will be sent a letter informing him or her of the restriction. Unless we believe your trading behavior to be inconsistent with these short-term and excessive trading policies, these limitations will not apply to automatic asset transfers, scheduled or systematic transactions involving portfolio rebalancing, dollar cost averaging, initial allocations or changes in future allocations, to the extent these features are available under your Policy. Once a Policy is restricted, we will allow one additional transfer into the Government Money Market Division until the next Policy Anniversary. Additionally, in accordance with our procedures, we may modify some of these limitations to allow for transfers that would not count against the total transfer limit but only as necessary to alleviate any potential hardships to Owners (e.g., in situations involving a substitution of an underlying fund). These limitations are not intended to supersede any limits that may be imposed on the Government Money Market Division (see “Restrictions on Amounts in the SAS Account and Government Money Market Division”).
Policies such as this (or other Policies supported by the Separate Account) may be purchased by a corporation or other entity as a means to informally fund the liabilities created by the entity’s employee benefit or similar plan. These Policies may be aggregately managed to match liabilities under such plans. Policies sold under these circumstances may be subject to special transfer restrictions. Namely, transactions involving portfolio rebalancing programs may be exempt from the twelve transfers per Policy year limitation where: (1) the purpose of the portfolio rebalancing program is to match the Policy to the entity’s employee benefit or similar plan; (2) the portfolio rebalancing program adequately protects against short-term or excessive trading; and (3) the portfolio rebalancing program is managed by a third party administrator that meets our requirements. We reserve the right to monitor or limit transactions involving portfolio rebalancing programs where we believe such transactions may be potentially harmful to a Portfolio.
We may change these policies and procedures from time to time in our sole discretion without notice; provided, however, Owners will be given advance, written notice if the policies and procedures are revised to accommodate market timing. Additionally, the Funds may have their own policies and procedures described in their prospectuses that are designed to limit or restrict frequent trading. Such policies may be different from our policies and procedures, and may be more or less restrictive. As the Funds may accept purchase payments from other investors, including other insurance company separate accounts on behalf of their variable product customers and retirement plans, we cannot guarantee that the Funds will not be harmed by any abusive market timing activity relating to the retirement plans and/or other insurance companies that may invest in the Funds. The Funds’ policies and procedures may provide for the imposition of a redemption fee and may require us to provide transaction information to the Fund (including an Owner’s tax identification number) and to restrict or prohibit transfers and other transactions that involve the purchase of shares of a Portfolio. In the event a Fund instructs us to restrict or prohibit transfers or other transactions involving shares of a Portfolio, you may not be able to make additional purchases in a Division until the restriction or prohibition ends. If you submit a request that includes a purchase or transfer into such a restricted Division, we will consider the request “not in Good Order” and it will not be processed. You may, however, submit a new transfer request.
If we believe your trading activity is in violation of, or inconsistent with, our policies and procedures or otherwise is potentially disruptive to the interests of other investors, you may be asked to stop such activities and future investments, and allocations or transfers by you may be rejected without prior notice. Because we retain discretion to determine what action is appropriate in a given situation, investors may be treated differently and some may be allowed to engage in activities that might be viewed as market timing.
We intend to monitor events and the effectiveness of our policies and procedures in order to identify whether instances of potentially abusive trading practices are occurring. However, we may not be able to identify all instances of abusive trading practices, nor completely eliminate the possibility of such activities, and there may be technological limitations on our ability to impose restrictions on the trading practices of Owners.
Substitution of Portfolio Shares and Other Changes When permitted by law and subject to any required regulatory approvals, we reserve the right to eliminate a Portfolio and to substitute another Portfolio or mutual fund for such Portfolio (or substitute a class of shares of an existing Portfolio for a different class of the same Portfolio) if the shares of the Portfolio are no longer available for investment or, in our judgment, further investment in the shares of the Portfolio is no longer appropriate.
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36
Charges and Deductions
Premium Expense Charges We deduct a charge of 2.00% from each Premium Payment for state premium taxes that we incur (Premium Tax Charge). Premium taxes vary from state to state, and some jurisdictions within a state may charge an additional premium tax in certain circumstances. We charge 2.00% regardless of the state (or other jurisdiction) in which you live. The total tax rate for the state (and/or other jurisdiction) in which you live may be lower, higher, or equal to the 2.00% deduction. This charge may increase or decrease in the future to cover these taxes.
We deduct a charge from each Premium Payment for the cost of a portion of our federal corporate income taxes attributable to policy acquisition expenses (Federal Deferred Acquisition Cost Charge). Due to a federal tax law change under the Omnibus Budget Reconciliation Act of 1990, as amended (“OBRA”), 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. We currently make a charge of 0.55% against each Premium Payment to compensate us for the additional corporate tax burden. We believe that this charge does not exceed a reasonable estimate of an increase in our federal income taxes resulting from a change in the Internal Revenue Code relating to deferred acquisition costs. This charge may increase or decrease in the future to reflect changes in tax laws.
We deduct a charge, or sales load, from each Premium Payment for sales costs. This charge is a percentage of Premium Payments and is a function of the premium paid relative to the Target Premium. For Premium Payments up to the Target Premium in Policy Years 1-10, the percentage is 6.95%. For Premium Payments in excess of the Target Premium in Policy Years 1-10, the percentage is 5.60%. For Premium Payments up to the Target Premium in Policy Years 11-20, the percentage is 3.95%. For Premium Payments in excess of Target Premium in Policy Years 11-20, the percentage is 5.60%. There is no sales load charge deduction for premiums received in Years 21+.
We expect to recover distribution expenses from this amount over the period while the Policies are in force, and from the surrender charges described below. The amounts we deduct for distribution expenses (e.g., selling and advertising) in a Policy Year are not specifically related to distribution expenses incurred that year. To the extent that distribution expenses exceed the amounts deducted, we will pay the expenses from our other assets. These assets may include, among other things, any gain realized from the monthly charge against Contract Fund Value. (See “Monthly Policy Charges and Service Charges”). To the extent that the amounts deducted for distribution expenses exceed the amounts needed, we will realize a gain.
Monthly Policy Charges and Service Charges We deduct a Monthly Policy Charge from Contract Fund Value on each Monthly Processing Date. The Monthly Policy Charge includes the monthly Cost of Insurance Charge, the monthly Percent of Contract Fund Value Charge, the monthly Administrative Charge, the monthly Underwriting and Issue Charge, the monthly Specified Amount Charge, and, if applicable, the monthly Policy Debt Expense Charge, the monthly Death Benefit Guarantee Charge, and the monthly charge for optional benefits. These components of the Monthly Policy Charge are described in the following paragraphs.
•
Monthly Cost of Insurance Charge. We determine the amount of the charge by multiplying the net amount at risk by the cost of insurance rate, which is based on factors including but not limited to the Issue Age, sex, and underwriting classification of the Insured, the underwriting amount, and the Policy Year. The net amount at risk is the difference between the Death Benefit (or the Guaranteed Minimum Death Benefit if the Policy is in force under the Death Benefit Guarantee) and the Policy Value. The net amount at risk will be affected by investment performance, the amount and timing of Premium Payments, and the charges and expenses for the Policy. The maximum cost of insurance rates are included in the Policy schedule pages. All things being equal, higher Issue Ages and/or worse underwriting classifications will result in higher cost of insurance rates, and men will pay higher rates than women. In addition, cost of insurance rates will generally increase each Policy Year. The Cost of Insurance Charge covers the cost of mortality and some expenses.
•
Monthly Percent of Contract Fund Value Charge. The Monthly Percent of Contract Fund Value Charge covers a portion of the costs of selling and administering the Policy. Our revenues attributable to this charge may exceed costs covered by this charge, in which case we may realize a gain.
•
Monthly Administrative Charge. This charge, which varies based on factors including but not limited to the Insured’s Issue Age, underwriting classification on the Date of Issue, and the Policy Year, is for administrative expenses, including costs of Premium Payment collection, processing claims, keeping records and communicating with Owners.
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Monthly Specified Amount Charge. This charge applies only during the first ten Policy Years and is based on factors, including, but not limited to, the Initial Specified Amount, the Insured’s Issue Age and the underwriting classification of the Insured on the Date of Issue. The Monthly Specified Amount Charge covers a portion of the costs of selling the Policy. Our revenue attributable to this charge may exceed costs covered by this charge, in which case we may realize a gain.
37Variable Universal Life Plus Prospectus
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Monthly Underwriting and Issue Charge. This charge applies only during the first ten Policy Years and is based on the application date, the Initial Specified Amount, the Insured’s Issue Age and the underwriting classification of the Insured on the Date of Issue. The Monthly Underwriting and Issue Charge covers the cost of underwriting and issuing the Policy.
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Monthly Death Benefit Guarantee Charge. This charge compensates us for the risk we have assumed by guaranteeing the Guaranteed Minimum Death Benefit.
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Monthly Policy Debt Expense Charge. This charge is for the expenses and taxes associated with Policy Debt, if any, and encompasses any loan interest spread. A loan interest spread is the difference between the interest rate charged on policy loan amounts and the interest rate credited on amounts designated as collateral for such loans. (Please see “Policy Loans” for more information on how the loan interest rate is calculated.) This charge is deducted from Contract Fund Value.
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Additional Purchase Benefit Charge. This charge compensates us for the Additional Purchase Benefit (see “Other Benefits Available Under the Policy-Additional Purchase Benefit”) if selected. The charge for this optional benefit varies based on the Insured’s Attained Age at the time the benefit is added to the policy, the Insured’s gender, and the amount of the benefit.
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Waiver Benefit: Payment of Selected Monthly Premium Upon Total Disability. The charge for a waiver upon total disability benefit is deducted if the benefit is selected. This charge may vary based on factors including but not limited to the Insured’s Attained Age and underwriting classification, and the amount of the benefit, and may increase from year to year. For substandard risks, the charges may be increased by a multiple of up to 4.0 times the standard risk rate.
We also charge certain transaction fees (also referred to as service charges) to be deducted from Contract Fund Value on the dates on which transactions take place. These service charges are $25 per change if more than one change occurs in Specified Amount in a Policy Year, $25 per withdrawal, $25 per transfer of assets among the Divisions and/or the NM Strength and Stability Account, $25 per illustration of the Policy’s benefits and/or values if more than one request for an illustration occurs in a Policy Year and $25 per change of the Death Benefit option. Currently we waive all of these fees.
You may have the option of receiving funds via wire transfer or priority mail. Currently, a fee of $25 is charged for wire transfers (up to $50 for international wires) and a $15 fee (up to $45 for next day, a.m. delivery) for priority mail. These fees are to cover our administrative costs or other expenses. We may discontinue the availability of these options at any time, with or without notice.
Unless another Policy provision or rider dictates, deductions from Contract Fund Value are apportioned among the Divisions and/or the NM Strength and Stability Account in proportion to the amounts invested in the Divisions and/or the SAS Account. Deductions from the SAS Account are applied to the Tier Two balance first.
A surrender charge will be deducted from Contract Fund Value only during the first ten Policy Years if the Policy is surrendered or changed to the Paid-up insurance. The surrender charge during the first through fifth Policy Year is a percentage of the Target Premium, where the percentage varies by Issue Age, but never exceeds 50% of the Target Premium. After the fifth Policy Year, the surrender charge grades down monthly in Policy Years six through ten to zero.
All charges in this section expressed in dollars have been rounded to the nearest dollar, where appropriate. Amounts that would round to zero have been rounded to the nearest penny or less, as necessary.
Expenses of the Portfolios The value of the net assets of each Division reflects the management fees and other expenses incurred by the corresponding Portfolio in which the Division invests. For certain Portfolios, certain expenses may have been reimbursed or fees may have been waived during 2021 in addition to any contractual fee waiver or reimbursements. It is anticipated that any such voluntary expense reimbursement and fee waiver arrangements would continue past the current year, although certain arrangements may be terminated at any time. After taking into account these arrangements, as well as any contractual fee waiver or expense reimbursement arrangements, Annual Portfolio Operating Expenses would have ranged from a minimum of 0.19% to a maximum of 1.12%. (See “Fee and Expense Tables—Annual Portfolio Operating Expenses” and Appendix A.)
Commissions Paid to Financial Representatives  The maximum commission payable to the registered representative who sold the Policy is 42.5% of Target Premium and 2.75% of Premium Payments in excess of that amount during the first Policy Year; 6% of Target Premium and 2.75% of Premium Payments in excess of that amount paid in Policy Years 2-10; and 1.5% of Premium Payments thereafter. Registered representatives may receive less than the maximum commission or no commission in certain circumstances according to pre-established guidelines. We may also pay new registered representatives differently during a training period. In addition, a commission of 0.07% of Invested Assets is paid at the end of Policy Years 2 and later. The entire amount of sales commissions paid to registered representatives is passed through Northwestern Mutual Investment Services, LLC (“NMIS”), our wholly-owned company, to the registered representative who sold the Policy and to his or her managers. The Company pays compensation and bonuses for the management team of NMIS, and other expenses of distributing the Policies.
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Other Policy Provisions
Naming a Beneficiary You must name a beneficiary on your Application at the time you apply for your Policy, but you may change the beneficiaries (direct, contingent or further payees) you designate while the Insured is living and during the first 60 days after the date of death of the Insured if you are not the Insured. Naming or changing a beneficiary will be made after receipt of your written request in our Home Office in Good Order, effective as of the date you sign your request. Any beneficiary change terminates all rights under previous beneficiary designations. We will not be responsible for any payment or other action we take with respect to your Policy before we receive your written request, and we may require the Policy to be sent to us for endorsement to reflect the beneficiary change. If you do not name a beneficiary or your direct and contingent beneficiaries are not living when the Life Insurance Benefit becomes payable, you, as Owner, or your estate if you are deceased, will receive the proceeds.
Incontestability We will not contest a Policy after it has been in force during the lifetime of the Insured for two years from the Date of Issue or the date of reinstatement (or earlier, as required by state law), except in cases of fraudulent misstatement, which may be contested at any time unless restricted by your state of issue. We will not contest a change (including an increase in the amount of insurance) to the Policy that was subject to insurability requirements after the change has been in force during the lifetime of the Insured for two years from the date of the change except in cases of fraudulent misstatement, which may be contested at any time unless restricted by your state of issue. After the two year period, to the extent permitted by state law we may rescind the Policy if the application contains a fraudulent misstatement.
Suicide If the Insured dies by suicide within two years from the Date of Issue (or earlier, as required by state law), the amount payable under the Policy will be limited to the Premium Payments, less the amount of any Policy Debt and withdrawals. If the Insured dies by suicide within two years of the date of issuance (or earlier, as required by state law) of a change in the Policy that was subject to insurability requirements, the amount payable will be an amount that would have been paid had no change been made less any applicable charges attributable to the change. The amount payable may be different in your state.
Misstatement of Age or Sex If the age or sex of the Insured has been misstated, the Policy will be modified by recalculating all values and benefits based on the correct age and sex.
Collateral Assignment If deemed acceptable by the Company, under certain circumstances and pursuant to the terms of your Policy you may assign a Policy as collateral security. We are not responsible for the validity or effect of a collateral assignment and we will not be deemed to know of an assignment before receipt of the assignment in writing at our Home Office even if effect of such assignment is given as of the time the Owner signs the assignment. The interests of any beneficiary will be subject to any collateral assignment made either before or after any beneficiary is named. The collateral assignee is not an Owner. A collateral assignment is not a transfer of ownership. (See “Ownership Rights”). Any such assignment will be subordinate to any assignment to the Company for loans regardless of the date of the loan.
Deferral of Determination and Payment We will ordinarily pay Policy Benefits (i.e., Policy loans, Cash Surrender Value, and withdrawals) within seven days after we receive all required documents at our Home Office. However, we may defer determination and payment of benefits if:
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the NYSE is closed, other than customary weekend and holiday closings, or trading on the NYSE is restricted as determined by the SEC; or
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the SEC permits, by an order, the postponement of any payment for the protection of Owners; or
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the SEC determines that an emergency exists that would make the disposal of securities held in the Separate Account or the determination of their value not reasonably practicable; or
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such suspension or postponement is otherwise permitted by the 1940 Act.
If, under SEC rules, the Government Money Market Portfolio suspends payments of redemption proceeds in connection with a liquidation of the Portfolio, we will delay payment of any transfer, partial surrender, surrender, death benefit from the Government Money Market Division until the Portfolio is liquidated.
When the Policy is in force as Paid-up insurance or for the portion of the Cash Surrender Value invested in the NM Strength and Stability Account, we may defer paying the Cash Surrender Value for up to six months from the date of surrender. If payment is deferred for 30 days or more, interest will be paid on the Cash Surrender Value at an annual effective rate determined by the Company (currently 1.25%) from the date of surrender to the date of payment (or as otherwise required by state law). We may also defer payment of a Policy loan or withdrawal for up to six months.
If you have submitted a check or draft to our Home Office, we have the right to defer payment of Life Insurance Benefit, surrender, withdrawal, loan, or Income Plan proceeds until the check or draft has been honored.
39Variable Universal Life Plus Prospectus
If mandated under applicable law, we may be required to freeze an Owner’s Policy Value and thereby refuse to pay any requests for transfer, withdrawal, surrender, loans, or Life Insurance Benefit, until instructions are received from the appropriate regulatory or other lawful authority. We may also be required to provide additional information about you, your Policy, and your trading activities to government regulators.
Dividends This Policy is eligible to share in the divisible surplus, if any, of the Company. Each year we determine, in our sole discretion, the amount and appropriate allocation of divisible surplus. Divisible surplus allocated to your Policy is referred to as a “dividend.” The Policy’s share, if any, will be credited as an annual dividend on the Policy Anniversary.
There is no guaranteed method or formula for the determination or allocation of divisible surplus. The Company’s approach is subject to change. There is no guarantee of divisible surplus. Even if there is a divisible surplus, the payment of a dividend on the Policy is not guaranteed. It is not expected that any dividends will be payable on the Policy.
We will credit annual dividends, if any, in cash or you may use them to increase the Policy Value. If you do not provide direction as to the use of dividends, we will use them to increase the Contract Fund Value. Dividends used to increase the Contract Fund Value will be allocated according to the allocation of Net Premiums then in effect.
Voting Rights
As long as the Separate Account continues to be registered as a unit investment trust under the 1940 Act, and as long as Separate Account assets of a particular Division are invested in shares of a given Portfolio, we will vote the shares of that Portfolio held in the Separate Account in accordance with instructions we receive from Owners. Periodic reports relating to the Portfolios, proxy material and a form on which one can give instructions with respect to the proportion of shares of the Portfolio held in the Separate Account corresponding to the Owner’s Policy Value, will be made available to the Owner(s). We will vote shares for which no instructions have been received in the same proportion as the shares for which instructions have been received from Owners. The effect of such proportional voting is that a small number of Owners may control the outcome of a particular vote.
We may, if required by state insurance regulations, disregard voting instructions which would require shares to be voted for a change in the sub-classification or investment objectives of a Portfolio, or to approve or disapprove an investment advisory agreement for a Portfolio. We may also disregard voting instructions that would require changes in the investment policy or investment adviser for a Portfolio, provided that we reasonably determine to take this action in accordance with applicable federal law. If we disregard voting instructions we will include a summary of the action and reasons therefore in the next annual report to Policy Owners.
Reports and Financial Statements
For each Policy Year, we will send you a statement showing the Death Benefit, Policy Value, Contract Fund Value and any Policy Debt (including interest charged) as of the Policy Anniversary. We will also send you a confirmation statement when you make a Premium Payment, transfer assets among Divisions, make a withdrawal, take a Policy loan, or surrender the Policy. The annual statement and confirmation statements will show the apportionment of allocations among the Divisions and/or the SAS Account. If the Policy is in force as Paid-Up insurance, statements and reports will be limited to an annual Policy statement showing the Death Benefit, Contract Fund Value, and any Policy Debt.
Semi-annually, we will send you reports containing financial information, performance information and schedules of investments for the Portfolios underlying the Divisions to which your Contract Fund Value is allocated. We may also provide you with a notice informing you where you may obtain these reports in lieu of sending you these reports in paper. Because each Division invests exclusively in the shares of an underlying Portfolio, the performance information for a Division and its corresponding Portfolio will generally be the same except that if the Policy level charges were reflected in this performance information, the results would be lower. Current historical performance information, updated on a monthly and quarterly basis, is available at www.northwesternmutual.com/prospectuses-performance-and-reports. The financial statements of the Company and the Separate Account appear in the Statement of Additional Information. To receive a copy of the Annual Report, Semi-Annual Report and/or Statement of Additional Information (containing such financial statements), call (866) 464-3800. Certain reports and other information can be obtained on our website at www.nmprospectus.com.
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Householding
To reduce costs, we may send only a single copy of the same disclosure document(s) (such as prospectuses, prospectus supplements, reports, announcements, proxy statements, notices, and information statements) to each consenting household (rather than sending copies to each Owner residing in a household). If you are or become a member of such a household, you can revoke your consent to “householding” at any time, and can begin receiving your own copy of such disclosure documents by calling (866) 464-3800.
Abandoned Property Requirements
Every state has unclaimed property laws which generally declare insurance contracts/policies to be abandoned after a period of inactivity of three to five years from the Policy's maturity date, the date the death benefit is due and payable, or in some states, the date the insurer learns of the death of the insured. For example, if the payment of the death benefit has been triggered, but, if after a thorough search, we are still unable to locate the beneficiary, or if the beneficiary does not come forward to claim the death benefit proceeds in a timely manner, the death benefit proceeds will be paid to the abandoned property division or unclaimed property office of the state in which the beneficiary or you last resided, as shown on our books and records, or to our state of domicile. This “escheatment” is revocable, however, and the state is obligated to pay the death benefit proceeds (without interest) if your beneficiary steps forward to claim them with the proper documentation. To prevent such escheatment, it is important that you update your beneficiary designations, including addresses, if and as they change. Please contact your Financial Representative or call (866) 464-3800 for assistance in making such changes.
Legal Proceedings
Northwestern Mutual, like other life insurance companies, is generally involved in litigation at any given time. Although the outcome of any litigation cannot be predicted with certainty, we believe that, as of the date of this Prospectus, there are no pending or threatened lawsuits that will have a materially adverse impact on the ability of Northwestern Mutual to meet its obligations under the Policy, on the Separate Account, or on NMIS and its ability to perform its duties as underwriter for the Separate Account.
Speculative Investing
Do not purchase this Policy if you plan to use it, or any of its riders, for any type of speculative collective investment scheme (including, for example, arbitrage). Your Policy is not intended to be traded on any stock exchange or secondary market, and attempts to engage in such trading may violate state and/or federal law.
Owner Inquiries
If eligible, you may get up-to-date information about your Policy at your convenience with your User ID and password at our website www.northwesternmutual.com where you can access performance information, forms for routine service, and daily values for Policies you own. Eligible Owners may also set up certain electronic payments, make transfers (including as applicable Dollar-Cost Averaging and/or Portfolio Rebalancing) and change the allocation of future Premium Payments online, subject to our administrative procedures. For enrollment information, please visit our website www.northwesternmutual.com. Please note that electronic devices may not always be available. Any electronic device, whether it is yours, your service provider’s, your agent’s or ours, can experience outages or slowdowns for a variety of reasons, which may delay or prevent our processing of your request or payment. Although we have taken precautions to limit these problems, we cannot promise complete reliability under all circumstances. If you are experiencing problems, you should make your request or payment in writing at our Home Office. Electronic requests or payments are deemed to be received by us upon receipt at the electronic location designated by us in our procedures. If you have questions about surrendering your Policy, please contact your Financial Representative or call (866) 464-3800. To file a claim, please call your Financial Representative or Life Benefits at (800) 635-8855.
Illustrations
Your Northwestern Mutual Financial Representative will provide you an illustration for your Policy upon your request when you apply for a Policy and while your Policy is in force. When you apply for a Policy, the illustrations will be based on the information you give us about the proposed Insured and will reflect such factors as the Specified Amount, Death Benefit option and Premium Payments that you select. While the Policy is in force, the illustrations will reflect the performance of your Policy to date. Illustrations show how the Death Benefit and Policy Value for a Policy would vary based on hypothetical future investment results. These should be based upon realistic expectations given your own individual situation.
41Variable Universal Life Plus Prospectus
Illustrations for variable life insurance policies do not project or predict investment results. The illustrated values assume that non-guaranteed elements such as dividends, Policy charges and level investment returns will not change. Given the volatility of the securities markets over time, the illustrated scenario is unlikely to occur and actual values, death benefits, and certain expenses (which may vary with the investment performance of the Portfolios) will be more or less than those illustrated. In addition, the actual timing and amounts of payments, deductions, expenses and any values removed from the Policy will also impact product performance. Due to these variations, even a Portfolio that averaged the same return as illustrated will produce values which will be more or less than those which were originally illustrated. We reserve the right to charge for Illustrations in excess of one per Policy year (see “Charges and Deductions”).
Tax Considerations
General  The following discussion provides a general description of federal tax considerations relating to the Policy. The discussion is based on current provisions of the Internal Revenue Code (“Code”) as currently interpreted by the Treasury Department and the Internal Revenue Service (“IRS”). The discussion is not exhaustive, it does not address the likelihood of future changes in federal tax law or interpretations thereof, and it does not address state or local tax considerations, which may be significant in the purchase and ownership of a Policy.
Depending on the circumstances, the exchange of a Policy, a Policy loan (including the addition of unpaid loan interest to a Policy loan), or a change in ownership or an assignment of the Policy, or an interest in the Policy, may have federal income tax consequences. In addition, federal, state and local transfer, estate, inheritance, and other tax consequences of Policy ownership, premium payments and receipt of Policy proceeds depend on the circumstances of each Owner or beneficiary. If you contemplate any such transaction you should consult a qualified tax adviser.
This tax discussion is intended to describe the tax consequences associated with your Policy. It does not constitute legal or tax advice, and is not intended to be used and cannot be used to avoid any penalties that may be imposed on a taxpayer. Taxpayers should seek advice based on their particular circumstances from an independent tax advisor.
There is no additional tax benefit if the Policy is purchased through a tax-qualified plan or individual retirement account (IRA). Withdrawals will generally be subject to tax penalties.
Life Insurance Qualification Section 7702 of the Code defines life insurance for federal income tax purposes. Under Section 7702, a Policy will generally be treated as life insurance for federal tax purposes if at all times it meets either a Guideline Premium/Cash Value Corridor Test (“GLPT”) or a Cash Value Accumulation Test (“CVAT”). You must choose either the GLPT or the CVAT before the Policy is issued. Once the Policy is issued, you may not change to a different test. The Death Benefit may vary depending on which test is used.
The definitional tests under the Code are based on the Commissioner's Standard Ordinary (CSO) mortality tables in effect when the Policies were issued. The test applied to your policy is based on the 2017 CSO mortality tables.
The GLPT has two components, a premium limit component and a corridor component. The premium limit restricts the amount of premium that can be paid into the Policy. The corridor requires that the Death Benefit be at least a certain percentage (varying each year by age of the Insured, or younger Insured in the case of survivorship life policies) of the Policy Value. The CVAT does not have a premium limit, but does have a corridor that requires that the Death Benefit be at least a certain percentage of the Policy Value, with the percentage varying based on factors including but not limited to the age, sex and underwriting classification of the Insured, or in the case of survivorship life insurance, of the younger Insured. The corridor under the CVAT is different from the corridor under the GLPT. Specifically, the CVAT corridor generally requires more Death Benefit in relation to Policy Value than is required by the GLPT corridor. Therefore, as your Policy Value increases your Death Benefit may increase more rapidly in the Policy’s earlier years under CVAT than it would under GLPT. The increase to the Death Benefit is more likely if premiums are paid to or in excess of the longest Death Benefit Guarantee premium. We have designed the Policy to comply with these rules. We will return premiums that would cause a Policy to be disqualified as life insurance, or we may take any other action that may be necessary for the Policy to qualify as life insurance for tax purposes.
In deciding whether or not to choose the CVAT, you should consider that the CVAT generally permits more premiums to be contributed to a Policy, but may require the Policy to have a higher Death Benefit relative to the Policy Value, which may increase the Cost of Insurance charges, especially in the Policy’s later years.
As provided by Section 817(h) of the Code, the Secretary of the Treasury has set standards for diversification of the investments underlying variable life insurance policies. Failure to meet the diversification requirements would disqualify your Policy as life insurance for purposes of Section 7702 of the Code. We believe that your Policy complies with the provisions of Sections 7702 and 817(h) of the Code, but the application of these rules is not entirely clear. We may make changes to your Policy if necessary for the Policy to qualify as life insurance for tax purposes.
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IRS Rev. Ruls. 2003-91 and 2003-92 provide guidance on when an Owner’s control of Separate Account assets will cause the Owner, and not the life insurance company, to be treated as the owner of those assets. Important indicators of investor control are the ability of the Owner to select the investment advisor, the investment strategy or the particular investments of the Separate Account. If the Owner of a Policy were treated as the owner of the assets held in the Separate Account, the income and gains related to those assets would be included in the Owner’s gross income for federal income tax purposes. We believe that we own the assets of the Separate Account under current federal income tax law.
Tax Treatment of Life Insurance While a Policy is in force, increases in the Policy Value as a result of investment experience are not subject to federal income tax until there is a distribution as defined by the Code. The Death Benefit received by a beneficiary will generally not be subject to federal income tax.
So long as your Policy is not classified as a MEC (see “Modified Endowment Contract”), the proceeds from a surrender or withdrawal will generally be taxable only to the extent that the proceeds exceed the investment in the contract (“cost basis” or “basis”) of the Policy. The basis of the Policy is generally equal to the premiums and other consideration paid for the contract less any amounts previously received as tax-free distributions. Dividends paid in cash, if any, are generally taxed as withdrawals with a resulting reduction in basis. However, dividends applied to purchase additional insurance or used to pay premiums are generally not taxable. In certain circumstances, a withdrawal of Policy Value during the first 15 Policy Years may be taxable to the extent that the Policy Value exceeds the basis of the Policy. This means that the amount withdrawn may be taxable even if that amount is less than the basis of the Policy.
Unless the Policy is a MEC a loan received under your Policy will not be treated as a distribution subject to current federal income tax. If the Policy remains in force until the death of the Insured or, in the case of joint life insurance, the second death, the Policy Debt will be repaid from the Death Benefit. However, if the Policy terminates by any method other than death, the Policy Debt will be repaid from the Policy of the Policy, and the total Policy Value , including the total amount of the Policy Debt, will be taxable to the extent it exceeds the basis of the Policy. If the extended term insurance nonforfeiture option is available in your Policy, and it lapses to extended term insurance, the Policy Debt will be repaid from Policy Value of the Policy and the Policy Debt repayment will be treated as income and taxable to the extent it exceeds Policy’s basis.
Caution must be used when taking cash out of a Policy through Policy loans. If interest is not paid annually, it is added to the principal amount and the total Policy Debt will continue to increase for as long as the loan is maintained on the Policy. In extreme situations, Owners can face what is called the “surrender squeeze.” The surrender squeeze occurs if the Policy Debt becomes too large when compared to the unborrowed Policy Value, less the applicable surrender charge, is insufficient to cover the Monthly Policy Charges, thereby causing the Policy to lapse. As described above, if your policy lapses with outstanding Policy Debt, you will have an income tax liability to the extent the Policy Debt exceeds the Policy basis. This means that you may have to pay income tax for a year in which you did not receive any cash from the policy.
Interest paid by individual Owners of a Policy will ordinarily not be deductible. You should consult a qualified tax advisor as to the deductibility of interest paid, or accrued, by business Owners of a Policy. (See “Business-Owned Life Insurance”).
Subject to the agreement of the Company, and the Owner meeting any conditions set by the Company, a Policy may be exchanged tax-free for another life insurance policy covering the same Insured or an annuity contract with the same owner (or, in the case of an annuity owned by a non-natural owner, if the annuitant is the same as the life insurance policy insured). The Code also allows certain policies to be exchanged for stand-alone and combination long-term care policies on a tax-free basis. Any cash received or loan repaid in an exchange will be taxed to the extent of the gain in the Policy (i.e., on a gain-first basis).
Ownership of a Policy, or an interest in the Policy, may be transferred. If the transfer is for a valuable consideration, it is taxable to the extent the sales proceeds or fair market value of property received exceed the basis of the Policy. The transfer of a Policy with a loan in excess of Policy basis is considered a sale to the extent of the loan, and the loan is treated as “sales proceeds” paid to the transferor. The general rule is that if a Policy, or an interest in a Policy were transferred for valuable consideration, the death benefit may be taxable as ordinary income to the extent it exceeds the sum of the purchase price and subsequent premiums paid by the new owner. However, the death benefit may not be taxable if both of the following criteria are satisfied:
1.
The transfer was not a “Reportable Policy Sale,” and
2.
The transferee is the insured, a partner of the insured, a partnership in which the insured is a partner or a corporation in which the insured is a shareholder or officer or the basis of the Policy is carried over, in whole or in part, in the transfer.
A Reportable Policy Sale is defined by Code section 101(a)(3), which was enacted in 2017 as part of the Tax Cuts and Jobs Act. A Reportable Policy Sale occurs when a Policy or an interest in the Policy is transferred, directly or indirectly, for valuable consideration and the acquirer does not have a “substantial family, business, or financial relationship with the insured apart from the acquirer’s interest in” the Policy. An example of an indirect transfer is an acquisition of an interest in a partnership that owns the Policy. If a Reportable Policy Sale occurs, the acquirer and the insurance company are required to send information about the sale to the IRS and the transferor.
43Variable Universal Life Plus Prospectus
Whether the death benefit of any particular policy will be subject to income taxation because of transfers prior to the insured’s death will depend on specific facts. You should seek qualified tax advice if you plan a transfer of an interest in a life insurance policy.
Where the Policy cash value is distributed as periodic payments under a payment plan, part or all of the taxable payments may be subject to an additional 3.8% Medicare tax. The tax will be assessed on the Owner’s net investment income for the year to the extent that the Owner’s adjusted gross income (with slight modifications) exceeds $250,000 (married filing jointly or surviving spouse), $125,000 (married filing separately) or $200,000 (other filers) (not indexed). Under final regulations issued by the IRS, “net investment income” may, among other things, include the transfer of a life insurance policy that constitutes a sale, interest paid on the Death Benefit and taxable distributions from life insurance policies held in arrangements that constitute “passive activities”. You should seek qualified tax advice.
Modified Endowment Contracts (MEC) A modified endowment contract (“MEC”) is a type of life insurance contract that is taxed less favorably on lifetime distributions than other life insurance contracts. A MEC has less-favorable tax treatment because it is considered to be too investment oriented. Generally, a Policy will be classified as a MEC if the cumulative premiums paid during the first seven Policy Years after issue, or after a “material change” (described below), exceed the policy’s “seven-pay” limit. The seven-year time period is commonly referred to as the “seven-pay period”. Code Section 7702A defines the seven-pay limit as the sum of the premiums paid (net of expense and administrative charges) that would have to be paid in order for the Policy to be fully paid-up after seven level annual payments, based on defined interest and mortality assumptions. If premiums in excess of the seven-pay limit are paid during a seven-pay period, a Policy will be a MEC. However, a policy will not be a MEC if the excess premiums are refunded, with interest, within 60 days after the end of the Policy Year in which they are paid. For purposes of measuring this 60-day refund period, the term “Policy Year” refers to the year that starts on the date of a material change if that date is different than the Policy Date. If excess premium is refunded, all Policy values are recalculated as though the excess premium had never been paid.
A Policy can also become a MEC if the benefits under the Policy are reduced during the seven-pay period. If such a reduction occurs, the seven-pay premium limit will be redetermined based on the reduced level of benefits. All premiums paid during the seven-pay period must be retroactively tested against the new, lower, seven-pay limit. If the premiums previously paid are greater than the recalculated seven-pay limit, the Policy will become a MEC. This means that a reduction of Policy benefits can result in a MEC because of premiums paid in prior years even if those premiums did not exceed the policy’s seven-pay limit at the time they were paid. A reduction in benefits includes a decrease in the amount of coverage, the termination or reduction of certain riders, a withdrawal or any other action resulting in a surrender of Policy Value to you according to the terms of the Policy, an election for the Paid-up insurance option or, in some cases, a lapsing of the Policy where the Policy is not reinstated within 90 days. In the case of joint life Policies, the reduction test must be applied during the lifetime of either insured rather than only during seven-pay periods. Additionally, in the case of joint life policies, all premiums paid since the policy were issued are retroactively tested against the new MEC limit.
A life insurance policy which is received in exchange for a MEC will also be considered a MEC.
Whenever there is a “material change” under a Policy, it will generally be treated as a new contract for purposes of determining whether the Policy is a MEC. This means that a new seven-pay period begins with a new seven-pay limit. The new seven-pay limit is determined by taking into account the Policy Value of the Policy at the time of such change. A material change could occur as a result of certain changes to the benefits or terms of the Policy, such as a change in a death benefit option or a change in the Insured(s), if allowable under your Policy. A material change could occur as a result of an increase in the death benefit, the addition of a benefit or the payment of a premium after the seven-pay period, which could be considered “unnecessary” under the Code.
If a Policy is a MEC, any distribution from the Policy will be treated as a distribution of gain first, subject to ordinary income taxation. Distributions for this purpose include a loan, a withdrawal of Policy Value , a surrender of the Policy, and dividends paid in cash. Distributions taken within the two-year period prior to a Policy becoming a MEC may also be taxed under the MEC tax rules. The Policy basis is increased to the extent a loan is a taxable distribution from a MEC. For these purposes, the term “loan”, includes an increase in Policy Debt due to accrued but unpaid loan interest, or an assignment or pledge of the policy to secure a loan. For purposes of determining the taxable portion of any distribution, all MECs issued by Northwestern Mutual to the same Owner (excluding certain qualified plans) during any calendar year are to be aggregated. The Secretary of the Treasury has authority to prescribe additional rules to prevent avoidance of gain-first taxation on distributions from MECs.
A 10% penalty tax will apply to the taxable portion of a distribution from a MEC. The penalty tax will not, however, apply to distributions (i) to taxpayers 59 ½ years of age or older, (ii) in the case of a disability (as defined in the Code) or (iii) received as part of a series of substantially equal periodic annuity payments for the life (or life expectancy) of the taxpayer or the survivorship lives (or survivorship life expectancies) of the taxpayer and the taxpayer’s beneficiaries. The exceptions generally do not apply to life insurance policies owned by corporations or other entities.
Variable Universal Life Plus Prospectus
44
Estate Tax and Generation Skipping Transfer Taxes If the Insured owns, or has any incidents of ownership in, the Policy, the amount of the Death Benefit will generally be includible in the Insured’s estate for purposes of the federal estate tax and any applicable state inheritance tax. If a Policy is a survivorship life Policy, the Death Benefit will be includible in the estate if the second of the Insureds to die, if that individual owned, or had any incidents of ownership in, the Policy at the time of death. In some circumstances, the Death Benefit of a policy may be included in an Insured’s estate even if not owned at the time of death. This may occur if the Insured transferred an ownership interest, or an incident of ownership, in a policy within three years of death. If the Owner dies, but an Insured is still alive, the fair market value of the Policy will be includible in the Owner’s estate. With appropriate estate planning, an unlimited marital deduction may permit deferral of federal estate and gift taxes until the death of the Owner’s surviving spouse.
If ownership of the Policy is transferred, either directly or in trust, to a person two or more generations younger than the Owner, the value of the Policy may be subject to a generation skipping transfer tax.
Business-Owned Life Insurance Business-owned life insurance may be subject to certain additional rules. Section 101(j) of the Code provides that a portion of the Death Benefit payable under business-owned life insurance in which the business is also the beneficiary will be taxable to the extent it exceeds the premiums or other consideration the business paid for the policy. This rule will not apply if (i) the insured is an eligible employee and (ii) certain notice and consent requirements are satisfied before the policy is issued. Generally, an eligible employee is someone who was an employee at any time during the 12-month period before death, a director, a person who owns more than 5% of the business, an employee earning more than $120,000 annually (increased for cost of living), one of the highest 5 paid officers or an employee who is among the highest paid 35% of employees. The law also imposes an annual reporting and record-keeping obligation on the employer. Increases in Policy Value may also be subject to tax under the corporation alternative minimum tax provisions.
Section 264(a)(1) of the Code generally disallows a deduction for premiums paid on Policies by anyone who is directly or indirectly a beneficiary under the Policy. Interest on debt that is related to or is incurred to purchase or carry life insurance might be deductible in certain, limited, circumstances set forth in Code Section 264. For example, interest paid or accrued for up to an aggregate of $50,000 of indebtedness with respect to life insurance covering a “key person” may be deductible. Generally, a key person is defined as an officer or a 20% owner. However, the number of key persons will be limited to the greater of (a) five individuals, or (b) the lesser of 5% of the total officers and employees of the taxpayer or 20 individuals. Deductible interest for these Policies will be subject to limits based on current market rates.
In addition, if a business owns life insurance with cash value, Section 264(f) may disallow a portion of a business’s non-life insurance related interest deduction. The disallowance is based on a ratio that compares the amount of unborrowed life insurance Cash Surrender Value to the adjusted basis of other business assets. Certain policies may be excluded from the disallowance calculation. These include policies held by natural persons unless the business is a direct or indirect beneficiary under the policy and policies owned by a business and insuring an individual who at the time the policy is issued is an employee, director, officer or 20% owner (as well as survivorship life policies insuring 20% owners and their spouses). The IRS has ruled that a policy received in a tax-free exchange is newly issued for this purpose.
The IRS has ruled privately that losses in business-owned life insurance could be deducted upon the surrender of the policy if there was no reasonable prospect of recovery, but that the losses would be calculated by reducing the basis of the policy by the annual cost of the insurance protection provided by the policy. Private rulings apply only to the taxpayer who receives the ruling but may be indicative of the IRS’s thinking on an issue.
Special rules under the Code govern how life insurance companies calculate income tax deductions. Under these rules the annual increase in the cash value of life insurance policies owned by life insurance companies may limit the company’s deductions, resulting in an overall increase in its taxable income. In Revenue Procedure 2007-61, the IRS provided a safe harbor under which the annual increase in cash value of life insurance policies covering no more than 35% of the company’s employees, directors, officers and 20% owners will not limit the life insurance company’s deductions. Additionally, the Revenue Procedure included language that the tax-deferred nature of such contracts remains subject to challenge by the IRS under other provisions of the tax law, including judicial doctrines such as the business purpose doctrine.
Split Dollar Arrangements Life insurance purchased under a split dollar arrangement is subject to special tax rules. Treasury regulations regarding the taxation of split dollar arrangements apply only to arrangements entered into or materially changed after September 17, 2003. The regulations provide that such split dollar arrangements must be taxed under one of two mutually exclusive tax regimes depending on the ownership of the underlying life insurance policy. Collateral assignment split dollar arrangements, in which the employee owns the policy, must be taxed under a loan regime. Where such an arrangement imposes a below market interest rate or no interest rate, the employee is taxed on the imputed interest under Section 7872 of the Code. Endorsement split dollar arrangements, in which the employer owns the policy, must be taxed under an economic benefit regime. Under this regime, the employee is taxed each year on (i) the value of the current life insurance protection provided to the employee, (ii) the increase in the amount of policy Cash Value to which the employee has current access, and (iii) the value of any other economic benefits provided to the employee during the taxable year.
45Variable Universal Life Plus Prospectus
Under the Sarbanes-Oxley Act of 2002, it is a criminal offense for an employer with publicly traded stock to extend or arrange a personal loan to a director or executive officer after July 30, 2002. One issue that has not been clarified is whether each premium paid by such an employer under a split dollar arrangement with a director or executive officer is a personal loan subject to this law.
Section 409A of the Code imposes requirements for nonqualified deferred compensation plans with regard to the timing of deferrals, distribution triggers, funding mechanisms and reporting requirements. Nonqualified deferred compensation plans that fail to meet these conditions are taxed currently on all compensation previously deferred and interest earned thereon and are assessed an additional 20% penalty. The law does not limit the use of life insurance as an informal funding mechanism for nonqualified deferred compensation plans, but IRS Notice 2007-34 treats certain split dollar arrangements as nonqualified deferred compensation plans that must comply with the new rules. These rules became effective December 31, 2008.
Valuation of Life Insurance Special valuation rules apply to Policies distributed from a qualified plan to a participant or transferred by an employer to an employee. IRS Rev. Proc. 2005-25 provides safe harbor formulas for valuing variable and non-variable life insurance. Generally, the safe harbor value is the greater of (i) the sum of the interpolated terminal reserve, any unearned premiums, and a pro rata portion of the estimated dividends for the Policy Year; or (ii) the cash value without reduction for surrender charges (but adjusted by a surrender factor for policies distributed from qualified plans) multiplied by a factor specified in Rev. Proc. 2005-25. These rules do not apply to split dollar arrangements entered into on or before September 17, 2003 and not materially modified thereafter.
Other Tax Considerations Under Code Section 6011, taxpayers are required to annually report all “reportable transactions”. Regulations under Code Section 6011 provide a list of several types of reportable transactions, some of which may involve life insurance policies. For example, in some circumstances a reportable transaction might exist if life insurance is owned by a welfare benefit plan. “Reportable transactions” also include transactions that create significant differences between the amount of any item for purposes of determining income, gain, expense or loss for tax purposes differs by more than $10 million, on a gross basis, from the amount of the item for purposes for book purposes. However, Rev. Proc. 2004-67 held that the purchase of life insurance policies that creates such a difference does not, by itself, constitute a “reportable transaction.” The rules related to reportable transactions are complicated and you should consult a qualified tax advisor before purchasing any insurance policy as part of a transaction.
Distribution of the Policy
We sell the Policy through our Financial Representatives who also are registered representatives of Northwestern Mutual Investment Services, LLC (“NMIS”). NMIS, our wholly-owned company, was organized under Wisconsin law in 1998 and is located at 720 East Wisconsin Avenue, Milwaukee, Wisconsin 53202. NMIS is a registered broker-dealer under the Securities Exchange Act of 1934, an investment adviser registered with the SEC, and is a member of the Financial Industry Regulatory Authority (FINRA) and SIPC. You may obtain information about SIPC, including the SIPC brochure, by contacting SIPC at 202-371-3800 or visiting its website at www.SIPC.org. NMIS is the principal underwriter and distributor of the Policy and has entered into a Distribution Agreement with us.
Northwestern Mutual variable insurance and annuity products are available exclusively through NMIS and its registered representatives and cannot be held with or transferred to an unaffiliated broker-dealer. Except in limited circumstances, NMIS registered representatives are required to offer Northwestern Mutual variable insurance and annuity products. The amount and timing of sales compensation paid by insurance companies varies. The commissions, benefits, and other sales compensation that NMIS and its registered representatives receive for the sale of a Northwestern Mutual variable insurance or annuity product might be more or less than that received for the sale of a comparable product from another company. For more information on commission amounts see “Charges and Deductions—Commissions Paid to Financial Representatives.”
Because registered representatives of NMIS are also our appointed agents, they may be eligible for various cash benefits, such as bonuses, insurance benefits, retirement benefits, and non-cash compensation programs that we offer, such as conferences, achievement recognition, prizes, and awards. In addition, registered representatives of NMIS who meet certain productivity, persistency, and length of service standards and/or their managers may be eligible for additional compensation. For example, registered representatives who meet certain annual sales production requirements with respect to their sales of Northwestern Mutual insurance and annuity products can qualify to receive additional cash compensation for their other sales of investment products and services. Sales of the Policies help registered representatives and/or their managers qualify for such compensation and benefits. Certain registered representatives of NMIS may receive other payments from us for the recruitment, training, development, and supervision of financial representatives, production of promotional literature and similar services.
Variable Universal Life Plus Prospectus
46
Commissions and other incentives and payments described above are not charged directly to Owners or to the Separate Account. We intend to recoup commissions and other sales expenses through fees and charges deducted under the Policy. NMIS registered representatives receive ongoing servicing compensation related to the Policies, but may be ineligible to receive ongoing servicing compensation paid by issuers of other investment products for certain smaller accounts.
47Variable Universal Life Plus Prospectus
Glossary of Terms
APPLICATION
The form completed by the applicant when applying for coverage under the Policy. This includes any:
1. amendments or endorsements;
2. supplemental Applications;
3. reinstatement Applications; and
4. Policy change Applications.
ATTAINED AGE
The Insured’s Issue Age listed in the Policy schedule pages, plus the number of complete Policy Years that have elapsed since the Policy Date.
CASH SURRENDER VALUE
An amount equal to the Policy Value minus the sum of Policy Debt and any surrender charge. Please note that in certain contexts outside of the Prospectus, such as sales literature, notices and/or other materials, the term Accumulated Value After Loan and Surrender Charge may be used in place of Cash Surrender Value. In some circumstances, the terms Accumulated Value After Loan, Accumulated Value After Surrender Charge, or Net Accumulated Value may be used to describe your Cash Surrender Value, as appropriate.
CODE
The Internal Revenue Code of 1986, as amended.
COMPANY
The Northwestern Mutual Life Insurance Company.
CONTRACT FUND VALUE
An amount equal to amounts in the Divisions and the NM Strength and Stability Account but does not include Policy Debt. Please note that in certain contexts outside of the Prospectus, such as sales literature, notices and/or other materials, the term Accumulated Value may be used in place of Contract Fund Value. In some circumstances, the terms Accumulated Value After Loan, Accumulated Value After Surrender Charge, or Net Accumulated Value may be used to describe your Contract Fund Value after deductions for a surrender charge or an outstanding loan, as appropriate.
DATE OF ISSUE
The date on which insurance coverage takes effect and the date on which the suicide and contestable periods begin. The date is shown in the Policy.
DEATH BENEFIT
The gross amount payable to the beneficiary upon the second death, before the deduction of Policy Debt and other adjustments. (See “Life Insurance Benefit” in the Prospectus).
DEATH BENEFIT GUARANTEE GRACE PERIOD
A 61-day period after which the Death Benefit Guarantee will terminate if you do not make a sufficient payment.
DIVISION
A subdivision of the Separate Account. We invest each Division’s assets exclusively in shares of one Portfolio.
FINANCIAL REPRESENTATIVE
An individual who is authorized to sell you the Policy and who is licensed both as a Northwestern Mutual insurance agent and as a registered as a representative of our affiliate, Northwestern Mutual Investment Services, LLC, the principal underwriter of the Policy.
FUND
Each Fund is registered under the 1940 Act as an open-end management investment company or as a unit investment trust, or is not required to be registered under the Act. Each Portfolio of the Funds is available as an investment option under the Policy. The assets of each of the Divisions of the Separate Account are used to purchase shares of the corresponding Portfolio of a Fund.
GENERAL ACCOUNT
All assets of the Company, other than those held in the Separate Account or in other separate accounts that have been or may be established by the Company.
GOOD ORDER
Your request or payment meets all the current requirements necessary for us to process it. For certain requests this may include, as applicable, the return of proceeds, evidence of insurability, underwriting, MEC-limit (or insurance qualification) requirements, any premium payments due, instructions as to payment due dates, or proper completion of certain Northwestern Mutual forms.
Variable Universal Life Plus Prospectus
48
GUARANTEED MINIMUM DEATH BENEFIT
The gross amount of death benefit proceeds if the policy is being kept in force by the Death Benefit Guarantee.
HOME OFFICE
Our office at 720 East Wisconsin Avenue, Milwaukee, Wisconsin 53202-4797.
INCOME PLAN
An optional method of receiving the Death Benefit, maturity benefit, surrender proceeds or withdrawal proceeds of an insurance policy or annuity contract through a series of periodic payments. An Income Plan may also be known as a “payment plan.”
IN FORCE DATE
The date on which the initial Net Premium is transferred from the General Account to the Separate Account after you have met all the conditions necessary for us to proceed with the final issuance of your Policy, such as determination of underwriting classification, receipt of minimum premiums and receipt of all paperwork in Good Order.
INITIAL ALLOCATION DATE
The date identified in the Policy on which we first allocate Net Premium to the Divisions of the Separate Account and/or the NM Strength and Stability Account according to the Owner's instructions.
INITIAL SPECIFIED AMOUNT
The Specified Amount of coverage on the Date of Issue of the Policy.
INSURED
The person named as the Insured on the Application and in the Policy.
INVESTMENT ACCOUNT
Amounts allocated to the Divisions of the Separate Account. Please note that in certain contexts outside of the Prospectus, such as sales literature, notices and/or other materials, the term Invested Assets may be used in place of Investment Account.
ISSUE AGE
The Insured’s age on his/her birthday nearest the Policy Date.
LIFE INSURANCE BENEFIT
The net amount payable upon the death of the Insured. The Life Insurance Benefit equals the Death Benefit (or the Guaranteed Minimum Death Benefit if the Policy is in force under the Death Benefit Guarantee) reduced by any outstanding Policy Debt and other adjustments if death occurs during a grace period.
LOAN VALUE
An amount equal to 90% of the Policy Value on the date of the loan.
MEC
Modified endowment contract as described in Section 7702A of the Internal Revenue Code. A modified endowment contract is a life insurance contract that is considered too investment oriented and is taxed less favorably on lifetime distributions than other life insurance contracts. See the “Tax Considerations” section for more detailed information.
MONTHLY POLICY CHARGE
The amount equal to the sum of:
1. the monthly cost of insurance charge;
2. the monthly percent of contract fund value charge;
3. the monthly administrative charge;
4. the monthly Specified Amount charge;
5. the monthly underwriting and issue charge;
6. the monthly cost of any optional benefit, if applicable;
7. the monthly Policy Debt Expense charge, if applicable; and
8. the monthly Death Benefit Guarantee charge, if applicable.
MONTHLY PROCESSING DATE
The first Monthly Processing Date is the Policy Date; thereafter, the Monthly Processing Date is the same day of each month as the Policy Date. If the Monthly Processing Date would otherwise fall on the 29th, 30th, or 31st of the month, monthly processing will occur on that day or on the last day of the month if the month does not have that day.
NET PREMIUM(S)
The amount of Premium Payment remaining after the Premium Expense Charges have been deducted.
49Variable Universal Life Plus Prospectus
NM STRENGTH AND STABILITY ACCOUNT
Amounts allocated or transferred to a fixed interest crediting option on or after the NM Strength and Stability Account availability date that are part of the Company’s General Account.
NORTHWESTERN MUTUAL
The Northwestern Mutual Life Insurance Company.
NYSE
New York Stock Exchange.
OWNER (You, Your)
The person named in the Application as the Owner, or the person who becomes Owner by transfer or succession.
POLICY ANNIVERSARY
The same day and month as the Policy Date in each year following the first Policy Year.
POLICY DATE
The date shown on the Policy Schedule Page from which the following are computed:
1. Policy Year;
2. Policy Anniversary;
3. Monthly Processing Date;
4. the Issue Age of each Insured.
5. the Issue Age of Insured; and
6. the Attained Age of the Insured.
POLICY DEBT
The total amount of all outstanding Policy loans, including both principal and accrued interest.
POLICY GRACE PERIOD
A 61-day period after which a Policy will lapse if you do not make a sufficient payment. This period may be longer if mandated by your state.
POLICY VALUE
The sum of Contract Fund Value and Policy Debt. Please note that in certain contexts outside of the Prospectus, such as sales literature, notices and/or other materials, the term Accumulated Value may be used in place of Policy Value. In some circumstances, the terms Accumulated Value After Loan, Accumulated Value After Surrender Charge, or Net Accumulated Value may be used to describe your Policy Value or an outstanding loan, as appropriate.
POLICY YEAR
A year that starts on the Policy Date or on a Policy Anniversary.
PORTFOLIO
A series of a Fund available for investment under the Policy which corresponds to a particular Division of the Separate Account.
PREMIUM PAYMENTS
All payments you make under the Policy other than loan repayments and transaction fees.
SELECTED MONTHLY PREMIUM
An amount the Owner selects subject to a maximum permitted amount under the Selected Monthly Premium Benefit.
SEPARATE ACCOUNT
Northwestern Mutual Variable Life Account II.
SPECIFIED AMOUNT
The amount you select, subject to minimums and underwriting requirements we establish, which is used in determining the insurance coverage on an Insured’s life.
SPECIFIED MONTHLY CHARGES
Current Monthly Policy Charges excluding the Monthly Policy Debt Expense Charge and the charge for the Selected Monthly Premium Benefit.
TARGET PREMIUM
An amount based on the Specified Amount, Death Benefit Guarantee Period, any optional benefits, and factors relating to the Insured including but not limited to Issue Age, sex, and underwriting classification, used to compute certain charges. The Target Premium is the dollar amount identified in the Maximum Sales Load section of the Policy schedule pages.
UNIT
An accounting unit of measure representing the value in one or more Divisions of the Separate Account.
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50
UNIT VALUE
The value of a particular Unit at a particular time. Unit Value is analogous, but not the same as, the share price of a Portfolio in which a Division invests. It may fluctuate from one Valuation Period to the next.
VALUATION DATE
Any day the NYSE is open for trading, except for any days specified in the Policy’s Prospectus including any day that a Division's corresponding investment option does not value its shares. A Valuation Date ends when the NYSE closes.
VALUATION PERIOD
The time between the close of trading on the NYSE on a Valuation Date and the close of trading on the next Valuation Date.
51Variable Universal Life Plus Prospectus
Appendix A—Portfolios Available under Your Policy
The following is a list of Portfolios available under your Policy. More information about the Portfolios is available in the prospectuses for the Portfolios, which may be amended from time to time and can be found online at www.nmprospectus.com. You can also request this information at no cost by calling (866) 464-3800 or by sending an email request to vavldocrequest@northwesternmutual.com.
The current expenses and performance information below reflects fees and expenses of the Portfolios, but do not reflect the other fees and expenses that your Policy may charge. Expenses would be higher and performance would be lower if these other charges were included. Each Portfolio’s past performance is not necessarily an indication of future performance. Please note that depending on whether your Death Benefit Guarantee is in effect, allocations or transfers into the Government Money Market Division are subject to certain restrictions (see “The Fixed Option - Restrictions on Amounts in the SAS Account and Government Money Market Division” in the Prospectus).  
Investment
Objective
Portfolio and Adviser/
Sub-adviser (if applicable)
Current
Expenses
Average Annual
Total Returns
(as of 12/31/2021)
1 Year
5 Year
10 Year
Long-term growth of
capital; current income is
a secondary objective
Growth Stock Portfolio2
Mason Street Advisors, LLC
(MSA)/T. Rowe Price
Associates, Inc.
0.42%
16.67%
20.77%
16.66%
Long-term growth of
capital
Focused Appreciation
Portfolio2
MSA/Loomis, Sayles &
Company, L.P.
0.62%1
18.90%
22.10%
18.67%
Long-term growth of
capital and income
Large Cap Core Stock
Portfolio2
MSA/Wellington
Management Company LLP
0.43%1
25.10%
18.77%
14.40%
Long-term growth of
capital and income
Large Cap Blend
Portfolio2
MSA/Fiduciary Management,
Inc.
0.78%1
18.46%
13.05%
13.30%
Investment results that
approximate the
performance of the
Standard & Poor’s 500®
Composite Stock Price
Index
Index 500 Stock
Portfolio2
MSA/BlackRock Advisors, LLC
0.19%1
28.45%
18.22%
16.30%
Long-term growth of
capital; income is a
secondary objective
Large Company Value
Portfolio2
MSA/American Century
Investment Management,
Inc.
0.71%1
21.92%
10.32%
12.10%
Long-term growth of
capital and income
Domestic Equity
Portfolio2
MSA/Delaware Investments
Fund Advisers, a series of
Macquarie Investment
Management Business Trust
0.49%1
22.71%
10.54%
12.71%
Long-term growth of
capital and income
Equity Income Portfolio2
MSA/T. Rowe Price
Associates, Inc.
0.57%1
25.70%
11.16%
11.93%
Long-term growth of
capital
Mid Cap Growth Stock
Portfolio2
MSA/Wellington
Management Company LLP
0.52%1
10.18%
15.41%
12.23%
Investment results that
approximate the
performance of the
Standard & Poor’s
MidCap 400® Stock Price
Index
Index 400 Stock
Portfolio2
MSA/Northern Trust
Investments, Inc.
0.24%1
24.46%
12.80%
13.91%
Long-term growth of
capital; current income is
a secondary objective
Mid Cap Value Portfolio2
MSA/American Century
Investment Management,
Inc.
0.72%1
23.27%
9.55%
13.02%
Long-term growth of
capital
Small Cap Growth Stock
Portfolio2
MSA/Wellington
Management Company LLP
0.54%
4.11%
15.15%
14.16%
Investment results that
approximate the
performance of the
Standard & Poor’s
SmallCap 600® Index
Index 600 Stock
Portfolio2
MSA/Northern Trust
Investments, Inc.
0.27%
26.22%
12.05%
14.08%
Long-term growth of
capital
Small Cap Value
Portfolio2
MSA/T. Rowe Price
Investment Management,
Inc.
0.92%1
23.00%
10.52%
12.23%
Variable Universal Life Plus Prospectus
52
Investment
Objective
Portfolio and Adviser/
Sub-adviser (if applicable)
Current
Expenses
Average Annual
Total Returns
(as of 12/31/2021)
1 Year
5 Year
10 Year
Long-term growth of
capital
International Growth
Portfolio2
MSA/FIAM LLC
0.61%1
15.92%
16.28%
10.54%
Capital appreciation
Research International
Core Portfolio2
MSA/Massachusetts
Financial Services Company
0.73%1
12.07%
12.54%
8.62%
Long-term growth of
capital and income
International Equity
Portfolio2
MSA/Dodge & Cox
0.68%
5.00%
3.54%
4.88%
Capital appreciation
Emerging Markets Equity
Portfolio2
MSA/Aberdeen Asset
Managers Limited
0.89%1
-4.55%
9.99%
5.00%
Maximum current income
to the extent consistent
with liquidity and stability
of capital3
Government Money
Market Portfolio4
MSA/BlackRock Advisors, LLC
0.33%
0.01%
0.88%
0.48%
Provide as high a level of
current income as is
consistent with prudent
investment risk
Short-Term Bond
Portfolio2
MSA/T. Rowe Price
Associates, Inc.
0.38%
-0.10%
2.24%
1.65%
Provide as high a level of
total return consistent
with prudent investment
risk; a secondary
objective is to seek
preservation of
shareholders’ capital
Select Bond Portfolio2
MSA/Allspring Global
Investments, LLC
0.30%1
-1.59%
3.79%
3.07%
Maximum total return,
consistent with
preservation of capital
and prudent investment
management
Long-Term U.S.
Government Bond
Portfolio2
MSA/Pacific Investment
Management Company LLC
0.67%
-5.37%
5.92%
3.99%
Pursue total return using
a strategy that seeks to
protect against U.S.
inflation
Inflation Protection
Portfolio2
MSA/American Century
Investment Management,
Inc.
0.53%1
6.61%
5.14%
2.93%
High current income and
capital appreciation
High Yield Bond
Portfolio2
MSA/Federated Investment
Management Company
0.44%
5.31%
6.07%
6.35%
Maximum total return,
consistent with prudent
investment management
Multi-Sector Bond
Portfolio2
MSA/Pacific Investment
Management Company LLC
0.71%1
-0.08%
5.28%
5.08%
Realize as high a level of
total return as is
consistent with prudent
investment risk, through
income and capital
appreciation
Balanced Portfolio2
MSA
0.52%1
7.56%
9.06%
7.86%
Realize as high a level of
total return as is
consistent with
reasonable investment
risk
Asset Allocation
Portfolio2
MSA
0.60%1
10.45%
10.64%
9.25%
Long-term growth of
capital
Fidelity® VIP Mid Cap
Portfolio – Initial Class5
Fidelity Management &
Research Company LLC
(FMR)6
0.61%
26.60%
13.60%
13.29%
Long-term capital
appreciation
Fidelity® VIP Contrafund®
Portfolio – Initial Class5
FMR6
0.60%
27.83%
20.17%
16.64%
Long-term growth of
capital by investing
primarily in securities of
companies that meet the
Portfolio’s environmental,
social and governance
criteria
Sustainable Equity
Portfolio7
Neuberger Berman
Investment Advisers LLC
0.89%
23.48%
15.72%
14.36%
53Variable Universal Life Plus Prospectus
Investment
Objective
Portfolio and Adviser/
Sub-adviser (if applicable)
Current
Expenses
Average Annual
Total Returns
(as of 12/31/2021)
1 Year
5 Year
10 Year
Long-term growth of
capital
U.S. Strategic Equity
Fund8
Russell Investment
Management LLC (RIM)9
0.84%
20.40%
16.22%
15.08%
Long-term growth of
capital
U.S. Small Cap Equity
Fund8
RIM9
1.12%1
25.79%
12.14%
12.39%
Current income and long-
term growth of capital
Global Real Estate
Securities Fund8
RIM9
0.91%
27.19%
9.11%
9.25%
Long-term growth of
capital
International Developed
Markets Fund8
RIM9
1.02%1
12.66%
8.56%
7.83%
Provide total return
Strategic Bond Fund8
RIM9
0.67%
-1.82%
3.67%
3.34%
Current income and
moderate long-term
capital appreciation
LifePoints® Variable
Target Portfolio Series
Moderate Strategy Fund8
RIM9
0.84%1
8.23%
6.25%
5.96%
Above-average long-term
capital appreciation and a
moderate level of current
income
LifePoints® Variable
Target Portfolio Series
Balanced Strategy Fund8
RIM9
0.92%1
13.04%
8.15%
7.67%
High long-term capital
appreciation; and as a
secondary objective,
current income
LifePoints® Variable
Target Portfolio Series
Growth Strategy Fund8
RIM9
0.98%1
17.44%
10.11%
9.02%
High long-term capital
appreciation
LifePoints® Variable
Target Portfolio Series
Equity Growth Strategy
Fund8
RIM9
1.00%1
19.61%
10.60%
9.72%
Total return
Commodity Return
Strategy Portfolio – Class
210
Credit Suisse Asset
Management, LLC
0.78%
28.46%
N/A
N/A
1 This reflects an expense reimbursement and/or fee waiver arrangement that is in place and reported in the Portfolio’s registration statement. This agreement may be terminated in the future and, therefore, the expense figures shown reflect temporary fee reductions.
2 A series of Northwestern Mutual Series Fund, Inc., for which MSA, our wholly-owned company, serves as investment adviser.
3 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. Please note that allocations into the Government Money Market Division are subject to certain restrictions if your Death Benefit Guarantee is in effect (see “The Fixed Option - Restrictions on Amounts in the SAS Account and Government Money Market Division” in the Prospectus).
4 Please note that allocations or transfers into the Government Money Market Division are subject to certain restrictions if your Death Benefit Guarantee is in effect. These restrictions include limits on the timing and amounts allocated or transferred to this Division to ensure total amounts in, or percentages allocated or transferred to, this Division and/or the SAS Account do not exceed certain maximum percentages (see "The Fixed Option-Restrictions on Amounts in the SAS Account and Government Money Market Division" in the Prospectus).
5The 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.
6The following affiliates of Fidelity Management & Research Company also assist with foreign investments for each Portfolio: Fidelity Management & Research (U.K.) Inc., Fidelity Management & Research (Hong Kong) Limited, and Fidelity Management & Research (Japan) Inc.
7 A series of Neuberger Berman Advisers Management Trust.
8 A series of Russell Investment Funds.
9 Assets of each Portfolio are invested by one or more investment management organizations researched and recommended by Russell Investment Management LLC, the investment adviser for the Russell Investment Funds.
10 A series of Credit Suisse Trust.
Variable Universal Life Plus Prospectus
54
Appendix B—State Variations
This Appendix B contains important state specific variations for Policies issued in the states as noted below. The Prospectus provides a general description of the Policy (and any endorsements) but your state of issue may provide different features from, and impose different costs than, those described in the body of the Prospectus. Please see your Policy for specific details. 
STATE
POLICY
FEATURE/BENEFIT/COST
VARIATION
Arizona
Incontestability
There is no exception for fraudulent misstatements.
Arkansas
Policy Loans (Annual Market Loan
Rate on Policy Loans)
Loan interest is payable at an annual effective rate of 5%.
California
Right to Exchange for a Fixed Benefit
Policy
The Policy may be exchanged without evidence of insurability for a fixed
benefit life insurance policy within eighteen (18) months after the date
of issue.
Optional Waiver Benefit (Upon Total
Disability)
For two years following the Date of Issue the Insured will not covered for
a Total Disability caused or substantially caused by a pre-existing
condition.
Colorado
Right to Return
Unless the Policy is a replacement it may be returned within fifteen (15)
days after it was received.
Connecticut
Right to Return
If the Policy is a replacement it may be returned within ten (10) days
after it was received. For non-replacements, the amount of the refund
will not be less than the premium paid less any policy debt and
withdrawals.
Right to Exchange for a Fixed Benefit
Policy
The Policy may be exchanged without evidence of insurability for a fixed
benefit life insurance policy within eighteen (18) months after the date
of issue.
Incontestability
There is no exception for fraudulent misstatements.
Delaware
Right to Return
If the Policy is a replacement, it may be returned within twenty (20) days
after it was received. For replacements, the amount of the refund will be
the premium paid less any policy debt and withdrawals.
District of Columbia
Right to Return
The Policy may be returned within ten (10) days after it was received or
forty-five (45) days after the application was signed, whichever is later.
The amount of the refund will not be less than the premium paid less any
policy debt and withdrawals.
Incontestability
There is no exception for fraudulent misstatements.
Florida
Right to Return
The Policy may be returned within fourteen (14) days after it was
received. The amount of the refund will not be less than the premium
paid less any policy debt and withdrawals.
Changing Death Benefit Option
Only changes to Option A are allowed. Changes to Options B or C are not
allowed.
Incontestability
There is no exception for fraudulent misstatements.
Georgia
Right to Return
The Policy may be returned within ten (10) days after it was received.
The amount of the refund will not be less than the premium paid less any
policy debt and withdrawals.
Right to Exchange for a Fixed Benefit
Policy
The Policy may be exchanged without evidence of insurability for a fixed
benefit life insurance policy within eighteen (18) months after the date
of issue.
Hawaii
Policy Loans (Annual Market Loan
Rate on Policy Loans)
Loan interest is payable at an annual effective rate not to exceed the
greater of the rate determined by the company or 8%.
Optional Waiver Benefit (Upon Total
Disability)
Unless there is evidence of changes in medical circumstances, upon Total
Disability the Company will not require proof from a physician more
often than once in any three calendar years.
Idaho
Right to Return
The Policy may be returned within twenty (20) days after it was received.
For replacements, the amount of the refund will be the premium paid
less any policy debt and withdrawals.
Illinois
Right to Return
If the Policy is a replacement, it may be returned within twenty (20) days
after it was received. For replacements, the amount of the refund will be
the premium paid less any policy debt and withdrawals.
Incontestability
There is no exception for fraudulent misstatements.
Deferral of Determination and
Payment
The Company will not defer the payment of the life insurance benefit for
longer than two months.
55Variable Universal Life Plus Prospectus
STATE
POLICY
FEATURE/BENEFIT/COST
VARIATION
Indiana
Right to Return
For non-replacements, the Policy may be returned within ten (10) days
after it was received. The amount of the refund will not be less than the
premium paid less any policy debt and withdrawals. If the Policy is a
replacement, it may be returned within twenty (20) days after it was
received. For replacements, the amount of the refund will be the
premium paid less any policy debt and withdrawals.
Incontestability
There is no exception for fraudulent misstatements.
Suicide
The life insurance benefit paid as a result of suicide within two years of
policy changes is calculated the same as for benefits paid as a result of
suicides within two years of issue.
Surrenders
Cash Surrender Value paid upon surrenders within 30 days of after a
Policy anniversary shall not be less than the Cash Surrender Value as of
such Policy anniversary.
Deferral of Determination and
Payment
The Company will not defer the payment of the life insurance benefit for
longer than sixty (60) days.
Kansas
Right to Return
If the Policy is a replacement, it may be returned within twenty (20) days
after it was received. For replacements the amount of the refund will be
the premium paid less any policy debt and withdrawals.
Louisiana
Incontestability
There is no exception for fraudulent misstatements.
Maryland
Right to Return
For non-replacements, the Policy may be returned within ten (10) days
after it was received or forty-five (45) days after the date the application
is signed, whichever is later. The amount of the refund will not be less
than the premium paid less any policy debt and withdrawals.
For replacements, the Policy may be returned within thirty (30) days
after it was received or forty-give (45) days after the date the application
is signed, whichever is later.
Right to Exchange for a Fixed Benefit
Policy
The Policy may be exchanged without evidence of insurability for a fixed
benefit life insurance policy within eighteen (18) months after the date
of issue.
Massachusetts
Paid-up Insurance
This feature is not available for policies issued where the Guideline
Premium/Cash Value Corridor Test was elected at issue for the minimum
death benefit.
Right to Return
For non-replacements, the Policy may be returned within 10 days after it
was received. The amount of the refund will not be less than the
premium paid less any policy debt and withdrawals.
If the Policy is a replacement, it may be returned within 20 days after it
was received. For replacements, the amount of the refund will be the
premium paid less any policy debt and withdrawals.
Michigan
Right to Return
The Policy may be returned within ten (10) days after it was received or
forty-five (45) days after the date the application is signed, whichever is
later. The amount of the refund will not be less than the premium paid
less any policy debt and withdrawals.
Deferral of Determination and
Payment
The Company will not defer the payment of the life insurance benefit for
longer than sixty (60) days assuming the Company has sufficient
information to determine the appropriate payee and no other legal
impediment exists to prevent payment.
Minnesota
Right to Return
For non-replacements, the amount of the refund will include all
premiums paid, including the refund of any fees or charges.
Policy Loans (Annual Market Loan
Rate on Policy Loans)
Loan interest is payable at an annual effective rate not to exceed the
greater of the rate determined by the company or 8%.
Missouri
Right to Return
For non-replacements, the Policy may be returned within 10 days after it
was received. The amount of the refund will not be less than the
premium paid less any policy debt and withdrawals.
If the Policy is a replacement, it may be returned within 20 days after it
was received. For replacements, the amount of the refund will be the
premium paid less any policy debt and withdrawals.
Incontestability
There is no exception for fraudulent misstatements.
Suicide
The suicide exclusion applies within one year after date of issue or policy
changes.
Variable Universal Life Plus Prospectus
56
STATE
POLICY
FEATURE/BENEFIT/COST
VARIATION
Montana
Right to Return
For non-replacements, the amount of the refund will be the premium
paid less any policy debt and withdrawals.
Policy Loans (Annual Market Loan
Rate on Policy Loans)
Loan interest is payable at an annual effective rate not to exceed the
greater of the rate determined by the company or 8%.
Optional Waiver Benefit (Upon Total
Disability)
Written notice of any claim for this benefit must be provided to the
Company within 6 months from the occurrence or commencement of
loss.
Incontestability
There is no exception for fraudulent misstatements.
Suicide
Payments made under this provision are limited to refund of premiums
or cash value, whichever is greater.
Nebraska
Right to Return
For non-replacements, the Policy may be returned within 10 days after it
was received. The amount of the refund will not be less than the
premium paid less any policy debt and withdrawals.
Life Insurance Benefit
Interest paid on the life insurance benefit from the date of death shall
not be less than the rate required by Nebraska law.
Nevada
Right to Return
For non-replacements, the Policy may be returned within 10 days after it
was received. The amount of the refund will not be less than the
premium paid less any policy debt and withdrawals.
For replacements, the Policy may be returned within 30 days after it was
received. The amount of the refund will not be less than the premium
paid less any policy debt and withdrawals.
New Hampshire
Paid-up Insurance
This feature is not available for policies issued where the Guideline
Premium/Cash Value Corridor Test was elected at issue for the minimum
death benefit.
New Jersey
Right to Return
For non-replacements, the Policy may be returned within 10 days after it
was received. The amount of the refund will not be less than the
premium paid less any policy debt and withdrawals.
Life Insurance Benefit
Interest rates on the life insurance benefits paid after 60 days (or 90 days
if under investigation) from proof of death shall not be less than the rate
applicable to the New Jersey Cash Management Fund for the preceding
year rounded to the nearest one-half percent.
Incontestability
There is no exception for fraudulent misstatements.
North Carolina
Right to Return
For non-replacements, the Policy may be returned within ten (10) days
after it was received or forty-five (45) days after date the application is
signed, whichever is later. For non-replacements, the amount of the
refund will not be less than the premium paid less any policy debt and
withdrawals.
Right to Exchange for a Fixed Benefit
Policy
The Policy may be exchanged without evidence of insurability for a fixed
benefit life insurance policy within twenty-four (24) months after the
date of issue.
Policy Loans (Annual Market Loan
Rate on Policy Loans)
Loan interest is payable at an annual effective rate not to exceed the
greater of the rate determined by the company or 8%.
Reinstatement
The Policy may be reinstated within five years after termination.
Incontestability
There is no exception for fraudulent misstatements.
North Dakota
Right to Return
The Policy may be returned within twenty (20) days after it was received.
The amount of the refund will not be less than the premium paid less any
policy debt and withdrawals.
Right to Exchange for a Fixed Benefit
Policy
The Policy may be exchanged without evidence of insurability for a fixed
benefit life insurance policy within eighteen (18) months after the date
of issue.
Suicide
The suicide exclusion applies within one year after date of issue or policy
changes.
Ohio
Deferral of Determination and
Payment
The Company will not defer the payment of the life insurance benefit for
longer than sixty (60) days assuming the Company has no other legal
impediment exists to prevent payment.
Oklahoma
Right to Return
If Policy is a replacement, it may be returned within twenty (20) days
after it was received. For replacements, the amount of the refund will be
the premium paid less any policy debt and withdrawals. If the refund is
deferred more than 30 days, interest will be paid on the refund in
accordance with Oklahoma law.
57Variable Universal Life Plus Prospectus
STATE
POLICY
FEATURE/BENEFIT/COST
VARIATION
Oregon
Right to Exchange for a Fixed Benefit
Policy
The Policy may be exchanged without evidence of insurability for a fixed
benefit life insurance policy within eighteen (18) months after the date
of issue.
Incontestability
There is no exception for fraudulent misstatements.
Pennsylvania
Paid-up Insurance
This feature is not available for policies issued where the Guideline
Premium/Cash Value Corridor Test was elected at issue for the minimum
death benefit.
Rhode Island
Right to Return
For non-replacements, the Policy may be returned within twenty (20)
days after it was received. The amount of the refund will be the premium
paid less any policy debt and withdrawals.
Life Insurance Benefit
Interest paid on the life insurance benefit from the date of death shall
not be less than 9%.
Incontestability
There is no exception for fraudulent misstatements.
South Carolina
Right to Return
For non-replacements, the amount of the refund will not be less than the
premium paid less any policy debt and withdrawals.
Tennessee
Right to Return
If Policy is a replacement, it may be returned within twenty (20) days
after it was received. For replacements, the amount of the refund will be
the premium paid less any policy debt and withdrawals.
Texas
Right to Return
For non-replacements, the amount of the refund will not be less than the
premium paid less any policy debt and withdrawals.
Deferral of Determination and
Payment
The Company will not defer the payment of the life insurance benefit for
longer than sixty (60) days assuming the right to proceeds has been
established.
Incontestability
There is no exception for fraudulent misstatements.
Utah
Right to Return
The amount of the refund will not be less than the premium paid less any
policy debt and withdrawals.
Vermont
Right to Return
For non-replacements, the amount of the refund will not be less than the
premium paid less any policy debt and withdrawals.
Incontestability
There is no exception for fraudulent misstatements.
Life Insurance Benefit
Interest paid on the life insurance benefit shall not be less than the
greater of the interest on proceeds left on deposit or 6%.
Virginia
Paid-up Insurance
This feature is not available for policies issued where the Guideline
Premium/Cash Value Corridor Test was elected at issue for the minimum
death benefit.
Washington
Right to Return
If the Policy is a replacement, it may be returned within twenty (20) days
after it was received. For all returns, the amount of the refund will be the
premium paid less any policy debt and withdrawals.
West Virginia
Right to Return
For non-replacements, the amount of the refund will be the premium
paid less any policy debt and withdrawals.
Variable Universal Life Plus Prospectus
58
Additional Information
More information about your Policy and 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 Northwestern Mutual Life Insurance Company. To request a free copy of the Separate Account’s SAI, or current annual report, or to request other information about the Policy or to make investor inquiries, call (866) 464-3800. Under certain circumstances you or your Financial Representative may be able to obtain these documents online at www.nmprospectus.com. Reports and other information about the Separate Account are available on the SEC’s Internet site at www.sec.gov, or they may be obtained, upon payment of a duplicating fee, by electronic request at the following email address: publicinfo@sec.gov.
Edgar Contract Identifier C000212050
59

