497 1 d103271d497.htm NML VARIABLE ANNUITY ACCOUNT A (FEE BASED) NML Variable Annuity Account A (Fee Based)
Prospectus
May 1, 2021
Individual Flexible Payment Variable Annuity (Fee Based)
Issued by The Northwestern Mutual Life Insurance Company
and NML Variable Annuity Account A
This prospectus describes an individual flexible payment variable annuity contract (the “Contract”) for Individual Retirement Annuities (“IRAs”), Roth IRAs, and Non-Tax Qualified Annuities and Non-Qualified Plans offered to purchasers who pay periodic fees based on assets in lieu of brokerage commissions as compensation for advisory services (Fee-Based Programs). The Contract provides for accumulation of Contract Value through variable and/or a fixed options and a payment of annuity benefits on a fixed or variable basis. Net Purchase Payments may be invested, pursuant to the Contract, in the following variable and fixed options:
Variable Options
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
Fixed Option
Guaranteed Interest Fund
The Contract and the investment options are not guaranteed to achieve their goals, are not bank deposits, are not federally insured, and are not endorsed by any bank or government agency. You could lose the money you invest in this Contract. All contractual guarantees are contingent upon the claims-paying ability of the Company. Some terms of the Contract may differ from the terms of the Contract delivered in another state because of state legal requirements but all material state variations are described in Appendix B.
Please read carefully this prospectus or any accompanying prospectuses for the variable options and keep them for future reference. These prospectuses provide information that you should know before investing in the Contract. No person is authorized to make any representation in connection with the offering of the Contract other than those contained in these prospectuses.
You may cancel your Contract 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 Purchase Payment(s) or your Contract Value. You should review the prospectus, or consult with your financial representative, for additional information about the specific cancellation terms that apply.
The Contract is sold exclusively through financial representatives of Northwestern Mutual's affiliated broker-dealer, who charge an advisory fee for their investment advice or other services. Any advisory fee that is charged by your Investment Professional is in addition to the fees and expenses that apply to your Contract. If you elect to withdraw the advisory fee from your Contract Value, this withdrawal will reduce the death benefit, and may be subject to federal and state income taxes and a 10% federal penalty tax.
The Securities and Exchange Commission (“SEC”) has not approved or disapproved these securities or passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense. The Contract may not be available in all states and is only offered where it can be lawfully sold. Our Distributor may limit sales of the Contract to certain government entities and government entity plans. Additional information about certain investment products, including variable annuity contracts, has been prepared by the Securities and Exchange Commission'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 the Company that you wish to continue receiving paper copies of your shareholder reports by calling us at (866) 910-1232. Your election to receive shareholder reports in paper will apply to all future reports for all Portfolios under your Contract.
 
 
Table of Contents
 
 
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Glossary of Special Terms
Unless otherwise specified in this prospectus, the words “Northwestern Mutual,” “we,” “us,” “our,” and “Company” mean The Northwestern Mutual Life Insurance Company. The words “you” and “your,” unless otherwise specified, mean the Contract Owner. We use a number of special terms in this prospectus, including the following:
Accumulation Unit—An accounting unit of measure representing the Contract Value, before the date on which Annuity Payments begin, in one or more Divisions of the Separate Account. The related term “Accumulation Unit Value” means the value of a particular Accumulation Unit at a particular time and is analogous to, but not the same as, the share price of a mutual fund.
Annuitant—The person upon whose life the Contract is issued and Contract benefits depend. The Primary Annuitant is the person upon whose life the Contract is initially issued. The Contingent Annuitant is the person who becomes the Annuitant upon the death of the Primary Annuitant. If the Contract is annuitized under a single life income plan, there will be one Annuitant. If the Contract is annuitized under a joint life income plan, there will be two Joint Annuitants.
Annuity Payments—Money we pay pursuant to the terms of the Contract. Payments may be paid under one or more of the following three methods: (1) a variable income plan; (2) a fixed income plan; or (3) in cash.
Annuity Unit—An accounting unit of measure representing the actuarial value of a variable income plan’s interest in a Division of the Separate Account after Annuity Payments begin.
Beneficiary—A person who receives payments under the Contract upon the death of the Annuitant before the Maturity Date provided that the Annuitant was an Owner of the Contract at the time of death.
Company—The Northwestern Mutual Life Insurance Company.
Contract—The agreement between you and us described in this variable annuity prospectus. During the accumulation period of the Contract, you may invest money under your Contract and any earnings on your investment will accumulate on a tax-deferred basis. During the annuitization period, you receive periodic payments based largely on the amounts you accumulate, all or a portion of which will be taxable as ordinary income.
Contract Value—The value of your Contract on any Valuation Date is the sum of: (1) the value of your amounts held in the Divisions of the Separate Account on that Valuation Date; and (2) the sum of your amounts allocated to any Guaranteed Account, plus credited interest; less (3) any withdrawals from any Guaranteed Account and any applicable charges under the Contract deducted from any Guaranteed Account.
Division—A sub-account of the Separate Account, the assets of which are invested exclusively in the shares of one of the Portfolios of the underlying Funds.
Fund—A Fund is registered under the Investment Company Act of 1940 (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 1940 Act. A Fund is available as an investment option under the Contract. 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.
Guaranteed Interest Fund—A fixed investment option under the Contract, supported by the assets held in the Company’s General Account, that has a one-year term.
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.”
Investment Professional—Someone you select to provide you with brokerage service or investment advice with respect to amounts you invest under your Contract who either is registered as a broker-dealer under the Securities Exchange Act of 1934 or as an investment adviser under the Investment Advisers Act of 1940 directly (or by association with another person), or who provides such service or advice under an exemption from the Investment Advisers Act of 1940.
Market Value Adjustment—An amount that may be credited (or charged) upon a withdrawal from a multi-year Guaranteed Account before the end of a Guaranteed Period.
Maturity Date—The date, stated on the specifications page of the Contract, on which Purchase Payments cease and Annuity Payments become payable. The maximum Maturity Date is stated on the specifications page of the Contract and may not be changed.
Northwestern Mutual—The Northwestern Mutual Life Insurance Company.
Owner—The person with the sole right to exercise all rights and privileges under the Contract, except as the Contract otherwise provides.
Portfolio—A series of a Fund available for investment under the Contract which corresponds to a particular Division of the Separate Account.
Purchase Payments—Money you give us to apply to your Contract. The related term “Net Purchase Payment” refers to Purchase Payments after all applicable deductions.
Prospectus—The full statutory prospectus for the Contract.
Account A (Fee Based) Prospectus  1
Required Minimum Distribution (“RMD”)—A minimum amount that federal tax law generally requires be withdrawn from certain tax-qualified annuities each year.
Separate Account—The account the Company has established pursuant to Wisconsin law for those assets, although belonging to the Company, that are reserved for you and other owners of variable annuity contracts supported by the Separate Account.
Summary Prospectus—This document is a summary version of the Contract, which summarizes key information found in the Prospectus for the Contract.
Valuation Date—Any day on which the New York Stock Exchange (“NYSE”) is open for trading and any other day we are required under the 1940 Act to value assets of a Division of the Separate Account.
2  Account A (Fee Based) Prospectus
Important Information You Should Consider About the Contract 
 
FEES AND EXPENSES
Cross-Reference(s)
to Location in
Prospectus
Charges for Early
Withdrawal
If you withdraw amounts or surrender your Contract, you will not be assessed a
surrender charge.
Fee and Expense
Tables – Contract
Fees and Expenses
Transaction
Charges
You may be charged for other transactions, such as tax-related charges, as well
as charges for expedited delivery or wire transfers.
Charges
Ongoing Fees and
Expenses
(annual charges)
The table below describes the fees and expenses that you may pay each year,
depending on the options you choose. The fees and expenses do not reflect any
advisory fees paid to your Investment Professional from Contract Value or other
assets of the owner. If such charges were reflected, the fees and expenses would
be higher. Please refer to your Contract specifications page for information
about the specific fees you will pay each year based on the options you have
elected.
Fee and Expense
Tables – Contract
Fees and Expenses,
Range of Annual
Portfolio Operating
Expenses, and
Examples
Annual Fee
Minimum
Maximum
Base Contract
0.35%1
0.75%1
Investment Options
(Portfolio company fees and expenses)
0.21%2
1.41% 2
Optional Benefits Available
for an Additional Charge (for single optional
benefit if elected)
0.10%3
0.40%3
1 As a percentage of Separate Account assets.
2 As a percentage of Portfolio assets.
3 As a percentage of the entire benefit.
 
Because your Contract is customizable, the choices you make affect how much
you will pay. To help you understand the cost of owning your Contract, the
following table shows the lowest and highest cost you could pay each year,
based on current charges. This estimate assumes that you do not take
withdrawals from the Contract. Although your actual costs may be higher or
lower than those shown below, based on these assumptions, your costs would be
as follows:
 
LOWEST ANNUAL COST
$5601
HIGHEST ANNUAL COST
$2,7931
Assumes:
•Investment of $100,000
•5% annual appreciation
•Least expensive combination of Contract
Classes and Portfolio fees and expenses
•No optional benefits
•No sales charges or advisory fees
•No additional Purchase Payments,
transfers or withdrawals
Assumes:
•Investment of $100,000
•5% annual appreciation
•Most expensive combination
of Contract Classes and
Portfolio fees and expenses
•No sales charges or advisory
fees
•No additional Purchase
Payments, transfers or
withdrawals
1 The lowest and highest dollar amount of fees that would be assessed, based
on the assumptions described in the tabular presentation above, for each of the
first 10 Contract years.
Account A (Fee Based) Prospectus  3
 
RISKS
Cross-Reference(s)
to Location in
Prospectus
Risk of Loss
You can lose money by investing in the Contract.
The Investment
Options
Not a Short-Term
Investment
The Contract is not a short-term investment and is not appropriate for you if you
need ready access to cash. It is intended for retirement and long-term savings.
Your Contract Value will be reduced if you withdraw money and withdrawals
may be subject to income taxes and tax penalties or other unfavorable treatment.
The Contract –
Generally
Risks Associated
with Investment
Options
Investment in the Contract is subject to the risk of poor investment performance
and can vary depending on the performance of the investment options
(Portfolios) and fixed account options you choose. Each Portfolio (including any
fixed account investment options) will have its own unique risks. You should
review these investment options Portfolios before making an investment
decision.
The Investment
Options
Insurance
Company Risks
Investment in the Contract is subject to the risks related to the depositor
(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 (888)
455-2232.
The Company
 
RESTRICTIONS
 
Investments
Transfer requests involving the fixed account options are subject to special
restrictions, including individual state law restrictions as to availability or
amounts. These options are available only during the accumulation phase of your
Contract and after your initial investment may be subject to limits on additional
amounts, including minimum required investments or maximum limits on total
amounts. Transfers out of these fixed options are also subject to specific
limitations.
Transfers among Divisions are subject to the Contract’s short-term and excessive
trading policies.
Under certain circumstances Northwestern Mutual reserves the right to remove a
Portfolio or substitute another Portfolio for such Portfolio.
The Investment
Options – Fixed
Options and The
Contract –Purchase
Payments Under the
Contract
(Guaranteed
Account Investment
Minimums and
Maximums)
The Investment
Options (Short Term
and Excessive
Trading)
Contract Owner
Services
(Substitution of
Portfolio Shares and
Other Changes)
Optional Benefits
Optional benefits may be subject to additional charges that may vary by issue
age, are not available for all issue ages, must be elected at issue and cannot be
added once it is removed or expires.
If you elect to withdraw the advisory fee from your Contract Value, the
withdrawal will reduce the death benefit and may be subject to federal and state
income taxes and a 10% federal penalty tax.
The Contract –
Death Benefit
(Enhanced Death
Benefit Examples)
 
TAXES
 
Tax Implications
You should consult with a tax professional to determine the tax implications of
an investment in, and payments received under, the Contract. There is no
additional tax benefit if the Contract is purchased through a tax-qualified plan or
individual retirement account (IRA). Withdrawals (and some distributions) will
generally be subject to ordinary income tax rates, and may be subject to
penalties.
Federal Income
Taxes
4  Account A (Fee Based) Prospectus
 
CONFLICTS OF INTEREST
Cross-Reference(s)
to Location in
Prospectus
Exchanges
Some financial representatives may have a financial incentive to offer a new
contract in place of the one you already own. You should only exchange an
existing contract if you determine, after comparing the features, fees and risks of
both contracts, that it is preferable to purchase the new contract rather than
continue to own an existing contract.
Additional
Information –The
Distributor
 
Overview of the Contract
The Contract is an individual flexible payment variable annuity contract, the purpose of which is primarily to provide for the accumulation of value through variable or fixed investment options, and payment of annuity benefits on a fixed or variable basis, through allocations to a variety of Portfolios and/or fixed account options. The Contract is sold for use under a variety of tax-qualified and nontax-qualified plans and may be appropriate if you have a long-term investment horizon. It 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.
During the years when funds are being paid into your Contract, known as the accumulation (savings) phase, the earnings accumulate on a tax-deferred basis. The annuitization (income) period begins when you start receiving a stream of periodic annuity payments under your Contract that begin on the date you select, and all or a portion of such payments will be taxed as ordinary income. Once you annuitize your Contract, your withdrawal rights will depend on the income plan selected. The amount you accumulate under your Contract, including the results of investment performance of your Divisions and interest earned under the fixed options will determine the amount of your monthly annuity payments. Additional information about the Portfolios in which the Divisions invest is provided in the Appendix (see “Appendix A: Portfolios Available Under Your Contract).
In addition to the Divisions which vary with the investment experience of the underlying Portfolios, the Contract offers a fixed option (Guaranteed Interest Fund or GIF) that credits interest at a declared rate.
Below are other features and options that the Contract offers.
•
Accessing your money. During the accumulation phase, you may make a withdrawal of your Contract Value or surrender the Contract by submitting a request in writing or by telephone, subject to our administrative procedures.
•
Deduction of Advisory Fee. We will allow you to deduct advisory fees due to your Investment Professional from Contract Value. We limit the gross annual advisory fee to 2.15% of Contract Value. If you elect to withdraw the advisory fee from your Contract Value, this withdrawal will reduce the death benefit, and may be subject to federal and state income taxes and a 10% federal penalty tax.
•
Tax treatment. You may transfer Contract Value among the Divisions and the fixed options without tax implications, and earnings (if any) on your investments are generally tax-deferred. You are taxed only when (1) you make a withdrawal or surrender; (2) you receive an annuity payments under the Contract; or (3) upon payment of the death benefit.
•
Standard Death Benefit. Your Contract includes a death benefit that will pay your designated beneficiaries (1) the Contract Value if an Annuitant dies before the Contract Maturity Date and on or after his or her 75th birthday, or (2) the greater of the Contract Value or Purchase Payments less any adjustment for each withdrawal if an Annuitant dies before the Contract Maturity Date and before his or her 75th birthday. If an Annuitant dies after the Contract Maturity Date or any time after Annuity Payments begin, no death benefit is payable. The Contract has an Enhanced Death Benefit option available for an additional charge.
•
Additional Features and Services. We make certain additional services available under the Contract at no additional charge:
The Automatic Dollar Cost Averaging Plan allows you to transfer a set amount from the Government Money Market Division to other Divisions on a regular schedule. The Portfolio Rebalancing feature automatically rebalances your Contract Value among your selected Divisions in order to restore your allocation to the original level. You may participate only in one of the Automatic Dollar Cost Averaging Plan and Portfolio Rebalancing feature at a time. We also allow automatic transfers or sweeps of interest from the GIF to any combination of the Divisions monthly, quarterly, semi-annually or annually. We do not charge for participation in these features.
The Systematic Withdrawal Plan allows you to set up automatic monthly withdrawals from your Contract Value. We will take any withdrawal under this plan proportionally from your Contract Value in your selected investment options or the investment options you designate subject to certain conditions. We do not charge for participation in this feature.
Account A (Fee Based) Prospectus  5
Fee and Expense Tables
Contract Fees and Expenses
The following tables describe the fees and expenses that you will pay when buying, owning, and surrendering the Contract. They do not include any advisory fee your Investment Professional may withdraw from Contract Value for his or her services. The fees and expenses do not reflect any advisory fees paid to your Investment Professional from Contract Value or other assets of the owner. If such charges would be reflected, your fees and expenses would be higher. Please refer to your Contract specifications page for information about the specific fees you will pay each year based on the options you have selected. The first table describes the fees and expenses that you will pay at the time that you buy the Contract, surrender, or make withdrawals from the Contract, or transfer Contract Value between investment options. These tables do not include any charge for state premium tax deductions, which we do not charge for at present, but we reserve the right to do so.
 
Transaction Expenses
Maximum
Fee
Current
Fee
Sales Load (as a percentage
of Purchase Payments)
N/A
N/A
Maximum Withdrawal Charge for Sales
Expenses
N/A
N/A
Transfer Fee
N/A
N/A
Expedited Delivery Charges1
$17
$17
Wire Transfer Fee2
$15
$15
The next table describes the fees and expenses that you will pay each year during the time that you own the Contract (not including Portfolio company fees and expenses).
If you choose to purchase an optional benefit, you will pay additional charges as shown below. 
Annual Contract Expenses
Maximum
Fee
Current
Fee
Administrative Expenses3
$30
$30
Base Contract Expenses (as a percentage
of Separate Account assets)4
0.75%
0.35%
Optional Enhanced Death Benefit
Expenses (as a percentage of the entire
benefit)5
0.40%
0.10%
1
For express mail delivery with signature required; the express mail delivery charge without signature is $15.
2
We also charge $15 for wire transfers in connection with withdrawals.
3
We are currently waiving the Annual Contract Fee if Purchase Payments less withdrawals equal or exceed $25,000. We reserve the right to change this practice in the future. We will give at least 30 days notice.
4
We reserve the right to increase the current base contract charges to a maximum annual rate of 0.75%. The expense numbers shown in the tables reflect the maximum base contract charges. The Contracts may provide for charges for transfers between the Divisions of the Separate Account and for premium taxes, but we are not presently assessing such charges.
5
The maximum charge is for issue age (i.e., the age nearest the Primary Annuitant’s birthday at the time the application is approved) 56-65. The charge is 0.10% for issue age 45 or less and 0.20% for issue age 46-55. The “entire” enhanced death benefit on any Valuation Date equals the greatest of (i) the Contract Value on that Valuation Date, (ii) the amount of Purchase Payments made under the Contract (adjusted for any withdrawals), or (iii) the EDB on the most recent Contract anniversary date prior to the Primary Annuitant’s 80th birthday, increased by any Purchase Payments we received since that Contract anniversary and decreased by the percentage of Contract Value withdrawn since that Contract anniversary. The EDB is available only at the time the Contract is issued. At the time of issue, the value of the EDB would be equal to the greater of the Initial Purchase Payment or the Contract Value.
6  Account A (Fee Based) Prospectus
Annual Portfolio Operating Expenses
The table below shows the minimum and maximum total operating expenses of the Portfolios that you may pay periodically during the time that you own the Contract. A complete list of the Portfolios available under the Contract, including their annual expenses, may be found at the back of this document (i.e., Appendix A: Portfolios Available Under Your Contract).  
 
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%
1.41%
Annual Portfolio Operating Expenses After Contractual Fee Waiver or Reimbursement*
0.20%
1.25%
*
The “Annual Portfolio Operating Expenses After Contractual Fee Waiver or Reimbursement” line in the above table shows the minimum and maximum fees and expenses as of December 31, 2020 charged by all of the Portfolios after taking into account contractual fee waiver or reimbursement arrangements in place. Those contractual arrangements are designed to reduce total Annual Portfolio Operating Expenses and will continue for at least one year from the date of this prospectus.
**
As a percentage of average Portfolio assets.
For more information about voluntary fee waivers that may be in place, see the “Charges” section.
Example1
The following Example is intended to help you compare the cost of investing in the Contract with the cost of investing in other variable annuity contracts. These costs include Contract Owner transaction expenses, annual Contract fees, and the fees and annual Portfolio expense. The Example does not include any advisory fee your Investment Professional may withdraw from Contract Value for his or her services. If such charges would be reflected, your fees and expenses would be higher. Because we impose no charges upon surrender or annuitization, your costs will be the same whether you continue to own, surrender, or annuitize the Contract at the end of the period shown. The Example assumes that you invest $100,000 in the Contract for the time periods indicated and that your investment has a 5% return each year. The Example reflects the maximum expenses of the underlying Portfolios (as set forth above) as well as the Optional Enhanced Death Benefit Maximum Charge. Although your actual costs may be higher or lower than those shown below, based on these assumptions, your costs would be as follows:
Contract With the Enhanced Death Benefit 
 
1 year
3 years
5 years
10 years
If you surrender your
Contract at the end of the
applicable time period:
$2,232
$7,646
$13,327
$28,781
If you annuitize at the end
of the applicable time
period:
$2,232
$7,646
$13,327
$28,781
If you do not surrender
your Contract:
$2,232
$7,646
$13,327
$28,781
1 The charge for the EDB above was determined by multiplying the maximum EDB percentage charge (40%) by the entire EDB. The EDB amounts assumed for purposes of this example are equal to the Contract Value at each anniversary. Such hypothetical amounts are for illustrative purposes only. The $30 annual Contract fee is reflected as 0.00% based on the annual Contract fees collected divided by the average assets attributable to the Contracts for the fiscal year ended December 31, 2020.
Please remember that the examples are simply illustrations and do not represent past or future expenses. Your actual expenses may be higher or lower than those shown in the examples. Similarly, your rate of return may be more or less than the 5% assumed in the examples.
Principal Risks
Investment Risk You can lose money by investing in the Contract.
The Contract is not a short-term investment and is not appropriate for you if you need ready access to cash. It is intended for retirement and long-term savings and from a tax perspective is generally less attractive if owned by a non-natural person. Your Contract Value will be reduced if you withdraw money and withdrawals may be subject to tax penalties or other unfavorable treatment.
If, in addition, you elect to withdraw the advisory fee from your Contract Value, the deduction will reduce the death benefit, and may be subject to federal and state income taxes and a 10% federal penalty tax. Your Contract has also adopted measures to deter short-term trading that may trigger additional restrictions.
Investment in the Contract is subject to the risk of poor investment performance and can vary depending on the performance of the investment options (Portfolios) available
Account A (Fee Based) Prospectus  7
under the Contract, and each Portfolio will have its own unique risks. You should review the prospectuses for the Portfolios before making an investment decision.
Insurance Company Risks Investment in the Contract is subject to the risks related to the Depositor (Northwestern Mutual), and any obligations, 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.
The Company
The Northwestern Mutual Life Insurance Company, or through its subsidiaries and affiliates, offers insurance products, investment products, and advisory services which are designed to address clients’ needs for financial security and protection, wealth accumulation and distribution, and estate preservation. Organized by a special act of the Wisconsin Legislature in 1857, the Company is licensed to conduct a conventional life insurance business in the District of Columbia and in all states of the United States. The Company’s total assets were over $308 billion as of December 31, 2020. The Home Office of Northwestern Mutual is located at 720 East Wisconsin Avenue, Milwaukee, Wisconsin 53202.
In addition to your fixed account allocations, General Account assets are used to guarantee the payment of the benefits under the Contract, including death benefits. To the extent that we are required to pay you amounts in addition to your Contract Value
under these benefits, such amounts will come from General Account assets. Thus, Contract Owners must look to the strength of the Company and its General Account with regard to insurance contract guarantees. You should also be aware that 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.
The Separate Account 
We established the NML Variable Annuity Account A (the “Separate Account”) on February 14, 1968 by action of our Board of Trustees in accordance with the provisions of the Wisconsin insurance law. The Separate Account is registered with the Securities and Exchange Commission (“SEC”) as a unit investment trust under the 1940 Act.
You may allocate the money you invest under your Contract among the variable and fixed options (if available in your state) described elsewhere in this prospectus. Each variable option is a Division of the Separate Account, which corresponds to one of the Portfolios of the Funds also described elsewhere in this prospectus. Under Wisconsin law, the investment operations of the Separate Account are kept separate from our other operations. The values for your Contract supported by the Separate Account will not be affected by income, gains, or losses from the rest of our business. The income, gains or losses, realized or unrealized, for the assets we place in the Separate Account for your Contract will determine the value of your Contract benefits supported by the Separate Account, and will not affect the rest of our business. The assets in the Separate Account are reserved for you and other owners of variable annuity contracts, although the assets belong to us and we do not hold the assets as a trustee. While we and our creditors cannot reach the assets of the Separate Account to satisfy other obligations until our obligations under your Contract have been satisfied, all of our assets (except those we
hold in certain other separate accounts) are available to satisfy our obligations under your Contract. The obligations under the variable annuity contracts are obligations of the Company as depositor.
When permitted by law and subject to any required regulatory approvals or votes by Contract Owners, we reserve the right to:
•
Operate the Separate Account or a Division as either a unit investment trust or a management company under the 1940 Act, or in any other form allowed by law, if deemed by the Company to be in the best interest of Contract 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 the assets and liabilities of the Separate Account to another separate account.
•
Transfer cash from time to time between the Company’s General Account and the Separate Account as deemed
8  Account A (Fee Based) Prospectus
necessary or appropriate and consistent with the terms of the Contracts, 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 Contracts supported by the Separate Account to the Company’s General Account.
•
Add, delete, or make changes to the securities and other assets that are held or purchased by the Separate Account.
•
Terminate and/or liquidate the Separate Account.
•
Restrict or eliminate any voting rights of Contract Owners or other persons who have voting rights as to the Separate Account.
•
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 Contract and take other actions to carry out what we have done.
The Investment Options
The Contract makes available a fixed option and a variety of variable investment options. The Company does not endorse or recommend any particular option nor does it provide asset allocation or investment advice. Additionally, not all of the investment options may be available in the Fee-Based Program under which you hold your Contract. You, together with your Investment Professional, are responsible for choosing your investment options and the amounts you allocate to each based on your individual situation and your personal savings goals and risk tolerances. After your initial investment decision, you should monitor your investments and periodically review the options you select and the amount allocated to each option to ensure your decisions continue to be appropriate. The amounts invested in the variable options are not guaranteed and, because both your principal and any return on your investment are subject to market risk, you can lose money. The amounts invested in the fixed option earn interest for a specified period at a rate we declare from time to time and, together with the interest earned, are guaranteed by, and subject to the claims-paying ability of, the Company.
The Role of Your Investment Professional
Your Investment Professional may provide us with instructions on your behalf involving the investment of Net Purchase Payments and the allocation and transfer of Accumulation Value of your Contract among the available investment options, subject to our rules, including the restrictions on short term and excessive trading discussed elsewhere in this prospectus.
We are not a party to any agreement you have with your Investment Professional, nor are we responsible for any brokerage service or investment advice your Investment Professional provides to you. Your Investment Professional may be associated with our affiliated registered investment advisor and/or our affiliated limited purpose federal savings bank, and a Contract may only be purchased through such an Investment Professional. Any non-incidental investment advice that your Investment Professional provides to you related to investment option selection or asset allocation within your Contract is pursuant to a separate agreement with an entity qualified to provide such advice, such as our affiliated registered investment advisor (Northwestern Mutual Investment Services, LLC) or our affiliated limited purpose federal savings bank (the Northwestern Mutual Wealth Management Company), and is
not provided by the Company. For more information, you may obtain a Northwestern Mutual Signature Annuities Disclosure Brochure from your Investment Professional. By signing the application for the Contract, (or by executing other documents acceptable to us), you affirm that you understand and agree that instructions you provide your Investment Professional may not be relayed concurrently to us and that we are not liable for any loss or liability that may arise as a result. All instructions we receive from your Investment Professional will be deemed to have been authorized by you and provided on your behalf (not on our behalf), until you either notify us in writing that you have revoked that authority or we receive notice of your death. We may require your Investment Professional to enter into a separate agreement with us relating to communications between us on behalf of all Contract Owners your Investment Professional represents as a condition of accepting his or her instructions. This agreement also may restrict the aggregate amounts your Investment Professional may transfer on behalf of the Contract Owners he or she represents or impose additional requirements with respect to such transfers. These limitations are intended to minimize the potential adverse effects large transfers may have on the interests of all contract owners.
Any fee that is charged by your Investment Professional is in addition to the fees and expenses that apply to your Contract described in this prospectus. You may choose to have your advisory fee deducted from Contract Value, but if you do, the advisory fee can only be up to 2.15% of Contract Value. If you choose to have your advisory fee deducted from Contract Value, your advisory fee will be calculated as a percentage of Contract Value and will be deducted on a quarterly basis. By advance written agreement with us, you may authorize your Investment Professional to withdraw amounts from your Contract and the amount to be deducted to pay for his or her fee. If you decide you would no longer like your advisory fee deducted from Contract Value, please contact your Investment Professional to discuss your options. These withdrawals are deducted proportionately from each of your investments. We will send you a confirmation of the withdrawal. Any such withdrawal will have the same tax effect and effect on Contract benefits as any other withdrawal you make from your Contract.
Account A (Fee Based) Prospectus  9
Your Investment Professional must be appointed by us, or associated with a broker-dealer appointed by us, as our authorized agent to sell the Contract.
Variable Options
The assets of each Division of the Separate Account are invested in a corresponding Portfolio that is a series of one of the following mutual fund families: Northwestern Mutual Series Fund, Inc.; Fidelity® Variable Insurance Products; Neuberger Berman Advisers Management Trust; the Russell Investment Funds; and the 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 Contract may change from time to time, and not all Portfolios in which assets of the Separate Account are invested may be available under your Contract. Your ability to invest in a Portfolio may be affected by the actions of such Portfolio, such as when a Portfolio closes.
Subject to any limitations imposed by your Fee-Based Program, you may choose to allocate the Accumulation Value of your Contract among the Divisions of the Separate Account and you may, subject to certain conditions, transfer values from one Division to another. 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 Portfolio.
There can be no assurance that the Portfolios will realize their objectives. 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. Read the prospectus carefully before investing. You can find these documents online at www.nmprospectus.com, by calling (866) 910-1232 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.
Payments We Receive The Contract makes available both proprietary and non-proprietary Portfolios. The Northwestern Mutual Series Fund, Inc. 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 Contract, we consider during the selection process whether the 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-advisers’ 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 of Contract Value 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 Contract Value of your Contract resulting from the performance of the Portfolio 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 offered through the Contract. 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 Contracts 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 Contracts and Portfolios. The Company and its affiliates may profit from these payments.
While not currently the case, certain Portfolios available under the Contract 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. These 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 consider receipt of these payments when deciding whether to offer a Portfolio.
Additionally, an investment adviser of a Portfolio or its affiliates may provide the Company with wholesaling services that assist in the distribution of the Contracts 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 its affiliate) with increased access to persons involved in the distribution of the Contracts.
Transfers Between Divisions Subject to any limitations imposed by your Fee-Based program, the short term and excessive trading limitations described below and any frequent trading policies adopted by the Funds that are described in their prospectuses, you may change the allocation of Purchase Payments among the Divisions and transfer values from one Division to another both before and after Annuity Payments begin. In order to take full advantage of these features you should carefully consider, on a continuing basis, which investment options are best suited to your long-term investment needs. See “Owner Inquiries and Instructions” for more information on how you may change the allocation of Accumulation or Annuity Units among the Divisions. Subject
10  Account A (Fee Based) Prospectus
to our requirements and availability, your Financial Representative may provide us with instructions on your behalf involving the allocation and transfer of Accumulation Value of your Contract among the available investment options, subject to our rules, including the restrictions on short term and excessive trading discussed below.
We will make the transfer based upon the next valuation of Accumulation or Annuity Units in the affected Divisions after our receipt of your request for transfer at our Home Office, provided it is in good order. If we receive your request for transfer before the close of trading on the NYSE (typically, 4:00 p.m. Eastern Time), your request will receive same-day pricing. If we receive your request for transfer on or after the close of trading on the NYSE, we will process the order using the value of the units in the Divisions determined at the close of the next regular trading session of the NYSE. We will adjust the number of such units to be credited to reflect the respective value of the units in each of the Divisions. The minimum amount of Accumulation Units which may be transferred is the lesser of $100 or the entire value of the Accumulation Units in the Division from which the transfer is being made. There is no minimum transfer amount for Annuity Units.
Before the Maturity Date, you may transfer amounts which you have invested in the Guaranteed Interest Fund to any Division of the Separate Account, and you may transfer the value of Accumulation Units in any Division of the Separate Account to the Guaranteed Interest Fund for investment on a fixed basis, subject to the restrictions described in the Contract. (See “Fixed Option—The Guaranteed Interest Fund”.)
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 Contract (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 Contract Owners. Any exceptions must be either expressly permitted by our policies and procedures or subject to an approval process described in them. We may also be prevented from uniformly applying these policies and procedures under applicable state or federal law or regulation. 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 Contract during a Contract year. Multiple transfers with the same effective date made by the same Owner will be counted as a single transfer for purposes of applying the twelve transfer limitation. Further, an investor 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 after making two or more such round trip transfers within any Contract year, including the year in which the first such round trip transfer was made. The restriction will last until the next Contract anniversary date and the Contract Owner will be sent a letter informing him or her of the restriction. An investor 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 after making one more such round trip transfer within any Contract year, including the year in which the first such round trip transfer was made. The restriction will last until the next Contract anniversary date and the Contract 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, interest sweeps, or to initial allocations or changes in future allocations, to the extent these features are available in your Contract. Once a Contract is restricted, we will allow one additional transfer into the Government Money Market Division until the next Contract 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).
We may change these policies and procedures from time to time in our sole discretion without notice; provided, however, Contract 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 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. Such policies and procedures may provide for the imposition of a redemption fee and, upon request from the Fund, require us to provide transaction information to the Fund (including an Owner’s tax identification number) and to
Account A (Fee Based) Prospectus  11
restrict or prohibit transfers and other transactions that involve the purchase of shares of a Portfolio(s). 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 an investment option until the restriction or prohibition ends. If you submit a request that includes a purchase or transfer into such a restricted investment option, 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. If your Investment Professional provides substantially the same asset allocation or investment advice to a number of Contract Owners whose investments represent a substantial portion of the assets in an underlying Portfolio, resulting trading activities may adversely affect all Contract Owners. Therefore, we may restrict the aggregate amounts your Investment Professional may transfer on behalf of the Contract Owners he or she represents or impose additional requirements with respect to such transfers. These limitations are intended to minimize the potential adverse effects large transfers may have on the interests of all Contract Owners. 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 Contract Owners. We may be unable to monitor trading activity by individual participants in omnibus accounts established under group annuity contracts.
Fixed Option—The Guaranteed Interest Fund
During the accumulation phase of your Contract, you may direct all or part of your Purchase Payments to the Guaranteed Interest Fund (“GIF”) for investment on a fixed basis, provided it is available in your state and under your Contract. Your ability to make investments in a Guaranteed Account may be limited by state law. Currently, the GIF is not available in Contracts subject to New York law. To find out if a GIF is available in your state, or for the current interest rate, please contact your Northwestern Mutual Financial Representative or call 1-888-455-2232. The GIF is not available under fee-based programs sponsored by affiliates of the Company. All material state variations are described in Appendix B.
Moving into a Guaranteed Account You may make an initial investment in a Guaranteed Account by applying all or part of a Net Purchase Payment or an amount transferred from Divisions of the Separate Account or another Guaranteed Account prior to the Maturity date, subject to restrictions
described in the Contract. Subject to limitations described below, you may make additional investments in GIF at any time prior to the Maturity Date of the Contract.
Moving out of a Guaranteed Account Transfers from the GIF to the Separate Account Divisions are subject to certain limits. After a transfer from the GIF, we will allow no further transfers from the GIF for a period of 365 days; in addition, we will allow no further transfers back into the GIF for a period of 90 days. The maximum amount that you may transfer from the GIF in one transfer is the greater of (1) 25% of the amount that you had invested in the GIF as of the last Contract anniversary preceding the transfer and (2) the amount of your most recent transfer from the GIF. In no event will this maximum transfer amount be less than $1,000 or more than $50,000. These transfer limitations can be illustrated as follows: 
Amount of initial
deposit into a GIF
Maximum amount
you
can transfer annually
Total number of
years
until initial deposit
can
be transferred
completely
$25,000
$6,250
4 years
$75,000
$18,750
4 years
$100,000
$25,000
4 years
Additional Information In reliance on certain exemptive and exclusionary provisions, we have not registered interests in the GIF under the Securities Act of 1933 and we have not registered the GIF as an investment company under the 1940 Act. Accordingly, neither the GIF nor any interests therein are generally subject to these Acts. We have been advised that the staff of the SEC has not reviewed the disclosure in this prospectus relating to the GIF. This disclosure, however, is subject to certain generally applicable provisions of the federal securities laws relating to the accuracy and completeness of statements made in prospectuses.
Amounts you invest in the GIF become part of our General Account, which represents all of our assets other than those held by us in the Separate Account and other separate accounts. The General Account is used to support all of our annuity and insurance obligations and is available to our general creditors. As part of our General Account, however, amounts in the GIF do not bear any mortality rate and expense charges applicable to the Separate Account under the Contract, nor do they bear expenses of the Portfolios in which the Divisions of the Separate Account invest. Other charges under the Contract may apply to amounts in the GIF. (See “Charges.”) For purposes of allocating and deducting the annual Contract fee, we consider any investment in the GIF as though it were an investment of the same amount in one of the Separate Account Divisions.
Interest is credited and compounded daily on amounts you invest in the GIF at a rate that we declare (“Declared Rate”), in our discretion, for a guaranteed period that we specify (“Guaranteed Period”). The Declared Rate will not be less than a minimum guaranteed annual effective rate of 0.50% (or a higher rate if required by applicable state law). We also guarantee that the cash value of your investment in the Guaranteed Accounts will not be less than a minimum amount determined by a formula that complies with applicable state insurance nonforfeiture law. For GIF, the Declared Rate will be
12  Account A (Fee Based) Prospectus
effective for a Guaranteed Period equal to the shorter of the following two periods: (i) the twelve month period measured from the end of the month of the investment’s effective date, or (ii) the period remaining until the Maturity Date of the Contract.
Upon expiration of a Guaranteed Period for GIF, we will apply a new Declared Rate for a new one-year Guaranteed Period.
Investments in the GIF are subject to a maximum limit of $100,000 without our prior consent. To the extent that a Purchase Payment or transfer from a Division of the Separate Account causes the Contract’s interest in the GIF to exceed this maximum limit, we will place the amount of the excess in the Government Money Market Division and it will remain there until you instruct us otherwise.
The Contract
Generally  The Contract is intended for retirement and long-term savings. The Contract provides for a death benefit during the years when funds are being accumulated and for a variety of income options following retirement. During the years when funds are being paid into your Contract, known as the accumulation phase, the earnings accumulate on a tax-deferred basis. The earnings are subject to tax as ordinary income if you make a withdrawal. The annuitization phase begins when you start receiving Annuity Payments under your Contract. Monthly Annuity Payments begin on the date you select. The amount you accumulate under your Contract, including the results of investment performance, will determine the amount of your monthly Annuity Payments. If, however, the Contract is owned by a non-natural person (e.g., a corporation or a trust), the tax deferral on earnings may be lost. While there are exceptions for certain employee benefit plans, any income on a Contract owned by a non-natural person will generally be treated as ordinary income subject to annual taxation.
If you are purchasing the Contract through a tax-favored arrangement, including IRAs and Roth IRAs, you should carefully consider the costs and benefits of the Contract before purchasing the Contract, since the tax-favored arrangement itself provides for tax-sheltered growth. Certain provisions of the Contract may be different than the general description in this prospectus, and certain riders, options, or funds may not be available because of legal restrictions in your state. You should consult your Contract, as any such state variations will be included in your Contract or in riders or endorsements attached to your Contract.
Free Look If you change your mind about owning this Contract, you can cancel it within ten days after you receive it (or whatever period is required under applicable state law). There is no charge for our expenses but the amount you receive may be more or less than what you paid, based on actual investment experience following the date we received your purchase payment. We will refund the sum of (a) the value of the Accumulation Units of the Separate Account on the effective day of the return plus (b) any amount deducted from the portion of the Purchase Payments applied to the Separate Account. In the event applicable state law requires us to return the greater of your Contract value or your purchase payment, we will do so. All material state variations are described in Appendix B.
Contract Values The value of your Contract on any Valuation Date is the sum of the following: (i) the value of your amounts held in the Divisions of the Separate Account on that Valuation Date; and (ii) the sum of your amounts allocated to the Guaranteed Interest Fund, plus credited interest; less (iii) any
withdrawals from any Guaranteed Account and any applicable MVA or charges under the Contract deducted from any Guaranteed Account. If, for example, the advisory fee is withdrawn from Contract Value, the withdrawal will reduce the Guaranteed Account value. We use the “net investment factor” as a way to calculate the investment performance of a Division from valuation period to valuation period. For each Division, the net investment factor shows the investment performance of the underlying mutual fund Portfolio in which a particular Division invests, including the charges assessed against that Division for a given valuation period. The Portfolios will distribute investment income and realized capital gains to the Divisions, which we will reinvest in additional shares of those same Portfolios. Unrealized capital gains and realized and unrealized capital losses will be reflected by changes in the value of the shares held by the Division. We will notify you, if, before the Maturity Date no Purchase Payments have been received under the Contract for a period of two full years and both the Contract Value and the total Purchase Payments paid (less amounts withdrawn) are each less than $2,000. If you are unable to increase the Contract Value or the total Purchase Payments paid to $2,000 within 30 days after we notify you, we may surrender your Contract for its Contract Value (i.e., with no withdrawal charge) in accordance with applicable state law, provided such surrender does not affect or terminate any other benefits or riders provided or elected under the Contract.
Purchase Payments Under the Contract
Frequency and Amount  A Purchase Payment is the money you give us to apply to your Contract. You may make Purchase Payments monthly, quarterly, semiannually, annually, or on any other frequency acceptable to us. The minimum initial Purchase Payment is $50,000. The minimum amount for each subsequent Purchase Payment is $25, although we may accept lower amounts in certain circumstances. We will accept larger Purchase Payments than the minimums, but total Purchase Payments under any Contract may not exceed $5,000,000 without our consent. Purchase Payments may not exceed the applicable federal income tax limits. (See “Federal Income Taxes.”)
In certain situations, we may, in our discretion, reduce or waive our minimum purchase payment requirements. For example, we may reduce the minimum initial purchase amount from $50,000 to no less than $25,000 provided you agree to make additional subsequent Purchase Payments such that the total Purchase Payments you make on or before the first anniversary date of your Contract equal or exceed $50,000. Also, when initial Purchase Payments representing proceeds from rollovers or
Account A (Fee Based) Prospectus  13
annuity exchanges are determined to satisfy the Contract minimum based on values at the time you sign your application, but the amount subsequently received by us is less than the required minimum due to market value fluctuations and sales or administrative fees charged in connection with the rollover or exchange, we may reduce the required minimum by the sum of any such depreciation and fees. The amount of minimum Purchase Payments may also be reduced in light of certain other requirements of Fee-Based Programs.
Guaranteed Account Investment Minimums and Maximums  The Guaranteed Interest Fund is subject to certain investment minimums and maximums in addition to those described above. Without our prior consent, no investment may cause the Accumulation Value of the Guaranteed Interest Fund (the sum of all applied amounts and credited interest, less fees and any amounts transferred or withdrawn) to exceed a maximum amount we specify in the Contract. For Contracts currently being issued, the maximum amount specified in the Contract is $100,000.
Application of Purchase Payments We credit Net Purchase Payments to the variable and/or fixed investment options as you direct. If we do not have appropriate instructions in good order, we will continue to credit Net Purchase Payments to your Contract according to the allocation instructions then in effect. The application of Purchase Payments to the Guaranteed Interest Fund is subject to special rules (see “The Investment Options—Fixed Option”). We invest those assets allocated to the variable options in shares of those Portfolios that correspond to the applicable Divisions; the term “Accumulation Units” describes the value of this interest in the Separate Account.
Initial Net Purchase Payments allocated to a Division will be priced at the Accumulation Unit Value determined no later than two Valuation Dates after we receive at our Home Office or a lockbox facility we have designated both your initial Purchase Payment and your application in good order. “Good order” means that the application is complete and accurate and all applicable requirements are satisfied. If your application is not in good order, we may take up to five Valuation Dates to resolve the problem. If we are unable to resolve the problem within that time, we will notify you in writing of the reasons for the delay. If you revoke the consent given with your application to hold your initial Purchase Payment pending resolution of the problem, we will return your payment. Otherwise, the number of Accumulation Units you receive for your initial Net Purchase Payment will be determined based upon the valuation of the assets of that Division we make not later than two Valuation Dates following the date on which the problem is resolved and your application is put into good order. Although we do not anticipate delays in our receipt and processing of applications or Purchase Payment requests, we may experience such delays to the extent applications and Purchase Payments are not forwarded to our Home Office in a timely manner. Such delays could result in delays in the issuance of Contracts and the allocation of Purchase Payments under existing Contracts.
Subsequent Net Purchase Payments will be priced based on the next determined Accumulation Unit Value after the payment is received in good order either at the Home Office or a lockbox facility we have designated. The number of Accumulation Units
credited to a Contract is determined by dividing the Net Purchase Payments by the value of the Accumulation Unit on the effective date. This number of Accumulation Units will not be changed by any subsequent change in the dollar value of the Accumulation Units.
We deem receipt of a Purchase Payment to occur on a given Valuation Date if receipt occurs before the close of trading on the NYSE (typically, 4:00 p.m. Eastern Time). If receipt occurs on or after the close of trading on the NYSE, we deem receipt to occur on the following Valuation Date. You may send Purchase 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 Purchase Payments by check or electronic funds transfer (“EFT”). We do not accept third-party checks at the Home Office as part of the initial Purchase 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 Purchase Payment with a check or bank draft and, for whatever reason, it is later returned unpaid or uncollected, or if a Purchase 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 Contract Value. We may reject any application or Purchase Payment for any reason permitted by law. We may also be required to provide additional information about you and your account to government regulators.
The value of an Accumulation Unit in each Division varies with the investment experience of the Division (which in turn is determined by the investment experience of the corresponding Portfolio). We determine the value by multiplying the value on the immediately preceding valuation date by the net investment factor for the Division. The net investment factor takes into account the investment experience of the Portfolio, the deduction for mortality and expense risks we have assumed, and a deduction for any applicable taxes or for any expenses resulting from a substitution of securities. Since you bear the investment risk, there is no guarantee as to the aggregate value of your Accumulation Units. That value may be less than, equal to, or more than the cumulative net purchase payments you have made.
Maturity Date Under Contracts currently offered, Purchase Payments may be made until the Maturity Date stated on the Contract’s specifications page, or until Annuity Payments begin, whichever is earlier. Distributions may be required before the Maturity Date.(See “Minimum Distribution Requirements.”) Any death benefit you elect will automatically terminate upon annuitization, which will occur no later than the contract’s maturity date (i.e., the date upon which you must either annuitize or take a lump sum).
Access to Your Money
Withdrawals Contract Owners may withdraw some or all of the Accumulation Unit Value of their Contract Value at any time before the Maturity Date. We may require that a Contract Value of at least $2,000 remain after a partial withdrawal. You may instruct us how to allocate your partial withdrawal request
14  Account A (Fee Based) Prospectus
among your investments in the Divisions and Guaranteed Interest Fund. If no direction is received, your withdrawal will be deducted proportionately from each of your investments.
Withdrawals may also be made after the Maturity Date. If Annuity Payments are being made under variable income plan 1, the payee may surrender the Contract and receive the value of the Annuity Units credited to his or her Contract. If Annuity Payments are being made under variable income plan 2 and the payee dies during the certain period (or if both payees die during the certain period of variable income plan 3), the beneficiary may surrender the Contract and receive the withdrawal value of the unpaid payments for the certain period. The withdrawal value is based on the Annuity Unit value on the withdrawal date, with the unpaid payments discounted at the Assumed Investment Rate. (See “Description of Variable Income Plans.”)
We may accept withdrawal or full surrender requests (including, but not limited to exchanges reported under IRC §1035 and direct trustee to trustee transfers) in writing or by telephone, subject to our administrative procedures, which may include the proper completion of certain forms, the provision of appropriate identifying information, and other administrative requirements. Full surrenders may require a signed form. Withdrawal requests may be submitted on properly completed Northwestern Mutual forms or an electronic order ticket. See “Owner Inquiries and Instructions” for more information. Improperly submitted and incomplete forms will not be considered to be in good order and will not be processed. We will process your request at the accumulation value next determined only after our receipt of your request in good order, which includes satisfaction of all our administrative requirements. Subject to our administrative procedures and our approval, you may request that a withdrawal be processed (or that an Income Plan start) on a future date you specify. Otherwise, we will pay the amount of any withdrawal from the Separate Account within seven days (or earlier, if required under applicable state law) after we receive the request in good order unless the suspension of payments or transfers provision is in effect. You may revoke a request for withdrawal on a specified future date any time prior to such future date. Subject to our rules, requirements, and availability, your Financial Representative may provide us with instructions on your behalf involving the frequency, amount, and destination of partial and complete withdrawals made under your Contract.
Withdrawals are not subject to a surrender charge, including withdrawals of your advisory fee from Contract Value. If you elect to have your advisory fee withdrawn from Contract Value, the withdrawal of your advisory fee will result in the cancellation of Accumulation Units. The withdrawal will have the same tax effect and effect on Contract benefits as any other withdrawal you make from your Contract. For each withdrawal,
including withdrawals of your advisory fee from Contract Value, the death benefit and optional enhanced death benefit is reduced proportionally by the percentage of the Contract Value withdrawn. (See "Benefits Available Under the Contract.") This method of calculating reductions could reduce the relevant values significantly, and by substantially more than the actual amount of the withdrawal. The withdrawal may be subject to federal and state income taxes and a 10% federal penalty tax if withdrawals are made before age 59 1/2. (See "Benefits Available Under the Contract.") Given the significant effect such reductions could have on your Contract benefits, you should discuss the impact of withdrawing advisory fees from Contract Value with your Investment Professional prior to making any election.
If mandated under applicable law, we may be required to block an Owner’s account and thereby refuse to pay any requests for transfer, partial withdrawal, surrender or death benefits, until instructions are received from the appropriate regulator. We may also be required to provide additional information about an Owner and an Owner’s account to government regulators.
Benefits Provided Under the Contracts
Subject to the restrictions noted below, we will pay the death benefit of a Contract in a lump sum or under the Income Plans described below. We reserve the right to defer determination of the withdrawal value of the Contracts, or the payment of benefits under a variable income plan, until after the end of any period during which the right to redeem shares of a Portfolio is suspended, or payment of the redemption value is postponed pursuant to the provisions of the 1940 Act because of one or more of the following: (a) the NYSE is closed, except for routine closings on holidays or weekends; (b) the SEC has determined that trading on the NYSE is restricted; (c) the SEC permits suspension or postponement and so orders; (d) an emergency exists, as defined by the SEC, so that valuation of the assets of the Funds or disposal of securities they hold is not reasonably practical; or (e) 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 or death benefit from the Government Money Market Division until the Portfolio is liquidated.
Benefits Available Under the Contract
The following table summarizes information about a variety of standard and optional benefits available under the Contract. If applicable, information about the fees associated with a benefit included in the table may be found in the Fees and Expense Tables.
 
