497 1 d284696d497.htm NML VARIABLE ANNUITY ACCOUNT C NML VARIABLE ANNUITY ACCOUNT C
Group Combination Annuity (Account C)
Issued by The Northwestern Mutual Life Insurance Company and NML Variable Annuity Account C
Prospectus May 1, 2022
This prospectus describes an unallocated Group Combination Annuity Contract (the “Contract”) to provide retirement annuity benefits for self-employed persons and their eligible employees. Although the Contract is no longer offered for sale to retirement plans of self-employed persons, subsequent Purchase Payments may continue to be made under in-force Contracts. You may choose to invest your Net Purchase Payments on a variable, fixed, or a combination thereof on a tax-deferred 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 Options
- Guaranteed Return Fund (in 1-,3-, and 5-year durations)
The Contract (including the fixed option) and the variable 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 (including the fixed option) 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 specific legal requirements. .
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 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—A Participant in the Plan or Trust who has been named to receive Annuity Payments in accordance with the provisions of the Plan or Trust.
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 an interest in a variable income plan, after the date on which Annuity Payments begin, in one or more Divisions of the Separate Account.
Certificate—A document issued to an Annuitant describing the benefits to be received under the Contract. A Certificate will also include beneficiary provisions.
Company—The Northwestern Mutual Life Insurance Company.
Contract—The agreement between you and us described in this variable annuity Prospectus.
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 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 Return Fund—A fixed investment option under the Contract, supported by the assets held in the Company’s General Account, that has a term of a specified duration (called a “Guaranteed Period”).
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”.
Market Value Adjustment—An amount that may be credited (or charged) upon a withdrawal from a Guaranteed Return Fund before the end of a Guaranteed Period.
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. The Owner is ordinarily the employer, a custodian, or trustee.
Penalty Tax—If premature payment of benefits are made under an Annuity Contract, a penalty tax may be incurred. (See “Taxation of Contract Benefits.”)
Plan—The document(s) under which the benefits provided by this Contract are distributed to the individual employees or plan participants. The term includes any trust, custodial, or other document providing for the funding of Plan benefits.
Portfolio—A series of a Fund available for investment under the Contract which corresponds to a particular Division of the Separate Account.
Prospectus—The full statutory prospectus for the Contract.
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.
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.
1Account C Prospectus
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.
Withdrawal Amount—The value of the Accumulation Units which you are permitted to withdraw pursuant to the terms of the Contract. Withdrawal Amounts may be subject to short-term trading fees charged by Portfolios and Market Value Adjustments applied to withdrawals from a Guaranteed Return Fund.
This prospectus describes two classes of the Group Combination Annuity Contract: a front-load version (in which a sales charge is assessed when Purchase Payments are made) and a simplified-load version (in which no sales charge is assessed).
Account C Prospectus
2
Important Information You Should Consider About the Contract 
 
FEES AND EXPENSES
Cross-Reference(s)
to Location in
Prospectus
Charges for Early
Withdrawal
If you 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 certain tax-related charges,
as well as front-end sales load on front-load Contracts.
The maximum sales load on a front-load Contract is 4.5% as a percentage of
Purchase Payments.
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. 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
(varies depending on whether
Contract is front-load or simplified-load)
0.65%1
1.50%1
Investment Options
(Portfolio company
fees and expenses)
0.21%2
1.28%2
1 As a percentage of Separate Account assets.
2 As a percentage of Portfolio assets.
 
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. 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
$8211
HIGHEST ANNUAL COST
$3,1281
Assumes:
•Investment of $100,000
•5% annual appreciation
•Least expensive combination of Contract
Classes and Portfolio fees and expenses
•No sales charges
•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
•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.
 
RISKS
 
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.
The Contract –
Generally
3Account C Prospectus
 
RISKS
Cross-Reference(s)
to Location in
Prospectus
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 Guaranteed Return Fund (GRF) accounts, fixed investment options offered
under the Contracts, are subject to the risk of negative Market Value
Adjustment (MVA) which could decrease the amount available for transfer or
withdrawal from a GRF account. You should carefully consider the effects of a
negative MVA before making a transfer or withdrawal from a GRF account.
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, including charges, and monies moved out of these options
may limit the availability of any positive market value adjustment that might
otherwise apply.
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)
 
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. Some
distributions will generally be subject to ordinary income tax rates, and may be
subject to penalties.
Federal Income
Taxes
 
CONFLICTS OF INTEREST
 
Investment
Professional
Compensation
The Contract is sold exclusively through financial representatives of
Northwestern Mutual’s affiliated broker-dealer, who are compensated with a
commission based on a percentage of Purchase Payments, and Northwestern
Mutual may share revenue it earns on the Contract with its affiliated broker-
dealer. These financial representatives may have a financial incentive to offer
or recommend the Contract over other investments.
Additional
Information – The
Distributor
 
Account C Prospectus
4
Overview of the Contract
The Contracts are unallocated group annuity contracts, the purpose of which is primarily to provide for the accumulation of funds and the payment of retirement benefits to participants or their beneficiaries (“Annuitants”). Funds may be accumulated on a variable, fixed, or a combined basis in one or more omnibus accounts established for each Contract. The Contracts do not provide for the establishment of individual accounts for Plan or Trust participants until participants become entitled to receive benefits from the Plan or Trust.
We offer the Contracts only for use under tax-qualified plans meeting the requirements of Sections 401 and 403(a) of the Code. The Contracts are not intended for short term-investment and are 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 the Contract, known as the accumulation (savings) phase, the earnings accumulate on a tax-deferred basis. The annuitization (income) period begins when a participant retires or otherwise becomes entitled to receive benefits and you direct us to pay Annuity benefits to the participant. (See “Retirement Benefits.”) All or a portion of such payments will be taxed as ordinary income. We will then pay retirement benefits in a lump sum or under a variable or fixed income plan and issue the Annuitant a Certificate describing the benefits which have been selected. (See “Income Plans.”) The amount accumulated under the Contract, including the results of investment performance of the Divisions, and interest earned under the fixed options, will determine the amount of the Retirement Benefit. Additional information about the Portfolios in which the Divisions invest is provided in the Appendix (see "Appendix A: Portfolios Available Under Your Contract). Benefits available to participants are determined entirely by the provisions of the Plan or Trust.
In addition to the Divisions which vary with the investment experience of the underlying Portfolios, the Contracts offer fixed options (Guaranteed Return Fund or “GRF” accounts) that credit interest at declared rates.
Below are other features and options that the Contract offers.
•
Contract classes. The Contract currently offers two classes for new investors, a front-load version (in which a sales charge is assessed when Purchase Payments are made) and a simplified-load version (in which a sales charge is assessed).
•
Accessing your money. To the extent permitted by the Plan or Trust, you may terminate the Contract and redeem the value of Accumulation Units credited to the Contract by submitting a request in writing, subject to our administrative procedures.Withdrawal rights during the annuitization period will depend on the income plan selected.
•
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 retirement benefit.
•
Retirement Benefit. You may direct us to pay retirement benefits to an Annuitant at any time while your contract is in force. Upon your request, benefits may be paid in a lump sum or under an Income Plan. If a participant under your retirement plan or trust dies before retirement, any retirement benefits available are governed by the terms of your plan or trust. If he dies after retirement (i.e., after he annuitizes), any death benefits would be governed by the Income Plan in effect at that time.
5Account C Prospectus
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. There are two sets of tables: one for a front-load Contract (in which a sales charge is assessed when Purchase Payments are made) and one for a one for a simplified-load Contract (in which a sales charge is assessed). 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 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.
Each table shows the maximum and current fees and expenses for multiple Contract versions. The first column [(the “RR” series)] shows the maximum and current fees and expenses related to the current Contract version. The subsequent columns show the maximum and current fees and expenses for each prior Contract version.
Front-Load Contract (in which a sales charge is assessed when Purchase Payments are made) 
Transaction Expenses
Maximum
Fee
Current
Fee
Maximum Sales Load (as a percentage
of Purchase Payments)1
4.5%
4.5%
Transfer Fee
N/A
N/A
Expedited Delivery Charge2
$17
$17
Wire Transfer Fee3
$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). 
Annual Contract Expenses
Maximum
Fee
Current
Fee
Administrative Expenses4
$150
$150
Base Contract Expenses (as a percentage of Separate Account assets)5
1.00%
0.65%
Simplified-Load Contract (in which a one-time sales charge is assessed) 
Transaction Expenses
Maximum
Fee
Current
Fee
Sales Load (as a percentage
of Purchase Payments)1
None
None
Installation Fee
$750
$750
Expedited Delivery Charges2
$17
$17
Wire Transfer Fee3
$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). 
Annual Contract Expenses
Maximum
Fee
Current
Fee
Administrative Expenses4
$150
$150
Base Contract Expenses (as a percentage of Separate Account assets)5
1.50%
1.25%
1 The sales load for a front-load Contract depends on the amount of cumulative Purchase Payments.
2 For express mail delivery with signature required; the express mail delivery charge without signature is $15.
3 We also charge $15 for wire transfers in connection with withdrawals.
4 We charge an Annual Contract Fee of $150. 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 prior notice.
5 We guarantee the current Base Contract Expense for five years from the date of this Prospectus. Thereafter, we reserve the right to raise the Base Contract Expense to a maximum annual rate of 1.00% for the front-load Contract and 1.50% for the simplified-load Contract. After the fifth Contract year we may amend the Contract with respect to the maximum annual rate for the base contract expense as well as other Contract terms.
Account C Prospectus
6
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%
1.28%
Annual Portfolio Operating Expenses After Contractual Fee Waiver or Reimbursement*
0.19%
1.12%
*
The “Annual Portfolio Operating Expenses After Contractual Fee Waiver or Reimbursement” line in the above table shows the minimum and maximum fees and expenses as of December 31, 2021 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.
For more information about voluntary fee waivers that may be in place, see the “Charges” section.
Examples1
The following Examples are 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 Examples assume that you invest $100,000 in the Contract for the time periods indicated and that your investment has a 5% return each year. The Examples reflect 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:
Front-Load Contract 
 
1 year
3 years
5 years
10 years
If you surrender your
Contract at the end of the
applicable time period:
$6,439
$11,047
$15,909
$29,271
If you annuitize at the end
of the applicable time
period:
$6,439
$11,047
$15,909
$29,271
If you do not surrender
your Contract:
$6,439
$11,047
$15,909
$29,271
Simplified-Load Contract 
 
1 year
3 years
5 years
10 years
If you surrender your
Contract at the end of the
applicable time period:
$2,548
$8,373
$14,460
$30,899
If you annuitize at the end
of the applicable time
period:
$2,548
$8,373
$14,460
$30,899
If you do not surrender
your Contract:
$2,548
$8,373
$14,460
$30,899
Note: The purchase payments for either a front-load Contract or a simplified-load Contract must reach a total minimum amount of $25,000 during the first Contract year. The installation fee of $750 is divided between the funds for the simplified-load fee table. The numbers above must be multiplied by 2.5 to find the expenses for a front-load Contract or a simplified-load Contract of this minimum size.
The sales load for a front-load Contract depends on the amount of cumulative Purchase Payments. See “Charges” for additional information about expenses for the Contracts. The expense numbers shown in the tables reflect the Base Contract Charge. 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.
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.
7Account C Prospectus
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 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 under the Contract, and each Portfolio (including any fixed account investment options) 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 (including 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.
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. The risk of cyber-attacks may be higher during periods of geopolitical turmoil (such as the Russian invasion of Ukraine and the responses by the United States and other governments). There can be no assurance that we or the underlying 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.
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 $334 billion as of December 31, 2021. 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. 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,
Account C Prospectus
8
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 C (the “Separate Account”) on July 22, 1970 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 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.
9Account C Prospectus
The Investment Options
The Contract makes available a variety of variable and fixed investment options. The Company does not endorse or recommend any particular option nor does it provide investment advice. 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 options earn interest for a specified period at a rate we declare from time to time; the principal and interest rate are guaranteed by the Company and are subject to the claims-paying ability of the Company.
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.
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.
Account C Prospectus
10
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 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 Net Purchase Payments among the Divisions or transfer Accumulation Units from one Division to another at any time. After the effective date of a variable Income Plan, the Annuitant may transfer Annuity Units from one Division to another. Changes in allocation and transfers are made based on the valuation of Accumulation or Annuity Units in the affected Divisions after our receipt of a written request at our Home Office, provided it is in good order, or on a future specified date. “Good order” means that the request is complete and accurate and all applicable requirements are satisfied. If such a request is received before the close of trading on the NYSE (typically, 4:00 p.m. Eastern Time), the request will receive same-day pricing. If we receive such a 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 Accumulation or Annuity Units to be credited to reflect the respective value of the Accumulation and Annuity Units in each of the Divisions. You may transfer Accumulation or Annuity Units among the Divisions up to twelve times in a Contract year. We may set waiting periods for transfers of Annuity Units.
If you contemplate the transfer of funds from one Division to another, you should consider the risk inherent in a switch from one investment medium to another. In general, frequent transfers based on short-term expectations for the securities markets, especially transfers of large sums, will tend to accentuate the danger that a transfer will be made at an inopportune time. Frequent transfers, or transfers that are large in relation to the assets of the Portfolio in which a Division invests, may also be disruptive and may disadvantage other investors. We reserve the right to limit the frequency or amount of transfers. See the attached prospectuses for the Funds for more information about their frequent trading policies. We will assist the Funds in the implementation of their policies. After the effective date of a variable Income Plan which includes the right of withdrawal, a payee may transfer the Withdrawal Value to any other Income Plan. An administrative charge may apply.
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 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, except to the extent we are prevented from doing so under applicable or federal law or regulations. 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 if a total of three round trips are made within that same Contract year or two round trip transfers are made within any subsequent year. 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 if a total of two round trips are made within that same Contract year or one round trip transfer is made within any subsequent year. 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
11Account C Prospectus
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 may require us to provide transaction information to the Fund (including an Owner’s tax identification number) and to restrict or prohibit transfers and other transactions that involve the purchase of shares of a Portfolio(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. 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, we do request that Contract Owners take steps that are reasonably designed to discourage individual participants from market timing.
Fixed Options
During the Accumulation phase of your Contract, you may invest on a fixed basis in the following guaranteed accounts, provided they are available in your state and under your Contract. To find out if a Guaranteed Return Fund Account 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 Guaranteed Return Fund Accounts
General During the Accumulation phase of the Contract, the Owner of a Series NN contract may invest on a fixed basis in the following Guaranteed Return Fund (“GRF”) accounts of different durations, provided they are available in your state: a 1-year GRF, a 3-year GRF, and a 5-year GRF. The sum of all the Accumulation Values of all the GRF Accounts in a given contract may not exceed the GRF Accounts Maximum as shown in the Contract. To find out if a particular GRF is available, please contact your Northwestern Mutual Financial Representative or call 1-888-455-2232.
Interest Rates Assets deposited into a GRF earn the interest rate effective on the date of the deposit. Interest rates are set as follows: For contract amounts of more than $1 million, interest rates are set daily. For amounts of $1 million or less, interest rates are set Friday of each week and apply to contributions received during the following week.
Interest rate bands for the simplified-load contracts are as follows: 
Contract Size
Interest Rate
At Least
But less than
 
0
$125,000
Base Rate
$125,000
$500,000
Base Rate + 0.20%
$500,000
$1,000,000
Base Rate + 0.40%
$1,000,000
$1,500,000
Base Rate + 0.60%
$1,500,000
 
Base Rate + 0.80%
Account C Prospectus
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Interest rate bands for the front-load contracts are shown below. 
Contract Size
Interest Rate
At Least
But less than
 
0
$1,500,000
Base Rate
$1,500,000
 
Base Rate + 0.10%
Maturity Dates GRF Maturity Dates are quarterly and are set in accordance with the plan year end date. The table below shows several examples: 
If the Plan Year End
Date is
Example
The Maturity Dates
are
The first day of the month
01/01
01/01
04/01
07/01
10/01
The last day of the month
03/31 or 06/30
03/31
06/30
09/30
12/31
Neither the first nor the last day of the
month
01/10
01/10
04/10
07/10
10/10
If, for example, the plan trustees of a calendar-year plan select a 1-year GRF and make monthly deposits in January, February, and March 2020, all the deposits will mature on March 31, 2021. Thus, the rate guarantee for a specific deposit into a 1-year GRF will be effective for 12-15 months (the “Guaranteed Period”). This same process is used to determine the Guarantee Periods for all GRFs. In those cases where the plan year end changes, maturities for subsequent purchase payments will be based on the new plan year end date. Maturity Dates established under the previous plan year end date will remain. In those cases, there may be more than four Maturity Dates in a year.
Options at Maturity When assets invested in a GRF mature, we transfer the funds pursuant to the direction of the Owner/Trustee. If the Owner/Trustee has so indicated on the Group Pension Annuity application, the assets will renew in the same GRF or be transferred to the Government Money Market Investment Division. If the application contains no such direction, and if the Owner/Trustee has not properly instructed us before the Maturity Date to transfer the funds to different investment Division(s), we will send a GRF Maturity Letter to the Owner/Trustee approximately thirty days before the Maturity Date notifying him/her that the GRF assets are due to mature and giving notice of what will happen unless we are provided with other instructions. If we are in receipt of no instructions, the assets will be transferred to the Government Money Market Investment Division. 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).
Market Value Adjustment A Market Value Adjustment (“MVA”) may be assessed (or credited) on transfers or withdrawals from a GRF (of any duration) prior to the Maturity Date or before the end of Guarantee Period. The amount of the MVA may be positive or negative, but in all events is the difference between the interest rate credited to a new deposit (with a Guarantee Period equal to the original length of the Guarantee Period of the amount being transferred or withdrawn) and the interest rate credited to the amount being transferred or withdrawn, multiplied by the number of years to maturity of the amount withdrawn. MVAs are generally not assessed in the following circumstances: (1) a withdrawal or transfer made within 30 (thirty) days of maturity; (2) when contracts are settled to a life income plan; or (3) when the withdrawal is used to pay a plan benefit under a defined contribution plan (e.g., payments upon a bona fide retirement, disability, death, or termination of employment). Reasonable proof that these provisions have been met must be provided to the Company upon request.
In no event will the MVA decrease the amount transferred or withdrawn by more than a proportionate allocation of the excess, if any, of the interest credited to a GRF since the beginning of the Guaranteed Period in which such amount is transferred or withdrawn to the date of transfer or withdrawal, over the interest that would have been credited if the Declared Rate had equaled an annual effective rate of 3% during that same time period. In general, the longer the period remaining to the end of the Guaranteed Period at the time of a transfer or withdrawal, the larger the MVA.Because a negative MVA can reduce credited interest in excess of the minimum interest rate required to be credited under applicable state law, you should carefully consider its effect before making a transfer or withdrawal from a GRF prior to the end of a Guaranteed Period.
Other Information Amounts you invest in a GRF 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, the GRFs do not bear any mortality rate and expense charges applicable to the Separate Account under the Contract, nor do they
13Account C Prospectus
bear expenses of the Portfolios in which the Divisions of the Separate Account invest. Other charges under the Contract apply to the GRFs. (See “Deductions.”) In reliance on certain exemptions and exclusionary provisions, we have not registered interests in the GRFs under the Securities Act of 1933, nor have we registered the GRFs or the General Account as investment companies under the 1940 Act. Accordingly, interests in a GRF are not subject to the same laws as interests in the Divisions of the Separate Account, and the staff of the SEC has not reviewed the disclosure in this Prospectus regarding the GRF.
The Contracts
Unallocated Group Annuity Contracts
We offered two versions of the Contracts: front-load Contracts and simplified-load Contracts. (See “Expense Table” and “Deductions.”) The Contracts are unallocated group annuity contracts that provide for the accumulation of funds and the payment of retirement benefits to participants or their beneficiaries (“Annuitants”). Funds may be accumulated on a variable, fixed, or a combined basis in one or more omnibus accounts established for each Contract. The Contracts do not provide for the establishment of individual accounts for Plan or Trust participants until participants become entitled to receive benefits from the Plan or Trust.
When a participant retires or otherwise becomes entitled to receive benefits, you may direct us to pay Annuity benefits to the participant. (See “Retirement Benefits.”) We will then pay retirement benefits in a lump sum or under a variable or fixed income plan and issue the Annuitant a Certificate describing the benefits which have been selected. (See “Income Plans.”) Benefits available to participants are determined entirely by the provisions of the Plan or Trust.
Purchase Payments Under The Contracts
Amount and Frequency You determine the amount and frequency of Purchase Payments subject to the provisions of the Plan or Trust. You may pay larger or additional purchase payments. However, we will not accept (a) any purchase payment unless it is a contribution for funding or for the payment of fees or loads under a pension or profit-sharing plan or trust which meets the requirements of Section 401 of the Internal Revenue Code of 1986, as amended (the “Code”) or the requirements for deduction of the employer’s contribution under Section 404(a)(2) of the Code; or (b) any Purchase Payment (initial or subsequent) of less than $100.
You may make Purchase Payments monthly, quarterly, semiannually, annually, or on any other frequency acceptable to us. If a Purchase Payment is not paid when due, or if we decline to accept a Purchase Payment as provided above, the Contract will continue in force unless you redeem all Accumulation Units for their value. You may resume payment of Purchase Payments at any time the Contract is inforce.
Application of Purchase Payments We credit Net Purchase Payments to your Contract, after deduction of any sales load or installation fee, and we allocate the payments as you direct. To the extent that you direct a Net Purchase Payment to accumulate on a variable basis, we place it in the Separate Account and allocate it to one or more Divisions. Assets we allocate to each Division we thereupon invest in shares of the Portfolio which corresponds to that Division. If we receive no allocation instructions, we will place the Net Purchase Payment in the Government Money Market Division.
We apply payments we place in the Separate Account to provide “Accumulation Units” in one or more Divisions. Accumulation Units represent your interest in the Separate Account.
The number of Accumulation Units you receive for each Net Purchase Payment after the initial Purchase Payment is determined by dividing the amount of the Purchase Payment to be allocated to a Division by the value of an Accumulation Unit in that Division, based upon the next valuation of the assets of that Division we make after we receive your Purchase Payment is received in good order either at our Home Office or a lockbox facility we have designated. We may reject any application or Purchase Payment for any reason permitted by law. We may also be required to provide additional information about Owners and Beneficiaries to government regulators. We value assets as of the close of trading on the NYSE for each day the Exchange is open.
The number of your Accumulation Units will be increased by additional purchase payments and decreased by withdrawals. The investment experience of the Separate Account does not change the number (as distinguished from the value) of your Accumulation Units. The value of an Accumulation Unit in each Division varies with the investment experience of the Division. This in turn is determined by the investment experience of the corresponding Portfolio. We determine the value of an Accumulation Unit on any date by multiplying the value on the immediately preceding Valuation Date by the Net Investment
Account C Prospectus
14
Factor for the Division for the current period. (See “Net Investment Factor.”) Since you bear the investment risk, there is no guarantee as to the aggregate value of your Accumulation Unit. That value may be less than, equal to, or more than the cumulative Net Purchase Payments you have made.
Net Investment Factor
For each Division, the Net Investment Factor for any period ending on a Valuation Date is 1.000000 plus the net investment rate for the Division for that period. Under the Contract, the net investment rate is related to the assets of the Division. However, since all amounts are simultaneously invested in shares of the corresponding Portfolio when allocated to the Division, calculation of the net investment rate for each of the Divisions may also be based upon the change in value of a single share of the corresponding Portfolio.
Thus, for example, in the case of the Balanced Division the net investment rate is equal to (a) the change in the net asset value of a Balanced Portfolio share for the period from the immediately preceding Valuation Date up to and including the current Valuation Date, plus the per share amount of any dividends and other distributions made by the Balanced Portfolio during the valuation period, less a deduction for any applicable taxes or for any expenses resulting from a substitution of securities, (b) divided by the net asset value of a Balanced Portfolio share at the beginning of the valuation period, (c) less an adjustment to provide for the charge for mortality rate and expense guarantees. (See “Deductions.”)
The Portfolios will distribute investment income and realized capital gains to the Separate Account Divisions. We will reinvest those distributions in additional shares of the same Portfolio. Unrealized capital gains and realized and unrealized capital losses will be reflected by changes in the value of the shares held by the Separate Account.
Benefits Provided Under The Contracts
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, or surrender, 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.
The benefits provided under the Contracts consist of a Surrender Value and a retirement benefit. (No death benefits are provided.) Subject to the restrictions noted below, we will pay all of these benefits in a lump sum or under the Income Plans described below. We will take the amounts required to pay benefits from the Divisions of the Separate Account, or from the value accumulated on a fixed basis, as you direct. If a participant under your retirement plan or trust dies before retirement, any death benefits available are governed by the terms of your plan or trust. If he dies after retirement (i.e., after he annuitizes), any death benefits would be governed by the Income Plan in effect at that time.
Benefits Available Under the Contract
The following table summarizes information about a variety of standard 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. 
Name of Benefit
Purpose
Is Benefit
Standard or
Optional
Maximum Fee
Brief Description of Limitations/
Restrictions
Surrender or
Withdrawal Value
You may terminate the Contract
and redeem the value of
Accumulation Units credited to
the Contract
Standard
No charge1
•You may surrender all or a portion
of the Accumulation Units
•Withdrawal rights during
annuitization period will depend on
income plan selected
Retirement
Benefits
The Contract allows for a
retirement benefit to be paid to
an Annuitant in a lump sum or
under a fixed or variable Income
Plan
Standard
No charge1
•Paid in lump sum or under income
plan
•May be subject to federal income
tax and tax penalty
•Amounts accumulated under
Contract may not be sufficient to
provide retirement benefits under
the Plan or Trust
15Account C Prospectus
Name of Benefit
Purpose
Is Benefit
Standard or
Optional
Maximum Fee
Brief Description of Limitations/
Restrictions
Income Plans
Annuity payments and
retirement benefit payments are
payable under various income
plans on a variable or fixed basis
Standard
No charge1
•Plans for annuity payments for sa
pecified 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 and may be
subject to a withdrawal charge
•Transfers between income plans
are only allowed under limited
circumstances
 