Table of Contents
NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT II
(Account)
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
(Depositor)
720 EAST WISCONSIN AVENUE
MILWAUKEE, WI 53202
1-866-464-3800
STATEMENT OF ADDITIONAL INFORMATION
Variable Universal Life Plus
This Statement of Additional Information (“SAI”) contains additional information regarding the Variable Universal Life Plus insurance policy (the “Policy”) offered by The Northwestern Mutual Life Insurance Company (“Northwestern Mutual”). This SAI is not a prospectus, and should be read together with the prospectus for the Policy (the “Prospectus”) dated May 1, 2022. You may obtain a copy of the Prospectus by writing or calling Northwestern Mutual at the address or phone number shown above, or by visiting www.nmprospectus.com. Capitalized terms in this SAI have the same meanings as in the Prospectus for the Policy.
The date of this Statement of Additional Information is May 1, 2022.
B-1
Table of Contents 
B-2
DISTRIBUTION OF THE POLICY
Northwestern Mutual Investment Services, LLC (“NMIS”), our wholly-owned company, is the principal underwriter and distributor of the Policy. NMIS is located at 720 East Wisconsin Avenue, Milwaukee, Wisconsin 53202. The Policy is offered on a continuous basis exclusively through our Financial Representatives, who are also registered representatives of NMIS. We do not anticipate discontinuing the offering of the Policy but we reserve the right to do so at any time.
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 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.  
Year
Amount
2021
$88,642,733
2020
$52,135,241
2019
$38,385,091
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.
EXPERTS
The statutory financial statements of The Northwestern Mutual Life Insurance Company as of December 31, 2021 and 2020 and for each of the three years in the period ended December 31, 2021, and the financial statements of Northwestern Mutual Variable Life Account II as of December 31, 2021 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

