<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
-----------------
COMMISSION FILE NUMBERS 333-72913 AND 2-89905-01
------------------------
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
IN RESPECT OF NML VARIABLE ANNUITY ACCOUNT A & NML VARIABLE ANNUITY ACCOUNT C
-----------------------------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
WISCONSIN 39-0509570
--------- ----------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
720 EAST WISCONSIN AVENUE
MILWAUKEE, WISCONSIN 53202
-------------------- -----
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 414/271-1444
------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
------------------- ----------------
NONE NONE
---- ----
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE
----
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No | |
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this form 10-K or any
amendment to this Form 10-K. |X|
State the aggregate market value of the voting and non-voting common
equity held by non-affiliates computed by reference to the price at which the
common equity was sold, or the average bid and asked price of such common
equity, as of a specified date within the past 60 days.
Not Applicable
--------------
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date.
None
----
DOCUMENTS INCORPORATED BY REFERENCE
None
----
<PAGE> 2
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
FORM 10-K
PART I
ITEM 1. BUSINESS
Accounts A & C
NML Variable Annuity Account A ("Account A") and NML Variable Annuity
Account C ("Account C") are segregated asset accounts of The
Northwestern Mutual Life Insurance Company ("Northwestern Mutual")
formed to provide retirement annuity benefits for (i) employees of
corporate employers who adopt pension or profit sharing plans meeting
the requirements of Section 401(a) of the Internal Revenue Code of
1986, as amended (the "Code"), or annuity purchase plans meeting the
requirements of Section 403(a) of the Code (collectively, "Corporate
Plans"), and (ii) for self-employed individuals (and their eligible
employees) who adopt plans meeting the requirements of Sections 401 or
403(a) of the Code ("HR-10 Plans"). Account A receives payments under
individual variable annuity contracts issued by Northwestern Mutual in
connection with Corporate Plans and HR-10 Plans. Account C receives
payments under group combination variable annuity contracts issued by
Northwestern Mutual in connection with Corporate Plans and HR-10 Plans.
The variable annuity contracts issued by Northwestern Mutual in
connection with Corporate Plans and HR-10 Plans are hereinafter
referred to as the "Contracts." Account A and Account C were
established on February 14, 1968 and July 22, 1970, respectively, by
action of the Board of Trustees of Northwestern Mutual in accordance
with the provisions of Wisconsin insurance law. Neither Account A nor
Account C is registered as an investment company under the Investment
Company Act of 1940.
The Contracts provide for the accumulation of funds and the payment of
retirement benefits to participants and their beneficiaries
("Annuitants"). Account A and Account C each have 16 divisions. Money
invested to provide variable benefits under the Contracts is placed in
one or more divisions of the applicable Account which are in turn
invested in 11 portfolios of Northwestern Mutual Series Fund, Inc.
(Small Cap Growth Stock Portfolio, Aggressive Growth Stock Portfolio,
International Equity Portfolio, Index 400 Stock Portfolio, Growth Stock
Portfolio, Growth and Income Stock Portfolio, Index 500 Stock
Portfolio, Balanced Portfolio, High Yield Bond Portfolio, Select Bond
Portfolio and Money Market Portfolio) and 5 funds of Russell Insurance
Funds (Multi-Style Equity Fund, Aggressive Equity Fund, Non-U.S. Fund,
Real Estate Securities Fund and Core Bond Fund), each of which
corresponds to one of the Account divisions, all as directed by the
Annuitant. Northwestern Mutual Series Fund, Inc. and Russell Insurance
Funds, which are affiliates of Northwestern Mutual, are registered as
investment companies under the Investment Company Act of 1940. The
Contracts are sold through individuals who, in addition to being
licensed insurance agents of Northwestern Mutual, are registered
representatives of Northwestern Mutual Investment Services, LLC
("NMIS"), a wholly-owned subsidiary of Northwestern Mutual and a
registered broker-dealer under the Securities Exchange Act of 1934.
Under Wisconsin law, the investment operations of each of Account A and
Account C are kept separate from the operations of Northwestern Mutual.
Northwestern Mutual and its creditors cannot reach assets in Account A
or Account C to satisfy non-Contract related obligations until all
obligations under the Contracts have been satisfied.
See Item 8 herein for the audited financial statements of Account A and
Account C.