1 Variable income plans continue to be assessed Base Contract Charges.
Surrender or Withdrawal Value To the extent permitted by the Plan or Trust, you may terminate the Contract and redeem the value of Accumulation Units credited to the Contract. We determine the value, which may be either greater or less than the amount you have paid, as of the Valuation Date coincident with or next following our receipt of a written request for termination. Request forms are available from our Home Office and our agents. You may surrender a portion of the Accumulation Units on the same basis. You may instruct us how to allocate your partial surrender request among your investments in the Divisions or fixed investment options. If no direction is received, your surrender will be deducted proportionately from each of your investments.
A payee under Income Plan 1 may elect to withdraw the present value of any unpaid income payments at any time. Upon death during the certain period of the payee under Plan 2 or both payees under Plan 3, the beneficiary may elect to withdraw the present value of any unpaid payments for the certain period. We base the Withdrawal Value on the Annuity Unit value on the withdrawal date, the date we receive proof of death at our Home Office, or, if later, the date on which a method of payment is elected, with the unpaid payments discounted at the Assumed Investment Rate if received before the close of trading for the NYSE (typically 4:00 p.m. Eastern time). (See “Description of Income Plans.”) If received on or after the closing of the NYSE, we will determine the Withdrawal Value at the close of the next regular trading session of the NYSE.
Retirement Benefits You may direct us to pay retirement benefits to an Annuitant at any time while your Contract is in force. Upon your request, benefits may be paid in a lump sum or under the Income Plans described below. Your request will state the Income Plan you have elected and the amount and date of the first payment. Amounts distributed to an Annuitant may be subject to federal income tax. A 10% penalty tax may be imposed on the taxable portion of premature payments of benefits (prior to age 59½ or disability) unless payments are made after the employee separates from service and payments are either paid in substantially equal installments over the life or life expectancy of the employee, are paid on account of early retirement after age 55, or are paid for deductible medical expenses in excess of 7.5% of Adjusted Gross Income. (See “Federal Income Taxes.”)
We will determine the amount required to pay the Annuity or cash benefits and will redeem Accumulation Units in that amount. If an Annuitant selects an Income Plan, our current practice is to issue a certificate to the Annuitant describing his or her interest and then transfer the amount of the redeemed Accumulation Units to one of our other separate accounts, where they will be administered for the benefit of the Annuitant under the terms of the Contract. There is no assurance that amounts accumulated under the Contract will be sufficient to provide the retirement benefits under the Plan or Trust.
Income Plans
Generally We will pay part or all of the benefits under a Contract under either a fixed or variable income plan you select, 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. The fixed plans are not described in this Prospectus. Under a variable plan, the payee bears the entire investment risk, since no guarantees of investment return are made. 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. Under a variable income plan, an Annuitant must select the initial allocation of Annuity Units among the Divisions and may reallocate Annuity Units among the Divisions at any time while the variable income plan is in effect. The Annuitant may name and change the beneficiaries of unpaid payments for the specified
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period under Plan 1 or the certain period under Plans 2 or 3. We will issue the Annuitant a Certificate describing the variable Annuity benefits and including beneficiary provisions of Annuity Contracts we issue on the date of issue of the Certificate. For a discussion of tax considerations and limitations regarding the election of Income Plans, see “Federal Income Taxes.”
Description of Income Plans The following 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 5 to 30 years (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 Period Certain). An annuity payable monthly until the payee’s death, or until the expiration of a selected certain period, whichever is later. After the payee’s death during the certain period, if any, payments becoming due are paid to the designated contingent beneficiary. A certain period of either 10 or 20 years may be selected, or a plan with no certain period may be chosen.
3. Joint and Survivor Life Income with Period Certain (sometimes referred to as Joint and Survivor Life Income with Period Certain). 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 Annuitants, payments continue for the remainder of the 10 years certain or the remaining lifetime of the survivor, whichever is longer.
An Income Plan must result in payments that meet the minimums we require for annuity Income Plans on the date you elect the plan. From time to time, we may establish 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 Income Plans, with provisions and rates as we publish for those plans.
Amount of Annuity Payments We will determine the amount of the first Annuity Payment on the basis of the particular Income Plan the Annuitant selects, 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. We will calculate the amount of the first Annuity Payment on a basis 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 Income Plan involves life contingencies. The first payment will be lower if the Income Plan includes a longer certain period. 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. Annuity Units represent the interest of the Income Plan in a Portfolio.
Assumed Investment Rate The payment rate tables for the Contracts are based upon an Assumed Investment Rate of 3 ½%. Payment 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 actual value of the future payments as of the date when payments begin.
Over a period of time, if each Division achieved a net investment result exactly equal to the Assumed Investment Rate applicable to a particular Income Plan, the Annuity Unit for each Division would not change in value, and 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.
Charges
We will make the following current charge deductions:
1. Deductions from Purchase Payments:
Front-Load Contract
We deduct a sales load from all Purchase Payments we receive. The sales load compensates us for the costs we incur in selling the Contracts. We base the charge on the cumulative amounts we have received and the rates in the table below: 
17Account C Prospectus
Cumulative Purchase
Payments Paid Under
the Contract
Charge
(as % of Purchase
Payment)
Charge
(as % of Amount
Invested)
First $150,000
4.50%
4.50%
Next $350,000
3.00%
3.45%
Next $500,000
1.00%
2.23%
Balance over $1,000,000
0.50%
2.07%1
1This percentage assumes cumulative Purchase Payments paid under the Contract were $1,100,000.
Simplified-Load Contract
We charge an installation fee in the amount of $750 from the first purchase payment we receive. Alternatively, you may pay the fee separately when you submit the application for the Contract. The installation fee covers the non-recurring expenses of processing the application and issuing the Contract.
2. Annual Base Contract Charge. The Net Investment Factor (see “Net Investment Factor”) we use in determining the value of Accumulation and Annuity Units reflects a charge on each Valuation Date for mortality and expense risks we have assumed. For the front-load Contract the charge on an annual basis is 0.65% of the current value of the net assets of the Account. For the simplified-load Contract the charge on an annual basis is 1.25% of the net assets. We may increase this charge to a maximum of 1.00% for the front-load Contract and 1.50% for the simplified-load Contract. After the fifth Contract year we may amend the maximum.
The mortality risk is that Annuity Payments will continue for longer periods than anticipated because the Annuitants as a group live longer than expected. The expense risk is 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 Net Investment Factor also reflects the deduction of any reasonable expenses which may result if there were a substitution of other securities for shares of the Portfolios as described under “Substitution and Change,” and the deduction of any applicable taxes. Applicable taxes could include any tax liability we have paid or reserved for resulting from the maintenance or operation of a division of the Account. We do not presently anticipate that any charge will be made for federal income taxes (see “Federal Income Taxes”), nor do we anticipate that maintenance or operation of the Separate Account will give rise to any charge 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 Net Investment Factor for such Contracts.
3. Administration Fee. We may terminate a Contract on 60 days’ written notice after it has been in force for one year if the total Contract value (including any amounts held on a fixed basis) is less than the minimum Contract value of $25,000. In lieu of terminating the Contract, we may charge an administration fee of $150 annually on the Contract anniversary.
4. Premium Taxes. The Contracts provide 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.
5. Expenses for the Portfolios and Funds. The expenses borne by the Portfolios in which the assets of the Separate Account are invested are described in the attached mutual fund prospectuses.
For certain Portfolios, certain expenses may have been reimbursed or fees may have been waived during 2021 in addition to any contractual fee waiver or reimbursements. It is anticipated that any such voluntary expense reimbursement and fee waiver arrangements will continue past the current year, although certain arrangements may be terminated at any time. After taking into account these arrangements, as well as any contractual fee waiver or expense reimbursement arrangements, Annual Portfolio Operating Expenses would have ranged from a minimum of 0.19% to a maximum of 1.12%.
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Federal Income Taxes
We offer the Contracts only for use under tax-qualified plans meeting the requirements of Sections 401 and 403(a) of the Code. However, in the event Contracts should be issued pursuant to HR-10 Plans, trusts or custodial accounts which at the time of issuance are not qualified under the Code, some or all of the tax benefits described herein may be lost.
Contribution Limits
Any employer, including a self-employed person, can establish a plan under Section 401(a) or 403(a) for participating employees. As a general rule, annual contributions to a defined contribution plan made by the employer and the employee cannot exceed the lesser of $61,000 or 100% of compensation or earned income up to $305,000 (dollar amounts as indexed for 2022). The employer’s deduction for contributions is limited to 25% of eligible payroll.
Salary reduction contributions made under a cash or deferred arrangement (401(k) plan) are limited to $20,500 in 2022, indexed thereafter. This annual dollar limit applies to the aggregate of all “elective deferrals” to a Roth 401(k) plan and all tax-favored plans of the employee. Employees who are age 50 or over may also make a catch up contribution of $6,500 for 2022, indexed thereafter.
Qualified plans are subject to minimum coverage, nondiscrimination and spousal consent requirements. In addition, “top heavy” rules apply if more than 60% of the present value of the cumulative accrued benefits or the aggregate of the account balances are allocated to certain highly compensated employees. Violations of the contribution limits or other requirements may disqualify the plan and/or subject the employer to taxes and penalties.
Taxation of Contract Benefits
No tax is payable as a result of any increase in the value of a Contract until benefits from the Contract are received. Benefits received as Annuity Payments will be taxable as ordinary income when received in accordance with Section 72 of the Code. As a general rule, where an employee makes nondeductible contributions to the Plan, the payee may exclude from income that portion of each Annuity Payment which represents the ratio of the employee’s “investment in the contract” to the employee’s “expected return” as defined in Section 72, until the entire “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, if any, which represents a pro rata return of the employee’s “investment in the contract.” Benefits received as a “lump sum distribution” by individuals born before January 1, 1936 may be eligible for a separate tax averaging calculation.With certain limited exceptions, all benefits are subject to the tax-free rollover provisions of the Code. A 10% penalty tax may be imposed on the taxable portion of premature payments of benefits (prior to age 59½ or disability) unless payments are made after the employee separates from service and payments are paid in substantially equal installments over the life or life expectancy of the employee, or are paid on account of early retirement after age 55, or unless payments are made for medical expenses in excess of 7.5% of the employee’s Adjusted Gross Income.
A loan from the Plan to an employee may be taxable as ordinary income depending on the amount and terms of the loan. Benefit payments will be subject to mandatory 20% withholding unless the payments are rolled over directly to traditional IRA or “eligible employer plan” that accepts rollovers. An “eligible employer plan” includes a tax-qualified plan, an individual retirement arrangement, a tax-deferred annuity, or a governmental Section 457 plan. Exceptions apply if benefits are paid in substantially equal installments over the life or life expectancy of the employee (or of the employee and the employee’s beneficiary) or over a period of 10 years or more, are “required minimum distributions,” or are due to hardship.
Minimum Distribution Requirements As a general rule, the Plan is required to make certain required minimum distributions to the employee during the employee’s life and to the employee’s beneficiary following the employee’s death. If a portion or all of the distribution is less than the required minimum distribution, a 50% penalty tax may be imposed on the person who should have received the payment for the shortfall amount.
The Plan must make 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 employee and an assumed beneficiary who is ten years younger, provided, however, that 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 is April 1 of the calendar year following the later of the calendar year in which the employee attains age 72 or, if the employee is not a “5% owner” of the employer, the calendar year in which the employee retires.
If the employee dies before the required beginning date, the Plan must make distributions under one of three main rules: (1) the life expectancy rule, (2) the ten year rule, or (3) the five year rule.
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(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 )the entire balance must be distributed by December 31st of the tenth year after reaching the age of the 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 employee’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 Owner 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.
A nonspouse designated beneficiary may directly roll over (i.e., trustee-to-trustee transfer) 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.
Spousal Exceptions If the employee’s spouse, as defined under federal tax law (below), elects the life expectancy rule, distributions do not need to begin until December 31 of the year following the year of the employee’s death or, if later, by the end of the year the employee would have attained age 72. Alternatively, 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.
If the employee dies after distributions have begun, but before the entire interest is distributed, the remaining portion of the interest must be distributed at least as rapidly as under the method of distribution permitted under IRS regulations as of the date of the employee’s death.
The rules governing plan provisions, payments and deductions and taxation of distributions from such Plans and Trusts, as set forth in the Code and the regulations relating thereto, are complex and cannot be readily summarized. Furthermore, special rules are applicable in many situations. For example, certain declared federal disaster relief or military service provisions may supplement this information. 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. You should consult qualified tax counsel before you adopt an HR-10 pension or profit-sharing plan or trust.
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 “Deductions.”)
Contracts Issued Prior to January 6, 1992
Contracts Issued Beginning May 1, 1984 and Prior to January 6, 1992 For Contracts issued beginning May 1, 1984 and prior to January 6, 1992, there is no surrender charge, but Purchase Payments paid under the Contract are subject to a deduction of 4.0% on the first $25,000 of Purchase Payments, 2.0% on the next $75,000, 1.0% on the next $100,000, 0.4% on the next $100,000, 0.2% on the next $200,000, and 0.1% on amounts in excess of $500,000, based on total cumulative Purchase Payments paid under the Contract. The charge for mortality rate and expense risks may not exceed 0.25% of the Separate Account assets held for these Contracts (unless the Contracts are amended after the fifth Contract year), and we currently are making no charge for these risks. These Contracts contain no provisions for accumulation of funds on a fixed basis. (See “Appendix A—Accumulation Unit Values.”) The annual contract fee is based on the contract cash value as follows: 0.5% on the first $100,000 of cash value, 0.4% on the next $100,000, 0.3% on the next $100,000, 0.2% on the next $200,000 and 0.1% on the balance above $500,000. The Company has the right to amend the Contract with regard to deductions, charges, fees, and rate guarantees effective 30 days after written notice is provided to the Owner. In compliance with section 408(b)(5) of ERISA, the Purchase Payment deduction and annual contract fee are waived for Contracts issued to plans sponsored by the Company.
Contracts Issued Beginning December 17, 1981 and Prior to May 1, 1984 For Contracts issued beginning December 17, 1981 and prior to May 1, 1984, the surrender charge is currently being waived, but Purchase Payments paid under the Contract are subject to a deduction of 3% on the first $25,000 of Purchase Payments, 2% on the next $75,000, and 1% on
Account C Prospectus
20
amounts in excess of $100,000, based on total cumulative Purchase Payments paid under the Contract. The charge for mortality and expense risks for these Contracts is 0.50%. The annual Contract fee is the lesser of $30 or 1% of the Contract Value. We currently waive the Contract fee if the Contract Value is $25,000 or more. The Company has the right to amend the Contract with regard to deductions, charges, fees, and rate guarantees effective 30 days after written notice is provided to the Owner.
Contracts Issued Prior to December 17, 1981 For Contracts issued prior to December 17, 1981 there is no surrender charge, but Purchase Payments are subject to a deduction for sales expenses. The deduction is 8% on the first $5,000 received during a single Contract year as defined in the Contract, 4% on the next $20,000, 2% on the next $75,000 and 1% on the excess over $100,000. There is no charge assessed at present for mortality and expense risks for these Contracts. There is no annual Contract fee. The Company has the right to amend the Contract with regard to deductions, charges, fees, and rate guarantees effective 30 days after written notice is provided to the Owner. In compliance with section 408(b)(5) of ERISA, the Purchase Payment deduction is waived for Contracts issued to plans sponsored by the Company.
Contract Owner Services
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.
Free Look Depending upon applicable state law and the terms of the applicable employee benefit plan, you may have the right to return the Contract within the next ten days after you receive it (or whatever period is required under applicable state law), and receive your money back. 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. In the event the state in which you live requires us to return the full amount of your purchase payment, we will do so.
Amendments and Termination After the fifth Contract year, we may amend the Contract with respect to (1) the sales load; (2) the maximum annual Annuity rate and expense guarantee charge; (3) the administration fee; (4) the transfer fee; (5) the minimum amounts for purchase payment(s) and for the Contract value; or (6) the payment rate tables which are included in the Contract. An amendment will not become effective until after we have given you at least 30 days’ written notice. An Amendment to the payment rate tables will not apply to an Income Plan that starts before the amendment becomes effective. We reserve the right to terminate a Contract if representations you have made to us are or become incorrect. You may terminate a Contract in whole or in part at any time and we will pay you the value of the Accumulation Units.
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, an investment adviser registered with the SEC, and is a member of the Financial Industry Regulatory Authority (FINRA) and SIPC. You may obtain information about SIPC, including the SIPC brochure, by contacting SIPC at 202-371-3800 or visiting its website at www.SIPC.org. NMIS is the principal underwriter of the Contracts, and has entered into a Distribution Agreement with us.
Under the Distribution Agreement, the Company receives all sales loads and withdrawal charges, and pays NMIS an annual fee based upon NMIS’ actual expenses for the services NMIS performs under the Distribution Agreement, including all compensation payable to its registered representatives. Commissions paid to the agents on sales of the Contracts are calculated partly as a percentage of purchase payments and partly as a percentage of Contract values for each Contract year.
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
21Account C Prospectus
might be more or less than that received for the sale of a comparable product from another company. However, there are situations where the variable annuity contract will pay greater compensation than investments over certain time periods, which may offer an incentive to your registered representative to recommend a variable annuity contract instead of investments.
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.The Distributor's registered representatives receive ongoing servicing compensation related to the Contracts but may be ineligible to receive ongoing servicing compensation paid by issuers of other investment products for certain smaller accounts.
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 the Owners of Accumulation Units or payees receiving payments under variable Income Plans. 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.
A vote of Contract Owners, or of those who have an interest in one or more of the divisions of the Separate Account, may be required. Approval by the SEC or another regulatory authority may be required. 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.
Dividends This Contract is eligible to share in the divisible surplus, if any, of the Company, except while payments are being made under an 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.” On Group Combination Annuity Contracts, dividends have arisen principally as a result of more favorable expense experience than that assumed in determining mortality rate and expense guarantee charges. However, 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.
Any dividends allocated to your Contract will be credited on the Contract anniversary and, under the Company’s current approach, will be based on the average variable Contract value, which is defined as the value of the Accumulation units on the last Contract anniversary adjusted to reflect any transactions since that date which increased or decreased the Contract’s interest in the Separate Account. Under the terms of the Contract, dividends, if any, will be applied as a net purchase payment allocated to the Government Money Market Division. For the coming year, all NN Series front-load and simplified-load Contracts with an average variable Contract value of $250,000 or more will receive a dividend of 0.25% of the average variable Contract value. For the simplified-load Contracts, this factor increases to 0.75% on the portion of the average variable Contract value in excess of $500,000.
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22
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.
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.
The more investments and annuity products your registered representative sells in a year, the higher percent of commissions or fees your registered representative receives from NMIS for investment products such as mutual funds and the Northwestern Mutual Wealth Management Company (“NMWMC”) investment advisory accounts. The different production levels and increasing percentages tied to those production levels are known as a “grid.”
Deferment of Benefit Payments We reserve the right to defer determination and payment of the Surrender Value of the Accumulation Units, the Withdrawal Value under a variable Income Plan, 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.
23Account C Prospectus
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 12/31/2021)
1 Year
5 Year
10 year
Long-term growth of
capital; current income is
a secondary objective
Growth Stock Portfolio2
Mason Street Advisors, LLC
(MSA)/T. Rowe Price
Associates, Inc
0.42%
16.67%
20.77%
16.66%
Long-term growth of
capital
Focused Appreciation
Portfolio2
MSA/Loomis, Sayles &
Company, L.P.
0.62%1
18.90%
22.10%
18.67%
Long-term growth of
capital and income
Large Cap Core Stock
Portfolio2
MSA/Wellington
Management Company LLP
0.43%1
25.10%
18.77%
14.40%
Long-term growth of
capital and income
Large Cap Blend
Portfolio2
MSA/Fiduciary Management,
Inc.
0.78%1
18.46%
13.05%
13.30%
Investment results that
approximate the
performance of the
Standard & Poor’s 500®
Composite Stock Price
Index
Index 500 Stock
Portfolio2
MSA/BlackRock Advisors, LLC
0.19%1
28.45%
18.22%
16.30%
Long-term growth of
capital; income is a
secondary objective
Large Company Value
Portfolio2
MSA/American Century
Investment Management,
Inc.
0.71%1
21.92%
10.32%
12.10%
Long-term growth of
capital and income
Domestic Equity
Portfolio2
MSA/Delaware Investments
Fund Advisers, a series of
Macquarie Investment
Management Business Trust
0.49%1
22.71%
10.54%
12.71%
Long-term growth of
capital and income
Equity Income Portfolio2
MSA/T. Rowe Price
Associates, Inc
0.57%1
25.70%
11.16%
11.93%
Long-term growth of
capital
Mid Cap Growth Stock
Portfolio2
MSA/Wellington
Management Company LLP
0.52%1
10.18%
15.41%
12.23%
Investment results that
approximate the
performance of the
Standard & Poor’s
MidCap 400® Stock Price
Index
Index 400 Stock
Portfolio2
MSA/Northern Trust
Investments, Inc.
0.24%1
24.46%
12.80%
13.91%
Long-term growth of
capital; current incomes is
a secondary objective
Mid Cap Value Portfolio2
MSA/American Century
Investment Management,
Inc.
0.72%1
23.27%
9.55%
13.02%
Long-term growth of
capital
Small Cap Growth Stock
Portfolio2
MSA/Wellington
Management Company LLP
0.54%
4.11%
15.15%
14.16%
Investment results that
approximate the
performance of the
Standard & Poor’s
SmallCap 600® Index
Index 600 Stock
Portfolio2
MSA/Northern Trust
Investments, Inc.
0.27%
26.22%
12.05%
14.08%
Account C Prospectus
24
Investment Objective
Portfolio
Adviser/
Sub-adviser (if applicable)
Current Expenses
Average Annual
Total Returns
(as of 12/31/2021)
1 Year
5 Year
10 year
Long-term growth of
capital
Small Cap Value
Portfolio2
MSA/T. Rowe Price
Investment Management,
Inc.
0.92%1
23.00%
10.52%
12.23%
Long-term growth of
capital
International Growth
Portfolio2
MSA/FIAM LLC
0.61%1
15.92%
16.28%
10.54%
Capital appreciation
Research International
Core Portfolio2
MSA/Massachusetts
Financial Services Company
0.73%1
12.07%
12.54%
8.62%
Long-term growth of
capital and income
International Equity
Portfolio2
MSA/Dodge & Cox
0.68%
5.00%
3.54%
4.88%
Capital appreciation
Emerging Markets Equity
Portfolio2
MSA/Aberdeen Asset
Managers Limited
0.89%1
-4.55%
9.99%
5.00%
Maximum current income
to the extent consistent
with liquidity and stability
of capital3
Government Money
Market Portfolio2
MSA/BlackRock Advisors, LLC
0.33%
0.01%
0.88%
0.48%
Provide as high a level of
current income as is
consistent with prudent
investment risk
Short-Term Bond
Portfolio2
MSA/T. Rowe Price
Associates, Inc
0.38%
-0.10%
2.24%
1.65%
Provide as high a level of
total return consistent
with prudent investment
risk; a secondary
objective is to seek
preservation of
shareholders’ capital
Select Bond Portfolio2
MSA/Allspring Global
Investments, LLC
0.30%1
-1.59%
3.79%
3.07%
Maximum total return,
consistent with
preservation of capital
and prudent investment
management
Long-Term U.S.
Government Bond
Portfolio2
MSA/Pacific Investment
Management Company LLC
0.67%
-5.37%
5.92%
3.99%
Pursue total return using
a strategy that seeks to
protect against U.S.
inflation
Inflation Protection
Portfolio2
MSA/American Century
Investment Management,
Inc.
0.53%1
6.61%
5.14%
2.93%
High current income and
capital appreciation
High Yield Bond
Portfolio2
MSA/Federated Investment
Management Company
0.44%
5.31%
6.07%
6.35%
Maximum total return,
consistent with prudent
investment management
Multi-Sector Bond
Portfolio2
MSA/Pacific Investment
Management Company LLC
0.71%1
-0.08%
5.28%
5.08%
Realize as high a level of
total return as is
consistent with prudent
investment risk, through
income and capital
appreciation
Balanced Portfolio2
MSA
0.52%1
7.56%
9.06%
7.86%
Realize as high a level of
total return as is
consistent with
reasonable investment
risk
Asset Allocation
Portfolio2
MSA
0.60%1
10.45%
10.64%
9.25%
Long-term growth of
capital
Fidelity® VIP Mid Cap
Portfolio – Initial Class2
Fidelity Management &
Research Company LLC
(FMR)4
0.61%
26.60%
13.60%
13.29%
Long-term capital
appreciation
Fidelity® VIP Contrafund®
Portfolio – Initial Class2
Fidelity Management &
Research Company/FMR Co.,
Inc.4
0.60%
27.83%
20.17%
16.64%
25Account C Prospectus
Investment Objective
Portfolio
Adviser/
Sub-adviser (if applicable)
Current Expenses
Average Annual
Total Returns
(as of 12/31/2021)
1 Year
5 Year
10 year
Long-term growth of
capital 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
0.89%
23.48%
15.72%
14.36%
Long-term growth of
capital
U.S. Strategic Equity
Fund6
Russell Investment
Management LLC (RIM)7
0.84%
20.40%
16.22%
15.08%
Long-term growth of
capital
U.S. Small Cap Equity
Fund6
RIM7
1.12%1
25.79%
12.14%
12.39%
Current income and long-
term growth of capital
Global Real Estate
Securities Fund6
RIM7
0.91%
27.19%
9.11%
9.25%
Long-term growth of
capital
International Developed
Markets Fund6
RIM7
1.02%1
12.66%
8.56%
7.83%
Provide total return
Strategic Bond Fund6
RIM7
0.67%
-1.82%
3.67%
3.34%
Current income and
moderate long-term
capital appreciation
LifePoints® Variable
Target Portfolio Series
Moderate Strategy Fund6
RIM7
0.84%1
8.23%
6.25%
5.96%
Above-average long-term
capital appreciation and a
moderate level of current
income
LifePoints® Variable
Target Portfolio Series
Balanced Strategy Fund6
RIM7
0.92%1
13.04%
8.15%
7.67%
High long-term capital
appreciation; and as a
secondary objective,
current income
LifePoints® Variable
Target Portfolio Series
Growth Strategy Fund6
RIM7
0.98%1
17.44%
10.11%
9.02%
High long-term capital
appreciation
LifePoints® Variable
Target Portfolio Series
Equity Growth Strategy
Fund6
RIM7
1.00%1
19.61%
10.60%
9.72%
Total return
Commodity Return
Strategy Portfolio – Class
28
Credit Suisse Asset
Management, LLC
0.78%
28.46%
N/A
N/A
1
This reflects an expense reimbursement and/or fee waiver arrangement that is in place and reported in the Portfolio’s registration statement. This agreement may be terminated in the future and, therefore, the expense figures shown reflect temporary fee reductions.
2
A series of Northwestern Mutual Series Fund, Inc., for which MSA, our wholly-owned company, serves as investment adviser.
3
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.
4
The 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.
Account C Prospectus
26
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 C (the “Separate Account”) is included in the SAI dated May 1, 2022. 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 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: C000000097
27Account C Prospectus

STATEMENT OF ADDITIONAL INFORMATION
May 1, 2022
GROUP COMBINATION ANNUITY
A group combination Annuity Contract (the “Contract”) to provide retirement annuity benefits for self-employed persons and their eligible employees. Although the Contract is no longer offered for sale to retirement plans of
self-employed persons, subsequent Purchase Payments may continue to be made under in-force Contracts.
Issued by The Northwestern Mutual Life Insurance Company
and
NML Variable Annuity Account C
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
GENERAL INFORMATION
The Account was originally named NML Separate Account C but was renamed NML Variable Annuity Account C on November 23, 1983. The Account is used for the Contracts and for other variable annuity contracts issued by the Company.
DISTRIBUTION OF THE CONTRACTS
Although the Contract is no longer offered for sale to retirement plans of self-employed persons, subsequent Purchase Payments may continue to be made under in-force Contracts, either directly to the Company or through individuals who, in addition to being life insurance agents of Northwestern Mutual, are registered representatives of Northwestern Mutual Investment Services, LLC (“NMIS”). NMIS is our wholly-owned company. The principal business address of NMIS is 720 East Wisconsin Avenue, Milwaukee, Wisconsin 53202.
NMIS is the principal underwriter of the Contracts for purposes of the federal securities laws. We paid the following amounts to NMIS with respect to sales of the Contracts, including commissions on sales of variable annuity contracts to corporate pension plans, during each of the last three years representing commission payments NMIS made to our agents and related benefits. None of these amounts was retained by NMIS and no amounts were paid to other underwriters or broker-dealers. 
Year
Amount
2021
$18,785
2020
$19,500
2019
$20,003
NMIS also provides certain services related to the administration of certain income plans under the Policies. In exchange for these services, NMIS receives compensation to cover the actual costs incurred by NMIS in performing these services under an administrative services contract with us.
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”; “Net Investment Factor”; and “Deductions.”
Amount of Annuity Payments The amount of the first annuity payment 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. The payments from each Division are determined by multiplying the applicable monthly variable annuity payment rate by the benefits allocated to the Division under the variable Income Plan. (See “Illustrations of Variable Annuity Payments”.) Payment rate tables are set forth in the Contracts. Annuity payment rates currently in use by Northwestern Mutual are based on the 1983 Table A Mortality Table with Projection Scale G and an age adjustment.
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.
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 Income 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. The payments from each Division are determined by multiplying the number of Annuity Units credited to the Annuitant in the Division 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
B-3
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 arbitrarily established as of the date on which the operations of the Division began. 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 annuity rate and expense guarantee charge.
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 mortality rate tables.
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.
Illustrations of Variable Annuity Payments To illustrate the manner in which variable annuity payments are determined consider this example. Item (2) 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). 
(1)
Value of Annuitant's retirement benefit allocated to Balanced
$50,000
(2)
Assumed applicable monthly payment rate per $1,000 from annuity rate table
$5.00
(3)
Amount of first payment from Balanced Division (1) x (2) divided by $1,000.
$250.00
(4)
Assumed Value of Annuity Unit in Balanced Division on effective date of income plan.
$1.500000
(5)
Number of Annuity Units credited in Balanced Division, (3) divided by (4)
166.67
The $50,000 value on the effective date of the income plan provides a first payment from the Balanced Division of $250.00, and payments thereafter of the varying dollar value of 166.67 Annuity Units. The amount of subsequent payments from the Balanced Division is determined by multiplying 166.67 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 166.67 multiplied by $1.501000, or $250.17.
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 (see “Net Investment Factor”) 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 166.67 X $1.499000, or $249.84.
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.
TRANSFERABILITY RESTRICTIONS
Ownership of a Contract may be transferred subject to the terms of the Plan or Trust. The transferee, or its fiduciary representative, must acknowledge in writing that the new Owner is a tax-qualified pension or profit-sharing plan. Written proof of transfer satisfactory to Northwestern Mutual must be received at the Home Office of Northwestern Mutual. The transfer will take effect on the date the proof of the transfer is signed. Ownership of a Contract may not be assigned without the consent of Northwestern Mutual. Northwestern Mutual will not be responsible for the validity or effect of the assignment or for any payment or other action taken by Northwestern Mutual before Northwestern Mutual consents to the assignment.
EXPERTS
The statutory financial statements of The Northwestern Mutual Life Insurance Company as of December 31, 2021 and 2020 and for each of the three years in the period ended December 31, 2021, and the financial statements of NML Variable Annuity Account C as of December 31, 2021 and for the periods indicated, included in this
B-4
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.
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Annual Report December 31, 2021

Northwestern Mutual Variable Annuity Account C

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 C

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

 

Growth Stock Division (1)

   

Mid Cap Value Division (1)

   

Select Bond Division (1)

    U.S. Strategic Equity Division (1)

Focused Appreciation

   

Small Cap Growth

   

Long-Term U.S.

   

U.S. Small Cap Equity

Division (1)

   

Stock Division (1)

   

Government Bond

   

Division (1)

         

Division (1)

     

Large Cap Core Stock

   

Index 600 Stock

   

Inflation Protection

   

International

Division (1)

   

Division (1)

   

Division (1)

   

Developed Markets

              

Division (1)

Large Cap Blend

   

Small Cap Value

   

High Yield Bond

   

Strategic Bond Division

Division (1)

   

Division (1)

   

Division (1)

   

(1)

Index 500 Stock

   

International Growth

   

Multi-Sector Bond

   

Global Real Estate

Division (1)

   

Division (1)

   

Division (1)

   

Securities Division (1)

Large Company Value

   

Research International

   

Balanced Division (1)

   

LifePoints Moderate

Division (1)

   

Core Division (1)

        

Strategy Division (1)

Domestic Equity

   

International Equity

   

Asset Allocation

   

LifePoints Balanced

Division (1)

   

Division (1)

   

Division (1)

   

Strategy Division (1)

Equity Income Division (1)

   

Emerging Markets

   

Fidelity VIP Mid Cap

   

LifePoints Growth

    

Equity Division (1)

   

Division (1)

   

Strategy Division (1)

Mid Cap Growth Stock

   

Government Money

   

Fidelity VIP

   

LifePoints Equity

Division (1)

   

Market Division (1)

   

Contrafund Division (1)

   

Growth Strategy

              

Division (1)

Index 400 Stock

   

Short-Term Bond

   

AMT Sustainable

   

Credit Suisse Trust

Division (1)

   

Division (1)

   

Equity Division (1)

   

Commodity Return

              

Strategy Division (1)

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

Basis for Opinions

These financial statements are the responsibility of The Northwestern Mutual Life Insurance Company management. Our responsibility is to express an opinion on the financial statements of each of the divisions of NML Variable Annuity Account C 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 C 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, 2021 by correspondence with the custodians and the transfer agents of the investee mutual funds. We believe that our audits provide a reasonable basis for our opinions.

/s/ PricewaterhouseCoopers LLP

Milwaukee, Wisconsin

April 26, 2022

We have served as the auditor of one or more of the divisions of NML Variable Annuity Account C since 1971.

 

2

Northwestern Mutual Variable Annuity Account C

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 C

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

 

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

Assets:

               

Investments, at fair value (1)

               

Northwestern Mutual Series Fund, Inc.

    $ 1,014      $ 4,076      $ 711      $ 604      $ 15,033  

Fidelity Variable Insurance Products Fund

      -        -        -        -        -  

Neuberger Berman Advisers Management Trust

      -        -        -        -        -  

Russell Investment Funds

      -        -        -        -        -  

Credit Suisse Trust

      -        -        -        -        -  

Due from Northwestern Mutual Life Insurance Company

      -        -        -        -        -  

Total Assets

      1,014        4,076        711        604        15,033  

Liabilities:

               

Due to Northwestern Mutual Life Insurance Company

      -        -        -        -        -  

Due to Participants

      -        -        -        -        -  

Total Liabilities

      -        -        -        -        -  

Total Net Assets

      1,014      $ 4,076      $ 711      $ 604      $ 15,033  
                                            

Net Assets:

               

Group Variable Annuity Contracts Issued:

               

Prior to December 17, 1981 or On or After May 1, 1984 and Prior to January 6, 1992

               

Accumulation Units (2)

    $ 211      $ -      $ -      $ -      $ 902  

Annuity Reserves

      -        -        -        -        -  

On or After January 6, 1992 - Front Load Version

               

Accumulation Units (3)

      51        139        -        -        10  

Annuity Reserves

      -        -        -        -        -  

On or After January 6, 1992 - Simplified Load Version

               

Accumulation Units (4)

      148        412        197        -        2,728  

Annuity Reserves

      -        -        -        -        -  

Individual Variable Annuity Contracts Issued: On or After October 16, 2006 - Network Edition

               

Accumulation Units (5)

      604        3,525        514        604        11,269  

Annuity Reserves

      -        -        -        -        124  

Total Net Assets

    $ 1,014      $ 4,076      $ 711      $ 604      $ 15,033  
                                            

(1)  Investments, at cost

    $ 830      $ 2,819      $ 516      $ 498      $ 9,380  

Mutual Fund Shares Held

      251        944        322        436        1,838  

(2)  Accumulation Unit Value

    $ 152.095850      $ 108.543824      $ 100.458713      $ 27.701179      $ 270.376034  

Units Outstanding

      1        -        -        -        3  

(3)  Accumulation Unit Value

    $ 12.706123      $ 9.614046      $ 8.392297      $ 2.517964      $ 16.407726  

Units Outstanding

      4        14        -        -        - (a)  

(4)  Accumulation Unit Value

    $ 10.765725      $ 8.597069      $ 7.110610      $ 2.306054      $ 17.960899  

Units Outstanding

      14        48        27        -        152  

(5)  Accumulation Unit Value

    $ 4.191147      $ 10.166871      $ 3.481907      $ 2.631043      $ 4.474335  

Units Outstanding

      144        347        148        230        2,519  

 

 

(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 C

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

 

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

Assets:

               

Investments, at fair value (1)

               

Northwestern Mutual Series Fund, Inc.