Account A (Fee Based) Prospectus  15
Name of Benefit
Purpose
Is Benefit
Standard or
Optional
Maximum Fee
Brief Description of Limitations/
Restrictions
Standard Death
Benefit
The Contract provides a death
benefit to be paid under a lump
sum, fixed or variable income
plans or continued in force as a
new contract for the payee(s)
Standard
No Charge
•Only payable if the Annuitant dies
before the Maturity Date
•Income plans have their own payout
benefit rules at death (see below)
•Is reduced proportionately for
withdrawals, including withdrawals
from Contract Value to cover the
advisory fee.
•If payee elects to continue the
contract in force, additional
restrictions may apply
Enhanced Death
Benefit
An optional enhanced death
benefit is available that allows
the owner to annually “lock in”
certain increases in Contract
Value
Optional
0.40%1
•Not available for all issue ages and
enhanced death benefit adjustments
are limited by the primary
Annuitant’s age
•Must be elected at issue
•Cannot be added once terminated
•There is a charge for this benefit
•Is reduced proportionately for
withdrawals, including withdrawals
from Contract Value to cover the
advisory fee
Income Plans
Annuity payments and death
benefit payments are payable
under various income plans on a
variable or fixed basis
Standard
No charge2
•Plans for annuity payments for a
specified period are not available for
Contracts issued after May 1, 2013
•Variable Income Plans are subject to
some Contract charges (as well as
expenses of the underlying
Portfolios) and are subject to market
risk
•Fixed income plans are funded
through withdrawals from the
Separate Account
•Transfers between income plans are
only allowed under limited
circumstances
Fixed Option
The fixed option (Guaranteed
Interest Fund or GIF) is available
during the accumulation phase.
The Declared Rate will not be
less than a minimum guaranteed
annual effective rate of 0.50%
(or a higher rate if required by
applicable state law). The
Declared Rate will be effective
for a Guaranteed Period equal to
the shorter of the following two
periods: (i) the twelve month
period measured from the end of
the month of the investment’s
effective date, or (ii) the period
remaining until the Maturity
Date of the Contract.
Standard
No Charge3
•Principal and interest rates for fixed
option amounts guaranteed by
Northwestern Mutual are subject to
its claims-paying ability
•Effective rates apply only for
specified Guarantee Periods, the
terms for which may change at our
discretion and may be limited by
your Contract’s Maturity Date
•Allocations to and from the GIF
may be subject to special
restrictions, such as minimum and
maximum limits on initial and
additional amounts invested and
limits on the timing and amount of
transfers out of these options
Automatic Dollar
Cost Averaging
On a periodic basis,
automatically transfers a specific
amount from the Government
Money Market Division into
other Divisions you selected
Standard
No charge
•Cannot use with portfolio
rebalancing
16  Account A (Fee Based) Prospectus
Name of Benefit
Purpose
Is Benefit
Standard or
Optional
Maximum Fee
Brief Description of Limitations/
Restrictions
Systematic
Withdrawal Plan
Allows for monthly payments
drawn from your investment
options during the accumulation
phase either proportionately
from your investment options or
from specific investment options
Standard
No charge
•Proportionate deductions may be
limited for amounts in the
Guaranteed Interest Fund
•Taxes or penalties may apply
Portfolio
Rebalancing
Automatically rebalances the
Divisions you select (either
monthly, quarterly, semi-
annually or annually) to maintain
your chosen mix of Divisions
Standard
No charge
•Ordinarily ends upon transfers from
applicable Divisions
•Cannot use with dollar cost
averaging
Interest Sweeps
Automatically transfers interest
from the GIF to any combination
of Divisions
Standard
No charge
•Minimum Contract Value required
for eligibility
 
1 The annual charge for the Optional Enhanced Death Benefit is expressed as a percentage of the entire benefit and varies by issue age.
2 Variable income plans continue to be assessed Base Contract Charges.
3 Some charges apply to amounts allocated to or withdrawn from the Guaranteed Interest Fund but may be calculated in a manner different than the manner applicable to other amounts.
Death Benefit
How Much is the Death Benefit? The amount of the Death Benefit depends in part on when the Annuitant dies. (Remember that the Annuitant is the person upon whose life the Contract is issued.)
•
If an Annuitant dies before the Contract’s Maturity Date—and on or after his or her 75th birthday—the Death Benefit will equal the Contract Value (determined as described below).
•
If an Annuitant dies after the Contract’s Maturity Date (which is stated on the specifications page of the Contract), or any time after Annuity Payments begin, no Death Benefit is payable. Income Plans have their own payout benefit rules at death. (See “Income Plans.”)
•
If an Annuitant dies before the Contract’s Maturity Date—and before his or her 75th birthday—the Death Benefit will equal the greater of the following:
•
the Contract Value (determined as described immediately below); or
•
the amount of Purchase Payments we received, less an adjustment for every withdrawal. (For each withdrawal, we reduce the minimum death benefit and optional enhanced death benefit proportionally by the percentage of the Contract Value withdrawn. This method of calculating reductions could reduce the relevant values significantly, and by substantially more than the actual amount of the withdrawal. A return of premium death benefit could be substantially eroded by withdrawals to pay the annual advisory fee, as shown below.)
•
· Standard Death Benefit Example: After 10 years, for example, assuming no asset growth and only a 2.15% annual advisory fee, a $100,000 purchase payment may only provide for a $80,465 return of purchase payment death benefit.

  · Enhanced Death Benefit Example: After 10 years, for example, assuming no asset growth, and only a 0.40% annual enhanced death benefit fee and a 2.15% annual advisory fee, a $100,000 purchase payment may provide a $100,000 return of purchase payment death benefit. The surrender value at year 10 may be limited to $76,838.
When is the Death Benefit Determined? In determining the amount of the Death Benefit, the Contract Value is determined as of the date we receive proof of the Annuitant’s death at our Home Office. If we receive proof of death before the close of trading for the NYSE (typically, 4:00 p.m. Eastern Time), we will determine the Contract Value based on the value of the units in the Divisions determined at the close of that day’s trading session. If, however, we receive proof of death on or after the close of NYSE trading, we will determine the Contract Value based on the value of the units in the Divisions determined at the close of the next NYSE trading session. The values in any Guaranteed Account are determined in the same manner as are the values in the Separate Account Divisions; i.e., based on the time we receive the appropriate paperwork.
Account A (Fee Based) Prospectus  17
Guaranteed Minimum Death Benefit Examples
Set forth below are two numerical examples illustrating the effect of a withdrawal from the contract upon the minimum death benefit. The first example shows a hypothetical increase in Contract Value and a hypothetical withdrawal amount; the second shows a hypothetical decrease in Contract Value and a different hypothetical withdrawal amount (this method of calculating reductions has a greater effect on withdrawals when the death benefit exceeds the Contract Value): 
 