Northwestern Mutual
Founded in 1857, Northwestern Mutual is a mutual insurance company
organized under the laws of the State of Wisconsin. Northwestern
Mutual's products consist of a complete range of permanent and term
life insurance, disability income insurance, long-term care insurance,
mutual funds and annuities for personal, estate, retirement, business
and benefits planning. Northwestern Mutual markets its insurance
products and services in all 50 states of the United States and in the
District of Columbia through an exclusive network of approximately
7,500 agents at December 31, 1999 associated with over 100 general
agencies. At December 31, 1999, Northwestern Mutual had approximately
3,700 full- and part-time employees.
1
<PAGE> 3
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
FORM 10-K
Northwestern Mutual's three principal lines of business are: (i) life
insurance, which provides a full range of individual life insurance
products, including traditional whole life, CompLife, variable life and
term policies to meet the needs of middle to upper income individuals,
small business owners and professionals, estates and selected large
corporations; (ii) disability income insurance, which provides a
complete line of individual and group products, including individual
non-cancelable, guaranteed renewable loss of earnings, buyout, key
person, and short and long-term group coverages, marketed primarily to
middle to upper income individuals, professionals, and small- to
medium-sized businesses and their owners; and (iii) annuity and
accumulation products, which provide individual variable, fixed and
immediate annuities offered in conjunction with qualified pension
plans, retirement plans for self employed individuals, individual
retirement and personal non-tax qualified situations, group annuities
and a family of retail mutual funds known as Mason Street Funds,
marketed primarily to middle to upper income individuals, small
business owners and professionals. A new business line for Northwestern
Mutual, long-term care insurance, commenced in August 1998 with the
introduction of its QuietCare product. For the years ended December 31,
1999, 1998 and 1997, Northwestern Mutual had total premiums, including
annuity considerations and deposit funds, of $8.3 billion, $8.0 billion
and $7.3 billion, respectively, of which $6.8 billion, $6.5 billion and
$5.9 billion, respectively, was attributable to life insurance, $0.5
billion, $0.5 billion and $0.5 billion, respectively, was attributable
to disability income insurance and $1.0 billion, $1.0 billion and $0.9
billion, respectively, was attributable to annuity and accumulation
products.
The life insurance industry is mature and highly competitive.
Competitiveness in the life insurance business is affected by various
factors including, but not limited to, product quality, financial
strength and stability, claims-paying ratings, size and competence of
agency force, range of product lines, customer service, and reputation.
At the end of 1999, there were more than 1,500 life insurance companies
in the United States and many of these companies offer individual life
insurance and annuity products similar to those offered by Northwestern
Mutual. In addition, Northwestern Mutual competes with banks, brokerage
firms, investment advisers, mutual funds and other financial entities
for investment and savings customers. In the individual and group
disability markets, Northwestern Mutual competes with a limited number
of major national and regional companies offering these specialized
products. National banks, with their pre-existing customer bases for
financial services products, may pose increasing competition in the
future to insurers who sell life insurance and annuity products,
including Northwestern Mutual. Recent United States Supreme Court
decisions have expanded the authority of national banks to sell life
insurance products and annuities. In addition, legislation to overturn
Depression-era restrictions on bank affiliations, the
Gramm-Leach-Bliley Act (the "Act"), was signed into law by the
President on November 12, 1999, implementing fundamental changes in the
regulation of the financial services industry in the U.S. Generally
effective March 11, 2000, the Act eliminates certain barriers to and
restrictions on affiliations between banks, securities firms and
insurance companies that were previously contained in the
Glass-Steagall Act of 1933, as amended, and the Bank Holding Company
Act of 1956, as amended. Under the Act, through the use of two new
structures, financial holding companies and financial subsidiaries,
qualifying bank holding companies and state and national banks will be
allowed to provide a wide variety of financial services, including the
authority to engage in certain insurance activities (e.g., the sale
and, in the case of qualifying bank holding companies only, the
underwriting of insurance and annuities). As a result of the Act, among
other things, bank holding companies may acquire insurers and insurance
holding companies may acquire banks. While it is too early to assess
the effects of the Act on Northwestern Mutual, the Act may change the
competitive and regulatory environment in which Northwestern Mutual and
its subsidiaries conduct their businesses and may result in additional
competition in one or more markets in which they sell their products
and services.