    $ 618      $ 2,446      $ 2,600      $ 1,624      $ 3,821  

Fidelity Variable Insurance Products Fund

      -        -        -        -        -  

Neuberger Berman Advisers Management Trust

      -        -        -        -        -  

Russell Investment Funds

      -        -        -        -        -  

Credit Suisse Trust

      -        -        -        -        -  

Due from Northwestern Mutual Life Insurance Company

      -        -        -        -        -  

Total Assets

      618        2,446        2,600        1,624        3,821  

Liabilities:

               

Due to Northwestern Mutual Life Insurance Company

      -        -        -        -        -  

Due to Participants

      -        -        -        -        -  

Total Liabilities

      -        -        -        -        -  

Total Net Assets

    $ 618      $ 2,446      $ 2,600      $ 1,624      $ 3,821  
                                            

Net Assets:

               

Group Variable Annuity Contracts Issued:

               

Prior to December 17, 1981 or On or After May 1, 1984 and Prior to January 6, 1992

               

Accumulation Units (2)

    $ -      $ -      $ -      $ -      $ -  

Annuity Reserves

      -        -        -        -        -  

On or After January 6, 1992 - Front Load Version

               

Accumulation Units (3)

      -        112        10        8        14  

Annuity Reserves

      -        -        -        -        -  

On or After January 6, 1992 - Simplified Load Version

               

Accumulation Units (4)

      27        -        107        1,120        669  

Annuity Reserves

      -        -        -        -        -  

Individual Variable Annuity Contracts Issued:

               

On or After October 16, 2006 - Network Edition

               

Accumulation Units (5)

      580        2,334        2,483        496        3,100  

Annuity Reserves

      11        -        -        -        38  

Total Net Assets

    $ 618      $ 2,446      $ 2,600      $ 1,624      $ 3,821  
                                            

(1)  Investments, at cost

    $ 519      $ 2,084      $ 2,123      $ 1,391      $ 2,985  

Mutual Fund Shares Held

      518        1,264        1,291        413        1,485  

(2)  Accumulation Unit Value

    $ 25.131615      $ 43.518946      $ 51.480302      $ 213.536458      $ 93.570328  

Units Outstanding

      -        -        -        -        -  

(3)  Accumulation Unit Value

    $ 2.284369      $ 3.810923      $ 4.559822      $ 11.588139      $ 8.074608  

Units Outstanding

      -        29        2        1        2  

(4)  Accumulation Unit Value

    $ 2.092019      $ 3.372163      $ 4.077248      $ 15.364526      $ 7.049211  

Units Outstanding

      13        -        26        73        95  

(5)  Accumulation Unit Value

    $ 2.387048      $ 4.051266      $ 4.821858      $ 2.994607      $ 7.006063  

Units Outstanding

      243        576        515        165        442  

 

 

(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 C

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

 

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

Assets:

               

Investments, at fair value (1)

               

Northwestern Mutual Series Fund, Inc.

    $ 1,358      $ 1,202      $ 2,135      $ 1,340      $ 2,483  

Fidelity Variable Insurance Products Fund

      -        -        -        -        -  

Neuberger Berman Advisers Management Trust

      -        -        -        -        -  

Russell Investment Funds

      -        -        -        -        -  

Credit Suisse Trust

      -        -        -        -        -  

Due from Northwestern Mutual Life Insurance Company

      -        -        -        -        -  

Total Assets

      1,358        1,202        2,135        1,340        2,483  

Liabilities:

               

Due to Northwestern Mutual Life Insurance Company

      -        -        -        -        -  

Due to Participants

      -        -        -        -        -  

Total Liabilities

      -        -        -        -        -  

Total Net Assets

    $ 1,358      $ 1,202      $ 2,135      $ 1,340      $ 2,483  
                                            

Net Assets:

               

Group Variable Annuity Contracts Issued:

               

Prior to December 17, 1981 or On or After May 1, 1984 and Prior to January 6, 1992

               

Accumulation Units (2)

    $ -      $ -      $ -      $ -      $ -  

Annuity Reserves

      -        -        -        -        -  

On or After January 6, 1992 - Front Load Version

               

Accumulation Units (3)

      53        27        14        25        -  

Annuity Reserves

      -        -        -        -        -  

On or After January 6, 1992 - Simplified Load Version

               

Accumulation Units (4)

      86        202        112        32        175  

Annuity Reserves

      -        -        -        -        -  

Individual Variable Annuity Contracts Issued:

               

On or After October 16, 2006 - Network Edition

               

Accumulation Units (5)

      1,213        968        1,992        1,283        2,300  

Annuity Reserves

      6        5        17        -        8  

Total Net Assets

    $ 1,358      $ 1,202      $ 2,135      $ 1,340      $ 2,483  
                                            

(1)  Investments, at cost

    $ 1,112      $ 1,058      $ 1,633      $ 1,136      $ 1,781  

Mutual Fund Shares Held

      680        373        1,156        520        1,034  

(2)  Accumulation Unit Value

    $ 61.756931      $ 108.425869      $ 38.363170      $ 70.431381      $ 39.539175  

Units Outstanding

      -        -        -        -        -  

(3)  Accumulation Unit Value

    $ 5.469857      $ 9.356465      $ 3.487151      $ 6.167700      $ 3.462241  

Units Outstanding

      9        3        4        4        -  

(4)  Accumulation Unit Value

    $ 4.891257      $ 8.168117      $ 3.193533      $ 5.457584      $ 3.063761  

Units Outstanding

      18        25        35        6        57  

(5)  Accumulation Unit Value

    $ 5.784413      $ 4.466101      $ 3.643851      $ 6.556463      $ 3.680692  

Units Outstanding

      210        216        547        196        625  

 

 

(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 C

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

 

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

Assets:

               

Investments, at fair value (1)

               

Northwestern Mutual Series Fund, Inc.

    $ 2,134      $ 4,181      $ 3,331      $ 1,017      $ 1,333  

Fidelity Variable Insurance Products Fund

      -        -        -        -        -  

Neuberger Berman Advisers Management Trust

      -        -        -        -        -  

Russell Investment Funds

      -        -        -        -        -  

Credit Suisse Trust

      -        -        -        -        -  

Due from Northwestern Mutual Life Insurance Company

      -        -        -        -        -  

Total Assets

      2,134        4,181        3,331        1,017        1,333  

Liabilities:

               

Due to Northwestern Mutual Life Insurance Company

      -        -        -        -        -  

Due to Participants

      -        -        -        -        -  

Total Liabilities

      -        -        -        -        -  

Total Net Assets

    $ 2,134      $ 4,181      $ 3,331      $ 1,017      $ 1,333  
                                            

Net Assets:

               

Group Variable Annuity Contracts Issued:

               

Prior to December 17, 1981 or On or After May 1, 1984 and Prior to January 6, 1992

               

Accumulation Units (2)

    $ -      $ -      $ -      $ -      $ -  

Annuity Reserves

      -        -        -        -        -  

On or After January 6, 1992 - Front Load Version

               

Accumulation Units (3)

      -        61        -        156        -  

Annuity Reserves

      -        -        -        -        -  

On or After January 6, 1992 - Simplified Load Version

               

Accumulation Units (4)

      -        535        184        118        199  

Annuity Reserves

      -        -        -        -        -  

Individual Variable Annuity Contracts Issued:

               

On or After October 16, 2006 - Network Edition

               

Accumulation Units (5)

      2,115        3,544        3,116        743        1,132  

Annuity Reserves

      19        41        31        -        2  

Total Net Assets

    $ 2,134      $ 4,181      $ 3,331      $ 1,017      $ 1,333  
                                            

(1)  Investments, at cost

    $ 1,676      $ 4,349      $ 2,662      $ 1,017      $ 1,331  

Mutual Fund Shares Held

      1,654        2,629        2,520        1,017        1,265  

(2)  Accumulation Unit Value

    $ 18.026460      $ 5.930327      $ 15.578805      $ 43.483468      $ 13.941366  

Units Outstanding

      -        -        -        -        -  

(3)  Accumulation Unit Value

    $ 1.638483      $ 4.922001      $ 1.416015      $ 1.693967      $ 1.266962  

Units Outstanding

      -        13        -        92        -  

(4)  Accumulation Unit Value

    $ 1.500516      $ 4.145278      $ 1.296801      $ 2.747974      $ 1.160639  

Units Outstanding

      -        129        142        43        171  

(5)  Accumulation Unit Value

    $ 1.712231      $ 2.172077      $ 1.479685      $ 1.289068      $ 1.324314  

Units Outstanding

      1,235        1,631        2,106        577        855  

 

 

(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 C

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

 

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

Assets:

               

Investments, at fair value (1)

               

Northwestern Mutual Series Fund, Inc.

    $ 6,605      $ 506      $ 1,479      $ 2,026      $ 3,782  

Fidelity Variable Insurance Products Fund

      -        -        -        -        -  

Neuberger Berman Advisers Management Trust

      -        -        -        -        -  

Russell Investment Funds

      -        -        -        -        -  

Credit Suisse Trust

      -        -        -        -        -  

Due from Northwestern Mutual Life Insurance Company

      -        -        -        -        -  

Total Assets

      6,605        506        1,479        2,026        3,782  

Liabilities:

               

Due to Northwestern Mutual Life Insurance Company

      -        -        -        -        -  

Due to Participants

      -        -        -        -        -  

Total Liabilities

      -        -        -        -        -  

Total Net Assets

    $ 6,605      $ 506      $ 1,479      $ 2,026      $ 3,782  
                                            

Net Assets:

               

Group Variable Annuity Contracts Issued:

               

Prior to December 17, 1981 or On or After May 1, 1984 and Prior to January 6, 1992

               

Accumulation Units (2)

    $ -      $ -      $ -      $ -      $ -  

Annuity Reserves

      -        -        -        -        -  

On or After January 6, 1992 - Front Load Version

               

Accumulation Units (3)

      4        -        -        4        -  

Annuity Reserves

      -        -        -        -        -  

On or After January 6, 1992 - Simplified Load Version

               

Accumulation Units (4)

      189        -        182        78        -  

Annuity Reserves

      -        -        -        -        -  

Individual Variable Annuity Contracts Issued:

               

On or After October 16, 2006 - Network Edition

               

Accumulation Units (5)

      6,236        506        1,293        1,936        3,771  

Annuity Reserves

      176        -        4        8        11  

Total Net Assets

    $ 6,605      $ 506      $ 1,479      $ 2,026      $ 3,782  
                                            

(1)  Investments, at cost

    $ 6,739      $ 605      $ 1,307      $ 1,975      $ 3,728  

Mutual Fund Shares Held

      5,259        539        1,158        2,701        3,362  

(2)  Accumulation Unit Value

    $ 263.835614      $ 25.468271      $ 18.278682      $ 66.738383      $ 22.416380  

Units Outstanding

      -        -        -        -        -  

(3)  Accumulation Unit Value

    $ 4.007198      $ 2.315101      $ 1.661540      $ 5.575654      $ 2.037600  

Units Outstanding

      1        -        -        1        -  

(4)  Accumulation Unit Value

    $ 15.764793      $ 2.120232      $ 1.521651      $ 4.724197      $ 1.866147  

Units Outstanding

      12        -        119        16        -  

(5)  Accumulation Unit Value

    $ 2.671253      $ 2.419118      $ 1.736226      $ 3.838927      $ 2.129210  

Units Outstanding

      2,334        209        745        504        1,771  

 

 

(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 C

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

 

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

Assets:

               

Investments, at fair value (1)

               

Northwestern Mutual Series Fund, Inc.

    $ 5,771      $ 524      $ -      $ -      $ -  

Fidelity Variable Insurance Products Fund

      -        -        2,816        4,478        -  

Neuberger Berman Advisers Management Trust

      -        -        -        -        1,025  

Russell Investment Funds

      -        -        -        -        -  

Credit Suisse Trust

      -        -        -        -        -  

Due from Northwestern Mutual Life Insurance Company

      1        -        -        -        -  

Total Assets

      5,772        524        2,816        4,478        1,025  

Liabilities:

               

Due to Northwestern Mutual Life Insurance Company

      -        -        -        -        -  

Due to Participants

      -        -        -        -        -  

Total Liabilities

      -        -        -        -        -  

Total Net Assets

    $ 5,772      $ 524      $ 2,816      $ 4,478      $ 1,025  
                                            

Net Assets:

               

Group Variable Annuity Contracts Issued:

               

Prior to December 17, 1981 or On or After May 1, 1984 and Prior to January 6, 1992

               

Accumulation Units (2)

    $ 1,360      $ -      $ -      $ -      $ -  

Annuity Reserves

      -        -        -        -        -  

On or After January 6, 1992 - Front Load Version

               

Accumulation Units (3)

      72        17        63        -        -  

Annuity Reserves

      -        -        -        -        -  

On or After January 6, 1992 - Simplified Load Version

               

Accumulation Units (4)

      1,158        -        130        182        -  

Annuity Reserves

      -        -        -        -        -  

Individual Variable Annuity Contracts Issued:

               

On or After October 16, 2006 - Network Edition

               

Accumulation Units (5)

      3,102        502        2,623        4,253        1,021  

Annuity Reserves

      80        5        -        43        4  

Total Net Assets

    $ 5,772      $ 524      $ 2,816      $ 4,478      $ 1,025  
                                            

(1)  Investments, at cost

    $ 5 ,438      $ 491      $ 2,370      $ 3,078      $ 7 16  

Mutual Fund Shares Held

      3,667        395        68        82        28  

(2)  Accumulation Unit Value

    $ 298.595878      $ 36.450275      $ 88.496791      $ 45.041088      $ 36.931533  

Units Outstanding

      5        -        -        -        -  

(3)  Accumulation Unit Value

    $ 6.901592      $ 3.191828      $ 7.838309      $ 4.094145      $ 3.357091  

Units Outstanding

      10        5        8        -        -  

(4)  Accumulation Unit Value

    $ 17.938388      $ 2.824479      $ 7.008987      $ 3.749539      $ 3.074461  

Units Outstanding

      65        -        19        49        -  

(5)  Accumulation Unit Value

    $ 2.882625      $ 3.393259      $ 8.288944      $ 4.278173      $ 3.507848  

Units Outstanding

      1,076        148        316        994        291  

 

 

(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 C

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

 

     U.S. Strategic
Equity Division		      U.S. Small Cap
Equity Division		      International
Developed
Markets
Division		      Strategic Bond
Division		      Global Real
Estate
Securities
Division		  

Assets:

               

Investments, at fair value (1)

               

Northwestern Mutual Series Fund, Inc.

    $ -      $ -      $ -      $ -      $ -  

Fidelity Variable Insurance Products Fund

      -        -        -        -        -  

Neuberger Berman Advisers Management Trust

      -        -        -        -        -  

Russell Investment Funds

      479        267        845        2,050        3,181  

Credit Suisse Trust

      -        -        -        -        -  

Due from Northwestern Mutual Life Insurance Company

      -        -        -        -        -  

Total Assets

      479        267        845        2,050        3,181  

Liabilities:

               

Due to Northwestern Mutual Life Insurance Company

      -        -        -        -        -  

Due to Participants

      -        -        -        -        -  

Total Liabilities

      -        -        -        -        -  

Total Net Assets

    $ 479      $ 267      $ 845      $ 2,050      $ 3,181  
                                            

Net Assets:

               

Group Variable Annuity Contracts Issued:

               

Prior to December 17, 1981 or On or After May 1, 1984 and Prior to January 6, 1992

               

Accumulation Units (2)

    $ -      $ -      $ -      $ -      $ -  

Annuity Reserves

      -        -        -        -        -  

On or After January 6, 1992 - Front Load Version

               

Accumulation Units (3)

      -        -        8        -        31  

Annuity Reserves

      -        -        -        -        -  

On or After January 6, 1992 - Simplified Load Version

               

Accumulation Units (4)

      -        67        -        -        441  

Annuity Reserves

      -        -        -        -        -  

Individual Variable Annuity Contracts Issued:

               

On or After October 16, 2006 - Network Edition

               

Accumulation Units (5)

      479        200        837        2,046        2,690  

Annuity Reserves

      -        -        -        4        19  

Total Net Assets

    $ 479      $ 267      $ 845      $ 2,050      $ 3,181  
                                            

(1)  Investments, at cost

    $ 356      $ 258      $ 816      $ 2,057      $ 2,724  

Mutual Fund Shares Held

      22        17        68        196        185  

(2)  Accumulation Unit Value

    $ 42.853358      $ 53.013410      $ 27.103303      $ 28.706174      $ 71.324137  

Units Outstanding

      -        -        -        -        -  

(3)  Accumulation Unit Value

    $ 3.697975      $ 4.574718      $ 2.338794      $ 2.477229      $ 6.154816  

Units Outstanding

      -        -        3        -        5  

(4)  Accumulation Unit Value

    $ 3.228324      $ 3.993712      $ 2.041810      $ 2.162708      $ 5.373126  

Units Outstanding

      -        16        -        -        82  

(5)  Accumulation Unit Value

    $ 3.862348      $ 4.286640      $ 2.103441      $ 2.589798      $ 6.375369  

Units Outstanding

      124        47        398        790        422  

 

 

(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 C

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

 

     LifePoints
Moderate
Strategy
Division		      LifePoints
Balanced
Strategy
Division		      LifePoints
Growth
Strategy
Division		      LifePoints
Equity Growth
Strategy
Division		      Credit Suisse
Trust Commodity
Return Strategy
Division		  

Assets:

               

Investments, at fair value (1)

               

Northwestern Mutual Series Fund, Inc.

    $ -      $ -      $ -      $ -      $ -  

Fidelity Variable Insurance Products Fund

      -        -        -        -        -  

Neuberger Berman Advisers Management Trust

      -        -        -        -        -  

Russell Investment Funds

      1,070        1,384        1,698        863        -  

Credit Suisse Trust

      -        -        -        -        1,681  

Due from Northwestern Mutual Life Insurance Company

      -        -        -        -        -  

Total Assets

      1,070        1,384        1,698        863        1,681  

Liabilities:

               

Due to Northwestern Mutual Life Insurance Company

      -        -        -        -        -  

Due to Participants

      -        -        -        -        -  

Total Liabilities

      -        -        -        -        -  

Total Net Assets

    $ 1,070      $ 1,384      $ 1,698      $ 863      $ 1,681  
                                            

Net Assets:

               

Group Variable Annuity Contracts Issued:

               

Prior to December 17, 1981 or On or After May 1, 1984 and Prior to January 6, 1992

               

Accumulation Units (2)

    $ -      $ -      $ -      $ -      $ -  

Annuity Reserves

      -        -        -        -        -  

On or After January 6, 1992 - Front Load Version

               

Accumulation Units (3)

      -        -        -        -        -  

Annuity Reserves

      -        -        -        -        -  

On or After January 6, 1992 - Simplified Load Version

               

Accumulation Units (4)

      380        781        949        863        100  

Annuity Reserves

      -        -        -        -        -  

Individual Variable Annuity Contracts Issued:

               

On or After October 16, 2006 - Network Edition

               

Accumulation Units (5)

      690        603        749        -        1,563  

Annuity Reserves

      -        -        -        -        18  

Total Net Assets

    $ 1,070      $ 1,384      $ 1,698      $ 863      $ 1,681  
                                            

(1)  Investments, at cost

    $ 1,011      $ 1,316      $ 1,521      $ 742      $ 1,483  

Mutual Fund Shares Held

      102        135        163        87        68  

(2)  Accumulation Unit Value

    $ 20.401736      $ 21.853460      $ 22.430026      $ 21.427646      $ 5.986523  

Units Outstanding

      -        -        -        -        -  

(3)  Accumulation Unit Value

    $ 1.854495      $ 1.986441      $ 2.038785      $ 1.947678      $ 5.584941  

Units Outstanding

      -        -        -        -        -  

(4)  Accumulation Unit Value

    $ 1.698371      $ 1.819166      $ 1.867142      $ 1.783706      $ 5.238853  

Units Outstanding

      224        430        508        484        19  

(5)  Accumulation Unit Value

    $ 1.937804      $ 2.075714      $ 2.130455      $ 2.035276      $ 5.766476  

Units Outstanding

      356        290        352        -        271  

 

 

(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 C

For the Year Ended December 31, 2021 (in thousands)

 

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

Income:

           

Dividend income

   $ -     $ 7     $ 5      $ 4     $ 169  

Expenses:

           

Mortality and expense risk charges

     4       18       4        2       67  

Net investment income (loss)

     (4 )      (11 )      1        2       102  

Realized gain (loss) on investments:

           

Realized gain (loss) on sale of fund shares

     34       200       27        5       602  

Realized gain distribution

     40       412       48        35       346  

Realized gains (losses)

     74       612       75        40       948  

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

     72       60       66        52       2,218  

Net increase (decrease) in net assets resulting from operations

   $ 142     $ 661     $ 142      $ 94     $ 3,268  
                                        
    Large
Company Value
Division		     Domestic
Equity Division		     Equity Income
Division		      Mid Cap
Growth Stock
Division		     Index 400
Stock Division		  

Income:

           

Dividend income

   $ 7     $ 40     $ 51      $ 2     $ 35  

Expenses:

           

Mortality and expense risk charges

     2       8       10        15       18  

Net investment income (loss)

     5       32       41        (13 )      17  

Realized gain (loss) on investments:

           

Realized gain (loss) on sale of fund shares

     9       34       25        37       160  

Realized gain distribution

     7       51       -        207       116  

Realized gains (losses)

     16       85       25        244       276  

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

     87       312       478        (97 )      476  

Net increase (decrease) in net assets resulting from operations

   $ 108     $ 429     $ 544      $ 134     $ 769  
                                        
    Mid Cap Value
Division		     Small Cap
Growth Stock
Division		     Index 600
Stock Division		      Small Cap
Value Division		     International
Growth
Division		  

Income:

           

Dividend income

   $ 15     $ -     $ 17      $ 5     $ 12  

Expenses:

           

Mortality and expense risk charges

     5       6       9        5       9  

Net investment income (loss)

     10       (6 )      8        -       3  

Realized gain (loss) on investments:

           

Realized gain (loss) on sale of fund shares

     16       82       170        34       125  

Realized gain distribution

     10       126       35        59       69  

Realized gains (losses)

     26       208       205        93       194  

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

     224       (156 )      267        168       128  

Net increase (decrease) in net assets resulting from operations

   $ 260     $ 46     $ 480      $ 261     $ 325  
                                        

 

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

 

F-9

Statements of Operations

NORTHWESTERN MUTUAL VARIABLE ANNUITY ACCOUNT C

For the Year Ended December 31, 2021 (in thousands)

 

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

Income:

          

Dividend income

   $ 23     $ 98     $ 18     $ -     $ 23  

Expenses:

          

Mortality and expense risk charges

     7       20       14       6       6  

Net investment income (loss)

     16       78       4       (6 )      17  

Realized gain (loss) on investments:

          

Realized gain (loss) on sale of fund shares

     42       (69 )      162       -       4  

Realized gain distribution

     32       -       -       -       2  

Realized gains (losses)

     74       (69 )      162       -       6  

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

     119       163       (343 )      -       (31 ) 

Net increase (decrease) in net assets resulting from operations

   $ 209     $ 172     $ (177 )    $ (6 )    $ (8 ) 
                                       
    Select Bond
Division		     Long-Term U.S
Government
Bond Division		     Inflation
Protection
Division		     High Yield
Bond Division		     Multi-Sector
Bond Division		  

Income:

          

Dividend income

   $ 139     $ 4     $ 14     $ 100     $ 78  

Expenses:

          

Mortality and expense risk charges

     25       2       6       7       13  

Net investment income (loss)

     114       2       8       93       65  

Realized gain (loss) on investments:

          

Realized gain (loss) on sale of fund shares

     35       -       30       10       68  

Realized gain distribution

     302       82       4       -       33  

Realized gains (losses)

     337       82       34       10       101  

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

     (575 )      (114 )      46       (14 )      (182 ) 

Net increase (decrease) in net assets resulting from operations

   $ (124 )    $ (30 )    $ 88     $ 89     $ (16 ) 
                                       
    Balanced
Division		     Asset
Allocation
Division		     Fidelity VIP
Mid Cap
Division		     Fidelity VIP
Contrafund
Division		     AMT
Sustainable
Equity Division		  

Income:

          

Dividend income

   $ 133     $ 11     $ 17     $ 3     $ 3  

Expenses:

          

Mortality and expense risk charges

     24       2       11       17       3  

Net investment income (loss)

     109       9       6       (14 )      -  

Realized gain (loss) on investments:

          

Realized gain (loss) on sale of fund shares

     129       25       55       325       61  

Realized gain distribution

     250       25       421       531       18  

Realized gains (losses)

     379       50       476       856       79  

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

     (126 )      (12 )      101       219       120  

Net increase (decrease) in net assets resulting from operations

   $ 362     $ 47     $ 583     $ 1,061     $ 199  
                                       

 

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

 

F-10

Statements of Operations

NORTHWESTERN MUTUAL VARIABLE ANNUITY ACCOUNT C

For the Year Ended December 31, 2021 (in thousands)

 

   
 U.S. Strategic
Equity Division		  
 		     
 U.S. Small Cap
Equity Division		  
 		    

 International
Developed
Markets Division		  
 
 		    
 Strategic Bond
Division		  
 

Income:

         

Dividend income

   $ 3      $ 1     $ 22     $ 18  

Expenses:

         

Mortality and expense risk charges

     2        2       3       7  

Net investment income (loss)

     1        (1 )      19       11  

Realized gain (loss) on investments:

         

Realized gain (loss) on sale of fund shares

     4        20       26       3  

Realized gain distribution

     40        59       62       25  

Realized gains (losses)

     44        79       88       28  

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

     35        (26 )      (9 )      (84 ) 

Net increase (decrease) in net assets resulting from operations

   $ 80      $ 52     $ 98     $ (45 ) 
                                
   


 Global Real
Estate
Securities
Division		  
 
 
 		     


 LifePoints
Moderate
Strategy
Division		  
 
 
 		    

 LifePoints
Balanced
Strategy Division		  
 
 		    


 LifePoints
Growth
Strategy
Division		  
 
 
 

Income:

         

Dividend income

   $ 144      $ 44     $ 60     $ 74  

Expenses:

         

Mortality and expense risk charges

     14        7       10       13  

Net investment income (loss)

     130        37       50       61  

Realized gain (loss) on investments:

         

Realized gain (loss) on sale of fund shares

     3        2       3       10  

Realized gain distribution

     30        38       89       157  

Realized gains (losses)

     33        40       92       167  

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

     526        (2 )      (14 )      1  

Net increase (decrease) in net assets resulting from operations

   $ 689      $ 75     $ 128     $ 229  
                                
   


 LifePoints
Equity Growth
Strategy
Division		  
 
 
 		     



 Credit Suisse
Trust
Commodity
Return Strategy
Division		  
 
 
 
 		    

Income:

         

Dividend income

   $ 41      $ 81      

Expenses:

         

Mortality and expense risk charges

     10        6      

Net investment income (loss)

     31        75      

Realized gain (loss) on investments:

         

Realized gain (loss) on sale of fund shares

     4        (14 )     

Realized gain distribution

     65        -      

Realized gains (losses)

     69        (14 )     

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

     29        315      

Net increase (decrease) in net assets resulting from operations

   $ 129      $ 376      
                    

 

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

 

F-11

Statements of Changes in Net Assets

NORTHWESTERN MUTUAL VARIABLE ANNUITY ACCOUNT C

(in thousands)

 

     Growth Stock Division          Focused Appreciation Division  
    

 Year Ended
December 31,
2021		  
 
 		    

 Year Ended
December 31,
2020		  
 
 		       

 Year Ended
December 31,
2021		  
 
 		    

 Year Ended
December 31,
2020		  
 
 

Operations:

            

Net investment income (loss)

    $ (4 )    $ 2        $ (11 )    $ 3  

Net realized gains (losses)

      74       187          612       246  

Net change in unrealized appreciation/(depreciation)

      72       48          60       630  

Net increase (decrease) in net assets resulting from operations

      142       237          661       879  

Contract Transactions:

            

Contract owners’ net payments

      65       19          120       51  

Annuity payments

      -       -          -       -  

Surrenders and other (net)

      (79 )      (178 )         (279 )      (46 ) 

Transfers from other divisions or sponsor

      692       557          3,897       3,663  

Transfers to other divisions or sponsor

      (686 )      (462 )         (4,052 )      (3,676 ) 

Net increase (decrease) in net assets resulting from contract transactions

      (8 )      (64 )         (314 )      (8 ) 

Net increase (decrease) in net assets

      134       173          347       871  

Net Assets:

            

Beginning of period

      880       707          3,729       2,858  

End of period

    $ 1,014     $ 880        $ 4,076     $ 3,729  
                                   

Units issued during the period

      191       184          421       521  

Units redeemed during the period

      (192 )      (156 )         (436 )      (526 ) 

Net units issued (redeemed) during period

      (1 )      28          (15 )      (5 ) 
                                   
     Large Cap Core Stock Division          Large Cap Blend Division  
    

 Year Ended
December 31,
2021		  
 
 		    

 Year Ended
December 31,
2020		  
 
 		       

 Year Ended
December 31,
2021		  
 
 		    

 Year Ended
December 31,
2020		  
 
 

Operations:

            

Net investment income (loss)

    $ 1     $ 3        $ 2     $ 21  

Net realized gains (losses)

      75       15          40       9  

Net change in unrealized appreciation/(depreciation)

      66       122          52       16  

Net increase (decrease) in net assets resulting from operations

      142       140          94       46  

Contract Transactions:

            

Contract owners’ net payments

      62       16          9       2  

Annuity payments

      -       -          -       -  

Surrenders and other (net)

      (137 )      (42 )         (13 )      (10 ) 

Transfers from other divisions or sponsor

      588       689          2,353       1,838  

Transfers to other divisions or sponsor

      (605 )      (548 )         (2,358 )      (1,860 ) 

Net increase (decrease) in net assets resulting from contract transactions

      (92 )      115          (9 )      (30 ) 

Net increase (decrease) in net assets

      50       255          85       16  

Net Assets:

            

Beginning of period

      661       406          519       503  

End of period

    $ 711     $ 661        $ 604     $ 519  
                                   

Units issued during the period

      206       307          977       965  

Units redeemed during the period

      (226 )      (249 )         (976 )      (980 ) 

Net units issued (redeemed) during period

      (20 )      58          1       (15 ) 
                                   

 

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

 

F-12

Statements of Changes in Net Assets

NORTHWESTERN MUTUAL VARIABLE ANNUITY ACCOUNT C

(in thousands)

 

     Index 500 Stock Division          Large Company Value Division  
    

 Year Ended
December 31,
2021		  
 
 		    

 Year Ended
December 31,
2020		  
 
 		       

 Year Ended
December 31,
2021		  
 
 		    

 Year Ended
December 31,
2020		  
 
 

Operations:

            

Net investment income (loss)

    $ 102     $ 114        $ 5     $ 8  

Net realized gains (losses)

      948       615          16       5  

Net change in unrealized appreciation/(depreciation)

      2,218       959          87       2  

Net increase (decrease) in net assets resulting from operations

      3,268       1,688          108       15  

Contract Transactions:

            

Contract owners’ net payments

      1,096       1,071          30       1  

Annuity payments

      (13 )      (5 )         (1 )      (1 ) 

Surrenders and other (net)

      (768 )      (431 )         (41 )      (27 ) 

Transfers from other divisions or sponsor

      13,076       10,214          693       675  

Transfers to other divisions or sponsor

      (13,105 )      (10,649 )         (682 )      (597 ) 

Net increase (decrease) in net assets resulting from contract transactions

      286       200          (1 )      51  

Net increase (decrease) in net assets

      3,554       1,888          107       66  

Net Assets:

            

Beginning of period

      11,479       9,591          511       445  

End of period

    $ 15,033     $ 11,479        $ 618     $ 511  
                                   

Units issued during the period

      3,605       3,781          328       401  

Units redeemed during the period

      (3,426 )      (3,686 )         (327 )      (372 ) 

Net units issued (redeemed) during period

      179       95          1       29  
                                   
     Domestic Equity Division          Equity Income Division  
    

 Year Ended
December 31,
2021		  
 
 		    

 Year Ended
December 31,
2020		  
 
 		       

 Year Ended
December 31,
2021		  
 
 		    

 Year Ended
December 31,
2020		  
 
 

Operations:

            

Net investment income (loss)

    $ 32     $ 29        $ 41     $ 83  

Net realized gains (losses)

      85       204          25       34  

Net change in unrealized appreciation/(depreciation)

      312       (184 )         478       (89 ) 

Net increase (decrease) in net assets resulting from operations

      429       49          544       28  

Contract Transactions:

            

Contract owners’ net payments

      273       25          34       54  

Annuity payments

      -       -          -       -  

Surrenders and other (net)

      (138 )      (34 )         (110 )      (36 ) 

Transfers from other divisions or sponsor

      4,930       3,788          2,578       2,728  

Transfers to other divisions or sponsor

      (4,950 )      (4,348 )         (2,663 )      (2,720 ) 

Net increase (decrease) in net assets resulting from contract transactions

      115       (569 )         (161 )      26  

Net increase (decrease) in net assets

      544       (520 )         383       54  

Net Assets:

            

Beginning of period

      1,902       2,422          2,217       2,163  

End of period

    $ 2,446     $ 1,902        $ 2,600     $ 2,217  
                                   

Units issued during the period

      1,399       1,355          581       870  

Units redeemed during the period

      (1,369 )      (1,515 )         (615 )      (860 ) 

Net units issued (redeemed) during period

      30       (160 )         (34 )      10  
                                   

 

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

 

F-13

Statements of Changes in Net Assets

NORTHWESTERN MUTUAL VARIABLE ANNUITY ACCOUNT C

(in thousands)

 

     Mid Cap Growth Stock Division          Index 400 Stock Division  
    

 Year Ended
December 31,
2021		  
 
 		    

 Year Ended
December 31,
2020		  
 
 		       

 Year Ended
December 31,
2021		  
 
 		    

 Year Ended
December 31,
2020		  
 
 

Operations:

            

Net investment income (loss)

    $ (13 )      (9 )       $ 17     $ 23  

Net realized gains (losses)

      244       106          276       72  

Net change in unrealized appreciation/(depreciation)

      (97 )      228          476       250  

Net increase (decrease) in net assets resulting from operations

      134       325          769       345  

Contract Transactions:

            

Contract owners’ net payments

      88       123          348       461  

Annuity payments

      -       -          (4 )      (2 ) 

Surrenders and other (net)

      (124 )      (279 )         (341 )      (29 ) 

Transfers from other divisions or sponsor

      817       639          5,319       3,683  

Transfers to other divisions or sponsor

      (777 )      (669 )         (5,473 )      (3,826 ) 

Net increase (decrease) in net assets resulting from contract transactions

      4       (186 )         (151 )      287  

Net increase (decrease) in net assets

      138       139          618       632  

Net Assets:

            

Beginning of period

      1,486       1,347          3,203       2,571  

End of period

    $ 1,624     $ 1,486        $ 3,821     $ 3,203  
                                   

Units issued during the period

      301       318          887       914  

Units redeemed during the period

      (292 )      (319 )         (899 )      (861 ) 

Net units issued (redeemed) during period

      9       (1 )         (12 )      53  
                                   
     Mid Cap Value Division         
 Small Cap Growth Stock
Division		  
 
    

 Year Ended
December 31,
2021		  
 
 		    

 Year Ended
December 31,
2020		  
 
 		       

 Year Ended
December 31,
2021		  
 
 		    

 Year Ended
December 31,
2020		  
 
 

Operations:

            

Net investment income (loss)

    $ 10     $ 16        $ (6 )    $ (3 ) 

Net realized gains (losses)

      26       (14 )         208       50  

Net change in unrealized appreciation/(depreciation)

      224       27          (156 )      246  

Net increase (decrease) in net assets resulting from operations

      260       29          46       293  

Contract Transactions:

            

Contract owners’ net payments

      131       16          142       67  

Annuity payments

      -       -          (1 )      -  

Surrenders and other (net)

      (163 )      (52 )         (207 )      (2 ) 

Transfers from other divisions or sponsor

      1,920       1,722          1,054       821  

Transfers to other divisions or sponsor

      (1,990 )      (1,641 )         (1,058 )      (919 ) 

Net increase (decrease) in net assets resulting from contract transactions

      (102 )      45          (70 )      (33 ) 

Net increase (decrease) in net assets

      158       74          (24 )      260  

Net Assets:

            

Beginning of period

      1,200       1,126          1,226       966  

End of period

    $ 1,358     $ 1,200        $ 1,202     $ 1,226  
                                   

Units issued during the period

      380       427          264       274  

Units redeemed during the period

      (391 )      (414 )         (264 )      (294 ) 

Net units issued (redeemed) during period

      (11 )      13          -       (20 ) 
                                   

 

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

 

F-14

Statements of Changes in Net Assets

NORTHWESTERN MUTUAL VARIABLE ANNUITY ACCOUNT C

(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,  
     2021     2020            2021     2020  

Operations:

            

Net investment income (loss)

    $ 8     $ 21        $ -     $ 2  

Net realized gains (losses)

      205       50          93       42  

Net change in unrealized appreciation/(depreciation)

      267       111          168       72  

Net increase (decrease) in net assets resulting from operations

      480       182          261       116  

Contract Transactions:

            

Contract owners’ net payments

      94       382          91       20  

Annuity payments

      (1 )      (1 )         -       -  

Surrenders and other (net)

      (159 )      (47 )         (87 )      (88 ) 

Transfers from other divisions or sponsor

      3,342       2,246          2,800       2,529  

Transfers to other divisions or sponsor

      (3,517 )      (2,194 )         (2,910 )      (2,541 ) 

Net increase (decrease) in net assets resulting from contract transactions

      (241 )      386          (106 )      (80 ) 

Net increase (decrease) in net assets

      239       568          155       36  

Net Assets:

            

Beginning of period

      1,896       1,328          1,185       1,149  

End of period

    $ 2,135     $ 1,896        $ 1,340     $ 1,185  
                                   

Units issued during the period

      1,015       1,130          470       600  

Units redeemed during the period

      (1,069 )      (981 )         (484 )      (599 ) 

Net units issued (redeemed) during period

      (54 )      149          (14 )      1  
                                   
     International Growth Division            Research International Core
Division		  
     Year Ended     Year Ended            Year Ended     Year Ended  
     December 31,     December 31,            December 31,     December 31,  
     2021     2020            2021     2020  

Operations:

            

Net investment income (loss)

    $ 3     $ 23        $ 16     $ 28  

Net realized gains (losses)

      194       100          74       43  

Net change in unrealized appreciation/(depreciation)

      128       163          119       111  

Net increase (decrease) in net assets resulting from operations

      325       286          209       182  

Contract Transactions:

            

Contract owners’ net payments

      252       146          271       43  

Annuity payments

      -       -          (1 )      (1 ) 

Surrenders and other (net)

      (265 )      (157 )         (132 )      (34 ) 

Transfers from other divisions or sponsor

      3,885       3,082          3,028       2,773  

Transfers to other divisions or sponsor

      (3,784 )      (3,217 )         (3,008 )      (2,941 ) 

Net increase (decrease) in net assets resulting from contract transactions

      88       (146 )         158       (160 ) 

Net increase (decrease) in net assets

      413       140          367       22  

Net Assets:

            

Beginning of period

      2,070       1,930          1,767       1,745  

End of period

    $ 2,483     $ 2,070        $ 2,134     $ 1,767  
                                   

Units issued during the period

      1,196       1,215          2,001       2,162  

Units redeemed during the period

      (1,140 )      (1,246 )         (1,904 )      (2,296 ) 

Net units issued (redeemed) during period

      56       (31 )         97       (134 ) 
                                   

 

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

 

F-15

Statements of Changes in Net Assets

NORTHWESTERN MUTUAL VARIABLE ANNUITY ACCOUNT C

(in thousands)

 

     International Equity Division         

 Emerging Markets Equity

Division

  

 

    

 Year Ended
December 31,
2021		  
 
 		    

 Year Ended
December 31,
2020		  
 
 		       

 Year Ended
December 31,
2021		  
 
 		    

 Year Ended
December 31,
2020		  
 
 

Operations:

            

Net investment income (loss)

    $ 78     $ 111        $ 4     $ 48  

Net realized gains (losses)

      (69 )      (188 )         162       34  

Net change in unrealized appreciation/(depreciation)

      163       (62 )         (343 )      635  

Net increase (decrease) in net assets resulting from operations

      172       (139 )         (177 )      717  

Contract Transactions:

            

Contract owners’ net payments

      296       181          292       146  

Annuity payments

      (5 )      (2 )         (4 )      (2 ) 

Surrenders and other (net)

      (303 )      (115 )         (224 )      (49 ) 

Transfers from other divisions or sponsor

      6,430       6,363          5,521       4,389  

Transfers to other divisions or sponsor

      (6,325 )      (6,477 )         (5,354 )      (4,461 ) 

Net increase (decrease) in net assets resulting from contract transactions

      93       (50 )         231       23  

Net increase (decrease) in net assets

      265       (189 )         54       740  

Net Assets:

            

Beginning of period

      3,916       4,105          3,277       2,537  

End of period

    $ 4,181     $ 3,916        $ 3,331     $ 3,277  
                                   

Units issued during the period

      3,106       3,530          3,693       3,906  

Units redeemed during the period

      (3,046 )      (3,553 )         (3,546 )      (3,860 ) 

Net units issued (redeemed) during period

      60       (23 )         147       46  
                                   
    

 Government Money Market

Division

  

 

        Short-Term Bond Division  
    

 Year Ended
December 31,
2021		  
 
 		    

 Year Ended
December 31,
2020		  
 
 		       

 Year Ended
December 31,
2021		  
 
 		    

 Year Ended
December 31,
2020		  
 
 

Operations:

            

Net investment income (loss)

    $ (6 )    $ (2 )       $ 17     $ 23  

Net realized gains (losses)

      -       -          6       8  

Net change in unrealized appreciation/(depreciation)

      -       -          (31 )      16  

Net increase (decrease) in net assets resulting from operations

      (6 )      (2 )         (8 )      47  

Contract Transactions:

            

Contract owners’ net payments

      417       350          62       38  

Annuity payments

      -       -          -       -  

Surrenders and other (net)

      (1,028 )      (825 )         (138 )      (114 ) 

Transfers from other divisions or sponsor

      700       3,039          2,465       2,386  

Transfers to other divisions or sponsor

      (1,485 )      (1,081 )         (2,307 )      (2,328 ) 

Net increase (decrease) in net assets resulting from contract transactions

      (1,396 )      1,483          82       (18 ) 

Net increase (decrease) in net assets

      (1,402 )      1,481          74       29  

Net Assets:

            

Beginning of period

      2,419       938          1,259       1,230  

End of period

    $ 1,017     $ 2,419        $ 1,333     $ 1,259  
                                   

Units issued during the period

      935       1,873          1,945       1,926  

Units redeemed during the period

      (1,406 )      (1,352 )         (1,840 )      (1,938 ) 

Net units issued (redeemed) during period

      (471 )      521          105       (12 ) 
                                   

 

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

 

F-16

Statements of Changes in Net Assets

NORTHWESTERN MUTUAL VARIABLE ANNUITY ACCOUNT C

(in thousands)

 

     Select Bond Division         

 Long-Term U.S. Government

Bond Division

  

 

    

 Year Ended
December 31,
2021		  
 
 		    

 Year Ended
December 31,
2020		  
 
 		       

 Year Ended
December 31,
2021		  
 
 		    

 Year Ended
December 31,
2020		  
 
 

Operations:

            

Net investment income (loss)

    $ 114     $ 146        $ 2     $ 4  

Net realized gains (losses)

      337       84          82       39  

Net change in unrealized appreciation/(depreciation)

      (575 )      271          (114 )      17  

Net increase (decrease) in net assets resulting from operations

      (124 )      501          (30 )      60  

Contract Transactions:

            

Contract owners’ net payments

      346       139          16       5  

Annuity payments

      (21 )      (10 )         -       -  

Surrenders and other (net)

      (573 )      (118 )         (15 )      (4 ) 

Transfers from other divisions or sponsor

      10,956       10,437          1,008       873  

Transfers to other divisions or sponsor

      (10,489 )      (10,307 )         (978 )      (801 ) 

Net increase (decrease) in net assets resulting from contract transactions

      219       141          31       73  

Net increase (decrease) in net assets

      95       642          1       133  

Net Assets:

            

Beginning of period

      6,510       5,868          505       372  

End of period

    $ 6,605     $ 6,510        $ 506     $ 505  
                                   

Units issued during the period

      4,205       4,051          433       336  

Units redeemed during the period

      (4,046 )      (4,004 )         (422 )      (309 ) 

Net units issued (redeemed) during period

      159       47          11       27  
                                   
     Inflation Protection Division          High Yield Bond Division  
    

 Year Ended
December 31,
2021		  
 
 		    

 Year Ended
December 31,
2020		  
 
 		       

 Year Ended
December 31,
2021		  
 
 		    

 Year Ended
December 31,
2020		  
 
 

Operations:

            

Net investment income (loss)

    $ 8     $ 20        $ 93     $ 94  

Net realized gains (losses)

      34       5          10       (16 ) 

Net change in unrealized appreciation/(depreciation)

      46       88          (14 )      22  

Net increase (decrease) in net assets resulting from operations

      88       113          89       100  

Contract Transactions:

            

Contract owners’ net payments

      73       39          190       21  

Annuity payments

      -       -          (2 )      -  

Surrenders and other (net)

      (250 )      (39 )         (204 )      (91 ) 

Transfers from other divisions or sponsor

      2,251       2,043          2,677       2,588  

Transfers to other divisions or sponsor

      (2,086 )      (2,090 )         (2,521 )      (2,675 ) 

Net increase (decrease) in net assets resulting from contract transactions

      (12 )      (47 )         140       (157 ) 

Net increase (decrease) in net assets

      76       66          229       (57 ) 

Net Assets:

            

Beginning of period

      1,403       1,337          1,797       1,854  

End of period

    $ 1,479     $ 1,403        $ 2,026     $ 1,797  
                                   

Units issued during the period

      1,391       1,378          762       789  

Units redeemed during the period

      (1,358 )      (1,410 )         (721 )      (834 ) 

Net units issued (redeemed) during period

      33       (32 )         41       (45 ) 
                                   

 

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

 

F-17

Statements of Changes in Net Assets

NORTHWESTERN MUTUAL VARIABLE ANNUITY ACCOUNT C

(in thousands)

 

     Multi-Sector Bond Division          Balanced Division  
    

 Year Ended
December 31,
2021		  
 
 		    

 Year Ended
December 31,
2020		  
 
 		       

 Year Ended
December 31,
2021		  
 
 		    

 Year Ended
December 31,
2020		  
 
 

Operations:

            

Net investment income (loss)

    $ 65     $ 136        $ 109     $ 101  

Net realized gains (losses)

      101       (3 )         379       956  

Net change in unrealized appreciation/(depreciation)

      (182 )      93          (126 )      (318 ) 

Net increase (decrease) in net assets resulting from operations

      (16 )      226          362       739  

Contract Transactions:

            

Contract owners’ net payments

      253       48          314       314  

Annuity payments

      (1 )      (1 )         (8 )      (7 ) 

Surrenders and other (net)

      (288 )      (98 )         (983 )      (3,833 ) 

Transfers from other divisions or sponsor

      8,159       7,595          1,938       1,427  

Transfers to other divisions or sponsor

      (8,319 )      (7,041 )         (1,411 )      (2,280 ) 

Net increase (decrease) in net assets resulting from contract transactions

      (196 )      503          (150 )      (4,379 ) 

Net increase (decrease) in net assets

      (212 )      729          212       (3,640 ) 

Net Assets:

            

Beginning of period

      3,994       3,265          5,560       9,200  

End of period

    $ 3,782     $ 3,994        $ 5,772     $ 5,560  
                                   

Units issued during the period

      3,954       3,870          757       594  

Units redeemed during the period

      (4,049 )      (3,617 )         (517 )      (526 ) 

Net units issued (redeemed) during period

      (95 )      253          240       68  
                                   
     Asset Allocation Division          Fidelity VIP Mid Cap Division  
    

 Year Ended
December 31,
2021		  
 
 		    

 Year Ended
December 31,
2020		  
 
 		       

 Year Ended
December 31,
2021		  
 
 		    

 Year Ended
December 31,
2020		  
 
 

Operations:

            

Net investment income (loss)

    $ 9     $ 9        $ 6     $ 5  

Net realized gains (losses)

      50       20          476       7  

Net change in unrealized appreciation/(depreciation)

      (12 )      31          101       370  

Net increase (decrease) in net assets resulting from operations

      47       60          583       382  

Contract Transactions:

            

Contract owners’ net payments

      109       3          53       75  

Annuity payments

      (1 )      -          -       -  

Surrenders and other (net)

      (151 )      (8 )         (70 )      (119 ) 

Transfers from other divisions or sponsor

      427       505          3,228       3,122  

Transfers to other divisions or sponsor

      (440 )      (441 )         (3,355 )      (3,144 ) 

Net increase (decrease) in net assets resulting from contract transactions

      (56 )      59          (144 )      (66 ) 

Net increase (decrease) in net assets

      (9 )      119          439       316  

Net Assets:

            

Beginning of period

      533       414          2,377       2,061  

End of period

    $ 524     $ 533        $ 2,816     $ 2,377  
                                   

Units issued during the period

      164       185          429       621  

Units redeemed during the period

      (183 )      (163 )         (446 )      (615 ) 

Net units issued (redeemed) during period

      (19 )      22          (17 )      6  
                                   

 

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

 

F-18

Statements of Changes in Net Assets

NORTHWESTERN MUTUAL VARIABLE ANNUITY ACCOUNT C

(in thousands)

 

    
 Fidelity VIP Contrafund
Division		  
 		       
 AMT Sustainable Equity
Division		  
 
    

 Year Ended
December 31,
2021		  
 
 		    

 Year Ended
December 31,
2020		  
 
 		       

 Year Ended
December 31,
2021		  
 
 		    

 Year Ended
December 31,
2020		  
 
 

Operations:

            

Net investment income (loss)

    $ (14 )    $ (6 )       $ -     $ 2  

Net realized gains (losses)

      856       123          79       42  

Net change in unrealized appreciation/(depreciation)

      219       846          120       102  

Net increase (decrease) in net assets resulting from operations

      1,061       963          199       146  

Contract Transactions:

            

Contract owners’ net payments

      251       57          77       9  

Annuity payments

      (3 )      (2 )         -       -  

Surrenders and other (net)

      (637 )      (79 )         (92 )      (5 ) 

Transfers from other divisions or sponsor

      4,333       3,856          1,782       1,530  

Transfers to other divisions or sponsor

      (4,561 )      (3,883 )         (1,840 )      (1,560 ) 

Net increase (decrease) in net assets resulting from contract transactions

      (617 )      (51 )         (73 )      (26 ) 

Net increase (decrease) in net assets

      444       912          126       120  

Net Assets:

            

Beginning of period

      4,034       3,122          899       779  

End of period

    $ 4,478     $ 4,034        $ 1,025     $ 899  
                                   

Units issued during the period

      1,222       1,412          580       667  

Units redeemed during the period

      (1,340 )      (1,418 )         (602 )      (677 ) 

Net units issued (redeemed) during period

      (118 )      (6 )         (22 )      (10 ) 
                                   
     U.S. Strategic Equity Division         
 U.S. Small Cap Equity
Division		  
 
    

 Year Ended
December 31,
2021		  
 
 		    

 Year Ended
December 31,
2020		  
 
 		       

 Year Ended
December 31,
2021		  
 
 		    

 Year Ended
December 31,
2020		  
 
 

Operations:

            

Net investment income (loss)

    $ 1     $ 1        $ (1 )    $ (1 ) 

Net realized gains (losses)

      44       (3 )         79       (1 ) 

Net change in unrealized appreciation/(depreciation)

      35       98          (26 )      36  

Net increase (decrease) in net assets resulting from operations

      80       96          52       34  

Contract Transactions:

            

Contract owners’ net payments

      8       4          52       52  

Annuity payments

      -       -          -       -  

Surrenders and other (net)

      (4 )      (61 )         (84 )      (2 ) 

Transfers from other divisions or sponsor

      532       1,033          199       171  

Transfers to other divisions or sponsor

      (540 )      (1,115 )         (164 )      (164 ) 

Net increase (decrease) in net assets resulting from contract transactions

      (4 )      (139 )         3       57  

Net increase (decrease) in net assets

      76       (43 )         55       91  

Net Assets:

            

Beginning of period

      403       446          212       121  

End of period

    $ 479     $ 403        $ 267     $ 212  
                                   

Units issued during the period

      149       395          61       87  

Units redeemed during the period

      (150 )      (441 )         (61 )      (64 ) 

Net units issued (redeemed) during period

      (1 )      (46 )         -       23  
                                   

 

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

 

F-19

Statements of Changes in Net Assets

NORTHWESTERN MUTUAL VARIABLE ANNUITY ACCOUNT C

(in thousands)

 

    
 International Developed
Markets Division		  
 		        Strategic Bond Division  
    

 Year Ended
December 31,
2021		  
 
 		    

 Year Ended
December 31,
2020		  
 
 		       

 Year Ended
December 31,
2021		  
 
 		    

 Year Ended
December 31,
2020		  
 
 

Operations:

            

Net investment income (loss)

    $ 19     $ 6        $ 11     $ 33  

Net realized gains (losses)

      88       (13 )         28       83  

Net change in unrealized appreciation/(depreciation)

      (9 )      41          (84 )      60  

Net increase (decrease) in net assets resulting from operations

      98       34          (45 )      176  

Contract Transactions:

            

Contract owners’ net payments

      12       13          87       19  

Annuity payments

      -       -          -       -  

Surrenders and other (net)

      (120 )      (17 )         (275 )      (244 ) 

Transfers from other divisions or sponsor

      829       661          4,481       6,044  

Transfers to other divisions or sponsor

      (793 )      (724 )         (4,393 )      (6,193 ) 

Net increase (decrease) in net assets resulting from contract transactions

      (72 )      (67 )         (100 )      (374 ) 

Net increase (decrease) in net assets

      26       (33 )         (145 )      (198 ) 

Net Assets:

            

Beginning of period

      819       852          2,195       2,393  

End of period

    $ 845     $ 819        $ 2,050     $ 2,195  
                                   

Units issued during the period

      407       426          1,759       2,396  

Units redeemed during the period

      (441 )      (465 )         (1,777 )      (2,544 ) 

Net units issued (redeemed) during period

      (34 )      (39 )         (18 )      (148 ) 
                                   
    
 Global Real Estate Securities
Division		  
 		       
 LifePoints Moderate Strategy
Division		  
 
    

 Year Ended
December 31,
2021		  
 
 		    

 Year Ended
December 31,
2020		  
 
 		       

 Year Ended
December 31,
2021		  
 
 		    

 Year Ended
December 31,
2020		  
 
 

Operations:

            

Net investment income (loss)

    $ 130     $ 26        $ 37     $ 12  

Net realized gains (losses)

      33       (74 )         40       2  

Net change in unrealized appreciation/(depreciation)

      526       (132 )         (2 )      39  

Net increase (decrease) in net assets resulting from operations

      689       (180 )         75       53  

Contract Transactions:

            

Contract owners’ net payments

      209       129          1       5  

Annuity payments

      (2 )      (1 )         -       -  

Surrenders and other (net)

      (259 )      (137 )         (17 )      (56 ) 

Transfers from other divisions or sponsor

      3,742       3,475          282       284  

Transfers to other divisions or sponsor

      (3,830 )      (3,644 )         (282 )      (293 ) 

Net increase (decrease) in net assets resulting from contract transactions

      (140 )      (178 )         (16 )      (60 ) 

Net increase (decrease) in net assets

      549       (358 )         59       (7 ) 

Net Assets:

            

Beginning of period

      2,632       2,990          1,011       1,018  

End of period

    $ 3,181     $ 2,632        $ 1,070     $ 1,011  
                                   

Units issued during the period

      695       793          150       171  

Units redeemed during the period

      (717 )      (824 )         (158 )      (211 ) 

Net units issued (redeemed) during period

      (22 )      (31 )         (8 )      (40 ) 
                                   

 

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

 

F-20

Statements of Changes in Net Assets

NORTHWESTERN MUTUAL VARIABLE ANNUITY ACCOUNT C

(in thousands)

 

    
 LifePoints Balanced Strategy
Division		  
 		       
 LifePoints Growth Strategy
Division		  
 
    

 Year Ended
December 31,
2021		  
 
 		    

 Year Ended
December 31,
2020		  
 
 		       

 Year Ended
December 31,
2021		  
 
 		    

 Year Ended
December 31,
2020		  
 
 

Operations:

            

Net investment income (loss)

    $ 50     $ 11        $ 61     $ 8  

Net realized gains (losses)

      92       (26 )         167       22  

Net change in unrealized appreciation/(depreciation)

      (14 )      92          1       76  

Net increase (decrease) in net assets resulting from operations

      128       77          229       106  

Contract Transactions:

            

Contract owners’ net payments

      3       3          190       6  

Annuity payments

      -       -          -       -  

Surrenders and other (net)

      (5 )      (995 )         (25 )      -  

Transfers from other divisions or sponsor

      842       524          1,921       1,419  

Transfers to other divisions or sponsor

      (599 )      (524 )         (1,921 )      (1,419 ) 

Net increase (decrease) in net assets resulting from contract transactions

      241       (992 )         165       6  

Net increase (decrease) in net assets

      369       (915 )         394       112  

Net Assets:

            

Beginning of period

      1,015       1,930          1,304       1,192  

End of period

    $ 1,384     $ 1,015        $ 1,698     $ 1,304  
                                   

Units issued during the period

      436       331          1,040       924  

Units redeemed during the period

      (301 )      (901 )         (953 )      (920 ) 

Net units issued (redeemed) during period

      135       (570 )         87       4  
                                   
    
 LifePoints Equity Growth
Strategy Division		  
 		       
 Credit Suisse Trust Commodity
Return Strategy Division		  
 
    

 Year Ended
December 31,
2021		  
 
 		    

 Year Ended
December 31,
2020		  
 
 		       

 Year Ended
December 31,
2021		  
 
 		    

 Year Ended
December 31,
2020		  
 
 

Operations:

            

Net investment income (loss)

    $ 31     $ 4        $ 75     $ 63  

Net realized gains (losses)

      69       19          (14 )      (98 ) 

Net change in unrealized appreciation/(depreciation)

      29       22          315       22  

Net increase (decrease) in net assets resulting from operations

      129       45          376       (13 ) 

Contract Transactions:

            

Contract owners’ net payments

      29       5          110       17  

Annuity payments

      -       -          (3 )      1  

Surrenders and other (net)

      -       -          (90 )      (32 ) 

Transfers from other divisions or sponsor

      -       18          2,674       2,320  

Transfers to other divisions or sponsor

      -       (27 )         (2,743 )      (2,270 ) 

Net increase (decrease) in net assets resulting from contract transactions

      29       (4 )         (52 )      36  

Net increase (decrease) in net assets

      158       41          324       23  

Net Assets:

            

Beginning of period

      705       664          1,357       1,334  

End of period

    $ 863     $ 705        $ 1,681     $ 1,357  
                                   

Units issued during the period

      17       14          527       588  

Units redeemed during the period

      -       (17 )         (539 )      (578 ) 

Net units issued (redeemed) during period

      17       (3 )         (12 )      10  
                                   

 

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

 

F-21

Notes to Financial Statements

 

1.

Organization

Northwestern Mutual Variable Annuity Account C (“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 unallocated group combination variable annuity contracts (“contracts”) to provide retirement annuity benefits for self-employed persons and their eligible employees and individual flexible payment deferred variable annuity contracts (“Network Edition”) of certain eligible persons. Three versions of the contract are currently offered: Front Load contracts with a sales charge up to 4.50% of purchase payments; Simplified Load contracts with an installment fee of $750; and Network Edition 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, 2021, all of the Account’s investments are identified as Level 1 securities for valuation purposes under the Fair Value Measurement Topic of the FASB Accounting Standards Codification. Level 1 fair value is determined by unadjusted quoted prices in active markets for identical securities or derivatives. Level 2 fair value is determined by other significant observable inputs (including quoted prices for similar securities). Level 3 fair value is determined by significant unobservable inputs (including the Account’s own assumptions in determining fair value). There were no transfers between levels during the year. All changes in fair value are recorded as change in unrealized appreciation/(depreciation) of investments during the period in the statements of operations of the applicable Division.

 

  C.

Investment Income, Securities Transactions and 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, 2021 were as follows (amounts in thousands):

 

    Fund Name    Purchases      Sales    

Growth Stock Division

    $ 148      $ 119  

Focused Appreciation Division

      658        571  

Large Cap Core Stock Division

      125        176  

Large Cap Blend Division

      82        46  

Index 500 Stock Division

      2,255              1,520  

Large Company Value Division

      89        79  

Domestic Equity Division

      478        280  

Equity Income Division

      196        317  

Mid Cap Growth Stock Division

      358        161  

Index 400 Stock Division

      684        703  

Mid Cap Value Division

      198        281  

Small Cap Growth Stock Division

      319        269  

Index 600 Stock Division

      333        531  

Small Cap Value Division

      213        260  

International Growth Division

      518        358  

Research International Core Division

      397        191  

International Equity Division

      626        455  

Emerging Markets Equity Division

      782        546  

Government Money Market Division

      563        1,965  

 

 

F-22

Notes to Financial Statements

 

    Fund Name    Purchases      Sales    

Short-Term Bond Division

    $ 266      $ 165  

Select Bond Division

      1,502        867  

Long-Term U.S. Government Bond Division

      236        121  

Inflation Protection Bond Division

      271        271  

High Yield Bond Division

      492        260  

Multi-Sector Bond Division

      781        880  

Balanced Division

      1,407        1,199  

Asset Allocation Division

      153        174  

Fidelity VIP Mid Cap Division

      554        272  

Fidelity VIP Contrafund Division

      865        966  

AMT Sustainable Equity Division

      158        213  

U.S. Strategic Equity Division

      54        17  

U.S. Small Cap Equity Division

      158        98  

International Developed Markets Division

      148        140  

Strategic Bond Division

      373        437  

Global Real Estate Securities Division

      450        430  

LifePoints Moderate Strategy Division

      84        24  

LifePoints Balanced Strategy Division

      395        16  

LifePoints Growth Strategy Division

      421        38  

LifePoints Equity Growth Strategy Division

      135        10  

Credit Suisse Trust Commodity Return Strategy Division

      258        235  

 

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 or beginning May 1, 1984 and prior to January 6, 1992 there is no deduction for mortality and expense risks. For those contracts issued beginning May 1, 1984 and prior to January 6, 1992 the rates may be increased by the Board of Trustees of Northwestern Mutual, not to exceed a 0.25% annual rate.

There are no contracts outstanding that were issued on or after December 17, 1981 and prior to May 1, 1984.

For contracts issued on or after January 6, 1992, for the Front Load version and the Simplified Load version, the deduction for mortality and expense risks is determined daily at annual rates of 0.65% 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 1.00% and 1.50% annual rates, respectively.

For Network Edition 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 0.75% annual rate.