Table of Contents

 

Annual Report December 31, 2021

Northwestern Mutual Variable Life Account II

Financial Statements

Table of Contents

Report of Independent Registered Public Accounting Firm

To the Board of Trustees of The Northwestern Mutual Life Insurance Company and the Policyowners of Northwestern Mutual Variable Life Account II

Opinions on the Financial Statements

We have audited the accompanying statements of assets and liabilities of each of the divisions of Northwestern Mutual Variable Life Account II indicated in the table below as of December 31, 2021, and the related statements of operations and of changes in net assets for each of the periods indicated in the table below, including the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of each of the divisions of Northwestern Mutual Variable Life Account II as of December 31, 2021, and the results of each of their operations and the changes in each of their net assets for the periods indicated in the table below, in conformity with accounting principles generally accepted in the United States of America.

 

Growth Stock Division (1)    Mid Cap Value Division (1)    Select Bond Division (1)    U.S. Strategic Equity Division (1)
Focused Appreciation Division (1)    Small Cap Growth Stock Division (1)    Long-Term U.S. Government Bond Division (1)    U.S. Small Cap Equity Division (1)
Large Cap Core Stock Division (1)    Index 600 Stock Division (1)    Inflation Protection Division (1)    International Developed Markets Division (1)
Large Cap Blend Division (1)    Small Cap Value Division (1)    High Yield Bond Division (1)    Strategic Bond Division (1)
Index 500 Stock Division (1)    International Growth Division (1)    Multi-Sector Bond Division (1)    Global Real Estate Securities Division (1)
Large Company Value Division (1)    Research International Core Division (1)    Balanced Division (1)    LifePoints Moderate Strategy Division (1)
Domestic Equity Division (1)    International Equity Division (1)    Asset Allocation Division (1)    LifePoints Balanced Strategy Division (1)
Equity Income Division (1)    Emerging Markets Equity Division (1)    Fidelity VIP Mid Cap Division (1)    LifePoints Growth Strategy Division (1)
Mid Cap Growth Stock Division (1)    Government Money Market Division (1)    Fidelity VIP Contrafund Division (1)    LifePoints Equity Growth Strategy Division (1)
Index 400 Stock Division (1)    Short-Term Bond Division (1)    AMT Sustainable Equity Division (1)    Credit Suisse Trust Commodity Return Strategy Division (1)

(1)   Statement of operations for the year ended December 31, 2021 and statement of changes in net assets for the years ended December 31, 2021 and 2020

Basis for Opinions

These financial statements are the responsibility of The Northwestern Mutual Life Insurance Company management. Our responsibility is to express an opinion on the financial statements of each of the divisions of Northwestern Mutual Variable Life Account II based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to each of the divisions of Northwestern Mutual Variable Life Account II in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

Table of Contents

We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of investments owned as of December 31, 2021 by correspondence with the custodians and the transfer agents of the investee mutual funds. We believe that our audits provide a reasonable basis for our opinions.

/s/ PricewaterhouseCoopers LLP

Milwaukee, Wisconsin

April 26, 2022

We have served as the auditor of one or more of the divisions of Northwestern Mutual Variable Life Account II since 2007.

 

2

Table of Contents

Northwestern Mutual Variable Life Account II

Table of Contents

 

Statements of Assets and Liabilities

      1  

Statements of Operations

      9  

Statements of Changes on Net Assets

      12  

Notes to Financial Statements

      22  

Table of Contents

Statements of Assets and Liabilities

NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT II

December 31, 2021 (in thousands, except accumulation unit values)

 

     Growth Stock
Division		      Focused
Appreciation
Division		      Large Cap Core
Stock Division		      Large Cap
Blend Division		     Index 500
Stock Division		  

Assets:

              

Investments, at fair value (1)

              

Northwestern Mutual Series Fund, Inc.

    $ 24,658      $ 39,391      $ 16,388      $ 2,889     $ 350,059  

Fidelity Variable Insurance Products Fund

      -        -        -        -       -  

Neuberger Berman Advisers Management Trust

      -        -        -        -       -  

Russell Investment Funds

      -        -        -        -       -  

Credit Suisse Trust

      -        -        -        -       -  

Due from Northwestern Mutual Life Insurance Company

      -        -        -        -       16  

Total Assets

      24,658        39,391        16,388        2,889       350,075  

Liabilities:

              

Due to Northwestern Mutual Life Insurance Company

      84        -        54        -       -  

Due to Participants

      -        1        -        -       7  

Total Liabilities

      84        1        54        -       7  

Total Net Assets

    $ 24,574      $ 39,390      $ 16,334      $ 2,889     $ 350,068  
        

Net Assets:

              

Custom Variable Universal Life Policies Issued

              

Between January 31, 2007 and December 23, 2019 (2)

              

Policyowners’ Equity

    $ 11,189      $ 28,522      $ 9,340      $ 2,684     $ 221,133  

Executive Variable Universal Life Policies Issued

              

Between January 31, 2007 and December 23, 2019 (3)

              

Policyowners’ Equity

      10,310        3,137        3,989        13       21,125  

Survivorship Variable Universal Life Policies Issued

              

Between January 31, 2007 and December 23, 2019 (4)

              

Policyowners’ Equity

      448        2,673        1,863        91       15,249  

Variable Universal Life Plus Policies Issued

              

On or After November 11, 2019 (5)

              

Policyowners’ Equity

      2,314        4,937        876        99       91,163  

Executive Variable Universal Life II Policies Issued

              

On or After November 11, 2019 (6)

              

Policyowners’ Equity

      313        121        266        2       1,398  
        

Total Net Assets

    $ 24,574      $ 39,390      $ 16,334      $ 2,889     $ 350,068  
        

(1)  Investments, at cost

    $ 20,725      $ 29,594      $ 12,675      $ 2,458     $ 255,210  

Mutual Fund Shares Held

      6,099        9,120        7,419        2,084       42,810  

(2)  Accumulation Unit Value

    $ 152.095850      $ 108.543824      $ 100.458713      $ 27.701179     $ 270.376034  

Units Outstanding

      74        263        91        97       820  

(3)  Accumulation Unit Value

    $ 152.095850      $ 108.543824      $ 100.458713      $ 27.701179     $ 270.376034  

Units Outstanding

      68        29        40        - (a)      78  

(4)  Accumulation Unit Value

    $ 152.095850      $ 108.543824      $ 100.458713      $ 27.701179     $ 270.376034  

Units Outstanding

      3        25        19        3       56  

(5)  Accumulation Unit Value

    $ 152.095850      $ 108.543824      $ 100.458713      $ 27.701179     $ 270.376034  

Units Outstanding

      15        45        9        4       337  

(6)  Accumulation Unit Value

    $ 152.095850      $ 108.543824      $ 100.458713      $ 27.701179     $ 270.376034  

Units Outstanding

      2        1        3        - (a)      5  

(a) Amount is less than 500

 

The Accompanying Notes are an Integral Part of these Financial Statements.

 

F-1

Table of Contents

Statements of Assets and Liabilities

NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT II

December 31, 2021 (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.

    $ 5,543      $ 42,553      $ 19,694      $ 13,876      $ 71,431  

Fidelity Variable Insurance Products Fund

      -        -        -        -        -  

Neuberger Berman Advisers Management Trust

      -        -        -        -        -  

Russell Investment Funds

      -        -        -        -        -  

Credit Suisse Trust

      -        -        -        -        -  

Due from Northwestern Mutual Life Insurance Company

      -        3        -        -        4  

Total Assets

      5,543        42,556        19,694        13,876        71,435  

Liabilities:

               

Due to Northwestern Mutual Life Insurance Company

      -        -        -        45        -  

Due to Participants

      -        -        -        -        4  

Total Liabilities

      -        -        -        45        4  

Total Net Assets

    $ 5,543      $ 42,556      $ 19,694      $ 13,831      $ 71,431  
        

Net Assets:

               

Custom Variable Universal Life Policies Issued

               

Between January 31, 2007 and December 23, 2019 (2)

               

Policyowners’ Equity

    $ 3,670      $ 29,675      $ 15,523      $ 7,478      $ 51,358  

Executive Variable Universal Life Policies Issued

               

Between January 31, 2007 and December 23, 2019 (3)

               

Policyowners’ Equity

      595        4,420        2,247        4,051        4,021  

Survivorship Variable Universal Life Policies Issued

               

Between January 31, 2007 and December 23, 2019 (4)

               

Policyowners’ Equity

      677        1,356        1,068        1,040        2,926  

Variable Universal Life Plus Policies Issued

               

On or After November 11, 2019 (5)

               

Policyowners’ Equity

      574        6,994        856        1,091        12,993  

Executive Variable Universal Life II Policies Issued

               

On or After November 11, 2019 (6)

               

Policyowners’ Equity

      27        111        -        171        133  
        

Total Net Assets

    $ 5,543      $ 42,556      $ 19,694      $ 13,831      $ 71,431  
        

(1)  Investments, at cost

    $ 4,718      $ 35,720      $ 16,446      $ 12,266      $ 56,325  

Mutual Fund Shares Held

      4,646        22,002        9,779        3,526        27,762  

(2)  Accumulation Unit Value

    $ 25.131615      $ 43.518946      $ 51.480302      $ 213.536458      $ 93.570328  

Units Outstanding

      146        681        299        35        549  

(3)  Accumulation Unit Value

    $ 25.131615      $ 43.518946      $ 51.480302      $ 213.536458      $ 93.570328  

Units Outstanding

      24        102        44        19        43  

(4)  Accumulation Unit Value

    $ 25.131615      $ 43.518946      $ 51.480302      $ 213.536458      $ 93.570328  

Units Outstanding

      27        31        21        5        31  

(5)  Accumulation Unit Value

    $ 25.131615      $ 43.518946      $ 51.480302      $ 213.536458      $ 93.570328  

Units Outstanding

      23        161        17        5        139  

(6)  Accumulation Unit Value

    $ 25.131615      $ 43.518946      $ 51.480302      $ 213.536458      $ 93.570328  

Units Outstanding

      1        3        -        1        1  

(a) Amount is less than 500

 

The Accompanying Notes are an Integral Part of these Financial Statements.

 

F-2

Table of Contents

Statements of Assets and Liabilities

NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT II

December 31, 2021 (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.

    $ 25,397      $ 24,789      $ 35,999      $ 14,455     $ 52,808  

Fidelity Variable Insurance Products Fund

      -        -        -        -       -  

Neuberger Berman Advisers Management Trust

      -        -        -        -       -  

Russell Investment Funds

      -        -        -        -       -  

Credit Suisse Trust

      -        -        -        -       -  

Due from Northwestern Mutual Life Insurance Company

      1        -        -        1       1  

Total Assets

      25,398        24,789        35,999        14,456       52,809  

Liabilities:

              

Due to Northwestern Mutual Life Insurance Company

      -        28        1        -       -  

Due to Participants

      -        1        3        -       -  

Total Liabilities

      -        29        4        -       -  

Total Net Assets

    $ 25,398      $ 24,760      $ 35,995      $ 14,456     $ 52,809  
        

Net Assets:

              

Custom Variable Universal Life Policies Issued

              

Between January 31, 2007 and December 23, 2019 (2)

              

Policyowners’ Equity

    $ 17,852      $ 15,249      $ 24,759      $ 12,236     $ 39,662  

Executive Variable Universal Life Policies Issued

              

Between January 31, 2007 and December 23, 2019 (3)

              

Policyowners’ Equity

      2,140        4,019        2,654        1,004       1,447  

Survivorship Variable Universal Life Policies Issued

              

Between January 31, 2007 and December 23, 2019 (4)

              

Policyowners’ Equity

      918        1,670        968        422       2,370  

Variable Universal Life Plus Policies Issued

              

On or After November 11, 2019 (5)

              

Policyowners’ Equity

      4,432        3,672        7,539        792       9,254  

Executive Variable Universal Life II Policies Issued

              

On or After November 11, 2019 (6)

              

Policyowners’ Equity

      56        150        75        2       76  
        

Total Net Assets

    $ 25,398      $ 24,760      $ 35,995      $ 14,456     $ 52,809  
        

(1)  Investments, at cost

    $ 21,121      $ 21,902      $ 28,159      $ 12,249     $ 38,609  

Mutual Fund Shares Held

      12,718        7,694        19,490        5,605       22,003  

(2)  Accumulation Unit Value

    $ 61.756931      $ 108.425869      $ 38.363170      $ 70.431381     $ 39.539175  

Units Outstanding

      289        142        645        174       1,002  

(3)  Accumulation Unit Value

    $ 61.756931      $ 108.425869      $ 38.363170      $ 70.431381     $ 39.539175  

Units Outstanding

      35        37        69        14       37  

(4)  Accumulation Unit Value

    $ 61.756931      $ 108.425869      $ 38.363170      $ 70.431381     $ 39.539175  

Units Outstanding

      15        15        25        6       60  

(5)  Accumulation Unit Value

    $ 61.756931      $ 108.425869      $ 38.363170      $ 70.431381     $ 39.539175  

Units Outstanding

      72        34        197        11       234  

(6)  Accumulation Unit Value

    $ 61.756931      $ 108.425869      $ 38.363170      $ 70.431381     $ 39.539175  

Units Outstanding

      1        1        2        - (a)      2  

(a) Amount is less than 500

 

The Accompanying Notes are an Integral Part of these Financial Statements.

 

F-3

Table of Contents

Statements of Assets and Liabilities

NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT II

December 31, 2021 (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.

    $ 48,331      $ 69,373      $ 56,729      $ 20,945      $ 6,120  

Fidelity Variable Insurance Products Fund

      -        -        -        -        -  

Neuberger Berman Advisers Management Trust

      -        -        -        -        -  

Russell Investment Funds

      -        -        -        -        -  

Credit Suisse Trust

      -        -        -        -        -  

Due from Northwestern Mutual Life Insurance Company

      3        -        3        234        -  

Total Assets

      48,334        69,373        56,732        21,179        6,120  

Liabilities:

               

Due to Northwestern Mutual Life Insurance Company

      -        88        -        -        9  

Due to Participants

      -        3        3        596        -  

Total Liabilities

      -        91        3        596        9  

Total Net Assets

    $ 48,334      $ 69,282      $ 56,729      $ 20,583      $ 6,111  
        

Net Assets:

               

Custom Variable Universal Life Policies Issued

               

Between January 31, 2007 and December 23, 2019 (2)

               

Policyowners’ Equity

    $ 34,321      $ 52,211      $ 42,782      $ 8,915      $ 3,360  

Executive Variable Universal Life Policies Issued

               

Between January 31, 2007 and December 23, 2019 (3)

               

Policyowners’ Equity

      1,959        4,565        1,253        3,932        625  

Survivorship Variable Universal Life Policies Issued

               

Between January 31, 2007 and December 23, 2019 (4)

               

Policyowners’ Equity

      2,955        2,349        2,202        202        1,430  

Variable Universal Life Plus Policies Issued

               

On or After November 11, 2019 (5)

               

Policyowners’ Equity

      9,004        9,948        10,397        7,258        671  

Executive Variable Universal Life II Policies Issued

               

On or After November 11, 2019 (6)

               

Policyowners’ Equity

      95        209        95        276        25  
        

Total Net Assets

    $ 48,334      $ 69,282      $ 56,729      $ 20,583      $ 6,111  
        

(1)  Investments, at cost

    $ 39,797      $ 70,909      $ 47,367      $ 20,945      $ 6,219  

Mutual Fund Shares Held

      37,466        43,631        42,912        20,945        5,806  

(2)  Accumulation Unit Value

    $ 18.026460      $ 5.930327      $ 15.578805      $ 43.483468      $ 13.941366  

Units Outstanding

      1,904        8,804        2,746        205        240  

(3)  Accumulation Unit Value

    $ 18.026460      $ 5.930327      $ 15.578805      $ 43.483468      $ 13.941366  

Units Outstanding

      109        770        80        90        45  

(4)  Accumulation Unit Value

    $ 18.026460      $ 5.930327      $ 15.578805      $ 43.483468      $ 13.941366  

Units Outstanding

      164        396        141        5        103  

(5)  Accumulation Unit Value

    $ 18.026460      $ 5.930327      $ 15.578805      $ 43.483468      $ 13.941366  

Units Outstanding

      499        1,678        667        167        48  

(6)  Accumulation Unit Value

    $ 18.026460      $ 5.930327      $ 15.578805      $ 43.483468      $ 13.941366  

Units Outstanding

      5        35        6        6        3  

(a) Amount is less than 500

 

The Accompanying Notes are an Integral Part of these Financial Statements.

 

F-4

Table of Contents

Statements of Assets and Liabilities

NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT II

December 31, 2021 (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.

    $ 52,699      $ 1,352     $ 12,406      $ 19,702      $ 34,478  

Fidelity Variable Insurance Products Fund

      -        -       -        -        -  

Neuberger Berman Advisers Management Trust

      -        -       -        -        -  

Russell Investment Funds

      -        -       -        -        -  

Credit Suisse Trust

      -        -       -        -        -  

Due from Northwestern Mutual Life Insurance Company

      -        -       -        -        -  

Total Assets

      52,699        1,352       12,406        19,702        34,478  

Liabilities:

              

Due to Northwestern Mutual Life Insurance Company

      52        -       -        7        -  

Due to Participants

      2        -       2        -        -  

Total Liabilities

      54        -       2        7        -  

Total Net Assets

    $ 52,645      $ 1,352     $ 12,404      $ 19,695      $ 34,478  
        

Net Assets:

              

Custom Variable Universal Life Policies Issued

              

Between January 31, 2007 and December 23, 2019 (2)

              

Policyowners’ Equity

    $ 33,673      $ 900     $ 6,552      $ 14,892      $ 24,921  

Executive Variable Universal Life Policies Issued

              

Between January 31, 2007 and December 23, 2019 (3)

              

Policyowners’ Equity

      11,047        99       2,270        2,647        2,188  

Survivorship Variable Universal Life Policies Issued

              

Between January 31, 2007 and December 23, 2019 (4)

              

Policyowners’ Equity

      1,477        -       277        424        1,104  

Variable Universal Life Plus Policies Issued

              

On or After November 11, 2019 (5)

              

Policyowners’ Equity

      5,852        352       3,227        1,610        6,095  

Executive Variable Universal Life II Policies Issued

              

On or After November 11, 2019 (6)

              

Policyowners’ Equity

      596        1       78        122        170  
        

Total Net Assets

    $ 52,645      $ 1,352     $ 12,404      $ 19,695      $ 34,478  
        

(1)  Investments, at cost

    $ 54,860      $ 1,619     $ 11,532      $ 19,250      $ 34,183  

Mutual Fund Shares Held

      41,958        1,440       9,707        26,269        30,647  

(2)  Accumulation Unit Value

    $ 263.835614      $ 25.468271     $ 18.278682      $ 66.738383      $ 22.416380  

Units Outstanding

      127        35       358        223        1,111  

(3)  Accumulation Unit Value

    $ 263.835614      $ 25.468271     $ 18.278682      $ 66.738383      $ 22.416380  

Units Outstanding

      42        4       124        40        98  

(4)  Accumulation Unit Value

    $ 263.835614      $ 25.468271     $ 18.278682      $ 66.738383      $ 22.416380  

Units Outstanding

      6        -       15        6        49  

(5)  Accumulation Unit Value

    $ 263.835614      $ 25.468271     $ 18.278682      $ 66.738383      $ 22.416380  

Units Outstanding

      22        14       177        24        272  

(6)  Accumulation Unit Value

    $ 263.835614      $ 25.468271     $ 18.278682      $ 66.738383      $ 22.416380  

Units Outstanding

      2        - (a)      4        2        8  

(a) Amount is less than 500

 

The Accompanying Notes are an Integral Part of these Financial Statements.

 

F-5

Table of Contents

Statements of Assets and Liabilities

NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT II

December 31, 2021 (in thousands, except accumulation unit values)

 

     Balanced
Division		     Asset
Allocation
Division		      Fidelity VIP
Mid Cap
Division		     Fidelity VIP
Contrafund
Division		      AMT
Sustainable
Equity
Division		  

Assets:

             

Investments, at fair value (1)

             

Northwestern Mutual Series Fund, Inc.

    $ 9,809     $ 2,457      $ -     $ -      $ -  

Fidelity Variable Insurance Products Fund

      -       -        21,649       43,123        -  

Neuberger Berman Advisers Management Trust

      -       -        -       -        22,709  

Russell Investment Funds

      -       -        -       -        -  

Credit Suisse Trust

      -       -        -       -        -  

Due from Northwestern Mutual Life Insurance Company

      3       -        -       2        2  

Total Assets

      9,812       2,457        21,649       43,125        22,711  

Liabilities:

             

Due to Northwestern Mutual Life Insurance Company

      -       -        -       -        -  

Due to Participants

      -       -        -       1        -  

Total Liabilities

      -       -        -       1        -  

Total Net Assets

    $ 9,812     $ 2,457      $ 21,649     $ 43,124      $ 22,711  
        

Net Assets:

             

Custom Variable Universal Life Policies Issued

             

Between January 31, 2007 and December 23, 2019 (2)

             

Policyowners’ Equity

    $ 4,328     $ 944      $ 18,183     $ 29,287      $ 17,090  

Executive Variable Universal Life Policies Issued

             

Between January 31, 2007 and December 23, 2019 (3)

             

Policyowners’ Equity

      4,948       1,077        1,175       1,560        772  

Survivorship Variable Universal Life Policies Issued

             

Between January 31, 2007 and December 23, 2019 (4)

             

Policyowners’ Equity

      13       316        1,209       3,168        734  

Variable Universal Life Plus Policies Issued

             

On or After November 11, 2019 (5)

             

Policyowners’ Equity

      428       71        1,077       8,995        4,063  

Executive Variable Universal Life II Policies Issued

             

On or After November 11, 2019 (6)

             

Policyowners’ Equity

      95       49        5       114        52  
        

Total Net Assets

    $ 9,812     $ 2,457      $ 21,649     $ 43,124      $ 22,711  
        

(1)  Investments, at cost

    $ 9,248     $ 2,217      $ 18,211     $ 32,858      $ 16,684  

Mutual Fund Shares Held

      6,232       1,850        526       793        613  

(2)  Accumulation Unit Value

    $ 298.595878     $ 36.450275      $ 88.496791     $ 45.041088      $ 36.931533  

Units Outstanding

      14       26        205       649        463  

(3)  Accumulation Unit Value

    $ 298.595878     $ 36.450275      $ 88.496791     $ 45.041088      $ 36.931533  

Units Outstanding

      17       30        13       35        21  

(4)  Accumulation Unit Value

    $ 298.595878     $ 36.450275      $ 88.496791     $ 45.041088      $ 36.931533  

Units Outstanding

      - (a)      9        14       70        20  

(5)  Accumulation Unit Value

    $ 298.595878     $ 36.450275      $ 88.496791     $ 45.041088      $ 36.931533  

Units Outstanding

      1       2        12       200        110  

(6)  Accumulation Unit Value

    $ 298.595878     $ 36.450275      $ 88.496791     $ 45.041088      $ 36.931533  

Units Outstanding

      - (a)      1        - (a)      3        1  

(a) Amount is less than 500

 

The Accompanying Notes are an Integral Part of these Financial Statements.

 

F-6

Table of Contents

Statements of Assets and Liabilities

NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT II

December 31, 2021 (in thousands, except accumulation unit values)

 

     U.S. Strategic
Equity
Division		     U.S. Small
Cap Equity
Division		      International
Developed
Markets
Division		      Strategic
Bond Division		      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

      6,411       4,628        15,291        18,381        42,779  

Credit Suisse Trust

      -       -        -        -        -  

Due from Northwestern Mutual Life Insurance Company

      1       2        -        -        -  

Total Assets

      6,412       4,630        15,291        18,381        42,779  

Liabilities:

              

Due to Northwestern Mutual Life Insurance Company

      -       -        -        -        23  

Due to Participants

      -       -        -        -        1  

Total Liabilities

      -       -        -        -        24  

Total Net Assets

    $ 6,412     $ 4,630      $ 15,291      $ 18,381      $ 42,755  
        

Net Assets:

              

Custom Variable Universal Life Policies Issued

              

Between January 31, 2007 and December 23, 2019 (2)

              

Policyowners’ Equity

    $ 5,228     $ 3,671      $ 10,330      $ 10,855      $ 32,839  

Executive Variable Universal Life Policies Issued

              

Between January 31, 2007 and December 23, 2019 (3)

              

Policyowners’ Equity

      980       446        3,805        4,640        1,687  

Survivorship Variable Universal Life Policies Issued

              

Between January 31, 2007 and December 23, 2019 (4)

              

Policyowners’ Equity

      36       326        175        775        1,678  

Variable Universal Life Plus Policies Issued

              

On or After November 11, 2019 (5)

              

Policyowners’ Equity

      112       153        847        1,748        6,432  

Executive Variable Universal Life II Policies Issued

              

On or After November 11, 2019 (6)

              

Policyowners’ Equity

      56       34        134        363        119  

Total Net Assets

    $ 6,412     $ 4,630      $ 15,291      $ 18,381      $ 42,755  
                                           

(1)  Investments, at cost

    $ 5,107     $ 4,457      $ 14,352      $ 18,677      $ 36,434  

Mutual Fund Shares Held

      299       303        1,238        1,757        2,484  

(2)  Accumulation Unit Value

    $ 42.853358     $ 53.013410      $ 27.103303      $ 28.706174      $ 71.324137  

Units Outstanding

      122       69        382        378        460  

(3)  Accumulation Unit Value

    $ 42.853358     $ 53.013410      $ 27.103303      $ 28.706174      $ 71.324137  

Units Outstanding

      23       8        140        162        24  

(4)  Accumulation Unit Value

    $ 42.853358     $ 53.013410      $ 27.103303      $ 28.706174      $ 71.324137  

Units Outstanding

      - (a)      6        6        27        24  

(5)  Accumulation Unit Value

    $ 42.853358     $ 53.013410      $ 27.103303      $ 28.706174      $ 71.324137  

Units Outstanding

      3       3        31        61        90  

(6)  Accumulation Unit Value

    $ 42.853358     $ 53.013410      $ 27.103303      $ 28.706174      $ 71.324137  

Units Outstanding

      1       1        5        13        2  

(a) Amount is less than 500

 

The Accompanying Notes are an Integral Part of these Financial Statements.