Northwestern Mutual is licensed to transact its insurance business in,
and is subject to regulation and supervision by, all 50 states of the
United States and the District of Columbia. Northwestern Long Term Care
Insurance Company, Northwestern Mutual's only insurance subsidiary, is
authorized and regulated in all jurisdictions in which it conducts its
long-term care business. The extent of such regulation varies, but most
jurisdictions have laws and regulations governing the financial aspects
of insurance companies, including standards of solvency, reserves,
reinsurance, capital adequacy and the business conduct of insurance
companies. In addition, statutes and regulations usually require the
licensing of insurers and their agents, the approval of policy forms
and related materials and, for certain lines of insurance, the approval
of rates. Such statutes and regulations also prescribe the permitted
types and concentration of investments. The Act reaffirms that the
states are to remain responsible for regulating the business of
insurance. However, subject to certain exceptions, no state authority
can prevent or restrict depository institutions and their affiliates
from affiliating with insurance companies as permitted under the Act.
In addition, certain state laws and regulations that place restrictions
on a depository institution's insurance sales activities would be
preempted.
2
<PAGE> 4
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
FORM 10-K
Robert W. Baird & Co. Incorporated ("Baird"), a subsidiary of
Northwestern Mutual, is one of the nation's largest regional investment
banking firms based on dollar volume of underwritings, amount of equity
capital, and the number of financial advisors and branch offices.
Baird, a member of the New York Stock Exchange, Inc., provides
broker-dealer, asset management, equity research, investment banking,
merchant banking and public finance services for individuals,
corporations, municipalities and institutional investors.
On January 1, 1999, Northwestern Mutual acquired all the outstanding
common stock of Frank Russell Company ("Frank Russell"). Founded in
1936, Frank Russell is a leading investment management and consulting
firm, providing investment advice, analytical tools and funds to
institutional and individual investors in more than 30 countries.
Through its subsidiaries, at December 31, 1999, Frank Russell managed
approximately $60 billion in assets. Frank Russell is also well known
for its family of market indices, including the Russell 2000, which
provide complete sets of performance benchmarks for investors in
Australia, Canada, Japan, the United Kingdom and the United States.
See Item 14 herein for the audited consolidated financial statements of
Northwestern Mutual.
Purpose of Annual Report
This Annual Report on Form 10-K of Northwestern Mutual is filed with
respect to its Account A and Account C. While certain information in
this Form 10-K relates to Northwestern Mutual as a whole, this Form
10-K is intended to provide information with respect to such Account A
and Account C where relevant.
ITEM 2. PROPERTIES
Account A and Account C own no physical properties. Northwestern Mutual
owns and occupies all of the space in its home office complex in
Milwaukee, Wisconsin. Northwestern Mutual is the lessee of ten leases
covering its real estate regional offices in locations throughout the
United States.
ITEM 3. LEGAL PROCEEDINGS
Neither Account A nor Account C are involved in any pending legal
proceedings. Northwestern Mutual is subject to various claims and
proceedings, including claims or proceedings related to its
investments, that occur in the ordinary course of its business. Based
on information currently available to Northwestern Mutual, Northwestern
Mutual believes that none of these current claims or proceedings,
either individually or in the aggregate, will have a material adverse
effect on the financial position of Northwestern Mutual.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
As segregated asset accounts, Account A and Account C have no common
equity securities issued by them. As a mutual life insurance company,
Northwestern Mutual has no common equity securities issued by it.
The Contracts issued in connection with Account A and Account C, and
interests in those Contracts, are offered on a continuous basis to
Corporate Plans and HR-10 Plans. The Contracts for Corporate Plans are
not registered under the Securities Act of 1933, in reliance on the
exemption provided by Section 3(a)(2) thereof. All of the Contracts are
offered exclusively by agents of the Northwestern Mutual who are also
registered representatives of NMIS.
3
<PAGE> 5
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
FORM 10-K
During 1999, the following aggregate dollar amounts of such
unregistered securities were sold to Corporate Plans, generating the
aggregate commissions stated:
<TABLE>
<CAPTION>
ACCOUNT A ACCOUNT C
--------- ---------
AMOUNT SOLD COMMISSIONS AMOUNT SOLD COMMISSIONS
----------- ----------- ----------- -----------
<S> <C> <C> <C>
$40,480,117 (A) $1,529,592 (B) $74,577,449 (A) $1,221,524 (B)
</TABLE>
------------------
(A) Reflects premiums paid by Contract holders as well as dividend
additions.