 

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:  
      Units
Outstanding
(000’s)		     

Unit Value,

Lowest to Highest

      Net Assets
(000’s)		              Dividend
Income as
a % of
Average
Net Assets		     Expense Ratio,
Lowest to
Highest (1) 		    

Total Return, Lowest

to Highest (1)

 

Growth Stock Division

 

                            

2021

      163      $ 4.191147      to    $ 152.095850      $ 1,014           0.00   %      0.35% to 1.25%        15.22   %      to        16.67   % 

2020

      164        3.604955      to      130.365531        880           0.67       0.35 to 1.25        33.30       to        34.97  

2019

      136        2.680241      to      96.585761        707           0.67       0.35 to 1.25        28.08       to        29.68  

2018

      158        2.073988      to      74.477290        757           0.67       0.35 to 1.25        0.00   (2)      to        1.26  

2017

      194        2.055452      to      73.551913        893                 0.68       0.35 to 1.25        22.73       to        24.27  

Focused Appreciation Division

 

                            

2021

      409      $ 8.597069      to    $ 108.543824      $ 4,076           0.17   %      0.35% to 1.25%        17.43   %      to        18.90   % 

2020

      424        7.321217      to      91.289389        3,729           0.54       0.35 to 1.25        30.90       to        32.55  

2019

      429        5.593023      to      68.873586        2,858           0.62       0.35 to 1.25        30.33       to        31.97  

2018

      430        4.291278      to      52.188290        2,176           0.49       0.35 to 1.25        (3.55 )      to        (2.34 ) 

2017

      424        4.449605      to      53.438372        2,222                 0.76       0.35 to 1.25        31.97       to        33.62  

Large Cap Core Stock Division

 

                            

2021

      175      $ 3.481907      to    $ 100.458713      $ 711           0.79   %      0.35% to 1.25%        23.55   %      to        25.10   % 

2020

      195        2.793028      to      80.301917        661           1.23       0.35 to 1.25        21.21       to        22.74  

2019

      137        2.283558      to      65.424142        406           1.22       0.35 to 1.25        29.56       to        31.19  

2018

      137        1.746744      to      49.869208        313           1.46       0.35 to 1.25        (7.20 )      to        (6.04 ) 

2017

      189        1.865558      to      53.073917        462                 1.43       0.35 to 1.25        23.33       to        24.87  

Large Cap Blend Division

 

                            

2021

      230      $ 2.306054      to    $ 27.701179      $ 604           0.65   %      0.35% to 1.25%        16.99   %      to        18.46   % 

2020

      229        1.971217      to      23.385328        519           5.26       0.35 to 1.25        8.68       to        10.05  

2019

      244        1.813711      to      21.249241        503           1.11       0.35 to 1.25        22.43       to        23.97  

2018

      269        1.481405      to      17.140701        447           0.76       0.35 to 1.25        (5.20 )      to        (4.00 ) 

2017

      297        1.562708      to      17.855817        517                 0.86       0.35 to 1.25        17.55       to        19.02  

Index 500 Stock Division

 

                            

2021

      2,674      $ 4.474335      to    $ 270.376034      $ 15,033           1.25   %      0.35% to 1.25%        26.86   %      to        28.45   % 

2020

      2,495        3.495577      to      210.492951        11,479           1.65       0.35 to 1.25        16.71       to        18.18  

2019

      2,400        2.968210      to      178.109105        9,591           1.60       0.35 to 1.25        29.55       to        31.18  

2018

      2,205        2.270665      to      135.776139        7,066           1.60       0.35 to 1.25        (5.76 )      to        (4.58 ) 

2017

      2,258        2.387940      to      142.286114        7,929                 1.71       0.35 to 1.25        20.01       to        21.52  

Large Company Value Division

 

                            

2021

      256      $ 2.092019      to    $ 25.131615      $ 618           1.17   %      0.35% to 1.25%        20.41   %      to        21.92   % 

2020

      255        1.737445      to      20.613433        511           2.16       0.35 to 1.25        1.36       to        2.64  

2019

      226        1.714135      to      20.083819        445           2.24       0.35 to 1.25        26.08       to        27.66  

2018

      208        1.359607      to      15.732361        322           1.59       0.35 to 1.25        (9.07 )      to        (7.92 ) 

2017

      255        1.495275      to      17.086312        429                 2.05       0.35 to 1.25        9.72       to        11.10  

Domestic Equity Division

 

                            

2021

      605      $ 3.372163      to    $ 43.518946      $ 2,446           1.87   %      0.35% to 1.25%        21.19   %      to        22.71   % 

2020

      575        2.782499      to      35.463950        1,902           2.19       0.35 to 1.25        (0.52 )      to        0.73  

2019

      735        2.797166      to      35.207252        2,422           1.77       0.35 to 1.25        19.27       to        20.77  

2018

      610        2.345210      to      29.152607        1,659           1.79       0.35 to 1.25        (4.02 )      to        (2.81 ) 

2017

      745        2.443559      to      29.996128        2,059                 1.62       0.35 to 1.25        12.37       to        13.78  

Equity Income Division

 

                            

2021

      543      $ 4.077248      to    $ 51.480302      $ 2,600           2.06   %      0.35% to 1.25%        24.14   %      to        25.70   % 

2020

      577        3.284293      to      40.954303        2,217           4.82       0.35 to 1.25        (0.06 )      to        1.20  

2019

      567        3.286138      to      40.467475        2,163           2.30       0.35 to 1.25        25.04       to        26.61  

2018

      612        2.627977      to      31.961107        1,846           2.07       0.35 to 1.25        (10.47 )      to        (9.35 ) 

2017

      590        2.935634      to      35.257091        1,980           2.24       0.35 to 1.25        14.81       to        16.24  

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

(2) Ratio is less than 0.005%.

 

F-24

Notes to Financial Statements

6. Financial Highlights

 

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

Mid Cap Growth Stock Division

 

                            

2021

      239      $ 2.994607      to    $ 213.536458      $ 1,624           0.15   %      0.35% to 1.25%        8.81   %      to        10.18   % 

2020

      230        2.727520      to      193.811117        1,486           0.29       0.35 to 1.25        23.85       to        25.41  

2019

      231        2.182501      to      154.540637        1,347           0.18       0.35 to 1.25        31.36       to        33.01  

2018

      278        1.646579      to      116.184426        1,179           0.13       0.35 to 1.25        (8.53 )      to        (7.38 ) 

2017

      295        1.784051      to      125.441587        1,412                 0.22       0.35 to 1.25        18.80       to        20.29  

Index 400 Stock Division

 

                            

2021

      539      $ 7.006063      to    $ 93.570328      $ 3,821           0.95   %      0.35% to 1.25%        22.92   %      to        24.46   % 

2020

      551        5.648868      to      75.180406        3,203           1.39       0.35 to 1.25        11.96       to        13.37  

2019

      498        5.000182      to      66.313755        2,571           1.21       0.35 to 1.25        24.32       to        25.88  

2018

      447        3.985981      to      52.678316        1,848           1.11       0.35 to 1.25        (12.43 )      to        (11.33 ) 

2017

      438        4.511315      to      59.411237        2,043                 1.08       0.35 to 1.25        14.52       to        15.96  

Mid Cap Value Division

 

                            

2021

      237      $ 4.891257      to    $ 61.756931      $ 1,358           1.17   %      0.35% to 1.25%        21.74   %      to        23.27   % 

2020

      248        4.017711      to      50.098747        1,200           1.90       0.35 to 1.25        0.40       to        1.67  

2019

      235        4.001596      to      49.276848        1,126           1.61       0.35 to 1.25        27.60       to        29.21  

2018

      237        3.135936      to      38.138006        885           1.64       0.35 to 1.25        (13.93 )      to        (12.85 ) 

2017

      231        3.643868      to      43.762109        1,004                 1.40       0.35 to 1.25        10.43       to        11.81  

Small Cap Growth Stock Division

 

                            

2021

      244      $ 4.466101      to    $ 108.425869      $ 1,202           0.02   %      0.35% to 1.25%        2.81   %      to        4.11   % 

2020

      244        4.305002      to      104.149054        1,226           0.11       0.35 to 1.25        31.81       to        33.47  

2019

      264        3.236751      to      78.030714        966           0.10       0.35 to 1.25        34.01       to        35.69  

2018

      258        2.393724      to      57.505467        703           0.00       0.35 to 1.25        (12.80 )      to        (11.71 ) 

2017

      283        2.720661      to      65.129570        945                 0.11       0.35 to 1.25        20.10       to        21.61  

Index 600 Stock Division

 

                            

2021

      586      $ 3.193533      to    $ 38.363170      $ 2,135           0.78   %      0.35% to 1.25%        24.65   %      to        26.22   % 

2020

      640        2.561959      to      30.394793        1,896           1.83       0.35 to 1.25        9.55       to        10.93  

2019

      491        2.338584      to      27.399696        1,328           0.25       0.35 to 1.25        20.92       to        22.44  

2018

      460        1.934012      to      22.378619        1,021           1.36       0.35 to 1.25        (9.91 )      to        (8.78 ) 

2017

      438        2.146980      to      24.532713        1,083                 1.91       0.35 to 1.25        11.53       to        12.93  

Small Cap Value Division

 

                            

2021

      206      $ 5.457584      to    $ 70.431381      $ 1,340           0.40   %      0.35% to 1.25%        21.48   %      to        23.00   % 

2020

      220        4.492731      to      57.260960        1,185           0.52       0.35 to 1.25        7.93       to        9.29  

2019

      219        4.162762      to      52.395678        1,149           0.48       0.35 to 1.25        24.33       to        25.89  

2018

      220        3.348176      to      41.620093        919           0.50       0.35 to 1.25        (13.81 )      to        (12.73 ) 

2017

      297        3.885050      to      47.690780        1,378                 0.80       0.35 to 1.25        10.27       to        11.65  

International Growth Division

 

                            

2021

      682      $ 3.063761      to    $ 39.539175      $ 2,483           0.55   %      0.35% to 1.25%        14.48   %      to        15.92   % 

2020

      626        2.676266      to      34.110132        2,070           1.62       0.35 to 1.25        16.44       to        17.91  

2019

      657        2.298310      to      28.928599        1,930           1.22       0.35 to 1.25        33.13       to        34.80  

2018

      589        1.726341      to      21.459907        1,300           1.45       0.35 to 1.25        (12.38 )      to        (11.28 ) 

2017

      494        1.970410      to      24.188049        1,285                 1.31       0.35 to 1.25        28.42       to        30.03  

Research International Core Division

 

                         

2021

      1,235      $ 1.500516      to    $ 18.026460      $ 2,134           1.17   %      0.35% to 1.25%        10.68   %      to        12.07   % 

2020

      1,138        1.355712      to      16.084924        1,767           2.14       0.35 to 1.25        12.05       to        13.46  

2019

      1,272        1.209890      to      14.176293        1,745           1.69       0.35 to 1.25        26.66       to        28.25  

2018

      1,215        0.955206      to      11.053328        1,296           1.71       0.35 to 1.25        (14.73 )      to        (13.66 ) 

2017

      1,021        1.120355      to      12.802534        1,269           1.67       0.35 to 1.25        26.62       to        28.21  

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

 

F-25

Notes to Financial Statements

6. Financial Highlights

 

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

International Equity Division

 

                            

2021

      1,773      $ 2.172077      to    $ 5.930327      $ 4,181           2.35   %      0.35% to 1.25%        3.70   %      to        5.00    % 

2020

      1,713        2.075812      to      5.647675        3,916           3.58       0.35 to 1.25        (3.92 )      to        (2.71 ) 

2019

      1,736        2.141147      to      5.804990        4,105           2.54       0.35 to 1.25        11.20       to        12.60  

2018

      1,662        1.908282      to      5.155553        3,560           2.52       0.35 to 1.25        (16.46 )      to        (15.41 ) 

2017

      1,723        2.263791      to      6.094491        4,449                 2.32       0.35 to 1.25        20.78       to        22.30  

Emerging Markets Equity Division

 

                            

2021

      2,248      $ 1.296801      to    $ 15.578805      $ 3,331           0.53   %      0.35% to 1.25%        (5.74 )  %      to        (4.55 )  % 

2020

      2,101        1.375728      to      16.321818        3,277           2.28       0.35 to 1.25        25.28       to        26.86  

2019

      2,055        1.098154      to      12.866468        2,537           1.12       0.35 to 1.25        19.10       to        20.60  

2018

      1,971        0.922016      to      10.668771        2,024           1.40       0.35 to 1.25        (14.83 )      to        (13.75 ) 

2017

      1,741        1.082576      to      12.370178        2,079                 0.94       0.35 to 1.25        26.26       to        27.84  

Government Money Market Division

 

                         

2021

      712      $ 1.289068      to    $ 43.483468      $ 1,017           0.00   %      0.35% to 1.25%        (1.23 )  %      to        0.01    % 

2020

      1,183        1.293416      to      43.480109        2,419           0.19       0.35 to 1.25        (0.94 )      to        0.31  

2019

      662        1.293907      to      43.345856        938           1.98       0.35 to 1.25        0.67       to        1.94  

2018

      934        1.273783      to      42.522150        1,334           1.57       0.35 to 1.25        0.27       to        1.53  

2017

      1,071        1.258833      to      41.875417        1,630                 0.60       0.35 to 1.25        (0.65 )      to        0.60  

Short-Term Bond Division

 

                            

2021

      1,026      $ 1.160639      to    $ 13.941366      $ 1,333           1.81   %      0.35% to 1.25%        (1.33 )  %      to        (0.10 )  % 

2020

      921        1.176335      to      13.954768        1,259           2.28       0.35 to 1.25        3.00       to        4.29  

2019

      933        1.142089      to      13.380170        1,230           1.48       0.35 to 1.25        3.09       to        4.38  

2018

      1,015        1.107847      to      12.818134        1,279           1.59       0.35 to 1.25        0.09       to        1.36  

2017

      876        1.106873      to      12.646732        1,119                 1.33       0.35 to 1.25        0.07       to        1.33  

Select Bond Division

 

                            

2021

      2,347      $ 2.671253      to    $ 263.835614      $ 6,605           2.14   %      0.35% to 1.25%        (2.81 )  %      to        (1.59 )  % 

2020

      2,188        2.723858      to      268.089237        6,510           2.75       0.35 to 1.25        7.63       to        8.98  

2019

      2,141        2.508203      to      245.997917        5,868           2.75       0.35 to 1.25        7.30       to        8.65  

2018

      2,160        2.316621      to      226.413644        5,771           2.25       0.35 to 1.25        (1.45 )      to        (0.21 ) 

2017

      2,146        2.329757      to      226.897252        5,552                 2.09       0.35 to 1.25        2.30       to        3.58  

Long-Term U.S. Government Bond Division

                      

2021

      209      $ 2.120232      to    $ 25.468271      $ 506           0.87   %      0.35% to 1.25%        (6.55 )  %      to        (5.37 )  % 

2020

      198        2.268738      to      26.913884        505           1.47       0.35 to 1.25        15.91       to        17.37  

2019

      171        1.957302      to      22.930587        372           2.77       0.35 to 1.25        11.76       to        13.17  

2018

      161        1.751302      to      20.262648        315           1.96       0.35 to 1.25        (3.26 )      to        (2.04 ) 

2017

      188        1.810437      to      20.685508        377                 2.02       0.35 to 1.25        6.94       to        8.28  

Inflation Protection Division

 

                            

2021

      864      $ 1.521651      to    $ 18.278682      $ 1,479           0.98   %      0.35% to 1.25%        5.28    %      to        6.61    % 

2020

      831        1.445291      to      17.146141        1,403           1.99       0.35 to 1.25        8.21       to        9.57  

2019

      863        1.335651      to      15.648347        1,337           2.55       0.35 to 1.25        7.67       to        9.02  

2018

      962        1.240557      to      14.354000        1,359           2.10       0.35 to 1.25        (3.82 )      to        (2.61 ) 

2017

      854        1.289916      to      14.738894        1,267                 0.68       0.35 to 1.25        2.30       to        3.58  

High Yield Bond Division

 

                            

2021

      521      $ 3.838927      to    $ 66.738383      $ 2,026           5.30   %      0.35% to 1.25%        4.00    %      to        5.31    % 

2020

      480        3.658289      to      63.375613        1,797           5.84       0.35 to 1.25        5.32       to        6.64  

2019

      525        3.442495      to      59.428074        1,854           5.50       0.35 to 1.25        13.54       to        14.97  

2018

      553        3.004797      to      51.690668        1,712           5.33       0.35 to 1.25        (3.91 )      to        (2.71 ) 

2017

      558        3.099311      to      53.128855        1,756           5.53       0.35 to 1.25        5.56       to        6.88  

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

 

F-26

Notes to Financial Statements

6. Financial Highlights

 

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

Multi-Sector Bond Division

 

                            

2021

      1,771      $ 1.866147      to    $ 22.416380      $ 3,782           2.15   %      0.35% to 1.25%        (1.32 )  %      to        (0.08 )  % 

2020

      1,866        1.891030      to      22.433485        3,994           4.15       0.35 to 1.25        4.81       to        6.13  

2019

      1,613        1.804270      to      21.138053        3,265           4.53       0.35 to 1.25        12.63       to        14.04  

2018

      1,451        1.602009      to      18.535667        2,563           3.15       0.35 to 1.25        (2.53 )      to        (1.30 ) 

2017

      1,159        1.643634      to      18.780164        2,122                 3.83       0.35 to 1.25        7.04       to        8.38  

Balanced Division

 

                            

2021

      1,156      $ 2.882625      to    $ 298.595878      $ 5,772           2.46   %      0.35% to 1.25%        6.23    %      to        7.56    % 

2020

      916        2.689434      to      277.610210        5,560           1.64       0.35 to 1.25        11.09       to        12.49  

2019

      848        2.399220      to      246.784874        9,200           2.31       0.35 to 1.25        16.46       to        17.92  

2018

      1,102        2.041719      to      209.277798        9,762           2.38       0.35 to 1.25        (4.65 )      to        (3.45 ) 

2017

      1,138        2.122194      to      216.761163        11,453                 2.14       0.35 to 1.25        10.60       to        11.98  

Asset Allocation Division

 

                            

2021

      153      $ 2.824479      to    $ 36.450275      $ 524           2.15   %      0.35% to 1.25%        9.08    %      to        10.45    % 

2020

      172        2.589358      to      33.001529        533           2.36       0.35 to 1.25        12.02       to        13.43  

2019

      150        2.311468      to      29.093477        414           1.87       0.35 to 1.25        19.58       to        21.08  

2018

      187        1.932994      to      24.028105        425           1.99       0.35 to 1.25        (6.06 )      to        (4.88 ) 

2017

      183        2.057749      to      25.259678        442                 2.00       0.35 to 1.25        13.45       to        14.87  

Fidelity VIP Mid Cap Division

 

                            

2021

      343      $ 7.008987      to    $ 88.496791      $ 2,816           0.61   %      0.35% to 1.25%        24.04    %      to        25.60    % 

2020

      360        5.650379      to      70.458211        2,377           0.62       0.35 to 1.25        16.60       to        18.07  

2019

      354        4.846019      to      59.676525        2,061           0.67       0.35 to 1.25        21.64       to        23.17  

2018

      397        3.983763      to      48.449732        1,841           0.41       0.35 to 1.25        (15.83 )      to        (14.77 ) 

2017

      407        4.733325      to      56.847028        2,227                 0.49       0.35 to 1.25        19.05       to        20.54  

Fidelity VIP Contrafund Division

 

                            

2021

      1,043      $ 3.749539      to    $ 45.041088      $ 4,478           0.06   %      0.35% to 1.25%        26.25    %      to        27.83    % 

2020

      1,161        2.969929      to      35.233871        4,034           0.21       0.35 to 1.25        28.83       to        30.46  

2019

      1,167        2.305232      to      27.008170        3,122           0.22       0.35 to 1.25        29.65       to        31.27  

2018

      1,180        1.778089      to      20.573795        2,399           0.44       0.35 to 1.25        (7.80 )      to        (6.64 ) 

2017

      1,133        1.928613      to      22.036922        2,495                 0.78       0.35 to 1.25        20.08       to        21.59  

AMT Sustainable Equity Division

 

                            

2021

      291      $ 3.074461      to    $ 36.931533      $ 1,025           0.37   %      0.35% to 1.25%        21.95    %      to        23.48    % 

2020

      313        2.521165      to      29.909730        899           0.62       0.35 to 1.25        18.07       to        19.56  

2019

      323        2.135226      to      25.016087        779           0.41       0.35 to 1.25        24.32       to        25.88  

2018

      333        1.717474      to      19.872228        11,744           0.51       0.35 to 1.25        (6.89 )      to        (5.72 ) 

2017

      317        1.844614      to      21.076980        12,719                 0.52       0.35 to 1.25        16.96       to        18.43  

U.S. Strategic Equity Division

 

                            

2021

      124      $ 3.228324      to    $ 42.853358      $ 479           0.56   %      0.35% to 1.25%        18.91    %      to        20.40    % 

2020

      125        2.715036      to      35.592905        403           0.47       0.35 to 1.25        22.30       to        23.84  

2019

      171        2.220002      to      28.741505        446           1.07       0.35 to 1.25        28.65       to        30.26  

2018

      196        1.725623      to      22.064057        392           1.15       0.35 to 1.25        (10.76 )      to        (9.64 ) 

2017

      297        1.933892      to      24.418364        629                 1.03       0.35 to 1.25        19.30       to        20.80  

U.S. Small Cap Equity Division

 

                            

2021

      63      $ 3.993712      to    $ 53.013410      $ 267           0.25   %      0.35% to 1.25%        24.23    %      to        25.79    % 

2020

      63        3.214751      to      42.144292        212           0.05       0.35 to 1.25        11.30       to        12.70  

2019

      40        2.888359      to      37.394611        121           0.56       0.35 to 1.25        21.54       to        23.07  

2018

      43        2.376428      to      30.385277        106           0.47       0.35 to 1.25        (13.07 )      to        (11.97 ) 

2017

      43        2.733797      to      34.518205        120           0.18       0.35 to 1.25        14.05       to        15.48  

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

 

F-27

Notes to Financial Statements

6. Financial Highlights

 

     As of the respective period end date:            

For the respective period ended:

  
      Units
Outstanding
(000’s)		     

Unit Value,

Lowest to Highest

      Net Assets
(000’s)		              Dividend
Income as
a % of
Average
Net Assets		     Expense Ratio,
Lowest to
Highest (1) 		     Total Return, Lowest
to Highest (1) 		 

International Developed Markets Division

 

                   

2021

      401      $ 2.041810      to    $ 27.103303      $ 845           2.53   %      0.35% to 1.25%        11.26    %      to        12.66    % 

2020

      435        1.835201      to      24.058667        819           1.23       0.35 to 1.25        3.77       to        5.08  

2019

      474        1.768556      to      22.896522        852           2.66       0.35 to 1.25        18.24       to        19.72  

2018

      472        1.495765      to      19.124827        711           1.78       0.35 to 1.25        (15.93 )      to        (14.87 ) 

2017

      380        1.768232      to      22.466466        677                 2.68       0.35 to 1.25        23.43       to        24.98  

Strategic Bond Division

 

                   

2021

      790      $ 2.162708      to    $ 28.706174      $ 2,050           0.90   %      0.35% to 1.25%        (3.04 )  %      to        (1.82 )  % 

2020

      808        2.230428      to      29.237785        2,195           1.83       0.35 to 1.25        7.09       to        8.43  

2019

      956        2.082855      to      26.963899        2,393           2.76       0.35 to 1.25        7.84       to        9.19  

2018

      1,034        1.931442      to      24.693685        2,357           2.11       0.35 to 1.25        (2.04 )      to        (0.81 ) 

2017

      933        1.971861      to      24.895915        2,203                 1.35       0.35 to 1.25        2.58       to        3.86  

Global Real Estate Securities Division

 

                   

2021

      509      $ 5.373126      to    $ 71.324137      $ 3,181           4.89   %      0.35% to 1.25%        25.62    %      to        27.19    % 

2020

      531        4.277349      to      56.074809        2,632           1.52       0.35 to 1.25        (6.36 )      to        (5.18 ) 

2019

      562        4.567716      to      59.135972        2,990           5.16       0.35 to 1.25        20.13       to        21.64  

2018

      551        3.802249      to      48.615288        2,432           4.48       0.35 to 1.25        (6.90 )      to        (5.73 ) 

2017

      527        4.084164      to      51.568102        2,483                 3.69       0.35 to 1.25        10.42       to        11.80  

LifePoints Moderate Strategy Division

 

                   

2021

      580      $ 1.698371      to    $ 20.401736      $ 1,070           4.23   %      0.35% to 1.25%        6.89    %      to        8.23    % 

2020

      588        1.588894      to      18.849922        1,011           2.03       0.35 to 1.25        5.08       to        6.40  

2019

      628        1.512123      to      17.716081        1,018           1.19       0.35 to 1.25        11.15       to        12.54  

2018

      673        1.360492      to      15.741887        979           4.49       0.35 to 1.25        (6.10 )      to        (4.92 ) 

2017

      675        1.449028      to      16.557145        1,040                 2.35       0.35 to 1.25        8.53       to        9.88  

LifePoints Balanced Strategy Division

 

                   

2021

      720      $ 1.819166      to    $ 21.853460      $ 1,384           4.86   %      0.35% to 1.25%        11.64    %      to        13.04    % 

2020

      585        1.629523      to      19.332571        1,015           2.15       0.35 to 1.25        6.31       to        7.65  

2019

      1,155        1.532773      to      17.958473        1,930           1.57       0.35 to 1.25        15.01       to        16.45  

2018

      1,185        1.332766      to      15.421524        1,711           5.48       0.35 to 1.25        (7.95 )      to        (6.80 ) 

2017

      1,207        1.448010      to      16.545882        1,884                 2.35       0.35 to 1.25        10.61       to        12.00  

LifePoints Growth Strategy Division

 

                   

2021

      860      $ 1.867142      to    $ 22.430026      $ 1,698           4.73   %      0.35% to 1.25%        15.99    %      to        17.44    % 

2020

      773        1.609785      to      19.098502        1,304           1.62       0.35 to 1.25        8.38       to        9.75  

2019

      769        1.485265      to      17.402048        1,192           0.71       0.35 to 1.25        16.60       to        18.06  

2018

      813        1.273823      to      14.739598        1,082           5.00       0.35 to 1.25        (9.19 )      to        (8.05 ) 

2017

      821        1.402805      to      16.029490        1,202                 3.16       0.35 to 1.25        14.22       to        15.65  

LifePoints Equity Growth Strategy Division

 

                   

2021

      484      $ 1.783706      to    $ 21.427646      $ 863           5.07   %      0.35% to 1.25%        18.13    %      to        19.61    % 

2020

      467        1.509990      to      17.914598        705           2.07       0.35 to 1.25        6.91       to        8.26  

2019

      470        1.412370      to      16.548015        664           0.23       0.35 to 1.25        18.60       to        20.09  

2018

      466        1.190878      to      13.779890        556           4.56       0.35 to 1.25        (10.58 )      to        (9.45 ) 

2017

      518        1.331848      to      15.218716        691                 3.40       0.35 to 1.25        16.10       to        17.55  

Credit Suisse Trust Commodity Return Strategy Division

 

                   

2021

      290      $ 5.238853      to    $ 5.986523      $ 1,681           5.13   %      0.35% to 1.25%        26.90    %      to        28.49    % 

2020

      302        4.128458      to      4.659188        1,357           5.59       0.35 to 1.25        (2.71 )      to        (1.48 ) 

2019

      290        4.243255      to      4.729147        1,334           0.89       0.35 to 1.25        5.37       to        6.69  

2018

      286        4.027153      to      4.432602        1,237           2.43       0.35 to 1.25        (12.75 )      to        (11.66 ) 

2017

      199        4.616153      to      5.017461        973           8.77       0.35 to 1.25        0.26       to        1.52  

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

 

F-28

The Northwestern Mutual

Life Insurance Company

Statutory Financial Statements and

Supplementary Information

December 31, 2021, 2020 and 2019

 

 

NM-1

LOGO

 

Report of Independent Auditors

To the Board of Trustees of

The Northwestern Mutual Life Insurance Company

Opinions

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

Unmodified Opinion on Statutory Basis of Accounting

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in accordance with the accounting practices prescribed or permitted by the Office of the Commissioner of Insurance of the State of Wisconsin described in Note 1.

Adverse Opinion on U.S. Generally Accepted Accounting Principles

In our opinion, because of the significance of the matter discussed in the Basis for Adverse Opinion on U.S. Generally Accepted Accounting Principles section of our report, the accompanying financial statements do not present fairly, in accordance with accounting principles generally accepted in the United States of America, the financial position of the Company as of December 31, 2021 and 2020, or the results of its operations or its cash flows for each of the three years in the period ended December 31, 2021.

Basis for Opinions

We conducted our audit in accordance with auditing standards generally accepted in the United States of America (US GAAS). Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Company and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

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

As described in Note 1 to the financial statements, the financial statements are prepared by the Company on the basis of the accounting practices prescribed or permitted by the Office of the Commissioner of Insurance of the State of Wisconsin, which is a basis of accounting other than accounting principles generally accepted in the United States of America.

The effects on the financial statements of the variances between the statutory basis of accounting described in Note 1 and accounting principles generally accepted in the United States of America, although not reasonably determinable, are presumed to be material.

Responsibilities of Management for the Financial Statements

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

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

T: (414) 212 1600, www.pwc.com/us

 

NM-2

LOGO

 

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

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

Auditors’ Responsibilities for the Audit of the Financial Statements

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

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

 

  •  

Exercise professional judgment and maintain professional skepticism throughout the audit.

 

  •  

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

 

  •  

Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. Accordingly, no such opinion is expressed.

 

  •  

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

 

  •  

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

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

 

LOGO

Milwaukee, Wisconsin

February 15, 2022

 

NM-3

The Northwestern Mutual Life Insurance Company

Statutory Statements of Financial Position

(in millions)

 

 

     December 31,
             2021                   2020        

Assets:

     

Bonds

        $ 179,121         $ 166,324    

Mortgage loans

      47,844       41,568  

Policy loans

      17,208       17,686  

Common and preferred stocks

      4,242       5,083  

Real estate

      3,113       2,959  

Other investments

      29,184       24,942  

Cash and short-term investments

      3,786       3,239  
  

 

 

 

  

 

 

 

Total investments

      284,498       261,801  

Due and accrued investment income

      2,042       2,522  

Net deferred tax assets

      1,569       2,305  

Deferred premium and other assets

      4,162       3,692  

Separate account assets

      42,383       38,447  
  

 

 

 

  

 

 

 

Total assets

      $ 334,654       $ 308,767  
  

 

 

 

  

 

 

 

Liabilities and surplus:

     

Policy benefit reserves

      $ 230,034       $ 217,365  

Deposit funds

      8,303       4,860  

Policyowner dividends payable

      6,505       6,220  

Interest maintenance reserve

      3,162       2,355  

Asset valuation reserve

      7,733       7,362  

Income taxes payable

      -       231  

Other liabilities

      7,251       6,970  

Separate account liabilities

      42,383       38,447  
  

 

 

 

  

 

 

 

Total liabilities

      305,371       283,810  

Surplus:

     

Surplus notes

      4,475       3,573  

Unassigned surplus

      24,808       21,384  
  

 

 

 

  

 

 

 

Total surplus

      29,283       24,957  
  

 

 

 

  

 

 

 

Total liabilities and surplus

      $ 334,654       $ 308,767  
  

 

 

 

  

 

 

 

 

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

NM-4

The Northwestern Mutual Life Insurance Company

Statutory Statements of Operations

(in millions)

 

 

    For the years ended
   

 

December 31,

          2021               2020               2019      

Revenue:

      

Premiums

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

Net investment income

     10,447       11,078       10,149  

Other income

     814       723       696  
 

 

 

 

  

 

 

 

  

 

 

 

Total revenue

     34,032       31,124       29,855  
 

 

 

 

  

 

 

 

  

 

 

 

Benefits and expenses:

      

Benefit payments to policyowners and beneficiaries

     12,022       11,736       11,515  

Net additions to policy benefit reserves

     12,736       9,527       9,451  

Net transfers from separate accounts

     (805 )      (680 )      (783 ) 
 

 

 

 

  

 

 

 

  

 

 

 

Total benefits

     23,953       20,583       20,183  

Commissions and operating expenses

     4,048       3,502       3,306  
 

 

 

 

  

 

 

 

  

 

 

 

Total benefits and expenses

     28,001       24,085       23,489  
 

 

 

 

  

 

 

 

  

 

 

 

Gain from operations before dividends and taxes

     6,031       7,039       6,366  

Policyowner dividends

     6,522       6,235       5,999  
 

 

 

 

  

 

 

 

  

 

 

 

(Loss) gain from operations before taxes

     (491 )      804       367  

Income tax (benefit) expense

     (1,166 )      277       (199 ) 
 

 

 

 

  

 

 

 

  

 

 

 

Net gain from operations

     675       527       566  

Net realized capital gains (losses)

     303       (102 )      702  
 

 

 

 

  

 

 

 

  

 

 

 

Net income

     $ 978       $ 425       $ 1,268  
 

 

 

 

  

 

 

 

  

 

 

 

 

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

NM-5

The Northwestern Mutual Life Insurance Company

Statutory Statements of Changes in Surplus

(in millions)

 

 

     For the years ended
     December 31,
           2021               2020               2019      

Beginning of year balance

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

Net income

      978       425       1,268  

Change in net unrealized capital gains and losses

      3,489       799       1,141  

Change in net deferred tax assets

      (476 )      807       (130 ) 

Change in nonadmitted assets

      (579 )      228       (143 ) 

Change in asset valuation reserve

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

Change in surplus notes

      902       5       620  

Other surplus changes

      383       (364 )      932  
  

 

 

 

  

 

 

 

  

 

 

 

Net increase in surplus

      4,326       741       2,082  
  

 

 

 

  

 

 

 

  

 

 

 

End of year balance

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

 

 

 

  

 

 

 

  

 

 

 

 

 

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

NM-6

The Northwestern Mutual Life Insurance Company

Statutory Statements of Cash Flows

(in millions)

 

 

     For the years ended
December 31,
     2021   2020   2019

Cash flows from operating activities:

       

Premiums and other income received

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

Investment income received

      10,345       10,036       9,518  

Benefit and dividend payments to policyowners and beneficiaries

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

Net transfers from separate accounts

      771       664       770  

Commissions, expenses and taxes paid

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

 

 

 

  

 

 

 

  

 

 

 

Net cash provided by operating activities

      13,737       10,162       10,224  
  

 

 

 

  

 

 

 

  

 

 

 

Cash flows used in investing activities:

       

Proceeds from investments sold or matured:

       

Bonds

      53,499       60,747       41,841  

Mortgage loans

      2,868       3,301       3,078  

Common and preferred stocks

      2,741       4,046       5,461  

Real estate

      298       468       941  

Other investments

      4,213       3,063       2,235  
  

 

 

 

  

 

 

 

  

 

 

 

Subtotal proceeds from investments

      63,619       71,625       53,556  
  

 

 

 

  

 

 

 

  

 

 

 

Cost of investments acquired:

       

Bonds

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

Mortgage loans

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

Common and preferred stocks

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

Real estate

      (247 )      (478 )      (841 ) 

Other investments

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

 

 

 

  

 

 

 

  

 

 

 

Subtotal cost of investments acquired

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

 

 

 

  

 

 

 

  

 

 

 

Net inflows of policy loans

      746       492       168  
  

 

 

 

  

 

 

 

  

 

 

 

Net cash applied to investing activities

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

 

 

 

  

 

 

 

  

 

 

 

Cash flows from financing and miscellaneous sources:

       

Surplus notes issuance

      897       -       596  

Net inflows (outflows) on deposit-type contracts

      2,877       724       (232 ) 

Other cash applied

      (592 )      (98 )      (229 ) 
  

 

 

 

  

 

 

 

  

 

 

 

Net cash provided by financing and miscellaneous sources

      3,182       626       135  
  

 

 

 

  

 

 

 

  

 

 

 

Net increase in cash and short-term investments

      547       831       509  

Cash and short-term investments, beginning of year

      3,239       2,408       1,899  
  

 

 

 

  

 

 

 

  

 

 

 

Cash and short-term investments, end of year

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

 

 

 

  

 

 

 

  

 

 

 

 

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

NM-7

The Northwestern Mutual Life Insurance Company

Statutory Statements of Cash Flows (supplemental)

(in millions)

 

 

     For the years ended  
     December 31,  
           2021                  2020                  2019        

Supplemental disclosures of cash flow information

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

Operating:

         

Dividends used to pay premiums and loans

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

Capitalized interest and payment in-kind investment income

      848        895        870  

Other policyowner contract activity

      299        268        245  

Employee benefit and compensation plan expenses

      80        100        155  

Investing:

         

Bond refinancings and exchanges

      3,065        3,652        13,075  

Mortgage loan refinancings and transfers

      573        520        731  

Net policy loan activity

      335        285        316  

Other invested asset exchanges

      113        163        270  

Common stock exchanges

      4        22        105  

Net premium loan activity

      131        113        125  

Net asset transfers with affiliated entities

      94        434        199  

Real estate exchange

      27        -        -  

Financing and Miscellaneous:

         

Deposit-type contract deposits and interest credited

      567        556        505  

Surplus note exchange

      5        5        24  

 

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

NM-8

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

1.