When Contract Value Exceeds
Total Purchase Payments
When Contract Value is Less
Than Total Purchase Payments
Total Purchase Payments
$50,000
$50,000
Guaranteed Minimum Death Benefit
immediately before withdrawal
$50,000
$50,000
Contract Value at the time of withdrawal
$100,000
$40,000
Withdrawal Amount
$25,000
$10,000
Proportionate Adjustment for Withdrawal
($25,000/$100,000) x $50,000 = $12,500
($10,000/$40,000) x $50,000 = $12,500
Percentage Reduction in Death Benefit
25%
25%
Guaranteed Minimum Death Benefit
immediately after the withdrawal
$50,000–$12,500 = $37,500
$50,000–$12,500 = $37,500
If you elect to have your advisory fee withdrawn from Contract Value, the withdrawal will have the same effect on the death benefit as any other withdrawal you make from your Contract. Given the significant effect such reductions could have on the death benefit, you should discuss the the impact of withdrawing advisory fees from Contract Value with your Investment Professional prior to making any elections.
Example: John Doe was the Owner of a Contract. John dies before the Contract Maturity Date and after his 75th birthday. Upon his death, the Company pays the Contract Value to his wife Jane, his designated beneficiary.
John Doe was the Owner of a Contract. John dies before the Contract Maturity Date and before his 75th birthday. Upon his death, the Company pays the greater of the Contract Value or Purchase Payments less any adjustments for each withdrawal to his wife Jane, his designated beneficiary.
John Doe was the Owner of a Contract. John dies after the Contract Maturity Date. Since the Contract has matured, no death benefits are payable through the Contract. If John settled the funds from the Contract to an Income Plan, a death benefit may be payable based on the Income Plan chosen.
An enhanced death benefit (“EDB”) is available at extra cost. The EDB allows an Owner to “lock in” increases in Contract Value as measured on each Contract anniversary date prior to the Primary Annuitant’s 80th birthday, increased by the dollar amount of subsequent Purchase Payments and proportionally reduced for subsequent withdrawals, in determining the death benefit payable. The EDB also guarantees that the death benefit payable under the Contract will never be less than Purchase Payments made under the Contract (adjusted for any withdrawals). The EDB on any Valuation Date equals the greatest of (i) the Contract value on that date, (ii) the amount of Purchase Payments made under the Contract (adjusted for any withdrawals), or (iii) the EDB on the most recent Contract anniversary date prior to the Primary Annuitant’s 80th birthday, increased by any Purchase Payments we received since that Contract anniversary and decreased by the percentage of Contract value withdrawn since that Contract anniversary. We deduct the extra cost for the EDB from the Contract Value on each Contract anniversary while the EDB is in effect. (See “Enhanced Death Benefit Charge.”) The EDB is available through issue age 65 (i.e., the application must be approved no later than six months following the Primary Annuitant’s 65th birthday) and must be elected when the Contract is issued. The EDB will remain in effect until the Maturity Date or the death of the Primary Annuitant or if you ask us to remove it from your Contract. You cannot add it to your Contract again after it has been removed.
Example: John Doe was the Owner of a Contract and had elected to add the optional enhanced death benefit (“EDB”) to his Contract for an additional charge. John dies before the Contract Maturity Date, after one year of owning the Contract and before his 80th birthday. Upon his death, the Company pays the greatest of the Contract Value, Purchase Payments less any adjustments for each withdrawal, or the EDB on the most recent anniversary plus payments and less any adjustments for withdrawals since the prior anniversary to his wife Jane, his designated beneficiary.
John Doe was the Owner of a Contract and had elected to add the optional enhanced death benefit (“EDB”) to his Contract for an additional charge. John dies before the Contract Maturity Date and after his 80th birthday. Upon his death, the Company pays the greater of the Contract Value or the EDB on the anniversary immediately prior to his 80th birthday plus payments and less any adjustments for withdrawals since that anniversary to his wife Jane, his designated beneficiary.
Enhanced Death Benefit Examples
Set forth below is a numerical example demonstrating the calculation of the enhanced death benefit (assuming an initial purchase payment of $100,000 with no subsequent purchase payments and no withdrawals): 
18  Account A (Fee Based) Prospectus
Contract Anniversary
Contract Value
Enhanced Death Benefit
First
$120,000
$120,000
Second
$130,000
$130,000
Third
$110,000
$130,000
Set forth below is an example showing the calculation of both the death benefit and the enhanced death benefit for a contract with a subsequent purchase payment and a withdrawal (for illustrative purposes, the contract values are hypothetical and no annual fees are taken into account). If you elect to have your advisory fee withdrawn from Contract Value, the withdrawal will have the same effect on the death benefit as any other withdrawal you make from your Contract. Given the significant effect such reductions could have on the death benefit, you should discuss the impact of withdrawing advisory fees from Contract Value with your Investment Professional prior to making any elections. 
Date-Activity
Contract Value
Death Benefit
Enhanced Death Benefit
1/1/2022–$100,000 Initial
Purchase Payment
$100,000 (immediately after
Purchase Payment)
$100,000
$100,000
1/1/2023–$50,000 Purchase
Payment
$120,000 (immediately before
Purchase Payment)
$150,000 (i.e., the sum of the
two Purchase Payments)
$170,000 (i.e., the highest
anniversary account value plus
the $50,000 Purchase Payment)
6/1/2023–$20,000 withdrawal
$125,000 (immediately before
the withdrawal)
(1–$20,000/$125,000) x
$150,000 = $126,000
(immediately after the
withdrawal)
(1–$20,000/$125,000) x
$170,000 = $142,800
(immediately after the
withdrawal)
How is the Death Benefit Distributed? If the Owner is the Annuitant and dies before the Contract’s Maturity Date, the Beneficiary automatically becomes the new Owner and Annuitant. As a matter of current practice, the Contract continues in force, subject to limitations under federal and/or state law. (If there is more than one Beneficiary for a given Contract, each Beneficiary must make his or her own method of payment election.) If the Contract continues in force, we will set the Contract Value at an amount equal to the Death Benefit. If this results in an addition to the Contract Value, we will place the additional amount in the Government Money Market Division and the Beneficiary (now, the new Owner) may transfer it to the Divisions chosen by such Beneficiary/Owner. Pursuant to the terms of the Contract, the Contract Value will remain invested in the same investment options as those at the time of the Annuitant’s death until such time as the Beneficiary elects to transfer to different investment options or to make a withdrawal.
If the Owner is not the Annuitant and the Annuitant dies before the Maturity Date, the contingent Annuitant automatically becomes the new Annuitant and the Contract continues in force. If no contingent Annuitant is named within 60 days (or whatever period that may be required under applicable state law) after we receive proof of death of the Annuitant, the Death Benefit becomes payable to the Owner.
If an Owner is the Annuitant and, during his or her life, elected an Income Plan (see “Income Plans”) for a Beneficiary, Annuity Payments begin to such Beneficiary upon the death of the Owner, as described above. If the Owner did not elect an Income Plan for a Beneficiary, the Beneficiary may elect to:
•
continue the Contract (as described above),
•
receive the Death Benefit under an Income Plan, subject to limitations under federal and/or state law, or
•
receive the Death Benefit as a lump sum check.
In any event, the Beneficiary must take distributions from the Contract pursuant to the applicable minimum distribution requirements. (See “Minimum Distribution Requirements.”) If no affirmative election is made, the Beneficiary will receive the Death Benefit as a lump sum check.
Income Plans
Generally If you decide to begin receiving Annuity Payments from your Contract, you may choose either: (1) monthly payments for a specified period (guaranteed only for contracts issued before May 1, 2013), or (2) monthly payments for your life (assuming you are the Annuitant), and you may choose to have payments continue to your Beneficiary for the balance of 10 or 20 years if you die sooner, or (3) monthly payments for your life and for the life of another person (usually your spouse) selected by you. These Income Plans are available to you on a variable or fixed basis, or a combination thereof, depending on applicable state law. Your Contract may guarantee the right to other Income Plans, and we may offer other Income Plans from time to time from which you may choose when deciding to start receiving Annuity Payments. While no charges are assessed on fixed income plans, we will continue to assess Base Contract Charges on variable income plans. You will also continue to incur the fees and expenses of the underlying Portfolios in which you direct the assets supporting your Income Plan be invested. Fixed income plans describe in the Contract or otherwise offered by the Company include income plans with a guaranteed income amount or income amount that changes annually based on the company’s declared rate. If you select a fixed income plan, we will cancel any Accumulation Units credited to your Contract, transfer the withdrawal value of the Contract to our General Account, and you will no longer have any interest in the Separate Account. Your interest, if any, in our General Account would also include the value of any amounts allocated to any GIF, plus credited interest, less any withdrawals you have made.
Account A (Fee Based) Prospectus  19
A variable income plan means that the amount representing the actuarial liability under the variable income plan will continue to be invested in one or more of the investment choices you select. Transfers made between investment options during pay-out cannot: (1) exceed 12 transfers per year, (2) transfer into and then out of the same fund within 14 days, if the transfer is $10,000 or more, and (3) transfer into and then out of the same fund within 30 days, if the transfer is in excess of 1% of the underlying fund’s total assets. Your monthly Annuity Payments will vary up or down to reflect continuing investment performance. Under a variable income plan, you bear the entire investment risk, since we make no guarantees of investment return. Accordingly, there is no guarantee of the amount of the variable payments, and you must expect the amount of such payments to change from month to month. If you select a fixed income plan, the Fee-Based Program under which you hold your Contract will automatically terminate when the withdrawal value of your Contract is transferred to our General Account. You should check with your Investment Professional about the status of your Fee-Based Program if you select a variable income plan. For a discussion of tax considerations and limitations regarding the election of Income Plans, see “Federal Income Taxes.”
The annuitization period begins when you start receiving a stream of periodic annuity payments under your Contract on the date you select. For Income Plans, the earliest possible annuity commencement date is immediately after we issue your Contract. The latest possible annuity commencement date is the Maturity Date (i.e., the date you must annuitize or take the lump sum). On the Maturity Date, if you have not elected a permissible Income Plan (i.e., one offered by the Company for your Contract), we will change the Maturity Date to the Contract anniversary nearest the Annuitant’s 98th birthday (if the Maturity Date is not already such date) and, upon that Maturity Date, we will pay the Contract Value in monthly payments for life under a variable income plan with payments certain for ten years, using your investment choices then in effect. In addition, upon the Maturity Date, expiration of a Guaranteed Period, or when you elect a variable income plan, any amounts in a Guaranteed Account will be transferred to the Government Money Market Portfolio unless you instruct us otherwise.
Example: John Doe was the Owner of a Contract and had elected a single life income plan for a ten-year certain period. John dies before the ten-year certain period is over and his wife Jane, his beneficiary, continues to receive income payments for the remainder of the certain period. After the ten-year certain period, no income payments are payable to Jane, his beneficiary.
Description of Variable Income Plans The following variable income plans are available:
1. Period Certain (sometimes referred to as Installment Income for a Specified Period). An annuity payable monthly for a specified period of 10 to 30 years during the first five Contract years and over a specified period of 5 to 30 years beginning with the sixth Contract year (guaranteed only for contracts issued before May 1, 2013).
2. Single Life Income with or without Period Certain (sometimes referred to as Single Life Income with or without Certain Period). An annuity payable monthly until the payee’s death, or until the expiration of a selected certain period, whichever is later. You may select a certain period of either 10 or 20 years, or you may choose a plan with no certain period. After the payee’s death, we will make any remaining guaranteed payments to the designated beneficiary. Where no certain period was selected and the Income Plan beneficiary dies before the first scheduled payment, then no payments will be paid.
3. Joint and Survivor Life Income with Period Certain (sometimes referred to as Joint and Survivor Life Income with Certain Period). An annuity payable monthly for a certain period of 10 years and thereafter during the joint lifetime of two Joint Annuitants. On the death of either Joint Annuitant, payments continue for the remainder of the 10 years certain or the remaining lifetime of the survivor, whichever is longer.
We may, subject to applicable state law, limit the election of a variable income plan to one that results in an initial payment of at least $20. A variable income plan will continue even if payments fall to less than $20 after the plan begins. From time to time we may establish variable income plan rates with greater actuarial value than those stated in the Contract and make them available at the time of settlement. We may also make available other plans, with provisions and rates we publish for those plans. Amounts (or portions thereof) payable under a variable income plan with a period certain may be redeemed after we have a request for redemption in good order at the Home Office. Where no certain period was selected and the Income Plan beneficiary dies before the first scheduled payment, then no payments will be paid.
After the effective date of an Income Plan which does not involve a life contingency (i.e., Plan 1), a payee may transfer to either form of life annuity (i.e., Plans 2 or 3) at no charge. We will apply the value of the remaining payments to the new plan selected. We will determine the amount of the first Annuity Payment under the new plan on the basis of the particular plan selected, the Annuity Payment rate, and the Annuitant’s adjusted age and sex. Subsequent payments will vary to reflect changes in the value of the Annuity Units credited. We may permit other transfers between Income Plans, subject to such limitations we may reasonably determine. If you are in an Income Plan involving a life contingency (i.e., Plans 2 or 3), you will not be able to withdraw any Contract Value after the annuity commencement date. We will not permit a transfer to an Income Plan that involves a different life contingency. Income Plans for Beneficiaries may differ from those offered to Owners. At the written request of the Owner, we may impose restrictions on payments to beneficiaries.
Amount of Annuity Payments We will determine the amount of the first Annuity Payment on the basis of the particular variable income plan you select, the Annuity Payment rate (i.e., the stream of projected annuity payments based on an actuarial projection of the length of time annuity payments will continue as well as other factors including the assumed investment rate) and, for plans involving life contingencies, the Annuitant’s adjusted age and sex. We will calculate the amount of the first Annuity Payment on a basis
20  Account A (Fee Based) Prospectus
that takes into account the length of time over which we expect Annuity Payments to continue. The first payment will be lower for an Annuitant who is younger when payments begin, and higher for an Annuitant who is older, if the variable income plan involves life contingencies. The first payment will be lower if the variable income plan includes a longer certain period. Variable Annuity Payments after the first will vary from month to month to reflect the fluctuating value of the Annuity Units credited to your Contract. Annuity Units represent the actuarial value of a variable income plan’s interest in a Division of the Separate Account after Annuity Payments begin.
Assumed Investment Rate The variable annuity rate tables for the Contracts are based upon an Assumed Investment Rate of 3 ½%. Variable annuity rate tables based upon an Assumed Investment Rate of 5% are also available where permitted by state law. The Assumed Investment Rate affects both the amount of the first variable payment and the amount by which subsequent payments increase or decrease. The Assumed Investment Rate does not affect the actuarial value of the future payments as of the date when payments begin, though it does affect the actual amount which may be received by an individual Annuitant.
Over a period of time, if each Division achieved a net investment result exactly equal to the Assumed Investment Rate applicable to a particular variable income plan, the amount of Annuity Payments would be level. However, if the Division achieved a net investment result greater than the Assumed Investment Rate, the amount of Annuity Payments would increase. Similarly, if the Division achieved a net investment result smaller than the Assumed Investment Rate, the amount of Annuity Payments would decrease. A higher Assumed Investment Rate will result in a larger initial payment but more slowly rising and more rapidly falling subsequent payments than a lower Assumed Investment Rate.
Additional Features and Services
Automatic Dollar-Cost Averaging
The Dollar-Cost Averaging Plan is an investment strategy designed to reduce the investment risks associated with market fluctuations. The strategy spreads the allocation of money (expressed in whole percentages and in amounts of at least $100) into the Divisions over a period of time by systematically and automatically transferring, on a monthly, quarterly, semiannual, or annual basis, specified dollar amounts from the Government Money Market Division into the other Division(s). This allows you to potentially reduce the risk of investing most of your Purchase Payments into the Divisions at a time when prices are high. Transfers will end either when the amount in the Government Money Market Division is depleted or when you notify us to stop such transfers, whichever is earlier. There is no charge for the Dollar-Cost Averaging Plan. We reserve the right to modify or terminate the Dollar-Cost Averaging Plan at any time.
Dollar cost averaging does not assure a profit or protect against loss in a declining market. Carefully consider your willingness to continue payments during periods of low prices. You should consult your financial representative before deciding whether to elect dollar cost averaging.
Systematic Withdrawal Privilege
You can arrange to have regular amounts of money sent to you while your Contract is still in the accumulation phase. Our Systematic Withdrawal Plan allows you to automatically redeem Accumulation Units to generate monthly payments. The withdrawals may be taken either proportionately from each investment option or from specific investment options you designate except that proportionate deductions are not made from a multi-year Guaranteed Account unless amounts in the other investment options are insufficient to cover the requested withdrawal. Systematic withdrawals continue until at least one of the following occurs: (1) the amount in any of the selected Portfolios or Guaranteed Accounts is depleted; (2) less than 100 Accumulation Units remain in the Contract; (3) a systematic withdrawal plan terminates; (4) when the final amount is distributed and there is no value left in the Contract (in which case the Contract will terminate); or (5) you terminate systematic withdrawals. You may have to pay income taxes and tax penalties on amounts you receive. There is no charge for the Systematic Withdrawal Plan service. We reserve the right to modify or terminate this Systematic Withdrawal Plan at any time.
Portfolio Rebalancing
To help you maintain your asset allocation over time, we offer a rebalancing service. This will automatically readjust your current investment option allocations, on a periodic basis (i.e., monthly, quarterly, semi-annually, or annually), back to the allocation percentages you have selected. There is no charge for this Portfolio Rebalancing feature. We reserve the right to modify or terminate this Portfolio Rebalancing feature at any time. If you transfer between underlying investment options, automatic portfolio rebalancing (“APR”) will ordinarily end and you will need to make a new APR election if you want APR to continue.
Only contracts with accumulation values of $10,000 or more or those Contracts that have been annuitized are eligible. Portfolio rebalancing may only be used with the variable, not the fixed, investment options. A program of regular investing cannot assure a profit or protect against loss in a declining market.
Interest Sweeps
If you select this service we will automatically sweep or transfer interest from the GIF to any combination of Divisions. Interest earnings can be swept monthly, quarterly, semi-annually or annually. Transfers (which must be expressed in whole percentages) will end either on a date you specify or when the amount of interest being transferred is less than $25, whichever is earlier.
Account A (Fee Based) Prospectus  21
Only contracts with $10,000 or more in the GIF are eligible. The amount and timing restrictions that ordinarily apply to transfers between the GIF and the investment Divisions do not apply to interest sweeps.
Charges
We will make the following deductions:
Base Contract Charges
Nature and Amount of the Charges When we determine the value of Accumulation and Annuity Units, we deduct a charge for mortality rate and expense risks we have assumed. We assume, for example, the risk that Annuity Payments will continue for longer periods than anticipated because the Annuitants as a group live longer than expected. We also assume the risk that the charges we make may be insufficient to cover the actual costs we incur in connection with the Contracts, including other costs such as those related to marketing and distribution. We assume these risks for the duration of the Contract. In case these costs exceed the amount of the charges we collect, the costs will be paid out of our general assets. If the amount of the charge is more than sufficient to cover the mortality and expense risk, any excess may be used for any Company purpose.
The deduction from Accumulation Units and Annuity Units is at a current annual rate of 0.35% of the assets of the Separate Account. Our Board of Trustees may increase or decrease the deduction, but in no event may the deduction exceed an annual rate of 0.75%.
Other Expense Risks The value of your Contract may reflect a deduction of any reasonable expenses which may result if there were a substitution of other securities for shares of the Portfolios as described under “The Separate Account” and any applicable taxes, (i.e., any tax liability) we have paid or reserved for resulting from the maintenance or operation of a Division of the Separate Account, other than applicable premium taxes which we may deduct directly from considerations. We do not presently anticipate that we will make any deduction for federal income taxes (see “Taxation of Northwestern Mutual”), nor do we anticipate that maintenance or operation of the Separate Account will give rise to any deduction for state or local taxes. However, we reserve the right to charge the appropriate Contracts with their shares of any tax liability which may result under present or future tax laws from the maintenance or operation of the Separate Account or to deduct any such tax liability in the computation of the value of such Contracts. Our right to make deductions for expenses resulting from a substitution of securities may be restricted by the 1940 Act.
Contract Fee On each Contract anniversary prior to the Maturity Date, we make a deduction of $30 for administrative expenses relating to a Contract during the prior year. We make the charge by reducing the number of Accumulation Units credited to the Contract. We will apply the charge for the Contract Fee by reducing the number of Accumulation Units credited to your Contract. For purposes of allocating and deducting the annual Contract fee, we consider any investment
in the Guaranteed Interest Fund as though it were an investment of the same amount in one of the Separate Account Divisions. We cannot increase this charge. The charge is intended only to reimburse us for our actual administrative expenses. We waive the Contract fee if the Contract Value on the Contract anniversary is $25,000 or more. Currently, we are also waiving the Contract fee if the Purchase Payments, less withdrawals, equal or exceed $25,000. We reserve the right to change this practice in the future. We will give prior notice.
Enhanced Death Benefit Charge On each Contract anniversary on which the enhanced death benefit is in effect, we deduct from the Contract Value a charge based on the amount of the enhanced death benefit on the Contract Anniversary and the age of the Annuitant when the Contract was issued. The charge is 0.10% of the amount of the enhanced death benefit for issue age 45 or less, 0.20% for issue age 46-55, and 0.40% for issue age 56-65. This charge is for the risks we assume in guaranteeing the enhanced death benefit. Except for some Contracts subject to New York law, we deduct the charge from the Divisions of the Separate Account and the Guaranteed Accounts in proportion to the amounts you have invested.
Premium Taxes The Contracts provides for the deduction of applicable premium taxes, if any, from Purchase Payments or from Contract benefits. Various jurisdictions levy premium taxes. Premium taxes generally range from 0% to 3.5% of total Purchase Payments. Many jurisdictions presently exempt from premium taxes annuities such as the Contracts. As a matter of current practice, we do not deduct premium taxes from Purchase Payments received under the Contracts or from Contract benefits. However, we reserve the right to deduct premium taxes in the future. The amount deducted, if any, may be more or less than the percentage charged by your state of residence.
Portfolio Expenses and Charges The expenses borne by the Portfolios in which the assets of the Separate Account are invested are described in the mutual fund prospectuses.
For certain Portfolios, certain expenses may have been reimbursed or fees may have been waived during 2020 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 0.20% to a maximum of 1.25%.
22  Account A (Fee Based) Prospectus
Expedited Delivery Charge When, at your request, we incur the expense of providing expedited delivery of your redemption request (e.g., a complete or partial withdrawal) we assess the following charges: $15 for express mail delivery (plus $2 for “signature required” service at your request) and $15 for a wire transfer.
Federal Income Taxes
Qualified and Non-Tax Qualified Plans
We offer the Contract for use under the tax-qualified plans (i.e., contributions are generally not taxable) identified below:
1.
Individual retirement annuities pursuant to the provisions of Section 408 of the Internal Revenue Code of 1986, as amended (the “Code”), including a traditional IRA established under Section 408(b).
2.
Roth IRAs pursuant to the provisions of Section 408A of the Code.
We also offer the Contract for use in non tax-qualified situations (i.e., contributions are not tax deductible).
Contribution Limitations and General Requirements Applicable to Contract
Traditional IRA If an individual has earned income, the individual and the individual’s spouse, as defined under federal tax law, are each permitted to make a maximum contribution of $6,000 for 2021 and the limit is indexed thereafter. The contribution limit is reduced by contributions to any Roth IRAs of the Owner. A catch up contribution of $1,000 per year is allowed for Owners who are age 50 or older. Contributions may be made after age 72 for tax years after December 31, 2020. Annual contributions are generally deductible unless the Owner or the Owner’s spouse, as defined under federal tax law, is an “active participant” in another qualified plan during the taxable year. If the Owner is an “active participant” in a plan, the deduction phases out at an adjusted gross income (“AGI”) of between $65,000—$75,000 for single filers and between $105,000—$125,000 (indexed) for married individuals filing jointly. If the Owner is not an “active participant” in a plan but the Owner’s spouse is, the Owner’s deduction phases out at an AGI of between $198,000—$208,000 (indexed). Federal income tax refunds can be deposited directly into an IRA, subject to the contribution limits.
The Owner may also make tax free rollover and direct transfer contributions to an IRA from the Owner’s other IRAs or tax qualified plans. The surviving spouse, as defined under federal tax law, can also roll over the deceased Owner’s IRA, tax deferred annuity or qualified plan to the spouse’s own IRA or any other plan in which the spouse participates that accepts rollovers. A nonspouse beneficiary also can roll over the deceased owner’s IRA, tax-deferred annuity or qualified plan to an inherited IRA in a trustee-to-trustee transfer, subject to the after death required minimum distribution rules. In addition, certain declared federal disaster relief or military service provisions may supplement this information.
An IRA is nonforfeitable and generally cannot be transferred.
Roth IRA If an individual has earned income, the individual and the individual’s spouse are each permitted to make a maximum contribution of $6,000 for 2021 and is indexed thereafter. The contribution limit is reduced by contributions to any traditional IRAs of the Owner. A catch up contribution of $1,000 per year is allowed for Owners who are age 50 or older. The maximum contribution is phased out at an adjusted gross income (“AGI”) of between $125,000 and $140,000 for single filers, between $198,000 and $206,000 for married individuals filing jointly and between $0 and $10,000 for married individuals filing separately. Regular contributions to a Roth IRA are not deductible. In addition, certain declared federal disaster relief or military service provisions may supplement this information.
An IRA, SEP or SIMPLE IRA (after two years of participation in a SIMPLE IRA plan), and employer plans may be rolled over or converted to a Roth IRA. Special valuation rules may apply to the conversion. A rollover to a Roth IRA is fully taxable but is not subject to a 10% premature withdrawal penalty.
Non-Tax Qualified Contract There are no federal tax limitations on who can purchase a non-tax qualified annuity or the amount that can be contributed to the Contract. Contributions to non-tax qualified Contracts are not deductible. For the Contract to qualify as a non-tax qualified annuity, the Contract death proceeds must be distributed to any non-spouse beneficiary either within five years of the Owner’s death or as substantially periodic payments over a period not to exceed the beneficiary’s life or life expectancy commencing within one year of the Owner’s death. The surviving spouse, as defined under federal tax law, is not subject to any distribution requirements.
Taxation of Contract Benefits
For Contracts held by individuals, no tax is payable as a result of any increase in the value of a Contract. Except for qualified distributions from Roth IRAs, Contract benefits will be taxable as ordinary income when received in accordance with Section 72 of the Code. If, for example, you elect to withdraw your advisory fee from Contract Value, the advisory fee may be taxable as ordinary income.
IRAs As a general rule, benefits received as Annuity Payments or upon death or withdrawal from these contracts will be taxable as ordinary income when received.
Where nondeductible contributions are made to individual retirement annuities, the Owner may exclude from income that portion of each Annuity Payment which represents the ratio of the Owner’s “investment in the contract” to the Owner’s “expected return” as defined in Section 72, until the entire
Account A (Fee Based) Prospectus  23
“investment in the contract” is recovered. Benefits paid in a form other than Annuity Payments will be taxed as ordinary income when received except for that portion of the payment which represents a pro rata return of the employee’s “investment in the contract.” After the Owner attains age 72, a 50% penalty may be imposed on payments made from individual retirement annuities to the extent the payments are less than certain required minimum amounts. (See “Minimum Distribution Requirements.”) With certain limited exceptions, benefits from individual retirement annuity contracts are subject to the tax-free roll-over provisions of the Code.
A loan transaction, using a Contract purchased under a tax-qualified plan as collateral, will generally have adverse tax consequences. For example, such a transaction destroys the tax status of the individual retirement annuity and results in taxable income equal to the Contract Value.
Roth IRAs Qualified distributions from a Roth IRA are not taxable. A qualified distribution is a distribution (1) made at least 5 years after the issuance of the Owner’s first Roth IRA, and (2) made after the Owner has attained age 59½, or a distribution made to a beneficiary after the Owner’s death, attributable to the Owner being disabled, or used to pay acquisition expenses of a qualified first time home purchase. A nonqualified distribution is taxable as ordinary income only to the extent it exceeds the “investment in the contract” as defined in Section 72. Distributions are not required to be made from a Roth IRA before the Owner’s death.
A withdrawal from a Roth IRA of part or all of an IRA rollover contribution within 5 years of the rollover is subject to a 10% premature withdrawal penalty (unless an exception applies). Rollover contributions are treated as withdrawn after regular contributions for this purpose.
A regular or conversion contribution to a Roth IRA can be recharacterized to an IRA in a trustee-to-trustee transfer provided the transfer includes the net income or loss allocable to the contribution and is completed by the due date for filing the Owner’s federal income tax return for the year the contribution was made. The recharacterized amount will be treated for tax purposes as originally made from the IRA. Recharacterized amounts can be reconverted to a Roth IRA once each calendar year. Benefits from a Roth IRA can be rolled over or transferred directed only to another Roth IRA.
Nonqualified Contracts If the Owner of a non-tax qualified Contract elects to receive the entire value of the Contract as Annuity Payments under a variable income plan or fixed income plan, or a portion of the Contract as Annuity Payments under either Income Plan for a period of at least the Owner’s life expectancy or ten years, benefits received will be taxable as ordinary income to the extent they exceed that portion of each payment which represents the ratio of the Owner’s “investment in the contract” to the Owner’s “expected return” as defined in Section 72 (the “exclusion ratio”), until the entire “investment in the contract” is recovered. Benefits received in a lump sum or as partial annuity payments that do not qualify for exclusion ratio taxation will be taxable as ordinary income to the extent they exceed the “investment in the contract.” A partial withdrawal or collateral assignment prior to the Maturity Date will result in the receipt of gross income by the Owner to the
extent that the amounts withdrawn or assigned do not exceed the excess (if any) of the total value of Accumulation Units over total purchase payments paid under the Contract less any amounts previously withdrawn or assigned. Thus, any investment gains reflected in the Contract Values are considered to be withdrawn first and are taxable as ordinary income. Investment gains will be determined by aggregating all non-tax qualified deferred Contracts we issue to the Owner during the same calendar year.
For taxable years beginning in 2013, part or all of the taxable benefits from and sales of non-tax qualified Contracts 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). The term “net investment income” is defined to include payments from non-tax qualified annuities and dispositions of property. You should consult a tax advisor about the impact of this new tax on distributions from your contract/policy.
One or more non-tax qualified Contracts can be wholly or partially exchanged for one or more other annuity contracts under Section 1035 of the Code without recognition of gain or loss. However, withdrawals taken within 6 months after a partial exchange may cause the partial exchange to be taxed as a withdrawal. Certain nonqualified Contracts not held by individuals, such as Contracts purchased by corporate employers in connection with deferred compensation plans, will not be taxed as annuity Contracts and increases in the value of the Contracts will be taxable in the year earned.
Premature Withdrawals A penalty tax will apply to premature payments of Contract benefits. A penalty tax of 10% of the amount of the payment which is includible in income will be imposed on non-exempt withdrawals under individual retirement annuities, Roth IRAs, and nonqualified deferred annuities. Payments which are exempt from the penalty tax include payments upon disability, after age 59½ and for certain substantially equal periodic payments for life. Additional exceptions for certain large medical expenses, reimbursement of health insurance premiums paid while the Owner was unemployed, qualified education expenses and first time home purchases apply to IRAs and Roth IRAs.
Minimum Distribution Requirements All of the Contracts are required to satisfy some form of minimum distribution requirement. A 50% excise tax applies for each violation of these requirements (except under nonqualified Contracts).
1. IRAs: As a general rule, the Owner of these Contracts is required to take certain distributions during the Owner’s life and the beneficiary designated by the Owner is required to take the balance of the Contract Value within certain specified periods following the Owner’s death.
The Owner must take the first required distribution no later than the “required beginning date” and subsequent required distributions by December 31 of that year and each year thereafter. Payments must be calculated according to the Uniform Table provided in IRS regulations, which provides divisors based on the joint life expectancy of the Owner and an
24  Account A (Fee Based) Prospectus
assumed beneficiary who is ten years younger. Where the beneficiary is the Owner’s spouse and the spouse is more than ten years younger than the Owner, distributions may be based upon their joint life expectancy instead of the Uniform Table. The required beginning date for IRAs is April 1 of the calendar year following the calendar year the Owner attains age 72.
Upon the death of the Owner, the Owner’s beneficiary must take distributions under one of three main rules: (1) the life expectancy rule, (2) the ten year rule, or (3) the five year rule.
(1) Life Expectancy Rule: An eligible designated beneficiary may take distributions based on the beneficiary’s life or life expectancy when the beneficiary is the surviving spouse of the Owner, a child of the Owner who is under the age of majority, a disabled or chronically ill beneficiary, or any other person who is not more than ten years younger than the Owner. Generally, distributions must commence by December 31 of the year following the year of the Owner’s death. (See below for exception for spouse beneficiary.)
(2) Ten Year Rule: A designated beneficiary who is not an eligible designated beneficiary is required to draw down the entire inherited interest within ten years of the Owner’s death. This applies whether or not the decedent had begun RMDs prior to the Owner’s death.
(3) Five Year Rule: A beneficiary who is not either an eligible designated beneficiary or a designated beneficiary, as defined by federal tax law, may elect to withdraw the entire account balance over five years, completing distribution no later than December 31 of the year containing the fifth anniversary of the Owner’s death.
If the Owner dies on or after the required beginning date, a minimum distribution must be made for the year of death, to the extent not already paid to the Owner.
2. Spousal Exceptions: If the designated beneficiary is the Owner’s spouse, as defined under federal tax law, the spouse may roll over the Contract into an IRA owned by the spouse or to any other plan in which the spouse participates that accepts rollovers. The spouse may then defer distributions until the spouse’s own required beginning date. Alternatively, if the spouse elects the life expectancy rule, distributions do not need to begin until December 31 of the year following the year of the Owner’s death or, if later, by the end of the year the Owner would have attained age 72.
3. Non-spouse Transfers: A nonspouse designated beneficiary may directly roll over the death proceeds to an inherited IRA. The nonspouse designated beneficiary is then required to take distributions pursuant to the minimum distribution requirements discussed above.
4. Roth IRAs: The Owner of a Roth IRA is not required to take required minimum distributions during the Owner’s lifetime. However, after the Owner’s death, the beneficiary designated by the Owner is required to take distributions pursuant to the minimum distribution requirements discussed above.
5. Nonqualified Contracts: The Owner of a non-tax qualified Contract is not required to take required minimum distributions during the Owner’s lifetime. However, the beneficiary, other
than a spousal beneficiary, is required to take minimum distributions pursuant to Section 72 of the Code after the death of the Owner.
Upon the death of the Owner, the Owner’s non-spouse beneficiary must take distributions under one of two main rules: (1) the life expectancy rule, or (2) the five year rule.
(1) Life Expectancy Rule: A beneficiary may take distributions based on the beneficiary’s life or life expectancy. Generally, distributions must commence within 12 months of the Owner’s death.
(2) Five Year Rule: A beneficiary may elect to withdraw the entire account balance over five years, completing distributions no later than 60 months after the Owner’s death.
A surviving spouse, as defined under federal tax law, is not required by the federal tax law to take any distributions during his or her lifetime and may extend deferral by electing a spousal exchange.
Temporary Rules Under the CARES Act On March 27, 2020 Congress passed the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”). Among other provision, the CARES Act includes temporary relief from certain tax rules applicable to qualified contracts. You should consult with a tax and/or legal adviser to determine if relief is available to you before taking or failing to take any actions involving the contract or your interest in the contract.
Required Minimum Distributions: The CARES Act allowed participants and beneficiaries in certain qualified plans and IRAs to suspend taking required minimum distributions in 2020, including any initial required minimum distributions for 2019 that would have been due by April 1, 2020. Additionally, the year 2020 was not counted in measuring the five year or ten year post-death distribution period requirements. Any distributions made in 2020 that, but for the CARES Act, would have been a required minimum distribution instead may be eligible for rollover. Furthermore, distributions that were subject to 20% withholding because they were eligible rollover distributions from Section 403(b) or Former Pension Annuities were only be subject to default withholding.
Retirement Plan Distribution Relief: Under the CARES Act, an “eligible participant” could have withdrawn up to a total of $100,000 from IRAs and certain qualified plans that adopt this provision without being subject to the 10% additional tax on premature distributions. The Federal income tax on these distributions for eligible participants can be spread ratably over three years and the distributions may be re-contributed during the three-year period following the distribution. For these purposes, eligible participants are participants who:
•
have been diagnosed with COVID-19,
•
have spouses or dependents diagnosed with COVID-19, or
•
have experienced adverse financial consequences stemming from COVID-19 as a result of
•
being quarantined, furloughed or laid off,
•
having reduced work hours,
Account A (Fee Based) Prospectus  25
•
being unable to work due to lack of child care,
•
the closing or reduction of hours of a business owned or operated by the participant, or
•
other factors determined by the Treasury Department.
Eligible participants could have taken these distributions from 401(k), 403(b), and governmental 457(b) plans even if they would otherwise be subject to in-service withdrawal restrictions (e.g., distributions before age 59-1/2) and the 20% withholding that would otherwise apply to these distributions does not apply.
Taxation of Northwestern Mutual
We may charge the appropriate Contracts with their shares of any tax liability which may result from the maintenance or operation of the Divisions of the Separate Account. We are currently making no charge. (See “Charges.”)
Other Considerations
You should understand that the tax rules for annuities are complex and cannot be readily summarized. The foregoing discussion does not address special rules applicable in many situations, rules governing Contracts issued or purchase payments made in past years, current legislative proposals, or state or other law. This tax discussion is intended for the promotion of Northwestern Mutual Life products. 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. Before you purchase a Contract, we advise you to consult qualified tax counsel.
Contract Owner Services
While the following services are generally available under the Contract, not all of them may be available to Owners of Contracts held in the Fee-Based Program in which you participate. For more information, contact your Investment Professional.
Electronic Funds Transfer (“EFT”) Another convenient way to invest using the dollar-cost averaging approach is through our EFT Plan. These automatic withdrawals allow you to add Purchase Payments to the Division(s) within your traditional IRA, Roth IRA, SEP IRA, or non-tax qualified Contract on a regular monthly basis through payments drawn directly on your checking account. There is no charge for the EFT service.
A program of regular investing cannot assure a profit or protect against loss in a declining market.
Automatic Required Minimum Distributions (“RMD”) For IRAs, you can arrange for annual required minimum distributions to be sent to you automatically once you turn age 72.
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. In the event we take any action to substitute another Portfolio in the future, we may make an appropriate endorsement of your Contract and take other necessary actions.
Owner Inquiries and Instructions Get up-to-date information about your Contract at your convenience with your User ID and password. Visit our website ( http://www.northwesternmutual.com ) to enroll for access to Division performance information, forms for routine service, and daily unit values for Contracts you own. Eligible Contract Owners
may also set up certain electronic payments, transfer invested assets among Divisions and change the allocation of future contributions online, subject to our administrative procedures. For questions about your Contract or Division values, assistance with payments or distributions, or other contract changes (such as transferring among investment options, changing allocations, or obtaining Division performance information), please contact us toll-free at 1-888-455-2232.
The submission of transfer or withdrawal instructions by telephone or through our website (“Electronic Instructions”) must be made in accordance with our then current procedures for Electronic Instructions. However, 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. Please note that the telephone and/or electronic devices may not always be available. Any telephone or electronic device, whether it is yours, your service provider’s, or 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. 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 transfer request by writing to our Home Office. We reserve the right to limit, modify, suspend, or terminate the ability to make transfers via Electronic Instructions.
Householding To reduce costs, we now 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 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 us at 1-888-455-2232.
26  Account A (Fee Based) Prospectus
Additional Information
The Distributor We sell the Contracts 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 and is a member of the Financial Industry Regulatory Authority. NMIS is the principal underwriter of the Contracts, and has entered into a Distribution Agreement with us.
Although NMIS does not receive commissions on the sales of Contracts, it does receive fees for investment advice and other services provided to Contract Owners. The fees are based in part on the value of Contract assets held for their benefit by NMIS. The Contracts are offered to purchasers who pay periodic asset-based fees to an affiliated investment adviser such as NMIS (which is also a registered investment adviser) or our limited purpose federal savings bank (the Northwestern Mutual Wealth Management Company (“NMWMC”)) for providing investment advice and other services to Owners. For more information, you may obtain a Northwestern Mutual Signature Annuities Disclosure Brochure from your Investment Professional.
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. The individual NMIS or NMWMC Representative who recommends the Northwestern Mutual Signature Annuities advisory program to a client will receive a portion of the asset-based fee paid by the client. The amount of the compensation that a NMIS or NMWMC Representative may receive for recommending the Signature Annuities program may be more than what the individual would receive if the client paid separately for investment advice, brokerage, and other services.
NMIS and the Northwestern Mutual Wealth Management Company (“NMWMC”) use a system referred to as a “grid” for paying registered representatives commissions and fees for the sale or servicing of other investments such as mutual funds in brokerage accounts or advisory accounts. The higher level of overall commissions or fees for investments that your registered representative is responsible for generating, the higher percentage of commissions or fees they receive, which in turn lowers the percentage of fees or commissions retained by NMIS or NMWMC; those breakpoints and percentages are what is referred to as the grid. The grid payout percentages range between 35% and 95% payable to the registered
representative, depending on the level of sales or fees generated by that registered representative during the previous year. Therefore, a registered representative’s current year grid level is set based on the registered representative’s previous year’s sales production. Sales of Contracts count towards sales production used to measure grid placement, even though commissions for Contracts are not paid out through the grid. The ability to improve grid placement in the following year provides an incentive for your registered representative to sell the Contract.
Because registered representatives of the Distributor are also our appointed agents, they may be eligible for various cash benefits, such as additional bonuses, insurance benefits, retirement benefits, and non-cash compensation programs that we offer, such as conferences, achievement recognition, prizes, and awards. In addition, Distributor’s registered representatives 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 Contracts help registered representatives and/or their managers qualify for such compensation and benefits.
Certain of the Distributor’s registered representatives may receive other payments from us for the recruitment, development, training, and supervision of Financial Representatives, production of promotional literature, and similar services. Commissions and other incentives and payments described above are not charged directly to Owners or to the Separate Account. We intend to recoup sales expenses through fees and charges deducted under the Contract.
Dividends This Contract is eligible to share in the divisible surplus, if any, of the Company, except while payments are being made under a variable income plan. Each year we determine, in our sole discretion, the amount and appropriate allocation of divisible surplus. Divisible surplus credited to your Contract is referred to as a “dividend.” 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 a divisible surplus. Even if there is a divisible surplus, the payment of a dividend on this Contract is not guaranteed. It is not expected that any dividends will be payable on this Contract, except, possibly, on certain fixed installment plans.
We will credit dividends, if any, attributable to your Contract on the Contract anniversary. Dividends, if any, credited prior to the Maturity Date will be applied as a Net Purchase Payment on the Contract anniversary unless the Owner elects to have the dividend paid in cash. However, if the NYSE is closed on the Contract Anniversary, the amount of any dividend will be applied as of the next Valuation Date after the Contract
Account A (Fee Based) Prospectus  27
anniversary. Dividends, if any, applied as a Net Purchase Payment will be allocated to the Divisions of the Separate Account 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 (i) the Owners of Accumulation Units supported by assets of that Division; and (ii) the payees receiving payments under variable income plans supported by assets of that Division. 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 Account corresponding to the Accumulation Units credited to the Contract, or the number of shares of the Portfolio held in the Account representing the actuarial liability under the variable income plan, as the case may be) will be made available to each Owner or payee. The number of shares will increase from year to year as additional purchase payments are made by the Contract Owner; after a variable income plan is in effect, the number of shares will decrease from year to year as the remaining actuarial liability declines. We will vote shares for which no instructions have been received, as well as shares of the fund that the insurer itself owns, in the same proportion as the shares for which instructions have been received from Contract Owners and payees. Because of this proportional voting requirement, it is possible that a small number of Contract Owners and payees could determine 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 Contract Owners.
Internal Annuity Exchanges As a matter of current practice, which we may limit or stop at any time in our discretion, we permit owners of certain fixed and variable annuity contracts that we have previously issued to exchange those contracts for the Contract. Such exchanges are not intended to be available for all owners, as they may not be in a particular owner’s best interest. We are not presently charging an administrative fee on these transactions. We permit only one such transaction in any 12-month period.
Amounts exchanged from a front-load Contract to a Contract will not be subject to any additional front-end sales charge or withdrawal charge. We currently do not allow an exchange from a variable annuity contract we previously issued to a Contract when amounts exchanged from the previously issued variable annuity contract would be subject to a withdrawal charge, although we may allow such exchanges when there are no applicable withdrawal charges on the Contract being
exchanged. Fixed annuity contracts, which are not described in this prospectus, are available for exchange to a Contract, however, any applicable withdrawal charge or market value adjustment may be assessed on amounts exchanged from the fixed annuity contract.
It is our current practice not to allow exchanges from a Contract to a back-load variable annuity contract or a front-load variable annuity contract.
Speculative Investing Do not purchase this contract if you plan to use it, or any of its riders, for any type of speculative collective investment scheme (including, for example, arbitrage). Your Contract 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.
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 contract’s/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 it 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 call 888-455-2232 to make such changes.
Cybersecurity & 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 underlying funds, intermediaries and other affiliated or third-party service providers may adversely affect us and your Contract Value. For instance, cyber-attacks may interfere with our processing of contract transactions, including the processing of orders from our website or with the underlying funds, impact our ability to calculate AUVs, 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 underlying funds invest, which may cause the funds underlying your Contract to lose value. There can be no assurance that we or the underlying
28  Account A (Fee Based) Prospectus
funds or our service providers will avoid losses affecting your Contract 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 Contract due to a disaster or other catastrophe.
Legal Proceedings Northwestern Mutual, like other life insurance companies, generally is 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 Contract, on the Separate Account, or on NMIS and its ability to perform its duties as underwriter for the Separate Account.
Account A (Fee Based) Prospectus  29
APPENDIX A—Portfolios Available under Your Contract
The following is a list of Portfolios available under the Contract. 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) 910-1232 or by sending an email request to vavldocrequest@northwesternmutual.com. In addition to the Portfolios listed below, the Contract also offers fixed options (see “Other Benefits Available Under the Contract - Fixed Options” above), subject to restrictions, which can earn interest for specified periods at declared rates.
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 Contract 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. 
Investment Objective
Portfolio
Adviser/
Sub-adviser (if applicable)
Current Expenses
Average Annual
Total Returns
(as of 12/31/2020)
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%1
34.97%
17.68%
14.73%
Long-term growth of
capital
Focused Appreciation
Portfolio2
MSA/Loomis, Sayles &
Company, L.P.
0.62%1
32.55%
19.30%
15.90%
Long-term growth of
capital and income
Large Cap Core Stock
Portfolio2
MSA/
Wellington Management
Company LLP
0.44%1
22.74%
15.24%
11.73%
Long-term growth of
capital and income
Large Cap Blend
Portfolio2
MSA/
Fiduciary Management, Inc.
0.81%1
10.05%
12.18%
11.14%
Investment results that
approximate the
performance of the
Standard & Poor’s 500®
Composite Stock Price
Index
Index 500 Stock
Portfolio2
MSA/BlackRock Advisors,
LLC
0.20%1
18.18%
14.97%
13.64%
Long-term growth of
capital; income is a
secondary objective
Large Company Value
Portfolio2
MSA/American Century
Investment Management, Inc.
0.77%1
2.64%
9.11%
10.06%
Long-term growth of
capital and income
Domestic Equity
Portfolio2
MSA/Delaware Investments
Fund Advisers, a series of
Macquarie Investment
Management Business Trust
0.52%1
0.73%
9.11%
10.53%
Long-term growth of
capital and income
Equity Income Portfolio2
MSA/
T. Rowe Price Associates, Inc
0.58%1
1.20%
9.98%
9.30%
Long-term growth of
capital
Mid Cap Growth Stock
Portfolio2
MSA/
Wellington Management
Company LLP
0.54%
25.41%
13.38%
10.44%
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.
0.26%1
13.37%
12.05%
11.23%
Long-term growth of
capital; current incomes is
a secondary objective
Mid Cap Value Portfolio2
MSA/American Century
Investment Management, Inc.
0.76%1
1.67%
9.54%
10.61%
Long-term growth of
capital
Small Cap Growth Stock
Portfolio2
MSA/
Wellington Management
Company LLP
0.56%
33.47%
16.90%
13.38%
Investment results that
approximate the
performance of the
Standard & Poor’s
SmallCap 600® Index
Index 600 Stock
Portfolio2
MSA/Northern Trust
Investments, Inc.
0.31%
10.93%
12.03%
11.55%
30  Account A (Fee Based) Prospectus
Investment Objective
Portfolio
Adviser/
Sub-adviser (if applicable)
Current Expenses
Average Annual
Total Returns
(as of 12/31/2020)
1 Year
5 Year
10 year
Long-term growth of
capital
Small Cap Value
Portfolio2
MSA/
T. Rowe Price Associates, Inc
0.95%
9.29%
12.16%
9.78%
Long-term growth of
capital
International Growth
Portfolio2
MSA/FIAM LLC
0.63%
17.91%
12.11%
7.39%
Capital appreciation
Research International
Core Portfolio2
MSA/ Massachusetts
Financial Services Company
0.76%1
13.46%
9.76%
6.21%
Long-term growth of
capital; any income
realized will be incidental
International Equity
Portfolio2
MSA/Templeton Investment
Counsel, LLC
0.54%1
-2.71%
3.12%
3.26%
Capital appreciation
Emerging Markets
Equity Portfolio2
MSA/ Aberdeen Asset
Managers Limited
0.93%1
26.86%
12.97%
3.33%
Maximum current income
to the extent consistent
with liquidity and stability
of capital3
Government Money
Market Portfolio2
MSA/BlackRock Advisors,
LLC
0.33%
0.31%
0.90%
0.50%
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
0.39%
4.29%
2.60%
1.72%
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/Wells Capital
Management, Inc.
0.31%1
8.98%
4.75%
3.95%
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
0.94%
17.37%
7.33%
7.25%
Pursue total return using a
strategy that seeks to
protect against U.S.
inflation
Inflation Protection
Portfolio2
MSA/American Century
Investment Management, Inc.
0.56%1
9.57%
4.75%
3.43%
High current income and
capital appreciation
High Yield Bond
Portfolio2
MSA/Federated Investment
Management Company
0.45%
6.64%
7.88%
6.28%
Maximum total return,
consistent with prudent
investment management
Multi-Sector Bond
Portfolio2
MSA/Pacific Investment
Management Company LLC
0.73%1
6.13%
7.54%
5.60%
Realize as high a level of
total return as is
consistent with prudent
investment risk, through
income and capital
appreciation
Balanced Portfolio2
MSA
0.50%1
12.49%
8.86%
7.30%
Realize as high a level of
total return as is
consistent with reasonable
investment risk
Asset Allocation
Portfolio2
MSA
0.59%1
13.43%
10.10%
8.17%
Long-term growth of
capital
Fidelity® VIP Mid Cap
Portfolio – Initial Class2
Fidelity Management &
Research Company LLC
(FMR)4
0.62%
18.19%
11.07%
9.50%
Long-term capital
appreciation
Fidelity® VIP
Contrafund® Portfolio –
Initial Class2
Fidelity Management &
Research Company/FMR
Co., Inc.4
0.61%
30.57%
16.19%
13.52%
Account A (Fee Based) Prospectus  31
Investment Objective
Portfolio
Adviser/
Sub-adviser (if applicable)
Current Expenses
Average Annual
Total Returns
(as of 12/31/2020)
1 Year
5 Year
10 year
Long-term growth of
capital by investing
primarily in securities of
companies that meet the
Portfolios’s
environmental, social and
governance criteria
Sustainable Equity
Portfolio2
Neuberger Berman
Investment Advisers LLC
0.92%
19.56%
13.05%
11.62%
Long-term growth of
capital
U.S. Strategic Equity
Fund6
Russell Investment
Management LLC (RIM) 7
0.84%
23.84%
14.27%
12.79%
Long-term growth of
capital
U.S. Small Cap Equity
Fund6
RIM7
1.25%
12.70%
10.84%
9.37%
Current income and long-
term growth of capital
Global Real Estate
Securities Fund6
RIM7
0.91%
-5.18%
4.61%
5.88%
Long-term growth of
capital
International Developed
Markets Fund6
RIM7
1.06%
5.08%
6.50%
5.10%
Provide total return
Strategic Bond Fund6
RIM7
0.69%
8.43%
4.69%
4.00%
Current income and
moderate long-term
capital appreciation
LifePoints® Variable
Target Portfolio Series
Moderate Strategy
Fund6
RIM7
0.86%1
6.40%
6.15%
5.13%
Above-average long-term
capital appreciation and a
moderate level of current
income
LifePoints® Variable
Target Portfolio Series
Balanced Strategy Fund6
RIM7
0.95%1
7.65%
7.37%
6.10%
High long-term capital
appreciation; and as a
secondary objective,
current income
LifePoints® Variable
Target Portfolio Series
Growth Strategy Fund6
RIM7
1.01%1
9.75%
8.62%
6.76%
High long-term capital
appreciation
LifePoints® Variable
Target Portfolio Series
Equity Growth Strategy
Fund6
RIM7
1.04%1
8.26%
8.93%
7.09%
Total return
Commodity Return
Strategy Portfolio –
Class 28
Credit Suisse Asset
Management, LLC
0.80%1
28.52%9
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 The Fidelity® VIP Mid Cap Portfolio and the Fidelity® VIP Contrafund® Portfolio are series of Variable Insurance Products Fund III and the Variable Insurance Products Fund II, respectively.
4The 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.
5 A series of Neuberger Berman Advisers Management Trust.
6 A series of Russell Investment Funds.
7 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.
8 A series of Credit Suisse Trust.
9 Return represents performance from May 1, 2020 (inception date) to December 31, 2020.
32  Account A (Fee Based) Prospectus
Appendix B—State Variations
This Appendix contains important state-specific variations for Contracts issued in the states as noted below. The prospectus provides a general description of the Contract (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 Contract for specific details. 
State
Policy Feature/Benefit/Cost
Variation
Alabama
Misstatements
If the Company has underpaid any amounts due to a misstatement of age
or sex, the underpayment will be paid with interest at an annual effective
rate of 3.50%.
Alaska
Misstatements
If the Company has underpaid any amounts due to a misstatement of age
or sex, the underpayment will be paid with interest at an annual effective
rate of 3.50%.
Arizona
Right to Return
If the Contract is replacing an existing annuity contract, or if the Owner is
sixty-five (65) years of age or older on the issue date, it may be returned
within thirty (30) days after it was received.
California
Right to Return
If the Owner is sixty (60) years of age or older on the issue date, the
Contract may be returned within thirty (30) days after it was received.
Colorado
Misstatements
If the Company has underpaid any amounts due to a misstatement of age
or sex, the underpayment will be paid with interest at an annual effective
rate of 3.50%.
Connecticut
Right to Return
The amount of the refund will be the amount of the Purchase Payments
paid.
Florida
Right to Return
The Contract may be returned within twenty-one (21) days after it was
received. The amount of the refund will be the cash surrender value
provided in the Contract plus any fees or charges deducted from the
premiums.
Maturity Benefit
The Maturity Date may be changed upon request. The Contract may be
annuitized at any time after twelve (12) months following the issue date.
The latest Maturity Date is the Contract anniversary nearest the
Annuitant’s 98th birthday.
Deferment of Benefit Payments
If payment of contract values of the Separate Account Divisions is
deferred, interest will be paid at an annual effective interest rate in
accordance with Florida law.
Georgia
Misstatements
If the Company has underpaid any amounts due to a misstatement of age
or sex, the underpayment will be paid with interest at an annual effective
rate of 3.50%.
Hawaii
Misstatements
If the Company has underpaid any amounts due to a misstatement of age
or sex, the underpayment will be paid with interest at an annual effective
rate of 3.50%.
Idaho
Misstatements
If the Company has underpaid any amounts due to a misstatement of age
or sex, the underpayment will be paid with interest at an annual effective
rate of 3.50%.
Illinois
Misstatements
If the Company has underpaid any amounts due to a misstatement of age
or sex, the underpayment will be paid with interest at an annual effective
rate of 3.50%.
Indiana
Misstatements
If the Company has underpaid any amounts due to a misstatement of age
or sex, the underpayment will be paid with interest at an annual effective
rate of 3.50%.
Iowa
Misstatements
If the Company has underpaid any amounts due to a misstatement of age
or sex, the underpayment will be paid with interest at an annual effective
rate of 3.50%.
Kentucky
Misstatements
If the Company has underpaid any amounts due to a misstatement of age
or sex, the underpayment will be paid with interest at an annual effective
rate of 3.50%.
Louisiana
Misstatements
If the Company has underpaid any amounts due to a misstatement of age
or sex, the underpayment will be paid with interest at an annual effective
rate of 3.50%.
Maine
Misstatements
If the Company has underpaid any amounts due to a misstatement of age
or sex, the underpayment will be paid with interest at an annual effective
rate of 3.50%.
Account A (Fee Based) Prospectus  33
Maryland
Misstatements
If the Company has underpaid any amounts due to a misstatement of age
or sex, the underpayment will be paid with interest at an annual effective
rate of 3.50%.
Massachusetts
Misstatements
If the Company has underpaid any amounts due to a misstatement of age
or sex, the underpayment will be paid with interest at an annual effective
rate of 3.50%.
Michigan
Misstatements
If the Company has underpaid any amounts due to a misstatement of age
or sex, the underpayment will be paid with interest at an annual effective
rate of 3.50%.
Minnesota
Misstatements
If the Company has underpaid any amounts due to a misstatement of age
or sex, the underpayment will be paid with interest at an annual effective
rate of 3.50%.
Mississippi
Misstatements
If the Company has underpaid any amounts due to a misstatement of age
or sex, the underpayment will be paid with interest at an annual effective
rate of 3.50%.
Missouri
Misstatements
If the Company has underpaid any amounts due to a misstatement of age
or sex, the underpayment will be paid with interest at an annual effective
rate of 3.50%.
Montana
Misstatements
If the Company has underpaid any amounts due to a misstatement of age
or sex, the underpayment will be paid with interest at an annual effective
rate of 3.50%.
Nebraska
Misstatements
If the Company has underpaid any amounts due to a misstatement of age
or sex, the underpayment will be paid with interest at an annual effective
rate of 3.50%.
Nevada
Misstatements
If the Company has underpaid any amounts due to a misstatement of age
or sex, the underpayment will be paid with interest at an annual effective
rate of 3.50%.
New Hampshire
Misstatements
If the Company has underpaid any amounts due to a misstatement of age
or sex, the underpayment will be paid with interest at an annual effective
rate of 3.50%.
New Jersey
Misstatements
If the Company has underpaid any amounts due to a misstatement of age
or sex, the underpayment will be paid with interest at an annual effective
rate of 3.50%.
New Mexico
Misstatements
If the Company has underpaid any amounts due to a misstatement of age
or sex, the underpayment will be paid with interest at an annual effective
rate of 3.50%.
New York
Guaranteed Accounts
The Guaranteed Interest Fund is not available for investment.
Maturity Benefit
The latest Maturity Date is the contract anniversary nearest the
Annuitant’s 98th birthday.
Misstatements
If the Company has underpaid any amounts due to a misstatement of age
or sex, the underpayment will be paid with interest at an annual effective
rate of 3.50%.
Termination of Contract
The Company may terminate the Contract and pay the Owner the
Accumulation Value of the Contract with no further obligations if, prior to
the Maturity Date, no Purchase Payments have been paid for three (3) full
years and both the Accumulation Value of the Contract and the total
Purchase Payments paid (less withdrawals) are each less than the
minimum Accumulation Value required.
North Carolina
Misstatements
If the Company has underpaid any amounts due to a misstatement of age
or sex, the underpayment will be paid with interest at an annual effective
rate of 3.50%.
North Dakota
Right to Return
The Contract may be returned within twenty (20) days after it was
received.
Ohio
Misstatements
If the Company has underpaid any amounts due to a misstatement of age
or sex, the underpayment will be paid with interest at an annual effective
rate of 3.50%.
Oklahoma
Misstatements
If the Company has underpaid any amounts due to a misstatement of age
or sex, the underpayment will be paid with interest at an annual effective
rate of 3.50%.
Oregon
Misstatements
If the Company has underpaid any amounts due to a misstatement of age
or sex, the underpayment will be paid with interest at an annual effective
rate of 3.50%.
34  Account A (Fee Based) Prospectus
Pennsylvania
Misstatements
If the Company has underpaid any amounts due to a misstatement of age
or sex, the underpayment will be paid with interest at an annual effective
rate of 3.50%.
Rhode Island
Misstatements
If the Company has underpaid any amounts due to a misstatement of age
or sex, the underpayment will be paid with interest at an annual effective
rate of 3.50%.
South Carolina
Misstatements
If the Company has underpaid any amounts due to a misstatement of age
or sex, the underpayment will be paid with interest at an annual effective
rate of 3.50%.
South Dakota
Incontestability
While the Contract is contestable, the Company may rescind the Contract
or deny a claim under the Disability Waiver of Purchase Payment Benefit
on the basis of a misstatement in the application.
Tennessee
Misstatements
If the Company has underpaid any amounts due to a misstatement of age
or sex, the underpayment will be paid with interest at an annual effective
rate of 3.50%.
Texas
Misstatements
If the Company has underpaid any amounts due to a misstatement of age
or sex, the underpayment will be paid with interest at an annual effective
rate of 3.50%.
Utah
Misstatements
If the Company has underpaid any amounts due to a misstatement of age
or sex, the underpayment will be paid with interest at an annual effective
rate of 3.50%.
Vermont
Misstatements
If the Company has underpaid any amounts due to a misstatement of age
or sex, the underpayment will be paid with interest at an annual effective
rate of 3.50%.
Virginia
Misstatements
If the Company has underpaid any amounts due to a misstatement of age
or sex, the underpayment will be paid with interest at an annual effective
rate of 3.50%.
Washington
Misstatements
If the Company has underpaid any amounts due to a misstatement of age
or sex, the underpayment will be paid with interest at an annual effective
rate of 3.50%.
West Virginia
Misstatements
If the Company has underpaid any amounts due to a misstatement of age
or sex, the underpayment will be paid with interest at an annual effective
rate of 3.50%.
Wisconsin
Misstatements
If the Company has underpaid any amounts due to a misstatement of age
or sex, the underpayment will be paid with interest at an annual effective
rate of 3.50%.
Wyoming
Misstatements
If the Company has underpaid any amounts due to a misstatement of age
or sex, the underpayment will be paid with interest at an annual effective
rate of 3.50%.
Account A (Fee Based) Prospectus  35
Additional Information
Financial statements of the Separate Account and the financial statements of Northwestern Mutual appear in the Statement of Additional Information (“SAI”). The financial statements of the Company should only be considered with respect to the Company’s ability to meet its obligations under the Contract and not with respect to Contract Value held in the Separate Account, which is principally derived from the investment performance of the Portfolios. The SAI is available free of charge at www.nmprospectus.com. Semiannually, we will send you reports containing financial information and schedules of investments for the Portfolios underlying the Divisions in which you invest. We will notify you by mail that reports containing financial information and schedules of investments for the Portfolios underlying the Divisions in which you invest are available online.
More information about the Contract and NML Variable Annuity Account A (the “Separate Account”) is included in the SAI dated May 1, 2021. The SAI is incorporated by reference in this prospectus and is available free of charge at www.nmprospectus.com.
To receive a copy of the SAI, send a written request to Northwestern Mutual, Risk Products Department, Room T22, 720 East Wisconsin Avenue, Milwaukee, WI 53202. You can also request a copy of the SAI by calling us at (866) 910-1232 free of charge.
Information about the Separate Account (including the SAI) is available on the SEC’s internet site at http://www.sec.gov, or may be obtained, upon payment of a duplicating fee, by electronic request at the following email address: publicinfo@sec.gov.
 Edgar Contract Identifier: C000034305
36  Account A (Fee Based) Prospectus