(B) Reflects an estimate of amounts paid to Northwestern Mutual
agents for sales to Corporate Plans based on a pro rata
allocation of all Contract sales under the Account.
Accumulation units in Account A and Account C represent the interests
of Contract owners. Purchase payments are applied to credit additional
accumulation units based on the accumulation unit value next determined
after each payment is received. Accumulation units are valued as of the
close of business on the New York Stock Exchange on each business day.
4
<PAGE> 6
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
FORM 10-K
ITEM 6. SELECTED FINANCIAL DATA
Results of Operations for Account A for each of the five years ending
December 31, follows:
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Investment Income
Dividend Income from Northwestern
Mutual Series Fund, Inc.
Small Cap Growth Stock Portfolio #....... $ 149,387 N/A N/A N/A N/A
Dividend Income from Northwestern
Mutual Series Fund, Inc.
Aggressive Growth Stock Portfolio........ 2,871,237 $ 3,294,065 $ 5,046,819 $ 2,456,762 $ 256,787
Dividend Income from Northwestern
Mutual Series Fund, Inc.
International Equity Portfolio........... 6,194,164 2,854,899 1,627,765 1,820,972 217,966
Dividend Income from Northwestern
Mutual Series Fund, Inc.
Index 400 Stock Portfolio #.............. 29,809 N/A N/A N/A N/A
Dividend Income from Northwestern
Mutual Series Fund, Inc.
Growth Stock Portfolio................... 1,225,768 460,727 769,950 379,453 128,854
Dividend Income from Northwestern
Mutual Series Fund, Inc.
Growth and Income Stock Portfolio........ 4,191,005 294,097 5,154,785 1,206,606 465,091
Dividend Income from Northwestern
Mutual Series Fund, Inc.
Index 500 Stock Portfolio................ 3,676,359 4,267,429 3,229,605 1,906,168 522,842
Dividend Income from Northwestern
Mutual Series Fund, Inc.
Balanced Portfolio....................... 34,011,393 19,089,250 13,244,993 14,325,426 8,146,698
Dividend Income from Northwestern
Mutual Series Fund, Inc.
High Yield Bond Portfolio................ 821,476 951,201 1,418,106 473,729 199,805
Dividend Income from Northwestern
Mutual Series Fund, Inc.
Select Bond Portfolio.................... 2,087,636 1,767,739 1,556,695 906,892 652,667
Dividend Income from Northwestern
Mutual Series Fund, Inc.
Money Market Portfolio................... 1,410,026 1,254,017 1,203,410 1,024,534 1,119,254
Dividend Income from Russell Insurance Funds
Multi-Style Equity Fund #................ 76,045 N/A N/A N/A N/A
Dividend Income from Russell Insurance Funds
Aggressive Equity Fund #................. 4,518 N/A N/A N/A N/A
Dividend Income from Russell Insurance Funds
Non-U.S. Fund #.......................... 37,184 N/A N/A N/A N/A
Dividend Income from Russell Insurance Funds
Real Estate Securities Fund #............ 12,094 N/A N/A N/A N/A
Dividend Income from Russell Insurance Funds
Core Bond Fund #......................... 21,682 N/A N/A N/A N/A
----------- ----------- ----------- ----------- -----------
Total Dividend Income................. 56,819,783 34,233,424 33,252,128 24,500,542 11,709,964
Annuity Rate and Expense Guarantees........ 8,723,746 8,068,866 7,048,888 5,783,739 5,072,064
----------- ----------- ----------- ----------- -----------
Net Investment Income...................... $48,096,037 $26,164,558 $26,203,240 $18,716,803 $ 6,637,900
=========== =========== =========== =========== ===========
Realized and Unrealized Gain on Investments
Realized Gain on Investments............... $51,300,014 $37,627,804 $23,135,675 $13,967,988 $13,141,169
Unrealized Appreciation of Investments
During the Year.......................... 9,271,096 36,249,405 56,364,111 33,051,905 76,916,515
----------- ----------- ----------- ----------- -----------
Net Gain on Investments.................. $60,571,110 $73,877,209 $79,499,786 $47,019,893 $90,057,684
=========== =========== =========== =========== ===========
</TABLE>
- - - - - - - - - - - - - - - - - ------------------------
# Became an investment option under the Contracts effective April 30, 1999.
See Notes to Financial Statements on pages 27-28.