Basis of Presentation

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

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

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

Reclassifications

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

These statutory financial statements were prepared in accordance with accounting practices prescribed or permitted by the Office of the Commissioner of Insurance of the State of Wisconsin (statutory basis of accounting or SAP), which are based on the Accounting Practices and Procedures Manual of the National Association of Insurance Commissioners (NAIC). Financial statements prepared on the statutory basis of accounting differ from financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP), primarily because on a GAAP basis: (1) certain policy acquisition costs are deferred and amortized, (2) most bond and preferred stock investments are reported at fair value, (3) policy benefit reserves are established using different actuarial methods and assumptions, (4) deposit-type contracts, for which premiums, benefits and reserve changes are not included in revenue or benefits as reported in the statutory statements of operations, are defined differently, (5) majority-owned subsidiaries are consolidated, (6) changes in deferred taxes are reported as a component of net income, (7) no deferral of realized investment gains and losses is permitted and (8) “nonadmitted” assets, required for the statutory basis of accounting, are included in total assets. The effects on the Company’s statutory financial statements attributable to the differences between the statutory basis of accounting and GAAP are material.

 

2.

Summary of Significant Accounting Policies

The preparation of financial statements in accordance with the statutory basis of accounting requires the Company to make estimates or assumptions about the future that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the annual periods presented. Actual future results could differ from these estimates and assumptions.

Investments

See Notes 3, 4 and 14 regarding the statement value and fair value of the Company’s investments in bonds, mortgage loans, common and preferred stocks, real estate and other investments, including derivative instruments.

Policy Loans

Policy loans represent amounts borrowed from the Company by life insurance and annuity policyowners, secured by the cash value of the related policies. Policy loans earn interest at either a fixed or variable rate, based on either an election that is made by the policyowner when applying for their policy or, for certain

 

NM-9

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

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

Cash and Short-term Investments

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

Separate Accounts

Separate account assets and related reserve liabilities represent the segregation of balances attributable to variable life insurance and variable annuity products, as well as a group annuity separate account used to fund certain of the Company’s employee and financial representative benefit plan obligations. All separate account assets are legally insulated from claims by the Company’s general account policyowners and creditors. Variable product policyowners bear the investment performance risk associated with these products. Separate account assets related to variable products are invested at the direction of the policyowner in a variety of mutual fund options. Variable annuity and certain variable universal life policyowners also have the option to invest in fixed-rate investment options, which are supported by the assets held in the Company’s general account. Separate account assets are generally reported at fair value primarily based on quoted market prices for the underlying investment securities. See Note 7 and Note 14 for more information regarding the Company’s separate accounts and Note 8 for more information regarding the Company’s employee and financial representative benefit plans.

Policy Benefit Reserves

Policy benefit reserves generally represent the net present value of future policy benefits less future policy premiums, calculated using actuarial methods, mortality and morbidity experience tables and valuation interest rates prescribed or permitted by the Office of the Commissioner of Insurance of the State of Wisconsin (OCI). These actuarial tables and methods include assumptions regarding future mortality and morbidity experience. Actual future experience could differ from the assumptions used to make these reserve estimates. See Note 5 and Note 14 for more information regarding the Company’s policy benefit reserves.

Deposit funds

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

Policyowner Dividends

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

 

NM-10

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

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

Interest Maintenance Reserve

The Company is required to maintain an interest maintenance reserve (IMR). The IMR is used to defer realized capital gains and losses, net of any income tax, on fixed income investments and derivatives that are attributable to changes in market interest rates, including both changes in risk-free market interest rates and market credit spreads. Net realized capital gains and losses deferred to the IMR are amortized into net investment income over the estimated remaining term to maturity of the investment sold or the asset/ liability hedged by an interest rate-related derivative instrument.

Asset Valuation Reserve

The Company is required to maintain an asset valuation reserve (AVR). The AVR represents a reserve for invested asset valuation using a formula prescribed by the NAIC. The AVR is intended to protect surplus by absorbing declines in the value of the Company’s investments that are not related to changes in interest rates. Increases or decreases in the AVR are reported as direct adjustments to surplus in the statutory statements of changes in surplus.

Premium Revenue

Most life insurance premiums are recognized as revenue at the beginning of each respective policy year. Universal life insurance and annuity premiums are recognized as revenue when received. Considerations received on supplementary contracts and income annuities without life contingencies are deposit-type transactions and are excluded from revenue in the statutory statements of operations. Disability and long-term care insurance premiums are recognized as revenue when due. Premium revenue is reported net of ceded reinsurance. See Note 9 for more information regarding the Company’s use of reinsurance.

Net Investment Income

Net investment income primarily represents interest, dividends and prepayment fees received or accrued on bonds, mortgage loans, common and preferred stocks, policy loans and other investments. Net investment income also includes dividends and distributions paid to the Company from the accumulated earnings of joint ventures, partnerships and unconsolidated non-insurance subsidiaries. Net investment income is reduced by investment management expenses, real estate depreciation, interest costs associated with securities lending and repurchase agreements and interest expense related to the Company’s surplus notes. Accrued investment income more than ninety days past due is a nonadmitted asset. Accrued investment income that is ultimately deemed uncollectible is included as a reduction of net investment income in the period that such determination is made. See Note 3 for more information regarding net investment income and repurchase agreements and Note 13 for more information regarding the Company’s surplus notes.

Other Income

Other income primarily represents ceded reinsurance expense allowances and various insurance policy charges. Ceded reinsurance expense allowances are recognized as revenue when due. See Note 9 for more information regarding the Company’s use of reinsurance.

Benefit Payments to Policyowners and Beneficiaries

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

 

NM-11

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

Commissions and Operating Expenses

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

Federal Income Taxes

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

The statutory basis of accounting limits the amount of gross deferred tax assets that can be admitted to surplus to those for which ultimate recoverability can be demonstrated. This limit is based on a calculation that considers available tax loss carryback and carryforward capacity, the expected timing of reversal for accumulated temporary differences, gross deferred tax liabilities and the level of Company surplus.

A “more likely than not” standard is applied for financial statement recognition of contingent tax liabilities, whereby a liability is recorded only if the Company believes that there is a greater than 50% likelihood that the related tax position will not be sustained upon examination. In cases where liability recognition is appropriate, a best estimate of the ultimate tax liability is made. If this estimate represents 50% or less of the total amount of the tax contingency, the best estimate is established as a liability. If this best estimate represents more than 50% of the total tax contingency, the total amount is established as a liability. Changes in contingent tax liabilities are charged or credited to operations in the year that such determination is made by the Company. The Company reports interest accrued or released related to contingent tax liabilities in current income taxes or tax benefit.

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

Information Technology Equipment and Software

The cost of information technology (IT) equipment and operating system software is generally capitalized and depreciated over three years using the straight-line method. Non-operating system software is generally capitalized and depreciated over a maximum of five years using the straight-line method. IT equipment and operating software assets of $34 million and $27 million at December 31, 2021 and 2020, respectively, are included in other assets in the statutory statements of financial position and are net of accumulated depreciation of $60 million and $42 million, respectively. Non-operating software costs, net of accumulated depreciation, are nonadmitted assets and thereby excluded from assets and surplus in the statutory statements of financial position. These amounts were $423 million and $388 million at December 31, 2021 and 2020, respectively. Depreciation expense for IT equipment and software totaled $160 million, $153 million and $146 million for the years ended December 31, 2021, 2020 and 2019, respectively.

Furniture, Fixtures and Equipment

The cost of furniture, fixtures and equipment, including leasehold improvements, is generally capitalized and depreciated over the useful life of the assets using the straight-line method. Furniture, fixtures and equipment, net of accumulated depreciation, are nonadmitted assets and thereby excluded from assets and surplus in the statutory statements of financial position. These amounts were $132 million and $117 million at December 31, 2021 and 2020, respectively. Depreciation expense for furniture, fixtures and equipment totaled $17 million, $14 million and $16 million for the years ended December 31, 2021, 2020 and 2019, respectively.

 

NM-12

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

Corporate Owned Life Insurance

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

Nonadmitted Assets

Certain assets are designated as nonadmitted on the statutory basis of accounting. Such assets, principally related to defined benefit pension funding, amounts advanced to or due from the Company’s financial representatives, furniture, fixtures, equipment and non-operating software (net of accumulated depreciation), derivatives, and certain equity-method investments in entities for which audits are not performed are excluded from assets and surplus in the statutory statements of financial position. Changes in nonadmitted assets are reported as a direct adjustment to surplus in the statutory statements of changes in surplus.

Foreign Currency Translation

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

Accounting Pronouncement Adopted

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

Subsequent Events

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

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

 

3.

Investments

Bonds

The SVO of the NAIC Investment Analysis Office evaluates the credit quality of the Company’s bond investments and issues related credit ratings. Bonds rated at “1” (highest quality), “2” (high quality), “3” (medium quality), “4” (low quality) or “5” (lower quality) are reported in the statutory financial statements at amortized cost less any other-than-temporary impairment. Bonds rated “6” (lowest quality)

 

NM-13

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

are reported at the lower of amortized cost or fair value. SVO-identified exchange-traded fund investments are reported at fair value. The interest method is used to amortize any purchase premium or discount, including estimates of future prepayments that are obtained from independent sources. Prepayment assumptions are updated at least annually, with the retrospective method used to adjust net investment income for changes in the estimated yield to maturity.

The disclosure of fair value for bonds is primarily based on independent pricing services or internally-developed pricing models utilizing observable market data. See Note 14 for more information regarding the fair value of the Company’s investments in bonds.

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

 

December 31, 2021

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

U.S. Government

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

States, territories and possessions

      757       118       (2 )      873  

Special revenue and assessments

      17,829       687       (160 )      18,356  

All foreign governments

      5,135       262       (47 )      5,350  

Hybrid securities

      591       45       (1 )      635  

SVO-identified funds

      199       -                   -       199  

Industrial and miscellaneous

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

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

Total bonds

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

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

 

December 31, 2020

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

U.S. Government

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

States, territories and possessions

      603       153       -       756  

Special revenue and assessments

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

All foreign governments

      4,927       577       (4 )      5,500  

Hybrid securities

      976       69       (4 )      1,041  

SVO-identified funds

      401       -                   -       401  

Industrial and miscellaneous

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

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

Total bonds

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

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

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

 

NM-14

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

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

 

December 31, 2021

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

U.S. Government

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

States, territories and possessions

      609       148       -       -       -       -         757  

Special revenue and assessments

      17,615       186       28       -       -       -         17,829  

All foreign governments

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

Hybrid securities

      -       432       146       13       -       -         591  

SVO-identified funds

      -       199       -       -       -       -         199  

Industrial and miscellaneous

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

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

Total bonds

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

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

 

December 31, 2020

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

U.S. Government

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

States, territories and possessions

      527       76       -       -       -       -       603  

Special revenue and assessments

      18,435       178       30       -       -       -       18,643  

All foreign governments

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

Hybrid securities

      -       768       172       35       -       1       976  

SVO-identified funds

      -       401       -       -       -       -       401  

Industrial and miscellaneous

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

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

Total bonds

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

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

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

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

 

December 31, 2021

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

Residential mortgage-backed:

                

U.S. Government agencies

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

Other prime

      660       663       -          -       660       663  

Other below-prime

      888       885       1          1       889       886  

Commercial mortgage-backed:

                

U.S. Government agencies

      78       80       -          -       78       80  

Conduit

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

Other asset-backed

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

 

 

 

  

 

 

 

  

 

 

 

     

 

 

 

  

 

 

 

  

 

 

 

Total structured securities

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

 

 

 

  

 

 

 

  

 

 

 

     

 

 

 

  

 

 

 

  

 

 

 

 

NM-15

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

December 31, 2020

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

Residential mortgage-backed:

              

U.S. Government agencies

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

Other prime

     661       685       2         2       663       687  

Other below-prime

     546       560       3         4       549       564  

Commercial mortgage-backed:

              

U.S. Government agencies

     70       74       -         -       70       74  

Conduit

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

Other asset-backed

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

 

 

 

  

 

 

 

  

 

 

 

    

 

 

 

  

 

 

 

  

 

 

 

Total structured securities

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

 

 

 

  

 

 

 

  

 

 

 

    

 

 

 

  

 

 

 

  

 

 

 

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

Statement value and fair value of bonds and short-term investments by contractual maturity at December 31, 2021 are summarized below. Actual maturities may differ from contractual maturities because certain borrowers have the right to call or prepay obligations with or without call or prepayment fees.

 

     Statement    Fair
             Value                    Value        
     
    

 

(in millions)

Due in one year or less

        $ 6,279          $ 6,314  

Due after one year through five years

      38,555        39,787  

Due after five years through ten years

      51,446        53,318  

Due after ten years

      85,640        91,641  
  

 

 

 

   

 

 

 

Total

        $ 181,920            $ 191,060    
  

 

 

 

   

 

 

 

Mortgage Loans

Mortgage loans consist solely of commercial mortgage loans underwritten and originated by the Company and are reported at the unpaid principal balance, less any valuation adjustments or unamortized commitment or origination fees. Such fees are generally deferred upon receipt and amortized into net investment income over the life of the loan using the interest method. Affiliated mortgage loan investments were $199 million and $134 million at December 31, 2021 and 2020, respectively.

 

NM-16

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

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

 

December 31, 2021

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

Apartment

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

Office

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

Retail

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

Warehouse/Industrial

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

Manufactured housing

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

Other

      120       60       28       158       -       366  
  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

Total

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

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

 

December 31, 2020

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

Apartment

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

Office

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

Retail

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

Warehouse/Industrial

      741       546       585       1,311       185       3,368  

Manufactured housing

      283       317       1,118       898       231       2,847  

Other

      124       60       27       150       -       361  
  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

Total

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

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

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

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

 

For mortgage loans originated or refinanced during:

          2021               2020      

Minimum interest rate

      1.50 %      1.93 % 

Maximum interest rate

      7.15 %      5.50 % 

Weighted-average LTV

      56 %      57 % 

Maximum LTV

      74 %      71 % 

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

 

NM-17

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

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

 

December 31, 2021

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

 

(in millions)

Apartment

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

Office

      4,816       3,453       325       -       8,594  

Retail

      1,750       3,655       416       245       6,066  

Warehouse/Industrial

      2,154       2,623       -       -       4,777  

Manufactured housing

      1,240       2,166       15       -       3,421  

Other

      111       189       -       66       366  
  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

Total

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

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

 

December 31, 2020

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

 

(in millions)

Apartment

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

Office

      4,311       3,929       502       -       8,742  

Retail

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

Warehouse/Industrial

      1,836       1,214       318       -       3,368  

Manufactured housing

      902       1,945       -       -       2,847  

Other

      169       44       133       15       361  
  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

Total

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

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

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

The fair value of the collateral securing each commercial mortgage loan is updated at least annually by the Company. More frequent updates are performed if deemed necessary due to changes in market capitalization rates, borrower financial strength and/or property operating performance. Fair value of the collateral is estimated using the income capitalization approach based on stabilized property income and market capitalization rates. Stabilized property income is derived from actual property financial statements adjusted for non-recurring items, normalized market vacancy and lease rollover, among other factors. Other collateral, such as excess land and additional capital required to maintain property income, is also factored into fair value estimates. Both private market transactions and public market alternatives are considered in determining appropriate market capitalization rates. See Note 14 for more information regarding the fair value of the Company’s investments in mortgage loans.

In the normal course of business, the Company may refinance or otherwise modify the terms of an existing mortgage loan, typically in reaction to a request by the borrower. These modifications can include a partial repayment of outstanding loan principal, changes to interest rates, extensions of loan maturity and/or changes to loan covenants. When such modifications are made, the statutory basis of accounting requires that the new terms of the loan be evaluated to determine whether the modification qualifies as a “troubled debt restructuring.” If new terms are extended to a borrower that are less favorable to the Company than those currently being offered to new borrowers under similar circumstances in an arms-length transaction, a realized capital loss is reported for the estimated amount of the economic concessions made and the reported value of the mortgage loan is reduced. The Company recognized no capital losses related to troubled debt restructuring of mortgage loans for the years ended December 31, 2021, 2020 and 2019, respectively. The Company had no mortgage loans at either of December 31, 2021 or December 31, 2020 that were considered “restructured.”

In circumstances where the Company has deemed it probable that it will be unable to collect all contractual principal and interest on a mortgage loan, a valuation allowance is established to reduce the statement

 

NM-18

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

value of the mortgage loan to its net realizable value. Changes to mortgage loan valuation allowances are reported as a change in net unrealized capital gains and losses in the statutory statements of changes in surplus. If the Company later determines that the decline in value is other-than-temporary, a realized capital loss is reported, and any temporary valuation allowance is reversed. The Company had no mortgage loan valuation allowance at December 31, 2021 or 2020. The Company recognized other-than-temporary impairment losses on mortgage loans of $0 and $15 million for the years ended December 31, 2021 and 2020, respectively.

Common and Preferred Stocks

Common stocks are generally reported at fair value, with $4,067 million and $4,883 million included in the statutory statements of financial position at December 31, 2021 and 2020, respectively. The fair value for publicly-traded common stocks is primarily based on quoted market prices. For private common stocks without quoted market prices, fair value is primarily determined using a sponsor valuation or market comparables approach. The equity method is generally used to report investments in common stock of unconsolidated subsidiaries.

Redeemable preferred stocks rated 1, 2 or 3 by the SVO are reported at amortized cost. Redeemable preferred stocks rated 4, 5 or 6 by the SVO are reported at the lower of amortized cost or fair value. Upon the adoption of certain revisions to SSAP 32R—Preferred Stock in 2021, perpetual preferred stocks are reported at the lower of fair value or the currently effective call price for the stock. At December 31, 2021 and 2020, the statutory statements of financial position included $175 million and $200 million, respectively, of preferred stocks. The fair value for preferred stocks is primarily determined using a sponsor valuation or market comparables approach.

See Note 14 for more information regarding the fair value of the Company’s investments in common and preferred stock.

Real Estate

Real estate investments are reported at cost, less any encumbrances and accumulated depreciation of buildings and other improvements. Depreciation of real estate investments is recorded using a straight-line method over the estimated useful lives of the improvements. Fair value of real estate is estimated primarily based on the capitalization of stabilized net operating income.

The statement value of real estate investments by property type and U.S. geographic location at December 31, 2021 and 2020 was as follows:

 

December 31, 2021

          East               Midwest               South               West               Total      
                      
                      
     (in millions)

Apartment

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

Office

      211       672       52       -       935  

Warehouse/Industrial

      257       -       -       202       459  

Other

      16       10       105       -       131  
  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

Total

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

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

 

December 31, 2020

          East               Midwest               South               West               Total      
                      
     (in millions)

Apartment

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

Office

      213       688       62       -       963  

Warehouse/Industrial

      113       -       -       204       317  

Other

      16       53       108       -       177  
  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

Total

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

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

 

NM-19

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

The Company’s home office properties are included above (Office/Midwest) and had an aggregate statement value of $672 million and $688 million at December 31, 2021 and 2020, respectively. The Company’s other investments in real estate are held for the production of income.

Other Investments

Other investments primarily represent investments that are made through ownership interests in partnerships, joint ventures (JVs) and limited liability companies (LLCs). In some cases, these ownership interests are held directly by the Company, while in other cases these investments are held indirectly through wholly-owned non-insurance investment holding companies organized as LLCs. Whether held directly by the Company or indirectly through its investment holding companies, securities or real estate partnerships, JVs, and LLCs are reported in the statutory statements of financial position using the equity method of accounting based on the Company’s share of the underlying entities’ audited GAAP-basis equity.

The statement value of other investments held directly or indirectly by the Company at December 31, 2021 and 2020 was as follows:

 

     December 31,
           2021               2020      
          
     (in millions)

Securities partnerships and LLCs

      $ 11,112       $ 9,615  

Bonds

      4,748       3,296  

Real estate JVs, partnerships and LLCs

      3,989       3,435  

Common and preferred stocks

      3,083       3,499  

Cash and short-term investments

      1,964       1,100  

COLI

      1,248       1,195  

Wholly owned real estate

      1,171       1,197  

Structured settlements

      770       790  

Low income housing tax credit properties

      702       708  

Derivative instruments

      629       358  

Other net assets (liabilities)

      (232 )      (251 ) 
  

 

 

 

  

 

 

 

Total

      $ 29,184         $ 24,942    
  

 

 

 

  

 

 

 

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

 

NM-20

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

Investments in Subsidiaries, Controlled and Affiliated Entities

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

 

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

NM Wealth Management Company

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

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

Total common stock SCAs 1

      275          -          275          265          -          265    

NML Securities Holdings, LLC

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

NML Real Estate Holdings, LLC

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

NM Investment Holdings, LLC

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

QOZ Holding Company, LLC

      234          1          233          23          -          23    

NM Pebble Valley, LLC

      224          -          224          93          -          93    

NM Investment Services, LLC

      151          -          151          126          -          126    

NM GP Holdings, LLC

      64          7          57          56          6          50    

NM Investment Management Company, LLC

      64          64          -          3          3          -    

Mason Street Advisors, LLC

      45          45          -          6          6          -    

Wysh Financial Services, LLC

      15          3          12          -          -          -    

NM-SAS, LLC

      11          7          4          12          7          5    

NM Career Distribution Holdings, LLC

      3          3          -          2          2          -    

GRO-SUB, LLC

      2          2          -          2          2          -    

NM QOZ Fund II, LLC

      -          -          -          45          -          45    

NM QOZ FUND, LLC

      -          -          -          16          -          16    

GRO, LLC

      -          -          -          -          -          -    

Venture Studio Holdings, LLC

      -          -          -          -          -          -    
  

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

Total other investment SCAs 2

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

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

Total investments in SCAs

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

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

 

1 

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

2 

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

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

 

NM-21

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

Net Investment Income

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

 

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

Bonds

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

Mortgage loans

      1,829       1,717       1,676  

Common and preferred stocks

      194       188       146  

Real estate

      279       279       288  

Other investments

      1,200       2,122       1,205  

Policy loans

      1,148       1,180       1,180  

Amortization of IMR

      422       255       133  
  

 

 

 

  

 

 

 

  

 

 

 

Gross investment income

      11,358       11,895       11,028  

Less: investment expenses

      911       817       879  
  

 

 

 

  

 

 

 

  

 

 

 

Net investment income

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

 

 

 

  

 

 

 

  

 

 

 

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

Realized Capital Gains and Losses

Realized capital gains and losses are recognized based upon specific identification of investments sold. Realized capital losses also include valuation adjustments for impairment of bonds, mortgage loans, common and preferred stocks, real estate and other investments that have experienced a decline in fair value that the Company considers to be other-than-temporary. Realized capital gains and losses, as reported in the statutory statements of operations, are net of any capital gains tax (or benefit) and exclude any deferrals to the IMR of interest rate-related capital gains or losses.

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

 

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

 

(in millions)

          

 

(in millions)

          

 

(in millions)

    

Bonds

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

Mortgage loans

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

Common and preferred stocks

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

Real estate

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

Other investments

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

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

Subtotal

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

 

 

 

  

 

 

 

    

 

 

 

  

 

 

 

    

 

 

 

  

 

 

 

  

Less: IMR net gains (losses) before taxes

 

     1,556           2,064           674  

Less: Capital gains tax (benefit) expense

 

     233           (2 )          173  
 

 

 

 

      

 

 

 

      

 

 

 

Net realized capital (losses) gains

 

       $ 303               $ (102 )              $ 702      
      

 

 

 

      

 

 

 

      

 

 

 

 

NM-22

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

Realized capital gains and losses are generally the result of normal investment trading activity. Proceeds from the sale of bonds totaled $36 billion, $48 billion, and $30 billion for the years ended December 31, 2021, 2020 and 2019, respectively.

On a quarterly basis, the Company performs a review of bonds, mortgage loans, common and preferred stocks, real estate and other investments to identify investments that have experienced a decline in fair value that is considered to be other-than-temporary. Factors considered include the duration and extent to which fair value was less than cost, the financial condition and near-term financial prospects of the issuer and the Company’s ability and intent to hold the investment for a period of time sufficient to allow for an anticipated recovery in value. If the decline in an investment’s fair value is considered to be other-than-temporary, the statement value of the investment is generally written down to fair value and a realized capital loss is reported.

For fixed income investments, the review focuses on the issuer’s ability to remit all contractual interest and principal payments and the Company’s ability and intent to hold the investment until the earlier of a recovery in value or maturity. The Company’s intent and ability to hold an investment takes into consideration broad portfolio management parameters such as expected net cash flows and liquidity targets, asset/liability duration management and issuer and industry sector credit exposures. Mortgage loans considered to have experienced an other-than-temporary decline in value are written down to net realizable value based on the appraised value of the collateral property.

For equity securities, greater weight and consideration is given to the duration and extent of the decline in fair value and the likelihood that the fair value of the security will recover in the foreseeable future. A real estate equity investment is evaluated for an other-than-temporary impairment when the fair value of the property is lower than its depreciated cost.

For real estate and other investments that represent ownership interests in partnerships, JVs and LLCs, the review focuses on the likelihood that the Company will ultimately recover its initial investment, adjusted for its share of subsequent net earnings and/or distributions. The Company’s review of securities partnerships will generally defer to GAAP-basis impairment reviews performed by the general partner absent compelling evidence of a permanent impairment of the Company’s partnership interest.

 

NM-23

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

Realized capital losses related to declines in fair value of investments that were considered to be other-than-temporary for the years ended December 31, 2021, 2020 and 2019 were as follows:

 

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

Structured securities

      $ -       $ -       $ (1 ) 

Foreign government

      -       (34 )      -  

Consumer discretionary

      (44 )      (51 )      (84 ) 

Industrials

      (20 )      (42 )      (9 ) 

Energy

      -       (59 )      (44 ) 

Basic materials

      -       -       (1 ) 

Other

      -       (13 )      -  
  

 

 

 

  

 

 

 

  

 

 

 

Subtotal

      (64 )      (199 )      (139 ) 

Mortgage loans

      -       (15 )      -  

Real estate

      (39 )      -       (6 ) 

Other investments:

       

Securities partnerships

      (2 )      (6 )      (78 ) 

Energy and transportation

      (6 )      -       -  
  

 

 

 

  

 

 

 

  

 

 

 

Subtotal

      (8 )      (6 )      (78 ) 
  

 

 

 

  

 

 

 

  

 

 

 

Total

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

 

 

 

  

 

 

 

  

 

 

 

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

Unrealized Capital Gains and Losses

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

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

 

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

Bonds

      $ (470 )      $ 606       $ 152  

Mortgage loans

      (10 )      33       11  

Common and preferred stocks

      260       520       304  

Other investments

      3,969       (251 )      727  
  

 

 

 

  

 

 

 

  

 

 

 

Subtotal

      3,749       908       1,194  

Change in deferred taxes

      (260 )      (109 )      (53 ) 
  

 

 

 

  

 

 

 

  

 

 

 

Change in net unrealized capital gains and losses

      $ 3,489       $ 799       $ 1,141  
  

 

 

 

  

 

 

 

  

 

 

 

 

NM-24

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

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

The amortized cost and fair value of bonds and common and preferred stocks for which fair value declined and remained below cost at December 31, 2021 and 2020 were as follows:

 

     December 31, 2021
     Decline For Less Than 12 Months    Decline For Greater Than 12 Months
       Amortized  
Cost		      Fair  
Value		        Difference            Amortized    
Cost		        Fair Value            Difference    
     (in millions)

Bonds

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

Structured Securities

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

Common and preferred stocks

      188        169        (19 )       62        49        (13 ) 
  

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

Total

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

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

 

     December 31, 2020  
     Decline For Less Than 12 Months      Decline For Greater Than 12 Months  
       Amortized  
Cost		        Fair  
Value		          Difference              Amortized    
Cost		          Fair Value              Difference      
     (in millions)  

Bonds

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

Structured Securities

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

Common and preferred stocks

      150        131        (19)        159        123        (36)  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total

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

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

All of these bonds were current on contractual interest and principal payments at December 31, 2021. Based on the results of the impairment review process described above, the Company considers these declines in fair value to be temporary based on current facts and circumstances.