 

F-7

Table of Contents

Statements of Assets and Liabilities

NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT II

December 31, 2021 (in thousands, except accumulation unit values)

 

     LifePoints
Moderate
Strategy
Division		     LifePoints
Balanced
Strategy
Division		     LifePoints
Growth
Strategy
Division		      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

      791       3,600       3,572        1,100        -  

Credit Suisse Trust

      -       -       -        -        25,271  

Due from Northwestern Mutual Life Insurance Company

      -       -       -        -        1  

Total Assets

      791       3,600       3,572        1,100        25,272  

Liabilities:

             

Due to Northwestern Mutual Life Insurance Company

      -       -       -        -        -  

Due to Participants

      -       -       -        -        -  

Total Liabilities

      -       -       -        -        -  

Total Net Assets

    $ 791     $ 3,600     $ 3,572      $ 1,100      $ 25,272  
        

Net Assets:

             

Custom Variable Universal Life Policies Issued

             

Between January 31, 2007 and December 23, 2019 (2)

             

Policyowners’ Equity

    $ 150     $ 543     $ 2,245      $ 823      $ 17,803  

Executive Variable Universal Life Policies Issued

             

Between January 31, 2007 and December 23, 2019 (3)

             

Policyowners’ Equity

      598       2,522       638        227        736  

Survivorship Variable Universal Life Policies Issued

             

Between January 31, 2007 and December 23, 2019 (4)

             

Policyowners’ Equity

      -       -       531        -        605  

Variable Universal Life Plus Policies Issued

             

On or After November 11, 2019 (5)

             

Policyowners’ Equity

      40       534       15        50        6,046  

Executive Variable Universal Life II Policies Issued

             

On or After November 11, 2019 (6)

             

Policyowners’ Equity

      3       1       143        -        82  

Total Net Assets

    $ 791     $ 3,600     $ 3,572      $ 1,100      $ 25,272  
                                          

(1)  Investments, at cost

    $ 800     $ 3,529     $ 3,336      $ 1,041      $ 22,610  

Mutual Fund Shares Held

      76       350       342        111        1,019  

(2)  Accumulation Unit Value

    $ 20.401736     $ 21.853460     $ 22.430026      $ 21.427646      $ 5.986523  

Units Outstanding

      7       25       101        38        2,974  

(3)  Accumulation Unit Value

    $ 20.401736     $ 21.853460     $ 22.430026      $ 21.427646      $ 5.986523  

Units Outstanding

      29       115       28        11        123  

(4)  Accumulation Unit Value

    $ 20.401736     $ 21.853460     $ 22.430026      $ 21.427646      $ 5.986523  

Units Outstanding

      -       -       24        -        101  

(5)  Accumulation Unit Value

    $ 20.401736     $ 21.853460     $ 22.430026      $ 21.427646      $ 5.986523  

Units Outstanding

      2       24       1        2        1,010  

(6)  Accumulation Unit Value

    $ 20.401736     $ 21.853460     $ 22.430026      $ 21.427646      $ 5.986523  

Units Outstanding

      - (a)      - (a)      6        -        14  

(a) Amount is less than 500

 

The Accompanying Notes are an Integral Part of these Financial Statements.

 

F-8

Table of Contents

Statements of Operations

NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT II

For theYear Ended December 31, 2021 (in thousands)

 

     Growth Stock
Division		      Focused
Appreciation
Division		     Large Cap
Core Stock
Division		      Large Cap
Blend Division		     Index 500
Stock Division		  

Income:

             

Dividend income

    $ 1      $ 59     $ 117      $ 17     $ 3,529  

Net investment income (loss)

      1        59       117        17       3,529  

Realized gain (loss) on investments:

             

Realized gain (loss) on sale of fund shares

      751        1,507       277        34       3,382  

Realized gain distribution

      958        3,592       1,072        161       7,241  

Realized gains (losses)

      1,709        5,099       1,349        195       10,623  

Change in unrealized appreciation/(depreciation) of investments during the period

      1,664        706       1,786        216       53,062  

Net increase (decrease) in net assets resulting from operations

    $ 3,374      $ 5,864     $ 3,252      $ 428     $ 67,214  
                                       
     Large
Company
Value
Division		      Domestic
Equity
Division		     Equity Income
Division		      Mid Cap
Growth Stock
Division		     Index 400
Stock Division		  

Income:

             

Dividend income

    $ 55      $ 665     $ 378      $ 20     $ 581  

Net investment income (loss)

      55        665       378        20       581  

Realized gain (loss) on investments:

             

Realized gain (loss) on sale of fund shares

      31        510       233        405       917  

Realized gain distribution

      56        835       -        1,709       1,904  

Realized gains (losses)

      87        1,345       233        2,114       2,821  

Change in unrealized appreciation/(depreciation) of investments during the period

      678        5,171       3,367        (887 )      9,162  

Net increase (decrease) in net assets resulting from operations

    $ 820      $ 7,181     $ 3,978      $ 1,247     $ 12,564  
                                       
     Mid Cap
Value
Division		      Small Cap
Growth Stock
Division		     Index 600
Stock Division		      Small Cap
Value Division		     International
Growth
Division		  

Income:

             

Dividend income

    $ 254      $ 4     $ 241      $ 53     $ 242  

Net investment income (loss)

      254        4       241        53       242  

Realized gain (loss) on investments:

             

Realized gain (loss) on sale of fund shares

      127        516       721        124       392  

Realized gain distribution

      169        2,326       500        597       1,333  

Realized gains (losses)

      296        2,842       1,221        721       1,725  

Change in unrealized appreciation/(depreciation) of investments during the period

      3,644        (1,992 )      4,903        1,845       4,480  

Net increase (decrease) in net assets resulting from operations

    $ 4,194      $ 854     $ 6,365      $ 2,619     $ 6,447  
                                       

 

The Accompanying Notes are an Integral Part of these Financial Statements.

 

F-9

Table of Contents

Statements of Operations

NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT II

For theYear Ended December 31, 2021 (in thousands)

 

     Research
International
Core Division		     International
Equity
Division		     Emerging
Markets
Equity
Division		     Government
Money
Market
Division		     Short-Term
Bond Division		  

Income:

           

Dividend income

    $ 468     $ 1,471     $ 273     $ -     $ 103  

Net investment income (loss)

      468       1,471       273       -       103  

Realized gain (loss) on investments:

           

Realized gain (loss) on sale of fund shares

      258       (199 )      612       -       32  

Realized gain distribution

      652       -       -       1       11  

Realized gains (losses)

      910       (199 )      612       1       43  

Change in unrealized appreciation/(depreciation) of investments during the period

      3,017       1,056       (3,663 )      -       (160 ) 

Net increase (decrease) in net assets resulting from operations

    $ 4,395     $ 2,328     $ (2,778 )    $ 1     $ (14 ) 
                                     
     Select Bond
Division		     Long-Term
U.S.
Government
Bond Division		     Inflation
Protection
Division		     High Yield
Bond
Division		     Multi-Sector
Bond Division		  

Income:

           

Dividend income

    $ 1,025     $ 11     $ 93     $ 1,031     $ 644  

Net investment income (loss)

      1,025       11       93       1,031       644  

Realized gain (loss) on investments:

           

Realized gain (loss) on sale of fund shares

      237       (55 )      70       64       43  

Realized gain distribution

      2,223       218       24       -       268  

Realized gains (losses)

      2,460       163       94       64       311  

Change in unrealized appreciation/(depreciation) of investments during the period

      (4,125 )      (197 )      437       (126 )      (933 ) 

Net increase (decrease) in net assets resulting from operations

    $ (640 )    $ (23 )    $ 624     $ 969     $ 22  
                                     
     Balanced
Division		     Asset
Allocation
Division		     Fidelity VIP
Mid Cap
Division		     Fidelity VIP
Contrafund
Division		     AMT
Sustainable
Equity
Division		  

Income:

           

Dividend income

    $ 254     $ 52     $ 124     $ 19     $ 76  

Net investment income (loss)

      254       52       124       19       76  

Realized gain (loss) on investments:

           

Realized gain (loss) on sale of fund shares

      191       43       364       829       273  

Realized gain distribution

      480       118       3,236       4,595       391  

Realized gains (losses)

      671       161       3,600       5,424       664  

Change in unrealized appreciation/(depreciation) of investments during the period

      (204 )      -       617       3,115       3,157  

Net increase (decrease) in net assets resulting from operations

    $ 721     $ 213     $ 4,341     $ 8,558     $ 3,897  
                                     

 

The Accompanying Notes are an Integral Part of these Financial Statements.

 

F-10

Table of Contents

Statements of Operations

NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT II

For theYear Ended December 31, 2021 (in thousands)

 

     U.S. Strategic
Equity
Division		     U.S. Small
Cap Equity
Division		     International
Developed
Markets
Division		     Strategic
Bond Division		  

Income:

         

Dividend income

    $ 34     $ 11     $ 356     $ 142  

Net investment income (loss)

      34       11       356       142  

Realized gain (loss) on investments:

         

Realized gain (loss) on sale of fund shares

      221       207       121       -  

Realized gain distribution

      529       1,020       1,122       192  

Realized gains (losses)

      750       1,227       1,243       192  

Change in unrealized appreciation/(depreciation) of investments during the period

      325       (304 )      (74 )      (602 ) 

Net increase (decrease) in net assets resulting from operations

    $ 1,109     $ 934     $ 1,525     $ (268 ) 
                              
     Global Real
Estate
Securities
Division		     LifePoints
Moderate
Strategy
Division		     LifePoints
Balanced
Strategy
Division		     LifePoints
Growth
Strategy
Division		  

Income:

         

Dividend income

    $ 1,755     $ 22     $ 143     $ 154  

Net investment income (loss)

      1,755       22       143       154  

Realized gain (loss) on investments:

         

Realized gain (loss) on sale of fund shares

      136       35       23       66  

Realized gain distribution

      400       23       210       325  

Realized gains (losses)

      536       58       233       391  

Change in unrealized appreciation/(depreciation) of investments during the period

      6,123       (61 )      (119 )      (25 ) 

Net increase (decrease) in net assets resulting from operations

    $ 8,414     $ 19     $ 257     $ 520  
                              
     LifePoints
Equity Growth
Strategy
Division		     Credit Suisse
Trust
Commodity
Return
Strategy
Division		              

Income:

         

Dividend income

    $ 49     $ 1,214      

Net investment income (loss)

      49       1,214      

Realized gain (loss) on investments:

         

Realized gain (loss) on sale of fund shares

      3       52      

Realized gain distribution

      83       -      

Realized gains (losses)

      86       52      

Change in unrealized appreciation/(depreciation) of investments during the period

      (3 )      3,334      

Net increase (decrease) in net assets resulting from operations

    $ 132     $ 4,600      
                            

 

The Accompanying Notes are an Integral Part of these Financial Statements.

 

F-11

Table of Contents

Statements of Changes in Net Assets

NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT II

(in thousands)

 

     Growth Stock Division            Focused Appreciation
Division		  
     Year Ended
December 31,
2021		     Year Ended
December 31,
2020		            Year Ended
December 31,
2021		     Year Ended
December 31,
2020		  

Operations:

            

Net investment income (loss)

    $ 1     $ 103        $ 59     $ 137  

Net realized gains (losses)

      1,709       3,361          5,099       2,119  

Net change in unrealized appreciation/(depreciation)

      1,664       1,352          706       4,926  

Net increase (decrease) in net assets resulting from operations

      3,374       4,816          5,864       7,182  

Policy Transactions:

            

Policy owners’ net payments

      2,149       1,135          5,359       3,313  

Policy loans, surrenders and death benefits

      (415 )      (824 )         (1,134 )      (709 ) 

Mortality and other (net)

      (592 )      (415 )         (1,352 )      (859 ) 

Transfers from other divisions or sponsor

      42,579       93,459          59,746       46,314  

Transfers to other divisions or sponsor

      (42,146 )      (91,999 )         (58,838 )      (47,552 ) 
Net increase (decrease) in net assets resulting from contract transactions      1,575       1,356          3,781       507  

Net increase (decrease) in net assets

      4,949       6,172          9,645       7,689  

Net Assets:

            

Beginning of period

      19,625       13,453          29,745       22,056  

End of period

    $ 24,574     $ 19,625        $ 39,390     $ 29,745  
                                   

Units issued during the period

      331       1,184          692       729  

Units redeemed during the period

      (320 )      (1,173 )         (655 )      (723 ) 

Net units issued (redeemed) during period

      11       11          37       6  
                                   
     Large Cap Core Stock
Division		            Large Cap Blend Division  
     Year Ended
December 31,
2021		     Year Ended
December 31,
2020		            Year Ended
December 31,
2021		     Year Ended
December 31,
2020		  

Operations:

            

Net investment income (loss)

    $ 117     $ 114        $ 17     $ 101  

Net realized gains (losses)

      1,349       217          195       9  

Net change in unrealized appreciation/(depreciation)

      1,786       1,963          216       68  

Net increase (decrease) in net assets resulting from operations

      3,252       2,294          428       178  

Policy Transactions:

            

Policy owners’ net payments

      1,090       809          217       160  

Policy loans, surrenders and death benefits

      (349 )      (362 )         (47 )      (13 ) 

Mortality and other (net)

      (351 )      (316 )         (69 )      (66 ) 

Transfers from other divisions or sponsor

      15,744       28,878          2,728       2,045  

Transfers to other divisions or sponsor

      (15,454 )      (26,930 )         (2,688 )      (2,178 ) 
Net increase (decrease) in net assets resulting from contract transactions      680       2,079          141       (52 ) 

Net increase (decrease) in net assets

      3,932       4,373          569       126  

Net Assets:

            

Beginning of period

      12,402       8,029          2,320       2,194  

End of period

    $ 16,334     $ 12,402        $ 2,889     $ 2,320  
                                   

Units issued during the period

      199       615          119       115  

Units redeemed during the period

      (191 )      (583 )         (114 )      (119 ) 

Net units issued (redeemed) during period

      8       32          5       (4 ) 
                                   

 

The Accompanying Notes are an Integral Part of these Financial Statements.

 

F-12

Table of Contents

Statements of Changes in Net Assets

NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT II

(in thousands)

 

     Index 500 Stock Division            Large Company Value
Division		  
     Year Ended
December 31,
2021		     Year Ended
December 31,
2020		            Year Ended
December 31,
2021		     Year Ended
December 31,
2020		  

Operations:

            

Net investment income (loss)

    $ 3,529     $ 2,580        $ 55     $ 60  

Net realized gains (losses)

      10,623       7,238          87       (11 ) 

Net change in unrealized appreciation/(depreciation)

      53,062       19,712          678       99  
Net increase (decrease) in net assets resulting from operations      67,214       29,530          820       148  

Policy Transactions:

            

Policy owners’ net payments

      69,847       38,523          728       482  

Policy loans, surrenders and death benefits

      (5,731 )      (3,005 )         (151 )      (139 ) 

Mortality and other (net)

      (13,023 )      (7,777 )         (183 )      (112 ) 

Transfers from other divisions or sponsor

      366,491       301,242          5,957       4,924  

Transfers to other divisions or sponsor

      (334,784 )      (288,542 )         (5,128 )      (4,270 ) 
Net increase (decrease) in net assets resulting from contract transactions      82,800       40,441          1,223       885  

Net increase (decrease) in net assets

      150,014       69,971          2,043       1,033  

Net Assets:

            

Beginning of period

      200,054       130,083          3,500       2,467  

End of period

    $ 350,068     $ 200,054        $ 5,543     $ 3,500  
                                   

Units issued during the period

      2,002       2,253          326       354  

Units redeemed during the period

      (1,657 )      (2,033 )         (275 )      (307 ) 

Net units issued (redeemed) during period

      345       220          51       47  
                                   
     Domestic Equity Division            Equity Income Division  
     Year Ended
December 31,
2021		     Year Ended
December 31,
2020		            Year Ended
December 31,
2021		     Year Ended
December 31,
2020		  

Operations:

            

Net investment income (loss)

    $ 665     $ 509        $ 378     $ 609  

Net realized gains (losses)

      1,345       1,342          233       247  

Net change in unrealized appreciation/(depreciation)

      5,171       (821 )         3,367       (553 ) 
Net increase (decrease) in net assets resulting from operations      7,181       1,030          3,978       303  

Policy Transactions:

            

Policy owners’ net payments

      7,218       5,562          1,472       1,424  

Policy loans, surrenders and death benefits

      (905 )      (605 )         (516 )      (369 ) 

Mortality and other (net)

      (1,678 )      (1,214 )         (476 )      (392 ) 

Transfers from other divisions or sponsor

      74,026       60,176          31,521       23,013  

Transfers to other divisions or sponsor

      (72,131 )      (58,224 )         (31,637 )      (22,870 ) 
Net increase (decrease) in net assets resulting from contract transactions      6,530       5,695          364       806  

Net increase (decrease) in net assets

      13,711       6,725          4,342       1,109  

Net Assets:

            

Beginning of period

      28,845       22,120          15,352       14,243  

End of period

    $ 42,556     $ 28,845        $ 19,694     $ 15,352  
                                   

Units issued during the period

      2,164       2,363          705       736  

Units redeemed during the period

      (2,000 )      (2,177 )         (698 )      (713 ) 

Net units issued (redeemed) during period

      164       186          7       23  
                                   

 

The Accompanying Notes are an Integral Part of these Financial Statements.

 

F-13

Table of Contents

Statements of Changes in Net Assets

NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT II

(in thousands)

 

     Mid Cap Growth Stock
Division		            Index 400 Stock Division  
     Year Ended
December 31,
2021		     Year Ended
December 31,
2020		            Year Ended
December 31,
2021		     Year Ended
December 31,
2020		  

Operations:

            

Net investment income (loss)

    $ 20     $ 28        $ 581     $ 517  

Net realized gains (losses)

      2,114       575          2,821       1,102  

Net change in unrealized appreciation/(depreciation)

      (887 )      1,887          9,162       4,974  

Net increase (decrease) in net assets resulting from operations

      1,247       2,490          12,564       6,593  

Policy Transactions:

            

Policy owners’ net payments

      1,370       948          11,294       7,774  

Policy loans, surrenders and death benefits

      (187 )      (517 )         (1,528 )      (553 ) 

Mortality and other (net)

      (395 )      (293 )         (2,681 )      (1,732 ) 

Transfers from other divisions or sponsor

      24,701       56,703          102,599       81,897  

Transfers to other divisions or sponsor

      (24,680 )      (56,119 )         (99,332 )      (78,723 ) 
Net increase (decrease) in net assets resulting from contract transactions      809       722          10,352       8,663  

Net increase (decrease) in net assets

      2,056       3,212          22,916       15,256  

Net Assets:

            

Beginning of period

      11,775       8,563          48,515       33,259  

End of period

    $ 13,831     $ 11,775        $ 71,431     $ 48,515  
                                   

Units issued during the period

      129       485          1,399       1,722  

Units redeemed during the period

      (127 )      (479 )         (1,281 )      (1,578 ) 

Net units issued (redeemed) during period

      2       6          118       144  
                                   
     Mid Cap Value Division            Small Cap Growth Stock
Division		  
     Year Ended
December 31,
2021		     Year Ended
December 31,
2020		            Year Ended
December 31,
2021		     Year Ended
December 31,
2020		  

Operations:

            

Net investment income (loss)

    $ 254     $ 268        $ 4     $ 17  

Net realized gains (losses)

      296       (319 )         2,842       847  

Net change in unrealized appreciation/(depreciation)

      3,644       751          (1,992 )      4,479  

Net increase (decrease) in net assets resulting from operations

      4,194       700          854       5,343  

Policy Transactions:

            

Policy owners’ net payments

      4,439       3,247          3,913       2,777  

Policy loans, surrenders and death benefits

      (608 )      (487 )         (554 )      (272 ) 

Mortality and other (net)

      (1,043 )      (751 )         (903 )      (651 ) 

Transfers from other divisions or sponsor

      46,295       39,590          40,712       47,497  

Transfers to other divisions or sponsor

      (44,451 )      (39,258 )         (39,837 )      (47,783 ) 
Net increase (decrease) in net assets resulting from contract transactions      4,632       2,341          3,331       1,568  

Net increase (decrease) in net assets

      8,826       3,041          4,185       6,911  

Net Assets:

            

Beginning of period

      16,572       13,531          20,575       13,664  

End of period

    $ 25,398     $ 16,572        $ 24,760     $ 20,575  
                                   

Units issued during the period

      934       1,048          440       934  

Units redeemed during the period

      (853 )      (992 )         (409 )      (910 ) 

Net units issued (redeemed) during period

      81       56          31       24  
                                   

 

The Accompanying Notes are an Integral Part of these Financial Statements.

 

F-14

Table of Contents

Statements of Changes in Net Assets

NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT II

(in thousands)

 

     Index 600 Stock Division            Small Cap Value Division  
     Year Ended
December 31,
2021		     Year Ended
December 31,
2020		            Year Ended
December 31,
2021		     Year Ended
December 31,
2020		  

Operations:

            

Net investment income (loss)

    $ 241     $ 312        $ 53     $ 46  

Net realized gains (losses)

      1,221       474          721       227  

Net change in unrealized appreciation/(depreciation)

      4,903       2,195          1,845       806  
Net increase (decrease) in net assets resulting from operations      6,365       2,981          2,619       1,079  

Policy Transactions:

            

Policy owners’ net payments

      6,381       4,038          1,338       1,124  

Policy loans, surrenders and death benefits

      (899 )      (477 )         (339 )      (221 ) 

Mortality and other (net)

      (1,476 )      (895 )         (379 )      (296 ) 

Transfers from other divisions or sponsor

      54,662       47,741          21,510       15,482  

Transfers to other divisions or sponsor

      (52,286 )      (46,849 )         (21,646 )      (15,758 ) 
Net increase (decrease) in net assets resulting from contract transactions      6,382       3,558          484       331  

Net increase (decrease) in net assets

      12,747       6,539          3,103       1,410  

Net Assets:

            

Beginning of period

      23,248       16,709          11,353       9,943  

End of period

    $ 35,995     $ 23,248        $ 14,456     $ 11,353  
                                   

Units issued during the period

      1,799       2,379          362       378  

Units redeemed during the period

      (1,628 )      (2,224 )         (355 )      (370 ) 

Net units issued (redeemed) during period

      171       155          7       8  
                                   
     International Growth Division            Research International Core
Division		  
     Year Ended
December 31,
2021		     Year Ended
December 31,
2020		            Year Ended
December 31,
2021		     Year Ended
December 31,
2020		  

Operations:

            

Net investment income (loss)

    $ 242     $ 498        $ 468     $ 585  

Net realized gains (losses)

      1,725       717          910       584  

Net change in unrealized appreciation/(depreciation)

      4,480       4,155          3,017       2,934  
Net increase (decrease) in net assets resulting from operations      6,447       5,370          4,395       4,103  

Policy Transactions:

            

Policy owners’ net payments

      8,692       6,226          8,494       6,195  

Policy loans, surrenders and death benefits

      (1,090 )      (770 )         (961 )      (672 ) 

Mortality and other (net)

      (1,983 )      (1,454 )         (1,992 )      (1,422 ) 

Transfers from other divisions or sponsor

      81,353       56,266          87,141       62,171  

Transfers to other divisions or sponsor

      (76,408 )      (56,229 )         (81,602 )      (60,806 ) 
Net increase (decrease) in net assets resulting from contract transactions      10,564       4,039          11,080       5,466  

Net increase (decrease) in net assets

      17,011       9,409          15,475       9,569  

Net Assets:

            

Beginning of period

      35,798       26,389          32,859       23,290  

End of period

    $ 52,809     $ 35,798        $ 48,334     $ 32,859  
                                   

Units issued during the period

      2,554       2,367          5,812       5,371  

Units redeemed during the period

      (2,268 )      (2,230 )         (5,173 )      (4,971 ) 

Net units issued (redeemed) during period

      286       137          639       400  
                                   

 

The Accompanying Notes are an Integral Part of these Financial Statements.

 

F-15

Table of Contents

Statements of Changes in Net Assets

NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT II

(in thousands)

 

     International Equity Division            Emerging Markets Equity
Division		  
     Year Ended
December 31,
2021		     Year Ended
December 31,
2020		            Year Ended
December 31,
2021		     Year Ended
December 31,
2020		  

Operations:

            

Net investment income (loss)

    $ 1,471     $ 1,541        $ 273     $ 772  

Net realized gains (losses)

      (199 )      (1,140 )         612       174  

Net change in unrealized appreciation/(depreciation)

      1,056       (590 )         (3,663 )      9,301  
Net increase (decrease) in net assets resulting from operations      2,328       (189 )         (2,778 )      10,247  

Policy Transactions:

            

Policy owners’ net payments

      10,685       8,387          11,240       7,862  

Policy loans, surrenders and death benefits

      (1,678 )      (977 )         (1,323 )      (717 ) 

Mortality and other (net)

      (2,315 )      (1,796 )         (2,483 )      (1,782 ) 

Transfers from other divisions or sponsor

      123,084       98,483          97,847       59,677  

Transfers to other divisions or sponsor

      (113,920 )      (95,427 )         (91,626 )      (59,814 ) 
Net increase (decrease) in net assets resulting from contract transactions      15,856       8,670          13,655       5,226  

Net increase (decrease) in net assets

      18,184       8,481          10,877       15,473  

Net Assets:

            

Beginning of period

      51,098       42,617          45,852       30,379  

End of period

    $ 69,282     $ 51,098        $ 56,729     $ 45,852  
                                   

Units issued during the period

      23,378       24,245          6,932       5,849  

Units redeemed during the period

      (20,742 )      (22,539 )         (6,101 )      (5,401 ) 

Net units issued (redeemed) during period

      2,636       1,706          831       448  
                                   
     Government Money Market
Division		            Short-Term Bond Division  
     Year Ended
December 31,
2021		     Year Ended
December 31,
2020		            Year Ended
December 31,
2021		     Year Ended
December 31,
2020		  

Operations:

            

Net investment income (loss)

    $ -     $ 67        $ 103     $ 85  

Net realized gains (losses)

      1       -          43       45  

Net change in unrealized appreciation/(depreciation)

      -       -          (160 )      29  
Net increase (decrease) in net assets resulting from operations      1       67          (14 )      159  

Policy Transactions:

            

Policy owners’ net payments

      109,123       46,069          724       637  

Policy loans, surrenders and death benefits

      (5,079 )      (2,157 )         (112 )      (231 ) 

Mortality and other (net)

      (3,941 )      (2,450 )         (180 )      (143 ) 

Transfers from other divisions or sponsor

      28,705       88,699          10,255       6,305  

Transfers to other divisions or sponsor

      (130,499 )      (129,154 )         (8,606 )      (6,277 ) 
Net increase (decrease) in net assets resulting from contract transactions      (1,691 )      1,007          2,081       291  

Net increase (decrease) in net assets

      (1,690 )      1,074          2,067       450  

Net Assets:

            

Beginning of period

      22,273       21,199          4,044       3,594  

End of period

    $ 20,583     $ 22,273        $ 6,111     $ 4,044  
                                   

Units issued during the period

      5,619       3,743          838       597  

Units redeemed during the period

      (5,658 )      (3,721 )         (689 )      (576 ) 

Net units issued (redeemed) during period

      (39 )      22          149       21  
                                   

 

The Accompanying Notes are an Integral Part of these Financial Statements.

 

F-16

Table of Contents

Statements of Changes in Net Assets

NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT II

(in thousands)

 

     Select Bond Division            Long-Term U.S. Government
Bond Division		  
     Year Ended
December 31,
2021		     Year Ended
December 31,
2020		            Year Ended
December 31,
2021		     Year Ended
December 31,
2020		  

Operations:

            

Net investment income (loss)

    $ 1,025     $ 1,027        $ 11     $ 23  

Net realized gains (losses)

      2,460       743          163       164  

Net change in unrealized appreciation/(depreciation)

      (4,125 )      1,262          (197 )      (108 ) 
Net increase (decrease) in net assets resulting from operations      (640 )      3,032          (23 )      79  

Policy Transactions:

            

Policy owners’ net payments

      7,529       6,315          414       242  

Policy loans, surrenders and death benefits

      (1,522 )      (1,337 )         (31 )      (30 ) 

Mortality and other (net)

      (1,796 )      (1,612 )         (89 )      (102 ) 

Transfers from other divisions or sponsor

      121,263       149,290          3,531       2,942  

Transfers to other divisions or sponsor

      (113,978 )      (145,407 )         (4,554 )      (1,699 ) 
Net increase (decrease) in net assets resulting from contract transactions      11,496       7,249          (729 )      1,353  

Net increase (decrease) in net assets

      10,856       10,281          (752 )      1,432  

Net Assets:

            

Beginning of period

      41,789       31,508          2,104       672  

End of period

    $ 52,645     $ 41,789        $ 1,352     $ 2,104  
                                   

Units issued during the period

      510       727          173       207  

Units redeemed during the period

      (467 )      (699 )         (198 )      (158 ) 

Net units issued (redeemed) during period

      43       28          (25 )      49  
                                   
     Inflation Protection Division            High Yield Bond Division  
     Year Ended
December 31,
2021		     Year Ended
December 31,
2020		            Year Ended
December 31,
2021		     Year Ended
December 31,
2020		  

Operations:

            

Net investment income (loss)

    $ 93     $ 122        $ 1,031     $ 940  

Net realized gains (losses)

      94       111          64       (221 ) 

Net change in unrealized appreciation/(depreciation)

      437       314          (126 )      290  
Net increase (decrease) in net assets resulting from operations      624       547          969       1,009  

Policy Transactions:

            

Policy owners’ net payments

      1,632       1,218          2,451       2,041  

Policy loans, surrenders and death benefits

      (235 )      (458 )         (601 )      (507 ) 

Mortality and other (net)

      (395 )      (290 )         (594 )      (543 ) 

Transfers from other divisions or sponsor

      27,319       26,762          35,249       53,308  

Transfers to other divisions or sponsor

      (24,163 )      (25,085 )         (35,353 )      (52,942 ) 
Net increase (decrease) in net assets resulting from contract transactions      4,158       2,147          1,152       1,357  

Net increase (decrease) in net assets

      4,782       2,694          2,121       2,366  

Net Assets:

            

Beginning of period

      7,622       4,928          17,574       15,208  

End of period

    $ 12,404     $ 7,622        $ 19,695     $ 17,574  
                                   

Units issued during the period

      1,784       2,017          602       1,203  

Units redeemed during the period

      (1,550 )      (1,887 )         (584 )      (1,182 ) 

Net units issued (redeemed) during period

      234       130          18       21  
                                   

 

The Accompanying Notes are an Integral Part of these Financial Statements.

 

F-17

Table of Contents

Statements of Changes in Net Assets

NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT II

(in thousands)

 

     Multi-Sector Bond Division            Balanced Division  
     Year Ended     Year Ended            Year Ended     Year Ended  
     December 31,     December 31,            December 31,     December 31,  
     2021     2020            2021     2020  

Operations:

            

Net investment income (loss)

    $ 644     $ 819        $ 254     $ 210  

Net realized gains (losses)

      311       39          671       350  

Net change in unrealized appreciation/(depreciation)

      (933 )      334          (204 )      520  

Net increase (decrease) in net assets resulting from operations

      22       1,192          721       1,080  

Policy Transactions:

            

Policy owners’ net payments

      5,596       4,396          789       645  

Policy loans, surrenders and death benefits

      (880 )      (334 )         (566 )      (507 ) 

Mortality and other (net)

      (1,215 )      (957 )         (273 )      (234 ) 

Transfers from other divisions or sponsor

      53,309       39,281          13,363       30,267  

Transfers to other divisions or sponsor

      (46,630 )      (37,643 )         (13,810 )      (29,430 ) 
Net increase (decrease) in net assets resulting from contract transactions      10,180       4,743          (497 )      741  

Net increase (decrease) in net assets

      10,202       5,935          224       1,821  

Net Assets:

            

Beginning of period

      24,276       18,341          9,588       7,767  

End of period

    $ 34,478     $ 24,276        $ 9,812     $ 9,588  
                   

Units issued during the period

      2,830       2,201          50       167  

Units redeemed during the period

      (2,374 )      (1,986 )         (52 )      (164 ) 

Net units issued (redeemed) during period

      456       215          (2 )      3  
                   
     Asset Allocation Division            Fidelity VIP Mid Cap Division  
     Year Ended     Year Ended            Year Ended     Year Ended  
     December 31,     December 31,            December 31,     December 31,  
     2021     2020            2021     2020  

Operations:

            

Net investment income (loss)

    $ 52     $ 40        $ 124     $ 84  

Net realized gains (losses)

      161       125          3,600       (512 ) 

Net change in unrealized appreciation/(depreciation)

      -       215          617       3,034  

Net increase (decrease) in net assets resulting from operations

      213       380          4,341       2,606  

Policy Transactions:

            

Policy owners’ net payments

      325       252          2,002       1,761  

Policy loans, surrenders and death benefits

      (205 )      (1 )         (404 )      (438 ) 

Mortality and other (net)

      (63 )      (54 )         (554 )      (467 ) 

Transfers from other divisions or sponsor

      3,288       3,449          32,705       22,726  

Transfers to other divisions or sponsor

      (3,107 )      (4,381 )         (33,166 )      (23,752 ) 
Net increase (decrease) in net assets resulting from contract transactions      238       (735 )         583       (170 ) 

Net increase (decrease) in net assets

      451       (355 )         4,924       2,436  

Net Assets:

            

Beginning of period

      2,006       2,361          16,725       14,289  

End of period

    $ 2,457     $ 2,006        $ 21,649     $ 16,725  
                   

Units issued during the period

      134       260          442       497  

Units redeemed during the period

      (127 )      (280 )         (436 )      (499 ) 

Net units issued (redeemed) during period

      7       (20 )         6       (2 ) 
                   

 

The Accompanying Notes are an Integral Part of these Financial Statements.

 

F-18

Table of Contents

Statements of Changes in Net Assets

NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT II

(in thousands)

 

     Fidelity VIP Contrafund
Division		            AMT Sustainable Equity
Division		  
     Year Ended     Year Ended            Year Ended     Year Ended  
     December 31,     December 31,            December 31,     December 31,  
     2021     2020            2021     2020  

Operations:

            

Net investment income (loss)

    $ 19     $ 48        $ 76     $ 77  

Net realized gains (losses)

      5,424       372          664       622  

Net change in unrealized appreciation/(depreciation)

      3,115       5,705          3,157       1,870  

Net increase (decrease) in net assets resulting from operations

      8,558       6,125          3,897       2,569  

Policy Transactions:

            

Policy owners’ net payments

      7,463       5,503          4,180       3,268  

Policy loans, surrenders and death benefits

      (882 )      (494 )         (561 )      (324 ) 

Mortality and other (net)

      (1,744 )      (1,261 )         (1,005 )      (746 ) 

Transfers from other divisions or sponsor

      69,525       43,359          43,867       27,228  

Transfers to other divisions or sponsor

      (67,456 )      (43,825 )         (42,892 )      (27,856 ) 
Net increase (decrease) in net assets resulting from contract transactions      6,906       3,282          3,589       1,570  

Net increase (decrease) in net assets

      15,464       9,407          7,486       4,139  

Net Assets:

            

Beginning of period

      27,660       18,253          15,225       11,086  

End of period

    $ 43,124     $ 27,660        $ 22,711     $ 15,225  
                   

Units issued during the period

      2,050       1,730          1,499       1,303  

Units redeemed during the period

      (1,878 )      (1,620 )         (1,394 )      (1,236 ) 

Net units issued (redeemed) during period

      172       110          105       67  
                   
     U.S. Strategic Equity Division            U.S. Small Cap Equity
Division		  
     Year Ended     Year Ended            Year Ended     Year Ended  
     December 31,     December 31,            December 31,     December 31,  
     2021     2020            2021     2020  

Operations:

            

Net investment income (loss)

    $ 34     $ 20        $ 11     $ 2  

Net realized gains (losses)

      750       (45 )         1,227       (89 ) 

Net change in unrealized appreciation/(depreciation)

      325       1,113          (304 )      542  

Net increase (decrease) in net assets resulting from operations

      1,109       1,088          934       455  

Policy Transactions:

            

Policy owners’ net payments

      427       309          322       236  

Policy loans, surrenders and death benefits

      (321 )      (127 )         (154 )      (35 ) 

Mortality and other (net)

      (101 )      (92 )         (103 )      (74 ) 

Transfers from other divisions or sponsor

      10,850       14,355          7,147       11,286  

Transfers to other divisions or sponsor

      (11,038 )      (14,345 )         (7,103 )      (11,053 ) 
Net increase (decrease) in net assets resulting from contract transactions      (183 )      100          109       360  

Net increase (decrease) in net assets

      926       1,188          1,043       815  

Net Assets:

            

Beginning of period

      5,486       4,298          3,587       2,772  

End of period

    $ 6,412     $ 5,486        $ 4,630     $ 3,587  
                   

Units issued during the period

      297       671          149       473  

Units redeemed during the period

      (303 )      (665 )         (148 )      (462 ) 

Net units issued (redeemed) during period

      (6 )      6          1       11  
                   

 

The Accompanying Notes are an Integral Part of these Financial Statements.