5
<PAGE> 7
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
FORM 10-K
ITEM 6. (continued)
Changes in Equity for Account A for each of the five years ending
December 31, follows:
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
From Investment Activities
Net Investment Income ........... $ 48,096,037 $ 26,164,558 $ 26,203,240 $ 18,716,803 $ 6,637,900
Net Realized Gain on
Investments.................... 51,300,014 37,627,804 23,135,675 13,967,988 13,141,169
Net Change in Unrealized
Appreciation of Investments ... 9,271,096 36,249,405 56,364,111 33,051,905 76,916,515
------------- ------------- ------------- ------------- -------------
Increase in Equity Derived
From Investment Activities ..... 108,667,147 100,041,767 105,703,026 65,736,696 96,695,584
------------- ------------- ------------- ------------- -------------
From Equity Transactions
Contract Owners' Net Payments .. 55,484,960 62,320,941 61,964,558 65,169,358 49,124,853
Annuity Payments ............... (1,467,552) (1,305,331) (1,046,956) (830,996) (610,983
Surrenders and Other (Net) ..... (104,113,639) (83,817,967) (65,746,579) (52,376,445) (62,309,189)
------------- ------------- ------------- ------------- -------------
Increase (Decrease) in Equity
Derived from Equity
Transactions.................... (50,096,231) (22,802,357) (4,828,977) 11,961,917 (13,795,319)
------------- ------------- ------------- ------------- -------------
Net Increase in Equity ............ 58,570,916 77,239,410 100,874,049 77,698,613 82,900,265
Equity, Beginning of Year ......... 725,633,499 648,394,089 547,520,040 469,821,427 386,921,162
------------- ------------- ------------- ------------- -------------
Equity, End of Year ............... $ 784,204,415 $ 725,633,499 $ 648,394,089 $ 547,520,040 $ 469,821,427
============= ============= ============= ============= =============
</TABLE>
See Notes to Financial Statements on pages 27-28.
6
<PAGE> 8
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
FORM 10-K
ITEM 6. (continued)
Total Assets of Account A at December 31, follows:
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Assets
Investments at Market Value:
Northwestern Mutual Series Fund, Inc.
Small Cap Growth Stock Portfolio # ... $ 4,846,983 N/A N/A N/A N/A
Northwestern Mutual Series Fund, Inc.
Aggressive Growth Stock Portfolio .... 104,344,155 $ 87,973,307 $ 89,428,723 $ 78,087,972 $ 56,491,009
Northwestern Mutual Series Fund, Inc.
International Equity Portfolio ....... 45,439,022 44,994,454 50,148,435 41,497,787 31,789,148
Northwestern Mutual Series Fund, Inc.
Index 400 Growth Stock Portfolio # ... 2,204,952 N/A N/A N/A N/A
Northwestern Mutual Series Fund, Inc.
Growth Stock Portfolio ............... 39,031,078 26,774,398 17,260,514 9,523,179 4,284,669
Northwestern Mutual Series Fund, Inc.
Growth and Income Stock Portfolio .... 35,735,343 36,439,779 23,575,574 13,199,558 7,891,655
Northwestern Mutual Series Fund, Inc.
Index 500 Stock Portfolio ............ 169,861,157 143,375,448 111,140,823 80,917,025 62,391,687
Northwestern Mutual Series Fund, Inc.
Balanced Portfolio ................... 319,677,680 325,287,406 302,749,909 270,745,111 257,867,967
Northwestern Mutual Series Fund, Inc.
High Yield Bond Portfolio ............ 6,939,731 9,287,355 8,743,385 4,907,490 2,060,076
Northwestern Mutual Series Fund, Inc.
Select Bond Portfolio ................ 22,161,495 25,969,869 25,252,973 26,648,961 25,742,752
Northwestern Mutual Series Fund, Inc.