STATEMENT OF ADDITIONAL INFORMATION
May 1, 2021
Individual Flexible Payment Variable Annuity (Fee Based)
An individual flexible payment variable annuity contract (the “Contract”) for Individual Retirement Annuities (“IRAs”), Roth IRAs and Non-Tax Qualified Annuities and Non Qualified Plans offered to purchasers who pay periodic fees for brokerage/advisory services instead of sales charges.
Issued by The Northwestern Mutual Life Insurance Company
and
NML Variable Annuity Account A
This Statement of Additional Information (“SAI”) is not a prospectus, but supplements and should be read in conjunction with the prospectus for the Contract identified above and dated the same date as this SAI. A copy of the prospectus may be obtained by writing The Northwestern Mutual Life Insurance Company, Risk Products Department, Room T22, 720 East Wisconsin Avenue, Milwaukee, Wisconsin 53202, calling telephone number 1-888- 455-2232, or visiting the website www.northwesternmutual.com.
B-1
DISTRIBUTION OF THE CONTRACT
Northwestern Mutual Investment Services, LLC (“NMIS”) is the distributor of the Contract and is considered the principal underwriter of the Contract. NMIS is a wholly-owned company of Northwestern Mutual. The principal business address of NMIS is 720 East Wisconsin Avenue, Milwaukee, Wisconsin 53202. NMIS may enter into selling agreements with other affiliated and unaffiliated broker-dealers to distribute the Contract. The offering is continuous.
DETERMINATION OF ANNUITY PAYMENTS
The following discussion of the method for determining the amount of monthly annuity payments under a variable income plan is intended to be read in conjunction with these sections of the prospectus for the Contracts: “Variable Income Plans,” including “Description of Variable Income Plans,” “Amount of Annuity Payments,” and “Assumed Investment Rate”; “Dividends”; and “Deductions.”
Amount of Annuity Payments The amount of the first annuity payment under a variable Income Plan will be determined on the basis of the particular Income Plan selected, the annuity payment rate and, for plans involving life contingencies, the Annuitant’s adjusted age. The amount of the first payment is the sum of the payments from each Division of the Account determined by applying the appropriate annuity payment rate to the product of the number of Accumulation Units in the Division on the effective date of the Income Plan and the Accumulation Unit value for the Division on that date. Annuity rates currently in use are based on the 2012 Individual Annuity Mortality Period Table with 125% of Projection Scale G2, a 5.00% load, and an age adjustment. For currently-issued contracts (“RR series”), the Company may offer higher initial payment rates.
Variable annuity payments after the first will vary from month to month and will depend upon the number and value of Annuity Units credited to the Annuitant. After the effective date of an Income Plan a Contract will not share in the divisible surplus of Northwestern Mutual. The number of Annuity Units in each Division is determined by dividing the amount of the first annuity payment from the Division by the value of an Annuity Unit on the effective date of the Payment Plan. The number of Annuity Units thus credited to the Annuitant in each Division remains constant throughout the annuity period. However, the value of Annuity Units in each Division will fluctuate with the investment experience of the Division.
The amount of each variable annuity payment after the first is the sum of payments from each Division determined by multiplying this fixed number of Annuity Units each month by the value of an Annuity Unit for the Division on (a) the fifth valuation date prior to the payment due date if the payment due date is a valuation date, or (b) the sixth valuation date prior to the payment due date if the payment due date is not a valuation date. To illustrate, if a payment due date falls on a Friday, Saturday or Sunday, the amount of the payment will normally be based upon the Annuity Unit value calculated on the preceding Friday. The preceding Friday would be the fifth valuation date prior to the Friday due date, and the sixth valuation date prior to the Saturday or Sunday due dates.
Annuity Unit Value The value of an Annuity Unit for each Division was established at $1.00 as of the date operations began for that Division. The value of an Annuity Unit on any later date varies to reflect the investment experience of the Division, the Assumed Investment Rate on which the annuity rate tables are based, and the deduction for mortality rate and expense risks assumed by Northwestern Mutual.
The Annuity Unit value for each Division on any valuation date is determined by multiplying the Annuity Unit value on the immediately preceding valuation date by two factors: (a) the net investment factor for the current period for the Division; and (b) an adjustment factor to reflect the Assumed Investment Rate used in calculating the annuity rate tables.
B-3
Illustrations of Variable Annuity Payments To illustrate the manner in which variable annuity payments are determined consider this example. Item (4) in the example shows the applicable monthly payment rate for an annuitant, adjusted age 65, who has elected a life annuity Income Plan with a certain period of 10 years with an Assumed Investment Rate of 3-1/2% (Plan 2, as described in the prospectus). The example is for a Contract with sex-distinct rates. 
(1)
Assumed number of Accumulation Units in Balanced Division on maturity date
25,000
(2)
Assumed Value of an Accumulation Unit in Balanced Division at maturity
$ 2.000000
(3)
Cash Value of Contract at maturity, (1) X (2)
$ 50,000
(4)
Assumed applicable monthly payment rate per $1,000 from annuity rate table
$ 4.90
(5)
Amount of first payment from Balanced Division, (3) X (4) divided by $1,000
$ 245.00
(6)
Assumed Value of Annuity Unit in Balanced Division at maturity
$ 1.500000
(7)
Number of Annuity Units credited in Balanced Division, (5) divided by (6)
163.33
The $50,000 value at maturity provides a first payment from the Balanced Division of $245.00, and payments thereafter of the varying dollar value of 163.33 Annuity Units. The amount of subsequent payments from the Balanced Division is determined by multiplying 163.33 units by the value of an Annuity Unit in the Balanced Division on the applicable valuation date. For example, if that unit value is $1.501000, the monthly payment from the Division will be 163.33 multiplied by $1.501000, or $245.16.
However, the value of the Annuity Unit depends entirely on the investment performance of the Division. Thus in the example above, if the net investment rate for the following month was less than the Assumed Investment Rate of 3-1/2%, the Annuity Unit would decline in value. If the Annuity Unit value declined to$1.499000 the succeeding monthly payment would then be 163.33 X $1.499000, or $244.83.
For the sake of simplicity the foregoing example assumes that all of the Annuity Units are in the Balanced Division. If there are Annuity Units in two or more Divisions, the annuity payment from each Division is calculated separately, in the manner illustrated, and the total monthly payment is the sum of the payments from the Divisions.
VALUATION OF ASSETS OF THE ACCOUNT
The value of Portfolio or Fund shares held in each Division of the Account at the time of each valuation is the redemption value of such shares at such time. If the right to redeem shares of a Portfolio or Fund has been suspended, or payment of redemption value has been postponed, for the sole purpose of computing annuity payments the shares held in the Account (and Annuity Units) may be valued at fair value as determined in good faith by the Board of Trustees of Northwestern Mutual.
TRANSFERABILITY RESTRICTIONS
Ownership of a Contract purchased as an individual retirement annuity pursuant to Section 408(b) of the Internal Revenue Code of 1986, as amended, cannot be transferred except in limited circumstances involving divorce.
EXPERTS
The statutory financial statements of The Northwestern Mutual Life Insurance Company as of December 31, 2020 and 2019 and for each of the three years in the period ended December 31, 2020, and the financial statements of NML Variable Annuity Account A as of December 31, 2020 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-4

 

Annual Report December 31, 2020

Northwestern Mutual Variable Annuity Account A

Financial Statements

Report of Independent Registered Public Accounting Firm

To the Board of Trustees of The Northwestern Mutual Life Insurance Company and the Contract Owners of NML Variable Annuity Account A

Opinions on the Financial Statements

We have audited the accompanying statements of assets and liabilities of each of the divisions of NML Variable Annuity Account A indicated in the table below as of December 31, 2020, 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 NML Variable Annuity Account A as of December 31, 2020, 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, 2020 and statement of changes in net assets for the years ended December 31, 2020 and 2019

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 NML Variable Annuity Account A 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 NML Variable Annuity Account A in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

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, 2020 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, 2021

We have served as the auditor of one or more of the divisions of NML Variable Annuity Account A since 1968.

 

2

Northwestern Mutual Variable Annuity Account A

Table of Contents

 

Statements of Assets and Liabilities

      1  

Statements of Operations

      9  

Statements of Changes in Net Assets

      12  

Notes to Financial Statements

      22  

Statements of Assets and Liabilities

NORTHWESTERN MUTUAL VARIABLE ANNUITY ACCOUNT A

December 31, 2020 (in thousands, except accumulation unit values)

 

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

Assets:

               

Investments, at fair value (1)

               
  Northwestern Mutual Series Fund, Inc.    $ 19,753      $ 39,668      $ 10,386      $ 1,177      $ 142,333  
  Fidelity Variable Insurance Products Fund      -        -        -        -        -  
  Neuberger Berman Advisers Management Trust      -        -        -        -        -  
  Russell Investment Funds      -        -        -        -        -  
  Credit Suisse Trust      -        -        -        -        -  

Due from Northwestern Mutual Life Insurance Company

      26        -        -        -        -  
 

Total Assets

      19,779        39,668        10,386        1,177        142,333  

Liabilities:

               

Due to Northwestern Mutual Life Insurance Company

      -        1        -        -        635  

Due to Participants

      -        -        3        -        250  
 

Total Liabilities

      -        1        3        -        885  

Total Net Assets

    $ 19,779      $ 39,667      $ 10,383      $ 1,177      $ 141,448  
          

Net Assets:

               

Variable Annuity Contracts Issued:

               
  Prior to December 17, 1981               
 

Accumulation Units (2)

    $ 103      $ 93      $ 119      $ 33      $ 3,719  
 

Annuity Reserves

      2        2        1        -        164  
  After December 16, 1981 and Prior to March 31, 1995               
 

Accumulation Units (3)

      3,668        3,151        2,016        533        17,872  
 

Annuity Reserves

      61        54        34        11        273  
  On or After March 31, 1995 and Prior to March 31, 2000               
 

Front Load Version

               
 

Accumulation Units (4)

      51        34        93        -        574  
 

Annuity Reserves

      6        -        4        -        34  
 

Back Load Version

               
 

Accumulation Units (5)

      2,917        1,518        1,291        41        10,150  
 

Annuity Reserves

      -        -        -        -        3  
  On or After March 31, 2000               
 

Front Load Version

               
 

Accumulation Units (6)

      106        598        417        62        2,133  
 

Annuity Reserves

      -        -        -        -        -  
 

Back Load Version

               
 

Class A Accumulation Units (7)

      1,152        1,452        425        182        3,951  
 

Class B Accumulation Units (8)

      952        1,806        548        162        3,368  
 

Annuity Reserves

      -        -        -        15        9  
  On or After October 16, 2006 - Fee Based Version               
 

Accumulation Units (9)

      10,717        30,494        5,414        138        97,699  
 

Annuity Reserves

      44        465        21        -        1,499  

Total Net Assets

    $ 19,779      $ 39,667      $ 10,383      $ 1,177      $ 141,448  
          

(1)

   Investments, at cost    $ 17,149      $ 26,034      $ 8,447      $ 1,053      $ 99,646  
  Mutual Fund Shares Held      5,469        10,568        6,243        908        22,029  

(2)

   Accumulation Unit Value    $ 10.677189      $ 7.997967      $ 6.576866      $ 2.110828      $ 16.126492  
  Units Outstanding      10        12        18        16        231  

(3)

   Accumulation Unit Value    $ 9.343486      $ 7.321217      $ 5.755230      $ 1.971217      $ 13.875428  
  Units Outstanding      393        430        350        270        1,287  

(4)

   Accumulation Unit Value    $ 10.738147      $ 8.503505      $ 6.612251      $ 2.213450      $ 10.757777  
  Units Outstanding      5        4        14        -        53  

(5)

   Accumulation Unit Value    $ 9.343486      $ 7.321217      $ 5.755230      $ 1.971217      $ 13.875428  
  Units Outstanding      312        207        224        21        731  

(6)

   Accumulation Unit Value    $ 3.429793      $ 8.356486      $ 2.552890      $ 2.183796      $ 3.296759  
  Units Outstanding      31        72        163        29        647  

(7)

   Accumulation Unit Value    $ 3.429793      $ 8.356486      $ 2.552890      $ 2.183796      $ 3.296759  
  Units Outstanding      336        174        166        84        1,199  

(8)

   Accumulation Unit Value    $ 9.343486      $ 7.321217      $ 5.755230      $ 1.971217      $ 13.875428  
  Units Outstanding      102        247        95        82        243  

(9)

   Accumulation Unit Value    $ 3.604955      $ 8.580705      $ 2.793028      $ 2.228920      $ 3.495577  
  Units Outstanding      2,973        3,554        1,938        62        27,949  

 

(a)

Amount is less than 500

 

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

 

F-1

Statements of Assets and Liabilities

NORTHWESTERN MUTUAL VARIABLE ANNUITY ACCOUNT A

December 31, 2020 (in thousands, except accumulation unit values)

 

         Large                    Mid Cap         
         Company      Domestic      Equity Income      Growth Stock      Index 400  
         Value Division      Equity Division      Division      Division      Stock Division  

Assets:

               

Investments, at fair value (1)

               
  Northwestern Mutual Series Fund, Inc.    $ 9,863      $ 31,949      $ 34,643      $ 25,311      $ 47,316  
  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  
 

Total Assets

      9,863        31,950        34,643        25,311        47,317  

Liabilities:

               

Due to Northwestern Mutual Life Insurance Company

      1        -        2        -        -  

Due to Participants

      -        5        -        6        67  
 

Total Liabilities

      1        5        2        6        67  

Total Net Assets

    $ 9,862      $ 31,945      $ 34,641      $ 25,305      $ 47,250  
          

Net Assets:

               

Variable Annuity Contracts Issued:

               
  Prior to December 17, 1981               
 

Accumulation Units (2)

    $ 23      $ 32      $ 54      $ 129      $ 85  
 

Annuity Reserves

      2        2        2        3        -  
  After December 16, 1981 and Prior to March 31, 1995               
 

Accumulation Units (3)

      753        2,757        1,949        11,039        4,229  
 

Annuity Reserves

      9        30        49        71        154  
  On or After March 31, 1995 and Prior to March 31, 2000               
 

Front Load Version

               
 

Accumulation Units (4)

      26        262        5        183        164  
 

Annuity Reserves

      -        -        -        26        27  
 

Back Load Version

               
 

Accumulation Units (5)

      292        1,122        456        5,574        1,295  
 

Annuity Reserves

      -        -        -        2        3  
  On or After March 31, 2000               
 

Front Load Version

               
 

Accumulation Units (6)

      188        497        537        148        703  
 

Annuity Reserves

      -        -        -        -        -  
 

Back Load Version

               
 

Class A Accumulation Units (7)

      324        1,573        992        723        1,399  
 

Class B Accumulation Units (8)

      436        1,480        935        521        1,297  
 

Annuity Reserves

      -        -        -        3        -  
  On or After October 16, 2006 - Fee Based Version               
 

Accumulation Units (9)

      7,676        23,901        29,282        6,870        37,508  
 

Annuity Reserves

      133        289        380        13        386  

Total Net Assets

    $ 9,862      $ 31,945      $ 34,641      $ 25,305      $ 47,250  
          

(1)

   Investments, at cost    $ 9,697      $ 30,262      $ 34,601      $ 19,824      $ 41,207  
  Mutual Fund Shares Held      9,737        18,167        19,727        6,164        19,080  

(2)

   Accumulation Unit Value    $ 1.860645      $ 3.066394      $ 3.587861      $ 16.351983      $ 6.391884  
  Units Outstanding      12        11        15        8        13  

(3)

   Accumulation Unit Value    $ 1.737445      $ 2.782499      $ 3.284293      $ 14.068708      $ 5.734890  
  Units Outstanding      434        991        593        785        737  

(4)

   Accumulation Unit Value    $ 1.951117      $ 3.280244      $ 3.814697      $ 8.274196      $ 6.891049  
  Units Outstanding      13        80        1        22        24  

(5)

   Accumulation Unit Value    $ 1.737445      $ 2.782499      $ 3.284293      $ 14.068708      $ 5.734890  
  Units Outstanding      168        403        139        396        226  

(6)

   Accumulation Unit Value    $ 1.924879      $ 3.218025      $ 3.748846      $ 2.599080      $ 5.326092  
  Units Outstanding      98        154        143        57        132  

(7)

   Accumulation Unit Value    $ 1.924879      $ 3.218025      $ 3.748846      $ 2.599080      $ 5.326092  
  Units Outstanding      168        489        265        278        263  

(8)

   Accumulation Unit Value    $ 1.737445      $ 2.782499      $ 3.284293      $ 14.068708      $ 5.734890  
  Units Outstanding      251        532        285        37        226  

(9)

   Accumulation Unit Value    $ 1.964770      $ 3.312992      $ 3.849405      $ 2.727520      $ 5.648868  
  Units Outstanding      3,907        7,215        7,607        2,518        6,640  

 

(a)

Amount is less than 500

 

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

 

F-2

Statements of Assets and Liabilities

NORTHWESTERN MUTUAL VARIABLE ANNUITY ACCOUNT A

December 31, 2020 (in thousands, except accumulation unit values)

 

                Small Cap                    International  
         Mid Cap Value      Growth Stock      Index 600      Small Cap      Growth  
         Division      Division      Stock Division      Value Division      Division  

Assets:

               

Investments, at fair value (1)

               
  Northwestern Mutual Series Fund, Inc.    $ 18,747      $ 13,048      $ 22,274      $ 13,930      $ 42,345  
  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        -        -  
 

Total Assets

      18,747        13,049        22,275        13,930        42,345  

Liabilities:

               

Due to Northwestern Mutual Life Insurance Company

      1        -        -        1        -  

Due to Participants

      2        -        31        -        28  
 

Total Liabilities

      3        -        31        1        28  

Total Net Assets

    $ 18,744      $ 13,049      $ 22,244      $ 13,929      $ 42,317  
          

Net Assets:

               

Variable Annuity Contracts Issued:

               
  Prior to December 17, 1981               
 

Accumulation Units (2)

    $ 27      $ 68      $ 29      $ 90      $ 29  
 

Annuity Reserves

      -        2        -        -        1  
  After December 16, 1981 and Prior to March 31, 1995               
 

Accumulation Units (3)

      1,191        2,947        1,306        1,449        2,416  
 

Annuity Reserves

      15        63        11        9        51  
  On or After March 31, 1995 and Prior to March 31, 2000               
 

Front Load Version

               
 

Accumulation Units (4)

      83        45        48        24        52  
 

Annuity Reserves

      -        -        -        -        -  
 

Back Load Version

               
 

Accumulation Units (5)

      486        1,768        411        529        683  
 

Annuity Reserves

      -        -        -        -        -  
  On or After March 31, 2000               
 

Front Load Version

               
 

Accumulation Units (6)

      322        399        289        265        886  
 

Annuity Reserves

      -        -        -        -        -  
 

Back Load Version

               
 

Class A Accumulation Units (7)

      687        1,138        491        1,139        1,077  
 

Class B Accumulation Units (8)

      994        785        764        861        1,207  
 

Annuity Reserves

      14        -        -        11        -  
  On or After October 16, 2006 - Fee Based Version               
 

Accumulation Units (9)

      14,729        5,793        18,739        9,340        35,633  
 

Annuity Reserves

      196        41        156        212        282  

Total Net Assets

    $ 18,744      $ 13,049      $ 22,244      $ 13,929      $ 42,317  
          

(1)

   Investments, at cost    $ 18,091      $ 9,795      $ 19,034      $ 13,155      $ 29,695  
  Mutual Fund Shares Held      10,970        3,659        12,182        5,932        19,429  

(2)

   Accumulation Unit Value    $ 4.389088      $ 8.854626      $ 2.743510      $ 4.951332      $ 2.949337  
  Units Outstanding      6        8        11        18        10  

(3)

   Accumulation Unit Value    $ 4.017711      $ 7.944528      $ 2.561959      $ 4.492731      $ 2.676266  
  Units Outstanding      297        371        510        322        903  

(4)

   Accumulation Unit Value    $ 4.666564      $ 9.546381      $ 2.876863      $ 5.296340      $ 3.154916  
  Units Outstanding      18        5        17        5        16  

(5)

   Accumulation Unit Value    $ 4.017711      $ 7.944528      $ 2.561959      $ 4.492731      $ 2.676266  
  Units Outstanding      121        222        160        118        255  

(6)

   Accumulation Unit Value    $ 4.586032      $ 4.290772      $ 2.838365      $ 5.195796      $ 3.095127  
  Units Outstanding      70        93        102        51        286  

(7)

   Accumulation Unit Value    $ 4.586032      $ 4.290772      $ 2.838365      $ 5.195796      $ 3.095127  
  Units Outstanding      150        265        173        219        348  

(8)

   Accumulation Unit Value    $ 4.017711      $ 7.944528      $ 2.561959      $ 4.492731      $ 2.676266  
  Units Outstanding      247        99        298        192        451  

(9)

   Accumulation Unit Value    $ 4.708921      $ 4.305002      $ 2.897115      $ 5.349125      $ 3.186443  
  Units Outstanding      3,128        1,346        6,468        1,746        11,183  

 

(a)

Amount is less than 500

 

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

 

F-3

Statements of Assets and Liabilities

NORTHWESTERN MUTUAL VARIABLE ANNUITY ACCOUNT A

December 31, 2020 (in thousands, except accumulation unit values)

 

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

Assets:

               

Investments, at fair value (1)

               
  Northwestern Mutual Series Fund, Inc.    $ 37,297      $ 71,376      $ 77,827      $ 27,272      $ 46,897  
  Fidelity Variable Insurance Products Fund      -        -        -        -        -  
  Neuberger Berman Advisers Management Trust      -        -        -        -        -  
  Russell Investment Funds      -        -        -        -        -  
  Credit Suisse Trust      -        -        -        -        -  

Due from Northwestern Mutual Life Insurance Company

      -        1        3        1        -  
 

Total Assets

      37,297        71,377        77,830        27,273        46,897  

Liabilities:

               

Due to Northwestern Mutual Life Insurance Company

      -        -        -        -        -  

Due to Participants

      29        35        65        13        2  
 

Total Liabilities

      29        35        65        13        2  

Total Net Assets

    $ 37,268      $ 71,342      $ 77,765      $ 27,260      $ 46,895  
          

Net Assets:

               

Variable Annuity Contracts Issued:

               
  Prior to December 17, 1981               
 

Accumulation Units (2)

    $ 30      $ 103      $ 53      $ 91      $ 30  
 

Annuity Reserves

      1        2        1        7        -  
  After December 16, 1981 and Prior to March 31, 1995               
 

Accumulation Units (3)

      1,295        6,815        3,082        4,364        3,577  
 

Annuity Reserves

      15        101        21        27        29  
  On or After March 31, 1995 and Prior to March 31, 2000               
 

Front Load Version

               
 

Accumulation Units (4)

      63        299        80        16        59  
 

Annuity Reserves

      -        3        -        -        -  
 

Back Load Version

               
 

Accumulation Units (5)

      658        2,143        834        966        984  
 

Annuity Reserves

      -        -        -        -        -  
  On or After March 31, 2000               
 

Front Load Version

               
 

Accumulation Units (6)

      639        993        771        448        166  
 

Annuity Reserves

      -        -        -        -        -  
 

Back Load Version

               
 

Class A Accumulation Units (7)

      677        1,792        840        1,321        688  
 

Class B Accumulation Units (8)

      984        1,676        1,210        1,453        438  
 

Annuity Reserves

      -        5        -        -        -  
  On or After October 16, 2006 - Fee Based Version               
 

Accumulation Units (9)

      32,286        56,817        69,968        18,336        40,450  
 

Annuity Reserves

      620        593        905        231        474  

Total Net Assets

    $ 37,268      $ 71,342      $ 77,765      $ 27,260      $ 46,895  
          

(1)

   Investments, at cost    $ 30,468      $ 76,310      $ 53,753      $ 27,272      $ 45,506  
  Mutual Fund Shares Held      31,910        40,538        53,832        24,260        37,869  

(2)

   Accumulation Unit Value    $ 1.451851      $ 4.590852      $ 1.473169      $ 3.374193      $ 1.259363  
  Units Outstanding      21        22        36        27        24  

(3)

   Accumulation Unit Value    $ 1.355712      $ 3.997280      $ 1.375728      $ 2.776215      $ 1.176335  
  Units Outstanding      955        1,705        2,241        1,572        3,041  

(4)

   Accumulation Unit Value    $ 1.522389      $ 4.083102      $ 1.544866      $ 1.655462      $ 1.320967  
  Units Outstanding      41        73        52        10        45  

(5)

   Accumulation Unit Value    $ 1.355712      $ 3.997280      $ 1.375728      $ 2.776215      $ 1.176335  
  Units Outstanding      485        536        606        348        836  

(6)

   Accumulation Unit Value    $ 1.502051      $ 2.053572      $ 1.524120      $ 1.271520      $ 1.303353  
  Units Outstanding      425        484        506        352        127  

(7)

   Accumulation Unit Value    $ 1.502051      $ 2.053572      $ 1.524120      $ 1.271520      $ 1.303353  
  Units Outstanding      451        872        551        1,039        528  

(8)

   Accumulation Unit Value    $ 1.355712      $ 3.997280      $ 1.375728      $ 2.776215      $ 1.176335  
  Units Outstanding      726        419        880        523        372  

(9)

   Accumulation Unit Value    $ 1.533174      $ 2.075812      $ 1.555698      $ 1.293416      $ 1.330259  
  Units Outstanding      21,058        27,370        44,975        14,176        30,409  

 

(a)

Amount is less than 500

 

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

 

F-4

Statements of Assets and Liabilities

NORTHWESTERN MUTUAL VARIABLE ANNUITY ACCOUNT A

December 31, 2020 (in thousands, except accumulation unit values)

 

                Long-Term U.S.      Inflation                
         Select Bond      Government      Protection      High Yield      Multi-Sector  
         Division      Bond Division      Division      Bond Division      Bond Division  

Assets:

               

Investments, at fair value (1)

               
  Northwestern Mutual Series Fund, Inc.    $ 134,208      $ 17,087      $ 36,243      $ 46,301      $ 101,282  
  Fidelity Variable Insurance Products Fund      -        -        -        -        -  
  Neuberger Berman Advisers Management Trust      -        -        -        -        -  
  Russell Investment Funds      -        -        -        -        -  
  Credit Suisse Trust      -        -        -        -        -  

Due from Northwestern Mutual Life Insurance Company

      1        -        -        -        -  
 

Total Assets

      134,209        17,087        36,243        46,301        101,282  

Liabilities:

      -        2        -        -        -  

Due to Northwestern Mutual Life Insurance Company

               

Due to Participants

      118        -        3        37        78  
 

Total Liabilities

      118        2        3        37        78  

Total Net Assets

    $ 134,091      $ 17,085      $ 36,240      $ 46,264      $ 101,204  
          

Net Assets:

               

Variable Annuity Contracts Issued:

               
  Prior to December 17, 1981               
 

Accumulation Units (2)

    $ 676      $ 61      $ 25      $ 64      $ 83  
 

Annuity Reserves

      3        1        -        -        2  
  After December 16, 1981 and Prior to March 31, 1995               
 

Accumulation Units (3)

      9,946        1,172        1,344        2,033        4,105  
 

Annuity Reserves

      260        42        11        35        52  
  On or After March 31, 1995 and Prior to March 31, 2000               
 

Front Load Version

               
 

Accumulation Units (4)

      600        78        72        225        489  
 

Annuity Reserves

      2        -        -        3        -  
 

Back Load Version

               
 

Accumulation Units (5)

      2,058        478        288        486        1,065  
 

Annuity Reserves

      -        -        -        -        -  
  On or After March 31, 2000               
 

Front Load Version

               
 

Accumulation Units (6)

      1,519        213        423        420        936  
 

Annuity Reserves

      -        -        -        -        -  
 

Back Load Version

               
 

Class A Accumulation Units (7)

      3,419        312        527        594        877  
 

Class B Accumulation Units (8)

      3,161        385        583        786        1,237  
 

Annuity Reserves

      26        -        -        -        -  
  On or After October 16, 2006 - Fee Based Version               
 

Accumulation Units (9)

      109,849        14,319        32,392        40,895        91,335  
 

Annuity Reserves

      2,572        24        575        723        1,023  

Total Net Assets

    $ 134,091      $ 17,085      $ 36,240      $ 46,264      $ 101,204  
          

(1)

   Investments, at cost    $ 125,315      $ 16,403      $ 33,216      $ 45,215      $ 94,958  
  Mutual Fund Shares Held      98,751        12,150        29,011        62,707        89,171  

(2)

   Accumulation Unit Value    $ 19.528401      $ 2.429376      $ 1.547676      $ 5.190858      $ 2.024959  
  Units Outstanding      35        25        16        12        41  

(3)

   Accumulation Unit Value    $ 16.063574      $ 2.268738      $ 1.445291      $ 4.542495      $ 1.891030  
  Units Outstanding      619        516        930        448        2,171  

(4)

   Accumulation Unit Value    $ 3.687369      $ 2.547520      $ 1.622959      $ 5.296364      $ 2.123333  
  Units Outstanding      163        31        44        43        230  

(5)

   Accumulation Unit Value    $ 16.063574      $ 2.268738      $ 1.445291      $ 4.542495      $ 1.891030  
  Units Outstanding      128        211        199        107        563  

(6)

   Accumulation Unit Value    $ 2.669406      $ 2.513332      $ 1.601170      $ 3.549988      $ 2.094950  
  Units Outstanding      569        85        264        118        447  

(7)

   Accumulation Unit Value    $ 2.669406      $ 2.513332      $ 1.601170      $ 3.549988      $ 2.094950  
  Units Outstanding      1,281        124        329        167        419  

(8)

   Accumulation Unit Value    $ 16.063574      $ 2.268738      $ 1.445291      $ 4.542495      $ 1.891030  
  Units Outstanding      197        170        403        173        654  

(9)

   Accumulation Unit Value    $ 2.723858      $ 2.565411      $ 1.634367      $ 3.658289      $ 2.138307  
  Units Outstanding      40,328        5,582        19,820        11,178        42,714  

 

(a)

Amount is less than 500

 

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

 

F-5

Statements of Assets and Liabilities

NORTHWESTERN MUTUAL VARIABLE ANNUITY ACCOUNT A

December 31, 2020 (in thousands, except accumulation unit values)

 

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

Assets:

               

Investments, at fair value (1)

               
  Northwestern Mutual Series Fund, Inc.    $ 87,388      $ 4,743      $ -      $ -      $ -  
  Fidelity Variable Insurance Products Fund      -        -        24,180        49,027        -  
  Neuberger Berman Advisers Management Trust      -        -        -        -        14,309  
  Russell Investment Funds      -        -        -        -        -  
  Credit Suisse Trust      -        -        -        -        -  

Due from Northwestern Mutual Life Insurance Company

      15        -        -        -        -  
 

Total Assets

      87,403        4,743        24,180        49,027        14,309  

Liabilities:

               

Due to Northwestern Mutual Life Insurance Company

      -        -        -        2        -  

Due to Participants

      46        -        -        4        3  
 

Total Liabilities

      46        -        -        6        3  

Total Net Assets

    $ 87,357      $ 4,743      $ 24,180      $ 49,021      $ 14,306  
          

Net Assets:

               

Variable Annuity Contracts Issued:

               
  Prior to December 17, 1981               
 

Accumulation Units (2)

    $ 2,542      $ 44      $ 76      $ 54      $ -  
 

Annuity Reserves

      1,548        -        -        1        -  
  After December 16, 1981 and Prior to March 31, 1995               
 

Accumulation Units (3)

      66,269        2,659        2,059        2,607        542  
 

Annuity Reserves

      2,642        104        67        20        33  
  On or After March 31, 1995 and Prior to March 31, 2000               
 

Front Load Version

               
 

Accumulation Units (4)

      1,115        120        84        91        29  
 

Annuity Reserves

      406        -        -        -        -  
 

Back Load Version

               
 

Accumulation Units (5)

      7,372        775        965        912        335  
 

Annuity Reserves

      7        -        -        -        -  
  On or After March 31, 2000               
 

Front Load Version

               
 

Accumulation Units (6)

      483        15        701        779        315  
 

Annuity Reserves

      -        -        -        -        -  
 

Back Load Version

               
 

Class A Accumulation Units (7)

      2,400        516        1,067        1,222        465  
 

Class B Accumulation Units (8)

      2,406        503        918        1,858        680  
 

Annuity Reserves

      -        1        -        -        -  
  On or After October 16, 2006 - Fee Based Version               
 

Accumulation Units (9)

      167        6        17,931        40,831        11,674  
 

Annuity Reserves

      -        -        312        646        233  

Total Net Assets

    $ 87,357      $ 4,743      $ 24,180      $ 49,021      $ 14,306  
          

(1)

   Investments, at cost    $ 80,322      $ 4,396      $ 19,987      $ 34,389      $ 11,346  
  Mutual Fund Shares Held      56,204        3,531        673        1,207        509  

(2)

   Accumulation Unit Value    $ 20.424519      $ 2.853524      $ 6.172838      $ 3.180346      $ 2.699701  
  Units Outstanding      124        15        12        17        -  

(3)

   Accumulation Unit Value    $ 16.804115      $ 2.589358      $ 5.650379      $ 2.969929      $ 2.521165  
  Units Outstanding      3,944        1,027        364        878        215  

(4)

   Accumulation Unit Value    $ 5.717913      $ 3.052424      $ 6.563043      $ 3.334838      $ 2.831092  
  Units Outstanding      195        39        13        27        10  

(5)

   Accumulation Unit Value    $ 16.804115      $ 2.589358      $ 5.650379      $ 2.969929      $ 2.521165  
  Units Outstanding      439        299        171        307        133  

(6)

   Accumulation Unit Value    $ 2.590705      $ 2.994574      $ 6.449667      $ 3.290292      $ 2.793001  
  Units Outstanding      186        5        109        237        113  

(7)

   Accumulation Unit Value    $ 2.590705      $ 2.994574      $ 6.449667      $ 3.290292      $ 2.793001  
  Units Outstanding      927        172        165        371        167  

(8)

   Accumulation Unit Value    $ 16.804115      $ 2.589358      $ 5.650379      $ 2.969929      $ 2.521165  
  Units Outstanding      143        194        163        626        270  

(9)

   Accumulation Unit Value    $ 2.689434      $ 3.082984      $ 6.622537      $ 3.358390      $ 2.850867  
  Units Outstanding      62        2        2,707        12,158        4,095  

 

(a)

Amount is less than 500

 

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

 

F-6

Statements of Assets and Liabilities

NORTHWESTERN MUTUAL VARIABLE ANNUITY ACCOUNT A

December 31, 2020 (in thousands, except accumulation unit values)

 

                        International             Global Real  
                        Developed             Estate  
          U.S. Strategic      U.S. Small Cap      Markets      Strategic Bond      Securities  
          Equity Division      Equity Division      Division      Division      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      15,136        4,666        20,534        75,610        48,740  
   Credit Suisse Trust      -        -        -        -        -  

Due from Northwestern Mutual Life Insurance Company

      -        -        -        -        -  
  

Total Assets

      15,136        4,666        20,534        75,610        48,740  

Liabilities:

               

Due to Northwestern Mutual Life Insurance Company

      -        -        -        -        -  

Due to Participants

      -        -        34        110        40  
  

Total Liabilities

      -        -        34        110        40  

Total Net Assets

    $ 15,136      $ 4,666      $ 20,500      $ 75,500      $ 48,700  
           

Net Assets:

               

Variable Annuity Contracts Issued:

               
   Prior to December 17, 1981               
  

Accumulation Units (2)

    $ -      $ -      $ 4      $ 39      $ 44  
  

Annuity Reserves

      -        -        1        3        1  
   After December 16, 1981 and Prior to March 31, 1995               
  

Accumulation Units (3)

      460        930        467        2,526        2,332  
  

Annuity Reserves

      86        -        13        51        86  
   On or After March 31, 1995 and Prior to March 31, 2000               
  

Front Load Version

               
  

Accumulation Units (4)

      -        25        49        132        103  
  

Annuity Reserves

      -        -        4        -        3  
  

Back Load Version

               
  

Accumulation Units (5)

      609        345        294        1,198        1,131  
  

Annuity Reserves

      -        -        -        -        -  
   On or After March 31, 2000               
  

Front Load Version

               
  

Accumulation Units (6)

      100        44        179        751        669  
  

Annuity Reserves

      -        -        -        -        -  
  

Back Load Version

               
  

Class A Accumulation Units (7)

      578        597        421        884        1,515  
  

Class B Accumulation Units (8)

      235        320        239        1,301        1,415  
  

Annuity Reserves

      -        -        -        -        3  
   On or After October 16, 2006 - Fee Based Version               
  

Accumulation Units (9)

      12,972        2,374        18,626        67,441        40,841  
  

Annuity Reserves

      96        31        203        1,174        557  

Total Net Assets

    $ 15,136      $ 4,666      $ 20,500      $ 75,500      $ 48,700  
           
(1)    Investments, at cost    $ 12,385      $ 3,978      $ 18,721      $ 72,942      $ 49,001  
   Mutual Fund Shares Held      874        305        1,649        7,145        3,199  
(2)    Accumulation Unit Value    $ 3.026137      $ 3.583090      $ 2.045465      $ 2.485897      $ 4.767479  
   Units Outstanding      -        -        2        16        9  
(3)    Accumulation Unit Value    $ 2.715036      $ 3.214751      $ 1.835201      $ 2.230428      $ 4.277349  
   Units Outstanding      169        289        254        1,133        545  
(4)    Accumulation Unit Value    $ 3.262377      $ 3.862953      $ 2.205243      $ 2.680033      $ 5.139840  
   Units Outstanding      -        7        22        49        20  
(5)    Accumulation Unit Value    $ 2.715036      $ 3.214751      $ 1.835201      $ 2.230428      $ 4.277349  
   Units Outstanding      224        107        160        537        265  
(6)    Accumulation Unit Value    $ 3.002171      $ 3.219942      $ 1.726590      $ 2.606825      $ 5.334855  
   Units Outstanding      33        14        104        288        125  
(7)    Accumulation Unit Value    $ 3.002171      $ 3.219942      $ 1.726590      $ 2.606825      $ 5.334855  
   Units Outstanding      192        185        244        339        284  
(8)    Accumulation Unit Value    $ 2.715036      $ 3.214751      $ 1.835201      $ 2.230428      $ 4.277349  
   Units Outstanding      87        99        130        583        331  
(9)    Accumulation Unit Value    $ 3.219218      $ 3.419722      $ 1.873698      $ 2.647011      $ 5.029868  
   Units Outstanding      4,030        694        9,940        25,478        8,119  

 

(a)

Amount is less than 500

 

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

 

F-7

Statements of Assets and Liabilities

NORTHWESTERN MUTUAL VARIABLE ANNUITY ACCOUNT A

December 31, 2020 (in thousands, except accumulation unit values)

 

          LifePoints      LifePoints      LifePoints      LifePoints      Credit Suisse  
          Moderate      Balanced      Growth      Equity Growth      Trust Commodity  
          Strategy      Strategy      Strategy      Strategy      Return Strategy  
          Division      Division      Division      Division      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      2,579        1,803        371        69        -  
   Credit Suisse Trust      -        -        -        -        39,450  

Due from Northwestern Mutual Life Insurance Company

      -        -        -        -        -  
  

Total Assets

      2,579        1,803        371        69        39,450  

Liabilities:

               

Due to Northwestern Mutual Life Insurance Company

      -        -        -        -        -  

Due to Participants

      -        -        -        -        37  
  

Total Liabilities

      -        -        -        -        37  

Total Net Assets

    $ 2,579      $ 1,803      $ 371      $ 69      $ 39,413  
           

Net Assets:

               

Variable Annuity Contracts Issued:

               
   Prior to December 17, 1981               
  

Accumulation Units (2)

    $ -      $ 53      $ -      $ -      $ 31  
  

Annuity Reserves

      -        -        -        -        1  
   After December 16, 1981 and Prior to March 31, 1995               
  

Accumulation Units (3)

      1,255        686        76        12        889  
  

Annuity Reserves

               
   On or After March 31, 1995 and Prior to March 31, 2000      -        50        -        -        11  
  

Front Load Version

      -        -        -        -        48  
  

Accumulation Units (4)

               
  

Annuity Reserves

      -        -        -        -        -  
  

Back Load Version

               
  

Accumulation Units (5)

      209        393        1        -        206  
  

Annuity Reserves

      -        -        -        -        -  
   On or After March 31, 2000               
  

Front Load Version

               
  

Accumulation Units (6)

      7        -        -        -        375  
  

Annuity Reserves

      -        -        -        -        -  
  

Back Load Version

               
  

Class A Accumulation Units (7)

      975        298        107        4        287  
  

Class B Accumulation Units (8)

      133        323        187        53        549  
  

Annuity Reserves

      -        -        -        -        -  
   On or After October 16, 2006 - Fee Based Version               
  

Accumulation Units (9)

      -        -        -        -        36,587  
  

Annuity Reserves

      -        -        -        -        429  

Total Net Assets

    $ 2,579      $ 1,803      $ 371      $ 69      $ 39,413  
           
(1)    Investments, at cost    $ 2,442      $ 1,697      $ 331      $ 66      $ 44,096  
   Mutual Fund Shares Held      237        181        80        11        10,276  
(2)    Accumulation Unit Value    $ 1.701500      $ 1.745026      $ 1.723831      $ 1.616977      $ 4.333374  
   Units Outstanding      -        31        -        -        7  
(3)    Accumulation Unit Value    $ 1.588894      $ 1.629523      $ 1.609785      $ 1.509990      $ 4.128458  
   Units Outstanding      790        421        47        8        215  
(4)    Accumulation Unit Value    $ 1.784222      $ 1.829833      $ 1.807712      $ 1.695681      $ 4.481419  
   Units Outstanding      -        -        -        -        11  
(5)    Accumulation Unit Value    $ 1.588894      $ 1.629523      $ 1.609785      $ 1.509990      $ 4.128458  
   Units Outstanding      131        241        - (a)       -        50  
(6)    Accumulation Unit Value    $ 1.760249      $ 1.805352      $ 1.783430      $ 1.672934      $ 4.438832  
   Units Outstanding      4        -        -        -        85  
(7)    Accumulation Unit Value    $ 1.760249      $ 1.805352      $ 1.783430      $ 1.672934      $ 4.438832  
   Units Outstanding      555        166        61        3        65  
(8)    Accumulation Unit Value    $ 1.588894      $ 1.629523      $ 1.609785      $ 1.509990      $ 4.128458  
   Units Outstanding      83        198        116        34        133  
(9)    Accumulation Unit Value    $ 1.796695      $ 1.842719      $ 1.820383      $ 1.707568      $ 4.503663  
   Units Outstanding      -        -        -        -        8,124  

 

(a)

Amount is less than 500

 

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

 

F-8

Statements of Operations

NORTHWESTERN MUTUAL VARIABLE ANNUITY ACCOUNT A

For the Year Ended December 31, 2020 (in thousands)

 

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

Income:

           

Dividend income

    $ 109     $ 190     $ 104     $ 56     $ 2,042  

Expenses:

           

Mortality and expense risk charges

      121       178       65       11       716  

Net investment income (loss)

      (12 )      12       39       45       1,326  

Realized gain (loss) on investments:

           

Realized gain (loss) on sale of fund shares

      672       1,950       (282 )      29       6,466  

Realized gain distribution

      2,838       1,524       263       16       2,498  

Realized gains (losses)

      3,510       3,474       (19 )      45       8,964  

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

      1,295       6,358       1,889       24       10,842  

Net increase (decrease) in net assets resulting from operations

    $ 4,793     $ 9,844     $ 1,909     $ 114     $ 21,132  
        
     Large                 Mid Cap        
     Company Value     Domestic     Equity Income     Growth Stock     Index 400  
     Division     Equity Division     Division     Division     Stock Division  

Income:

           

Dividend income

    $ 188     $ 591     $ 1,420     $ 58     $ 531  

Expenses:

           

Mortality and expense risk charges

      44       145       138       198       188  

Net investment income (loss)

      144       446       1,282       (140 )      343  

Realized gain (loss) on investments:

           

Realized gain (loss) on sale of fund shares

      (375 )      249       (487 )      11       (291 ) 

Realized gain distribution

      316       1,339       1,369       912       1,821  

Realized gains (losses)

      (59 )      1,588       882       923       1,530  

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

      33       (1,876 )      (1,567 )      4,149       4,736  

Net increase (decrease) in net assets resulting from operations

    $ 118     $ 158     $ 597     $ 4,932     $ 6,609  
        
           Small Cap                 International  
     Mid Cap Value     Growth Stock     Index 600     Small Cap     Growth  
     Division     Division     Stock Division     Value Division     Division  

Income:

           

Dividend income

    $ 306     $ 11     $ 308     $ 60     $ 625  

Expenses:

           

Mortality and expense risk charges

      82       77       79       65       167  

Net investment income (loss)

      224       (66 )      229       (5 )      458  

Realized gain (loss) on investments:

           

Realized gain (loss) on sale of fund shares

      (349 )      256       (38 )      (529 )      1,443  

Realized gain distribution

      -       601       695       760       149  

Realized gains (losses)

      (349 )      857       657       231       1,592  

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

      627       2,535       1,950       1,260       4,535  

Net increase (decrease) in net assets resulting from operations

    $ 502     $ 3,326     $ 2,836     $ 1,486     $ 6,585  
        

 

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

 

F-9

Statements of Operations

NORTHWESTERN MUTUAL VARIABLE ANNUITY ACCOUNT A

For the Year Ended December 31, 2020 (in thousands)

 

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

Income:

            

Dividend income

    $ 706      $ 2,314     $ 1,380     $ 78     $ 1,017  

Expenses:

            

Mortality and expense risk charges

      138        315       251       161       200  

Net investment income (loss)

      568        1,999       1,129       (83 )      817  

Realized gain (loss) on investments:

            

Realized gain (loss) on sale of fund shares

      227        (2,220 )      567       -       198  

Realized gain distribution

      572        -       -       -       -  

Realized gains (losses)

      799        (2,220 )      567       -       198  

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

      2,610        (122 )      15,672       -       684  

Net increase (decrease) in net assets resulting from operations

    $ 3,977      $ (343 )    $ 17,368     $ (83 )    $ 1,699  
        
            Long-Term U.S.     Inflation              
     Select Bond      Government     Protection     High Yield     Multi-Sector  
     Division      Bond Division     Division     Bond Division     Bond Division  

Income:

            

Dividend income

    $ 3,584      $ 261     $ 663     $ 2,560     $ 3,912  

Expenses:

            

Mortality and expense risk charges

      601        75       138       188       399  

Net investment income (loss)

      2,983        186       525       2,372       3,513  

Realized gain (loss) on investments:

            

Realized gain (loss) on sale of fund shares

      945        635       2       (296 )      (318 ) 

Realized gain distribution

      712        1,046       -       -       117  

Realized gains (losses)

      1,657        1,681       2       (296 )      (201 ) 

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

      5,433        323       2,319       452       1,252  

Net increase (decrease) in net assets resulting from operations

    $ 10,073      $ 2,190     $ 2,846     $ 2,528     $ 4,564  
        
            Asset           Fidelity VIP     AMT  
     Balanced      Allocation     Fidelity VIP Mid     Contrafund     Sustainable  
     Division      Division     Cap Division     Division     Equity Division  

Income:

            

Dividend income

    $ 1,967      $ 90     $ 123     $ 95     $ 75  

Expenses:

            

Mortality and expense risk charges

      961        44       104       204       57  

Net investment income (loss)

      1,006        46       19       (109 )      18  

Realized gain (loss) on investments:

            

Realized gain (loss) on sale of fund shares

      403        (62 )      (661 )      1,357       124  

Realized gain distribution

      2,889        164       -       241       516  

Realized gains (losses)

      3,292        102       (661 )      1,598       640  

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

      4,459        222       4,675       10,611       1,414  

Net increase (decrease) in net assets resulting from operations

    $ 8,757      $ 370     $ 4,033     $ 12,100     $ 2,072  
        

 

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

 

F-10

Statements of Operations

NORTHWESTERN MUTUAL VARIABLE ANNUITY ACCOUNT A

For the Year Ended December 31, 2020 (in thousands)

 

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

Income:

         

Dividend income

    $ 61     $ 2     $ 216     $ 1,327  

Expenses:

         

Mortality and expense risk charges

      59       26       74       306  

Net investment income (loss)

      2       (24 )      142       1,021  

Realized gain (loss) on investments:

         

Realized gain (loss) on sale of fund shares

      (285 )      (218 )      (636 )      (38 ) 

Realized gain distribution

      122       93       -       2,414  

Realized gains (losses)

      (163 )      (125 )      (636 )      2,376  

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

      3,085       701       1,881       1,926  

Net increase (decrease) in net assets resulting from operations

    $ 2,924     $ 552     $ 1,387     $ 5,323  
        
     Global Real     LifePoints           LifePoints  
     Estate     Moderate     LifePoints     Growth  
     Securities     Strategy     Balanced     Strategy  
     Division     Division     Strategy Division     Division  

Income:

         

Dividend income

    $ 689     $ 46     $ 20     $ 11  

Expenses:

         

Mortality and expense risk charges

      203       22       19       4  

Net investment income (loss)

      486       24       1       7  

Realized gain (loss) on investments:

         

Realized gain (loss) on sale of fund shares

      (858 )      (7 )      (31 )      (44 ) 

Realized gain distribution

      -       -       25       13  

Realized gains (losses)

      (858 )      (7 )      (6 )      (31 ) 

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

      (1,562 )      118       106       22  

Net increase (decrease) in net assets resulting from operations

    $ (1,934 )    $ 135     $ 101     $ (2 ) 
        
           Credit Suisse              
     LifePoints     Trust              
     Equity Growth     Commodity              
     Strategy     Return Strategy              
     Division     Division              

Income:

         

Dividend income

    $ 2     $ 2,043      

Expenses:

         

Mortality and expense risk charges

      1       138      

Net investment income (loss)

      1       1,905      

Realized gain (loss) on investments:

         

Realized gain (loss) on sale of fund shares

      -       (5,059 )     

Realized gain distribution

      3       -      

Realized gains (losses)

      3       (5,059 )     

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

      -       2,897      

Net increase (decrease) in net assets resulting from operations

    $ 4     $ (257 )     
            

 

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

 

F-11

Statements of Changes in Net Assets

NORTHWESTERN MUTUAL VARIABLE ANNUITY ACCOUNT A

(in thousands)

 

     Growth Stock Division            Focused Appreciation Division  
     Year Ended     Year Ended            Year Ended     Year Ended  
     December 31,     December 31,            December 31,     December 31,  
     2020     2019            2020     2019  

Operations:

            

Net investment income (loss)

    $ (12 )    $ -        $ 12     $ 45  

Net realized gains (losses)

      3,510       2,115          3,474       2,459  

Net change in unrealized appreciation/(depreciation)

      1,295       1,962          6,358       6,049  

Net increase (decrease) in net assets resulting from operations

      4,793       4,077          9,844       8,553  

Contract Transactions:

            

Contract owners’ net payments

      446       328          699       728  

Annuity payments

      (16 )      (12 )         (58 )      (43 ) 

Surrenders and other (net)

      (1,452 )      (1,422 )         (2,527 )      (3,048 ) 

Transfers from other divisions or sponsor

      11,087       4,972          26,712       8,538  

Transfers to other divisions or sponsor

      (12,458 )      (5,092 )         (28,541 )      (9,438 ) 
Net increase (decrease) in net assets resulting from contract transactions      (2,393 )      (1,226 )         (3,715 )      (3,263 ) 

Net increase (decrease) in net assets

      2,400       2,851          6,129       5,290  

Net Assets:

            

Beginning of period

      17,379       14,528          33,538       28,248  

End of period

    $ 19,779     $ 17,379        $ 39,667     $ 33,538  
                   

Units issued during the period

      3,901       1,968          4,306       1,697  

Units redeemed during the period

      (4,761 )      (2,218 )         (4,842 )      (2,266 ) 

Net units issued (redeemed) during period

      (860 )      (250 )         (536 )      (569 ) 
                   
     Large Cap Core Stock Division            Large Cap Blend Division  
     Year Ended     Year Ended            Year Ended     Year Ended  
     December 31,     December 31,            December 31,     December 31,  
     2020     2019            2020     2019  

Operations:

            

Net investment income (loss)

    $ 39     $ 47        $ 45     $ 1  

Net realized gains (losses)

      (19 )      437          45       118  

Net change in unrealized appreciation/(depreciation)

      1,889       1,792          24       87  

Net increase (decrease) in net assets resulting from operations

      1,909       2,276          114       206  

Contract Transactions:

            

Contract owners’ net payments

      371       157          27       19  

Annuity payments

      (9 )      (17 )         (3 )      (3 ) 

Surrenders and other (net)

      (2,494 )      (544 )         (57 )      (81 ) 

Transfers from other divisions or sponsor

      7,150       6,089          533       426  

Transfers to other divisions or sponsor

      (6,644 )      (5,268 )         (543 )      (349 ) 
Net increase (decrease) in net assets resulting from contract transactions      (1,626 )      417          (43 )      12  

Net increase (decrease) in net assets

      283       2,693          71       218  

Net Assets:

            

Beginning of period

      10,100       7,407          1,106       888  

End of period

    $ 10,383     $ 10,100        $ 1,177     $ 1,106  
                   

Units issued during the period

      3,435       3,070          335       263  

Units redeemed during the period

      (3,967 )      (2,734 )         (356 )      (255 ) 

Net units issued (redeemed) during period

      (532 )      336          (21 )      8  
                   

 

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

 

F-12

Statements of Changes in Net Assets

NORTHWESTERN MUTUAL VARIABLE ANNUITY ACCOUNT A

(in thousands)

 

     Index 500 Stock Division            Large Company Value Division  
     Year Ended     Year Ended            Year Ended     Year Ended  
     December 31,     December 31,            December 31,     December 31,  
     2020     2019            2020     2019  

Operations:

            

Net investment income (loss)

    $ 1,326     $ 1,185        $ 144     $ 167  

Net realized gains (losses)

      8,964       6,790          (59 )      632  

Net change in unrealized appreciation/(depreciation)

      10,842       21,826          33       1,422  

Net increase (decrease) in net assets resulting from operations

      21,132       29,801          118       2,221  

Contract Transactions:

            

Contract owners’ net payments

      4,300       4,045          240       160  

Annuity payments

      (215 )      (204 )         (18 )      (20 ) 

Surrenders and other (net)

      (11,265 )      (10,814 )         (634 )      (430 ) 

Transfers from other divisions or sponsor

      84,275       35,294          5,798       2,802  

Transfers to other divisions or sponsor

      (83,899 )      (28,436 )         (5,701 )      (2,983 ) 
Net increase (decrease) in net assets resulting from contract transactions      (6,804 )      (115 )         (315 )      (471 ) 

Net increase (decrease) in net assets

      14,328       29,686          (197 )      1,750  

Net Assets:

            

Beginning of period

      127,120       97,434          10,059       8,309  

End of period

    $ 141,448     $ 127,120        $ 9,862     $ 10,059  
                   

Units issued during the period

      30,779       12,031          3,911       2,048  

Units redeemed during the period

      (32,007 )      (10,883 )         (4,085 )      (2,297 ) 

Net units issued (redeemed) during period

      (1,228 )      1,148          (174 )      (249 ) 
                   
     Domestic Equity Division            Equity Income Division  
     Year Ended     Year Ended            Year Ended     Year Ended  
     December 31,     December 31,            December 31,     December 31,  
     2020     2019            2020     2019  

Operations:

            

Net investment income (loss)

    $ 446     $ 391        $ 1,282     $ 620  

Net realized gains (losses)

      1,588       2,299          882       2,492  

Net change in unrealized appreciation/(depreciation)

      (1,876 )      2,718          (1,567 )      4,594  

Net increase (decrease) in net assets resulting from operations

      158       5,408          597       7,706  

Contract Transactions:

            

Contract owners’ net payments

      1,065       1,301          510       702  

Annuity payments

      (24 )      (25 )         (30 )      (31 ) 

Surrenders and other (net)

      (2,737 )      (2,958 )         (2,053 )      (3,696 ) 

Transfers from other divisions or sponsor

      21,645       8,914          21,445       9,603  

Transfers to other divisions or sponsor

      (19,954 )      (7,815 )         (20,878 )      (10,003 ) 
Net increase (decrease) in net assets resulting from contract transactions      (5 )      (583 )         (1,006 )      (3,425 ) 

Net increase (decrease) in net assets

      153       4,825          (409 )      4,281  

Net Assets:

            

Beginning of period

      31,792       26,967          35,050       30,769  

End of period

    $ 31,945     $ 31,792        $ 34,641     $ 35,050  
                   

Units issued during the period

      8,815       3,886          7,808       3,154  

Units redeemed during the period

      (8,806 )      (4,086 )         (7,992 )      (4,167 ) 

Net units issued (redeemed) during period

      9       (200 )         (184 )      (1,013 ) 
                   

 

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

 

F-13

Statements of Changes in Net Assets

NORTHWESTERN MUTUAL VARIABLE ANNUITY ACCOUNT A

(in thousands)

 

     Mid Cap Growth Stock Division            Index 400 Stock Division  
     Year Ended     Year Ended            Year Ended     Year Ended  
     December 31,     December 31,            December 31,     December 31,  
     2020     2019            2020     2019  

Operations:

            

Net investment income (loss)

    $ (140 )    $ (171 )       $ 343     $ 253  

Net realized gains (losses)

      923       1,035          1,530       2,769  

Net change in unrealized appreciation/(depreciation)

      4,149       4,990          4,736       4,762  

Net increase (decrease) in net assets resulting from operations

      4,932       5,854          6,609       7,784  

Contract Transactions:

            

Contract owners’ net payments

      345       1,384          1,170       1,380  

Annuity payments

      (11 )      (14 )         (45 )      (47 ) 

Surrenders and other (net)

      (1,103 )      (4,496 )         (3,391 )      (3,500 ) 

Transfers from other divisions or sponsor

      7,645       3,540          29,986       13,883  

Transfers to other divisions or sponsor

      (7,597 )      (4,074 )         (25,515 )      (11,669 ) 
Net increase (decrease) in net assets resulting from contract transactions      (721 )      (3,660 )         2,205       47  

Net increase (decrease) in net assets

      4,211       2,194          8,814       7,831  

Net Assets:

            

Beginning of period

      21,094       18,900          38,436       30,605  

End of period

    $ 25,305     $ 21,094        $ 47,250     $ 38,436  
                   

Units issued during the period

      3,475       1,391          7,689       3,467  

Units redeemed during the period

      (3,431 )      (1,876 )         (6,992 )      (3,435 ) 

Net units issued (redeemed) during period

      44       (485 )         697       32  
                   
     Mid Cap Value Division           

Small Cap Growth Stock

Division

  
     Year Ended     Year Ended            Year Ended     Year Ended  
     December 31,     December 31,            December 31,     December 31,  
     2020     2019            2020     2019  

Operations:

            

Net investment income (loss)

    $ 224     $ 185        $ (66 )    $ (68 ) 

Net realized gains (losses)

      (349 )      1,398          857       1,740  

Net change in unrealized appreciation/(depreciation)

      627       2,535          2,535       995  

Net increase (decrease) in net assets resulting from operations

      502       4,118          3,326       2,667  

Contract Transactions:

            

Contract owners’ net payments

      593       633          343       365  

Annuity payments

      (14 )      (15 )         (6 )      (6 ) 

Surrenders and other (net)

      (1,363 )      (1,864 )         (948 )      (922 ) 

Transfers from other divisions or sponsor

      13,128       6,710          6,569       3,931  

Transfers to other divisions or sponsor

      (12,247 )      (5,901 )         (6,199 )      (3,899 ) 
Net increase (decrease) in net assets resulting from contract transactions      97       (437 )         (241 )      (531 ) 

Net increase (decrease) in net assets

      599       3,681          3,085       2,136  

Net Assets:

            

Beginning of period

      18,145       14,464          9,964       7,828  

End of period

    $ 18,744     $ 18,145        $ 13,049     $ 9,964  
                   

Units issued during the period

      3,860       1,984          2,063       1,165  

Units redeemed during the period

      (3,791 )      (2,091 )         (1,983 )      (1,212 ) 

Net units issued (redeemed) during period

      69       (107 )         80       (47 ) 
                   

 

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

 

F-14

Statements of Changes in Net Assets

NORTHWESTERN MUTUAL VARIABLE ANNUITY ACCOUNT A

(in thousands)

 

     Index 600 Stock Division            Small Cap Value Division  
     Year Ended     Year Ended            Year Ended     Year Ended  
     December 31,     December 31,            December 31,     December 31,  
     2020     2019            2020     2019  

Operations:

            

Net investment income (loss)

    $ 229     $ (39 )       $ (5 )    $ (14 ) 

Net realized gains (losses)

      657       1,312          231       1,861  

Net change in unrealized appreciation/(depreciation)

      1,950       1,849          1,260       929  

Net increase (decrease) in net assets resulting from operations

      2,836       3,122          1,486       2,776  

Contract Transactions:

            

Contract owners’ net payments

      640       674          266       240  

Annuity payments

      (14 )      (15 )         (15 )      (16 ) 

Surrenders and other (net)

      (1,412 )      (1,466 )         (1,253 )      (1,486 ) 

Transfers from other divisions or sponsor

      15,068       6,021          8,788       4,516  

Transfers to other divisions or sponsor

      (12,279 )      (5,099 )         (8,210 )      (4,577 ) 
Net increase (decrease) in net assets resulting from contract transactions      2,003       115          (424 )      (1,323 ) 

Net increase (decrease) in net assets

      4,839       3,237          1,062       1,453  

Net Assets:

            

Beginning of period

      17,405       14,168          12,867       11,414  

End of period

    $ 22,244     $ 17,405        $ 13,929     $ 12,867  
                   

Units issued during the period

      7,935       3,044          2,497       1,156  

Units redeemed during the period

      (6,892 )      (2,994 )         (2,522 )      (1,460 ) 

Net units issued (redeemed) during period

      1,043       50          (25 )      (304 ) 
                   
     International Growth Division           

Research International Core

Division

  
     Year Ended     Year Ended            Year Ended     Year Ended  
     December 31,     December 31,            December 31,     December 31,  
     2020     2019            2020     2019  

Operations:

            

Net investment income (loss)

    $ 458     $ 257        $ 568     $ 381  

Net realized gains (losses)

      1,592       1,088          799       1,290  

Net change in unrealized appreciation/(depreciation)

      4,535       7,942          2,610       5,523  

Net increase (decrease) in net assets resulting from operations

      6,585       9,287          3,977       7,194  

Contract Transactions:

            

Contract owners’ net payments

      1,179       1,219          1,155       985  

Annuity payments

      (21 )      (19 )         (45 )      (43 ) 

Surrenders and other (net)

      (3,303 )      (3,149 )         (3,403 )      (2,551 ) 

Transfers from other divisions or sponsor

      31,210       11,540          26,617       12,999  

Transfers to other divisions or sponsor

      (29,275 )      (10,227 )         (25,533 )      (9,483 ) 
Net increase (decrease) in net assets resulting from contract transactions      (210 )      (636 )         (1,209 )      1,907  

Net increase (decrease) in net assets

      6,375       8,651          2,768       9,101  

Net Assets:

            

Beginning of period

      35,942       27,291          34,500       25,399  

End of period

    $ 42,317     $ 35,942        $ 37,268     $ 34,500  
                   

Units issued during the period

      13,420       5,727          23,764       11,844  

Units redeemed during the period

      (13,404 )      (5,998 )         (24,857 )      (10,305 ) 

Net units issued (redeemed) during period

      16       (271 )         (1,093 )      1,539  
                   

 

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

 

F-15

Statements of Changes in Net Assets

NORTHWESTERN MUTUAL VARIABLE ANNUITY ACCOUNT A

(in thousands)

 

     International Equity Division           

Emerging Markets Equity

Division

  
     Year Ended     Year Ended            Year Ended     Year Ended  
     December 31,     December 31,            December 31,     December 31,  
     2020     2019            2020     2019  

Operations:

            

Net investment income (loss)

    $ 1,999     $ 1,316        $ 1,129     $ 398  

Net realized gains (losses)

      (2,220 )      2,843          567       563  

Net change in unrealized appreciation/(depreciation)

      (122 )      3,144          15,672       9,183  

Net increase (decrease) in net assets resulting from operations

      (343 )      7,303          17,368       10,144  

Contract Transactions:

            

Contract owners’ net payments

      2,464       2,523          1,668       1,939  

Annuity payments

      (55 )      (62 )         (62 )      (62 ) 

Surrenders and other (net)

      (5,029 )      (6,666 )         (5,368 )      (5,188 ) 

Transfers from other divisions or sponsor

      54,353       22,924          51,127       17,381  

Transfers to other divisions or sponsor

      (46,886 )      (20,672 )         (47,278 )      (14,245 ) 
Net increase (decrease) in net assets resulting from contract transactions      4,847       (1,953 )         87       (175 ) 

Net increase (decrease) in net assets

      4,504       5,350          17,455       9,969  

Net Assets:

            

Beginning of period

      66,838       61,488          60,310       50,341  

End of period

    $ 71,342     $ 66,838        $ 77,765     $ 60,310  
                   

Units issued during the period

      32,239       10,905          52,119       17,789  

Units redeemed during the period

      (28,945 )      (11,355 )         (51,054 )      (17,852 ) 

Net units issued (redeemed) during period

      3,294       (450 )         1,065       (63 ) 
                   
    

Government Money Market

Division

            Short-Term Bond Division  
     Year Ended     Year Ended            Year Ended     Year Ended  
     December 31,     December 31,            December 31,     December 31,  
     2020     2019            2020     2019  

Operations:

            

Net investment income (loss)

    $ (83 )    $ 341        $ 817     $ 607  

Net realized gains (losses)

      -       -          198       87  

Net change in unrealized appreciation/(depreciation)

      -       -          684       786  

Net increase (decrease) in net assets resulting from operations

      (83 )      341          1,699       1,480  

Contract Transactions:

            

Contract owners’ net payments

      62,225       49,559          962       1,133  

Annuity payments

      (27 )      (28 )         (44 )      (44 ) 

Surrenders and other (net)

      (10,517 )      (5,380 )         (4,382 )      (3,616 ) 

Transfers from other divisions or sponsor

      30,895       8,663          41,503       12,442  

Transfers to other divisions or sponsor

      (79,481 )      (54,656 )         (32,705 )      (8,430 ) 
Net increase (decrease) in net assets resulting from contract transactions      3,095       (1,842 )         5,334       1,485  

Net increase (decrease) in net assets

      3,012       (1,501 )         7,033       2,965  

Net Assets:

            

Beginning of period

      24,248       25,749          39,862       36,897  

End of period

    $ 27,260     $ 24,248        $ 46,895     $ 39,862  
                   

Units issued during the period

      74,252       44,929          33,490       11,533  

Units redeemed during the period

      (72,549 )      (46,307 )         (29,293 )      (10,269 ) 

Net units issued (redeemed) during period

      1,703       (1,378 )         4,197       1,264  
                   

 

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

 

F-16

Statements of Changes in Net Assets

NORTHWESTERN MUTUAL VARIABLE ANNUITY ACCOUNT A

(in thousands)

 

     Select Bond Division            Long-Term U.S. Government
Bond Division		  
     Year Ended     Year Ended            Year Ended     Year Ended  
     December 31,     December 31,            December 31,     December 31,  
     2020     2019            2020     2019  

Operations:

            

Net investment income (loss)

    $ 2,983     $ 2,919        $ 186     $ 227  

Net realized gains (losses)

      1,657       (98 )         1,681       18  

Net change in unrealized appreciation/(depreciation)

      5,433       6,929          323       1,218  

Net increase (decrease) in net assets resulting from operations

      10,073       9,750          2,190       1,463  

Contract Transactions:

            

Contract owners’ net payments

      4,084       4,788          748       386  

Annuity payments

      (255 )      (252 )         (7 )      (6 ) 

Surrenders and other (net)

      (13,175 )      (13,332 )         (1,593 )      (1,634 ) 

Transfers from other divisions or sponsor

      109,885       44,269          17,629       4,173  

Transfers to other divisions or sponsor

      (104,400 )      (35,305 )         (15,478 )      (2,990 ) 
Net increase (decrease) in net assets resulting from contract transactions      (3,861 )      168          1,299       (71 ) 

Net increase (decrease) in net assets

      6,212       9,918          3,489       1,392  

Net Assets:

            

Beginning of period

      127,879       117,961          13,596       12,204  

End of period

    $ 134,091     $ 127,879        $ 17,085     $ 13,596  
                   

Units issued during the period

      41,055       16,333          7,557       2,271  

Units redeemed during the period

      (42,478 )      (15,502 )         (7,032 )      (2,340 ) 

Net units issued (redeemed) during period

      (1,423 )      831          525       (69 ) 
                   
     Inflation Protection Division            High Yield Bond Division  
     Year Ended     Year Ended            Year Ended     Year Ended  
     December 31,     December 31,            December 31,     December 31,  
     2020     2019            2020     2019  

Operations:

            

Net investment income (loss)

    $ 525     $ 710        $ 2,372     $ 2,304  

Net realized gains (losses)

      2       (264 )         (296 )      (135 ) 

Net change in unrealized appreciation/(depreciation)

      2,319       2,201          452       3,831  

Net increase (decrease) in net assets resulting from operations

      2,846       2,647          2,528       6,000  

Contract Transactions:

            

Contract owners’ net payments

      704       963          1,225       1,193  

Annuity payments

      (45 )      (44 )         (53 )      (55 ) 

Surrenders and other (net)

      (2,521 )      (3,486 )         (4,763 )      (4,068 ) 

Transfers from other divisions or sponsor

      25,357       7,279          28,624       13,612  

Transfers to other divisions or sponsor

      (22,830 )      (5,837 )         (28,138 )      (11,475 ) 
Net increase (decrease) in net assets resulting from contract transactions      665       (1,125 )         (3,105 )      (793 ) 

Net increase (decrease) in net assets

      3,511       1,522          (577 )      5,207  

Net Assets:

            

Beginning of period

      32,729       31,207          46,841       41,634  

End of period

    $ 36,240     $ 32,729        $ 46,264     $ 46,841  
                   

Units issued during the period

      18,005       6,069          9,470       4,468  

Units redeemed during the period

      (17,658 )      (6,803 )         (10,368 )      (4,677 ) 

Net units issued (redeemed) during period

      347       (734 )         (898 )      (209 ) 
                   

 

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

 

F-17

Statements of Changes in Net Assets

NORTHWESTERN MUTUAL VARIABLE ANNUITY ACCOUNT A

(in thousands)

 

     Multi-Sector Bond Division            Balanced Division  
     Year Ended     Year Ended            Year Ended     Year Ended  
     December 31,     December 31,            December 31,     December 31,  
     2020     2019            2020     2019  

Operations:

            

Net investment income (loss)

    $ 3,513     $ 4,047        $ 1,006     $ 949  

Net realized gains (losses)

      (201 )      99          3,292       5,993  

Net change in unrealized appreciation/(depreciation)

      1,252       7,891          4,459       5,890  

Net increase (decrease) in net assets resulting from operations

      4,564       12,037          8,757       12,832  

Contract Transactions:

            

Contract owners’ net payments

      2,215       2,946          1,398       2,019  

Annuity payments

      (99 )      (99 )         (549 )      (565 ) 

Surrenders and other (net)

      (8,866 )      (7,833 )         (4,743 )      (10,576 ) 

Transfers from other divisions or sponsor

      66,723       28,539          2,457       3,092  

Transfers to other divisions or sponsor

      (64,896 )      (22,530 )         (3,092 )      (4,143 ) 
Net increase (decrease) in net assets resulting from contract transactions      (4,923 )      1,023          (4,529 )      (10,173 ) 

Net increase (decrease) in net assets

      (359 )      13,060          4,228       2,659  

Net Assets:

            

Beginning of period

      101,563       88,503          83,129       80,470  

End of period

    $ 101,204     $ 101,563        $ 87,357     $ 83,129  
                   

Units issued during the period

      37,472       17,263          509       692  

Units redeemed during the period

      (40,321 )      (16,714 )         (947 )      (1,394 ) 

Net units issued (redeemed) during period

      (2,849 )      549          (438 )      (702 ) 
                   
     Asset Allocation Division            Fidelity VIP Mid Cap Division  
     Year Ended     Year Ended            Year Ended     Year Ended  
     December 31,     December 31,            December 31,     December 31,  
     2020     2019            2020     2019  

Operations:

            

Net investment income (loss)

    $ 46     $ 46        $ 19     $ 28  

Net realized gains (losses)

      102       262          (661 )      1,918  

Net change in unrealized appreciation/(depreciation)

      222       417          4,675       2,243  

Net increase (decrease) in net assets resulting from operations

      370       725          4,033       4,189  

Contract Transactions:

            

Contract owners’ net payments

      106       127          374       500  

Annuity payments

      (12 )      (12 )         (26 )      (27 ) 

Surrenders and other (net)

      (208 )      (266 )         (1,653 )      (2,229 ) 

Transfers from other divisions or sponsor

      1,046       898          13,620       5,610  

Transfers to other divisions or sponsor

      (857 )      (788 )         (13,505 )      (5,984 ) 
Net increase (decrease) in net assets resulting from contract transactions      75       (41 )         (1,190 )      (2,130 ) 

Net increase (decrease) in net assets

      445       684          2,843       2,059  

Net Assets:

            

Beginning of period

      4,298       3,614          21,337       19,278  

End of period

    $ 4,743     $ 4,298        $ 24,180     $ 21,337  
                   

Units issued during the period

      466       470          3,238       1,272  

Units redeemed during the period

      (473 )      (482 )         (3,386 )      (1,689 ) 

Net units issued (redeemed) during period

      (7 )      (12 )         (148 )      (417 ) 
                   

 

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

 

F-18

Statements of Changes in Net Assets

NORTHWESTERN MUTUAL VARIABLE ANNUITY ACCOUNT A

(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,  
     2020     2019            2020     2019  

Operations:

            

Net investment income (loss)

    $ (109 )    $ (100 )       $ 18     $ (5 ) 

Net realized gains (losses)

      1,598       5,139          640       1,028  

Net change in unrealized appreciation/(depreciation)

      10,611       5,656          1,414       1,860  

Net increase (decrease) in net assets resulting from operations

      12,100       10,695          2,072       2,883  

Contract Transactions:

            

Contract owners’ net payments

      1,290       1,503          274       509  

Annuity payments

      (43 )      (36 )         (16 )      (15 ) 

Surrenders and other (net)

      (4,202 )      (4,012 )         (769 )      (1,502 ) 

Transfers from other divisions or sponsor

      29,634       10,998          9,089       5,334  

Transfers to other divisions or sponsor

      (33,315 )      (11,245 )         (10,022 )      (5,086 ) 
Net increase (decrease) in net assets resulting from contract transactions      (6,636 )      (2,792 )         (1,444 )      (760 ) 

Net increase (decrease) in net assets

      5,464       7,903          628       2,123  

Net Assets:

            

Beginning of period

      43,557       35,654          13,678       11,555  

End of period

    $ 49,021     $ 43,557        $ 14,306     $ 13,678  
                   

Units issued during the period

      12,484       5,897          4,512       2,812  

Units redeemed during the period

      (14,755 )      (7,094 )         (5,205 )      (3,171 ) 

Net units issued (redeemed) during period

      (2,271 )      (1,197 )         (693 )      (359 ) 
                   
     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,  
     2020     2019            2020     2019  

Operations:

            

Net investment income (loss)

    $ 2     $ 86        $ (24 )    $ (7 ) 

Net realized gains (losses)

      (163 )      (58 )         (125 )      (108 ) 

Net change in unrealized appreciation/(depreciation)

      3,085       3,703          701       982  

Net increase (decrease) in net assets resulting from operations

      2,924       3,731          552       867  

Contract Transactions:

            

Contract owners’ net payments

      74       233          91       91  

Annuity payments

      (18 )      (19 )         (2 )      (2 ) 

Surrenders and other (net)

      (860 )      (3,222 )         (262 )      (525 ) 

Transfers from other divisions or sponsor

      10,299       2,682          2,090       749  

Transfers to other divisions or sponsor

      (11,293 )      (2,911 )         (2,160 )      (927 ) 
Net increase (decrease) in net assets resulting from contract transactions      (1,798 )      (3,237 )         (243 )      (614 ) 

Net increase (decrease) in net assets

      1,126       494          309       253  

Net Assets:

            

Beginning of period

      14,010       13,516          4,357       4,104  

End of period

    $ 15,136     $ 14,010        $ 4,666     $ 4,357  
                   

Units issued during the period

      4,844       1,735          1,004       347  

Units redeemed during the period

      (5,477 )      (3,169 )         (1,065 )      (569 ) 

Net units issued (redeemed) during period

      (633 )      (1,434 )         (61 )      (222 ) 
                   

 

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

 

F-19

Statements of Changes in Net Assets

NORTHWESTERN MUTUAL VARIABLE ANNUITY ACCOUNT A

(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,  
     2020     2019            2020     2019  

Operations:

            

Net investment income (loss)

    $ 142     $ 402        $ 1,021     $ 1,759  

Net realized gains (losses)

      (636 )      148          2,376       757  

Net change in unrealized appreciation/(depreciation)

      1,881       2,787          1,926       3,792  

Net increase (decrease) in net assets resulting from operations

      1,387       3,337          5,323       6,308  

Contract Transactions:

            

Contract owners’ net payments

      234       435          1,335       1,582  

Annuity payments

      (28 )      (31 )         (106 )      (103 ) 

Surrenders and other (net)

      (1,429 )      (2,426 )         (6,196 )      (6,464 ) 

Transfers from other divisions or sponsor

      15,354       4,155          58,176       17,034  

Transfers to other divisions or sponsor

      (14,348 )      (4,436 )         (58,431 )      (15,706 ) 
Net increase (decrease) in net assets resulting from contract transactions      (217 )      (2,303 )         (5,222 )      (3,657 ) 

Net increase (decrease) in net assets

      1,170       1,034          101       2,651  

Net Assets:

            

Beginning of period

      19,330       18,296          75,399       72,748  

End of period

    $ 20,500     $ 19,330        $ 75,500     $ 75,399  
                   

Units issued during the period

      11,760       3,109          24,830       8,705  

Units redeemed during the period

      (11,565 )      (4,476 )         (27,061 )      (10,180 ) 

Net units issued (redeemed) during period

      195       (1,367 )         (2,231 )      (1,475 ) 
                   
    

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,  
     2020     2019            2020     2019  

Operations:

            

Net investment income (loss)

    $ 486     $ 2,206        $ 24     $ 6  

Net realized gains (losses)

      (858 )      469          (7 )      36  

Net change in unrealized appreciation/(depreciation)

      (1,562 )      6,214          118       198  

Net increase (decrease) in net assets resulting from operations

      (1,934 )      8,889          135       240  

Contract Transactions:

            

Contract owners’ net payments

      1,373       1,581          144       41  

Annuity payments

      (52 )      (59 )         -       -  

Surrenders and other (net)

      (3,910 )      (4,484 )         (89 )      (222 ) 

Transfers from other divisions or sponsor

      36,452       14,981          81       141  

Transfers to other divisions or sponsor

      (32,458 )      (14,231 )         (71 )      (3 ) 
Net increase (decrease) in net assets resulting from contract transactions      1,405       (2,212 )         65       (43 ) 

Net increase (decrease) in net assets

      (529 )      6,677          200       197  

Net Assets:

            

Beginning of period

      49,229       42,552          2,379       2,182  

End of period

    $ 48,700     $ 49,229        $ 2,579     $ 2,379  
                   

Units issued during the period

      9,382       3,559          153       124  

Units redeemed during the period

      (8,943 )      (4,004 )         (107 )      (156 ) 

Net units issued (redeemed) during period

      439       (445 )         46       (32 ) 
                   

 

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

 

F-20

Statements of Changes in Net Assets

NORTHWESTERN MUTUAL VARIABLE ANNUITY ACCOUNT A

(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,  
     2020     2019            2020     2019  

Operations:

            

Net investment income (loss)

    $ 1     $ 6        $ 7     $ (2 ) 

Net realized gains (losses)

      (6 )      (7 )         (31 )      38  

Net change in unrealized appreciation/(depreciation)

      106       245          22       124  

Net increase (decrease) in net assets resulting from operations

      101       244          (2 )      160  

Contract Transactions:

            

Contract owners’ net payments

      42       63          24       51  

Annuity payments

      (11 )      (12 )         -       -  

Surrenders and other (net)

      (121 )      (363 )         (117 )      (597 ) 

Transfers from other divisions or sponsor

      118       107          32       550  

Transfers to other divisions or sponsor

      (101 )      (52 )         (345 )      (518 ) 
Net increase (decrease) in net assets resulting from contract transactions      (73 )      (257 )         (406 )      (514 ) 

Net increase (decrease) in net assets

      28       (13 )         (408 )      (354 ) 

Net Assets:

            

Beginning of period

      1,775       1,788          779       1,133  

End of period

    $ 1,803     $ 1,775        $ 371     $ 779  
                   

Units issued during the period

      109       119          57       398  

Units redeemed during the period

      (158 )      (296 )         (329 )      (754 ) 

Net units issued (redeemed) during period

      (49 )      (177 )         (272 )      (356 ) 
                   
    

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,  
     2020     2019            2020     2019  

Operations:

            

Net investment income (loss)

    $ 1     $ (1 )       $ 1,905     $ 185  

Net realized gains (losses)

      3       5          (5,059 )      (2,768 ) 

Net change in unrealized appreciation/(depreciation)

      -       11          2,897       4,821  

Net increase (decrease) in net assets resulting from operations

      4       15          (257 )      2,238  

Contract Transactions:

            

Contract owners’ net payments

      1       4          971       1,492  

Annuity payments

      -       -          (34 )      (40 ) 

Surrenders and other (net)

      (37 )      -          (2,828 )      (3,550 ) 

Transfers from other divisions or sponsor

      1       1          32,297       10,031  

Transfers to other divisions or sponsor

      (1 )      (2 )         (28,430 )      (9,062 ) 
Net increase (decrease) in net assets resulting from contract transactions      (36 )      3          1,976       (1,129 ) 

Net increase (decrease) in net assets

      (32 )      18          1,719       1,109  

Net Assets:

            

Beginning of period

      101       83          37,694       36,585  

End of period

    $ 69     $ 101        $ 39,413     $ 37,694  
                   

Units issued during the period

      2       4          8,894       2,712  

Units redeemed during the period

      (28 )      (2 )         (8,345 )      (2,965 ) 

Net units issued (redeemed) during period

      (26 )      2          549       (253 ) 
                   

 

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

 

F-21

Notes to Financial Statements

 

1.