 

F-19

Table of Contents

Statements of Changes in Net Assets

NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT II

(in thousands)

 

     International Developed
Markets Division		            Strategic Bond Division  
     Year Ended     Year Ended            Year Ended     Year Ended  
     December 31,     December 31,            December 31,     December 31,  
     2021     2020            2021     2020  

Operations:

            

Net investment income (loss)

    $ 356     $ 121        $ 142     $ 221  

Net realized gains (losses)

      1,243       (248 )         192       523  

Net change in unrealized appreciation/(depreciation)

      (74 )      843          (602 )      175  

Net increase (decrease) in net assets resulting from operations

      1,525       716          (268 )      919  

Policy Transactions:

            

Policy owners’ net payments

      1,752       1,334          2,287       1,902  

Policy loans, surrenders and death benefits

      (624 )      (438 )         (422 )      (586 ) 

Mortality and other (net)

      (427 )      (336 )         (588 )      (509 ) 

Transfers from other divisions or sponsor

      28,485       39,662          39,664       82,796  

Transfers to other divisions or sponsor

      (27,217 )      (39,576 )         (36,196 )      (79,948 ) 
Net increase (decrease) in net assets resulting from contract transactions      1,969       646          4,745       3,655  

Net increase (decrease) in net assets

      3,494       1,362          4,477       4,574  

Net Assets:

            

Beginning of period

      11,797       10,435          13,904       9,330  

End of period

    $ 15,291     $ 11,797        $ 18,381     $ 13,904  
                   

Units issued during the period

      1,216       2,489          1,511       3,944  

Units redeemed during the period

      (1,142 )      (2,454 )         (1,346 )      (3,814 ) 

Net units issued (redeemed) during period

      74       35          165       130  
                   
     Global Real Estate Securities
Division		            LifePoints Moderate Strategy
Division		  
     Year Ended     Year Ended            Year Ended     Year Ended  
     December 31,     December 31,            December 31,     December 31,  
     2021     2020            2021     2020  

Operations:

            

Net investment income (loss)

    $ 1,755     $ 358        $ 22     $ 4  

Net realized gains (losses)

      536       (441 )         58       18  

Net change in unrealized appreciation/(depreciation)

      6,123       (551 )         (61 )      50  

Net increase (decrease) in net assets resulting from operations

      8,414       (634 )         19       72  

Policy Transactions:

            

Policy owners’ net payments

      6,329       4,986          84       61  

Policy loans, surrenders and death benefits

      (967 )      (560 )         (3 )      (183 ) 

Mortality and other (net)

      (1,514 )      (1,104 )         (12 )      (9 ) 

Transfers from other divisions or sponsor

      70,732       58,767          751       647  

Transfers to other divisions or sponsor

      (68,367 )      (56,299 )         (503 )      (257 ) 
Net increase (decrease) in net assets resulting from contract transactions      6,213       5,790          317       259  

Net increase (decrease) in net assets

      14,627       5,156          336       331  

Net Assets:

            

Beginning of period

      28,128       22,972          455       124  

End of period

    $ 42,755     $ 28,128        $ 791     $ 455  
                   

Units issued during the period

      1,265       1,435          42       56  

Units redeemed during the period

      (1,167 )      (1,320 )         (28 )      (39 ) 

Net units issued (redeemed) during period

      98       115          14       17  
                   

 

The Accompanying Notes are an Integral Part of these Financial Statements.

 

F-20

Table of Contents

Statements of Changes in Net Assets

NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT II

(in thousands)

 

     LifePoints Balanced Strategy
Division		            LifePoints Growth Strategy
Division		  
     Year Ended     Year Ended            Year Ended     Year Ended  
     December 31,     December 31,            December 31,     December 31,  
     2021     2020            2021     2020  

Operations:

            

Net investment income (loss)

    $ 143     $ 17        $ 154     $ 39  

Net realized gains (losses)

      233       (38 )         391       13  

Net change in unrealized appreciation/(depreciation)

      (119 )      132          (25 )      266  

Net increase (decrease) in net assets resulting from operations

      257       111          520       318  

Policy Transactions:

            

Policy owners’ net payments

      237       289          321       449  

Policy loans, surrenders and death benefits

      (25 )      (84 )         (118 )      (1 ) 

Mortality and other (net)

      (44 )      (39 )         (78 )      (63 ) 

Transfers from other divisions or sponsor

      3,052       430          3,776       3,668  

Transfers to other divisions or sponsor

      (1,661 )      (466 )         (4,111 )      (3,731 ) 
Net increase (decrease) in net assets resulting from contract transactions      1,559       130          (210 )      322  

Net increase (decrease) in net assets

      1,816       241          310       640  

Net Assets:

            

Beginning of period

      1,784       1,543          3,262       2,622  

End of period

    $ 3,600     $ 1,784        $ 3,572     $ 3,262  
                   

Units issued during the period

      303       52          196       309  

Units redeemed during the period

      (231 )      (46 )         (207 )      (289 ) 

Net units issued (redeemed) during period

      72       6          (11 )      20  
                   
     LifePoints Equity Growth
Strategy Division		            Credit Suisse Trust Commodity
Return Strategy Division		  
     Year Ended     Year Ended            Year Ended     Year Ended  
     December 31,     December 31,            December 31,     December 31,  
     2021     2020            2021     2020  

Operations:

            

Net investment income (loss)

    $ 49     $ 8        $ 1,214     $ 594  

Net realized gains (losses)

      86       (1 )         52       (244 ) 

Net change in unrealized appreciation/(depreciation)

      (3 )      68          3,334       (21 ) 

Net increase (decrease) in net assets resulting from operations

      132       75          4,600       329  

Policy Transactions:

            

Policy owners’ net payments

      120       98          4,482       3,268  

Policy loans, surrenders and death benefits

      -       (46 )         (625 )      (291 ) 

Mortality and other (net)

      (41 )      (34 )         (1,057 )      (712 ) 

Transfers from other divisions or sponsor

      646       359          45,334       26,663  

Transfers to other divisions or sponsor

      (389 )      (240 )         (42,290 )      (25,176 ) 
Net increase (decrease) in net assets resulting from contract transactions      336       137          5,844       3,752  

Net increase (decrease) in net assets

      468       212          10,444       4,081  

Net Assets:

            

Beginning of period

      632       420          14,828       10,747  

End of period

    $ 1,100     $ 632        $ 25,272     $ 14,828  
                   

Units issued during the period

      38       33          9,620       7,480  

Units redeemed during the period

      (23 )      (23 )         (8,581 )      (6,569 ) 

Net units issued (redeemed) during period

      15       10          1,039       911  
                   

 

The Accompanying Notes are an Integral Part of these Financial Statements.

 

F-21

Table of Contents

Notes to Financial Statements

 

1.

Organization

Northwestern Mutual Variable Life Account II (“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 Funds 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 Fund in which it invests.

Variable Universal Life Plus and Executive Variable Universal Life II policies were offered starting November 11, 2019. New sales of Custom Variable Universal Life, Executive Variable Universal Life and Survivorship Variable Universal Life which invest in the Account were discontinued in 2019; however, premium payments made by policyowners existing at that date will continue to be recorded by the Account.

 

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, 2021, all of the Account’s investments are identified as Level 1 securities for valuation purposes under the Fair Value Measurement Topic of the FASB Accounting Standards Codification. Level 1 fair value is determined by unadjusted quoted prices in active markets for identical securities or derivatives. Level 2 fair value is determined by other significant observable inputs (including quoted prices for similar securities). Level 3 fair value is determined by significant unobservable inputs (including the Account’s own assumptions in determining fair value). 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 ex–date 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 policy 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 Northwestern Mutual. Currently, 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.

 

3.

Purchases and Sales of Investments

Purchases and sales of the Funds’ shares for the year ended December 31, 2021 were as follows (amounts in thousands):

 

    Fund Name    Purchases                    Sales  

Growth Stock Division

    $ 6,536         $ 3,917  

Focused Appreciation Division

      14,364           6,931  

Large Cap Core Stock Division

      4,059           2,132  

Large Cap Blend Division

      588           269  

Index 500 Stock Division

      134,977           41,400  

Large Company Value Division

      2,225           867  

Domestic Equity Division

      13,413           5,386  

Equity Income Division

      3,720           2,978  

Mid Cap Growth Stock Division

      4,767           2,181  

Index 400 Stock Division

      22,857           10,012  

Mid Cap Value Division

      8,390           3,336  

Small Cap Growth Stock Division

      10,224           4,534  

Index 600 Stock Division

      13,103           5,970  

Small Cap Value Division

      3,428           2,295  

International Growth Division

      17,479           5,339  

Research International Core Division

      17,387           5,189  

International Equity Division

      24,261           6,841  

Emerging Markets Equity Division

      21,604           7,668  

Government Money Market Division

      166,866           168,356  

Short-Term Bond Division

      4,239           2,035  

Select Bond Division

      23,537           8,739  

Long-Term U.S. Government Bond Division

      1,988           2,487  

Inflation Protection Bond Division

      5,769           1,492  

High Yield Bond Division

      6,252           4,062  

Multi-Sector Bond Division

      14,538           3,446  

 

F-22

Table of Contents

Notes to Financial Statements

 

    Fund Name    Purchases                    Sales  

Balanced Division

    $ 2,414         $ 2,164  

Asset Allocation Division

      982           557  

Fidelity VIP Mid Cap Division

      6,975           3,031  

Fidelity VIP Contrafund Division

      17,908           6,389  

AMT Sustainable Equity Division

      7,173           3,120  

U.S. Strategic Equity Division

      1,469           1,082  

U.S. Small Cap Equity Division

      2,119           982  

International Developed Markets Division

      5,253           1,806  

Strategic Bond Division

      8,282           3,203  

Global Real Estate Securities Division

      13,723           5,330  

LifePoints Moderate Strategy Division

      697           335  

LifePoints Balanced Strategy Division

      3,166           1,253  

LifePoints Growth Strategy Division

      852           583  

LifePoints Equity Growth Strategy Division

      530           63  

Credit Suisse Trust Commodity Return Strategy Division

      10,705           3,648  

 

4.

Expenses and Related Party Transactions

A monthly deduction for policy and service charges is paid to Northwestern Mutual. This monthly deduction includes charges for the cost of insurance, administrative fees, underwriting, and other charges for optional benefits.

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 death benefit among other charges which are detailed in the Prospectus.

The charges noted are reflected as a reduction in units and are included in Mortality and other in the accompanying financial statements.

 

5.

COVID-19

During the first quarter of 2020, the World Health Organization declared COVID-19 to be a public health emergency. COVID-19 has led to increased short-term market volatility and may have adverse long-term effects on U.S. and world economies and markets in general. COVID-19 may adversely impact the value of the Account’s investments. Because of the uncertainties regarding the impact of COVID-19 on the global economy, and business operations, and securities markets, values reflected in these financial statements may materially differ from the value received upon actual sales of those investments.

The extent of the impact on the performance of the Account and its investments will depend on future developments, including the duration and spread of the COVID-19 outbreak, related restrictions and advisories, and the effects on the financial markets and economy overall, all of which are highly uncertain and cannot be predicted.

 

F-23

Table of Contents

Notes to Financial Statements

 

6. Financial Highlights

     As of the respective period end date:             For the respective period ended:  
                                 Dividend              
                                 Income as              
     Units      Unit Value,                    a % of              
     Outstanding      Lowest to      Net Assets             Average     Expense     Total  
      (000’s)      Highest      (000’s)              Net Assets     Ratio (1)     Return (1)  

Growth Stock Division

 

       

2021

      162      $ 152.095850      $ 24,574           0.00     %(2)      0.00     %      16.67     % 

2020

      151        130.365531        19,625           0.67       0.00       34.97  

2019

      140        96.585761        13,453           0.67       0.00       29.68  

2018

      127        74.477290        9,428           0.72       0.00       1.26  

2017

      122        73.551913        8,916                 0.87       0.00       24.27  

Focused Appreciation Division

 

       

2021

      363      $ 108.543824      $ 39,390           0.17     %      0.00     %      18.90     % 

2020

      326        91.289389        29,745           0.54       0.00       32.55  

2019

      320        68.873586        22,056           0.66       0.00       31.97  

2018

      302        52.188290        15,761           0.51       0.00       (2.34 ) 

2017

      280        53.438372        14,971                 0.73       0.00       33.62  

Large Cap Core Stock Division

 

       

2021

      162      $ 100.458713      $ 16,334           0.80     %      0.00     %      25.10     % 

2020

      154        80.301917        12,402           1.23       0.00       22.74  

2019

      122        65.424142        8,029           1.20       0.00       31.19  

2018

      123        49.869208        6,138           1.54       0.00       (6.04 ) 

2017

      119        53.073917        6,274                 1.80       0.00       24.87  

Large Cap Blend Division

 

       

2021

      104      $ 27.701179      $ 2,889           0.66     %      0.00     %      18.46     % 

2020

      99        23.385328        2,320           5.26       0.00       10.05  

2019

      103        21.249241        2,194           1.14       0.00       23.97  

2018

      113        17.140701        1,940           0.79       0.00       (4.00 ) 

2017

      125        17.855817        2,235                 0.91       0.00       19.02  

Index 500 Stock Division

 

       

2021

      1,296      $ 270.376034      $ 350,068           1.28     %      0.00     %      28.45     % 

2020

      951        210.492951        200,054           1.65       0.00       18.18  

2019

      731        178.109105        130,083           1.64       0.00       31.18  

2018

      562        135.776139        76,297           1.66       0.00       (4.58 ) 

2017

      423        142.286114        60,194                 1.74       0.00       21.52  

Large Company Value Division

 

       

2021

      221      $ 25.131615      $ 5,543           1.21     %      0.00     %      21.92     % 

2020

      169        20.613433        3,500           2.16       0.00       2.64  

2019

      122        20.083819        2,467           2.33       0.00       27.66  

2018

      89        15.732361        1,409           1.78       0.00       (7.92 ) 

2017

      64        17.086312        1,095                 2.09       0.00       11.10  

Domestic Equity Division

 

       

2021

      978      $ 43.518946      $ 42,556           1.86     %      0.00     %      22.71     % 

2020

      814        35.463950        28,845           2.19       0.00       0.73  

2019

      628        35.207252        22,120           1.94       0.00       20.77  

2018

      506        29.152607        14,730           1.81       0.00       (2.81 ) 

2017

      415        29.996128        12,462                 1.65       0.00       13.78  

Equity Income Division

 

       

2021

      381      $ 51.480302      $ 19,694           2.08     %      0.00     %      25.70     % 

2020

      374        40.954303        15,352           4.82       0.00       1.20  

2019

      351        40.467475        14,243           2.34       0.00       26.61  

2018

      348        31.961107        11,143           2.10       0.00       (9.35 ) 

2017

      314        35.257091        11,036           2.23       0.00       16.24  

(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-24

Table of Contents

Notes to Financial Statements

6. Financial Highlights

 

     As of the respective period end date:             For the respective period ended:  
                                 Dividend              
                                 Income as              
     Units      Unit Value,                    a % of              
     Outstanding      Lowest to      Net Assets             Average     Expense     Total  
      (000’s)      Highest      (000’s)              Net Assets     Ratio (1)     Return (1)  

Mid Cap Growth Stock Division

 

       

2021

      65      $ 213.536458      $ 13,831           0.15     %      0.00     %      10.18     % 

2020

      62        193.811117        11,775           0.29       0.00       25.41  

2019

      56        154.540637        8,563           0.19       0.00       33.01  

2018

      38        116.184426        4,376           0.13       0.00       (7.38 ) 

2017

      40        125.441587        5,158                 0.24       0.00       20.29  

Index 400 Stock Division

 

       

2021

      763      $ 93.570328      $ 71,431           0.94     %      0.00     %      24.46     % 

2020

      645        75.180406        48,515           1.39       0.00       13.37  

2019

      501        66.313755        33,259           1.26       0.00       25.88  

2018

      384        52.678316        20,226           1.15       0.00       (11.33 ) 

2017

      297        59.411237        17,695                 1.07       0.00       15.96  

Mid Cap Value Division

 

       

2021

      412      $ 61.756931      $ 25,398           1.19     %      0.00     %      23.27     % 

2020

      330        50.098747        16,572           1.90       0.00       1.67  

2019

      274        49.276848        13,531           1.67       0.00       29.21  

2018

      240        38.138006        9,135           1.65       0.00       (12.85 ) 

2017

      193        43.762109        8,429                 1.46       0.00       11.81  

Small Cap Growth Stock Division

 

       

2021

      229      $ 108.425869      $ 24,760           0.02     %      0.00     %      4.11     % 

2020

      198        104.149054        20,575           0.11       0.00       33.47  

2019

      174        78.030714        13,664           0.10       0.00       35.69  

2018

      144        57.505467        8,319           0.00 (2)      0.00       (11.71 ) 

2017

      124        65.129570        8,046                 0.11       0.00       21.61  

Index 600 Stock Division

 

       

2021

      938      $ 38.363170      $ 35,995           0.78     %      0.00     %      26.22     % 

2020

      765        30.394793        23,248           1.83       0.00       10.93  

2019

      610        27.399696        16,709           0.26       0.00       22.44  

2018

      443        22.378619        9,918           1.43       0.00       (8.78 ) 

2017

      327        24.532713        8,012                 1.89       0.00       12.93  

Small Cap Value Division

 

       

2021

      205      $ 70.431381      $ 14,456           0.40     %      0.00     %      23.00     % 

2020

      198        57.260960        11,353           0.52       0.00       9.29  

2019

      190        52.395678        9,943           0.49       0.00       25.89  

2018

      176        41.620093        7,315           0.52       0.00       (12.73 ) 

2017

      165        47.690780        7,878                 0.78       0.00       11.65  

International Growth Division

 

       

2021

      1,335      $ 39.539175      $ 52,809           0.54     %      0.00     %      15.92     % 

2020

      1,049        34.110132        35,798           1.62       0.00       17.91  

2019

      912        28.928599        26,389           1.28       0.00       34.80  

2018

      765        21.459907        16,408           1.45       0.00       (11.28 ) 

2017

      603        24.188049        14,608                 1.30       0.00       30.03  

Research International Core Division

 

       

2021

      2,681      $ 18.026460      $ 48,334           1.15     %      0.00     %      12.07     % 

2020

      2,042        16.084924        32,859           2.14       0.00       13.46  

2019

      1,642        14.176293        23,290           1.75       0.00       28.25  

2018

      1,201        11.053328        13,280           1.73       0.00       (13.66 ) 

2017

      799        12.802534        10,233           1.67       0.00       28.21  

(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-25

Table of Contents

Notes to Financial Statements

6. Financial Highlights

 

     As of the respective period end date:             For the respective period ended:  
                                 Dividend              
                                 Income as              
     Units      Unit Value,                    a % of              
     Outstanding      Lowest to      Net Assets             Average     Expense     Total  
      (000’s)      Highest      (000’s)              Net Assets     Ratio (1)     Return (1)  

International Equity Division

 

       

2021

      11,683      $ 5.930327      $ 69,282           2.39     %      0.00     %      5.00     % 

2020

      9,047        5.647675        51,098           3.58       0.00       (2.71 ) 

2019

      7,341        5.804990        42,617           2.63       0.00       12.60  

2018

      6,042        5.155553        31,148           2.58       0.00       (15.41 ) 

2017

      5,092        6.094491        31,035                 2.43       0.00       22.30  

Emerging Markets Equity Division

 

       

2021

      3,640      $ 15.578805      $ 56,729           0.53     %      0.00     %      (4.55 )    % 

2020

      2,809        16.321818        45,852           2.28       0.00       26.86  

2019

      2,361        12.866468        30,379           1.17       0.00       20.60  

2018

      1,795        10.668771        19,148           1.40       0.00       (13.75 ) 

2017

      1,285        12.370178        15,898                 0.92       0.00       27.84  

Government Money Market Division

 

       

2021

      473      $ 43.483468      $ 20,583           0.00     %      0.00     %      0.01     % 

2020

      512        43.480109        22,273           0.19       0.00       0.31  

2019

      490        43.345856        21,199           1.88       0.00       1.94  

2018

      375        42.522150        15,950           1.55       0.00       1.53  

2017

      314        41.875417        13,129                 0.59       0.00       0.60  

Short-Term Bond Division

 

       

2021

      439      $ 13.941366      $ 6,111           2.02     %      0.00     %      (0.10 )    % 

2020

      290        13.954768        4,044           2.28       0.00       4.29  

2019

      269        13.380170        3,594           2.37       0.00       4.38  

2018

      187        12.818134        2,392           1.79       0.00       1.36  

2017

      112        12.646732        1,419                 1.33       0.00       1.33  

Select Bond Division

 

       

2021

      199      $ 263.835614      $ 52,645           2.18     %      0.00     %      (1.59 )    % 

2020

      156        268.089237        41,789           2.75       0.00       8.98  

2019

      128        245.997917        31,508           2.93       0.00       8.65  

2018

      104        226.413644        23,677           2.34       0.00       (0.21 ) 

2017

      93        226.897252        21,292                 2.11       0.00       3.58  

Long-Term U.S. Government Bond Division

 

       

2021

      53      $ 25.468271      $ 1,352           0.63     %      0.00     %      (5.37 )    % 

2020

      78        26.913884        2,104           1.47       0.00       17.37  

2019

      29        22.930587        672           1.56       0.00       13.17  

2018

      33        20.262648        678           2.58       0.00       (2.04 ) 

2017

      13        20.685508        266                 1.72       0.00       8.28  

Inflation Protection Division

 

       

2021

      678      $ 18.278682      $ 12,404           0.96     %      0.00     %      6.61     % 

2020

      444        17.146141        7,622           1.99       0.00       9.57  

2019

      314        15.648347        4,928           2.66       0.00       9.02  

2018

      259        14.354000        3,726           2.21       0.00       (2.61 ) 

2017

      199        14.738894        2,931                 0.72       0.00       3.58  

High Yield Bond Division

 

       

2021

      295      $ 66.738383      $ 19,695           5.40     %      0.00     %      5.31     % 

2020

      277        63.375613        17,574           5.84       0.00       6.64  

2019

      256        59.428074        15,208           5.74       0.00       14.97  

2018

      221        51.690668        11,390           5.46       0.00       (2.71 ) 

2017

      211        53.128855        11,192           5.51       0.00       6.88  

(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-26

Table of Contents

Notes to Financial Statements

6. Financial Highlights

 

     As of the respective period end date:             For the respective period ended:  
                                 Dividend              
                                 Income as              
     Units      Unit Value,                    a % of              
     Outstanding      Lowest to      Net Assets             Average     Expense     Total  
      (000’s)      Highest      (000’s)              Net Assets     Ratio (1)     Return (1)  

Multi-Sector Bond Division

 

       

2021

      1,538      $ 22.416380      $ 34,478           2.20     %      0.00     %      (0.08 )    % 

2020

      1,082        22.433485        24,276           4.15       0.00       6.13  

2019

      867        21.138053        18,341           4.85       0.00       14.04  

2018

      675        18.535667        12,522           3.14       0.00       (1.30 ) 

2017

      541        18.780164        10,176                 3.98       0.00       8.38  

Balanced Division

 

       

2021

      32      $ 298.595878      $ 9,812           2.55     %      0.00     %      7.56     % 

2020

      34        277.610210        9,588           1.64       0.00       12.49  

2019

      31        246.784874        7,767           2.28       0.00       17.92  

2018

      31        209.277798        6,448           2.36       0.00       (3.45 ) 

2017

      28        216.761163        5,889                 2.16       0.00       11.98  

Asset Allocation Division

 

       

2021

      68      $ 36.450275      $ 2,457           2.30     %      0.00     %      10.45     % 

2020

      61        33.001529        2,006           2.36       0.00       13.43  

2019

      81        29.093477        2,361           2.16       0.00       21.08  

2018

      42        24.028105        1,011           2.35       0.00       (4.88 ) 

2017

      31        25.259678        778                 2.08       0.00       14.87  

Fidelity VIP Mid Cap Division

 

       

2021

      244      $ 88.496791      $ 21,649           0.63     %      0.00     %      25.60     % 

2020

      238        70.458211        16,725           0.62       0.00       18.07  

2019

      240        59.676525        14,289           0.70       0.00       23.17  

2018

      251        48.449732        12,145           0.41       0.00       (14.77 ) 

2017

      240        56.847028        13,684                 0.50       0.00       20.54  

Fidelity VIP Contrafund Division

 

       

2021

      957      $ 45.041088      $ 43,124           0.05     %      0.00     %      27.83     % 

2020

      785        35.233871        27,660           0.21       0.00       30.46  

2019

      675        27.008170        18,253           0.22       0.00       31.27  

2018

      537        20.573795        11,051           0.47       0.00       (6.64 ) 

2017

      398        22.036922        8,788                 0.84       0.00       21.59  

AMT Sustainable Equity Division

 

       

2021

      615      $ 36.931533      $ 22,711           0.40     %      0.00     %      23.48     % 

2020

      509        29.909730        15,225           0.62       0.00       19.56  

2019

      442        25.016087        11,086           0.44       0.00       25.88  

2018

      338        19.872228        6,731           0.50       0.00       (5.72 ) 

2017

      269        21.076980        5,691                 0.57       0.00       18.43  

U.S. Strategic Equity Division

 

       

2021

      149      $ 42.853358      $ 6,412           0.56     %      0.00     %      20.40     % 

2020

      154        35.592905        5,486           0.47       0.00       23.84  

2019

      148        28.741505        4,298           1.07       0.00       30.26  

2018

      160        22.064057        3,548           1.15       0.00       (9.64 ) 

2017

      159        24.418364        3,876                 1.01       0.00       20.80  

U.S. Small Cap Equity Division

 

       

2021

      87      $ 53.013410      $ 4,630           0.24     %      0.00     %      25.79     % 

2020

      85        42.144292        3,587           0.05       0.00       12.70  

2019

      74        37.394611        2,772           0.57       0.00       23.07  

2018

      73        30.385277        2,200           0.47       0.00       (11.97 ) 

2017

      72        34.518205        2,490           0.17       0.00       15.48  

(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-27

Table of Contents

Notes to Financial Statements

6. Financial Highlights

 

     As of the respective period end date:             For the respective period ended:  
                                 Dividend              
                                 Income as              
     Units      Unit Value,                    a % of              
     Outstanding      Lowest to      Net Assets             Average     Expense     Total  
      (000’s)      Highest      (000’s)              Net Assets     Ratio (1)     Return (1)  

International Developed Markets Division

 

       

2021

      564      $ 27.103303      $ 15,291           2.56     %      0.00     %      12.66     % 

2020

      490        24.058667        11,797           1.23       0.00       5.08  

2019

      455        22.896522        10,435           2.86       0.00       19.72  

2018

      327        19.124827        6,264           1.77       0.00       (14.87 ) 

2017

      277        22.466466        6,236                 2.75       0.00       24.98  

Strategic Bond Division

 

       

2021

      641      $ 28.706174      $ 18,381           0.93     %      0.00     %      (1.82 )    % 

2020

      476        29.237785        13,904           1.83       0.00       8.43  

2019

      346        26.963899        9,330           2.84       0.00       9.19  

2018

      287        24.693685        7,082           2.15       0.00       (0.81 ) 

2017

      206        24.895915        5,143                 1.34       0.00       3.86  

Global Real Estate Securities Division

 

       

2021

      600      $ 71.324137      $ 42,755           4.90     %      0.00     %      27.19     % 

2020

      502        56.074809        28,128           1.52       0.00       (5.18 ) 

2019

      387        59.135972        22,972           5.30       0.00       21.64  

2018

      332        48.615288        16,199           4.49       0.00       (5.73 ) 

2017

      272        51.568102        14,039                 3.91       0.00       11.80  

LifePoints Moderate Strategy Division

 

       

2021

      38      $ 20.401736      $ 791           6.25     %      0.00     %      8.23     % 

2020

      24        18.849922        455           2.03       0.00       6.40  

2019

      7        17.716081        124           1.16       0.00       12.54  

2018

      6        15.741887        94           3.80       0.00       (4.92 ) 

2017

      9        16.557145        157                 2.12       0.00       9.88  

LifePoints Balanced Strategy Division

 

       

2021

      164      $ 21.853460      $ 3,600           5.39     %      0.00     %      13.04     % 

2020

      92        19.332571        1,784           2.15       0.00       7.65  

2019

      86        17.958473        1,543           1.57       0.00       16.45  

2018

      105        15.421524        1,621           6.44       0.00       (6.80 ) 

2017

      60        16.545882        986                 2.46       0.00       12.00  

LifePoints Growth Strategy Division

 

       

2021

      160      $ 22.430026      $ 3,572           4.69     %      0.00     %      17.44     % 

2020

      171        19.098502        3,262           1.62       0.00       9.75  

2019

      151        17.402048        2,622           0.70       0.00       18.06  

2018

      153        14.739598        2,256           5.28       0.00       (8.05 ) 

2017

      143        16.029490        2,284                 3.26       0.00       15.65  

LifePoints Equity Growth Strategy Division

 

       

2021

      51      $ 21.427646      $ 1,100           6.05     %      0.00     %      19.61     % 

2020

      36        17.914598        633           2.07       0.00       8.26  

2019

      26        16.548015        420           0.23       0.00       20.09  

2018

      31        13.779890        423           4.51       0.00       (9.45 ) 

2017

      38        15.218716        571                 3.51       0.00       17.55  

Credit Suisse Trust Commodity Return Strategy Division

 

       

2021

      4,222      $ 5.986523      $ 25,272           5.89     %      0.00     %      28.49     % 

2020

      3,183        4.659188        14,828           5.59       0.00       (1.48 ) 

2019

      2,272        4.729147        10,747           0.88       0.00       6.69  

2018

      1,729        4.432602        7,663           2.47       0.00       (11.66 ) 

2017

      1,392        5.017461        6,992           8.90       0.00       1.52  

(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.

 

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The Northwestern Mutual

Life Insurance Company

Statutory Financial Statements and

Supplementary Information

December 31, 2021, 2020 and 2019

 

 

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LOGO

 

Report of Independent Auditors

To the Board of Trustees of

The Northwestern Mutual Life Insurance Company

Opinions

We have audited the accompanying statutory financial statements of The Northwestern Mutual Life Insurance Company (the “Company”), which comprise the statutory statements of financial position as of December 31, 2021 and 2020, and the related statutory statements of operations, changes in surplus, and cash flows for each of the three years in the period ended December 31, 2021, including the related notes (collectively referred to as the “financial statements”).

Unmodified Opinion on Statutory Basis of Accounting

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, 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.

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 section of our report, the accompanying financial statements 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, 2021 and 2020, or the results of its operations or its cash flows for each of the three years in the period ended December 31, 2021.

Basis for Opinions

We conducted our audit in accordance with auditing standards generally accepted in the United States of America (US GAAS). Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Company and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. 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 financial statements, the 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.

The effects on the 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.

Responsibilities of Management for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with the accounting practices prescribed or permitted by the Office of the Commissioner of

PricewaterhouseCoopers LLP, 833 E. Michigan, Milwaukee, WI 53202

T: (414) 212 1600, www.pwc.com/us

 

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LOGO

 

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.

In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for one year after the date the financial statements are available to be issued.

Auditors’ Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with US GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.

In performing an audit in accordance with US GAAS, we:

 

  •  

Exercise professional judgment and maintain professional skepticism throughout the audit.

 

  •  

Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

 

  •  

Obtain an understanding of internal control relevant to the audit 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 Company’s internal control. Accordingly, no such opinion is expressed.

 

  •  

Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.

 

  •  

Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for a reasonable period of time.

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.

 

LOGO

Milwaukee, Wisconsin

February 15, 2022

 

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The Northwestern Mutual Life Insurance Company

Statutory Statements of Financial Position

(in millions)

 

 

     December 31,
             2021                   2020        

Assets:

     

Bonds

        $ 179,121         $ 166,324    

Mortgage loans

      47,844       41,568  

Policy loans

      17,208       17,686  

Common and preferred stocks

      4,242       5,083  

Real estate

      3,113       2,959  

Other investments

      29,184       24,942  

Cash and short-term investments

      3,786       3,239  
  

 

 

 

  

 

 

 

Total investments

      284,498       261,801  

Due and accrued investment income

      2,042       2,522  

Net deferred tax assets

      1,569       2,305  

Deferred premium and other assets

      4,162       3,692  

Separate account assets

      42,383       38,447  
  

 

 

 

  

 

 

 

Total assets

      $ 334,654       $ 308,767  
  

 

 

 

  

 

 

 

Liabilities and surplus:

     

Policy benefit reserves

      $ 230,034       $ 217,365  

Deposit funds

      8,303       4,860  

Policyowner dividends payable

      6,505       6,220  

Interest maintenance reserve

      3,162       2,355  

Asset valuation reserve

      7,733       7,362  

Income taxes payable

      -       231  

Other liabilities

      7,251       6,970  

Separate account liabilities

      42,383       38,447  
  

 

 

 

  

 

 

 

Total liabilities

      305,371       283,810  

Surplus:

     

Surplus notes

      4,475       3,573  

Unassigned surplus

      24,808       21,384  
  

 

 

 

  

 

 

 

Total surplus

      29,283       24,957  
  

 

 

 

  

 

 

 

Total liabilities and surplus

      $ 334,654       $ 308,767  
  

 

 

 

  

 

 

 

 

The accompanying notes are an integral part of these Statutory financial statements.

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The Northwestern Mutual Life Insurance Company

Statutory Statements of Operations

(in millions)

 

 

    For the years ended
   

 

December 31,

          2021               2020               2019      

Revenue:

      

Premiums

     $ 22,771         $ 19,323         $ 19,010    

Net investment income

     10,447       11,078       10,149  

Other income

     814       723       696  
 

 

 

 

  

 

 

 

  

 

 

 

Total revenue

     34,032       31,124       29,855  
 

 

 

 

  

 

 

 

  

 

 

 

Benefits and expenses:

      

Benefit payments to policyowners and beneficiaries

     12,022       11,736       11,515  

Net additions to policy benefit reserves

     12,736       9,527       9,451  

Net transfers from separate accounts

     (805 )      (680 )      (783 ) 
 

 

 

 

  

 

 

 

  

 

 

 

Total benefits

     23,953       20,583       20,183  

Commissions and operating expenses

     4,048       3,502       3,306  
 

 

 

 

  

 

 

 

  

 

 

 

Total benefits and expenses

     28,001       24,085       23,489  
 

 

 

 

  

 

 

 

  

 

 

 

Gain from operations before dividends and taxes

     6,031       7,039       6,366  

Policyowner dividends

     6,522       6,235       5,999  
 

 

 

 

  

 

 

 

  

 

 

 

(Loss) gain from operations before taxes

     (491 )      804       367  

Income tax (benefit) expense

     (1,166 )      277       (199 ) 
 

 

 

 

  

 

 

 

  

 

 

 

Net gain from operations

     675       527       566  

Net realized capital gains (losses)

     303       (102 )      702  
 

 

 

 

  

 

 

 

  

 

 

 

Net income

     $ 978       $ 425       $ 1,268  
 

 

 

 

  

 

 

 

  

 

 

 

 

The accompanying notes are an integral part of these Statutory financial statements.