Money Market Portfolio ............... 28,975,194 26,910,774 21,586,115 23,380,205 21,556,895
Russell Insurance Funds
Multi-Style Equity Fund # ............ 2,500,013 N/A N/A N/A N/A
Russell Insurance Funds
Aggressive Equity Fund # ............. 1,142,441 N/A N/A N/A N/A
Russell Insurance Funds
Non-U.S. Fund # ...................... 1,383,194 N/A N/A N/A N/A
Russell Insurance Funds
Real Estate Securities Fund # ........ 331,977 N/A N/A N/A N/A
Russell Insurance Funds
Core Bond Fund # ..................... 692,598 N/A N/A N/A N/A
Due from Northwestern Mutual ............. 1,011,681 22,305 322,747 123,152 491,572
Due from Sale of Fund Shares ............. 1,329,077 1,407,778 1,555,441 387,086 78,037
------------ ------------ ------------ ------------ ------------
Total Assets ......................... $787,607,771 $728,442,873 $651,764,639 $549,417,526 $470,645,467
============ ============ ============ ============ ============
</TABLE>
- - - - - - - - - - - - - - - - - ------------------------
# Became an investment option under the Contracts effective April 30, 1999.
See Notes to Financial Statements on pages 27-28.
7
<PAGE> 9
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
FORM 10-K
ITEM 6. (continued)
Results of Operations for Account C for each of the five years ending
December 31, follows:
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Investment Income
Dividend Income from Northwestern
Mutual Series Fund, Inc.
Small Cap Growth Stock Portfolio # ....... $ 30,993 N/A N/A N/A N/A
Dividend Income from Northwestern
Mutual Series Fund, Inc.
Aggressive Growth Stock Portfolio ........ 3,671,476 $ 4,152,153 $ 6,049,655 $ 2,574,462 $ 242,583
Dividend Income from Northwestern
Mutual Series Fund, Inc.
International Equity Portfolio ........... 8,183,887 3,732,935 1,945,549 1,805,160 190,138
Dividend Income from Northwestern
Mutual Series Fund, Inc.
Index 400 Stock Portfolio # .............. 6,302 N/A N/A N/A N/A
Dividend Income from Northwestern
Mutual Series Fund, Inc.
Growth Stock Portfolio ................... 1,222,775 447,543 712,380 366,920 59,271
Dividend Income from Northwestern
Mutual Series Fund, Inc.
Growth and Income Stock Portfolio ........ 4,566,474 343,472 5,940,640 1,146,200 276,923
Dividend Income from Northwestern
Mutual Series Fund, Inc.
Index 500 Stock Portfolio ................ 4,674,819 5,270,794 3,755,769 2,082,261 544,553
Dividend Income from Northwestern
Mutual Series Fund, Inc.
Balanced Portfolio ....................... 18,031,473 9,908,961 6,460,653 7,534,370 4,212,478
Dividend Income from Northwestern
Mutual Series Fund, Inc.
High Yield Bond Portfolio ................ 758,789 883,190 1,028,027 309,003 55,220
Dividend Income from Northwestern
Mutual Series Fund, Inc.
Select Bond Portfolio .................... 1,570,275 1,357,040 1,057,558 566,451 395,357
Dividend Income from Northwestern
Mutual Series Fund, Inc.
Money Market Portfolio ................... 1,015,173 899,183 738,932 609,543 494,253
Dividend Income from Russell Insurance Funds
Multi-Style Equity Fund # ................ 48,375 N/A N/A N/A N/A
Dividend Income from Russell Insurance Funds
Aggressive Equity Fund # ................. 1,284 N/A N/A N/A N/A
Dividend Income from Russell Insurance Funds
Non-U.S. Fund # .......................... 13,306 N/A N/A N/A N/A
Dividend Income from Russell Insurance Funds
Real Estate Securities Fund # ............ 4,030 N/A N/A N/A N/A
Dividend Income from Russell Insurance Funds
Core Bond Fund # ......................... 15,069 N/A N/A N/A N/A
----------- ----------- ----------- ----------- -----------
Total Dividend Income .................. 43,814,500 26,995,271 27,689,163 16,994,370 6,470,776
Annuity Rate and Expense Guarantees ........ 3,445,294 3,154,686 2,501,975 1,738,625 856,764
----------- ----------- ----------- ----------- -----------
Net Investment Income ...................... $40,369,206 $23,840,585 $25,187,188 $15,255,745 $ 5,614,012
=========== =========== =========== =========== ===========
Realized and Unrealized Gain on Investments
Realized Gain on Investments ............... $41,105,768 $29,250,486 $18,686,284 $ 8,855,390 $ 9,884,364
Unrealized Appreciation of Investments
During the Year .......................... 36,856,549 37,105,560 44,241,434 29,832,124 53,407,857
----------- ----------- ----------- ----------- -----------
Net Gain on Investments .................. $77,962,317 $66,356,046 $62,927,718 $38,687,514 $63,292,221
=========== =========== =========== =========== ===========
</TABLE>
------------------------
# Became an investment option under the Contracts effective April 30, 1999.
See Notes to Financial Statements on pages 37-38.