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

 

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

Preferred stock

     2       8       8       9       127       155  

Loan-backed and structured securities

     1       -       -       2       6       8  
 

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

Total

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

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

 

NM-25

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

Repurchase Agreements

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

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

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

 

For the quarter ended:

          Maximum      
Balance		       Ending Balance   
     (in millions)  

March 31, 2021

      $ 1,315          $ 1,287    

June 30, 2021

      $ 1,295          $ 1,292    

September 30, 2021

      $ 1,300          $ 1,280    

December 31, 2021

      $ 1,281          $ 1,277    

March 31, 2020

      $ 1,990          $ 1,862    

June 30, 2020

      $ 1,866          $ 1,278    

September 30, 2020

      $ 1,332          $ 1,319    

December 31, 2020

      $ 1,319          $ 1,315    

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

 

For the quarter ended:

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

March 31, 2021

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

June 30, 2021

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

September 30, 2021

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

December 31, 2021

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

March 31, 2020

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

June 30, 2020

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

September 30, 2020

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

December 31, 2020

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

 

NM-26

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

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

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

 

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

30 days or less

      $ 259        $ 259        $ 554        $ 554  

31-60 days

      204        204        165        165  

61-90 days

      70        70        39        39  

91-120 days

      26        26        2        2  

121-180 days

      13        13        138        138  

181-365 days

      134        134        115        115  

1-2 years

      330        331        54        54  

2-3 years

      155        155        214        215  

Over 3 years

      91        91        46        46  
  

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

Total

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

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

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

Restricted Assets

Certain of the Company’s investments are either pledged as collateral or are otherwise held beyond the exclusive control of the Company (“restricted assets”). These restrictions are generally the result of collateral support agreements with counterparties in connection with repurchase agreements and derivative transactions.

At December 31, 2021 and 2020, collateral held by counterparties was primarily in the form of cash, short-term investments and bonds, including U.S. Government securities. See Note 4 for more information regarding the Company’s derivative portfolio.

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

 

                 December 31,               
     2021      2020  
               
     (in millions)  

Loaned securities - repurchase agreements

      $ 1,277        $ 1,315  

Federal Home Loan Bank of Chicago pledged collateral

      3,705        1,359  

Derivative transactions

      121        242  

Federal Home Loan Bank of Chicago stock

      92        37  

Securities on deposit with states

      3        4  
  

 

 

     

 

 

  

Total restricted assets

      $ 5,198        $ 2,957  
  

 

 

     

 

 

  

 

NM-27

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

Collateral Assets Received

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

 

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

Repurchase agreement collateral

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

Derivative collateral

     898       898       154       154  

Mortgage loan escrow

     103       103       75       75  

Real estate escrow and security deposits

     4       4       4       4  
 

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

Total collateral assets

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

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

The Company received $0 and $1 million of derivative collateral related to the separate accounts at December 31, 2021 and 2020, respectively. The obligation to return this collateral is reported in separate account liabilities in the statutory statements of financial position. The obligation to return all other collateral received is reported as other liabilities in the statutory statements of financial position.

 

4.

Derivative Financial Instruments

The Company enters into derivative transactions, generally to mitigate the risk to its assets, liabilities and surplus from fluctuations in interest rates, foreign currency exchange rates, credit conditions and other market risks. Derivatives may be exchange traded, cleared or executed in the over-the-counter market. A majority of the Company’s over-the-counter derivatives are bilateral contracts between two counterparties. The Company’s remaining over-the-counter derivatives are cleared and settled through central clearing exchanges.

Derivatives that are designated as hedges for accounting purposes and meet the qualifications for statutory hedge accounting are reported on a basis consistent with the asset or liability being hedged (i.e., at amortized cost or fair value). Derivatives that are used to mitigate risk but are not designated as hedges for accounting purposes, or otherwise do not meet the qualifications for statutory hedge accounting are reported at fair value.

To qualify for hedge accounting, the hedge relationship must be designated and formally documented at inception. This documentation details the risk management objective and strategy for the hedge, the derivative used in the hedge and the methodology for assessing hedge effectiveness. The hedge must also be “highly effective,” with an assessment of its effectiveness performed both at inception and on an ongoing basis over the life of the hedge.

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

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

 

NM-28

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

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

 

                 December 31,               
         2021              2020      
               
     (in millions)  

Bonds:

      

General Account

      $ 36        $ 83  

Separate Accounts

      -        -  
  

 

 

     

 

 

  

Total bond collateral

      $ 36        $ 83  
  

 

 

     

 

 

  

Cash:

      

General Account

      $ 898        $ 153  

Separate Accounts

      -        1  
  

 

 

     

 

 

  

Total cash collateral

      $ 898            $ 154    
  

 

 

     

 

 

  

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

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

 

                 December 31,             
     2021   2020
          
     (in millions)

Bonds posted for derivative support agreements:

     

General Account

      $ 39       $ 12  

Separate Accounts

      2       -  

Bonds posted for futures agreements:

     

General Account

      41       92  

Separate Accounts

      17       15  
  

 

 

 

  

 

 

 

    Total bond collateral

      $ 99         $ 119    
  

 

 

 

  

 

 

 

Cash posted for derivative support agreements:

     

General Account

      $ 13       $ 117  

Separate Accounts

      1       -  

Cash posted for futures agreements:

     

General Account

      4       4  

Separate Accounts

      4       2  
  

 

 

 

  

 

 

 

    Total cash collateral

      $ 22       $ 123  
  

 

 

 

  

 

 

 

 

NM-29

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

Bonds posted as collateral are reported as bonds and cash posted as collateral is reported as a receivable included in other investments in the statutory statements of financial position.

The Company has no embedded credit derivatives that expose it to the possibility of being required to make future payments.

Hedging - Designated as Hedging Instruments

The Company designates and accounts for the following derivative types as cash flow or fair value hedges, with the related derivative instrument reported at amortized cost in the statutory statements of financial position. No component of these derivatives’ economic gain or loss was excluded from the assessment of hedge effectiveness.

Interest rate floors are used to mitigate the asset/liability management risk of a significant and sustained decrease in interest rates for certain of the Company’s insurance products. Interest rate floors entitle the Company to receive payments from a counterparty if market interest rates decline below a specified level. Amounts received on these contracts are reported as net investment income.

Interest rate swaps are used to mitigate interest rate risk for investments in fixed and variable interest rate bonds and fixed rate liabilities over a period of up to 12 years. Interest rate swaps obligate the Company and a counterparty to exchange amounts based on the difference between a variable interest rate index and a specified fixed rate of interest applied to the notional amount of the contract. Amounts received or paid on these contracts are reported as net investment income.

Foreign currency swaps are used to mitigate the foreign exchange risk for investments in bonds and mortgage loans denominated in foreign currencies over a period of up to 30 years. Foreign currency swaps obligate the Company and a counterparty to exchange the foreign currency-denominated interest and principal payments receivable on foreign bonds and mortgage loans for U.S. dollar-denominated payments based on currency exchange rates specified at trade inception. Foreign exchange gains or losses on these contracts are reported as a change in unrealized capital gains or losses until the maturity or termination of the contract, at which time a realized capital gain or loss is recognized. Amounts received or paid on these contracts are reported as net investment income.

Hedging - Not Designated as Hedging Instruments

The Company enters into other derivative transactions that mitigate economic risks but are not designated as a hedge for accounting purposes or otherwise do not qualify for statutory hedge accounting. These instruments are reported in the statutory statements of financial position at fair value. Changes in the fair value of these instruments are reported as a change in unrealized capital gains or losses until the maturity or termination of the contract, at which time a realized capital gain or loss is recognized.

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

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

Interest rate swaps are used to mitigate interest rate risk for investments in variable interest rate and fixed interest rate bonds over a period of up to 10 years. Interest rate swaps obligate the Company and a counterparty to exchange amounts based on the difference between a variable interest rate index and a specified fixed rate of interest applied to the notional amount of the contract. Amounts received or paid on these contracts are reported as net investment income.

 

NM-30

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

Swaptions are used to mitigate the asset/liability management risk of a significant and sustained increase in interest rates for certain of the Company’s insurance products. Swaptions provide the Company an option to enter into an interest rate swap with a counterparty on specified terms.

Fixed income futures are used to mitigate interest rate risk for investments in portfolios of fixed income securities. Fixed income futures obligate the Company to sell to or buy from a counterparty a specified number of contracts at a specified price at a future date.

Fixed income forwards are used to gain exposure to the investment risk and return of mortgage-backed securities by utilizing “to-be-announced” (TBA) forward contracts. The Company also uses TBA forward contracts to hedge interest rate risk and participate in the mortgage-backed securities market in an efficient and cost-effective way. Additionally, pursuant to the Company’s mortgage dollar roll program, TBAs or mortgage-backed securities are transferred to counterparties with a corresponding agreement to purchase a substantially similar security for later settlement. These transactions do not qualify as secured borrowings and are accounted for as derivatives.

Foreign currency forwards are used to mitigate the foreign exchange risk for investments in bonds denominated in foreign currencies or common stock or other equity investments in companies operating in foreign countries. Foreign currency forwards obligate the Company to pay to or receive from a counterparty a specified amount of a foreign currency at a future date.

Foreign currency swaps are used to mitigate the foreign exchange risk for investments in bonds denominated in foreign currencies over a period of up to 15 years. Foreign currency swaps obligate the Company and a counterparty to exchange the foreign currency-denominated interest and principal payments receivable on foreign bonds and mortgage loans for U.S. dollar-denominated payments based on currency exchange rates specified at trade inception. Foreign exchange gains or losses on these contracts are reported as a change in unrealized capital gains or losses until the maturity or termination of the contract, at which time a realized capital gain or loss is recognized. Amounts received or paid on these contracts are reported as net investment income.

Equity and fixed income total return swaps are used to mitigate market risk for investments in portfolios of common stocks, other equity securities, and fixed income investments. Total return swaps obligate the Company and a counterparty to exchange amounts based on the difference between the return on a specified security, basket of securities or index and a specified short-term funding rate, plus or minus a spread, applied to the notional amount of the contract.

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

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

Purchased credit default swaps are used to mitigate the credit risk for investments in bonds issued by specific bond issuers. Credit default swaps provide the Company an option to put a specific bond to a counterparty at par in the event of a “credit event” encountered by the bond issuer. A credit event is generally defined as a bankruptcy, failure to make required payments or acceleration of issuer obligations under the terms of the bond.

Investment Replications

Equity total return swap replications are used in conjunction with the purchase of cash market instruments to replicate investment in portfolios of common stocks and other equity securities. Equity total return swaps obligate the Company and a counterparty to exchange amounts based on the difference between a

 

NM-31

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

variable equity index return and a specified fixed rate of return applied to the notional amount of the contract. Equity total return swaps are reported at fair value, with changes in fair value reported as a change in unrealized capital gains or losses until the maturity or termination of the contract, at which time a realized capital gain or loss is recognized.

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

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

 

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

Derivatives designated as hedging instruments:

              

Interest rate contracts:

              

Interest rate floors

    $ 400      $ 1      $ -     $ 14      $ -  

Interest rate swaps

      1,204        -        -       5        (24 ) 

Foreign exchange contracts:

              

Foreign currency swaps

      12,492        412        (287 )      788        (147 ) 

Derivatives not designated as hedging instruments:

              

Interest rate contracts:

              

Interest rate caps

      1,596        15        -       15        -  

Interest rate floors

      200        28        -       28        -  

Interest rate swaps

      2,243        20        (16 )      20        (16 ) 

Swaptions

      4,471        90        -       90        -  

Fixed income futures

      9,534        -        -       -        -  

Fixed income forwards

      1,750        2        -       2        -  

Foreign exchange contracts:

              

Foreign currency forwards

      1,422        49        (4 )      49        (4 ) 

Foreign currency swaps

      148        12        (4 )      12        (4 ) 

Credit contracts:

              

Purchased credit default swaps

      -        -        -       -        -  

Warrants

      -        -        -       -        -  

Investment replications

              

Interest rate contracts:

              

Interest rate swaps

      6        -        -       -        -  
     

 

 

 

   

 

 

 

  

 

 

 

   

 

 

 

Total derivatives

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

 

 

 

   

 

 

 

  

 

 

 

   

 

 

 

 

NM-32

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

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

Derivatives designated as hedging instruments:

              

Interest rate contracts:

              

Interest rate floors

    $ 400      $ 2      $ -     $ 32      $ -  

Interest rate swaps

      350        -        -       9        -  

Foreign exchange contracts:

              

Foreign currency swaps

      11,592        258        (599 )      432        (477 ) 

Derivatives not designated as hedging instruments:

              

Interest rate contracts:

              

Interest rate caps

      1,338        1        -       1        -  

Interest rate floors

      200        35        -       35        -  

Interest rate swaps

      168        8        -       8        -  

Swaptions

      3,656        26        -       26        -  

Fixed income futures

      12,536        -        -       -        -  

Fixed income forwards

      2,295        15        (1 )      15        (1 ) 

Foreign exchange contracts:

              

Foreign currency forwards

      1,771        4        (16 )      4        (16 ) 

Foreign currency swaps

      132        9        (6 )      9        (6 ) 

Credit contracts:

              

Purchased credit default swaps

      -        -        -       -        -  

Warrants

      -        -        -       -        -  

Investment replications

              

Interest rate contracts:

              

Interest rate swaps

      6        -        -       -        -  
     

 

 

 

   

 

 

 

  

 

 

 

   

 

 

 

Total derivatives

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

 

 

 

   

 

 

 

  

 

 

 

   

 

 

 

The notional amounts shown above are used to denominate the derivative contracts and do not represent amounts exchanged between the Company and the derivative counterparties. Derivative instruments are reported as other investments or other liabilities in the statutory statements of financial position.

 

NM-33

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

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

 

     For the year ended December 31, 2021
         Change in Net    
Unrealized Capital
Gains (Losses)		   Net Realized Capital
Gains (Losses)		       Net Investment    
Income
         (in millions)    

Derivatives designated as hedging instruments:

       

Interest rate contracts:

       

Interest rate floors

    $ -     $ -     $ 11  

Interest rate swaps

      -       -       5  

Foreign exchange contracts:

       

Foreign currency swaps

      467       4       153  

Derivatives not designated as hedging instruments:

       

Interest rate contracts:

       

Interest rate caps

      12       -       (2 ) 

Interest rate floors

      (7 )      -       2  

Interest rate swaps

      (4 )      1       3  

Swaptions

      27       -       (9 ) 

Fixed income futures

      (44 )      273       -  

Fixed income forwards

      (12 )      (5 )      -  

Foreign exchange contracts:

       

Foreign currency forwards

      58       13       -  

Foreign currency swaps

      5       -       2  

Equity contracts:

       

Equity total return swaps

      -       -       -  

Equity index futures

      -       -       -  

Credit contracts:

       

Purchased credit default swaps

      -       -       -  

Warrants

      (2 )      -       -  

Investment replications

       

Interest rate contracts:

       

Interest rate swaps

      -       -       -  

Equity contracts:

       

Equity total return swaps

      -       -       -  
  

 

 

 

  

 

 

 

  

 

 

 

Total derivatives

      $ 500       $ 286       $ 165  
  

 

 

 

  

 

 

 

  

 

 

 

 

NM-34

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

     For the year ended December 31, 2020
         Change in Net    
Unrealized Capital
Gains (Losses)		   Net Realized Capital
Gains (Losses)		       Net Investment    
Income
              
     (in millions)

Derivatives designated as hedging instruments:

       

Interest rate contracts:

       

Interest rate floors

    $ -     $ -     $ 15  

Interest rate swaps

      -       -       1  

Foreign exchange contracts:

       

Foreign currency swaps

      (641 )      29       158  

Derivatives not designated as hedging instruments:

       

Interest rate contracts:

       

Interest rate caps

      -       -       (1 ) 

Interest rate floors

      9       27       -  

Interest rate swaps

      6       -       1  

Swaptions

      (3 )      -       (9 ) 

Fixed income futures

      12       (121 )      -  

Fixed income forwards

      13       23       -  

Foreign exchange contracts:

       

Foreign currency forwards

      2       (83 )      -  

Foreign currency swaps

      (1 )      -       2  

Equity contracts:

       

Equity total return swaps

      -       -       -  

Equity index futures

      -       -       -  

Credit contracts:

       

Purchased credit default swaps

      -       (1 )      -  

Warrants

      (40 )      117       -  

Investment replications

       

Interest rate contracts:

       

Interest rate swaps

      -       5       -  

Equity contracts:

       

Equity total return swaps

      -       52       -  
  

 

 

 

  

 

 

 

  

 

 

 

Total derivatives

      $ (643 )      $ 48       $ 167  
  

 

 

 

  

 

 

 

  

 

 

 

 

NM-35

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

     For the year ended December 31, 2019
         Change in Net    
Unrealized Capital
Gains (Losses)		   Net Realized Capital
Gains (Losses)		       Net Investment    
Income
         (in millions)    

Derivatives designated as hedging instruments:

       

Interest rate contracts:

       

Interest rate floors

    $ -     $ -     $ 8  

Interest rate swaps

      -       -       -  

Foreign exchange contracts:

       

Foreign currency swaps

      (188 )      (3 )      139  

Derivatives not designated as hedging instruments:

       

Interest rate contracts:

       

Interest rate caps

      (3 )      -       (2 ) 

Interest rate floors

      11       -       (1 ) 

Interest rate swaps

      (9 )      4       1  

Swaptions

      (34 )      -       (9 ) 

Fixed income futures

      7       (123 )      -  

Fixed income forwards

      -       4       -  

Foreign exchange contracts:

       

Foreign currency forwards

      (17 )      46       -  

Foreign currency swaps

      (1 )      -       1  

Equity contracts:

       

Equity total return swaps

      -       68       (9 ) 

Equity index futures

      -       -       -  

Credit contracts:

       

Purchased credit default swaps

      -       -       -  

Warrants

      26       -       -  

Investment replications

       

Interest rate contracts:

       

Interest rate swaps

      -       -       -  

Equity contracts:

       

Equity total return swaps

      -       -       -  
  

 

 

 

  

 

 

 

  

 

 

 

Total derivatives

      $ (208 )      $ (4 )      $ 128  
  

 

 

 

  

 

 

 

  

 

 

 

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

 

NM-36

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

5.

Policy Benefit Reserves and Deposit Funds

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

 

     December 31,
           2021                2020      
           
     (in millions)

Life insurance reserves

      $ 205,037        $ 194,110  

Disability and long-term care active life reserves

      6,728        6,064  

Disability and long-term care unpaid claims and claim reserves

      5,455        5,342  

Annuity reserves

      12,814        11,849  
  

 

 

 

   

 

 

 

Total policy benefit reserves

      $     230,034          $   217,365  
  

 

 

 

   

 

 

 

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

Life Insurance Reserves

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

Life insurance reserve calculations, using basic data, determine tabular interest, tabular cost, and tabular cost less actual reserves released. Tabular interest on funds not involving life contingencies is calculated as the product of the valuation interest rate times the mean of the amount of funds subject to such rate held at the beginning and end of the year of valuation.

As of December 31, 2021, the Company had nearly $2.1 trillion of total life insurance in force, including $23 billion of life insurance in force for which gross premiums were less than net premiums according to the standard valuation methods and assumptions prescribed by the OCI. Gross premiums are calculated using mortality tables that reflect both the Company’s actual experience and the potential transfer of risk to reinsurers. Net premiums are determined in the calculation of statutory reserves, which must be based on industry-standard mortality tables.

Additional premiums or charges are assessed for substandard lives on policies issued after January 1, 1956. Net level premium or CRVM mean reserves for these policies are based on multiples of mortality tables or one-half the net flat or other extra mortality charge. The Company waives deduction of fractional premiums upon death of an insured and returns any portion of the final premium beyond the date of death. Cash values are not promised in excess of the legally computed reserves.

 

NM-37

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

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

 

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

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

                  

Universal life

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

Universal life with secondary guarantees

      14        14        12        12        32        29  

Other permanent cash value life insurance

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

Variable life

      -        -        -        -        953        943  

Variable universal life

      6        5        6        5        37        27  

Not subject to discretionary withdrawal or no cash value:

                  

Term policies without cash value

      -        -        -        -        5,039        4,830  

Accidental death benefits

      -        -        -        -        10        11  

Disability - active lives

      -        -        -        -        971        1,100  

Disability - disabled lives

      -        -        -        -        1,475        1,297  

Miscellaneous reserves

      -        -        -        -        3,003        2,894  
  

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

Total gross life reserves

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

Reinsurance ceded

      -        -        -        -        1,203        1,216  
  

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

Total net life insurance

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

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

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

 

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

Subject to discretionary withdrawal, surrender values or policy loans:

                  

Variable life

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

Variable universal life

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

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

Total gross life reserves

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

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

Reinsurance ceded

      -        -        -        -        -        -  
  

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

Total net life insurance

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

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

 

NM-38

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

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

 

     December 31,
           2021               2020      
          
     ($ in millions)

From Life, Accident & Health Annual Statement:

     

Life insurance

        $ 201,186           $ 190,270    

Accidental death benefits

      10       11  

Disability - active lives

      971       1,100  

Disability - disabled lives

      1,473       1,297  

Miscellaneous reserves

      184       247  
  

 

 

 

  

 

 

 

Subtotal net life insurance

      203,824       192,925  

From Separate Accounts Annual Statement:

     

Life insurance

      11,037       9,486  
  

 

 

 

  

 

 

 

Combined Total

      $ 214,861       $ 202,411  
  

 

 

 

  

 

 

 

Annuity Reserves

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

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

Deposit Funds

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

Prior to November 1, 2013, beneficiaries of the Company’s life insurance policies also could choose to receive their death benefit by deposit of the proceeds (if $20,000 or more) into an interest-bearing retained asset account (“Northwestern Access Fund”). Funds held on behalf of Northwestern Access Fund account holders are segmented in the Company’s general account and are invested primarily in short-term, liquid investments and high quality corporate bonds. Northwestern Access Fund accounts are credited with interest at short-term market rates, with certain accounts subject to guaranteed minimum crediting rates.

 

NM-39

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

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

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

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

 

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

December 31, 2021

      $ 3,705          $ 3,948    

December 31, 2020

      1,359        1,525  

 

(1) 

Includes amounts in excess of minimum requirements

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

 

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

December 31, 2021

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

December 31, 2020

      1,359        1,525        886  

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

 

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

Borrowed

      $ 2,052          $ 886    

Deposit fund reserves

      $ 2,052        $ 886  

Max borrowed during the year

      $ 2,052        $ 886  

Borrowing capacity as determined by insurer

      $ 8,000        $ 8,000  

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

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

 

NM-40

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

Withdrawal Characteristics of Annuity Reserves and Deposit Funds

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

 

     General Account     Separate Account     Total  
    

 

    

 

    

 

  
    

 

December 31,

  
     2021     2020     2021     2020     2021     2020  
    

 

    

 

    

 

    

 

    

 

    

 

  
    

 

(in millions)

  

Individual Annuities

             

Subject to discretionary withdrawal

             

- with market value adjustment

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

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

      62       71       -       -       62       71  

- at fair value

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

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total with market value adjustment or at fair value

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

- at book value without adjustment

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

Not subject to discretionary withdrawal

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

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total gross individual annuities

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

Reinsurance ceded

      -       -       -       -       -       -  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total net individual annuities

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

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Group Annuities

             

Subject to discretionary withdrawal

             

- at fair value

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

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total with market value adjustment or at fair value

      -       -       16       19       16       19  

Not subject to discretionary withdrawal

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

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total gross group annuities

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

Reinsurance ceded

      -       -       -       -       -       -  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total net group annuities

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

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Deposit-Type Contracts

             

Subject to discretionary withdrawal

             

- with market value adjustment

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

- at fair value

      -       -       36       33       36       33  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total with market value adjustment or at fair value

      80       95       36       33       116       128  

- at book value without adjustment

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

Not subject to discretionary withdrawal

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

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total gross deposit-type contracts

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

Reinsurance ceded

      -       -       -       -       -       -  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total net deposit-type contracts

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

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total annuity reserves and deposit funds

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

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

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

 

NM-41

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

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

 

     December 31,  
     2021     2020  
    

 

    

 

  
     ($ in millions)  

From Life, Accident & Health Annual Statement:

     

Annuities

    $ 11,129     $ 10,300  

Supplementary contracts with life contingencies

      1,685       1,549  

Deposit-type contracts

      8,303       4,860  
  

 

 

    

 

 

  

Subtotal net annuity reserves

      21,117       16,709  

From Separate Accounts Annual Statement:

     

Annuities

      30,800       28,513  

Supplementary contracts

      311       289  

Other contract deposit funds

      36       33  
  

 

 

    

 

 

  

Subtotal net annuity reserves

      31,147       28,835  
  

 

 

    

 

 

  

Combined Total

    $ 52,264       $ 45,544    
  

 

 

    

 

 

  

Disability and Long-Term Care Reserves

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

 

     For the years ended  
     December 31,  
    

 

      2021      

    

 

      2020      

  
    

 

    

 

  
     (in millions)  

Balance at January 1

        $ 5,342         $ 5,200  

Incurred related to:

     

Current year

      990       972  

Prior years

      (125 )      (85)  
  

 

 

    

 

 

  

Total incurred

      865       887  
  

 

 

    

 

 

  

Paid related to:

     

Current year

      (33 )      (41)  

Prior years

      (719 )      (704)  
  

 

 

    

 

 

  

Total paid

      (752 )      (745)  
  

 

 

    

 

 

  

Balance at December 31

        $ 5,455         $ 5,342  
  

 

 

    

 

 

  

Changes in reserves for incurred claims related to prior years are generally the result of differences between assumed claim experience at the time reserves were originally estimated and subsequent actual claim experience. In 2020, this change also included the impact of certain disability income assumption updates made to align assumptions with recent experience.

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

 

NM-42

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

policies issued after 2000. Active life reserves for long-term care policies consist of mid-terminal reserves and unearned premiums. Mid-terminal reserves are based on the one-year preliminary term method and industry-based morbidity experience.

Additional Actuarial Reserves

Each year, the Company must perform asset adequacy testing (AAT) to demonstrate that reserves make adequate provision for the anticipated cash flows required by contractual obligations and related expenses, in light of assets held for the reserves. Asset adequacy testing is performed in accordance with presently accepted actuarial standards and must include assumptions necessary to determine the adequacy of reserves under moderately adverse conditions. At December 31, 2021 and 2020, reserves required as a result of AAT were as follows:

 

     December 31,
           2021                2020      
    

 

   

 

     (in millions)

Annuities and deposit funds

      $ 250        $ 320  

Life insurance

      2        2  
  

 

 

 

   

 

 

 

Total reserves

      $ 252        $ 322  
  

 

 

 

   

 

 

 

Statutory Minimum Reserves

The Company has the option to establish policy benefit reserves using a standard of valuation that produces higher reserves than those calculated according to the minimum standard provided in the statutory regulations. For contracts issued January 1, 2001 and later, excess reserves over the statutory minimums were $973 million and $665 million at December 31, 2021 and 2020, respectively.

 

6.

Premium and Annuity Considerations Deferred and Uncollected

Gross deferred and uncollected insurance premiums represent life insurance premiums due to be received from policyowners through the next respective policy anniversary dates. Net deferred and uncollected premiums represent only the portion of gross premiums related to mortality charges and interest and are reported in deferred premium and other assets in the statutory statements of financial position.

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

 

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

 

   

 

   

 

   

 

     (in millions)    (in millions)

Ordinary new business

       $     453         $     259         $     369         $     219  

Ordinary renewal

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

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

Total deferred and uncollected premiums

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

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

 

NM-43

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

7.

Separate Accounts

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

 

     Variable Life    Variable Annuities    Total
    

 

   

 

   

 

     December 31,
     2021    2020    2021    2020    2021    2020
    

 

   

 

   

 

   

 

   

 

   

 

     (in millions)

Separate account reserves

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

Non-policy liabilities

                  199        126  
              

 

 

 

   

 

 

 

Total separate account liabilities

                   $     42,383         $     38,447  
              

 

 

 

   

 

 

 

While separate account liability values are not guaranteed by the Company, variable annuity and variable life insurance products do include guaranteed minimum death benefits (GMDB) underwritten by the Company. General account policy benefit reserves included $7 million and $6 million attributable to GMDB at December 31, 2021 and 2020, respectively.

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

 

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

 

  

 

  

 

     (in millions)

From Separate Account Annual Statement:

       

Transfers to separate accounts

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

Transfers from separate accounts

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

 

 

 

  

 

 

 

  

 

 

 

Net transfers from separate accounts

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

 

 

 

  

 

 

 

  

 

 

 

 

8.

Employee and Financial Representative Benefit Plans

The Company provides defined pension benefits for all eligible employees and financial representatives. This includes sponsorship of noncontributory defined benefit pension plans that are “qualified” under the terms of the Employee Retirement Income Security Act (ERISA) and the Internal Revenue Code (“Code”), as well as “nonqualified” plans that provide benefits to certain participants in excess of limits set by ERISA and the Code for the qualified plans. The Company’s funding policy for the qualified plans is to make annual contributions that are no less than the minimum amount needed to comply with the requirements of ERISA and no greater than the maximum amount deductible for federal income tax purposes. The Company made no contributions to the qualified retirement plans during either of the years ended December 31, 2021 and 2020 and does not expect to make a contribution to the plans during 2022.

The Company’s defined benefit pension plans for employees contains two different benefit formulas – a formula based on the final average pay of the participant that was frozen as of December 31, 2013 and one that awards cash balance credits based on each participant’s age and years of service that became effective

 

NM-44

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

on January 1, 2014. Benefits accrued under the final average pay formula remain available to participants upon retirement. Accumulated cash balance credits earn interest based on market rates and are subject to a minimum crediting rate. The Company’s defined benefit pension plans for financial representatives utilize a formula that is based on the participant’s estimated annual income earned over their career.

In addition to defined pension benefits, the Company provides certain health care and life insurance benefits (“postretirement benefits”) to retired employees, retired financial representatives and their eligible dependents. Participants are eligible for retirement health care coverage if they meet eligibility requirements for age and length of service and were either active or retired as of July 31, 2013 for employees and as of December 31, 2013 for financial representatives. Employees or financial representatives hired or contracted after the above dates are not eligible for coverage under the postretirement health plans. During 2020, the Company announced that beginning with employees retiring on or after January 1, 2022, the Company will no longer provide a subsidy for retiree health care coverage.

Medicare-eligible retirees and their dependents are offered health care options provided under an independent third-party health care marketplace (“marketplace”). Retirees and dependents that are not yet Medicare-eligible retain the historical health care benefits offered by the Company. Medicare-eligible retirees and dependents are provided with a pre-funded retiree health reimbursement account and access to third-party advisors to purchase health benefits through the marketplace. Non-Medicare-eligible retirees and dependents are provided premium assistance based on the retirees’ years of service with the Company. The Company pays the entire cost of retiree life insurance coverage.

Benefit Plan Assets

Aggregate plan assets of the defined benefit pension plans and postretirement benefit plans at December 31, 2021 and 2020, and changes in these assets for the years then ended, were as follows:

 

     Defined Benefit Plans   Postretirement Benefit Plans
             2021                   2020                   2021                   2020        
    

 

  

 

  

 

  

 

     (in millions)   (in millions)

Fair value of plan assets at January 1

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

Changes in plan assets:

         

Actual return on plan assets

      515       854       9       13  

Actual plan benefits paid

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

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

Fair value of plan assets at December 31

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

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

Plan assets consist of group annuity contracts issued by the Company that are funded by a Group Annuity Separate Account, which primarily invests in a diversified portfolio of public and private common stocks and corporate, government and mortgage-backed debt securities. The overall investment objective of the plans is to maximize long-term total rate of return, consistent with prudent standards for investment and asset/liability risk management and in accordance with ERISA requirements. Plan investments are managed with a long-term perspective and for the sole benefit of the plans’ participants.

Plan asset allocations are rebalanced regularly to maintain holdings within desired asset allocation ranges and to reposition the portfolio based upon perceived market opportunities and risks. Diversification, both by and within asset classes, is a primary risk management consideration. Assets are invested across various asset classes, sectors, industries and geographies. The measurement date for plan assets was December 31 of the respective period with the fair value of plan assets primarily based on quoted market prices.

 

NM-45

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

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

 

     Target
Allocation		      Actual
Allocation		  
           2021                  2020                  2021                  2020        

Bonds

      74%        64%        70%        60%  

Equity investments

      25%        35%        28%        37%  

Other investments

      1%        1%        2%        3%  
  

 

 

     

 

 

     

 

 

     

 

 

  

Total assets

      100%        100%        100%        100%  
  

 

 

     

 

 

     

 

 

     

 

 

  

At each of December 31, 2021 and 2020, other investments were comprised of cash and short-term investments.