Organization

Northwestern Mutual Variable Annuity Account A (“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 individual flexible payment variable annuity contracts (“contracts”) for use by self-employed persons and their eligible employees in tax-qualified retirement plans. Three versions of the contract are currently offered: Front Load contracts with a sales charge up to 4.50% of purchase payments; Back Load contracts with a withdrawal charge up to 6.00%; and Fee Based contracts with no sales or withdrawal charges.

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.

 

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, 2020, 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 Contract 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. Certain contracts are eligible to receive contract dividends from Northwestern Mutual. Any contract dividends reinvested in the Account are reflected in Contract owners’ net payments in the accompanying financial statements.

 

  D.

Due to Participants – Upon notification of death of the contract owner or maturity of a contract, 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.

Annuity Reserves – Annuity reserves represent the present value of all future payments on current variable income plans and are represented as annuity reserves in the statements of assets and liabilities. Such reserves are determined by the Actuarial Department of Northwestern Mutual. Annuity reserves are based on published annuity tables with age adjustment and interest based on actual investment experience and assumed investment rates of 3.50% or 5.00%. For those contract holders that elect a fixed income plan option, the values accumulated are transferred out of the Account to the sponsor and all related payouts are funded by Northwestern Mutual.

 

  F.

Taxes – Northwestern Mutual is taxed as a “life insurance company” under the Internal Revenue Code. The operations of the Account are included in Northwestern Mutual’s consolidated income tax return. Under current law, no federal income taxes are payable with respect to the Account. Accordingly, no provision for any such liability has been made.

 

3.

Purchases and Sales of Investments

Purchases and sales of the Funds’ shares for the year ended December 31, 2020 were as follows (amounts in thousands):

 

    Fund Name    Purchases                    Sales  

Growth Stock Division

    $ 5,754         $ 5,347  

Focused Appreciation Division

      6,691           8,872  

Large Cap Core Stock Division

      2,647           3,975  

Large Cap Blend Division

      253           236  

Index 500 Stock Division

      20,415           22,850  

Large Company Value Division

      1,587           1,441  

Domestic Equity Division

      6,897           5,113  

Equity Income Division

      6,109           4,487  

Mid Cap Growth Stock Division

      3,336           3,291  

Index 400 Stock Division

      9,942           5,574  

Mid Cap Value Division

      2,960           2,635  

Small Cap Growth Stock Division

      2,591           2,303  

Index 600 Stock Division

      5,419           2,514  

Small Cap Value Division

      2,690           2,357  

International Growth Division

      7,079           6,656  

Research International Core Division

      7,290           7,356  

International Equity Division

      16,050           9,220  

Emerging Markets Equity Division

      9,955           8,712  

Government Money Market Division

      81,230           78,218  

 

F-22

Notes to Financial Statements

 

    Fund Name    Purchases                    Sales  

Short-Term Bond Division

    $ 14,911         $ 8,847  

Select Bond Division

      26,183           26,334  

Long-Term U.S. Government Bond Division

      8,848           6,314  

Inflation Protection Bond Division

      6,830           5,662  

High Yield Bond Division

      7,556           8,253  

Multi-Sector Bond Division

      16,527           17,833  

Balanced Division

      7,402           8,396  

Asset Allocation Division

      1,216           931  

Fidelity VIP Mid Cap Division

      2,683           3,873  

Fidelity VIP Contrafund Division

      4,681           11,207  

AMT Sustainable Equity Division

      1,469           2,376  

U.S. Strategic Equity Division

      538           2,212  

U.S. Small Cap Equity Division

      569           750  

International Developed Markets Division

      3,309           3,351  

Strategic Bond Division

      12,252           13,984  

Global Real Estate Securities Division

      8,117           6,222  

LifePoints Moderate Strategy Division

      273           183  

LifePoints Balanced Strategy Division

      194           241  

LifePoints Growth Strategy Division

      109           495  

LifePoints Equity Growth Strategy Division

      8           39  

Credit Suisse Trust Commodity Return Strategy Division

      9,789           5,891  

 

4.

Expenses and Related Party Transactions

A deduction for mortality and expense risks is determined daily and paid to Northwestern Mutual as compensation for assuming the risk that annuity payments will continue for longer periods than anticipated because the annuitants as a group live longer than expected, and the risk that the charges made by Northwestern Mutual may be insufficient to cover the actual costs incurred in connection with the contracts.

For contracts issued prior to December 17, 1981, the deduction is at an annual rate of 0.75% of the net assets of each Division attributable to these contracts and is paid to Northwestern Mutual. For these contracts, the rate may be increased or decreased by the Board of Trustees of Northwestern Mutual not to exceed a 1.00% annual rate.

For contracts issued after December 16, 1981 and prior to March 31, 1995, the deduction is at an annual rate of 1.25% of the net assets of each Division attributable to these contracts and is paid to Northwestern Mutual. For these contracts, the rate may be increased or decreased by the Board of Trustees of Northwestern Mutual not to exceed a 1.50% annual rate.

For contracts issued on or after March 31, 1995 and prior to March 31, 2000, for the Front Load version and the Back Load version, the deduction for mortality and expense risks on accumulation units is determined daily at annual rates of 0.40% and 1.25%, respectively, of the net assets of each Division attributable to these contracts and is paid to Northwestern Mutual. For these contracts, the rates may be increased or decreased by the Board of Trustees of Northwestern Mutual not to exceed a maximum annual rate of 0.75% and 1.50%, respectively.

For contracts issued on or after March 31, 2000, for the Front Load version and the Back Load version, the deduction for mortality and expense risks is determined daily at annual rates of 0.50% and 1.25%, respectively, of the net assets of each Division attributable to these contracts and is paid to Northwestern Mutual. Under the terms of the Back Load version of the contract, the net assets may be subject to the deduction for the Front Load version of the contract after the withdrawal charge period. Rates may be increased or decreased by the Board of Trustees of Northwestern Mutual not to exceed a maximum annual rate of 0.75% and 1.50% for the Front Load version and the Back Load version, respectively.

For Fee Based contracts issued on or after October 16, 2006, the deduction for mortality and expense risks is determined daily at an annual rate of 0.35% of the net assets of each Division attributable to these contracts and is paid to Northwestern Mutual. For these contracts, the rate may be increased by the Board of Trustees of Northwestern Mutual not to exceed a maximum annual rate of 0.75%.

 

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

Notes to Financial Statements

 

6. Financial Highlights

 

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

Growth Stock Division

 

                                 

2020

      4,162      $ 3.429793      to    $ 10.738147      $ 19,779           0.67 %    0.35% to 1.25%      33.30     %    to      34.50       %  

2019

      5,022        2.553848      to      7.987788        17,379           0.68     0.35 to 1.25      28.08        to      29.23    

2018

      5,272        1.979137      to      6.191870        14,528           0.72     0.35 to 1.25      0.00     (2)     to      0.90    

2017

      5,248        1.964404      to      6.161139        15,045           0.85     0.35 to 1.25      22.73        to      23.83    

2016

      6,270        1.588718      to      4.995165        14,223                 0.84     0.35 to 1.25      1.20          to      2.11          

Focused Appreciation Division

 

                                 

2020

      4,700      $ 7.321217      to    $ 8.580705      $ 39,667           0.54 %    0.35% to 1.25%      30.90     %    to      32.08       %  

2019

      5,236        5.593023      to      6.496505        33,538           0.65     0.35 to 1.25      30.33        to      31.51    

2018

      5,805        4.291278      to      4.939933        28,248           0.49     0.35 to 1.25      (3.55 )       to      (2.68 )   

2017

      6,453        4.449605      to      5.076121        32,124           0.72     0.35 to 1.25      31.97        to      33.16    

2016

      7,522        3.371663      to      3.812141        27,940                 0.24     0.35 to 1.25      4.56          to      5.50          

Large Cap Core Stock Division

 

                                 

2020

      2,968      $ 2.552890      to    $ 6.612251      $ 10,383           1.23 %    0.35% to 1.25%      21.21     %    to      22.31       %  

2019

      3,500        2.090360      to      5.408905        10,100           1.24     0.35 to 1.25      29.56        to      30.73    

2018

      3,164        1.601352      to      4.146023        7,407           1.52     0.35 to 1.25      (7.20 )       to      (6.37 )   

2017

      3,190        1.712864      to      4.445804        8,074           1.78     0.35 to 1.25      23.33        to      24.43    

2016

      2,939        1.378587      to      3.587029        6,265                 2.07     0.35 to 1.25      6.24          to      7.19          

Large Cap Blend Division

 

                                 

2020

      564      $ 1.971217      to    $ 2.228920      $ 1,177           5.26 %    0.35% to 1.25%      8.68     %    to      9.67       %  

2019

      585        1.813711      to      2.032451        1,106           1.14     0.35 to 1.25      22.43        to      23.54    

2018

      577        1.481405      to      1.645237        888           0.77     0.35 to 1.25      (5.20 )       to      (4.34 )   

2017

      665        1.562708      to      1.719920        1,088           0.90     0.35 to 1.25      17.55        to      18.61    

2016

      707        1.329366      to      1.450071        983                 1.04     0.35 to 1.25      12.57          to      13.59          

Index 500 Stock Division

 

                                 

2020

      32,340      $ 3.296759      to    $ 16.126492      $ 141,448           1.65 %    0.35% to 1.25%      16.71     %    to      17.77       %  

2019

      33,568        2.803577      to      13.748209        127,120           1.62     0.35 to 1.25      29.55        to      30.72    

2018

      32,420        2.147933      to      10.559216        97,434           1.65     0.35 to 1.25      (5.76 )       to      (4.91 )   

2017

      29,930        2.262276      to      11.149101        99,073           1.75     0.35 to 1.25      20.01        to      21.09    

2016

      28,498        1.871001      to      9.243657        84,331                 1.85     0.35 to 1.25      10.35          to      11.34          

Large Company Value Division

 

                                 

2020

      5,051      $ 1.737445      to    $ 1.964770      $ 9,862           2.16 %    0.35% to 1.25%      1.36     %    to      2.28       %  

2019

      5,225        1.714135      to      1.921039        10,059           2.24     0.35 to 1.25      26.08        to      27.21    

2018

      5,474        1.359607      to      1.510098        8,309           1.75     0.35 to 1.25      (9.07 )       to      (8.25 )   

2017

      5,560        1.495275      to      1.645847        9,231           1.97     0.35 to 1.25      9.72        to      10.71    

2016

      5,975        1.362750      to      1.486618        9,008                 1.71     0.35 to 1.25      13.93          to      14.96          

Domestic Equity Division

 

                                 

2020

      9,875      $ 2.782499      to    $ 3.312992      $ 31,945           2.19 %    0.35% to 1.25%      (0.52 )    %    to      0.38       %  

2019

      9,866        2.797166      to      3.300597        31,792           1.83     0.35 to 1.25      19.27        to      20.35    

2018

      10,066        2.345210      to      2.742575        26,967           1.76     0.35 to 1.25      (4.02 )       to      (3.15 )   

2017

      10,121        2.443559      to      2.831891        27,984           1.62     0.35 to 1.25      12.37        to      13.38    

2016

      10,460        2.174598      to      2.497727        25,497                 1.85     0.35 to 1.25      13.55          to      14.58          

Equity Income Division

 

                                 

2020

      9,048      $ 3.284293      to    $ 3.849405      $ 34,641           4.82 %    0.35% to 1.25%      (0.06 )    %    to      0.85       %  

2019

      9,232        3.286138      to      3.817039        35,050           2.29     0.35 to 1.25      25.04        to      26.17    

2018

      10,245        2.627977      to      3.025261        30,769           2.01     0.35 to 1.25      (10.47 )       to      (9.67 )   

2017

      11,638        2.935634      to      3.349027        38,655           2.19     0.35 to 1.25      14.81        to      15.84    

2016

      12,824        2.557036      to      2.891127        36,676                 2.00     0.35 to 1.25      17.69          to      18.75          

(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

Notes to Financial Statements

 

6. Financial Highlights

 

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

Mid Cap Growth Stock Division

                           

2020

      4,101      $ 2.599080      to    $ 16.351983      $ 25,305           0.29 %    0.35% to 1.25%      23.85     %    to      24.97       %  

2019

      4,057        2.082863      to      13.136859        21,094           0.18     0.35 to 1.25      31.36        to      32.55    

2018

      4,542        1.573756      to      9.950519        18,900           0.13     0.35 to 1.25      (8.53 )       to      (7.70 )   

2017

      4,478        1.707717      to      10.824550        21,508           0.24     0.35 to 1.25      18.80        to      19.87    

2016

      5,120        1.426767      to      9.066134        21,175                 0.18     0.35 to 1.25      (0.42 )         to      0.48          

Index 400 Stock Division

 

                                 

2020

      8,261      $ 5.326092      to    $ 6.891049      $ 47,250           1.39 %    0.35% to 1.25%      11.96     %    to      12.97       %  

2019

      7,564        4.721555      to      6.102847        38,436           1.23     0.35 to 1.25      24.32        to      25.44    

2018

      7,532        3.769499      to      4.867482        30,605           1.13     0.35 to 1.25      (12.43 )       to      (11.64 )   

2017

      7,237        4.272733      to      5.511839        33,374           1.08     0.35 to 1.25      14.52        to      15.55    

2016

      6,740        3.703134      to      4.772358        27,067                 1.14     0.35 to 1.25      18.89          to      19.96          

Mid Cap Value Division

 

                                 

2020

      4,037      $ 4.017711      to    $ 4.708921      $ 18,744           1.90 %    0.35% to 1.25%      0.40     %    to      1.31       %  

2019

      3,968        4.001596      to      4.647975        18,145           1.61     0.35 to 1.25      27.60        to      28.75    

2018

      4,075        3.135936      to      3.609939        14,464           1.59     0.35 to 1.25      (13.93 )       to      (13.16 )   

2017

      4,410        3.643868      to      4.156918        18,031           1.44     0.35 to 1.25      10.43        to      11.42    

2016

      4,734        3.299810      to      3.730873        17,407                 1.68     0.35 to 1.25      21.70          to      22.80          

Small Cap Growth Stock Division

                           

2020

      2,409      $ 4.290772      to    $ 9.546381      $ 13,049           0.11 %    0.35% to 1.25%      31.81     %    to      33.00       %  

2019

      2,329        3.230896      to      7.181178        9,964           0.10     0.35 to 1.25      34.01        to      35.22    

2018

      2,376        2.392969      to      5.313519        7,828           0.00     0.35 to 1.25      (12.80 )       to      (12.02 )   

2017

      2,514        2.720661      to      6.042354        9,705           0.10     0.35 to 1.25      20.10        to      21.18    

2016

      2,691        2.245084      to      4.988658        8,720                 0.22     0.35 to 1.25      10.86          to      11.86          

Index 600 Stock Division

 

                                 

2020

      7,739      $ 2.561959      to    $ 2.897115      $ 22,244           1.83 %    0.35% to 1.25%      9.55     %    to      10.54       %  

2019

      6,696        2.338584      to      2.620836        17,405           0.25     0.35 to 1.25      20.92        to      22.01    

2018

      6,646        1.934012      to      2.148073        14,168           1.38     0.35 to 1.25      (9.91 )       to      (9.10 )   

2017

      6,250        2.146980      to      2.363154        14,643           1.89     0.35 to 1.25      11.53        to      12.53    

2016

      5,743        1.925007      to      2.099948        11,982                 0.57     0.35 to 1.25      24.56          to      25.68          

Small Cap Value Division

 

                                 

2020

      2,671      $ 4.492731      to    $ 5.349125      $ 13,929           0.52 %    0.35% to 1.25%      7.93     %    to      8.90       %  

2019

      2,696        4.162762      to      4.911849        12,867           0.47     0.35 to 1.25      24.33        to      25.45    

2018

      3,000        3.348176      to      3.915385        11,414           0.51     0.35 to 1.25      (13.81 )       to      (13.03 )   

2017

      3,523        3.885050      to      4.502330        15,441           0.77     0.35 to 1.25      10.27        to      11.26    

2016

      3,948        3.523164      to      4.046577        15,533                 0.92     0.35 to 1.25      30.75          to      31.93          

International Growth Division

 

                                 

2020

      13,452      $ 2.676266      to    $ 3.186443      $ 42,317           1.62 %    0.35% to 1.25%      16.44     %    to      17.50       %  

2019

      13,436        2.298310      to      2.711910        35,942           1.25     0.35 to 1.25      33.13        to      34.33    

2018

      13,707        1.726341      to      2.018813        27,291           1.41     0.35 to 1.25      (12.38 )       to      (11.59 )   

2017

      13,109        1.970410      to      2.283495        29,487           1.28     0.35 to 1.25      28.42        to      29.58    

2016

      12,915        1.534322      to      1.762282        22,350                 1.15     0.35 to 1.25      (4.60 )         to      (3.74 )         

Research International Core Division

 

                                 

2020

      24,162      $ 1.355712      to    $ 1.533174      $ 37,268           2.14 %    0.35% to 1.25%      12.05     %    to      13.07       %  

2019

      25,255        1.209890      to      1.356007        34,500           1.68     0.35 to 1.25      26.66        to      27.81    

2018

      23,716        0.955206      to      1.060996        25,399           1.70     0.35 to 1.25      (14.73 )       to      (13.97 )   

2017

      22,002        1.120355      to      1.233245        27,463           1.68     0.35 to 1.25      26.62        to      27.76    

2016

      21,237        0.884785      to      0.965259        20,837                 1.77     0.35 to 1.25      (2.35 )         to      (1.47 )         

(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-25

Notes to Financial Statements

 

6. Financial Highlights

 

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

International Equity Division

                           

2020

      31,481      $ 2.053572      to    $ 4.590852      $ 71,342           3.58 %    0.35% to 1.25%      (3.92 )    %    to      (3.05 )      %  

2019

      28,187        2.121385      to      4.754268        66,838           2.53     0.35 to 1.25      11.20        to      12.20    

2018

      28,637        1.893505      to      4.254093        61,488           2.53     0.35 to 1.25      (16.46 )       to      (15.70 )   

2017

      27,506        2.249645      to      5.066863        71,426           2.33     0.35 to 1.25      20.78        to      21.87    

2016

      26,617        1.848705      to      4.174130        58,052                 2.14     0.35 to 1.25      1.62          to      2.53          

Emerging Markets Equity Division

 

                        

2020

      49,847      $ 1.375728      to    $ 1.555698      $ 77,765           2.28 %    0.35% to 1.25%      25.28     %    to      26.41       %  

2019

      48,782        1.098154      to      1.230663        60,310           1.12     0.35 to 1.25      19.10        to      20.18    

2018

      48,845        0.922016      to      1.024040        50,341           1.34     0.35 to 1.25      (14.83 )       to      (14.06 )   

2017

      45,371        1.082576      to      1.191540        54,374           0.90     0.35 to 1.25      26.26        to      27.39    

2016

      42,727        0.857413      to      0.935322        40,243                 0.73     0.35 to 1.25      7.71          to      8.68          

Government Money Market Division

 

                        

2020

      18,047      $ 1.271520      to    $ 3.374193      $ 27,260           0.19 %    0.35% to 1.25%      (0.94 )    %    to      (0.04 )      %  

2019

      16,344        1.273911      to      3.389082        24,248           1.93     0.35 to 1.25      0.67        to      1.58    

2018

      17,722        1.255967      to      3.349646        25,749           1.53     0.35 to 1.25      0.27        to      1.17    

2017

      16,842        1.243091      to      3.323610        25,322           0.59     0.35 to 1.25      (0.65 )       to      0.25    

2016

      15,738        1.241859      to      3.328556        25,161                 0.12     0.35 to 1.25      (1.11 )         to      (0.22 )         

Short-Term Bond Division

                           

2020

      35,382      $ 1.176335      to    $ 1.330259      $ 46,895           2.28 %    0.35% to 1.25%      3.00     %    to      3.93       %  

2019

      31,185        1.142089      to      1.279990        39,862           2.01     0.35 to 1.25      3.09        to      4.02    

2018

      29,921        1.107847      to      1.230522        36,897           1.56     0.35 to 1.25      0.09        to      1.00    

2017

      26,494        1.106873      to      1.218389        32,305           1.30     0.35 to 1.25      0.07        to      0.97    

2016

      25,457        1.106066      to      1.206680        30,694                 1.18     0.35 to 1.25      0.41          to      1.31          

Select Bond Division

 

                                 

2020

      43,320      $ 2.669406      to    $ 19.528401      $ 134,091           2.75 %    0.35% to 1.25%      7.63     %    to      8.60       %  

2019

      44,743        2.461743      to      18.054107        127,879           2.79     0.35 to 1.25      7.30        to      8.27    

2018

      43,912        2.277116      to      16.741563        117,961           2.28     0.35 to 1.25      (1.45 )       to      (0.56 )   

2017

      40,477        2.293482      to      16.904021        112,237           2.09     0.35 to 1.25      2.30        to      3.22    

2016

      35,051        2.225197      to      16.441431        98,042                 1.94     0.35 to 1.25      1.78          to      2.70          

Long-Term U.S. Government Bond Division

 

                        

2020

      6,744      $ 2.268738      to    $ 2.565411      $ 17,085           1.47 %    0.35% to 1.25%      15.91     %    to      16.96 %   

2019

      6,219        1.957302      to      2.193413        13,596           2.14     0.35 to 1.25      11.76        to      12.77    

2018

      6,288        1.751302      to      1.945014        12,204           2.02     0.35 to 1.25      (3.26 )       to      (2.39 )   

2017

      6,274        1.810437      to      1.992613        12,389           1.86     0.35 to 1.25      6.94        to      7.90    

2016

      6,446        1.693000      to      1.846758        11,753                 1.84     0.35 to 1.25      (0.17 )         to      0.74          

Inflation Protection Division

 

                                 

2020

      22,005      $ 1.445291      to    $ 1.634367      $ 36,240           1.99 %    0.35% to 1.25%      8.21     %    to      9.19 %   

2019

      21,658        1.335651      to      1.496834        32,729           2.60     0.35 to 1.25      7.67        to      8.64    

2018

      22,392        1.240557      to      1.377840        31,207           2.04     0.35 to 1.25      (3.82 )       to      (2.95 )   

2017

      21,157        1.289916      to      1.419776        30,348           0.68     0.35 to 1.25      2.30        to      3.22    

2016

      19,152        1.260965      to      1.375532        26,586                 1.21     0.35 to 1.25      3.39          to      4.32          

High Yield Bond Division

 

                                 

2020

      12,246      $ 3.549988      to    $ 5.296364      $ 46,264           5.84 %    0.35% to 1.25%      5.32     %    to      6.27 %   

2019

      13,144        3.345591      to      4.986498        46,841           5.50     0.35 to 1.25      13.54        to      14.57    

2018

      13,353        2.924589      to      4.354710        41,634           5.37     0.35 to 1.25      (3.91 )       to      (3.05 )   

2017

      13,802        3.021110      to      4.493974        44,469           5.49     0.35 to 1.25      5.56        to      6.51    

2016

      12,879        2.840699      to      4.221461        39,103                 5.34     0.35 to 1.25      13.17          to      14.19          

(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

Notes to Financial Statements

 

6. Financial Highlights

 

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

Multi-Sector Bond Division

                           

2020

      47,239      $ 1.891030      to    $ 2.138307      $ 101,204           4.15 %    0.35% to 1.25%      4.81     %    to      5.76       %  

2019

      50,088        1.804270      to      2.021924        101,563           4.60     0.35 to 1.25      12.63        to      13.64    

2018

      49,539        1.602009      to      1.779214        88,503           3.12     0.35 to 1.25      (2.53 )       to      (1.65 )   

2017

      45,601        1.643634      to      1.809045        82,715           3.89     0.35 to 1.25      7.04        to      8.01    

2016

      38,641        1.535492      to      1.674962        65,011                 4.54     0.35 to 1.25      9.71          to      10.70          

Balanced Division

 

                        

2020

      6,020      $ 2.590705      to    $ 20.424519      $ 87,357           1.64 %    0.35% to 1.25%      11.09     %    to      12.10       %  

2019

      6,458        2.314618      to      18.293306        83,129           2.31     0.35 to 1.25      16.46        to      17.51    

2018

      7,160        1.972675      to      15.629511        80,470           2.37     0.35 to 1.25      (4.65 )       to      (3.79 )   

2017

      7,770        2.053508      to      16.310677        91,394           2.22     0.35 to 1.25      10.60        to      11.59    

2016

      8,334        1.842907      to      14.674172        89,779                 2.20     0.35 to 1.25      5.26          to      6.21          

Asset Allocation Division

 

                        

2020

      1,753      $ 2.589358      to    $ 3.082984      $ 4,743           2.36 %    0.35% to 1.25%      12.02     %    to      13.04       %  

2019

      1,760        2.311468      to      2.727455        4,298           2.20     0.35 to 1.25      19.58        to      20.66    

2018

      1,772        1.932994      to      2.260490        3,614           1.98     0.35 to 1.25      (6.06 )       to      (5.21 )   

2017

      1,914        2.057749      to      2.384747        4,146           2.07     0.35 to 1.25      13.45        to      14.47    

2016

      1,966        1.813730      to      2.083222        3,884                 2.30     0.35 to 1.25      6.45          to      7.41          

Fidelity VIP Mid Cap Division

                           

2020

      3,704      $ 5.650379      to    $ 6.622537      $ 24,180           0.62 %    0.35% to 1.25%      16.60     %    to      17.65       %  

2019

      3,852        4.846019      to      5.628887        21,337           0.67     0.35 to 1.25      21.64        to      22.74    

2018

      4,269        3.983763      to      4.585972        19,278           0.40     0.35 to 1.25      (15.83 )       to      (15.07 )   

2017

      4,803        4.733325      to      5.399821        25,514           0.49     0.35 to 1.25      19.05        to      20.12    

2016

      5,296        3.976053      to      4.495510        23,397                 0.31     0.35 to 1.25      10.53          to      11.53          

Fidelity VIP Contrafund Division

 

                        

2020

      14,621      $ 2.969929      to    $ 3.358390      $ 49,021           0.21 %    0.35% to 1.25%      28.83     %    to      30.00       %  

2019

      16,892        2.305232      to      2.583390        43,557           0.21     0.35 to 1.25      29.65        to      30.82    

2018

      18,089        1.778089      to      1.974839        35,654           0.44     0.35 to 1.25      (7.80 )       to      (6.97 )   

2017

      19,368        1.928613      to      2.122752        41,072           0.78     0.35 to 1.25      20.08        to      21.16    

2016

      21,106        1.606056      to      1.751990        37,013                 0.62     0.35 to 1.25      6.39          to      7.35          

AMT Sustainable Equity Division

 

                        

2020

      5,003      $ 2.521165      to    $ 2.850867      $ 14,306           0.62 %    0.35% to 1.25%      18.07     %    to      19.14       %  

2019

      5,696        2.135226      to      2.392816        13,678           0.41     0.35 to 1.25      24.32        to      25.44    

2018

      6,055        1.717474      to      1.907475        11,744           0.49     0.35 to 1.25      (6.89 )       to      (6.05 )   

2017

      6,243        1.844614      to      2.030266        12,719           0.52     0.35 to 1.25      16.96        to      18.02    

2016

      6,868        1.577073      to      1.720338        9,808                 0.69     0.35 to 1.25      8.50          to      9.48          

U.S. Strategic Equity Division

 

                                 

2020

      4,735      $ 2.715036      to    $ 3.262377      $ 15,136           0.47 %    0.35% to 1.25%      22.30     %    to      23.40       %  

2019

      5,368        2.220002      to      2.645010        14,010           1.06     0.35 to 1.25      28.65        to      29.81    

2018

      6,802        1.725623      to      2.038668        13,516           1.15     0.35 to 1.25      (10.76 )       to      (9.96 )   

2017

      8,025        1.933892      to      2.265343        17,766           1.04     0.35 to 1.25      19.30        to      20.37    

2016

      9,431        1.620995      to      1.882855        17,356                 1.05     0.35 to 1.25      9.26          to      10.25          

U.S. Small Cap Equity Division

 

                        

2020

      1,395      $ 3.214751      to    $ 3.862953      $ 4,666           0.05 %    0.35% to 1.25%      11.30     %    to      12.31       %  

2019

      1,456        2.871413      to      3.441420        4,357           0.55     0.35 to 1.25      21.54        to      22.64    

2018

      1,678        2.344880      to      2.807594        4,104           0.46     0.35 to 1.25      (13.07 )       to      (12.28 )   

2017

      1,876        2.677261      to      3.202394        5,240           0.18     0.35 to 1.25      14.05        to      15.08    

2016

      2,056        2.329986      to      2.784266        5,012                 0.83     0.35 to 1.25      17.19          to      18.24          

(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.

 

F-27

Notes to Financial Statements

 

6. Financial Highlights

 

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

International Developed Markets Division

                           

2020

      10,856      $ 1.726590      to    $ 2.205243      $ 20,500           1.23 %    0.35% to 1.25%      3.77     %    to      4.71       %  

2019

      10,661        1.651451      to      2.107181        19,330           2.53     0.35 to 1.25      18.24        to      19.30    

2018

      12,028        1.386320      to      1.767145        18,296           1.69     0.35 to 1.25      (15.93 )       to      (15.17 )   

2017

      12,462        1.636764      to      2.084321        22,169           2.63     0.35 to 1.25      23.43        to      24.54    

2016

      12,422        1.316215      to      1.674471        17,764                 3.24     0.35 to 1.25      1.09          to      2.00          

Strategic Bond Division

 

                        

2020

      28,423      $ 2.230428      to    $ 2.680033      $ 75,500           1.83 %    0.35% to 1.25%      7.09     %    to      8.05       %  

2019

      30,654        2.082855      to      2.481567        75,399           2.75     0.35 to 1.25      7.84        to      8.81    

2018

      32,129        1.931442      to      2.281768        72,748           2.12     0.35 to 1.25      (2.04 )       to      (1.16 )   

2017

      30,716        1.971861      to      2.309777        70,308           1.34     0.35 to 1.25      2.58        to      3.50    

2016

      28,050        1.922321      to      2.232803        62,002                 1.60     0.35 to 1.25      1.82          to      2.74          

Global Real Estate Securities Division

 

                        

2020

      9,698      $ 4.277349      to    $ 5.334855      $ 48,700           1.52 %    0.35% to 1.25%      (6.36 )    %    to      (5.51 )      %  

2019

      9,259        4.567716      to      5.654394        49,229           5.02     0.35 to 1.25      20.13        to      21.22    

2018

      9,704        3.802249      to      4.671736        42,552           4.50     0.35 to 1.25      (6.90 )       to      (6.06 )   

2017

      9,536        4.084164      to      4.980485        44,427           3.70     0.35 to 1.25      10.42        to      11.41    

2016

      9,375        3.698741      to      4.476956        39,095                 4.57     0.35 to 1.25      1.74          to      2.66          

LifePoints Moderate Strategy Division

                           

2020

      1,563      $ 1.588894      to    $ 1.796695      $ 2,579           2.03 %    0.35% to 1.25%      5.08     %    to      6.03       %  

2019

      1,517        1.512123      to      1.694566        2,379           1.22     0.35 to 1.25      11.15        to      12.15    

2018

      1,549        1.360492      to      1.511015        2,182           4.37     0.35 to 1.25      (6.10 )       to      (5.26 )   

2017

      1,891        1.449028      to      1.594878        2,826           2.29     0.35 to 1.25      8.53        to      9.50    

2016

      1,758        1.335201      to      1.456484        2,405                 3.45     0.35 to 1.25      6.41          to      7.37          

LifePoints Balanced Strategy Division

 

                        

2020

      1,057      $ 1.629523      to    $ 1.842719      $ 1,803           2.15 %    0.35% to 1.25%      6.31 %       to      7.27       %  

2019

      1,106        1.532773      to      1.717774        1,775           1.56     0.35 to 1.25      15.01        to      16.04    

2018

      1,283        1.332766      to      1.480278        1,788           5.31     0.35 to 1.25      (7.95 )       to      (7.12 )   

2017

      1,480        1.448010      to      1.593814        2,244           2.38     0.35 to 1.25      10.61        to      11.61    

2016

      1,435        1.309079      to      1.428058        1,969                 2.86     0.35 to 1.25      7.70          to      8.67          

LifePoints Growth Strategy Division

 

                        

2020

      224      $ 1.609785      to    $ 1.820383      $ 371           1.62 %    0.35% to 1.25%      8.38     %    to      9.36       %  

2019

      496        1.485265      to      1.664527        779           0.60     0.35 to 1.25      16.60        to      17.65    

2018

      852        1.273823      to      1.414812        1,133           4.74     0.35 to 1.25      (9.19 )       to      (8.37 )   

2017

      958        1.402805      to      1.544057        1,389           3.17     0.35 to 1.25      14.22        to      15.25    

2016

      902        1.228131      to      1.339752        1,135                 2.18     0.35 to 1.25      8.36          to      9.34          

LifePoints Equity Growth Strategy Division

 

                                 

2020

      45      $ 1.509990      to    $ 1.707568      $ 69           2.07 %    0.35% to 1.25%      6.91     %    to      7.88       %  

2019

      71        1.412370      to      1.582862        101           0.23     0.35 to 1.25      18.60        to      19.67    

2018

      69        1.190878      to      1.322719        83           4.44     0.35 to 1.25      (10.58 )       to      (9.77 )   

2017

      93        1.331848      to      1.465982        125           3.27     0.35 to 1.25      16.10        to      17.14    

2016

      89        1.147180      to      1.251467        102                 2.60     0.35 to 1.25      9.47          to      10.46          

Credit Suisse Trust Commodity Return Strategy Division

 

                        

2020

      8,690      $ 4.128458      to    $ 4.503663      $ 39,413           5.59 %    0.35% to 1.25%      (2.71 )    %    to      (1.83 )      %  

2019

      8,141        4.243255      to      4.587388        37,694           0.88     0.35 to 1.25      5.37        to      6.32    

2018

      8,394        4.027153      to      4.314833        36,585           2.49     0.35 to 1.25      (12.75 )       to      (11.97 )   

2017

      7,103        4.616153      to      4.901414        35,138           9.03     0.35 to 1.25      0.26        to      1.16    

2016

      5,446        4.604145      to      4.845070        26,698                 0.00     0.35 to 1.25      10.63          to      11.63          

(1) Total return includes deductions for management and other expenses; it excludes deductions for sales loads and other charges, which are a reduction in units. The expense ratios further reflect only those expenses which impact total return. For additional information regarding all expenses assessed, refer to the accompanying notes.

 

F-28

The Northwestern Mutual

Life Insurance Company

Financial Statements and

Supplementary Information

December 31, 2020, 2019 and 2018

 

 

NM-1

LOGO

 

Report of Independent Auditors

To the Board of Trustees of

The Northwestern Mutual Life Insurance Company

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, 2020 and 2019, 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, 2020.

Management’s Responsibility 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 Insurance of the State of Wisconsin. Management is also responsible for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on the financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Company’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Basis for Adverse Opinion on U.S. Generally Accepted Accounting Principles

As described in Note 1 to the 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.

 

NM-2

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.

Adverse Opinion on U.S. Generally Accepted Accounting Principles

In our opinion, because of the significance of the matter discussed in the “Basis for Adverse Opinion on U.S. Generally Accepted Accounting Principles” paragraph, the financial statements referred to above do not present fairly, in accordance with accounting principles generally accepted in the United States of America, the financial position of the Company as of December 31, 2020 and 2019, or the results of its operations or its cash flows for each of the three years in the period ended December 31, 2020.

Opinion on Statutory Basis of Accounting

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, 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.