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The Northwestern Mutual Life Insurance Company

Statutory Statements of Changes in Surplus

(in millions)

 

 

     For the years ended
     December 31,
           2021               2020               2019      

Beginning of year balance

      $ 24,957       $ 24,216       $ 22,134  

Net income

      978       425       1,268  

Change in net unrealized capital gains and losses

      3,489       799       1,141  

Change in net deferred tax assets

      (476 )      807       (130 ) 

Change in nonadmitted assets

      (579 )      228       (143 ) 

Change in asset valuation reserve

      (371 )      (1,159 )      (1,606 ) 

Change in surplus notes

      902       5       620  

Other surplus changes

      383       (364 )      932  
  

 

 

 

  

 

 

 

  

 

 

 

Net increase in surplus

      4,326       741       2,082  
  

 

 

 

  

 

 

 

  

 

 

 

End of year balance

      $ 29,283         $ 24,957         $ 24,216    
  

 

 

 

  

 

 

 

  

 

 

 

 

 

The accompanying notes are an integral part of these Statutory financial statements.

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The Northwestern Mutual Life Insurance Company

Statutory Statements of Cash Flows

(in millions)

 

 

     For the years ended
December 31,
     2021   2020   2019

Cash flows from operating activities:

       

Premiums and other income received

      $ 17,146       $ 13,808       $ 13,864  

Investment income received

      10,345       10,036       9,518  

Benefit and dividend payments to policyowners and beneficiaries

      (10,983 )      (10,537 )      (10,660 ) 

Net transfers from separate accounts

      771       664       770  

Commissions, expenses and taxes paid

      (3,542 )      (3,809 )      (3,268 ) 
  

 

 

 

  

 

 

 

  

 

 

 

Net cash provided by operating activities

      13,737       10,162       10,224  
  

 

 

 

  

 

 

 

  

 

 

 

Cash flows used in investing activities:

       

Proceeds from investments sold or matured:

       

Bonds

      53,499       60,747       41,841  

Mortgage loans

      2,868       3,301       3,078  

Common and preferred stocks

      2,741       4,046       5,461  

Real estate

      298       468       941  

Other investments

      4,213       3,063       2,235  
  

 

 

 

  

 

 

 

  

 

 

 

Subtotal proceeds from investments

      63,619       71,625       53,556  
  

 

 

 

  

 

 

 

  

 

 

 

Cost of investments acquired:

       

Bonds

      (65,845 )      (64,976 )      (47,219 ) 

Mortgage loans

      (9,259 )      (5,008 )      (6,048 ) 

Common and preferred stocks

      (1,083 )      (4,075 )      (3,832 ) 

Real estate

      (247 )      (478 )      (841 ) 

Other investments

      (4,303 )      (7,537 )      (5,634 ) 
  

 

 

 

  

 

 

 

  

 

 

 

Subtotal cost of investments acquired

      (80,737 )      (82,074 )      (63,574 ) 
  

 

 

 

  

 

 

 

  

 

 

 

Net inflows of policy loans

      746       492       168  
  

 

 

 

  

 

 

 

  

 

 

 

Net cash applied to investing activities

      (16,372 )      (9,957 )      (9,850 ) 
  

 

 

 

  

 

 

 

  

 

 

 

Cash flows from financing and miscellaneous sources:

       

Surplus notes issuance

      897       -       596  

Net inflows (outflows) on deposit-type contracts

      2,877       724       (232 ) 

Other cash applied

      (592 )      (98 )      (229 ) 
  

 

 

 

  

 

 

 

  

 

 

 

Net cash provided by financing and miscellaneous sources

      3,182       626       135  
  

 

 

 

  

 

 

 

  

 

 

 

Net increase in cash and short-term investments

      547       831       509  

Cash and short-term investments, beginning of year

      3,239       2,408       1,899  
  

 

 

 

  

 

 

 

  

 

 

 

Cash and short-term investments, end of year

      $ 3,786         $ 3,239         $ 2,408    
  

 

 

 

  

 

 

 

  

 

 

 

 

The accompanying notes are an integral part of these Statutory financial statements.

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The Northwestern Mutual Life Insurance Company

Statutory Statements of Cash Flows (supplemental)

(in millions)

 

 

     For the years ended  
     December 31,  
           2021                  2020                  2019        

Supplemental disclosures of cash flow information

         
Non-cash operating, investing and financing and miscellaneous sources not included in the statutory statements of cash flows:         

Operating:

         

Dividends used to pay premiums and loans

      $     6,011        $     5,779        $     5,453  

Capitalized interest and payment in-kind investment income

      848        895        870  

Other policyowner contract activity

      299        268        245  

Employee benefit and compensation plan expenses

      80        100        155  

Investing:

         

Bond refinancings and exchanges

      3,065        3,652        13,075  

Mortgage loan refinancings and transfers

      573        520        731  

Net policy loan activity

      335        285        316  

Other invested asset exchanges

      113        163        270  

Common stock exchanges

      4        22        105  

Net premium loan activity

      131        113        125  

Net asset transfers with affiliated entities

      94        434        199  

Real estate exchange

      27        -        -  

Financing and Miscellaneous:

         

Deposit-type contract deposits and interest credited

      567        556        505  

Surplus note exchange

      5        5        24  

 

The accompanying notes are an integral part of these Statutory financial statements.

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The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

1.

Basis of Presentation

The accompanying statutory financial statements include the accounts of The Northwestern Mutual Life Insurance Company (the Company). The Company offers life, annuity and disability insurance products to the personal, business and estate markets throughout the United States of America.

In March 2020, the World Health Organization declared COVID-19, the disease caused by the novel coronavirus, a pandemic. The impact of COVID-19 has not significantly affected the Company’s financial position through December 31, 2021. The economic environment and other potential impacts of COVID-19 will continue to be monitored by the Company.

As part of an affiliated reinsurance agreement, the Company assumes the risks associated with the long-term care policies issued by its wholly-owned subsidiary, Northwestern Long Term Care Insurance Company (NLTC). See Note 9 for more information regarding reinsurance and its impacts on the Company’s statutory financial statements.

Reclassifications

Certain amounts in prior year statutory financial statement balances and footnote disclosures have been reclassified to conform to the current year presentation. See Note 5 for more information regarding this reclassification.

These statutory 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 or SAP), 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 U.S. 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 statutory statements of operations, are defined differently, (5) majority-owned 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 Company’s statutory financial statements attributable to the differences between the statutory basis of accounting and GAAP are material.

 

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 Company’s 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. Policy loans earn interest at either a fixed or variable rate, based on either an election that is made by the policyowner when applying for their policy or, for certain

 

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The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

policies, as specified by the contract. If a variable rate is elected or specified by the contract, the rate will be reset annually. Policy loans are reported at the unpaid principal balance, which approximates fair value.

Cash and Short-term Investments

Short-term investments include securities that have 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 Company’s employee and financial representative benefit plan obligations. All separate account assets are legally insulated from claims by the Company’s 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 and certain variable universal life policyowners also have the option to invest in fixed-rate investment options, which are supported by the assets held in the Company’s 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 Company’s separate accounts and Note 8 for more information regarding the Company’s employee and financial representative benefit plans.

Policy Benefit Reserves

Policy benefit reserves 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 Company’s policy benefit reserves.

Deposit funds

Deposit funds include liabilities for funding agreements, supplementary contracts and income annuities without life contingencies, and amounts left on deposit with the Company by beneficiaries or policyowners. See Note 5 for more information regarding the Company’s deposit funds.

Policyowner Dividends

All life and disability insurance policies and certain annuity policies issued by the Company are participating. All long-term care insurance policies issued by NLTC are also participating. Annually, the Company’s Board of Trustees (at its discretion) approves the amount and allocation, if any, of dividends among groups of policies issued by the Company, based on management’s recommendation. The payment of dividends on any particular policy is not guaranteed. Dividends are accrued and charged to operations when approved. The liability for policyowner dividends includes the estimated amount of annual and termination dividends. Termination dividends are additional dividends payable on whole life policies upon surrender, maturity or, for policies issued in one state, death. Depending on the type of policy they own, participating policyowners generally have the option to receive their dividends in cash, or use them as follows: reduce future premiums due, purchase additional insurance benefits, 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 premiums are reported as premiums in the statutory statements of operations but are not included in premiums received or benefit and dividend payments to policyowners and beneficiaries in the statutory statements of cash flows. The Company’s annual approval and declaration of policyowner dividends includes a guarantee of a minimum aggregate amount of annual dividends to be paid to policyowners as a group in the subsequent calendar year. If this guaranteed amount

 

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The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

is greater than the aggregate of annual dividends paid to policyowners in the subsequent year, the difference is paid in the immediately succeeding calendar year. The fact that the Company guarantees a minimum aggregate payment of annual dividends in one year does not obligate the Company to declare a dividend in future years or to guarantee any portion of dividends that may be declared in future years.

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 Company’s 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 statutory 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 contracts and income annuities without life contingencies are deposit-type transactions and are excluded from revenue in the statutory 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 Company’s 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 repurchase agreements and interest expense related to the Company’s surplus notes. Accrued investment income more than ninety days past due is a nonadmitted asset. 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. See Note 3 for more information regarding net investment income and repurchase agreements and Note 13 for more information regarding the Company’s 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 Company’s use of reinsurance.

Benefit Payments to Policyowners and Beneficiaries

Benefit payments to policyowners and beneficiaries include death, surrender, maturity, disability and long-term care benefits, as well as payments on supplementary contracts and income annuities that include life contingencies. Benefit payments on supplementary contracts and income annuities without life contingencies are deposit-type transactions and are excluded from benefits in the statutory statements of operations. Benefit payments are reported net of ceded reinsurance recoveries. See Note 9 for more information regarding the Company’s use of reinsurance.

 

NM-11

Table of Contents

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

Commissions and Operating Expenses

Commissions and other operating expenses, including costs of acquiring new insurance policies, are generally charged to expense as incurred.

Federal Income Taxes

Current federal income taxes are charged or credited to operations based upon amounts estimated to be payable or recoverable as a result of taxable operations for the current year and any adjustments to such estimates from prior years. Deferred tax assets and liabilities represent the respective future tax recoveries or obligations associated with the accumulation of temporary differences between the tax and financial statement bases of the Company’s assets and liabilities. 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 statutory statements of changes in surplus. Other net changes in deferred tax assets and liabilities are reported as direct adjustments to surplus in the statutory statements of changes in surplus.

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.

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 charged or credited to operations 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 taxes or tax benefit.

See Note 10 for more information on the Company’s income taxes.

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 $34 million and $27 million at December 31, 2021 and 2020, respectively, are included in other assets in the statutory statements of financial position and are net of accumulated depreciation of $60 million and $42 million, respectively. Non-operating software costs, net of accumulated depreciation, are nonadmitted assets and thereby excluded from assets and surplus in the statutory statements of financial position. These amounts were $423 million and $388 million at December 31, 2021 and 2020, respectively. Depreciation expense for IT equipment and software totaled $160 million, $153 million and $146 million for the years ended December 31, 2021, 2020 and 2019, 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 statutory statements of financial position. These amounts were $132 million and $117 million at December 31, 2021 and 2020, respectively. Depreciation expense for furniture, fixtures and equipment totaled $17 million, $14 million and $16 million for the years ended December 31, 2021, 2020 and 2019, respectively.

 

NM-12

Table of Contents

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

Corporate Owned Life Insurance

Through a wholly-owned subsidiary, the Company indirectly holds corporate-owned life insurance (“COLI”) to provide protection against key-person risk for certain qualified employees and to help fund certain future employee benefit expenses. See Note 3 for more information regarding COLI.

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 Company’s financial representatives, furniture, fixtures, equipment and non-operating software (net of accumulated depreciation), derivatives, and certain equity-method investments in entities for which audits are not performed are excluded from assets and surplus in the statutory statements of financial position. Changes in nonadmitted assets are reported as a direct adjustment to surplus in the statutory statements of changes in surplus.

Foreign Currency Translation

All of the Company’s insurance operations are conducted in the United States of America on a U.S. dollar-denominated basis. The Company invests in bonds, mortgage loans, equities, and other investments denominated in foreign currencies. Investments denominated in a foreign currency are remeasured to U.S. dollars at each reporting date using then-current foreign currency exchange rates. Translation gains or losses relating to fluctuations in exchange rates are reported as a change in net unrealized capital gains and losses until the related investment is sold, determined to be other-than-temporarily impaired 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 remeasured to U.S. dollars based on the actual exchange rate at the time of the transaction. See Note 4 for more information regarding the Company’s use of derivatives to mitigate exposure to fluctuations in foreign currency exchange rates.

Accounting Pronouncement Adopted

During 2021, the Company adopted revisions to Statement of Statutory Accounting Principles (SSAP) 26R - Bonds. These revisions require the Company to account for the difference of proceeds received and par on bond tenders as prepayment fees which are reported in net investment income on the statutory statements of operations. Previously, the Company treated bond tenders as sales, reporting the difference between proceeds and par as realized capital gains (losses) on the statutory statements of operations and subject to deferral to the IMR. The Company adopted the revisions to SSAP 26R prospectively as of January 1, 2021 resulting in $218 million of tenders being included in net investment income on the statutory statements of operations during the year.

Subsequent Events

The Company has evaluated events subsequent to December 31, 2021 through February 15, 2022, the date these statutory financial statements were available to be issued. Based on this evaluation, it is the Company’s opinion that other than described below, no other events subsequent to December 31, 2021 have occurred that are material to the Company’s financial position at that date or the results of its operations for the year then ended.

As part of a Spread Lending strategy, the Company issued a $550 million funding agreement under the funding-agreement-backed note (FABN) program in January 2022. See Note 5 for more information regarding the Company’s FABN program.

 

3.

Investments

Bonds

The SVO of the NAIC Investment Analysis Office evaluates the credit quality of the Company’s 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 statutory financial statements at amortized cost less any other-than-temporary impairment. Bonds rated “6” (lowest quality)

 

NM-13

Table of Contents

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

are reported at the lower of amortized cost or fair value. SVO-identified exchange-traded fund investments are reported at 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 Company’s investments in bonds.

Statement value and fair value of bonds at December 31, 2021 and 2020, summarized by asset categories required in the NAIC Annual Statement, were as follows:

 

December 31, 2021

    Reconciliation to Fair Value
         Gross   Gross    
     Statement   Unrealized   Unrealized   Fair
     Value   Gains   Losses   Value
                  
     (in millions)

U.S. Government

        $ 5,357           $ 115           $ (63 )          $ 5,409    

States, territories and possessions

      757       118       (2 )      873  

Special revenue and assessments

      17,829       687       (160 )      18,356  

All foreign governments

      5,135       262       (47 )      5,350  

Hybrid securities

      591       45       (1 )      635  

SVO-identified funds

      199       -                   -       199  

Industrial and miscellaneous

            149,253             8,844       (658 )          157,439  
  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

Total bonds

        $ 179,121         $ 10,071         $ (931 )        $ 188,261  
  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

 

December 31, 2020

    Reconciliation to Fair Value
         Gross   Gross    
     Statement   Unrealized   Unrealized   Fair
     Value   Gains   Losses   Value
                  
     (in millions)

U.S. Government

        $ 2,755           $ 168           $ (1 )          $ 2,922    

States, territories and possessions

      603       153       -       756  

Special revenue and assessments

      18,643       1,145       (4 )      19,784  

All foreign governments

      4,927       577       (4 )      5,500  

Hybrid securities

      976       69       (4 )      1,041  

SVO-identified funds

      401       -                   -       401  

Industrial and miscellaneous

            138,019             15,269       (258 )            153,030  
  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

Total bonds

        $ 166,324         $ 17,381         $ (271 )        $ 183,434  
  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

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

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The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

Statement value of bonds by SVO rating category at December 31, 2021 and 2020 was as follows:

 

December 31, 2021

    SVO Rating
     1   2   3   4   5   6   Total
     (in millions)

U.S. Government

        $ 5,357           $ -           $ -           $ -           $ -           $ -           $ 5,357    

States, territories and possessions

      609       148       -       -       -       -         757  

Special revenue and assessments

      17,615       186       28       -       -       -         17,829  

All foreign governments

      1,662       3,266       162       37       8       -         5,135  

Hybrid securities

      -       432       146       13       -       -         591  

SVO-identified funds

      -       199       -       -       -       -         199  

Industrial and miscellaneous

       69,951        64,509         7,183         4,770         2,658             182        149,253  
  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

Total bonds

        $ 95,194         $ 68,740         $ 7,519         $ 4,820         $ 2,666         $ 182         $ 179,121  
  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

 

December 31, 2020

    SVO Rating
     1   2   3   4   5   6   Total
     (in millions)

U.S. Government

        $ 2,755           $ -           $ -           $ -           $ -           $ -           $ 2,755    

States, territories and possessions

      527       76       -       -       -       -       603  

Special revenue and assessments

      18,435       178       30       -       -       -       18,643  

All foreign governments

      1,468       3,377       39       34       9       -       4,927  

Hybrid securities

      -       768       172       35       -       1       976  

SVO-identified funds

      -       401       -       -       -       -       401  

Industrial and miscellaneous

       59,331        61,398         8,797         5,208         3,160             125        138,019  
  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

Total bonds

        $ 82,516         $ 66,198         $ 9,038         $ 5,277         $ 3,169         $ 126         $ 166,324  
  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

Based on statement value, 92% and 89% of the Company’s bond portfolio was rated investment grade (i.e., rated 1 or 2 by the SVO) at December 31, 2021 and 2020, respectively.

Statement value and fair value of structured securities at December 31, 2021 and 2020, aggregated by investment grade or below investment grade (i.e., rated 3, 4, 5 or 6 by the SVO), were as follows:

 

December 31, 2021

    Investment Grade   Below Investment Grade   Total
     Statement
Value		   Fair Value   Statement
Value		                     Fair Value   Statement
Value		   Fair Value
               
     (in millions)       (in millions)     (in millions)

Residential mortgage-backed:

                

U.S. Government agencies

        $ 15,221                 $ 15,411                 $ -              $ -           $ 15,221                 $ 15,411          

Other prime

      660       663       -          -       660       663  

Other below-prime

      888       885       1          1       889       886  

Commercial mortgage-backed:

                

U.S. Government agencies

      78       80       -          -       78       80  

Conduit

      5,050       5,109       -          -       5,050       5,109  

Other asset-backed

        13,724         13,873               14                  15         13,738         13,888  
  

 

 

 

  

 

 

 

  

 

 

 

     

 

 

 

  

 

 

 

  

 

 

 

Total structured securities

        $ 35,621         $ 36,021         $ 15            $ 16         $ 35,636         $ 36,037  
  

 

 

 

  

 

 

 

  

 

 

 

     

 

 

 

  

 

 

 

  

 

 

 

 

NM-15

Table of Contents

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

December 31, 2020

             Investment Grade                       Below Investment Grade             Total
    Statement
Value		   Fair Value       Statement    
Value		         Fair Value       Statement    
Value		       Fair Value      
             
    (in millions)       (in millions)         (in millions)

Residential mortgage-backed:

              

U.S. Government agencies

       $ 16,465         $ 17,191         $ -           $ -     $ 16,465         $ 17,191  

Other prime

     661       685       2         2       663       687  

Other below-prime

     546       560       3         4       549       564  

Commercial mortgage-backed:

              

U.S. Government agencies

     70       74       -         -       70       74  

Conduit

     3,756       3,954       -         -       3,756       3,954  

Other asset-backed

     10,705       11,038       39         43       10,744       11,081  
 

 

 

 

  

 

 

 

  

 

 

 

    

 

 

 

  

 

 

 

  

 

 

 

Total structured securities

       $ 32,203           $ 33,502           $ 44             $     49           $ 32,247           $ 33,551    
 

 

 

 

  

 

 

 

  

 

 

 

    

 

 

 

  

 

 

 

  

 

 

 

Based on statement value, over 99% of the Company’s structured securities portfolio was rated as investment grade at each of December 31, 2021 and 2020. Based on statement value, the Company’s investment in residential mortgage-backed securities issued by U.S. Government agencies at December 31, 2021 and 2020 was 8% and 10%, respectively, of total bond investments.

Statement value and fair value of bonds and short-term investments by contractual maturity at December 31, 2021 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    Fair
             Value                    Value        
     
    

 

(in millions)

Due in one year or less

        $ 6,279          $ 6,314  

Due after one year through five years

      38,555        39,787  

Due after five years through ten years

      51,446        53,318  

Due after ten years

      85,640        91,641  
  

 

 

 

   

 

 

 

Total

        $ 181,920            $ 191,060    
  

 

 

 

   

 

 

 

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 $199 million and $134 million at December 31, 2021 and 2020, respectively.

 

NM-16

Table of Contents

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

The statement value of mortgage loans by collateral property type and geographic location at December 31, 2021 and 2020 was as follows:

 

December 31, 2021

    United States of America        
           East               Midwest               South               West               Foreign               Total      
                          
     (in millions)

Apartment

        $ 8,006         $ 2,577         $ 4,649         $ 9,388         $ -         $ 24,620  

Office

      3,185       790       1,100       3,519       -       8,594  

Retail

      2,237       506       1,472       1,851       -       6,066  

Warehouse/Industrial

      1,635       688       412       1,871       171       4,777  

Manufactured housing

      277       313       1,288       1,325       218       3,421  

Other

      120       60       28       158       -       366  
  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

Total

        $ 15,460           $ 4,934           $ 8,949           $ 18,112           $ 389           $ 47,844    
  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

 

December 31, 2020

    United States of America        
           East               Midwest               South               West               Foreign           Total      
                          
     (in millions)

Apartment

        $ 6,479         $ 2,170         $ 3,416         $ 7,901         $ -         $ 19,966  

Office

      3,552       871       1,127       3,192       -       8,742  

Retail

      2,318       524       1,492       1,950       -       6,284  

Warehouse/Industrial

      741       546       585       1,311       185       3,368  

Manufactured housing

      283       317       1,118       898       231       2,847  

Other

      124       60       27       150       -       361  
  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

Total

        $   13,497           $ 4,488           $ 7,765           $ 15,402           $ 416           $   41,568    
  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

The Company has mortgage loans where co-lending or participation arrangements are in place with unaffiliated third parties. Mortgage loans with co-lending or participation arrangements totaled $3.2 billion and $3.3 billion at December 31, 2021 and 2020, respectively.

All mortgage loans were current on contractual interest and principal payments at each of December 31, 2021 and 2020. Interest rates and loan-to-value (LTV) ratio information for the Company’s mortgage loans originated or refinanced during 2021 and 2020 is summarized below.

 

For mortgage loans originated or refinanced during:

          2021               2020      

Minimum interest rate

      1.50 %      1.93 % 

Maximum interest rate

      7.15 %      5.50 % 

Weighted-average LTV

      56 %      57 % 

Maximum LTV

      74 %      71 % 

LTV ratios are commonly used to assess the credit quality of commercial mortgage loans. A lower LTV ratio generally indicates a higher quality loan. At December 31, 2021 and 2020, the aggregate weighted-average LTV ratio for the mortgage loan portfolio was 52% and 54%, respectively.

 

NM-17

Table of Contents

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

The statement value of mortgage loans by collateral property type and LTV ratio at December 31, 2021 and 2020 was as follows:

 

December 31, 2021

          < 51%               51%-70%               71%-90%               > 90%               Total      
                      
    

 

(in millions)

Apartment

      $ 7,766       $ 16,240       $ 614       $ -       $ 24,620  

Office

      4,816       3,453       325       -       8,594  

Retail

      1,750       3,655       416       245       6,066  

Warehouse/Industrial

      2,154       2,623       -       -       4,777  

Manufactured housing

      1,240       2,166       15       -       3,421  

Other

      111       189       -       66       366  
  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

Total

      $ 17,837         $ 28,326         $ 1,370         $ 311         $ 47,844    
  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

 

December 31, 2020

          < 51%               51%-70%               71%-90%               > 90%               Total      
                      
    

 

(in millions)

Apartment

      $ 5,091       $ 14,268       $ 382       $ 225       $ 19,966  

Office

      4,311       3,929       502       -       8,742  

Retail

      1,797       3,230       1,141       116       6,284  

Warehouse/Industrial

      1,836       1,214       318       -       3,368  

Manufactured housing

      902       1,945       -       -       2,847  

Other

      169       44       133       15       361  
  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

Total

      $ 14,106         $ 24,630         $ 2,476         $ 356         $ 41,568    
  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

At December 31, 2021 and 2020, the Company had no mortgage loans with an LTV ratio in excess of 100%.

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 Company’s 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, 2021, 2020 and 2019, respectively. The Company had no mortgage loans at either of December 31, 2021 or December 31, 2020 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

 

NM-18

Table of Contents

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

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 statutory 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 December 31, 2021 or 2020. The Company recognized other-than-temporary impairment losses on mortgage loans of $0 and $15 million for the years ended December 31, 2021 and 2020, respectively.

Common and Preferred Stocks

Common stocks are generally reported at fair value, with $4,067 million and $4,883 million included in the statutory statements of financial position at December 31, 2021 and 2020, 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 subsidiaries.

Redeemable preferred stocks rated 1, 2 or 3 by the SVO are reported at amortized cost. Redeemable preferred stocks rated 4, 5 or 6 by the SVO are reported at the lower of amortized cost or fair value. Upon the adoption of certain revisions to SSAP 32R—Preferred Stock in 2021, perpetual preferred stocks are reported at the lower of fair value or the currently effective call price for the stock. At December 31, 2021 and 2020, the statutory statements of financial position included $175 million and $200 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 Company’s investments in common and 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, 2021 and 2020 was as follows:

 

December 31, 2021

          East               Midwest               South               West               Total      
                      
                      
     (in millions)

Apartment

      $ 315       $ 180       $ 283       $ 810       $ 1,588  

Office

      211       672       52       -       935  

Warehouse/Industrial

      257       -       -       202       459  

Other

      16       10       105       -       131  
  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

Total

      $ 799          $ 862          $ 440         $ 1,012         $ 3,113    
  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

 

December 31, 2020

          East               Midwest               South               West               Total      
                      
     (in millions)

Apartment

      $ 403         $ 187       $ 79       $ 833       $ 1,502  

Office

      213       688       62       -       963  

Warehouse/Industrial

      113       -       -       204       317  

Other

      16       53       108       -       177  
  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

Total

      $ 745          $ 928          $ 249          $ 1,037          $ 2,959     
  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

 

NM-19

Table of Contents

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

The Company’s home office properties are included above (Office/Midwest) and had an aggregate statement value of $672 million and $688 million at December 31, 2021 and 2020, respectively. The Company’s 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. 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 statutory statements of financial position using the equity method of accounting based on the Company’s 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, 2021 and 2020 was as follows:

 

     December 31,
           2021               2020      
          
     (in millions)

Securities partnerships and LLCs

      $ 11,112       $ 9,615  

Bonds

      4,748       3,296  

Real estate JVs, partnerships and LLCs

      3,989       3,435  

Common and preferred stocks

      3,083       3,499  

Cash and short-term investments

      1,964       1,100  

COLI

      1,248       1,195  

Wholly owned real estate

      1,171       1,197  

Structured settlements

      770       790  

Low income housing tax credit properties

      702       708  

Derivative instruments

      629       358  

Other net assets (liabilities)

      (232 )      (251 ) 
  

 

 

 

  

 

 

 

Total

      $ 29,184         $ 24,942    
  

 

 

 

  

 

 

 

For securities partnerships and LLCs, bonds, common and preferred stocks, COLI, 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), structured settlements, and tax credit properties, the underlying entity generally reports these investments at cost, reduced where appropriate by depreciation or amortization. Tax credit properties had 13 years of unexpired credits at December 31, 2021 and 2020, respectively. The required holding period for tax credit properties is 15 years. The amount of tax credits and other tax benefits recognized during 2021 and 2020 were $150 million and $136 million, respectively. See Note 10 for more information regarding the Company’s use of tax credits. See Note 4 for more information regarding the Company’s use of derivatives.

 

NM-20

Table of Contents

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

Investments in Subsidiaries, Controlled and Affiliated Entities

The Company’s investments in subsidiaries, controlled and affiliated entities (SCAs) are reported in the statutory statements of financial position using the equity method of accounting based on the Company’s share of the underlying entities’ audited GAAP-basis equity. At December 31, 2021 and 2020, the value of wholly-owned SCA investments were as follows:

 

     December 31, 2021    December 31, 2020
         Investment in    
SCA		        Nonadmitted    
Asset		        Statement    
Value		        Investment in    
SCA		        Nonadmitted    
Asset		        Statement    
Value
          (in millions)                      (in millions)             

NM Wealth Management Company

      $ 275          $ -          $ 275          $ 265          $ -          $ 265    
  

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

Total common stock SCAs 1

      275          -          275          265          -          265    

NML Securities Holdings, LLC

      13,533          -          13,533          11,016          -          11,016    

NML Real Estate Holdings, LLC

      2,814          -          2,814          2,467          -          2,467    

NM Investment Holdings, LLC

      1,383          -          1,383          1,371          -          1,371    

QOZ Holding Company, LLC

      234          1          233          23          -          23    

NM Pebble Valley, LLC

      224          -          224          93          -          93    

NM Investment Services, LLC

      151          -          151          126          -          126    

NM GP Holdings, LLC

      64          7          57          56          6          50    

NM Investment Management Company, LLC

      64          64          -          3          3          -    

Mason Street Advisors, LLC

      45          45          -          6          6          -    

Wysh Financial Services, LLC

      15          3          12          -          -          -    

NM-SAS, LLC

      11          7          4          12          7          5    

NM Career Distribution Holdings, LLC

      3          3          -          2          2          -    

GRO-SUB, LLC

      2          2          -          2          2          -    

NM QOZ Fund II, LLC

      -          -          -          45          -          45    

NM QOZ FUND, LLC

      -          -          -          16          -          16    

GRO, LLC

      -          -          -          -          -          -    

Venture Studio Holdings, LLC

      -          -          -          -          -          -    
  

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

Total other investment SCAs 2

      18,543          132          18,411          15,238          26          15,212    
  

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

Total investments in SCAs

      $ 18,818          $ 132          $ 18,686          $ 15,503          $ 26          $ 15,477    
  

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

 

1 

Reported in common and preferred stocks in the statutory statements of financial position.

2 

Reported in other investments in the statutory statements of financial position.

Investment filings for all common stock SCAs were submitted to the NAIC during 2021. In all cases, the NAIC accepted the statement value.

 

NM-21

Table of Contents

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

Net Investment Income

The sources of net investment income for the years ended December 31, 2021, 2020 and 2019 were as follows:

 

     For the years ended December 31,
           2021               2020               2019      
         (in millions)    

Bonds

      $ 6,286       $ 6,154       $ 6,400  

Mortgage loans

      1,829       1,717       1,676  

Common and preferred stocks

      194       188       146  

Real estate

      279       279       288  

Other investments

      1,200       2,122       1,205  

Policy loans

      1,148       1,180       1,180  

Amortization of IMR

      422       255       133  
  

 

 

 

  

 

 

 

  

 

 

 

Gross investment income

      11,358       11,895       11,028  

Less: investment expenses

      911       817       879  
  

 

 

 

  

 

 

 

  

 

 

 

Net investment income

      $ 10,447         $ 11,078         $ 10,149    
  

 

 

 

  

 

 

 

  

 

 

 

For the years ended December 31, 2021, 2020 and 2019 bond investment income included $392 million, $82 million and $72 million of prepayment fees, respectively, generated as a result of 321, 127 and 108 securities, respectively, sold, disposed, tendered or otherwise redeemed as a result of a callable feature.

Realized 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 statutory 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.

Realized capital gains and losses for the years ended December 31, 2021, 2020 and 2019 were as follows:

 

     For the year ended   For the year ended   For the year ended
     December 31, 2021   December 31, 2020   December 31, 2019
             Net           Net           Net
                 Realized               Realized               Realized  
         Realized           Realized           Gains           Realized           Realized           Gains           Realized           Realized           Gains    
     Gains   Losses   (Losses)   Gains   Losses   (Losses)   Gains   Losses   (Losses)
        

 

(in millions)

          

 

(in millions)

          

 

(in millions)

    

Bonds

      $ 1,637       $ (395 )      $ 1,242       $ 2,724       $ (861)       $ 1,863       $ 1,094       $ (369 )      $ 725  

Mortgage loans

      -       (2 )      (2 )      -       (22 )      (22 )      8       (3 )      5  

Common and preferred stocks

      494       (39 )      455       461       (643 )      (182 )      662       (291 )      371  

Real estate

      153       (42 )      111       253       -       253       502       (6 )      496  

Other investments

      1,506       (1,220 )      286       1,350       (1,302 )      48       1,005       (1,053 )      (48 ) 
  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

Subtotal

      $ 3,790           $ (1,698 )            2,092           $ 4,788           $ (2,828 )            1,960           $ 3,271           $ (1,722 )          1,549      
  

 

 

 

  

 

 

 

    

 

 

 

  

 

 

 

    

 

 

 

  

 

 

 

  

Less: IMR net gains (losses) before taxes

 

     1,556           2,064           674  

Less: Capital gains tax (benefit) expense

 

     233           (2 )          173  
 

 

 

 

      

 

 

 

      

 

 

 

Net realized capital (losses) gains

 

       $ 303               $ (102 )              $ 702      
      

 

 

 

      

 

 

 

      

 

 

 

 

NM-22

Table of Contents

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

Realized capital gains and losses are generally the result of normal investment trading activity. Proceeds from the sale of bonds totaled $36 billion, $48 billion, and $30 billion for the years ended December 31, 2021, 2020 and 2019, 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 Company’s 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 investment’s 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 issuer’s ability to remit all contractual interest and principal payments and the Company’s ability and intent to hold the investment until the earlier of a recovery in value or maturity. The Company’s 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 impairment 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 Company’s 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 Company’s partnership interest.

 

NM-23

Table of Contents

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

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, 2021, 2020 and 2019 were as follows:

 

     For the years ended December 31,
             2021                   2020                   2019        
Bonds, common and preferred stocks:        (in millions)    

Structured securities

      $ -       $ -       $ (1 ) 

Foreign government

      -       (34 )      -  

Consumer discretionary

      (44 )      (51 )      (84 ) 

Industrials

      (20 )      (42 )      (9 ) 

Energy

      -       (59 )      (44 ) 

Basic materials

      -       -       (1 ) 

Other

      -       (13 )      -  
  

 

 

 

  

 

 

 

  

 

 

 

Subtotal

      (64 )      (199 )      (139 ) 

Mortgage loans

      -       (15 )      -  

Real estate

      (39 )      -       (6 ) 

Other investments:

       

Securities partnerships

      (2 )      (6 )      (78 ) 

Energy and transportation

      (6 )      -       -  
  

 

 

 

  

 

 

 

  

 

 

 

Subtotal

      (8 )      (6 )      (78 ) 
  

 

 

 

  

 

 

 

  

 

 

 

Total

      $ (111 )        $ (220 )        $ (223 )   
  

 

 

 

  

 

 

 

  

 

 

 

In addition to the realized capital losses above, $61 million, $37 million and $0.2 million of other-than-temporary impairments were recorded by the Company’s unconsolidated non-insurance subsidiaries for the years ended December 31, 2021, 2020 and 2019, respectively. The decline in the Company’s equity in these subsidiaries resulting from these impairments is reported in changes in net unrealized capital gains and losses in the statutory statements of changes in surplus.

Unrealized Capital Gains and Losses

Unrealized capital gains and losses include changes in the fair value of common and some preferred stocks, other investments and currency translation adjustments on foreign-denominated bonds and mortgage loans and are reported net of any related changes in deferred taxes in the statutory statements of changes in surplus. Changes in the Company’s equity-method share of the undistributed earnings of partnerships, JVs, LLCs and unconsolidated subsidiaries are also reported as changes in unrealized capital gains and losses. 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.