Benefit Plan Obligations

Aggregate projected benefit obligations (PBOs) of the defined benefit pension plans and postretirement benefit plans at December 31, 2021 and 2020 and changes in these obligations for the years then ended were as follows:

 

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

Projected benefit obligation at January 1

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

Changes in benefit obligation:

         

Service cost of benefits earned

      205       134       10       14  

Interest cost on projected obligations

      141       177       11       16  

Projected gross plan benefits paid

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

Experience (gains)/losses

      (180 )      889       (30 )      119  

Plan amendments and other

      -       -       -       (207 ) 
  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

Projected benefit obligation at December 31

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

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

The PBO represents the estimated net present value of estimated future benefit obligations. For defined benefit plans, the PBO includes assumptions for future compensation increases for active participants. The accumulated benefit obligation (ABO) is similar to the PBO but is based only on current compensation with no assumption of future compensation increases. The aggregate ABO for the defined benefit plans was $6.6 billion for the years ended December 31, 2021 and 2020. Experience (gains)/losses for each of the years ended December 31, 2021 and 2020 primarily reflect the impact of changes in the PBO discount rate.

Benefit Plan Assumptions

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

 

     Defined Benefit Plans      Postretirement Benefit Plans                
         2021              2020              2021              2020                    

Projected benefit obligation:

                  

Weighted average discount rate

      2.77%        2.44%        2.72%        2.37%        

Annual increase in compensation

      3.75%        3.75%        3.75%        3.75%        

Cash balance plan interest crediting rate

      2.73%        2.39%        n/a        n/a        

 

NM-46

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

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

Net periodic benefit cost:

                  

Weighted average discount rate

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

Annual increase in compensation

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

Long-term rate of return on plan assets

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

Cash balance plan interest crediting rate

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

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

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

 

     December 31,  
         2021              2020      

Assumed annual increase

      5.00%        5.00%  

Ultimate rate of annual increase

      5.00%        5.00%  

Year in which ultimate rate is reached

      2022        2021  

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

Benefit Plan Funded Status

Following is an aggregate reconciliation of the funded status of the plans to the related financial statement liabilities reported by the Company at December 31, 2021 and 2020.

 

     Defined
Benefit Plans		     Postretirement
Benefit Plans		  
             2021                     2020                 2021                     2020          
    

 

    

 

    

 

    

 

  
     (in millions)     (in millions)  

Fair value of plan assets

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

Projected benefit obligation

      7,038       7,069       628       662  
  

 

 

    

 

 

    

 

 

    

 

 

  

Funded status

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

Nonadmitted asset

      (887 )      (463 )      -       -  
  

 

 

    

 

 

    

 

 

    

 

 

  

Financial statement liability

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

 

 

    

 

 

    

 

 

    

 

 

  

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

Statutory accounting guidance requires that changes in plan funded status be recognized immediately as a direct adjustment to surplus, subject to limitations such as admissibility of net pension assets. These adjustments are included in changes in nonadmitted assets and other in the statutory statements of changes in surplus.

 

NM-47

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

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

 

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

Net

initial

    asset    

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

 

    

 

    

 

    

 

    

 

  
    (in millions)     (in millions)  

Balance at January 1

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

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Balance at December 31

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

 

 

    

 

 

    

 

 

    

 

 

    

 

 

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

Net

initial

    asset    

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

 

    

 

    

 

    

 

    

 

  
    (in millions)     (in millions)  

Balance at January 1

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

Amortization from surplus into net periodic benefit cost

     56       (25 )      (14 )      4       (4 ) 

Changes in plan assets and benefit obligations recognized in surplus

     (384 )      -       -       (109 )      234  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Balance at December 31

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

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Benefit Plan Costs

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

 

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

 

  

 

  

 

  

 

  

 

  

 

    

 

(in millions)

  

 

(in millions)

Components of net periodic benefit cost:

             

Service cost of benefits earned

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

Interest cost on projected obligations

      141       177       204       11       16       23  

Amortization of experience losses

      67       56       53       7       4       (1 ) 

Amortization of prior service (credits) costs

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

Amortization of initial net asset

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

Expected return on plan assets

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

Curtailment

      -       (1 )      -       -       28       -  
  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

Net periodic benefit cost (credit)

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

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

 

NM-48

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

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

 

     Defined
Benefit Plans		    Postretirement
Benefit Plans
    

 

   

 

    

 

(in millions)

2022

      $ 189        $ 30  

2023

      212        29  

2024

      222        28  

2025

      240        28  

2026

      249        27  

2027-2031

      1,382        133  
  

 

 

 

   

 

 

 

Total

      $ 2,494        $ 275  
  

 

 

 

   

 

 

 

The Company sponsors a contributory 401(k) plan for eligible employees, for which the Company may provide a matching contribution, and a noncontributory defined contribution plan for financial representatives. In addition, the Company sponsors nonqualified plans that provide related benefits to certain participants in excess of limits set by ERISA for qualified defined contribution plans. For the years ended December 31, 2021, 2020 and 2019, the Company expensed total contributions to these plans of $34 million, $57 million and $53 million, respectively. In lieu of making matching contributions to the employee 401(k) plan in 2021 and 2022, the Company has made additional contributions to the cash balance plan in 2021.

 

9.

Reinsurance

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

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

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

 

NM-49

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

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

 

     For the years ended December 31,  
           2021                 2020                 2019        
    

 

    

 

    

 

  
     (in millions)  

Direct premium revenue

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

Premiums assumed

      830       800       763  

Premiums ceded

      (995 )      (978 )      (950 ) 
  

 

 

    

 

 

    

 

 

  

Premium revenue

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

 

 

    

 

 

    

 

 

  

Direct benefit expense

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

Benefits assumed

      915       837       830  

Benefits ceded

      (937 )      (792 )      (805 ) 
  

 

 

    

 

 

    

 

 

  

Total benefits    

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

 

 

    

 

 

    

 

 

  

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

Reinsurance contracts do not relieve the Company from its obligations to policyowners. Failure of reinsurers to honor their obligations could result in losses to the Company. The Company mitigates this counterparty risk by dealing only with reinsurers that meet its financial strength standards while adhering to concentration limits for counterparty exposure to any single reinsurer. Most significant reinsurance treaties contain financial protection provisions that take effect if a reinsurer’s credit rating falls below a prescribed level. There were no reinsurance recoverables at December 31, 2021 and 2020 that were considered by the Company to be uncollectible. No reinsurance contracts were identified which require disclosure under paragraph 79-84 of SSAP No. 61R—Life, Deposit-Type and Accident and Health Reinsurance.

 

10.

Federal Income Taxes

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

 

Northwestern Mutual Investment Services, LLC    NM Harrisburg, Inc
NML Real Estate Holdings, LLC and subsidiaries    Mason Street Advisors, LLC
NML Securities Holdings, LLC and subsidiaries    NM GP Holdings, LLC and subsidiaries
Northwestern Mutual MU TLD Registry, LLC    NM Pebble Valley, LLC
Northwestern Mutual Wealth Management Company    Northwestern Mutual Registry, LLC
NM Investment Holdings, LLC    QOZ Holding Co, LLC and subsidiaries
GRO, LLC and GRO-SUB, LLC    NM Career Distrib. Holdings, LLC and subsidiaries
NM Investment Management Company, LLC    NM SAS, LLC and subsidiaries
Northwestern Long Term Care Ins. Co    Venture Studio Holdings, LLC and subsidiaries
   Wysh Financial Services, LLC

The Company collects from or refunds to these subsidiaries their share of consolidated federal income taxes determined pursuant to written tax-sharing agreements, which generally require that these subsidiaries determine their share of consolidated tax payments or refunds as if each subsidiary filed a separate federal income tax return on a stand-alone basis.

 

NM-50

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

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

 

    For the years ended December 31,
   

 

      2021      

  

 

      2020      

  

 

      2019      

   

 

  

 

  

 

    (in millions)

Tax payable on ordinary income

     $ (914 )      $ 637       $ 103  

Low income housing tax credits

     (150 )      (136 )      (123 ) 

Other tax credits

     (122 )      (71 )      (49 ) 

Increase in contingent tax liabilities

     20       (153 )      (130 ) 
 

 

 

 

  

 

 

 

  

 

 

 

Total current tax expense (benefit)

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

 

 

 

  

 

 

 

  

 

 

 

In addition to current income tax benefit related to ordinary taxable income or loss as summarized above, the Company is subject to federal income tax on capital gains and losses that generally result from investment transactions. Investment capital gains and losses resulting from changes in market interest rates or credit spreads are deferred to the IMR net of any related tax expense or benefit. Current tax expense of $327 million, $433 million and $141 million was included in net IMR deferrals for the years ended December 31, 2021, 2020 and 2019, respectively. In addition, net realized capital gains and losses as reported in the statutory statements of operations included current tax expense (benefit) of $233 million, $(2) million and $173 million for the years ended December 31, 2021, 2020 and 2019, respectively.

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

 

     For the years ended December 31,
    

 

          2021      

  

 

      2020      

  

 

      2019      

    

 

  

 

  

 

     (in millions)

Provision computed at statutory rate

      $ 336       $ 580       $ 402  

Adjustments to the statutory rate:

       

Subsidiary distributions

      (28 )      (283 )      (73 ) 

Tax credits

      (270 )      (207 )      (172 ) 

Amortization of IMR

      (89 )      (53 )      (28 ) 

Dividends received deduction

      (41 )      (31 )      (33 ) 

Employee benefits

      (22 )      (22 )      (12 ) 

Deferred adjustments

      110       (29 )      183  

Other

      (127 )      (50 )      (21 ) 
  

 

 

 

  

 

 

 

  

 

 

 

Total statutory income tax (benefit) expense

      $ (131 )      $ (95 )      $ 246  
  

 

 

 

  

 

 

 

  

 

 

 

Federal income tax (benefit) expense reported on

the statutory statements of operations

    $ (1,166 )    $ 277     $ (199 ) 

Capital gains tax expense, net of IMR transfers

      559       431       315  

Change in net deferred tax assets

      476       (803 )      130  
  

 

 

 

  

 

 

 

  

 

 

 

Total statutory income tax (benefit) expense

      $ (131 )        $ (95 )        $ 246  
  

 

 

 

  

 

 

 

  

 

 

 

During the year, the Company may make payments to or receive refunds from the Internal Revenue Service (IRS) for federal income taxes that are applicable to current or previous tax years. The Company made or received net income tax payments, including subsidiaries, of $295 million, $679 million and $410 million to the IRS during the years ended December 31, 2021, 2020 and 2019, respectively.    

 

NM-51

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

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

Federal income tax returns for 2016 and prior years are closed as to further assessment of tax. In 2021, the Company amended its 2017 return and made certain tax method changes to its 2020 return. These actions resulted in a $984 million income tax benefit on the statutory statement of operations, offset by a $900 million reduction in net deferred tax assets on the statutory statement of changes in surplus, resulting in a net $84 million increase in total surplus for the year ended December 31, 2021. Income taxes payable in the statutory statements of financial position represents an estimate of taxes payable, including additional taxes that may become due with respect to tax years that remained open to examination by the IRS (“contingent tax liabilities”) at the respective reporting date.

Changes in contingent tax liabilities are charged or credited to operations in the year that such determination is made by the company. For the years ended December 31, 2021 and 2020 contingent liabilities were as follows:

 

           For the years ended      
December 31,		  
     2021      2020  
    

 

     

 

  
     (in millions)  

Balance at January 1

      $ -        $ 153  

Additions for tax positions of prior years

      20        (153 ) 
  

 

 

     

 

 

  

Balance at December 31

      $ 20        $ -  
  

 

 

     

 

 

  

Included in contingent tax liabilities at December 31, 2021 and 2020 were $0 million of tax positions for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of the deductions. Because of the impact of deferred taxes for amounts other than interest, the timing of the ultimate deduction may affect the effective tax rate in future periods. The Company has $20 million of tax positions for which the ultimate deductibility is not certain.

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

 

NM-52

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

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

 

     December 31,               
             2021                                2020                            Change          
    

 

           

 

           

 

  
     (in millions)               

Deferred tax assets:

             

Policy acquisition costs

      $ 1,142          $ 1,016          $ 126  

Investments

      239          319          (80 ) 

Policy benefit liabilities

      1,747          1,673          74  

Benefit plan obligations

      625          621          4  

Fixed Assets

      —          931          (931 ) 

Other

 

     

 

 82

 

  

 

       

 

 83

 

  

 

       

 

 (1

 

 ) 

 

  

 

 

       

 

 

       

 

 

  

Gross deferred tax assets

      3,835          4,643          (808 ) 

Nonadmitted deferred tax assets

 

      -          -          -  
  

 

 

       

 

 

       

 

 

  

Gross admitted deferred tax assets

 

     
 3,835
  
       
 4,643
  
       
 (808
 ) 
  

 

 

       

 

 

       

 

 

  

Deferred tax liabilities:

             

Investments

      1,185          986          199  

Other

      1,081          1,352          (271 ) 
  

 

 

       

 

 

       

 

 

  

Gross deferred tax liabilities

 

      2,266          2,338          (72 ) 
  

 

 

       

 

 

       

 

 

  

Net deferred tax assets

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

 

 

       

 

 

       

 

 

  

The Company exceeded the minimum RBC level of 300%, which is necessary to apply the maximum admissibility thresholds, based on authorized control level RBC computed without net deferred tax assets at December 31, 2021 and 2020.

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

 

     December 31, 2021      December 31, 2020            Change        
  

 

 

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

 

 

     

 

 

    

 

 

     

 

 

     

 

 

    

 

 

     

 

 

    

 

 

    

 

 

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

 

 

     

 

 

    

 

 

     

 

 

     

 

 

    

 

 

     

 

 

    

 

 

    

 

 

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

 

 

     

 

 

    

 

 

     

 

 

     

 

 

    

 

 

     

 

 

    

 

 

    

 

 

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

 

 

     

 

 

    

 

 

     

 

 

     

 

 

    

 

 

     

 

 

    

 

 

    

 

 

  

 

NM-53

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

     December 31, 2021        December 31, 2020     

 

Change

 

  

 

 

  
             Ordinary            Capital                Total                Ordinary                Capital                Total                Ordinary               Capital               Total      
Federal income taxes paid in prior years recoverable through loss carrybacks      $ -        $ 96        $ 96        $ -        $ 185        $ 185        $ -       $ (89 )      $ (89 ) 
Adjusted gross deferred tax assets expected to be realized (excluding the amount of deferred tax assets above) after application of the threshold limitation (lesser of a. or b. below)      1,720        -        1,720        2,599        -        2,599          $ (879 )      $ -       $ (879 ) 
Adjusted gross deferred tax assets (excluding the amount of deferred tax assets offset by gross deferred tax liabilities)      1,876        143        2,019        1,725        134        1,859        $ 151       $ 9       $ 160  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

    

 

 

    

 

 

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

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

    

 

 

    

 

 

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

 

 

           

 

 

         

 

 

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

 

 

           

 

 

         

 

 

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

 

 

           

 

 

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

 

 

           

 

 

         

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

 

11.

Commitments and Contingencies Commitments

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

Contingencies

The Company is engaged in various legal actions in the normal course of its insurance and investment operations. The status of these legal actions is actively monitored by the Company. If the Company believes, based on available information, that an adverse outcome upon resolution of a given legal action is probable and the amount of that adverse outcome is reasonably estimable, a loss is recognized and a related liability reported. Legal actions are subject to inherent uncertainties, and future events could change the Company’s assessment of the probability or estimated amount of potential losses from pending or threatened legal actions. Based on available information, it is the opinion of the Company that the ultimate resolution of pending or threatened legal actions, both individually and in the aggregate, will not result in losses that would have a material effect on the Company’s financial position at December 31, 2021.

 

NM-54

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

Guarantees

In the normal course of business, the Company makes guarantees to third parties on behalf of wholly-owned subsidiaries (e.g., debt guarantees) and financial representatives (e.g., the guarantee of office lease payments), or directly to financial representatives (e.g., future minimum compensation payments). If the financial representatives are not able to meet their obligations or these minimum compensation thresholds are not otherwise met, the Company would be required to make payments to fulfill its guarantees. For certain of these guarantees, the Company has the right to pursue recovery of payments made under the agreements. The terms of these guarantees range from less than one year to thirteen years at December 31, 2021.

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

 

     December 31, 2021    December 31, 2020

        Nature of guarantee                 

    Maximum
  potential amount  
of future
payments		               Financial        
statement
liability		    Maximum
  potential amount  
of future
payments		       Financial
  statement liability  
         (in millions)            (in millions)    

Guarantees of future minimum compensation - financial representatives

      $ 59           $ 1          $ 59           $ 1    

Guarantees of real estate obligations

      493           5          476           5    

Guarantees issued on behalf of wholly-owned subsidiaries

      89           -          106           -    

Guarantees on behalf of field loan support program

      37           -          -           -    
  

 

 

 

    

 

 

 

   

 

 

 

    

 

 

 

Total guarantees

      $ 678           $ 6          $ 641           $ 6    
  

 

 

 

    

 

 

 

   

 

 

 

    

 

 

 

No material payments have been required under these guarantees to date, and the Company believes the probability that it will be required to perform under these guarantees in the future is remote. Performance under these guarantees would require the Company to recognize additional operating expense or increase the amount of its equity investment in the affiliate or subsidiary on behalf of which the guarantee was made.

 

12.

Related Party Transactions

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

 

NM-55

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

13.

Surplus Notes

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

 

Description

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

2010 Notes

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

2017 Notes

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

2019 Notes

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

2021 Notes

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

 

 

     

 

 

     

 

 

     

 

 

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

 

 

     

 

 

     

 

 

     

 

 

       

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

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

The notes are unsecured and subordinated to all present and future indebtedness, policy claims and other creditor claims of the Company and do not repay principal prior to maturity, with principal payment at maturity subject to the prior approval of the OCI. The notes are not redeemable at the option of any note holder but are redeemable, in whole or in part, at the option of the Company at any time, subject to the prior approval of the OCI, at a “make whole” redemption price equal to the greater of the principal amount of the notes to be redeemed or the sum of the present value of the remaining scheduled payments of principal and interest on the notes to be redeemed, excluding accrued interest as of the date on which the notes are to be redeemed, discounted on a semi-annual basis at a defined U.S. Treasury rate plus 0.20% (2017 and 2021 notes) and 0.25% (2010 and 2019 notes). The entire amount of the 2017, 2019, and 2021 notes are redeemable, at par, in the event of certain defined tax events.

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

 

14.

Fair Value of Financial Instruments

Certain of the Company’s assets and liabilities are considered “financial instruments” as defined by Statement of Statutory Accounting Principles No. 100—Revised, Fair Value Measurements (SSAP 100R). The Company’s estimation of fair value for financial instruments uses a hierarchy that, where possible, makes use of quoted market prices from active and transparent markets for assets that are identical to those being valued, typically obtained from independent pricing services (“Level 1”). In the absence of quoted market prices for identical assets, fair value is estimated by these pricing services using relevant and observable market-based inputs for substantially similar securities (“Level 2”). Financial instruments for which no quoted market prices or observable inputs are available are generally valued using internally-developed pricing models or indicative (i.e., non-binding) quotes from independent securities brokers (“Level 3”).

 

NM-56

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

The Company actively monitors fair value estimates received from independent pricing services at each financial reporting date, including analysis of valuation changes for individual securities compared to overall market trends and validation on an exception basis with internally-developed pricing models. The Company also performs periodic reviews of the information sources, inputs and methods used by its independent pricing services, including an evaluation of their control processes. Where necessary, the Company will challenge third-party valuations or methods and require more observable inputs or different methodologies.

For financial instruments included in the scope of SSAP 100R, the statement value and fair value at December 31, 2021 and 2020 were as follows:

 

     December 31, 2021
               Quoted prices in        Significant        Significant    Net
               active markets    observable        unobservable        Asset
         Statement        Fair        for identical assets        inputs    inputs    Value
     Value          Value          (level 1)    (level 2)    (level 3)        (NAV)    
    

 

   

 

   

 

   

 

   

 

   

 

     (in millions)

General account investment assets:

                  

Bonds

      $  179,121        $  188,261        $ 5,500        $ 165,145        $ 17,616        $ -  

Mortgage loans

      47,844        50,089        -        -        50,089        -  

Common and preferred stocks

      3,749        3,751        3,062        83        606        -  

Policy loans

      17,208        17,208        -        -        17,208        -  

Derivative assets

      629        1,023        -        1,023        -        -  

Surplus note investments

      197        240        -        240        -        -  

Cash and short-term investments

      3,786        3,786        987        2,799        -        -  

Separate account assets

      42,383        42,383        37,493        3,642        758        490  

General account liabilities:

                  

Investment-type insurance reserves

      $ 9,810        $ 9,728        $ -        $ -        $ 9,728        $ -  

Liabilities for repurchase agreements

      1,277        1,277        -        1,277        -        -  

Derivative liabilities

      311        195        -        195        -        -  

Separate account liabilities

      42,383        42,383        37,493        3,642        758        490  

 

NM-57

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

     December 31, 2020  
                   Quoted prices in          Significant          Significant      Net  
                   active markets      observable          unobservable          Asset  
         Statement          Fair          for identical assets          inputs      inputs      Value  
     Value            Value            (level 1)      (level 2)      (level 3)      (NAV)  
    

 

     

 

     

 

     

 

     

 

     

 

  
     (in millions)  

General account investment assets:

                  

Bonds

      $  166,324        $  183,434        $ 3,175        $ 162,956        $ 17,303        $ -  

Mortgage loans

      41,568        45,155        -        -        45,155        -  

Common and preferred stocks

      4,623        4,659        4,051        60        548        -  

Policy loans

      17,686        17,686        -        -        17,686        -  

Derivative assets

      358        571        -        571        -        -  

Surplus note investments

      161        211        -        211        -        -  

Cash and short-term investments

      3,239        3,239        614        2,625        -        -  

Separate account assets

      38,447        38,447        34,519        3,172        711        45  

General account liabilities:

                  

Investment-type insurance reserves

      $ 6,397        $ 6,445        $ -        $ -        $ 6,445        $ -  

Liabilities for repurchase agreements

      1,315        1,315        -        1,315        -        -  

Derivative liabilities

      622        500        -        500        -        -  

Separate account liabilities

      38,447        38,447        34,519        3,172        711        45  

Bonds

Bonds classified as Level 1 financial instruments are generally limited to U.S. Treasury securities. Most bonds, including U.S. and foreign public and private corporate bonds, municipal bonds and structured securities, are classified as Level 2 financial instruments and are valued based on prices obtained from independent pricing services or internally-developed pricing models using observable inputs. Typical market-observable inputs include benchmark yields, reported trades, issuer spreads, bids, offers, benchmark securities, estimated cash flows and prepayment speeds. Level 3 bonds are typically privately-placed and relatively illiquid, with fair value based on non-binding broker quotes or internally-developed pricing models utilizing unobservable inputs. See Note 3 for more information regarding the Company’s investments in bonds.

Mortgage Loans

Mortgage loans consist solely of commercial mortgage loans underwritten and originated by the Company. Fair value of these loans is estimated using a discounted cash flow approach based on market interest rates for commercial mortgage debt with comparable credit risk and maturity. See Note 3 for more information regarding the Company’s investments in mortgage loans.

Common and Preferred Stock

Common and preferred stocks classified as Level 1 financial instruments are limited to those actively traded on a U.S. or foreign stock exchange. Level 2 securities are stocks for which market quotes are available but are not considered to be actively traded. Common and preferred stocks classified as Level 3 are generally privately-placed with fair value primarily based on a sponsor valuation or market comparables approach utilizing unobservable inputs. See Note 3 for more information regarding the Company’s investments in common and preferred stocks.

Policy Loans

See Note 2 for information regarding policy loans, for which the Company considers the unpaid principal balance to approximate fair value.

 

NM-58

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

Derivative Instruments

The Company’s derivative investments are generally traded in over-the-counter markets with fair value estimated using industry-standard models with market-observable inputs such as swap yield curves, basis curves, foreign currency spot rates, foreign currency basis curves, option volatilities and credit spreads. Warrants classified as level 3 are generally privately-placed with fair value primarily based on a sponsor valuation or market comparables approach utilizing unobservable inputs. See Note 4 for more information regarding the Company’s derivative investments.

Surplus Note Investments

The Company invests in surplus note issuances of other mutual insurance companies. These bond-like instruments are classified as level 2 financial instruments and are valued based on prices obtained from independent pricing services or internally-developed pricing models using observable inputs. Typical market-observable inputs include benchmark yields, reported trades, issuer spreads, bids, offers, benchmark securities, estimated cash flows and prepayment speeds.

Cash and Short-term Investments

Cash and short-term investments include cash deposit balances, money market mutual funds, short-term commercial paper and other highly-liquid debt instruments, for which the Company considers net asset value or amortized cost to approximate fair value.

Separate Account Assets and Liabilities

See Note 2 and Note 7 for information regarding the Company’s separate accounts, for which fair value is primarily based on quoted market prices for the related common stocks, preferred stocks, bonds, derivative instruments and other investments. Separate account assets classified as Level 3 financial instruments are primarily securities partnership investments that are valued based on the Company’s underlying equity in the partnerships, which the Company considers to approximate fair value. Separate account assets for which fair value is determined by a Net Asset Value (NAV) are mutual funds for which the NAV is used as a practical expedient as allowed under SSAP 100R.

General Account Insurance Reserves

The Company’s general account insurance liabilities defined as financial instruments under SSAP 100R are limited to “investment-type” products such as fixed-rate annuity policies, supplementary contracts without life contingencies and amounts left on deposit. The fair value of investment-type insurance reserves is estimated based on future cash flows discounted at market interest rates for similar instruments with comparable maturities.

Repurchase Agreement Liabilities

See Note 3 for information regarding repurchase agreement activity, for which the Company considers the liability to return collateral to approximate the fair value of collateral originally received.

 

NM-59

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

Assets and Liabilities Reported at Fair Value

The following tables summarize assets and liabilities measured and reported at fair value in the statutory statements of financial position at December 31, 2021 and 2020.

 

    December 31, 2021
    Quoted prices in   Significant   Significant   Net    
    active markets   observable   unobservable   Asset    
    for identical assets   inputs   inputs   Value    
    (level 1)   (level 2)   (level 3)   (NAV)   Total
    (in millions)

General account:

          

Bonds

     $ 199       $ 4       $ 115       $ -       $ 318  

Common and preferred stocks

     3,063       5       606       -       3,674  

Money market mutual funds

     848       -       -       -       848  

Derivative assets

     -       216       -       -       216  

Derivative liabilities

     -       24       -       -       24  
 

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

Total general account

     $ 4,110       $ 249       $ 721       $ -       $ 5,080  
 

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

Separate accounts:

          

Mutual fund investments

     $ 35,694       $ -       $ -       $ -       $ 35,694  

Other benefit plan assets/liabilities

     51       26       5       3       85  

Pension and postretirement assets:

          

Bonds

     459       3,462       109       -       4,030  

Common and preferred stock

     1,179       1       58       487       1,725  

Cash and short-term securities

     92       147       -       -       239  

Other assets/liabilities

     18       6       586       -       610  
 

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

Subtotal pension and postretirement assets

     1,748       3,616       753       487       6,604  
 

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

Total separate accounts

     $ 37,493       $ 3,642       $ 758       $ 490       $ 42,383  
 

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

 

    December 31, 2020
    Quoted prices in   Significant   Significant   Net    
    active markets   observable   unobservable   Asset    
    for identical assets   inputs   inputs   Value    
    (level 1)   (level 2)   (level 3)   (NAV)   Total
    (in millions)

General account:

          

Bonds

     $ 401       $ 30       $ 90       $ -       $ 521  

Common and preferred stocks

     4,051       -       390       -       4,441  

Money market mutual funds

     309       -       -       -       309  

Derivative assets

     -       98       -       -       98  

Derivative liabilities

     -       23       -       -       23  
 

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

Total general account

     $ 4,761       $ 151       $ 480       $ -       $ 5,392  
 

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

Separate accounts:

          

Mutual fund investments

     $ 32,149       $ -       $ -       $ -       $ 32,149  

Other benefit plan assets/liabilities

     21       20       4       -       45  

Pension and postretirement assets:

          

Bonds

     341       3,094       118       -       3,553  

Common and preferred stock

     1,768       1       47       45       1,861  

Cash and short-term securities

     50       52       -       -       102  

Other assets/liabilities

     190       5       542       -       737  
 

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

Subtotal pension and postretirement assets

     2,349       3,152       707       45       6,253  
 

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

Total separate accounts

     $ 34,519       $ 3,172       $ 711       $ 45       $ 38,447  
 

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

 

NM-60

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

During 2021, transfers into Level 3 are the result of observable market data, such as public ratings, no longer being available and transfers out of Level 3 are the result of observable market data, including 3rd party vendor prices and public ratings, being available and utilized in the determination of the fair market value of the securities. There were no material asset transfers into or out of Level 3 during the year ended December 31, 2020.

The following tables summarize the changes in fair value of Level 3 financial instruments for the years ended December 31, 2021 and 2020.

 

For the year ended December 31, 2021    General account
common and
preferred stock		    General
account bonds		    Derivative
assets		    Separate
account assets
     (in millions)

Fair value, beginning of period

      $                 390        $                 90        $                 -        $                 711  

Realized gains/(losses)

      52        (26)        -        98  

Unrealized gains/(losses)

      49        10        -        123  

Issuances

      -        -        -        -  

Purchases

      106        7        -        158  

Sales

      (101)        (34)        -        (336)  

Settlements

      -        -        -        -  

Net discount/premium

      4        -        -        1  

Transfers into level 3

      106        68        -        3  

Transfers out of level 3

      -        -        -        -  
  

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

Fair value, end of period

      $ 606        $ 115        $ -        $ 758  
  

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

 

For the year ended December 31, 2020    General account
common and
preferred stock		    General
account bonds		    Derivative
assets		    Separate
account assets
     (in millions)

Fair value, beginning of period

      $                 458        $                 5        $                 -        $                 617  

Realized gains/(losses)

      14        (5)        -        47  

Unrealized gains/(losses)

      (21)        (25)        -        41  

Issuances

      -        -        -        -  

Purchases

      58        5        -        137  

Sales

      (57)        -        -        (134)  

Settlements

      -        -        -        -  

Net discount/premium

      8        -        -        2  

Transfers into level 3

      -        110        -        7  

Transfers out of level 3

      (70)        -        -        (6)  
  

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

Fair value, end of period

      $ 390        $ 90        $ -        $ 711  
  

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

The fair values of Level 3 financial instruments are sensitive to changes in significant unobservable inputs. Level 3 bonds are valued using a combination of discounted cash flows and indicative quotes from independent securities brokers based on market comparable companies. The most significant unobservable input in the discounted cash flow analysis is the discount rate. This rate is estimated based upon a risk-free

 

NM-61

The Northwestern Mutual Life Insurance Company

Notes to the Statutory Financial Statements

December 31, 2021, 2020 and 2019

 

 

market interest rate (U.S. Treasury with comparable maturity) plus a credit spread adjustment based on the estimated credit rating of the issuer. In general, issuers with lower credit ratings have higher credit spreads. A decrease in the credit spread adjustment would increase the fair value of the investment as the future expected cash flows are discounted at a lower rate. The opposite impact would occur if credit spread adjustments increase.

Level 3 privately-placed common and preferred stocks and derivatives, are primarily valued using a private equity sponsor valuation or market comparables approach. Both approaches rely on the use of multiples that are based on industry-specific comparable companies. Multiples are derived from the relationship of an entity’s fair value to its book value or earnings before interest, taxes, depreciation and amortization (EBITDA). The use of EBITDA normalizes for company-specific differences in capital structure, taxation and fixed asset accounting. An increase in the multiple would result in an increase in the fair value of the investment. The opposite impact would occur if the multiple decreased.

 

NM-62