 

LOGO

Milwaukee, Wisconsin

February 15, 2021

 

NM-3

The Northwestern Mutual Life Insurance Company

Statements of Financial Position

(in millions)

 

 

     December 31,
             2020                   2019        

Assets:

     

Bonds

        $ 166,324         $ 159,760    

Mortgage loans

      41,568       39,771  

Policy loans

      17,686       17,829  

Common and preferred stocks

      5,083       4,677  

Real estate

      2,959       2,872  

Other investments

      24,942       20,962  

Cash and short-term investments

      3,239       2,408  
  

 

 

 

  

 

 

 

Total investments

      261,801       248,279  

Due and accrued investment income

      2,522       2,057  

Net deferred tax assets

      2,305       1,609  

Deferred premium and other assets

      3,692       3,541  

Separate account assets

      38,447       34,832  
  

 

 

 

  

 

 

 

Total assets

      $ 308,767       $ 290,318  
  

 

 

 

  

 

 

 

Liabilities and surplus:

     

Policy benefit reserves

      $ 222,225       $ 211,100  

Policyowner dividends payable

      6,220       5,995  

Interest maintenance reserve

      2,355       979  

Asset valuation reserve

      7,362       6,203  

Income taxes payable

      231       129  

Other liabilities

      6,970       6,864  

Separate account liabilities

      38,447       34,832  
  

 

 

 

  

 

 

 

Total liabilities

      283,810       266,102  

Surplus:

     

Surplus notes

      3,573       3,568  

Unassigned surplus

 

     

 

 21,384

 

  

 

    

 

 20,648

 

  

 

  

 

 

 

  

 

 

 

Total surplus

      24,957       24,216  
  

 

 

 

  

 

 

 

Total liabilities and surplus

      $ 308,767       $ 290,318  
  

 

 

 

  

 

 

 

 

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

NM-4

The Northwestern Mutual Life Insurance Company

Statements of Operations

(in millions)

 

 

    For the years ended
   

 

December 31,

          2020               2019               2018      

Revenue:

      

Premiums

     $ 19,323         $ 19,010         $ 18,036    

Net investment income

     11,078       10,149       9,791  

Other income

     723       696       655  
 

 

 

 

  

 

 

 

  

 

 

 

Total revenue

     31,124       29,855       28,482  
 

 

 

 

  

 

 

 

  

 

 

 

Benefits and expenses:

      

Benefit payments to policyowners and beneficiaries

     11,736       11,515       11,436  

Net additions to policy benefit reserves

     9,527       9,451       8,079  

Net transfers from separate accounts

     (680 )      (783 )      (497 ) 
 

 

 

 

  

 

 

 

  

 

 

 

Total benefits

     20,583       20,183       19,018  

Commissions and operating expenses

     3,502       3,306       3,230  
 

 

 

 

  

 

 

 

  

 

 

 

Total benefits and expenses

     24,085       23,489       22,248  
 

 

 

 

  

 

 

 

  

 

 

 

Gain from operations before dividends and taxes

     7,039       6,366       6,234  

Policyowner dividends

     6,235       5,999       5,634  
 

 

 

 

  

 

 

 

  

 

 

 

Gain from operations before taxes

     804       367       600  

Income tax expense (benefit)

     277       (199 )      (159 ) 
 

 

 

 

  

 

 

 

  

 

 

 

Net gain from operations

     527       566       759  

Net realized capital (losses) gains

     (102 )      702       24  
 

 

 

 

  

 

 

 

  

 

 

 

Net income

     $ 425       $ 1,268       $ 783  
 

 

 

 

  

 

 

 

  

 

 

 

 

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

NM-5

The Northwestern Mutual Life Insurance Company

Statements of Changes in Surplus

(in millions)

 

 

    

For the years ended

     December 31,
           2020               2019               2018      

Beginning of year balance

      $ 24,216       $ 22,134       $ 20,851  

Net income

      425       1,268       783  

Change in net unrealized capital gains and losses

      799       1,141       (126 ) 

Change in net deferred tax assets

      807       (130 )      (76 ) 

Change in nonadmitted assets

      228       (143 )      169  

Change in asset valuation reserve

      (1,159 )      (1,606 )      (263 ) 

Change in surplus notes

      5       620       -  

Other surplus changes

      (364 )      932       796  
  

 

 

 

  

 

 

 

  

 

 

 

Net increase in surplus

      741       2,082       1,283  
  

 

 

 

  

 

 

 

  

 

 

 

End of year balance

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

 

 

 

  

 

 

 

  

 

 

 

 

 

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

NM-6

The Northwestern Mutual Life Insurance Company

Statements of Cash Flows

(in millions)

 

 

     For the years ended
December 31,
     2020   2019   2018

Cash flows from operating activities:

       

Premiums and other income received

      $ 13,808       $ 13,864       $ 13,252  

Investment income received

      10,036       9,518       9,202  

Benefit and dividend payments to policyowners and beneficiaries

      (10,537 )      (10,660 )      (10,513 ) 

Net transfers from separate accounts

      664       770       496  

Commissions, expenses and taxes paid

      (3,809 )      (3,268 )      (2,699 ) 
  

 

 

 

  

 

 

 

  

 

 

 

Net cash provided by operating activities

      10,162       10,224       9,738  
  

 

 

 

  

 

 

 

  

 

 

 

Cash flows used in investing activities:

       

Proceeds from investments sold or matured:

       

Bonds

      60,747       41,841       33,279  

Mortgage loans

      3,301       3,078       3,167  

Common and preferred stocks

      4,046       5,461       4,886  

Real estate

      468       941       23  

Other investments

      3,063       2,235       2,831  
  

 

 

 

  

 

 

 

  

 

 

 

Subtotal proceeds from investments

      71,625       53,556       44,186  
  

 

 

 

  

 

 

 

  

 

 

 

Cost of investments acquired:

       

Bonds

      (64,976 )      (47,219 )      (40,797 ) 

Mortgage loans

      (5,008 )      (6,048 )      (4,314 ) 

Common and preferred stocks

      (4,075 )      (3,832 )      (4,857 ) 

Real estate

      (478 )      (841 )      (168 ) 

Other investments

      (7,537 )      (5,634 )      (4,515 ) 
  

 

 

 

  

 

 

 

  

 

 

 

Subtotal cost of investments acquired

      (82,074 )      (63,574 )      (54,651 ) 
  

 

 

 

  

 

 

 

  

 

 

 

Net inflows of policy loans

      492       168       35  
  

 

 

 

  

 

 

 

  

 

 

 

Net cash applied to investing activities

      (9,957 )      (9,850 )      (10,430 ) 
  

 

 

 

  

 

 

 

  

 

 

 

Cash flows from financing and miscellaneous sources:

       

Surplus notes issuance

      -       596       -  

Net inflows (outflows) on deposit-type contracts

      724       (232 )      (350 ) 

Other cash (applied) provided

      (98 )      (229 )      472  
  

 

 

 

  

 

 

 

  

 

 

 

Net cash provided by financing and miscellaneous sources

      626       135       122  
  

 

 

 

  

 

 

 

  

 

 

 

Net increase (decrease) in cash and short-term investments

      831       509       (570 ) 

Cash and short-term investments, beginning of year

      2,408       1,899       2,469  
  

 

 

 

  

 

 

 

  

 

 

 

Cash and short-term investments, end of year

      $ 3,239         $ 2,408         $ 1,899    
  

 

 

 

  

 

 

 

  

 

 

 

 

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

NM-7

The Northwestern Mutual Life Insurance Company

Statements of Cash Flows (supplemental)

(in millions)

 

 

     For the years ended  
     December 31,  
           2020                  2019                  2018        

Supplemental disclosures of cash flow information

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

Operating:

         

Dividends used to pay premiums and loans

      $     5,779        $     5,453        $     5,149  

Capitalized interest and payment in-kind investment income

      895        870        776  

Other policyowner contract activity

      268        245        226  

Employee benefit and compensation plan expenses

      100        155        128  

Investing:

         

Bond refinancings and exchanges

      3,652        13,075        2,116  

Mortgage loan refinancings and transfers

      520        731        1,377  

Net policy loan activity

      285        316        295  

Other invested asset exchanges

      163        270        103  

Common stock exchanges

      22        105        144  

Net premium loan activity

      113        125        139  

Net asset transfers with affiliated entities

      434        199        138  

Financing and Miscellaneous:

         

Deposit-type contract deposits and interest credited

      556        505        391  

Surplus note exchange

      5        24        -  

 

 

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

NM-8

The Northwestern Mutual Life Insurance Company

Notes to Financial Statements

December 31, 2020, 2019 and 2018

 

 

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 results during 2020. 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 financial statements.

These financial statements were prepared in accordance with accounting practices prescribed or permitted by the Office of the Commissioner of Insurance of the State of Wisconsin (statutory basis of accounting 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 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 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 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.

 

NM-9

The Northwestern Mutual Life Insurance Company

Notes to Financial Statements

December 31, 2020, 2019 and 2018

 

 

Cash and Short-term Investments

Short-term investments include securities that had maturities of one year or less at purchase, primarily money market funds and short-term commercial paper. These investments are reported at amortized cost, which approximates fair value.

Separate Accounts

Separate account assets and related reserve liabilities represent the segregation of balances attributable to variable life insurance and variable annuity products, as well as a group annuity separate account used to fund certain of the 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 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. Deposit funds, which 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, are also included within policy benefit reserves. See Note 5 and Note 14 for more information regarding the Company’s policy benefit reserves.

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 statements of operations but are not included in premiums received or benefit and dividend payments to policyowners and beneficiaries in the 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 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.

 

NM-10

The Northwestern Mutual Life Insurance Company

Notes to Financial Statements

December 31, 2020, 2019 and 2018

 

 

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 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 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. 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 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.

Commissions and Operating Expenses

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

 

NM-11

The Northwestern Mutual Life Insurance Company

Notes to Financial Statements

December 31, 2020, 2019 and 2018

 

 

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 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 statements of changes in surplus. Other net changes in deferred tax assets and liabilities are reported as direct adjustments to surplus in the 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 included in income tax benefit 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 $27 million and $31 million at December 31, 2020 and 2019, respectively, are included in other assets in the Statements of Financial Position and are net of accumulated depreciation of $42 million and $428 million, respectively. Non-operating software costs, net of accumulated depreciation, are nonadmitted assets and thereby excluded from assets and surplus in the statements of financial position. These amounts were $388 million and $357 million at December 31, 2020 and 2019, respectively. Depreciation expense for IT equipment and software totaled $153 million, $146 million and $134 million for the years ended December 31, 2020, 2019 and 2018, 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 statements of financial position. These amounts were $117 million and $130 million at December 31, 2020 and 2019, respectively. Depreciation expense for furniture, fixtures and equipment totaled $14 million, $16 million and $16 million for the years ended December 31, 2020, 2019 and 2018, respectively.

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.

 

NM-12

The Northwestern Mutual Life Insurance Company

Notes to Financial Statements

December 31, 2020, 2019 and 2018

 

 

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 for which audits are not performed are excluded from assets and surplus in the statements of financial position. Changes in nonadmitted assets are reported as a direct adjustment to surplus in the 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.

Subsequent Events

The Company has evaluated events subsequent to December 31, 2020 through February 15, 2021, the date these 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, 2020 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.

During January 2021, the Company issued a $750 million funding agreement as part of a funding agreement-backed note (FABN) program, first established in December 2020. See Note 5 for more information regarding the Company’s FABN program.

 

3.

Investments

Bonds

The Securities Valuation Office (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 financial statements at amortized cost less any other-than-temporary impairment. Bonds rated “6” (lowest quality) 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.

 

NM-13

The Northwestern Mutual Life Insurance Company

Notes to Financial Statements

December 31, 2020, 2019 and 2018

 

 

Statement value and fair value of bonds at December 31, 2020 and 2019, summarized by asset categories required in the NAIC Annual Statement, were as follows:

 

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  
  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

 

December 31, 2019

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

U.S. Government

        $ 2,701           $ 158           $ (5 )          $ 2,854    

States, territories and possessions

      742       139       (1 )      880  

Special revenue and assessments

      26,310       887       (48 )      27,149  

All foreign governments

      4,531       350       (23 )      4,858  

Hybrid securities

      473       28       (22 )      479  

SVO-identified funds

      3       -                   -       3  

Industrial and miscellaneous

            125,000             7,864       (358 )            132,506  
  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

Total bonds

        $ 159,760         $ 9,426         $ (457 )        $ 168,729  
  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

Bonds classified by the NAIC as special revenue and assessments primarily consist of U.S. Government agency-issued residential mortgage-backed securities and municipal bonds issued by political subdivisions to finance specific public projects. Bonds classified as industrial and miscellaneous consist primarily of notes issued by public and private corporate entities and structured securities not issued by U.S. Government agencies.

 

NM-14

The Northwestern Mutual Life Insurance Company

Notes to Financial Statements

December 31, 2020, 2019 and 2018

 

 

Statement value of bonds by SVO rating category at December 31, 2020 and 2019 was as follows:

 

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  
  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

   

 

 

 

 

December 31, 2019

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

U.S. Government

        $ 2,701           $ -           $ -           $ -           $ -           $ -           $ 2,701    

States, territories and possessions

      664       78       -       -       -       -       742  

Special revenue and assessments

      26,159       119       32       -       -       -       26,310  

All foreign governments

      1,472       2,903       65       40       51       -       4,531  

Hybrid securities

      -       270       173       30       -       -       473  

SVO-identified funds

      -       -       -       3       -       -       3  

Industrial and miscellaneous

       60,420        49,654         6,809         5,014         3,049             54        125,000  
  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

Total bonds

        $ 91,416         $ 53,024         $ 7,079         $ 5,087         $ 3,100         $ 54         $ 159,760  
  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

Based on statement value, 89% and 90% of the Company’s bond portfolio was rated investment grade (i.e., rated 1 or 2 by the SVO) at December 31, 2020 and 2019, respectively.

Statement value and fair value of structured securities at December 31, 2020 and 2019, aggregated by investment grade or below investment grade (i.e., rated 3, 4, 5 or 6 by the SVO), were as follows:

 

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 commercial mortgage-backed

      -       -       -          -       -       -  

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  
  

 

 

 

  

 

 

 

  

 

 

 

     

 

 

 

  

 

 

 

  

 

 

 

 

NM-15

The Northwestern Mutual Life Insurance Company

Notes to Financial Statements

December 31, 2020, 2019 and 2018

 

 

December 31, 2019

             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

       $ 24,486         $ 24,947         $ -           $ -     $ 24,486         $ 24,947  

Other prime

     709       719       1         1       710       720  

Other below-prime

     357       362       2         3       359       365  

Commercial mortgage-backed:

              

U.S. Government agencies

     64       66       -         -       64       66  

Conduit

     3,008       3,077       -         -       3,008       3,077  

Other commercial mortgage-backed

     2       2       -         -       2       2  

Other asset-backed

     8,420       8,574       98         107       8,518       8,681  
 

 

 

 

  

 

 

 

  

 

 

 

    

 

 

 

  

 

 

 

  

 

 

 

Total structured securities

       $ 37,046           $ 37,747           $ 101             $     111           $ 37,147           $ 37,858    
 

 

 

 

  

 

 

 

  

 

 

 

    

 

 

 

  

 

 

 

  

 

 

 

Based on statement value, over 99% of the Company’s structured securities portfolio was rated as investment grade at each of December 31, 2020 and 2019. Based on statement value, the Company’s investment in residential mortgage-backed securities issued by U.S. Government agencies at December 31, 2020 and 2019 was 10% and 15%, respectively, of total bond investments.

Statement value and fair value of bonds and short-term investments by contractual maturity at December 31, 2020 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

        $ 5,399          $ 5,443  

Due after one year through five years

      37,436        39,716  

Due after five years through ten years

      51,204        55,919  

Due after ten years

      74,910        84,981  
  

 

 

 

   

 

 

 

Total

        $ 168,949            $ 186,059    
  

 

 

 

   

 

 

 

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 $134 million and $163 million at December 31, 2020 and 2019, respectively.

 

NM-16

The Northwestern Mutual Life Insurance Company

Notes to Financial Statements

December 31, 2020, 2019 and 2018

 

 

The statement value of mortgage loans by collateral property type and geographic location at December 31, 2020 and 2019 was as follows:

 

                                                                             

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    
  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

 

                                                                             

December 31, 2019

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

Apartment

        $ 5,434         $ 1,915         $ 2,912            $ 7,411         $ -         $ 17,672  

Office

      3,617       897       1,293          3,263       -       9,070  

Retail

      2,593       535       1,670          2,052       -       6,850  

Warehouse/Industrial

      677       447       672          1,179       196       3,171  

Manufactured housing

      254       321       1,189          893       -       2,657  

Other

      126       59       28          138       -       351  
  

 

 

 

  

 

 

 

  

 

 

 

   

 

 

 

  

 

 

 

  

 

 

 

Total

        $   12,701           $ 4,174           $ 7,764            $ 14,936           $ 196           $   39,771    
  

 

 

 

  

 

 

 

  

 

 

 

   

 

 

 

  

 

 

 

  

 

 

 

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 $3.3 billion and $3.5 billion at December 31, 2020 and 2019, respectively.

All mortgage loans were current on contractual interest and principal payments at each of December 31, 2020 and 2019. Interest rates and loan-to-value (LTV) ratio information for the Company’s mortgage loans originated or refinanced during 2020 and 2019 is summarized below.

 

For mortgage loans originated or refinanced during:

          2020               2019      

Minimum interest rate

      1.93 %      2.95 % 

Maximum interest rate

      5.50 %      11.75 % 

Weighted-average LTV

      57 %      57 % 

Maximum LTV

      71 %      74 % 

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, 2020 and 2019, the aggregate weighted-average LTV ratio for the mortgage loan portfolio was 54% and 52%, respectively.

 

NM-17

The Northwestern Mutual Life Insurance Company

Notes to Financial Statements

December 31, 2020, 2019 and 2018

 

 

The statement value of mortgage loans by collateral property type and LTV ratio at December 31, 2020 and 2019 was as follows:

 

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    
  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

 

December 31, 2019

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

 

(in millions)

Apartment

      $ 5,628       $ 11,877       $ 167       $ -       $ 17,672  

Office

      5,977       2,704       318       71       9,070  

Retail

      3,179       3,370       258       43       6,850  

Warehouse/Industrial

      1,699       1,187       216       69       3,171  

Manufactured housing

      419       2,238       -       -       2,657  

Other

      222       54       59       16       351  
  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

Total

      $ 17,124         $ 21,430         $ 1,018         $ 199         $ 39,771    
  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

At December 31, 2020, the Company had no mortgage loans with an LTV ratio in excess of 100%. The aggregate statement value of mortgage loans with an LTV ratio in excess of 100% was $45 million at December 31, 2019.

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, 2020, 2019 and 2018, respectively. The Company had no mortgage loans at either of December 31, 2020 or December 31, 2019 that were considered “restructured.”

 

NM-18

The Northwestern Mutual Life Insurance Company

Notes to Financial Statements

December 31, 2020, 2019 and 2018

 

 

In circumstances where the Company has deemed it probable that it will be unable to collect all contractual principal and interest on a mortgage loan, a valuation allowance is established to reduce the statement value of the mortgage loan to its net realizable value. Changes to mortgage loan valuation allowances are reported as a change in net unrealized capital gains and losses in the 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, 2020 or 2019. The Company recognized other-than-temporary impairment losses on mortgage loans of $15 million and $0 for the years ended December 31, 2020 and 2019, respectively.

Common and Preferred Stocks

Common stocks are generally reported at fair value, with $ 4,883 million and $4,474 million included in the statements of financial position at December 31, 2020 and 2019, 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.

Preferred stocks rated 1, 2 or 3 by the SVO are reported at amortized cost. Preferred stocks rated 4, 5 or 6 by the SVO are reported at the lower of amortized cost or fair value. At December 31, 2020 and 2019, the statements of financial position included $200 million and $203 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, 2020 and 2019 was as follows:

 

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     
  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

 

December 31, 2019

          East               Midwest               South               West               Total      
     (in millions)

Apartment

      $ 277        $ 195        $ 178        $ 718        $ 1,368   

Office

      214       676       128       17       1,035  

Warehouse/Industrial

      118       -       38       205       361  

Other

      16       54       13       25       108  
  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

Total

      $ 625          $ 925          $ 357          $ 965          $ 2,872     
  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

 

NM-19

The Northwestern Mutual Life Insurance Company

Notes to Financial Statements

December 31, 2020, 2019 and 2018

 

 

The Company’s home office properties are included above (Office/Midwest) and had an aggregate statement value of $688 million and $676 million at December 31, 2020 and 2019, 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 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, 2020 and 2019 was as follows:

 

     December 31,
           2020               2019      
     (in millions)

Securities partnerships and LLCs

      $ 9,615       $ 7,581  

Common and preferred stocks

      3,499       2,030  

Real estate JVs, partnerships and LLCs

      3,435       2,697  

Bonds

      3,296       3,571  

Real estate

      1,197       1,023  

COLI

      1,195       1,043  

Cash and short-term investments

      1,100       444  

Structured settlements

      790       800  

Low income housing tax credit properties

      708       662  

Derivative instruments

      358       546  

Lease receivables

      144       274  

Other net assets (liabilities)

      (395 )      291  
  

 

 

 

  

 

 

 

Total

      $ 24,942         $ 20,962    
  

 

 

 

  

 

 

 

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, tax credit properties and lease receivables, 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, 2020 and 2019, respectively. The required holding period for tax credit properties is 15 years. The amount of tax credits and other tax benefits recognized during 2020 and 2019 were $136 million and $123 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

The Northwestern Mutual Life Insurance Company

Notes to Financial Statements

December 31, 2020, 2019 and 2018

 

 

Investments in Subsidiaries, Controlled and Affiliated Entities

The Company’s investments in subsidiaries, controlled and affiliated entities (SCAs) are reported in the 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, 2020 and 2019, the value of wholly-owned SCA investments were as follows:

 

     December 31, 2020    December 31, 2019
         Investment in    
SCA		        Nonadmitted    
Asset		        Statement    
Value		        Investment in    
SCA		        Nonadmitted    
Asset		        Statement    
Value
          (in millions)                      (in millions)             

NM Wealth Management Company

      $ 265          $ -          $ 265          $ 237          $ -          $ 237    
  

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

Total common stock SCAs 1

      265          -          265          237          -          237    

NML Securities Holdings, LLC

      11,016          -          11,016          8,485          -          8,485    

NML Real Estate Holdings, LLC

      2,467          -          2,467          2,404          -          2,404    

NM Investment Holdings, LLC

      1,371          -          1,371          1,334          -          1,334    

NM Investment Services, LLC

      126          -          126          124          -          124    

NM Pebble Valley, LLC

      93          -          93          128          -          128    

NM GP Holdings, LLC

      56          6          50          62          13          49    

NM QOZ Fund II, LLC

      45          -          45          -          -          -    

QOZ Holding Company, LLC

      23          -          23          -          -          -    

NM QOZ FUND, LLC

      16          -          16          16          -          16    

NM-SAS, LLC

      12          7          5          4          -          4    

Mason Street Advisors, LLC

      6          6          -          36          36          -    

Northwestern Mutual Investment Management Company, LLC

      3          3          -          44          44          -    

NM Career Distribution Holdings, LLC

      2          2          -          4          4          -    

GRO-SUB, LLC

      2          2          -          1          1          -    

GRO, LLC

      -          -          -          1          1          -    

Venture Studio Holdings, LLC

      -          -          -          -          -          -    
  

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

Total other investment SCAs 2

      15,238          26          15,212          12,643          99          12,544    
  

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

Total investments in SCAs

      $ 15,503          $ 26          $ 15,477          $ 12,880          $ 99          $ 12,781    
  

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

 

1

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

2

Reported in other investments in the statements of financial position.

Investment filings for all common stock SCAs were submitted to the NAIC during 2020. In all cases, the NAIC accepted the statement value.

Net Investment Income

The sources of net investment income for the years ended December 31, 2020, 2019 and 2018 were as follows:

 

     For the years ended December 31,
           2020               2019               2018      
         (in millions)    

Bonds

      $ 6,154       $ 6,400       $ 6,020  

Mortgage loans

      1,717       1,676       1,573  

Common and preferred stocks

      188       146       210  

Real estate

      279       288       275  

Other investments

      2,122       1,205       1,184  

Policy loans

      1,180       1,180       1,164  

Amortization of IMR

      255       133       135  
  

 

 

 

  

 

 

 

  

 

 

 

Gross investment income

      11,895       11,028       10,561  

Less: investment expenses

      817       879       770  
  

 

 

 

  

 

 

 

  

 

 

 

Net investment income

      $ 11,078         $ 10,149         $ 9,791    
  

 

 

 

  

 

 

 

  

 

 

 

 

NM-21

The Northwestern Mutual Life Insurance Company

Notes to Financial Statements

December 31, 2020, 2019 and 2018

 

 

For the years ended December 31, 2020 and 2019, bond investment income included $82 million and $72 million of prepayment fees, respectively, generated as a result of 127 and 108 securities, respectively, sold, disposed, or otherwise redeemed as a result of a callable feature. Accrued investment income more than ninety days past due is a nonadmitted asset. Changes in the nonadmitted amount are reported as direct adjustments to surplus in the statements of changes in surplus. Accrued investment income that is ultimately deemed uncollectible is included as a reduction of net investment income in the period that such determination is made.

Realized Capital Gains and Losses

Realized capital gains and losses 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 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, 2020, 2019 and 2018 were as follows:

 

     For the year ended   For the year ended   For the year ended
     December 31, 2020   December 31, 2019   December 31, 2018
             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

      $ 2,724       $ (861)       $ 1,863       $ 1,094       $ (369)       $ 725       $ 275       $ (543 )      $ (268 ) 

Mortgage loans

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

Common and preferred stocks

      461       (643 )      (182 )      662       (291 )      371       538       (147 )      391  

Real estate

      253       -       253       502       (6 )      496       12       (13 )      (1 ) 

Other investments

      1,350       (1,302 )      48       1,005       (1,053 )      (48 )      699       (952 )      (253 ) 
  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

Subtotal

      $ 4,788           $ (2,828 )          1,960       $ 3,271           $ (1,722 )          1,549       $ 1,524           $ (1,657 )          (133 )     
  

 

 

 

  

 

 

 

    

 

 

 

  

 

 

 

    

 

 

 

  

 

 

 

  

Less: IMR net gains (losses) before taxes

 

     2,064           674           (245 ) 

Less: Capital gains tax (benefit) expense

 

     (2 )          173           88  
 

 

 

 

      

 

 

 

      

 

 

 

Net realized capital (losses) gains

 

       $ (102 )              $ 702               $ 24      
      

 

 

 

      

 

 

 

      

 

 

 

Realized capital gains and losses are generally the result of normal investment trading activity. Proceeds from the sale of bonds totaled $48 billion, $30 billion, and $22 billion for the years ended December 31, 2020, 2019 and 2018, 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

 

NM-22

The Northwestern Mutual Life Insurance Company

Notes to Financial Statements

December 31, 2020, 2019 and 2018

 

 

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.

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, 2020, 2019 and 2018 were as follows:

 

     For the years ended December 31,
             2020                   2019                   2018        
Bonds, common and preferred stocks:        (in millions)    

Structured securities

      $ -       $ (1)       $ (1 ) 

Foreign government

      (34 )      -       -  

Financial services

      -       -       (1 ) 

Consumer discretionary

      (51 )      (84 )      -  

Industrials

      (42 )      (9 )      (35 ) 

Energy

      (59 )      (44 )      (2 ) 

Basic materials

      -       (1 )      -  

Other

      (13 )      -       -  
  

 

 

 

  

 

 

 

  

 

 

 

Subtotal

      (199 )      (139 )      (39 ) 

Mortgage loans

      (15 )      -       -  

Real estate

      -       (6 )      (13 ) 

Other investments:

       

Securities partnerships

      (6 )      (78 )      (44 ) 

Energy and transportation

      -       -       (22 ) 
  

 

 

 

  

 

 

 

  

 

 

 

Subtotal

      (6 )      (78 )      (66 ) 
  

 

 

 

  

 

 

 

  

 

 

 

Total

      $ (220 )        $ (223 )        $ (118 )   
  

 

 

 

  

 

 

 

  

 

 

 

In addition to the realized capital losses above, $37 million, $0.2 million and $22 million of other-than-temporary impairments were recorded by the Company’s unconsolidated non-insurance subsidiaries for the years ended December 31, 2020, 2019 and 2018, 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 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 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.

 

NM-23

The Northwestern Mutual Life Insurance Company

Notes to Financial Statements

December 31, 2020, 2019 and 2018

 

 

Changes in net unrealized capital gains and losses for the years ended December 31, 2020, 2019 and 2018 were as follows:

 

     For the years ended December 31,
             2020                   2019                   2018        
     (in millions)

Bonds

      $ 606       $ 152       $ (376 ) 

Mortgage loans

      33       11       (10 ) 

Common and preferred stocks

      520       304       (653 ) 

Other investments

      (251 )      727       833  
  

 

 

 

  

 

 

 

  

 

 

 

Subtotal

      908       1,194       (206 ) 

Change in deferred taxes

      (109 )      (53 )      80  
  

 

 

 

  

 

 

 

  

 

 

 

Change in net unrealized capital gains and losses

      $ 799       $ 1,141       $ (126 ) 
  

 

 

 

  

 

 

 

  

 

 

 

Changes in net unrealized capital gains and losses for the years ended December 31, 2020, 2019 and 2018 included the reversal of previously unrealized capital gains of $(1,428) million, $(369) million and $ (602) 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, 2020 and 2019 were as follows:

 

     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

      $ 5,669        $ 5,526        $ (143 )       $ 3,544        $ 3,290        $ (254 ) 

Common and preferred stocks

      150        131        (19 )       159        123        (36 ) 
  

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

Total

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

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

 

                                                                                                                 
     December 31, 2019
     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

      $ 11,128        $ 10,947        $ (181)        $ 9,657        $ 9,139        $ (518)  

Common and preferred stocks

      495        430        (65)        374        307        (67)  
  

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

Total

      $ 11,623        $ 11,377        $ (246)        $ 10,031        $ 9,446        $ (585)  
  

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

All of these bonds were current on contractual interest and principal payments at December 31, 2020. Based on the results of the impairment review process described above, the Company considers these declines in fair value to be temporary based on current facts and circumstances.

At December 31, 2020 and 2019, unrealized capital losses on structured securities in a loss position for greater than 12 months were $5 million and $32 million, respectively, while unrealized capital losses on structured securities in a loss position for less than 12 months were $20 million and $34 million, respectively.

 

NM-24

The Northwestern Mutual Life Insurance Company

Notes to Financial Statements

December 31, 2020, 2019 and 2018

 

 

For securities without a full SVO credit analysis performed, the statutory basis of accounting allows the Company to assign a NAIC designation of 5* to such securities for reporting purposes. At December 31, 2020 and 2019, the statement and fair values of NAIC 5* securities were as follows:

 

    December 31,
    2020   2019
            Number of        
Securities		         Statement      
Value		   Fair
      Value      		         Number of      
Securities		       Statement    
Value		   Fair
      Value      
    ($ in millions)   ($ in millions)
Bonds     51       $ 1,300       $ 1,279       59       $ 1,471       $ 1,412  

Preferred stock

     9       127       155       5       79       83  

Loan-backed and structured securities

     2       6       8       5       57       66  
 

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

Total

     62       $ 1,433       $ 1,442       69       $ 1,607       $ 1,561  
 

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

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 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 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, 2020 and 2019, the liability to return the repurchase agreement cash collateral was $1.3 billion and $1.7 billion, respectively, and is reported as other liabilities in the statements of financial position.

During 2020 and 2019, 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, 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  

March 31, 2019

      $ 1,867        $ 1,771  

June 30, 2019

      $ 1,798        $ 1,797  

September 30, 2019

      $ 1,833        $ 1,410  

December 31, 2019

      $ 1,718        $ 1,711  

 

NM-25

The Northwestern Mutual Life Insurance Company

Notes to Financial Statements

December 31, 2020, 2019 and 2018

 

 

During 2020 and 2019, 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, 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  

March 31, 2019

     $ 1,902       $ 1,799       $ 1,697  

June 30, 2019

     $ 1,835       $ 1,821       $ 1,697  

September 30, 2019

     $ 1,872       $ 1,434       $ 1,299  

December 31, 2019

     $ 1,754       $ 1,730       $ 1,600  

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, 2020 and 2019 was as follows:

 

     December 31, 2020    December 31, 2019
     Amortized
Cost		    Fair Value    Amortized
Cost		    Fair Value
     (in millions)    (in millions)

30 days or less

      $ 554        $ 554        $ 700        $ 700  

31-60 days

      165        165        9        9  

61-90 days

      39        39        30        30  

91-120 days

      2        2        60        60  

121-180 days

      138        138        117        118  

181-365 days

      115        115        258        258  

1-2 years

      54        54        486        486  

2-3 years

      214        215        45        45  

Over 3 years

      46        46        9        9  
  

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

Total

      $ 1,327          $ 1,328          $ 1,714          $ 1,715    
  

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

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, 2020 and 2019, 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.

 

NM-26

The Northwestern Mutual Life Insurance Company

Notes to Financial Statements

December 31, 2020, 2019 and 2018

 

 

The statement value of restricted assets at December 31, 2020 and 2019, summarized by type of restriction, was as follows:

 

                 December 31,               
     2020      2019  
     (in millions)  

Loaned securities - repurchase agreements

      $ 1,315        $ 1,600  

Federal Home Loan Bank of Chicago pledged collateral

      1,359        -  

Derivative transactions

      242        67  

Federal Home Loan Bank of Chicago stock

      37        -  

Securities on deposit with states

      4        4  
  

 

 

     

 

 

  

Total restricted assets

      $ 2,957        $ 1,671  
  

 

 

     

 

 

  

Collateral Assets Received

The statement and fair values of collateral received at December 31, 2020 and 2019 were as follows:

 

                December 31,             
2020		               December 31,             
2019
    Statement
Value		   Fair Value   Statement
Value		   Fair Value
    (in millions)   (in millions)

Repurchase agreement collateral

     $ 1,315       $ 1,341       $ 1,711       $ 1,711  

Derivative collateral

     154       154       642       642  

Mortgage loan escrow

     75       75       59       59  

Real estate escrow and security deposits

     4       4       5       5  
 

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

Total collateral assets

     $ 1,548       $ 1,574       $ 2,417       $ 2,417  
 

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

At December 31, 2020 and 2019, derivative collateral received included $1 million related to separate accounts and the obligation to return this collateral is reported in separate account liabilities in the statements of financial position. The obligation to return all other collateral received is reported as other liabilities in the 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.

 

NM-27

The Northwestern Mutual Life Insurance Company

Notes to Financial Statements

December 31, 2020, 2019 and 2018

 

 

The fair value of derivative instruments is based on quoted market prices when available. In the absence of quoted market prices, fair value is estimated using industry-standard models utilizing market observable inputs.

Derivative transactions expose the Company to the risk that a counterparty may not be able to fulfill its obligations under the contract. The Company manages this risk by dealing only with counterparties that maintain a minimum credit rating, by performing ongoing review of counterparties’ credit standing and by adhering to established limits for credit exposure to any single counterparty. The Company also utilizes collateral support arrangements that require the daily exchange of collateral assets if counterparty credit exposure exceeds certain limits. The Company does not offset the statement values for derivatives executed with the same counterparty, even if a master netting arrangement is in place. The Company also does not offset the right to claim collateral against the obligation to return such collateral.

The fair value of collateral held by the Company under derivative support agreements at December 31, 2020 and 2019 was as follows:

 

                 December 31,             
         2020           2019    
     (in millions)

Bonds:

     

General Account

      $ 83       $ 71  

Separate Accounts

      -       -  
  

 

 

 

  

 

 

 

Total bond collateral

      $ 83       $ 71  
  

 

 

 

  

 

 

 

Cash:

     

General Account

      $ 153       $ 642  

Separate Accounts

      1       -  
  

 

 

 

  

 

 

 

Total cash collateral

      $ 154         $ 642    
  

 

 

 

  

 

 

 

Bond collateral held in the general account is not reported in the statements of financial position. Cash collateral held in the general account is reported as cash and short-term investments in the 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 statements of financial position.

 

NM-28

The Northwestern Mutual Life Insurance Company

Notes to Financial Statements

December 31, 2020, 2019 and 2018

 

 

The fair value of collateral posted by the Company at December 31, 2020 and 2019 was as follows:

 

                 December 31,             
     2020   2019
     (in millions)

Bonds posted for derivative support agreements:

     

General Account

      $ 12       $ 7  

Separate Accounts

      -       -  

Bonds posted for futures agreements:

     

General Account

      92       34  

Separate Accounts

      15       10  
  

 

 

 

  

 

 

 

    Total bond collateral

      $ 119         $ 51    
  

 

 

 

  

 

 

 

Cash posted for derivative support agreements:

     

General Account

      $ 117       $ 12  

Separate Accounts

      -       -  

Cash posted for futures agreements:

     

General Account

      4       1  

Separate Accounts

      2       3  
  

 

 

 

  

 

 

 

    Total cash collateral

      $ 123       $ 16  
  

 

 

 

  

 

 

 

Bonds posted as collateral are reported as bonds and cash posted as collateral is reported as a receivable included in other investments in the 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 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.

 

NM-29

The Northwestern Mutual Life Insurance Company

Notes to Financial Statements

December 31, 2020, 2019 and 2018

 

 

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 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 $ 142 million and $136 million for the years ended December 31, 2020 and 2019, respectively. The average fair value of outstanding derivative liabilities not designated as hedging instruments was $30 million and $18 million for the years ended December 31, 2020 and 2019, 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.

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.

 

NM-30

The Northwestern Mutual Life Insurance Company

Notes to Financial Statements

December 31, 2020, 2019 and 2018

 

 

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, typically London Interbank Offered Rate (LIBOR) plus or minus a spread, applied to the notional amount of the contract.

Equity index futures are used to mitigate market risk for investments in portfolios of common stock. Equity index futures obligate the Company to pay to or receive from a counterparty an amount based on a specified equity market index as of a future date applied to the notional amount of the contract.

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 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.

 

NM-31

The Northwestern Mutual Life Insurance Company

Notes to Financial Statements

December 31, 2020, 2019 and 2018

 

 

The effects of the Company’s use of derivative instruments on the Statements of Financial Position at December 31, 2020 and 2019 were as follows:

 

     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 ) 

Equity contracts:

              

Equity total return swaps

      -        -        -       -        -  

Equity index futures

      -        -        -       -        -  

Fixed contracts:

              

Fixed income total return swaps

      -        -        -       -        -  

Credit contracts:

              

Purchased credit default swaps

      -        -        -       -        -  

Warrants

      -        -        -       -        -  

Investment replications

              

Interest rate contracts:

              

Interest rate swaps

      6        -        -       -        -  

Equity contracts:

              

Equity total return swaps

      -        -        -       -        -  
     

 

 

 

   

 

 

 

  

 

 

 

   

 

 

 

Total derivatives

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

 

 

 

   

 

 

 

  

 

 

 

   

 

 

 

 

NM-32

The Northwestern Mutual Life Insurance Company

Notes to Financial Statements

December 31, 2020, 2019 and 2018

 

 

     December 31, 2019
           Notional                      Statement Value                            Fair Value             
     Amount    Assets    Liabilities   Assets    Liabilities
               (in millions)         

Derivatives designated as hedging instruments:

              

Interest rate contracts:

              

Interest rate floors

    $ 600      $ 3      $ -     $ 27      $ -  

Interest rate swaps

      56        -        -       5        -  

Foreign exchange contracts:

              

Foreign currency swaps

      10,962        468        (168 )      590        (142 ) 

Derivatives not designated as hedging instruments:

              

Interest rate contracts:

              

Interest rate caps

      998        2        -       2        -  

Interest rate floors

      2,252        32        (2 )      32        (2 ) 

Interest rate swaps

      150        2        (0 )      2        -  

Swaptions

      3,559        31        -       31        -  

Fixed income futures

      7,370        -        -       -        -  

Fixed income forwards

      -        -        -       -        -  

Foreign exchange contracts:

              

Foreign currency forwards

      1,092        1        (15 )      1        (15 ) 

Foreign currency swaps

      121        7        (4 )      7        (4 ) 

Equity contracts:

              

Equity total return swaps

      -        -        -       -        -  

Equity index futures

      -        -        -       -        -  

Fixed contracts:

              

Fixed income total return swaps

      -        -        -       -        -  

Credit contracts:

              

Purchased credit default swaps

      -        -        -       -        -  

Warrants

      -        -        -       -        -  

Investment replications

              

Interest rate contracts:

              

Interest rate swaps

      -        -        -       -        -  

Equity contracts:

              

Equity total return swaps

      -        -        -       -        -  
     

 

 

 

   

 

 

 

  

 

 

 

   

 

 

 

Total derivatives

         $ 546        $ (189 )      $ 697        $ (163 ) 
     

 

 

 

   

 

 

 

  

 

 

 

   

 

 

 

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 statements of financial position.

 

NM-33

The Northwestern Mutual Life Insurance Company

Notes to Financial Statements

December 31, 2020, 2019 and 2018

 

 

The effects of the Company’s use of derivative instruments on the statements of operations and changes in surplus for the years ended December 31, 2020, 2019 and 2018 were as follows:

 

     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

      -       -       -  

Fixed contracts:

       

Fixed income total return swaps

      -       -       -  

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-34

The Northwestern Mutual Life Insurance Company

Notes to Financial Statements

December 31, 2020, 2019 and 2018

 

 

     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

      -       -       -  

Fixed contracts:

       

Fixed income total return swaps

      -       -       -  

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  
  

 

 

 

  

 

 

 

  

 

 

 

 

NM-35

The Northwestern Mutual Life Insurance Company

Notes to Financial Statements

December 31, 2020, 2019 and 2018

 

 

     For the year ended December 31, 2018
     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

    $ -     $ -     $ 6  

Interest rate swaps

      -       -       -  

Foreign exchange contracts:

       

Foreign currency swaps

      376       30       107  

Derivatives not designated as hedging instruments:

       

Interest rate contracts:

       

Interest rate caps

      -       -       (2 ) 

Interest rate floors

      (1 )      -       -  

Interest rate swaps

      7       12       (1 ) 

Swaptions

      8       -       (9 ) 

Fixed income futures

      (9 )      (32 )      -  

Fixed income forwards

      (4 )      (8 )      -  

Foreign exchange contracts:

       

Foreign currency forwards

      12       24       -  

Foreign currency swaps

      5       -       -  

Equity contracts:

       

Equity total return swaps

      -       -       -  

Equity index futures

      -       -       -  

Fixed contracts:

       

Fixed income total return swaps

      -       -       -  

Credit contracts:

       

Purchased credit default swaps

      -       -    

Warrants

      16       -       -  

Investment replications

       

Interest rate contracts:

       

Interest rate swaps

      -       -       -  

Equity contracts:

       

Equity total return swaps

      -       -       -  
  

 

 

 

  

 

 

 

  

 

 

 

Total derivatives

      $ 410       $ 26       $ 101  
  

 

 

 

  

 

 

 

  

 

 

 

Changes in net unrealized gains or losses resulting from derivatives that no longer qualify for hedge accounting were $0 million, $0 million and $5 million for the years ended December 31, 2020, 2019 and 2018, respectively.