Changes in net unrealized capital gains and losses for the years ended December 31, 2021, 2020 and 2019 were as follows:

 

     For the years ended December 31,
             2021                   2020                   2019        
              
     (in millions)

Bonds

      $ (470 )      $ 606       $ 152  

Mortgage loans

      (10 )      33       11  

Common and preferred stocks

      260       520       304  

Other investments

      3,969       (251 )      727  
  

 

 

 

  

 

 

 

  

 

 

 

Subtotal

      3,749       908       1,194  

Change in deferred taxes

      (260 )      (109 )      (53 ) 
  

 

 

 

  

 

 

 

  

 

 

 

Change in net unrealized capital gains and losses

      $ 3,489       $ 799       $ 1,141  
  

 

 

 

  

 

 

 

  

 

 

 

 

NM-24

Table of Contents

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

Changes in net unrealized capital gains and losses for the years ended December 31, 2021, 2020 and 2019 included the reversal of previously unrealized capital gains of $(236) million, $(1,428) million and $(369) million, respectively, related to distributions of accumulated net earnings made to the Company from unconsolidated non-insurance subsidiaries.

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, 2021 and 2020 were as follows:

 

     December 31, 2021
     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

      $ 29,396        $ 28,791        $ (605 )       $ 7,072        $ 6,693        $ (379 ) 

Structured Securities

      15,343        15,167        (176 )       1,613        1,560        (53 ) 

Common and preferred stocks

      188        169        (19 )       62        49        (13 ) 
  

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

Total

      $ 44,927        $     44,127        $ (800 )       $ 8,747        $ 8,302        $ (445 ) 
  

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

 

     December 31, 2020  
     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

      $ 3,656        $ 3,533        $ (123)        $ 2,917        $ 2,668        $ (249)  

Structured Securities

      2,013        1,993        $ (20)        627        622        (5)  

Common and preferred stocks

      150        131        (19)        159        123        (36)  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total

      $ 5,819        $ 5,657        $ (162)        $ 3,703        $ 3,413        $ (290)  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

All of these bonds were current on contractual interest and principal payments at December 31, 2021. 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.

For securities without a full SVO credit analysis performed that are current on principal and interest the statutory basis of accounting allows the Company to assign a NAIC designation of 5* to such securities for reporting purposes. At December 31, 2021 and 2020, the statement and fair values of NAIC 5* securities were as follows:

 

    December 31,
    2021   2020
            Number of        
Securities		         Statement      
Value		   Fair
      Value      		         Number of      
Securities		       Statement    
Value		   Fair
      Value      
                         
    ($ in millions)   ($ in millions)
Bonds     72       $ 1,613       $ 1,641       51       $ 1,300       $ 1,279  

Preferred stock

     2       8       8       9       127       155  

Loan-backed and structured securities

     1       -       -       2       6       8  
 

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

Total

     75       $ 1,621       $ 1,649       62       $ 1,433       $ 1,442  
 

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

 

NM-25

Table of Contents

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

Repurchase Agreements

The Company participates in bilateral and tri-party repurchase programs with U.S. domiciled unaffiliated third parties. The agreements under these programs require the Company to sell securities and simultaneously agree to repurchase the same (or substantially the same) securities prior to the securities reaching their maturity. These repurchase agreements are intended to enhance the yield of the Company’s investment portfolio. The agreements are accounted for as collateralized borrowings with the transferred security proceeds recorded as other liabilities in the statutory statements of financial position while the underlying securities continue to be recorded as investments by the Company. Investment earnings are recorded as net investment income and the difference between the transferred security proceeds and the amount at which the securities will be subsequently reacquired is amortized into net investment income as interest expense in the statutory statements of operations.

The Company manages counterparty and other risks associated with its repurchase program by adhering to guidelines that require counterparties to provide the Company with cash or other high-quality collateral of no less than 97% of the fair value of the securities on loan plus accrued interest and by setting conservative standards for the Company’s reinvestment of cash collateral received. At December 31, 2021 and 2020, the liability to return the repurchase agreement cash collateral was $1.3 billion, and is reported as other liabilities in the statutory statements of financial position.

During 2021 and 2020, cash collateral received, and the corresponding liability to return that collateral, had the following characteristics:

 

For the quarter ended:

          Maximum      
Balance		       Ending Balance   
     (in millions)  

March 31, 2021

      $ 1,315          $ 1,287    

June 30, 2021

      $ 1,295          $ 1,292    

September 30, 2021

      $ 1,300          $ 1,280    

December 31, 2021

      $ 1,281          $ 1,277    

March 31, 2020

      $ 1,990          $ 1,862    

June 30, 2020

      $ 1,866          $ 1,278    

September 30, 2020

      $ 1,332          $ 1,319    

December 31, 2020

      $ 1,319          $ 1,315    

During 2021 and 2020, securities sold under repurchase agreements included the following characteristics:

 

For the quarter ended:

   Maximum Balance
(Fair Value)		   Ending Balance
(Fair Value)		   Ending Balance
(Statement Value)
             
    (in millions)

March 31, 2021

     $ 1,350         $ 1,317         $ 1,287    

June 30, 2021

     $ 1,329       $ 1,318       $ 1,292  

September 30, 2021

     $ 1,334       $ 1,311       $ 1,280  

December 31, 2021

     $ 1,316       $ 1,302       $ 1,277  

March 31, 2020

     $ 2,033       $ 1,907       $ 1,862  

June 30, 2020

     $ 1,911       $ 1,303       $ 1,278  

September 30, 2020

     $ 1,367       $ 1,350       $ 1,319  

December 31, 2020

     $ 1,353       $ 1,341       $ 1,315  

 

NM-26

Table of Contents

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

The repurchase agreements have overnight contractual maturities. Securities sold under the repurchase agreements consisted of U.S. Treasury securities and U.S. Government agency-issued residential mortgage-backed securities. All securities sold had NAIC ratings of 1.

The amortized cost, fair value and remaining term to maturity of reinvested repurchase agreement collateral held by the Company at December 31, 2021 and 2020 was as follows:

 

     December 31, 2021    December 31, 2020
     Amortized
Cost		    Fair Value    Amortized
Cost		    Fair Value
                     
     (in millions)    (in millions)

30 days or less

      $ 259        $ 259        $ 554        $ 554  

31-60 days

      204        204        165        165  

61-90 days

      70        70        39        39  

91-120 days

      26        26        2        2  

121-180 days

      13        13        138        138  

181-365 days

      134        134        115        115  

1-2 years

      330        331        54        54  

2-3 years

      155        155        214        215  

Over 3 years

      91        91        46        46  
  

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

Total

      $ 1,282          $ 1,283          $ 1,327          $ 1,328    
  

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

If the securities sold under the repurchase agreements or the reinvested collateral become less liquid, the Company has the liquidity resources within its general account available to meet potential cash demands when securities are required to be repurchased.

Restricted Assets

Certain of the Company’s 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 repurchase agreements and derivative transactions.

At December 31, 2021 and 2020, 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 Company’s derivative portfolio.

The statement value of restricted assets at December 31, 2021 and 2020, summarized by type of restriction, was as follows:

 

                 December 31,               
     2021      2020  
               
     (in millions)  

Loaned securities - repurchase agreements

      $ 1,277        $ 1,315  

Federal Home Loan Bank of Chicago pledged collateral

      3,705        1,359  

Derivative transactions

      121        242  

Federal Home Loan Bank of Chicago stock

      92        37  

Securities on deposit with states

      3        4  
  

 

 

     

 

 

  

Total restricted assets

      $ 5,198        $ 2,957  
  

 

 

     

 

 

  

 

NM-27

Table of Contents

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

Collateral Assets Received

The statement and fair values of collateral received at December 31, 2021 and 2020 were as follows:

 

                December 31,             
2021		               December 31,             
2020
    Statement
Value		   Fair Value   Statement
Value		   Fair Value
                 
    (in millions)   (in millions)

Repurchase agreement collateral

     $ 1,277       $ 1,302       $ 1,315       $ 1,341  

Derivative collateral

     898       898       154       154  

Mortgage loan escrow

     103       103       75       75  

Real estate escrow and security deposits

     4       4       4       4  
 

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

Total collateral assets

     $ 2,282       $ 2,307       $ 1,548       $ 1,574  
 

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

The Company received $0 and $1 million of derivative collateral related to the separate accounts at December 31, 2021 and 2020, respectively. The obligation to return this collateral is reported in separate account liabilities in the statutory statements of financial position. The obligation to return all other collateral received is reported as other liabilities in the statutory 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 Company’s over-the-counter derivatives are bilateral contracts between two counterparties. The Company’s 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.

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.

 

NM-28

Table of Contents

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

The fair value of collateral held by the Company under derivative support agreements at December 31, 2021 and 2020 was as follows:

 

                 December 31,               
         2021              2020      
               
     (in millions)  

Bonds:

      

General Account

      $ 36        $ 83  

Separate Accounts

      -        -  
  

 

 

     

 

 

  

Total bond collateral

      $ 36        $ 83  
  

 

 

     

 

 

  

Cash:

      

General Account

      $ 898        $ 153  

Separate Accounts

      -        1  
  

 

 

     

 

 

  

Total cash collateral

      $ 898            $ 154    
  

 

 

     

 

 

  

Bond collateral held in the general account is not reported in the statutory statements of financial position. Cash collateral held in the general account is reported as cash and short-term investments in the statutory statements of financial position, while the Company’s obligation to return the collateral is reported as other liabilities. Separate account cash collateral assets and related liabilities is reported in the separate account assets and liabilities, respectively, in the statutory statements of financial position.

The fair value of collateral posted by the Company at December 31, 2021 and 2020 was as follows:

 

                 December 31,             
     2021   2020
          
     (in millions)

Bonds posted for derivative support agreements:

     

General Account

      $ 39       $ 12  

Separate Accounts

      2       -  

Bonds posted for futures agreements:

     

General Account

      41       92  

Separate Accounts

      17       15  
  

 

 

 

  

 

 

 

    Total bond collateral

      $ 99         $ 119    
  

 

 

 

  

 

 

 

Cash posted for derivative support agreements:

     

General Account

      $ 13       $ 117  

Separate Accounts

      1       -  

Cash posted for futures agreements:

     

General Account

      4       4  

Separate Accounts

      4       2  
  

 

 

 

  

 

 

 

    Total cash collateral

      $ 22       $ 123  
  

 

 

 

  

 

 

 

 

NM-29

Table of Contents

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

Bonds posted as collateral are reported as bonds and cash posted as collateral is reported as a receivable included in other investments in the statutory 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 or fair value hedges, with the related derivative instrument reported at amortized cost in the statutory statements of financial position. No component of these derivatives’ economic gain or loss was excluded from the assessment of hedge effectiveness.

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 Company’s 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.

Interest rate swaps are used to mitigate interest rate risk for investments in fixed and variable interest rate bonds and fixed rate liabilities over a period of up to 12 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 30 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 statutory 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.

The average fair value of outstanding derivative assets not designated as hedging instruments was $187 million and $142 million for the years ended December 31, 2021 and 2020, respectively. The average fair value of outstanding derivative liabilities not designated as hedging instruments was $38 million and $30 million for the years ended December 31, 2021 and 2020, respectively.

Interest rate caps and floors are used to mitigate the risk of a significant and sustained increase or decrease in interest rates for certain of the Company’s debt instruments and insurance and annuity products. Interest rate caps and floors entitle the Company to pay or receive payments from a counterparty if market interest rates rise above or decline below a specified level. Amounts paid or 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 10 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.

 

NM-30

Table of Contents

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

Swaptions are used to mitigate the asset/liability management risk of a significant and sustained increase in interest rates for certain of the Company’s 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 Company’s mortgage dollar roll program, TBAs or mortgage-backed securities are transferred to counterparties with a corresponding agreement to purchase a substantially similar security for later settlement. These transactions do not qualify as secured borrowings and are accounted for as derivatives.

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.

Foreign currency swaps are used to mitigate the foreign exchange risk for investments in bonds denominated in foreign currencies over a period of up to 15 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.

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, 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.

Warrants are acquired through the purchase of private bonds. Warrants provide the Company the right to purchase an underlying financial instrument at a given price and time. Changes in the value of the underlying financial instrument are reported as a change in unrealized capital gains or losses. When the warrant is exercised, the derivative is terminated, and the current value becomes the basis for the new financial instrument.

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.

Investment Replications

Equity total return swap replications are used in conjunction with the purchase of cash market instruments to replicate investment 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 a

 

NM-31

Table of Contents

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

variable equity index return and a specified fixed rate of return 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.

Interest rate swap replications are used to replicate a bond investment through the use of cash market instruments combined with an interest rate swap. Interest rate swaps obligate the Company and a counterparty to exchange amounts based on the difference between a variable interest rate and a specified fixed interest rate applied to the notional amount of the contract. Interest rate swap replications, including the derivative components, are reported at amortized cost.

The effects of the Company’s use of derivative instruments on the statutory statements of financial position at December 31, 2021 and 2020 were as follows:

 

     December 31, 2021
           Notional                      Statement Value                            Fair Value             
     Amount    Assets    Liabilities   Assets    Liabilities
               (in millions)         

Derivatives designated as hedging instruments:

              

Interest rate contracts:

              

Interest rate floors

    $ 400      $ 1      $ -     $ 14      $ -  

Interest rate swaps

      1,204        -        -       5        (24 ) 

Foreign exchange contracts:

              

Foreign currency swaps

      12,492        412        (287 )      788        (147 ) 

Derivatives not designated as hedging instruments:

              

Interest rate contracts:

              

Interest rate caps

      1,596        15        -       15        -  

Interest rate floors

      200        28        -       28        -  

Interest rate swaps

      2,243        20        (16 )      20        (16 ) 

Swaptions

      4,471        90        -       90        -  

Fixed income futures

      9,534        -        -       -        -  

Fixed income forwards

      1,750        2        -       2        -  

Foreign exchange contracts:

              

Foreign currency forwards

      1,422        49        (4 )      49        (4 ) 

Foreign currency swaps

      148        12        (4 )      12        (4 ) 

Credit contracts:

              

Purchased credit default swaps

      -        -        -       -        -  

Warrants

      -        -        -       -        -  

Investment replications

              

Interest rate contracts:

              

Interest rate swaps

      6        -        -       -        -  
     

 

 

 

   

 

 

 

  

 

 

 

   

 

 

 

Total derivatives

         $ 629        $ (311 )      $ 1,023        $ (195 ) 
     

 

 

 

   

 

 

 

  

 

 

 

   

 

 

 

 

NM-32

Table of Contents

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

     December 31, 2020
           Notional                      Statement Value                            Fair Value             
     Amount    Assets    Liabilities   Assets    Liabilities
               (in millions)         

Derivatives designated as hedging instruments:

              

Interest rate contracts:

              

Interest rate floors

    $ 400      $ 2      $ -     $ 32      $ -  

Interest rate swaps

      350        -        -       9        -  

Foreign exchange contracts:

              

Foreign currency swaps

      11,592        258        (599 )      432        (477 ) 

Derivatives not designated as hedging instruments:

              

Interest rate contracts:

              

Interest rate caps

      1,338        1        -       1        -  

Interest rate floors

      200        35        -       35        -  

Interest rate swaps

      168        8        -       8        -  

Swaptions

      3,656        26        -       26        -  

Fixed income futures

      12,536        -        -       -        -  

Fixed income forwards

      2,295        15        (1 )      15        (1 ) 

Foreign exchange contracts:

              

Foreign currency forwards

      1,771        4        (16 )      4        (16 ) 

Foreign currency swaps

      132        9        (6 )      9        (6 ) 

Credit contracts:

              

Purchased credit default swaps

      -        -        -       -        -  

Warrants

      -        -        -       -        -  

Investment replications

              

Interest rate contracts:

              

Interest rate swaps

      6        -        -       -        -  
     

 

 

 

   

 

 

 

  

 

 

 

   

 

 

 

Total derivatives

         $ 358        $ (622 )      $ 571        $ (500 ) 
     

 

 

 

   

 

 

 

  

 

 

 

   

 

 

 

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 statutory statements of financial position.

 

NM-33

Table of Contents

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

The effects of the Company’s use of derivative instruments on the statutory statements of operations and changes in surplus for the years ended December 31, 2021, 2020 and 2019 were as follows:

 

     For the year ended December 31, 2021
         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

    $ -     $ -     $ 11  

Interest rate swaps

      -       -       5  

Foreign exchange contracts:

       

Foreign currency swaps

      467       4       153  

Derivatives not designated as hedging instruments:

       

Interest rate contracts:

       

Interest rate caps

      12       -       (2 ) 

Interest rate floors

      (7 )      -       2  

Interest rate swaps

      (4 )      1       3  

Swaptions

      27       -       (9 ) 

Fixed income futures

      (44 )      273       -  

Fixed income forwards

      (12 )      (5 )      -  

Foreign exchange contracts:

       

Foreign currency forwards

      58       13       -  

Foreign currency swaps

      5       -       2  

Equity contracts:

       

Equity total return swaps

      -       -       -  

Equity index futures

      -       -       -  

Credit contracts:

       

Purchased credit default swaps

      -       -       -  

Warrants

      (2 )      -       -  

Investment replications

       

Interest rate contracts:

       

Interest rate swaps

      -       -       -  

Equity contracts:

       

Equity total return swaps

      -       -       -  
  

 

 

 

  

 

 

 

  

 

 

 

Total derivatives

      $ 500       $ 286       $ 165  
  

 

 

 

  

 

 

 

  

 

 

 

 

NM-34

Table of Contents

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

     For the year ended December 31, 2020
         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

    $ -     $ -     $ 15  

Interest rate swaps

      -       -       1  

Foreign exchange contracts:

       

Foreign currency swaps

      (641 )      29       158  

Derivatives not designated as hedging instruments:

       

Interest rate contracts:

       

Interest rate caps

      -       -       (1 ) 

Interest rate floors

      9       27       -  

Interest rate swaps

      6       -       1  

Swaptions

      (3 )      -       (9 ) 

Fixed income futures

      12       (121 )      -  

Fixed income forwards

      13       23       -  

Foreign exchange contracts:

       

Foreign currency forwards

      2       (83 )      -  

Foreign currency swaps

      (1 )      -       2  

Equity contracts:

       

Equity total return swaps

      -       -       -  

Equity index futures

      -       -       -  

Credit contracts:

       

Purchased credit default swaps

      -       (1 )      -  

Warrants

      (40 )      117       -  

Investment replications

       

Interest rate contracts:

       

Interest rate swaps

      -       5       -  

Equity contracts:

       

Equity total return swaps

      -       52       -  
  

 

 

 

  

 

 

 

  

 

 

 

Total derivatives

      $ (643 )      $ 48       $ 167  
  

 

 

 

  

 

 

 

  

 

 

 

 

NM-35

Table of Contents

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

     For the year ended December 31, 2019
         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

    $ -     $ -     $ 8  

Interest rate swaps

      -       -       -  

Foreign exchange contracts:

       

Foreign currency swaps

      (188 )      (3 )      139  

Derivatives not designated as hedging instruments:

       

Interest rate contracts:

       

Interest rate caps

      (3 )      -       (2 ) 

Interest rate floors

      11       -       (1 ) 

Interest rate swaps

      (9 )      4       1  

Swaptions

      (34 )      -       (9 ) 

Fixed income futures

      7       (123 )      -  

Fixed income forwards

      -       4       -  

Foreign exchange contracts:

       

Foreign currency forwards

      (17 )      46       -  

Foreign currency swaps

      (1 )      -       1  

Equity contracts:

       

Equity total return swaps

      -       68       (9 ) 

Equity index futures

      -       -       -  

Credit contracts:

       

Purchased credit default swaps

      -       -       -  

Warrants

      26       -       -  

Investment replications

       

Interest rate contracts:

       

Interest rate swaps

      -       -       -  

Equity contracts:

       

Equity total return swaps

      -       -       -  
  

 

 

 

  

 

 

 

  

 

 

 

Total derivatives

      $ (208 )      $ (4 )      $ 128  
  

 

 

 

  

 

 

 

  

 

 

 

There were no changes in net unrealized gains or losses resulting from derivatives that no longer qualify for hedge accounting for the years ended December 31, 2021, 2020 and 2019.

 

NM-36

Table of Contents

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

5.

Policy Benefit Reserves and Deposit Funds

General account policy benefit reserves at December 31, 2021 and 2020 were as follows:

 

     December 31,
           2021                2020      
           
     (in millions)

Life insurance reserves

      $ 205,037        $ 194,110  

Disability and long-term care active life reserves

      6,728        6,064  

Disability and long-term care unpaid claims and claim reserves

      5,455        5,342  

Annuity reserves

      12,814        11,849  
  

 

 

 

   

 

 

 

Total policy benefit reserves

      $     230,034          $   217,365  
  

 

 

 

   

 

 

 

See Note 9 for more information regarding the Company’s use of reinsurance and the related impact on policy benefit reserves.

Life Insurance Reserves

Policy and contract reserves are determined in accordance with standard valuation methods approved by the OCI and are computed in accordance with standard actuarial methodology based on the Commissioners’ Reserve Valuation Method (CRVM) or the net level premium method. The reserves are based on assumptions for interest, mortality and other risks insured. Effective January 1, 2017, the OCI required a principles-based approach (“PBR”) for the calculation of its policy benefit reserves with a three-year phase-in period from the effective date. PBR requires reserves to be calculated using company experience assumptions with margin subject to a floor based on similar prescribed methods and assumptions used with existing in-force business. The Company adopted PBR for certain new life insurance products issued on or after July 1, 2019 and for all remaining life insurance policies issued on or after January 1, 2020.

Life insurance reserve calculations, using basic data, determine tabular interest, tabular cost, and tabular cost less actual reserves released. 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.

As of December 31, 2021, the Company had nearly $2.1 trillion of total life insurance in force, including $23 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 Company’s 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.

Additional premiums or charges are assessed 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.

 

NM-37

Table of Contents

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

At December 31, 2021 and 2020, the account and cash values related to the Company’s general account life reserves were as follows:

 

     Account Value    Cash Value    Reserves
                               
     December 31,
           2021                2020                2021                2020                2021                2020      
                               
               (in millions)          

Subject to discretionary withdrawal, surrender values, or policy loans:

                  

Universal life

      $ 11,609        $ 8,449        $ 11,366        $ 8,185        $ 11,389        $ 8,211  

Universal life with secondary guarantees

      14        14        12        12        32        29  

Other permanent cash value life insurance

      -        -        177,829        171,031        182,118        174,799  

Variable life

      -        -        -        -        953        943  

Variable universal life

      6        5        6        5        37        27  

Not subject to discretionary withdrawal or no cash value:

                  

Term policies without cash value

      -        -        -        -        5,039        4,830  

Accidental death benefits

      -        -        -        -        10        11  

Disability - active lives

      -        -        -        -        971        1,100  

Disability - disabled lives

      -        -        -        -        1,475        1,297  

Miscellaneous reserves

      -        -        -        -        3,003        2,894  
  

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

Total gross life reserves

      11,629        8,468        189,213        179,233        205,027        194,141  

Reinsurance ceded

      -        -        -        -        1,203        1,216  
  

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

Total net life insurance

      $ 11,629        $ 8,468        $ 189,213        $ 179,233        $ 203,824        $ 192,925  
  

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

At December 31, 2021 and 2020, the withdrawal characteristics of the Company’s separate account life reserves were as follows:

 

     Account Value    Cash Value    Reserves
                               
     December 31,
           2021                2020                2021                2020                2021                2020      
                               
               (in millions)          

Subject to discretionary withdrawal, surrender values or policy loans:

                  

Variable life

      $ -        $ -        $ 10,251        $ 9,086        $ 9,350        $ 8,199  

Variable universal life

      1,817        1,375        1,718        1,308        1,687        1,287  
  

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

Total gross life reserves

      $ 1,817        $ 1,375        $ 11,969        $ 10,394        $ 11,037        $ 9,486  
  

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

Reinsurance ceded

      -        -        -        -        -        -  
  

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

Total net life insurance

      $ 1,817        $ 1,375        $ 11,969        $ 10,394        $ 11,037        $ 9,486  
  

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

 

NM-38

Table of Contents

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

Following are amounts reported as net life insurance reserves in the Company’s Annual Statement, which agree with the amounts reported as net life insurance reserves in the table above at December 31, 2021 and 2020.

 

     December 31,
           2021               2020      
          
     ($ in millions)

From Life, Accident & Health Annual Statement:

     

Life insurance

        $ 201,186           $ 190,270    

Accidental death benefits

      10       11  

Disability - active lives

      971       1,100  

Disability - disabled lives

      1,473       1,297  

Miscellaneous reserves

      184       247  
  

 

 

 

  

 

 

 

Subtotal net life insurance

      203,824       192,925  

From Separate Accounts Annual Statement:

     

Life insurance

      11,037       9,486  
  

 

 

 

  

 

 

 

Combined Total

      $ 214,861       $ 202,411  
  

 

 

 

  

 

 

 

Annuity Reserves

For annuities and supplementary contracts, policy and contract reserves are calculated using Commissioners’ Annuity Reserve Valuation Method (CARVM), Valuation Manual Section 21 (VM-21) for variable annuity products and Actuarial Guideline 33 for all other products. Other deferred annuity reserves are based on policy value, with additional reserves held to reflect guarantees under these contracts. Immediate annuity reserves are based on the present value of expected benefit payments. Changes in future policy benefit reserves on supplementary contracts and income annuities without life contingencies are deposit-type transactions and are excluded from net additions to policy benefit reserves in the statutory statements of operations.

During 2020, valuation interest rate assumptions used in certain annuity reserve calculations were reviewed and updated, and the corresponding reserves were increased by $126 million. This was accounted for as a change in valuation basis and is included in other surplus changes in the statutory statements of changes in surplus.

Deposit Funds

Deposit fund liabilities at December 31, 2021 and 2020 were $8.3 billion and $4.9 billion, respectively. Liabilities related to spread lending were previously presented within policy benefit reserves on the statutory statements of financial position. Due to the increase in spread lending and related liabilities, the Company will now disclose deposit fund liabilities separate from policy benefit reserves on the statutory statements of financial position. Deposit funds primarily represent reserves for funding agreements, supplementary contracts and income annuities without life contingencies, and amounts left on deposit with the Company by beneficiaries or policyowners. Beneficiaries of the Company’s life insurance policies can choose to receive their death benefit in a single lump sum payment or through a supplementary contract consisting of a series of scheduled payments. If the beneficiary does not affirmatively choose a supplementary contract, the proceeds are automatically paid to the beneficiary in a single lump sum.

Prior to November 1, 2013, beneficiaries of the Company’s 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 Company’s 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.

 

NM-39

Table of Contents

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

The total deposit fund liability for Northwestern Access Fund account balances held by the Company was $292 million and $310 million at December 31, 2021 and 2020, respectively. Accounts were credited with interest at annual rates ranging from 0.01% to 3.50% and 0.02% to 3.50% during 2021 and 2020, respectively. The crediting interest rates changed 13 times and 28 times during 2021 and 2020, respectively.

In May 2020, the Company became a member of the Federal Home Loan Bank of Chicago (FHLBC) and began issuing funding agreements to FHLBC in exchange for cash. Funding agreements are issued through the general account and the sales proceeds are invested as part of a spread lending strategy. The Company is required to pledge collateral to the FHLBC in the form of eligible securities when funding agreements are issued. Upon an event of default by the Company, the FHLBC’s recovery on the collateral is limited to the outstanding amount of the Company’s liability to the FHLBC.

At December 31, 2021 and 2020, the Company held $92 million and $37 million of FHLBC activity stock, respectively. The amount of collateral pledged to the FHLBC was as follows:

 

     Statement
Value (1)		    Fair
Value (1)
           
     (in millions)

December 31, 2021

      $ 3,705          $ 3,948    

December 31, 2020

      1,359        1,525  

 

(1) 

Includes amounts in excess of minimum requirements

The maximum amount of collateral pledged to the FHLBC was as follows:

 

     Statement
Value		      Fair Value      Amount Borrowed at
Time of Max Collateral		  
            (in millions)         

December 31, 2021

    $ 3,711      $ 3,958      $ 1,952  

December 31, 2020

      1,359        1,525        886  

The amount borrowed from FHLBC, in the form of funding agreements, was as follows:

 

     December 31,    December 31,
           2021                2020      
     (in millions)    (in millions)

Borrowed

      $ 2,052          $ 886    

Deposit fund reserves

      $ 2,052        $ 886  

Max borrowed during the year

      $ 2,052        $ 886  

Borrowing capacity as determined by insurer

      $ 8,000        $ 8,000  

The Company does not have prepayment obligations for these funding agreements.

During December 2020, the Company established a $10 billion global FABN program. As part of this program, a special purpose entity issues medium term notes (Notes) to investors. Note proceeds are used to purchase funding agreements from the Company. The issued funding agreements have payment terms substantially identical to the Notes. As of December 31, 2021, the Company had issued and outstanding funding agreements of $2 billion under the FABN program.

 

NM-40

Table of Contents

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

Withdrawal Characteristics of Annuity Reserves and Deposit Funds

At December 31, 2021 and 2020, the withdrawal characteristics of the Company’s general account and separate account annuity reserves and deposit funds were as follows:

 

     General Account     Separate Account     Total  
    

 

    

 

    

 

  
    

 

December 31,

  
     2021     2020     2021     2020     2021     2020  
    

 

    

 

    

 

    

 

    

 

    

 

  
    

 

(in millions)

  

Individual Annuities

             

Subject to discretionary withdrawal

             

- with market value adjustment

      $ 59       $ 70       $ -       $ -       $ 59       $ 70  

- at book value less surrender charge of 5% or more

      62       71       -       -       62       71  

- at fair value

      -       -       24,137       22,203       24,137       22,203  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total with market value adjustment or at fair value

      121       141       24,137       22,203       24,258       22,344  

- at book value without adjustment

      1,779       1,857       -       -       1,779       1,857  

Not subject to discretionary withdrawal

      8,861       7,861       311       289       9,172       8,150  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total gross individual annuities

      10,761       9,859       24,448       22,492       35,209       32,351  

Reinsurance ceded

      -       -       -       -       -       -  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total net individual annuities

      $ 10,761       $ 9,859       $ 24,448       $ 22,492       $ 35,209       $ 32,351  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Group Annuities

             

Subject to discretionary withdrawal

             

- at fair value

      $ -       $ -       $ 16       $ 19       $ 16       $ 19  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total with market value adjustment or at fair value

      -       -       16       19       16       19  

Not subject to discretionary withdrawal

      2,053       1,990       6,647       6,291       8,700       8,281  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total gross group annuities

      2,053       1,990       6,663       6,310       8,716       8,300  

Reinsurance ceded

      -       -       -       -       -       -  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total net group annuities

      $ 2,053       $ 1,990       $ 6,663       $ 6,310       $ 8,716       $ 8,300  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Deposit-Type Contracts

             

Subject to discretionary withdrawal

             

- with market value adjustment

      $ 80       $ 95       $ -       $ -       $ 80       $ 95  

- at fair value

      -       -       36       33       36       33  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total with market value adjustment or at fair value

      80       95       36       33       116       128  

- at book value without adjustment

      3,757       3,468       -       -       3,757       3,468  

Not subject to discretionary withdrawal

      4,466       1,297       -       -       4,466       1,297  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total gross deposit-type contracts

      8,303       4,860       36       33       8,339       4,893  

Reinsurance ceded

      -       -       -       -       -       -  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total net deposit-type contracts

      $ 8,303       $ 4,860       $ 36       $ 33       $ 8,339       $ 4,893  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total annuity reserves and deposit funds

      $   21,117         $   16,709         $   31,147         $   28,835         $   52,264         $   45,544    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Of the individual annuity reserves at book value less surrender charge of 5% or more noted above, the Company expects that $7 million will have less than a 5% surrender charge and be reported with the amounts at book value without adjustment in 2022.

 

NM-41

Table of Contents

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

The following are amounts reported as net annuity reserves in the Company’s Annual Statement, which agree with the amounts reported as net annuity reserves in the table above at December 31, 2021 and 2020.

 

     December 31,  
     2021     2020  
    

 

    

 

  
     ($ in millions)  

From Life, Accident & Health Annual Statement:

     

Annuities

    $ 11,129     $ 10,300  

Supplementary contracts with life contingencies

      1,685       1,549  

Deposit-type contracts

      8,303       4,860  
  

 

 

    

 

 

  

Subtotal net annuity reserves

      21,117       16,709  

From Separate Accounts Annual Statement:

     

Annuities

      30,800       28,513  

Supplementary contracts

      311       289  

Other contract deposit funds

      36       33  
  

 

 

    

 

 

  

Subtotal net annuity reserves

      31,147       28,835  
  

 

 

    

 

 

  

Combined Total

    $ 52,264       $ 45,544    
  

 

 

    

 

 

  

Disability and Long-Term Care Reserves

Unpaid claims and claim reserves for disability and long-term care policies are based on the present value of expected benefit payments. The changes in reserves for unpaid claims, losses and loss adjustment expenses on disability and long-term care policies for the years ended December 31, 2021 and 2020 were as follows:

 

     For the years ended  
     December 31,  
    

 

      2021      

    

 

      2020      

  
    

 

    

 

  
     (in millions)  

Balance at January 1

        $ 5,342         $ 5,200  

Incurred related to:

     

Current year

      990       972  

Prior years

      (125 )      (85)  
  

 

 

    

 

 

  

Total incurred

      865       887  
  

 

 

    

 

 

  

Paid related to:

     

Current year

      (33 )      (41)  

Prior years

      (719 )      (704)  
  

 

 

    

 

 

  

Total paid

      (752 )      (745)  
  

 

 

    

 

 

  

Balance at December 31

        $ 5,455         $ 5,342  
  

 

 

    

 

 

  

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. In 2020, this change also included the impact of certain disability income assumption updates made to align assumptions with recent experience.

Active life reserves are based on the net level premium method for disability policies issued prior to 1987 and the two-year preliminary term method for those issued after 1987. Active life reserves are mean reserves for disability policies issued through 2000 and mid-terminal plus unearned premium reserves for

 

NM-42

Table of Contents

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

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.

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, 2021 and 2020, reserves required as a result of AAT were as follows:

 

     December 31,
           2021                2020      
    

 

   

 

     (in millions)

Annuities and deposit funds

      $ 250        $ 320  

Life insurance

      2        2  
  

 

 

 

   

 

 

 

Total reserves

      $ 252        $ 322  
  

 

 

 

   

 

 

 

Statutory Minimum Reserves

The Company has the option to establish policy benefit reserves 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 $973 million and $665 million at December 31, 2021 and 2020, 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 statutory statements of financial position.

Deferred and uncollected premiums at December 31, 2021 and 2020 were as follows:

 

     December 31, 2021    December 31, 2020
     Gross    Net    Gross    Net
    

 

   

 

   

 

   

 

     (in millions)    (in millions)

Ordinary new business

       $     453         $     259         $     369         $     219  

Ordinary renewal

      3,056        2,397        2,919        2,321  
  

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

Total deferred and uncollected premiums

       $ 3,509         $ 2,656         $ 3,288         $ 2,540  
  

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

 

NM-43

Table of Contents

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

7.

Separate Accounts

Separate account liabilities at December 31, 2021 and 2020 were as follows:

 

     Variable Life    Variable Annuities    Total
    

 

   

 

   

 

     December 31,
     2021    2020    2021    2020    2021    2020
    

 

   

 

   

 

   

 

   

 

   

 

     (in millions)

Separate account reserves

       $     11,037         $     9,486         $     31,147         $     28,835         $     42,184         $     38,321  

Non-policy liabilities

                  199        126  
              

 

 

 

   

 

 

 

Total separate account liabilities

                   $     42,383         $     38,447  
              

 

 

 

   

 

 

 

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. General account policy benefit reserves included $7 million and $6 million attributable to GMDB at December 31, 2021 and 2020, respectively.

Premiums and other considerations received from variable annuity and variable life insurance policyowners were $1.7 billion and $1.5 billion for the years ended December 31, 2021 and 2020, respectively. These amounts are reported as premiums in the statutory 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 statutory statements of operations. Following are amounts reported as transfers to and from separate accounts within the Company’s Separate Account Annual Statement, which agree with the amounts reported as net transfers to (from) separate accounts within these statutory financial statements:

 

     At and for the years ended December 31,
         2021           2020           2019    
    

 

  

 

  

 

     (in millions)

From Separate Account Annual Statement:

       

Transfers to separate accounts

       $ 1,724        $ 1,467        $ 1,522  

Transfers from separate accounts

      (2,529 )      (2,147 )      (2,305 ) 
  

 

 

 

  

 

 

 

  

 

 

 

Net transfers from separate accounts

       $ (805 )       $ (680 )       $ (783 ) 
  

 

 

 

  

 

 

 

  

 

 

 

 

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 Company’s 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, 2021 and 2020 and does not expect to make a contribution to the plans during 2022.