 

NM-36

The Northwestern Mutual Life Insurance Company

Notes to Financial Statements

December 31, 2020, 2019 and 2018

 

 

5.

Policy Benefit Reserves

General account policy benefit reserves at December 31, 2020 and 2019 were as follows:

 

     December 31,
           2020                2019      
     (in millions)

Life insurance reserves

      $ 194,110        $ 185,991  

Annuity reserves

      11,849        10,887  

Deposit funds

      4,860        3,580  

Disability and long-term care unpaid claims and claim reserves

      5,342        5,200  

Disability and long-term care active life reserves

      6,064        5,442  
  

 

 

 

   

 

 

 

Total policy benefit reserves

      $     222,225        $     211,100  
  

 

 

 

   

 

 

 

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. PBR did not affect policy benefit reserves for policies in-force prior to January 1, 2017.

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, 2020, the Company had nearly $2 trillion of total life insurance in force, including $29 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

The Northwestern Mutual Life Insurance Company

Notes to Financial Statements

December 31, 2020, 2019 and 2018

 

 

At December 31, 2020 and 2019, the account and cash values related to the Company’s general account life reserves were as follows:

 

     Account Value    Cash Value    Reserves
     December 31,
           2020                2019                2020                2019                2020                2019      
               (in millions)          

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

                  

Universal life

      $ 8,449        $ 7,602        $ 8,185        $ 7,319        $ 8,211        $ 7,346  

Universal life with secondary guarantees

      14        14        12        11        29        26  

Other permanent cash value life insurance

      -        -        171,031        164,904        174,799        168,377  

Variable life

      -        -        -        -        943        941  

Variable universal life

      5        4        5        4        27        27  

Not subject to discretionary withdrawal or no cash value:

                  

Term policies without cash value

      -        -        -        -        4,830        4,556  

Accidental death benefits

      -        -        -        -        11        12  

Disability - active lives

      -        -        -        -        1,100        1,032  

Disability - disabled lives

      -        -        -        -        1,297        1,243  

Miscellaneous reserves

      -        -        -        -        2,894        2,774  
  

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

Total gross life reserves

      8,468        7,620        179,233        172,238        194,141        186,334  

Reinsurance ceded

      -        -        -        -        1,216        1,223  
  

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

Total net life insurance

      $ 8,468        $ 7,620        $ 179,233        $ 172,238        $ 192,925        $ 185,111  
  

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

At December 31, 2020 and 2019, the withdrawal characteristics of the Company’s separate account life reserves were as follows:

 

     Account Value    Cash Value    Reserves
     December 31,
           2020                2019                2020                2019                2020                2019      
               (in millions)          

Subject to discretionary withdrawal, surrender values or policy loans:

                  

Variable life

      $ -        $ -        $ 9,086        $ 8,162        $ 8,199        $ 7,281  

Variable universal life

      1,375        1,093        1,308        1,043        1,287        1,020  
  

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

Total gross life reserves

      $ 1,375        $ 1,093        $ 10,394        $ 9,205        $ 9,486        $ 8,301  
  

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

Reinsurance ceded

      -        -        -        -        -        -  
  

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

Total net life insurance

      $ 1,375        $ 1,093        $ 10,394        $ 9,205      $ 9,486        $ 8,301  
  

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

 

NM-38

The Northwestern Mutual Life Insurance Company

Notes to Financial Statements

December 31, 2020, 2019 and 2018

 

 

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, 2020 and 2019.

 

     December 31,
    

 

      2020      

  

 

      2019      

     ($ in millions)

From Life, Accident & Health Annual Statement:

     

Life insurance

      $ 190,270         $ 182,519    

Accidental death benefits

      11       12  

Disability - active lives

      1,100       1,032  

Disability - disabled lives

      1,297       1,243  

Miscellaneous reserves

      247       305  
  

 

 

 

  

 

 

 

Subtotal net life insurance

      192,925       185,111  

From Separate Accounts Annual Statement:

     

Life insurance

      9,486       8,301  
  

 

 

 

  

 

 

 

Combined Total

      $ 202,411       $ 193,412  
  

 

 

 

  

 

 

 

During 2019, the methodology and mortality assumptions used in certain life insurance reserve calculations were reviewed and updated, and the corresponding reserves were reduced by $1.6 billion, net of reinsurance, respectively. This was accounted for as a change in valuation basis and is included in other surplus changes in the statements of changes in surplus.

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 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 statements of changes in surplus.

Deposit Funds

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

The Northwestern Mutual Life Insurance Company

Notes to Financial Statements

December 31, 2020, 2019 and 2018

 

 

The total deposit fund liability for Northwestern Access Fund account balances held by the Company was $310 million and $328 million at December 31, 2020 and 2019, respectively. Accounts were credited with interest at annual rates ranging from 0.02% to 3.50% and 1.28% to 3.50% during 2020 and 2019, respectively. The crediting interest rates changed 28 times and 45 times during 2020 and 2019, 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, 2020, the Company held $37 million of FHLBC activity stock. At December 31, 2020, the amount of collateral pledged to the FHLBC was as follows:

 

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

Current year

      $ 1,359          $ 1,525    

 

(1)

Includes amounts in excess of minimum requirements

During the year ended December 31, 2020, 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)  

Current year

    $ 1,359      $ 1,525      $ 886  

At December 31, 2020, the amount borrowed from FHLBC, in the form of funding agreements, was as follows:

 

     December 31,
             2020        
     (in millions)

Borrowed

      $ 886    

Deposit fund reserves

      $ 886  

Max borrowed during the year

      $ 886  

Borrowing capacity as determined by insurer

      $ 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 will issue medium term notes (Notes) to investors. Note proceeds will be used to purchase funding agreements from the Company. The issued funding agreements will have payment terms substantially identical to the Notes. For the year ended December 31, 2020, the Company has not issued funding agreements under this FABN program. During January 2021, the Company issued its first funding agreement, in the amount of $750 million, as part of this program.

 

NM-40

The Northwestern Mutual Life Insurance Company

Notes to Financial Statements

December 31, 2020, 2019 and 2018

 

 

Withdrawal Characteristics of Annuity Reserves and Deposit Funds

At December 31, 2020 and 2019, 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,

  
     2020     2019     2020     2019     2020     2019  
    

 

(in millions)

  

Individual Annuities

             

Subject to discretionary withdrawal

             

- with market value adjustment

      $ 70       $ 85       $ -       $ -       $ 70       $ 85  

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

      71       80       -       -       71       80  

- at fair value

      -       -       22,203       20,535       22,203       20,535  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total with market value adjustment or at fair value

      141       165       22,203       20,535       22,344       20,700  

- at book value without adjustment

      1,857       1,893       -       -       1,857       1,893  

Not subject to discretionary withdrawal

      7,861       6,984       289       271       8,150       7,255  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total gross individual annuities

      9,859       9,042       22,492       20,806       32,351       29,848  

Reinsurance ceded

      -       -       -       -       -       -  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total net individual annuities

      $ 9,859       $ 9,042       $ 22,492       $ 20,806       $ 32,351       $ 29,848  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Group Annuities

             

Subject to discretionary withdrawal

             

- at fair value

      $ -       $ -       $ 19       $ 21       $ 19       $ 21  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total with market value adjustment or at fair value

      -       -       19       21       19       21  

Not subject to discretionary withdrawal

      1,990       1,845       6,291       5,577       8,281       7,422  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total gross group annuities

      1,990       1,845       6,310       5,598       8,300       7,443  

Reinsurance ceded

      -       -       -       -       -       -  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total net group annuities

      $ 1,990       $ 1,845       $ 6,310       $ 5,598       $ 8,300       $ 7,443  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Deposit-Type Contracts

             

Subject to discretionary withdrawal

             

- with market value adjustment

      $ 95       $ 112       $ -       $ -       $ 95       $ 112  

- at fair value

      -       -       33       31       33       31  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total with market value adjustment or at fair value

      95       112       33       31       128       143  

- at book value without adjustment

      3,468       3,133       -       -       3,468       3,133  

Not subject to discretionary withdrawal

      1,297       335       -       -       1,297       335  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total gross deposit-type contracts

      4,860       3,580       33       31       4,893       3,611  

Reinsurance ceded

      -       -       -       -       -       -  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total net deposit-type contracts

      $ 4,860       $ 3,580       $ 33       $ 31       $ 4,893       $ 3,611  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total annuity reserves and deposit funds

      $   16,709         $   14,467         $   28,835         $   26,435         $   45,544         $   40,902    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Of the individual annuity reserves at book value less surrender charge of 5% or more noted above, the Company expects that $9 million will have less than a 5% surrender charge and be reported with the amounts at book value without adjustment in 2021.

 

NM-41

The Northwestern Mutual Life Insurance Company

Notes to Financial Statements

December 31, 2020, 2019 and 2018

 

 

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, 2020 and 2019.

 

     December 31,  
     2020      2019  
     ($ in millions)  

From Life, Accident & Health Annual Statement:

      

Annuities

    $ 10,300      $ 9,469  

Supplementary contracts with life contingencies

      1,549        1,418  

Deposit-type contracts

      4,860        3,580  
  

 

 

     

 

 

  

Subtotal net annuity reserves

      16,709        14,467  

From Separate Accounts Annual Statement:

      

Annuities

      28,513        26,133  

Supplementary contracts

      289        271  

Other contract deposit funds

      33        31  
  

 

 

     

 

 

  

Subtotal net annuity reserves

      28,835        26,435  
  

 

 

     

 

 

  

Combined Total

    $ 45,544      $ 40,902  
  

 

 

     

 

 

  

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, 2020 and 2019 were as follows:

 

     For the years ended
     December 31,
    

 

      2020      

  

 

      2019      

     (in millions)

Balance at January 1

        $ 5,200         $ 5,012  

Incurred related to:

     

Current year

      972       845  

Prior years

      (85 )      57  
  

 

 

 

  

 

 

 

Total incurred

      887       902  
  

 

 

 

  

 

 

 

Paid related to:

     

Current year

      (41 )      (34)  

Prior years

      (704 )      (680)  
  

 

 

 

  

 

 

 

Total paid

      (745 )      (714)  
  

 

 

 

  

 

 

 

Balance at December 31

        $ 5,342         $ 5,200  
  

 

 

 

  

 

 

 

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 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.

 

NM-42

The Northwestern Mutual Life Insurance Company

Notes to Financial Statements

December 31, 2020, 2019 and 2018

 

 

During 2019, the morbidity assumptions used in certain long-term care insurance active life reserve calculations were reviewed and updated, and the corresponding reserves were increased by $340 million. This was accounted for as a change in valuation basis and is included in other surplus changes in the statements of changes in surplus.

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, 2020 and 2019, reserves required as a result of AAT were as follows:

 

     December 31,
           2020                2019      
     (in millions)

Annuities and deposit funds

      $ 320        $ 260  

Life insurance

      2        2  
  

 

 

 

   

 

 

 

Total reserves

      $ 322        $ 262  
  

 

 

 

   

 

 

 

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 $665 million and $549 million at December 31, 2020 and 2019, 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 statements of financial position.

Deferred and uncollected premiums at December 31, 2020 and 2019 were as follows:

 

     December 31, 2020    December 31, 2019
     Gross    Net    Gross    Net
     (in millions)    (in millions)

Ordinary new business

       $     369         $     219         $     252         $     156  

Ordinary renewal

      2,919        2,321        2,806        2,240  
  

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

Total deferred and uncollected premiums

       $ 3,288         $ 2,540         $ 3,058         $ 2,396  
  

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

 

NM-43

The Northwestern Mutual Life Insurance Company

Notes to Financial Statements

December 31, 2020, 2019 and 2018

 

 

7.

Separate Accounts

Separate account liabilities at December 31, 2020 and 2019 were as follows:

 

     Variable Life    Variable Annuities    Total
     December 31,
     2020    2019    2020    2019    2020    2019
     (in millions)    (in millions)    (in millions)

Separate account reserves

       $     9,486         $     8,301         $     28,835         $     26,435        38,321         $     34,736  

Non-policy liabilities

                  126        96  
              

 

 

 

   

 

 

 

Total separate account liabilities

                   $     38,447         $ 34,832  
              

 

 

 

   

 

 

 

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 $6 million and $5 million attributable to GMDB at December 31, 2020 and 2019, respectively.

Premiums and other considerations received from variable annuity and variable life insurance policyowners were $1.5 billion for the years ended December 31, 2020 and 2019, respectively. These amounts are reported as premiums in the 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 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 financial statements:

 

     At and for the years ended December 31,
         2020           2019           2018    
     (in millions)

From Separate Account Annual Statement:

       

Transfers to separate accounts

       $ 1,467        $ 1,522        $ 1,696  

Transfers from separate accounts

      (2,147 )      (2,305 )      (2,193 ) 
  

 

 

 

  

 

 

 

  

 

 

 

Net transfers to (from) separate accounts

       $ (680 )       $ (783 )       $ (497 ) 
  

 

 

 

  

 

 

 

  

 

 

 

 

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, 2020 and 2019 and does not expect to make a contribution to the plans during 2021.

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 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.

 

NM-44

The Northwestern Mutual Life Insurance Company

Notes to Financial Statements

December 31, 2020, 2019 and 2018

 

 

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, 2020 and 2019, and changes in these assets for the years then ended, were as follows:

 

     Defined Benefit Plans   Postretirement Benefit Plans
             2020                   2019                   2020                   2019        
     (in millions)   (in millions)

Fair value of plan assets at January 1

       $   5,459        $   4,621        $   84        $   73  

Changes in plan assets:

         

Actual return on plan assets

      854       988       13       15  

Actual plan benefits paid

      (155 )      (150 )      (3 )      (4 ) 
  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

Fair value of plan assets at December 31

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

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

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

The Northwestern Mutual Life Insurance Company

Notes to Financial Statements

December 31, 2020, 2019 and 2018

 

 

The target asset allocations and the actual allocation of the plans’ investments based on fair value at December 31, 2020 and 2019 were as follows:

 

     Target
Allocation		    Actual
Allocation
           2020                2019                2020                2019      

Bonds

      64%        64%        60%        62%  

Equity investments

      35%        35%        37%        36%  

Other investments

      1%        1%        3%        2%  
  

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

Total assets

      100%        100%        100%        100%  
  

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

At each of December 31, 2020 and 2019, 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, 2020 and 2019 and changes in these obligations for the years then ended were as follows:

 

     Defined Benefit Plans   Postretirement Benefit Plans
             2020                   2019                   2020                   2019        
     (in millions)   (in millions)

Projected benefit obligation at January 1

       $ 6,050          $ 4,970          $     743          $     610    

Changes in benefit obligation:

         

Service cost of benefits earned

      134       129       14       16  

Interest cost on projected obligations

      177       204       16       23  

Projected gross plan benefits paid

      (181 )      (168 )      (23 )      (22 ) 

Experience (gains)/losses

      889       915       119       116  

Plan amendments and other

      -       -       (207 )      -  
  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

Projected benefit obligation at December 31

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

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

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 and $5.7 billion for the years ended December 31, 2020 and 2019, respectively. Experience (gains)/losses for each of the years ended December 31, 2020 and 2019 primarily reflect the impact of changes in the PBO discount rate.

 

NM-46

The Northwestern Mutual Life Insurance Company

Notes to Financial Statements

December 31, 2020, 2019 and 2018

 

 

Benefit Plan Assumptions

The assumptions used in estimating the projected benefit obligations at December 31, 2020 and 2019 and the net periodic benefit cost for the years ended December 31, 2020, 2019 and 2018 were as follows:

 

     Defined
Benefit Plans		    Postretirement Benefit Plans          
         2020            2019            2020            2019              

Projected benefit obligation:

                  

Weighted average discount rate

      2.44%        3.17%        2.37%        3.18%        

Annual increase in compensation

      3.75%        3.75%        3.75%        3.75%        

Cash balance plan interest crediting rate

      2.39%        3.14%        n/a        n/a        
     Defined Benefit Plans    Postretirement Benefit Plans
         2020            2019            2018            2020            2019            2018    

Net periodic benefit cost:

                  

Weighted average discount rate

      3.17%        4.18%        3.57%        3.18%        4.18%        3.57%  

Annual increase in compensation

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

Long-term rate of return on plan assets

      6.25%        6.25%        6.25%        6.25%        6.25%        6.25%  

Cash balance plan interest crediting rate

      3.14%        4.16%        3.54%        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,
           2020                2019      

Assumed annual increase

      5.00%        5.00%  

Ultimate rate of annual increase

      5.00%        5.00%  

Year in which ultimate rate is reached

      2021        2020  

Effective January 1, 2019, the Company’s exposure to medical inflation will be limited to a maximum annual increase of 3% with any annual increase in excess of that rate passed on to the plan’s participants in the form of increased premiums.

 

NM-47

The Northwestern Mutual Life Insurance Company

Notes to Financial Statements

December 31, 2020, 2019 and 2018

 

 

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, 2020 and 2019.

 

     Defined
Benefit Plans		   Postretirement
Benefit Plans
             2020                   2019                   2020                   2019        
     (in millions)   (in millions)

Fair value of plan assets

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

Projected benefit obligation

      7,069       6,050       662       743  
  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

Funded status

      (911 )      (591 )      (568 )      (659 ) 

Nonadmitted asset

      (463 )      (485 )      -       -  
  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

Financial statement liability

       $ (1,374 )       $ (1,076 )       $ (568 )       $ (659 ) 
  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

The PBO for defined benefit plans above included $1,374 million related to the underfunded qualified plan for financial representatives and unfunded non-qualified plans at December 31, 2020 and $1,076 million related to unfunded non-qualified plans at December 31, 2019. In the aggregate, the fair value of qualified defined benefit plan assets represented 107% and 110% of the projected benefit obligations of these plans at December 31, 2020 and 2019, 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 statements of changes in surplus. Aggregate defined benefit pension and postretirement plan surplus impacts were as follows for the years ended December 31, 2020 and 2019:

 

    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  
 

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

 

NM-48

The Northwestern Mutual Life Insurance Company

Notes to Financial Statements

December 31, 2020, 2019 and 2018

 

 

    For the year ended December 31, 2019
    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

     $ (1,113 )      $ 190       $ 314       $ 42       $ (50 ) 

Amortization from surplus into net periodic benefit cost

     53       (25 )      (15 )      (1 )      5  

Changes in plan assets and benefit obligations recognized in surplus

     (229 )      -       -       (104 )      -  
 

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

Balance at December 31

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

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

Benefit Plan Costs

The components of net periodic benefit cost for the years ended December 31, 2020, 2019 and 2018 were as follows:

 

     Defined Benefit Plans   Postretirement Benefit Plans
     2020   2019   2018   2020   2019   2018
    

 

(in millions)

  

 

(in millions)

Components of net periodic benefit cost:

             

Service cost of benefits earned

      $ 134       $ 129       $ 146       $ 14       $ 16       $ 20  

Interest cost on projected obligations

      177       204       180       16       23       21  

Amortization of experience losses

      56       53       42       4       (1 )      -  

Amortization of prior service (credits) costs

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

Amortization of initial net asset

      (14 )      (15 )      -       -       -       -  

Expected return on plan assets

      (336 )      (284 )      (309 )      (5 )      (4 )      (5 ) 

Curtailment

      (1 )      -       -       28       -       -  
  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

Net periodic benefit (credit) cost

      $ (9 )        $ 62         $ 34         $     53         $     39         $     41    
  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

The expected benefit payments by the defined benefit plans and the postretirement benefit plans for the years 2021 through 2030 are as follows:

 

     Defined
Benefit Plans		   Postretirement
Benefit Plans
    

 

(in millions)

2021

      $ 183       $ 28  

2022

      205       27  

2023

      214       27  

2024

      225       26  

2025

      233       26  

2026-2030

     

 

 1,306

 

  

 

    

 

 125

 

  

 

  

 

 

 

  

 

 

 

Total

      $ 2,366         $ 259    
  

 

 

 

  

 

 

 

 

NM-49

The Northwestern Mutual Life Insurance Company

Notes to Financial Statements

December 31, 2020, 2019 and 2018

 

 

The Company sponsors a contributory 401(k) plan for eligible employees, for which the Company provides a matching contribution, and a noncontributory defined contribution plan for financial representatives. In addition, the Company sponsors nonqualified plans that provide related benefits to certain participants in excess of limits set by ERISA for qualified defined contribution plans. For the years ended December 31, 2020, 2019 and 2018, the Company expensed total contributions to these plans of $57 million, $53 million and $50 million, respectively. The Company announced in the fourth quarter of 2020 that it’s matching contributions to the 401(k) plan will be temporarily ceased beginning in 2021 and replaced by additional contribution credits to the cash balance plan.

 

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, 2020 and 2019, the net amount due from NLTC under this agreement was $50 million and $48 million, respectively.

Amounts in the 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, 2020 and 2019. The Company has reinsured all risks disclosed in the financial statements under Actuarial Guideline 48.

The effects of reinsurance on premium revenue and total benefits for the years ended December 31, 2020, 2019 and 2018 were as follows:

 

     For the years ended December 31,
           2020               2019               2018      
     (in millions)

Direct premium revenue

      $ 19,501       $ 19,197       $ 18,231  

Premiums assumed

      800       763       711  

Premiums ceded

      (978 )      (950 )      (906 ) 
  

 

 

 

  

 

 

 

  

 

 

 

Premium revenue

      $     19,323       $     19,010       $     18,036  
  

 

 

 

  

 

 

 

  

 

 

 

Direct benefit expense

      $ 20,538       $ 20,158       $ 19,037  

Benefits assumed

      837       830       680  

Benefits ceded

      (792 )      (805 )      (699 ) 
  

 

 

 

  

 

 

 

  

 

 

 

Total benefits    

      $ 20,583         $ 20,183         $ 19,018    
  

 

 

 

  

 

 

 

  

 

 

 

In addition, the Company received $133 million, $135 million and $129 million in allowances from reinsurers for reimbursement of commissions and other expenses on ceded business for the years ended December 31, 2020, 2019 and 2018, respectively. These amounts are reported in other income in the statements of operations. For the years ended December 31, 2020, 2019 and 2018, the Company incurred $127 million, $136 million and $138 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, 2020 and 2019 that were considered by the Company to be uncollectible.

 

NM-50

The Northwestern Mutual Life Insurance Company

Notes to Financial Statements

December 31, 2020, 2019 and 2018

 

 

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 QOZ Fund, LLC

NM Career Distrib. Holdings, LLC and subsidiaries

  

NM QOZ Fund II, LLC

NM Investment Management Company, LLC

  

NM SAS, LLC

Northwestern Long Term Care Ins. Co

  

Venture Studio Holdings, LLC

 

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.

The components of current income tax expense (benefit) in the Statements of Operations for the years ended December 31, 2020, 2019 and 2018 related to ordinary taxable income (loss) were as follows:

 

    For the years ended December 31,
   

 

      2020      

  

 

      2019      

  

 

      2018      

    (in millions)

Tax payable on ordinary income

     $ 637       $ 103       $ 110  

Low income housing tax credits

     (136 )      (123 )      (119 ) 

Other tax credits

     (71 )      (49 )      (23 ) 

Decrease in contingent tax liabilities

     (153 )      (130 )      (127 ) 
 

 

 

 

  

 

 

 

  

 

 

 

Total current tax expense (benefit)

     $ 277         $ (199 )        $ (159 )   
 

 

 

 

  

 

 

 

  

 

 

 

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 (benefit) of $433 million, $141 million and $(49) million was included in net IMR deferrals for the years ended December 31, 2020, 2019 and 2018, respectively. In addition, net realized capital gains and losses as reported in the statements of operations included current tax expense (benefit) of $(2) million, $173 million and $88 million for the years ended December 31, 2020, 2019 and 2018, respectively.

 

NM-51

The Northwestern Mutual Life Insurance Company

Notes to Financial Statements

December 31, 2020, 2019 and 2018

 

 

The table below shows how the Company’s income tax expense or benefit for the years ended December 31, 2020, 2019 and 2018 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,
    

 

          2020      

  

 

      2019      

  

 

      2018      

     (in millions)

Provision computed at statutory rate

      $ 580       $ 402       $ 98  

Adjustments to the statutory rate:

       

Subsidiary distributions

      (283 )      (73 )      (115 ) 

Tax credits

      (207 )      (172 )      (142 ) 

Amortization of IMR

      (53 )      (28 )      (28 ) 

Dividends received deduction

      (31 )      (33 )      (26 ) 

Employee benefits

      (22 )      (12 )      (17 ) 

Deferred adjustments

      (29 )      183       214  

Other

      (50 )      (21 )      (28 ) 
  

 

 

 

  

 

 

 

  

 

 

 

Total statutory income tax expense (benefit)

      $ (95 )      $ 246       $ (44 ) 
  

 

 

 

  

 

 

 

  

 

 

 

Federal income tax expense (benefit) reported on

statements of operations

    $ 277     $ (199 )    $ (159 ) 

Capital gains tax expense, net of IMR transfers

      431       315       39  

Change in net deferred tax assets

      (803 )      130       76  
  

 

 

 

  

 

 

 

  

 

 

 

Total statutory income tax expense (benefit)

      $ (95 )        $ 246         $ (44 )   
  

 

 

 

  

 

 

 

  

 

 

 

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 $679 million, $410 million and $150 million to the IRS during the years ended December 31, 2020, 2019 and 2018, respectively.

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 2020, 2019 and 2018 that are available for recoupment are $461 million, $496 million and $247 million, respectively.

Federal income tax returns for 2016 and 2013 and prior years are closed as to further assessment of tax. Tax returns for the 2014 and 2015 tax years are in appeals with the IRS. Income taxes payable in the statements of financial position represents an estimate of taxes payable, including additional taxes that may become due with respect to tax years that remained open to examination by the IRS (“contingent tax liabilities”) at the respective reporting date.

Changes in contingent tax liabilities for the years ended December 31, 2020 and 2019 were as follows:

 

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

Balance at January 1

      $ 153         $ 283    

Reductions for tax positions of prior years

      (153 )      (130 ) 
  

 

 

 

  

 

 

 

Balance at December 31

      $ -       $ 153  
  

 

 

 

  

 

 

 

 

NM-52

The Northwestern Mutual Life Insurance Company

Notes to Financial Statements

December 31, 2020, 2019 and 2018

 

 

Included in contingent tax liabilities at December 31, 2020 and 2019 were $0 million and $138 million, respectively, of tax positions for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of the deductions. Because of the impact of deferred taxes for amounts other than interest, the timing of the ultimate deduction may affect the effective tax rate in future periods. The Company has no tax positions for which the ultimate deductibility is not certain.

For the years ended December 31, 2020, 2019 and 2018, the Company recognized $(15) million, $(3) million and $(9) million, respectively, of interest-related tax expense.

The components of net deferred tax assets reported in the statements of financial position at December 31, 2020 and 2019 were as follows:

 

     December 31,         
             2020                            2019                          Change        
     (in millions)         

Deferred tax assets:

             

Policy acquisition costs

      $ 1,016          $ 942            $ 74    

Investments

      319          259          60  

Policy benefit liabilities

      1,673          1,656          17  

Benefit plan obligations

      621          573          48  

Fixed Assets

      931          -          931  

Other

 

     

 

 83

 

  

 

       

 

 115

 

  

 

       

 

 (32

 

 ) 

 

  

 

 

 

     

 

 

 

     

 

 

 

Gross deferred tax assets

      4,643          3,545          1,098  

Nonadmitted deferred tax assets

 

      -          -          -  
  

 

 

 

     

 

 

 

     

 

 

 

Gross admitted deferred tax assets

 

      4,643          3,545          1,098  
  

 

 

 

     

 

 

 

     

 

 

 

Deferred tax liabilities:

             

Investments

      986          822          164  

Other

      1,352          1,114          238  
  

 

 

 

     

 

 

 

     

 

 

 

Gross deferred tax liabilities

 

      2,338          1,936          402  
  

 

 

 

     

 

 

 

     

 

 

 

Net deferred tax assets

      $ 2,305          $ 1,609          $ 696  
  

 

 

 

     

 

 

 

     

 

 

 

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, 2020 and 2019.

 

NM-53

The Northwestern Mutual Life Insurance Company

Notes to Financial Statements

December 31, 2020, 2019 and 2018

 

 

Significant components of the calculation of net admitted deferred tax assets at December 31, 2020 and 2019 were as follows (in millions):

 

                                                                                                                                      
     December 31, 2020   December 31, 2019   Change
  

 

 

 

         Ordinary           Capital           Total           Ordinary           Capital           Total           Ordinary           Capital           Total    
Gross deferred tax assets      $ 4,324         $ 319         $ 4,643         $ 3,287         $ 258         $ 3,545         $ 1,037         $ 61         $ 1,098    
Statutory valuation allowance adjustment      -       -       -       -       -       -       -       -       -  
  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

Adjusted gross deferred tax assets      4,324       319       4,643       3,287       258       3,545       1,037       61       1,098  
Deferred tax assets nonadmitted      -       -       -       -       -       -       -       -       -  
  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

Subtotal net admitted deferred tax asset      4,324       319       4,643       3,287       258       3,545       1,037       61       1,098  
Deferred tax liabilities      1,352       986       2,338       1,114       822       1,936       238       164       402  
  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

Net admitted deferred tax asset/(liability)      $ 2,972       $ (667 )      $ 2,305       $ 2,173       $ (564 )      $ 1,609       $ 799       $ (103 )      $ 696  
  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

 

                                                                                                                                      
     December 31, 2020       December 31, 2019       Change  
  

 

 

 

             Ordinary           Capital               Total               Ordinary               Capital               Total               Ordinary               Capital               Total      
Federal income taxes paid in prior years recoverable through loss carrybacks      $ -         $ 185         $ 185         $ -         $ 147         $ 147       $ -         $ 38         $ 38    
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)      2,599       -       2,599       1,695       -       1,695       904       -       904  
Adjusted gross deferred tax assets (excluding the amount of deferred tax assets offset by gross deferred tax liabilities)      1,725       134       1,859       1,592       112       1,704       133       22       155  
  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

Total deferred tax assets admitted as the result of application of SSAP No. 101      $ 4,324       $ 319       $ 4,643       $ 3,287       $ 259       $ 3,545       $ 1,037       $ 60       $ 1,098  
  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

a. Adjusted gross deferred tax assets expected to be realized following the balance sheet date          $ 2,599           $ 1,695           $ 904  
      

 

 

 

      

 

 

 

      

 

 

 

b. Adjusted gross deferred tax assets allowed per limitation threshold          $ 3,394           $ 3,386           $ 8  
      

 

 

 

      

 

 

 

      

 

 

 

Ratio percentage used to detemine recovery period and threshold limitation amount          920%           1010%        
      

 

 

 

      

 

 

 

      
Amount of adjusted capital and surplus used to determine recovery period and threshold limitation          $ 22,625           $ 22,576        
      

 

 

 

      

 

 

 

      

All gross deferred tax liabilities have been recognized at December 31, 2020 and 2019. The Company did not employ tax planning strategies in its valuation allowance assessment at either December 31, 2020 or 2019. At December 31, 2020, the percentage of net ordinary deferred tax assets admitted as a result of tax planning strategies was 9%. The Company did not employ tax planning strategies in its deferred tax asset admissibility calculations at December 31, 2019.

 

11.

Commitments and Contingencies

Commitments

In the normal course of its investment activities, the Company makes commitments to fund private equity investments, real estate, mortgage loans and other investments. These forward commitments aggregated to $9.7 billion and $10.1 billion at December 31, 2020 and 2019, respectively, and were extended at market rates and terms.

Contingencies

The Company is engaged in various legal actions in the normal course of its insurance and investment operations. The status of these legal actions is actively monitored by the Company. If the Company believes, based on available information, that an adverse outcome upon resolution of a given legal action is probable and the amount of that adverse outcome is reasonably estimable, a loss is recognized and a related liability reported. Legal actions are subject to inherent uncertainties, and future events could change the 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, 2020.

 

NM-54

The Northwestern Mutual Life Insurance Company

Notes to Financial Statements

December 31, 2020, 2019 and 2018

 

 

Guarantees

In the normal course of business, the Company makes guarantees to third parties on behalf of wholly-owned subsidiaries (e.g., debt guarantees) and financial representatives (e.g., the guarantee of office lease payments), or directly to financial representatives (e.g., future minimum compensation payments). If the financial representatives are not able to meet their obligations or these minimum compensation thresholds are not otherwise met, the Company would be required to make payments to fulfill its guarantees. For certain of these guarantees, the Company has the right to pursue recovery of payments made under the agreements. The terms of these guarantees range from less than one year to twenty-one years at December 31, 2020.

Following is a summary of the guarantees provided by the Company that were outstanding at December 31, 2020 and 2019, including both the maximum potential exposure under the guarantees and the financial statement liability reported based on fair value of the guarantees.

 

     December 31, 2020   December 31, 2019

        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         $ 67           $ 1    

Guarantees of real estate obligations

      476         5       418         4  

Guarantees issued on behalf of wholly-owned subsidiaries

     
 106
  
      
 -
  
    
 19
  
      
 -
  
  

 

 

 

    

 

 

 

  

 

 

 

    

 

 

 

Total guarantees

      $ 641         $ 6       $ 504         $ 5  
  

 

 

 

    

 

 

 

  

 

 

 

    

 

 

 

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 amended during 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 and $25 million for the years ended December 31, 2020 and 2019, respectively. The Company has contributed a total of $205 million to NLTC through December 31, 2020. The Company reported a payable to NLTC of $59 million and $56 million at December 31, 2020 and 2019, respectively, which is reported in other liabilities in the 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

The Northwestern Mutual Life Insurance Company

Notes to Financial Statements

December 31, 2020, 2019 and 2018

 

 

13.

Surplus Notes

The following table summarizes the surplus notes issued by the Company and are outstanding at December 31, 2020:

 

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         $ 1,083         6.063 %      3/30/2040  

2017 Notes

      9/26/2017        1,200       1,198       46       139       3.850 %      9/30/2047  

2019 Notes

      9/20/2019        1,347       1,151       50       50       3.625 %      9/30/2059  
     Total               
  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

    
        $ 3,771       $ 3,573       $ 170     $ 1,272      
     

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

    

Each series of notes was distributed pursuant to Rule 144A under the Securities Act of 1933, as amended. Interest on each of the above notes is payable semi-annually on March 30 and September 30, subject to approval by the OCI. SAP requires recognition of interest expense on the notes upon OCI approval of semi-annual interest payments.

On September 20, 2019, the Company issued $1,347 million of 2019 notes. A portion of the issuance was comprised of $ 600 million new principal, issued at a discount, with net proceeds of $597 million. The remaining $747 million of principal was used to redeem 2010 notes with a principal balance of $526 million as part of a surplus note exchange transaction. Of the $221 million of discount at the time of the exchange, $22 million was related to an inducement for noteholders to exchange their 2010 notes, and was recorded as a reduction to net investment income within the statement of operations. Since this exchange transaction did not meet the “substantially different” criteria within SSAP No. 103R, Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, the remaining discount of $199 million will be amortized and charged to the statement of operations over the remaining life of the 2019 notes.

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 notes) and 0.25% (2010 and 2019 notes). The entire amount of the 2017 and 2019 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 notes or the 2019 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, 2020 and 2019.

 

NM-56

The Northwestern Mutual Life Insurance Company

Notes to Financial Statements

December 31, 2020, 2019 and 2018

 

 

14.

Fair Value of Financial Instruments

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

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 100, the statement value and fair value at December 31, 2020 and 2019 were as follows:

 

     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  

 

NM-57

The Northwestern Mutual Life Insurance Company

Notes to Financial Statements

December 31, 2020, 2019 and 2018

 

 

     December 31, 2019
               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

      $ 159,760        $ 168,729        $ 2,605        $ 151,243        $ 14,881        $ -  

Mortgage loans

      39,771        41,784        -        -        41,784     

Common and preferred stocks

      4,267        4,290        3,671        78        541     

Policy loans

      17,829        17,829        -        -        17,829     

Derivative assets

      546        697        -        697        -     

Surplus note investments

      111        144        -        144        -        -  

Cash and short-term investments

      2,408        2,408        809        1,599        -        -  

Separate account assets

      34,832        34,832        31,092        3,017        617        106  

General account liabilities:

                  

Investment-type insurance reserves

      $ 5,242        $ 5,189        $ -        $ -        $ 5,189        $ -  

Liabilities for repurchase agreements

      1,711        1,711        -        1,711        -        -  
                 

Derivative liabilities

      189        163        -        163        -        -  

Separate account liabilities

      34,832        34,832        31,092        3,017        617        106  

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.

 

NM-58

The Northwestern Mutual Life Insurance Company

Notes to Financial Statements

December 31, 2020, 2019 and 2018

 

 

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, LIBOR 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.

General Account Insurance Reserves

The Company’s general account insurance liabilities defined as financial instruments under SSAP 100 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

The Northwestern Mutual Life Insurance Company

Notes to Financial Statements

December 31, 2020, 2019 and 2018

 

 

Assets and Liabilities Reported at Fair Value

The following tables summarize assets and liabilities measured and reported at fair value in the statements of financial position at December 31, 2020 and 2019.

 

    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    
 

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

 

    December 31, 2019
    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

     $ 3       $ 37       $ 5       $ -       $ 45  

Common and preferred stocks

     3,671       -       458       -       4,129  

Money market mutual funds

     668       -       -       -       668  

Derivative assets

     -       75       -       -       75  

Derivative liabilities

     -       21       -         21  
 

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

Total general account

     $ 4,342       $ 133       $ 463       $ -       $ 4,938  
 

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

Separate accounts:

          

Mutual fund investments

     $ 29,245       $ -       $ -       -       $ 29,245  

Other benefit plan assets/liabilities

     21       18       4       1       44  

Pension and postretirement assets:

          

Bonds

     226       2,887       119       -       3,232  

Common and preferred stock

     1,462       1       46       105       1,614  

Cash and short-term securities

     34       105       -       -       139  

Other assets/liabilities

     104       6       448       -       558  
 

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

Subtotal pension and postretirement assets

     1,826       2,999       613       105       5,543  
 

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

Total separate accounts

     $ 31,092         $ 3,017         $ 617         $ 106         $ 34,832    
 

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

 

NM-60

The Northwestern Mutual Life Insurance Company

Notes to Financial Statements

December 31, 2020, 2019 and 2018

 

 

During 2020, 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, 2019.

The following tables summarize the changes in fair value of level 3 financial instruments for the years ended December 31, 2020 and 2019.

 

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    
  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

 

For the year ended December 31, 2019    General account
common and
preferred stock		   General
account bonds		   Derivative
assets		   Separate account
assets
     (in millions)

Fair value, beginning of period

      $                 455       $                 5       $                 16       $                 531  

Realized gains/(losses)

      (27)       -       -       41  

Unrealized gains/(losses)

      24       -         26  

Issuances

      -       -       -       -  

Purchases

      37       -       -       151  

Sales

      (35)       -       -       (132)  

Settlements

      -       -       -       -  

Net discount/premium

      4       -       -       (1)  

Transfers into level 3

        -       -       1  

Transfers out of level 3

      -       -       (16)    
  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

Fair value, end of period

      $ 458         $ 5         $ -         $ 617    
  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

 

NM-61

The Northwestern Mutual Life Insurance Company

Notes to Financial Statements

December 31, 2020, 2019 and 2018

 

 

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 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