The Company’s 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 participant’s age and years of service that became effective

 

NM-44

Table of Contents

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

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. The Company’s defined benefit pension plans for financial representatives utilize a formula that is based on the participant’s estimated annual income earned over their career.

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 July 31, 2013 for employees and as of December 31, 2013 for financial representatives. Employees or financial representatives hired or contracted after the above dates are not eligible for coverage under the postretirement health plans. During 2020, the Company announced that beginning with employees retiring on or after January 1, 2022, the Company will no longer provide a subsidy for retiree health care coverage.

Medicare-eligible retirees and their dependents are offered 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, 2021 and 2020, and changes in these assets for the years then ended, were as follows:

 

     Defined Benefit Plans   Postretirement Benefit Plans
             2021                   2020                   2021                   2020        
    

 

  

 

  

 

  

 

     (in millions)   (in millions)

Fair value of plan assets at January 1

       $   6,158        $   5,459        $   94        $   84  

Changes in plan assets:

         

Actual return on plan assets

      515       854       9       13  

Actual plan benefits paid

      (169 )      (155 )      (3 )      (3 ) 
  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

Fair value of plan assets at December 31

         $ 6,504          $ 6,158          $ 100          $ 94  
  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

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.

 

NM-45

Table of Contents

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

The target asset allocations and the actual allocation of the plans’ investments based on fair value at December 31, 2021 and 2020 were as follows:

 

     Target
Allocation		      Actual
Allocation		  
           2021                  2020                  2021                  2020        

Bonds

      74%        64%        70%        60%  

Equity investments

      25%        35%        28%        37%  

Other investments

      1%        1%        2%        3%  
  

 

 

     

 

 

     

 

 

     

 

 

  

Total assets

      100%        100%        100%        100%  
  

 

 

     

 

 

     

 

 

     

 

 

  

At each of December 31, 2021 and 2020, 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, 2021 and 2020 and changes in these obligations for the years then ended were as follows:

 

     Defined Benefit Plans   Postretirement Benefit Plans
             2021                   2020                   2021                   2020        
     (in millions)   (in millions)

Projected benefit obligation at January 1

       $ 7,069        $ 6,050        $     662        $     743  

Changes in benefit obligation:

         

Service cost of benefits earned

      205       134       10       14  

Interest cost on projected obligations

      141       177       11       16  

Projected gross plan benefits paid

      (197 )      (181 )      (25 )      (23 ) 

Experience (gains)/losses

      (180 )      889       (30 )      119  

Plan amendments and other

      -       -       -       (207 ) 
  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

Projected benefit obligation at December 31

       $ 7,038        $ 7,069        $ 628        $ 662  
  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

The PBO represents the estimated net present value of estimated future benefit obligations. For defined benefit plans, the 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 $6.6 billion for the years ended December 31, 2021 and 2020. Experience (gains)/losses for each of the years ended December 31, 2021 and 2020 primarily reflect the impact of changes in the PBO discount rate.

Benefit Plan Assumptions

The assumptions used in estimating the projected benefit obligations at December 31, 2021 and 2020 and the net periodic benefit cost for the years ended December 31, 2021, 2020 and 2019 were as follows:

 

     Defined Benefit Plans      Postretirement Benefit Plans                
         2021              2020              2021              2020                    

Projected benefit obligation:

                  

Weighted average discount rate

      2.77%        2.44%        2.72%        2.37%        

Annual increase in compensation

      3.75%        3.75%        3.75%        3.75%        

Cash balance plan interest crediting rate

      2.73%        2.39%        n/a        n/a        

 

NM-46

Table of Contents

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

     Defined Benefit Plans      Postretirement Benefit Plans  
         2021              2020              2019              2021              2020              2019      

Net periodic benefit cost:

                  

Weighted average discount rate

      2.44%        3.17%        4.18%        2.37%        3.18%        4.18%  

Annual increase in compensation

      3.75%        3.75%        3.75%        3.75%        3.75%        3.75%  

Long-term rate of return on plan assets

      5.75%        6.25%        6.25%        5.75%        6.25%        6.25%  

Cash balance plan interest crediting rate

      2.39%        3.14%        4.16%        n/a        n/a        n/a  

The expected long-term rate of return on plan assets is estimated in consideration of historical financial market performance, internal and third-party capital market expectations and the long-term target asset allocation.

The assumed annual increase in future retiree medical costs used in measuring the obligation for postretirement benefits were as follows:

 

     December 31,  
         2021              2020      

Assumed annual increase

      5.00%        5.00%  

Ultimate rate of annual increase

      5.00%        5.00%  

Year in which ultimate rate is reached

      2022        2021  

Effective January 1, 2019, the Company’s exposure to medical inflation will be limited to a maximum annual increase of 3%. In the event annual premiums increase greater than 3% plan participants are responsible for the balance of premiums which exceeded the 3% limit.

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, 2021 and 2020.

 

     Defined
Benefit Plans		     Postretirement
Benefit Plans		  
             2021                     2020                 2021                     2020          
    

 

    

 

    

 

    

 

  
     (in millions)     (in millions)  

Fair value of plan assets

       $ 6,504        $ 6,158        $ 100        $ 94  

Projected benefit obligation

      7,038       7,069       628       662  
  

 

 

    

 

 

    

 

 

    

 

 

  

Funded status

      (534 )      (911 )      (528 )      (568 ) 

Nonadmitted asset

      (887 )      (463 )      -       -  
  

 

 

    

 

 

    

 

 

    

 

 

  

Financial statement liability

       $ (1,421 )       $ (1,374 )       $ (528 )       $ (568 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

The PBO for defined benefit plans above included $1,421 million related to unfunded non-qualified plans at December 31, 2021 and $1,374 million related to the underfunded qualified plan for financial representatives and unfunded non-qualified plans at December 31, 2020. In the aggregate, the fair value of qualified defined benefit plan assets represented 116% and 107% of the projected benefit obligations of these plans at December 31, 2021 and 2020, respectively.

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 statutory statements of changes in surplus.

 

NM-47

Table of Contents

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

Aggregate defined benefit pension and postretirement plan surplus impacts were as follows for the years ended December 31, 2021 and 2020:

 

    For the year ended December 31, 2021  
    Defined Benefit Plans     Postretirement Benefit Plans  
      Net experience  
  gains (losses)  		       Prior service  
  (costs) credits  		    

Net

initial

    asset    

       Net experience  
  gains (losses)  		       Prior service  
  (costs) credits  		  
   

 

    

 

    

 

    

 

    

 

  
    (in millions)     (in millions)  

Balance at January 1

     $ (1,617 )      $ 140       $ 285       $ (168 )      $ 185  
Amortization from surplus into net periodic benefit cost     67       (25 )      (27 )      7       (12 ) 
Changes in plan assets and benefit obligations recognized in surplus     335       -       -       36       -  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Balance at December 31

     $ (1,215 )        $ 115       $ 258       $ (125 )      $ 173  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
    For the year ended December 31, 2020  
    Defined Benefit Plans     Postretirement Benefit Plans  
      Net experience  
  gains (losses)  		       Prior service  
  (costs) credits  		    

Net

initial

    asset    

       Net experience  
  gains (losses)  		       Prior service  
  (costs) credits  		  
   

 

    

 

    

 

    

 

    

 

  
    (in millions)     (in millions)  

Balance at January 1

     $ (1,289 )      $ 165       $ 299       $ (63 )    $ (45 ) 

Amortization from surplus into net periodic benefit cost

     56       (25 )      (14 )      4       (4 ) 

Changes in plan assets and benefit obligations recognized in surplus

     (384 )      -       -       (109 )      234  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Balance at December 31

     $ (1,617 )        $ 140       $ 285       $ (168 )      $ 185  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Benefit Plan Costs

The components of net periodic benefit cost for the years ended December 31, 2021, 2020 and 2019 were as follows:

 

     Defined Benefit Plans   Postretirement Benefit Plans
     2021   2020   2019   2021   2020   2019
    

 

  

 

  

 

  

 

  

 

  

 

    

 

(in millions)

  

 

(in millions)

Components of net periodic benefit cost:

             

Service cost of benefits earned

      $ 205       $ 134       $ 129       $ 10       $ 14       $ 16  

Interest cost on projected obligations

      141       177       204       11       16       23  

Amortization of experience losses

      67       56       53       7       4       (1 ) 

Amortization of prior service (credits) costs

      (25 )      (25 )      (25 )      (12 )      (4 )      5  

Amortization of initial net asset

      (27 )      (14 )      (15 )      -       -       -  

Expected return on plan assets

      (349 )      (336 )      (284 )      (5 )      (5 )      (4 ) 

Curtailment

      -       (1 )      -       -       28       -  
  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

Net periodic benefit cost (credit)

      $ 12         $ (9 )        $ 62         $     11         $     53         $     39    
  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

 

NM-48

Table of Contents

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

The expected benefit payments by the defined benefit plans and the postretirement benefit plans for the years 2022 through 2031 are as follows:

 

     Defined
Benefit Plans		    Postretirement
Benefit Plans
    

 

   

 

    

 

(in millions)

2022

      $ 189        $ 30  

2023

      212        29  

2024

      222        28  

2025

      240        28  

2026

      249        27  

2027-2031

      1,382        133  
  

 

 

 

   

 

 

 

Total

      $ 2,494        $ 275  
  

 

 

 

   

 

 

 

The Company sponsors a contributory 401(k) plan for eligible employees, for which the Company may provide 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, 2021, 2020 and 2019, the Company expensed total contributions to these plans of $34 million, $57 million and $53 million, respectively. In lieu of making matching contributions to the employee 401(k) plan in 2021 and 2022, the Company has made additional contributions to the cash balance plan in 2021.

 

9.

Reinsurance

The Company limits its exposure to life insurance death benefits by ceding coverage to various reinsurers. In 1999, the Company ceased reinsuring new individual disability policies, but has maintained a portion of the reinsurance ceded on policies issued prior to 1999. The Company cedes between 60—80% of the morbidity risk on group disability and 60% of the mortality risk on group life policies.

As part of an affiliated reinsurance agreement, the Company assumes 100% of the net risk associated with NLTC’s long-term care business. At December 31, 2021 and 2020, the net amount due from NLTC under this agreement was $48 million and $50 million, respectively.

Amounts in the statutory financial statements are reported net of the impact of reinsurance. Policy benefit reserves were reported net of ceded reserves of $1.7 billion at both December 31, 2021 and 2020. The Company has reinsured all risks disclosed in the statutory financial statements under Actuarial Guideline 48.

 

NM-49

Table of Contents

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

The effects of reinsurance on premium revenue and total benefits for the years ended December 31, 2021, 2020 and 2019 were as follows:

 

     For the years ended December 31,  
           2021                 2020                 2019        
    

 

    

 

    

 

  
     (in millions)  

Direct premium revenue

      $ 22,936       $ 19,501       $ 19,197  

Premiums assumed

      830       800       763  

Premiums ceded

      (995 )      (978 )      (950 ) 
  

 

 

    

 

 

    

 

 

  

Premium revenue

      $     22,771       $     19,323       $     19,010  
  

 

 

    

 

 

    

 

 

  

Direct benefit expense

      $ 23,975       $ 20,538       $ 20,158  

Benefits assumed

      915       837       830  

Benefits ceded

      (937 )      (792 )      (805 ) 
  

 

 

    

 

 

    

 

 

  

Total benefits    

      $ 23,953       $ 20,583       $ 20,183  
  

 

 

    

 

 

    

 

 

  

In addition, the Company received $127 million, $133 million and $135 million in allowances from reinsurers for reimbursement of commissions and other expenses on ceded business for the years ended December 31, 2021, 2020 and 2019, respectively. These amounts are reported in other income in the statutory statements of operations. For the years ended December 31, 2021, 2020 and 2019, the Company incurred $130 million, $127 million and $136 million, respectively, in expense allowances on reinsurance assumed from NLTC.

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 reinsurer’s credit rating falls below a prescribed level. There were no reinsurance recoverables at December 31, 2021 and 2020 that were considered by the Company to be uncollectible. No reinsurance contracts were identified which require disclosure under paragraph 79-84 of SSAP No. 61R—Life, Deposit-Type and Accident and Health Reinsurance.

 

10.

Federal Income Taxes

The results of the Company’s operations are consolidated with the following entities for purposes of filing the Company’s consolidated federal income tax return:

 

Northwestern Mutual Investment Services, LLC    NM Harrisburg, Inc
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    QOZ Holding Co, LLC and subsidiaries
GRO, LLC and GRO-SUB, LLC    NM Career Distrib. Holdings, LLC and subsidiaries
NM Investment Management Company, LLC    NM SAS, LLC and subsidiaries
Northwestern Long Term Care Ins. Co    Venture Studio Holdings, LLC and subsidiaries
   Wysh Financial Services, 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-50

Table of Contents

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

The components of current income tax expense (benefit) in the statutory statements of operations for the years ended December 31, 2021, 2020 and 2019 related to ordinary taxable income (loss) were as follows:

 

    For the years ended December 31,
   

 

      2021      

  

 

      2020      

  

 

      2019      

   

 

  

 

  

 

    (in millions)

Tax payable on ordinary income

     $ (914 )      $ 637       $ 103  

Low income housing tax credits

     (150 )      (136 )      (123 ) 

Other tax credits

     (122 )      (71 )      (49 ) 

Increase in contingent tax liabilities

     20       (153 )      (130 ) 
 

 

 

 

  

 

 

 

  

 

 

 

Total current tax expense (benefit)

     $ (1,166 )      $ 277       $ (199 ) 
 

 

 

 

  

 

 

 

  

 

 

 

In addition to current income tax 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 of $327 million, $433 million and $141 million was included in net IMR deferrals for the years ended December 31, 2021, 2020 and 2019, respectively. In addition, net realized capital gains and losses as reported in the statutory statements of operations included current tax expense (benefit) of $233 million, $(2) million and $173 million for the years ended December 31, 2021, 2020 and 2019, respectively.

The table below shows how the Company’s income tax expense or benefit for the years ended December 31, 2021, 2020 and 2019 differs from the amount obtained by applying the statutory rate of 21% to gain from operations before taxes, including net realized capital gains (losses) before IMR and capital gain tax (benefit):

 

     For the years ended December 31,
    

 

          2021      

  

 

      2020      

  

 

      2019      

    

 

  

 

  

 

     (in millions)

Provision computed at statutory rate

      $ 336       $ 580       $ 402  

Adjustments to the statutory rate:

       

Subsidiary distributions

      (28 )      (283 )      (73 ) 

Tax credits

      (270 )      (207 )      (172 ) 

Amortization of IMR

      (89 )      (53 )      (28 ) 

Dividends received deduction

      (41 )      (31 )      (33 ) 

Employee benefits

      (22 )      (22 )      (12 ) 

Deferred adjustments

      110       (29 )      183  

Other

      (127 )      (50 )      (21 ) 
  

 

 

 

  

 

 

 

  

 

 

 

Total statutory income tax (benefit) expense

      $ (131 )      $ (95 )      $ 246  
  

 

 

 

  

 

 

 

  

 

 

 

Federal income tax (benefit) expense reported on

the statutory statements of operations

    $ (1,166 )    $ 277     $ (199 ) 

Capital gains tax expense, net of IMR transfers

      559       431       315  

Change in net deferred tax assets

      476       (803 )      130  
  

 

 

 

  

 

 

 

  

 

 

 

Total statutory income tax (benefit) expense

      $ (131 )        $ (95 )        $ 246  
  

 

 

 

  

 

 

 

  

 

 

 

During the year, the Company may make payments to 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, including subsidiaries, of $295 million, $679 million and $410 million to the IRS during the years ended December 31, 2021, 2020 and 2019, respectively.    

 

NM-51

Table of Contents

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

Federal income taxes available for recoupment in the case of future tax losses are limited to amounts reported on previous tax returns. Total capital gain taxes paid for tax years 2021, 2020 and 2019 that are available for recoupment are $507 million, $597 million and $477 million, respectively.

Federal income tax returns for 2016 and prior years are closed as to further assessment of tax. In 2021, the Company amended its 2017 return and made certain tax method changes to its 2020 return. These actions resulted in a $984 million income tax benefit on the statutory statement of operations, offset by a $900 million reduction in net deferred tax assets on the statutory statement of changes in surplus, resulting in a net $84 million increase in total surplus for the year ended December 31, 2021. Income taxes payable in the statutory 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 are charged or credited to operations in the year that such determination is made by the company. For the years ended December 31, 2021 and 2020 contingent liabilities were as follows:

 

           For the years ended      
December 31,		  
     2021      2020  
    

 

     

 

  
     (in millions)  

Balance at January 1

      $ -        $ 153  

Additions for tax positions of prior years

      20        (153 ) 
  

 

 

     

 

 

  

Balance at December 31

      $ 20        $ -  
  

 

 

     

 

 

  

Included in contingent tax liabilities at December 31, 2021 and 2020 were $0 million 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 may affect the effective tax rate in future periods. The Company has $20 million of tax positions for which the ultimate deductibility is not certain.

For the years ended December 31, 2021, 2020 and 2019, the Company recognized $0 million, $(15) million and $(3) million, respectively, of interest-related tax expense.

 

NM-52

Table of Contents

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

The components of net deferred tax assets reported in the statutory statements of financial position at December 31, 2021 and 2020 were as follows:

 

     December 31,               
             2021                                2020                            Change          
    

 

           

 

           

 

  
     (in millions)               

Deferred tax assets:

             

Policy acquisition costs

      $ 1,142          $ 1,016          $ 126  

Investments

      239          319          (80 ) 

Policy benefit liabilities

      1,747          1,673          74  

Benefit plan obligations

      625          621          4  

Fixed Assets

      —          931          (931 ) 

Other

 

     

 

 82

 

  

 

       

 

 83

 

  

 

       

 

 (1

 

 ) 

 

  

 

 

       

 

 

       

 

 

  

Gross deferred tax assets

      3,835          4,643          (808 ) 

Nonadmitted deferred tax assets

 

      -          -          -  
  

 

 

       

 

 

       

 

 

  

Gross admitted deferred tax assets

 

     
 3,835
  
       
 4,643
  
       
 (808
 ) 
  

 

 

       

 

 

       

 

 

  

Deferred tax liabilities:

             

Investments

      1,185          986          199  

Other

      1,081          1,352          (271 ) 
  

 

 

       

 

 

       

 

 

  

Gross deferred tax liabilities

 

      2,266          2,338          (72 ) 
  

 

 

       

 

 

       

 

 

  

Net deferred tax assets

      $ 1,569          $ 2,305          $ (736 ) 
  

 

 

       

 

 

       

 

 

  

The Company exceeded the minimum 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, 2021 and 2020.

Significant components of the calculation of net admitted deferred tax assets at December 31, 2021 and 2020 were as follows (in millions):

 

     December 31, 2021      December 31, 2020            Change        
  

 

 

  
         Ordinary              Capital             Total              Ordinary              Capital             Total              Ordinary             Capital             Total      
Gross deferred tax assets      $  3,596        $ 239       $ 3,835        $ 4,324        $ 319       $ 4,643        $ (728 )        $ (80)         $ (808)  
Statutory valuation allowance adjustment      -        -       -        -        -       -        -       -       -  
  

 

 

     

 

 

    

 

 

     

 

 

     

 

 

    

 

 

     

 

 

    

 

 

    

 

 

  
Adjusted gross deferred tax assets      3,596        239       3,835        4,324        319       4,643        (728 )      (80 )      (808)  
Deferred tax assets nonadmitted      -        -       -        -        -       -        -       -       -  
  

 

 

     

 

 

    

 

 

     

 

 

     

 

 

    

 

 

     

 

 

    

 

 

    

 

 

  
Subtotal net admitted deferred tax asset      3,596        239       3,835        4,324        319       4,643        (728 )      (80 )      (808)  
Deferred tax liabilities      1,081        1,185       2,266        1,352        986       2,338        (271 )      199       (72)  
  

 

 

     

 

 

    

 

 

     

 

 

     

 

 

    

 

 

     

 

 

    

 

 

    

 

 

  
Net admitted deferred tax asset/ (liability)      $ 2,515        $ (946 )      $ 1,569        $ 2,972        $ (667 )      $ 2,305        $ (457 )        $ (279)         $ (736)
  

 

 

     

 

 

    

 

 

     

 

 

     

 

 

    

 

 

     

 

 

    

 

 

    

 

 

  

 

NM-53

Table of Contents

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

     December 31, 2021        December 31, 2020     

 

Change

 

  

 

 

  
             Ordinary            Capital                Total                Ordinary                Capital                Total                Ordinary               Capital               Total      
Federal income taxes paid in prior years recoverable through loss carrybacks      $ -        $ 96        $ 96        $ -        $ 185        $ 185        $ -       $ (89 )      $ (89 ) 
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)      1,720        -        1,720        2,599        -        2,599          $ (879 )      $ -       $ (879 ) 
Adjusted gross deferred tax assets (excluding the amount of deferred tax assets offset by gross deferred tax liabilities)      1,876        143        2,019        1,725        134        1,859        $ 151       $ 9       $ 160  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

    

 

 

    

 

 

  
Total deferred tax assets admitted as the result of application of SSAP No. 101      $ 3,596        $ 239        $ 3,835        $ 4,324        $ 319        $ 4,643          $ (728)       $ (80 )      $ (808 ) 
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

    

 

 

    

 

 

  
a. Adjusted gross deferred tax assets expected to be realized following the balance sheet date            $ 1,720            $ 2,599            $ (879 ) 
        

 

 

           

 

 

         

 

 

  
b. Adjusted gross deferred tax assets allowed per limitation threshold            $ 4,152              $ 3,394            $ 758  
        

 

 

           

 

 

         

 

 

  
Ratio percentage used to determine recovery period and threshold limitation amount            1048%              920%         
        

 

 

           

 

 

         
Amount of adjusted capital and surplus used to determine recovery period and threshold limitation            $ 27,680              $ 22,625         
        

 

 

           

 

 

         

All gross deferred tax liabilities have been recognized at December 31, 2021 and 2020. The Company did not employ tax planning strategies in its valuation allowance assessment at either December 31, 2021 and 2020. At December 31, 2021 and 2020, the percentage of net ordinary deferred tax assets admitted as a result of tax planning strategies was 0% and 9%, respectively.

 

11.

Commitments and Contingencies Commitments

In the normal course of its investment activities, the Company makes commitments to fund private equity investments, real estate acquisitions, mortgage loans and other investments. These forward commitments aggregated to $9.7 billion at December 31, 2021 and 2020, 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 Company’s 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 Company’s financial position at December 31, 2021.

 

NM-54

Table of Contents

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

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 thirteen years at December 31, 2021.

Following is a summary of the guarantees provided by the Company that were outstanding at December 31, 2021 and 2020, including both the maximum potential exposure under the guarantees and the financial statement liability reported based on fair value of the guarantees.

 

     December 31, 2021    December 31, 2020

        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

      $ 59           $ 1          $ 59           $ 1    

Guarantees of real estate obligations

      493           5          476           5    

Guarantees issued on behalf of wholly-owned subsidiaries

      89           -          106           -    

Guarantees on behalf of field loan support program

      37           -          -           -    
  

 

 

 

    

 

 

 

   

 

 

 

    

 

 

 

Total guarantees

      $ 678           $ 6          $ 641           $ 6    
  

 

 

 

    

 

 

 

   

 

 

 

    

 

 

 

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.

 

12.

Related Party Transactions

The Company has a capital support and guarantee of benefits agreement that requires it to maintain the capital and surplus (as defined) of NLTC at a minimum level based upon a formula applied to NLTC’s earned premium and policy benefit reserves, or 150% of its company action level of RBC as prescribed by the NAIC, whichever is lower. In addition, NM guarantees NLTC’s policyowners its ability to pay all policy benefits due and owed pursuant to contracts of insurance sold by NLTC during the term of the agreement. This agreement was most recently amended in 2020 to extend the length of the agreement through December 31, 2025 and increase the aggregate capital contribution limit from $200 million to $300 million. The Company contributed capital to NLTC of $15 million for each of the years ended December 31, 2021 and 2020. The Company has contributed a total of $220 million to NLTC through December 31, 2021. The Company reported a payable to NLTC of $59 million at December 31, 2021 and 2020, which is reported in other liabilities in the statutory statements of financial position at each of those dates. Intercompany balances are settled in cash, generally within thirty days of the respective reporting date.

 

NM-55

Table of Contents

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

13.

Surplus Notes

The following table summarizes the surplus notes issued by the Company and are outstanding at December 31, 2021:

 

Description

        Issue date              Principal    
amount		          Statement    
value		          Interest paid    
current year		          Cumulative    
    interest paid    		          Interest    
rate		         Maturity    
date		  
($ in millions)  

2010 Notes

      3/26/2010        $ 1,224        $ 1,224        $ 74        $ 1,157        6.063 %      3/30/2040  

2017 Notes

      9/26/2017        1,200        1,198        46        185        3.850 %      9/30/2047  

2019 Notes

      9/20/2019        1,347        1,156        49        99        3.625 %      9/30/2059  

2021 Notes

      3/22/2021        900        897        24        24        3.450 %      3/30/2051  
     Total                   
     

 

 

     

 

 

     

 

 

     

 

 

       
        $ 4,671        $ 4,475        $ 193      $ 1,465       
     

 

 

     

 

 

     

 

 

     

 

 

       

On March 22, 2021 the Company issued surplus notes (“2021 notes”) with a principal balance of $900 million, bearing interest at 3.450% and having a maturity date of March 30, 2051. The 2021 notes were issued at an offering price of 99.652%, receiving net proceeds of $897 million.

Each series of notes was distributed pursuant to Rule 144A or Regulation S under the Securities Act of 1933, as amended. Interest on the 2010, 2017, and 2019 notes is payable semi-annually on March 30 and September 30 while interest on the 2021 notes is payable semi-annually on June 30 and December 30. All interest payments are subject to approval by the OCI. SAP requires recognition of interest expense on the notes upon OCI approval of semi-annual interest payments.

The notes are unsecured and subordinated to all present and future indebtedness, policy claims and other creditor claims of the Company and do not repay principal prior to maturity, with principal payment at maturity subject to the prior approval of the OCI. The notes are not redeemable at the option of any note holder but 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 0.20% (2017 and 2021 notes) and 0.25% (2010 and 2019 notes). The entire amount of the 2017, 2019, and 2021 notes are redeemable, at par, in the event of certain defined tax events.

No affiliates of the Company hold any portion of the notes, which are generally held of record at the Depository Trust Company by bank custodians on behalf of investors. No single investor holds 10% or more of the 2017, 2019, or 2021 notes. The largest holder of the 2010 notes is Nippon Life Insurance Company of Japan, which held $250 million in principal amount of notes at each of December 31, 2021 and 2020.

 

14.

Fair Value of Financial Instruments

Certain of the Company’s assets and liabilities are considered “financial instruments” as defined by Statement of Statutory Accounting Principles No. 100—Revised, Fair Value Measurements (SSAP 100R). The Company’s 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”).

 

NM-56

Table of Contents

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

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 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 100R, the statement value and fair value at December 31, 2021 and 2020 were as follows:

 

     December 31, 2021
               Quoted prices in        Significant        Significant    Net
               active markets    observable        unobservable        Asset
         Statement        Fair        for identical assets        inputs    inputs    Value
     Value          Value          (level 1)    (level 2)    (level 3)        (NAV)    
    

 

   

 

   

 

   

 

   

 

   

 

     (in millions)

General account investment assets:

                  

Bonds

      $  179,121        $  188,261        $ 5,500        $ 165,145        $ 17,616        $ -  

Mortgage loans

      47,844        50,089        -        -        50,089        -  

Common and preferred stocks

      3,749        3,751        3,062        83        606        -  

Policy loans

      17,208        17,208        -        -        17,208        -  

Derivative assets

      629        1,023        -        1,023        -        -  

Surplus note investments

      197        240        -        240        -        -  

Cash and short-term investments

      3,786        3,786        987        2,799        -        -  

Separate account assets

      42,383        42,383        37,493        3,642        758        490  

General account liabilities:

                  

Investment-type insurance reserves

      $ 9,810        $ 9,728        $ -        $ -        $ 9,728        $ -  

Liabilities for repurchase agreements

      1,277        1,277        -        1,277        -        -  

Derivative liabilities

      311        195        -        195        -        -  

Separate account liabilities

      42,383        42,383        37,493        3,642        758        490  

 

NM-57

Table of Contents

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

     December 31, 2020  
                   Quoted prices in          Significant          Significant      Net  
                   active markets      observable          unobservable          Asset  
         Statement          Fair          for identical assets          inputs      inputs      Value  
     Value            Value            (level 1)      (level 2)      (level 3)      (NAV)  
    

 

     

 

     

 

     

 

     

 

     

 

  
     (in millions)  

General account investment assets:

                  

Bonds

      $  166,324        $  183,434        $ 3,175        $ 162,956        $ 17,303        $ -  

Mortgage loans

      41,568        45,155        -        -        45,155        -  

Common and preferred stocks

      4,623        4,659        4,051        60        548        -  

Policy loans

      17,686        17,686        -        -        17,686        -  

Derivative assets

      358        571        -        571        -        -  

Surplus note investments

      161        211        -        211        -        -  

Cash and short-term investments

      3,239        3,239        614        2,625        -        -  

Separate account assets

      38,447        38,447        34,519        3,172        711        45  

General account liabilities:

                  

Investment-type insurance reserves

      $ 6,397        $ 6,445        $ -        $ -        $ 6,445        $ -  

Liabilities for repurchase agreements

      1,315        1,315        -        1,315        -        -  

Derivative liabilities

      622        500        -        500        -        -  

Separate account liabilities

      38,447        38,447        34,519        3,172        711        45  

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 Company’s 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 Company’s investments in mortgage loans.

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 Company’s investments in common and preferred stocks.

Policy Loans

See Note 2 for information regarding policy loans, for which the Company considers the unpaid principal balance to approximate fair value.

 

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Table of Contents

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

Derivative Instruments

The Company’s 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, basis curves, foreign currency spot rates, foreign currency basis curves, option volatilities and credit spreads. Warrants 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 4 for more information regarding the Company’s derivative investments.

Surplus Note Investments

The Company invests in surplus note issuances of other mutual insurance companies. These bond-like instruments 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.

Cash and Short-term Investments

Cash and short-term investments include cash deposit balances, money market mutual funds, short-term commercial paper and other highly-liquid debt instruments, for which the Company considers net asset value or amortized cost to approximate fair value.

Separate Account Assets and Liabilities

See Note 2 and Note 7 for information regarding the Company’s 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 Company’s underlying equity in the partnerships, which the Company considers to approximate fair value. Separate account assets for which fair value is determined by a Net Asset Value (NAV) are mutual funds for which the NAV is used as a practical expedient as allowed under SSAP 100R.

General Account Insurance Reserves

The Company’s general account insurance liabilities defined as financial instruments under SSAP 100R are limited to “investment-type” products such as fixed-rate annuity policies, supplementary 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.

Repurchase Agreement Liabilities

See Note 3 for information regarding repurchase agreement activity, for which the Company considers the liability to return collateral to approximate the fair value of collateral originally received.

 

NM-59

Table of Contents

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

Assets and Liabilities Reported at Fair Value

The following tables summarize assets and liabilities measured and reported at fair value in the statutory statements of financial position at December 31, 2021 and 2020.

 

    December 31, 2021
    Quoted prices in   Significant   Significant   Net    
    active markets   observable   unobservable   Asset    
    for identical assets   inputs   inputs   Value    
    (level 1)   (level 2)   (level 3)   (NAV)   Total
    (in millions)

General account:

          

Bonds

     $ 199       $ 4       $ 115       $ -       $ 318  

Common and preferred stocks

     3,063       5       606       -       3,674  

Money market mutual funds

     848       -       -       -       848  

Derivative assets

     -       216       -       -       216  

Derivative liabilities

     -       24       -       -       24  
 

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

Total general account

     $ 4,110       $ 249       $ 721       $ -       $ 5,080  
 

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

Separate accounts:

          

Mutual fund investments

     $ 35,694       $ -       $ -       $ -       $ 35,694  

Other benefit plan assets/liabilities

     51       26       5       3       85  

Pension and postretirement assets:

          

Bonds

     459       3,462       109       -       4,030  

Common and preferred stock

     1,179       1       58       487       1,725  

Cash and short-term securities

     92       147       -       -       239  

Other assets/liabilities

     18       6       586       -       610  
 

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

Subtotal pension and postretirement assets

     1,748       3,616       753       487       6,604  
 

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

Total separate accounts

     $ 37,493       $ 3,642       $ 758       $ 490       $ 42,383  
 

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

 

    December 31, 2020
    Quoted prices in   Significant   Significant   Net    
    active markets   observable   unobservable   Asset    
    for identical assets   inputs   inputs   Value    
    (level 1)   (level 2)   (level 3)   (NAV)   Total
    (in millions)

General account:

          

Bonds

     $ 401       $ 30       $ 90       $ -       $ 521  

Common and preferred stocks

     4,051       -       390       -       4,441  

Money market mutual funds

     309       -       -       -       309  

Derivative assets

     -       98       -       -       98  

Derivative liabilities

     -       23       -       -       23  
 

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

Total general account

     $ 4,761       $ 151       $ 480       $ -       $ 5,392  
 

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

Separate accounts:

          

Mutual fund investments

     $ 32,149       $ -       $ -       $ -       $ 32,149  

Other benefit plan assets/liabilities

     21       20       4       -       45  

Pension and postretirement assets:

          

Bonds

     341       3,094       118       -       3,553  

Common and preferred stock

     1,768       1       47       45       1,861  

Cash and short-term securities

     50       52       -       -       102  

Other assets/liabilities

     190       5       542       -       737  
 

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

Subtotal pension and postretirement assets

     2,349       3,152       707       45       6,253  
 

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

Total separate accounts

     $ 34,519       $ 3,172       $ 711       $ 45       $ 38,447  
 

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

 

NM-60

Table of Contents

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

During 2021, transfers into Level 3 are the result of observable market data, such as public ratings, no longer being available and transfers out of Level 3 are the result of observable market data, including 3rd party vendor prices and public ratings, being available and utilized in the determination of the fair market value of the securities. There were no material asset transfers into or out of Level 3 during the year ended December 31, 2020.

The following tables summarize the changes in fair value of Level 3 financial instruments for the years ended December 31, 2021 and 2020.

 

For the year ended December 31, 2021    General account
common and
preferred stock		    General
account bonds		    Derivative
assets		    Separate
account assets
     (in millions)

Fair value, beginning of period

      $                 390        $                 90        $                 -        $                 711  

Realized gains/(losses)

      52        (26)        -        98  

Unrealized gains/(losses)

      49        10        -        123  

Issuances

      -        -        -        -  

Purchases

      106        7        -        158  

Sales

      (101)        (34)        -        (336)  

Settlements

      -        -        -        -  

Net discount/premium

      4        -        -        1  

Transfers into level 3

      106        68        -        3  

Transfers out of level 3

      -        -        -        -  
  

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

Fair value, end of period

      $ 606        $ 115        $ -        $ 758  
  

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

 

For the year ended December 31, 2020    General account
common and
preferred stock		    General
account bonds		    Derivative
assets		    Separate
account assets
     (in millions)

Fair value, beginning of period

      $                 458        $                 5        $                 -        $                 617  

Realized gains/(losses)

      14        (5)        -        47  

Unrealized gains/(losses)

      (21)        (25)        -        41  

Issuances

      -        -        -        -  

Purchases

      58        5        -        137  

Sales

      (57)        -        -        (134)  

Settlements

      -        -        -        -  

Net discount/premium

      8        -        -        2  

Transfers into level 3

      -        110        -        7  

Transfers out of level 3

      (70)        -        -        (6)  
  

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

Fair value, end of period

      $ 390        $ 90        $ -        $ 711  
  

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

The fair values of Level 3 financial instruments are sensitive to changes in significant unobservable inputs. 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

 

NM-61

Table of Contents

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

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 and derivatives, 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 entity’s fair value to its book value or earnings before interest, taxes, depreciation and amortization (EBITDA). The use of EBITDA normalizes 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-62