8
<PAGE> 10
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
FORM 10-K
ITEM 6. (continued)
Changes in Equity for Account C for each of the five years ending
December 31, follows:
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
From Investment Activities
Net Investment Income ............... $ 40,369,206 $ 23,840,585 $ 25,187,188 $ 15,255,745 $ 5,614,012
Net Realized Gain on Investments .... 41,105,768 29,250,486 18,686,284 8,855,390 9,884,364
Net Change in Unrealized Appreciation
of Investments .................... 36,856,549 37,105,561 44,241,434 29,832,124 53,407,857
------------- ------------- ------------- ------------- -------------
Increase in Equity Derived
From Investment Activities .......... 118,331,523 90,196,632 88,114,906 53,943,259 68,906,233
------------- ------------- ------------- ------------- -------------
From Equity Transactions
Contract Owners' Net Payments ....... 74,901,848 93,658,882 91,195,224 89,650,916 59,390,267
Surrenders and Other (Net) .......... (117,603,594) (86,757,540) (57,974,180) (34,747,640) 60,872,729
------------- ------------- ------------- ------------- -------------
Increase (Decrease) in Equity Derived
From Equity Transactions ............ (42,701,746) 6,901,342 33,221,044 54,903,276 (1,482,462)
------------- ------------- ------------- ------------- -------------
Net Increase in Equity ................ 75,629,777 97,097,974 121,335,950 108,846,535 67,423,771
Equity, Beginning of Year ............. 645,086,497 547,988,523 426,652,573 317,806,038 250,382,267
------------- ------------- ------------- ------------- -------------
Equity, End of Year ................... $ 720,716,274 $ 645,086,497 $ 547,988,523 $ 426,652,573 $ 317,806,038
============= ============= ============= ============= =============
</TABLE>
See Notes to Financial Statements on pages 37-38.
9
<PAGE> 11
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
FORM 10-K
ITEM 6. (continued)
Total Assets of Account C at December 31, follows:
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Assets
Investments at Market Value:
Northwestern Mutual Series Fund, Inc.
Small Cap Growth Stock Portfolio #.. $ 949,166 N/A N/A N/A N/A
Northwestern Mutual Series Fund, Inc.
Aggressive Growth Stock Portfolio... 139,738,783 $112,355,230 $111,586,520 $ 95,276,983 $ 57,421,016
Northwestern Mutual Series Fund, Inc.
International Equity Portfolio ..... 64,556,193 59,264,930 63,877,146 49,461,520 30,039,223
Northwestern Mutual Series Fund, Inc.
Index 400 Stock Portfolio # ........ 473,356 N/A N/A N/A N/A
Northwestern Mutual Series Fund, Inc.
Growth Stock Portfolio ............. 39,775,147 27,819,393 15,850,257 9,734,427 2,084,697
Northwestern Mutual Series Fund, Inc.
Growth and Income Stock Portfolio .. 41,105,386 40,353,938 27,484,626 13,034,961 4,888,505
Northwestern Mutual Series Fund, Inc.
Index 500 Stock Portfolio .......... 220,074,926 183,326,114 133,927,705 93,249,123 64,560,752
Northwestern Mutual Series Fund, Inc.
Balanced Portfolio ................. 167,443,550 172,971,811 153,733,599 131,324,909 132,469,239
Northwestern Mutual Series Fund, Inc.
High Yield Bond Portfolio .......... 6,380,157 8,611,383 6,568,438 2,983,258 736,774
Northwestern Mutual Series Fund, Inc.
Select Bond Portfolio .............. 17,537,190 20,754,940 18,059,926 17,803,016 16,281,140
Northwestern Mutual Series Fund, Inc.
Money Market Portfolio ............. 19,341,129 19,628,758 16,900,306 13,784,374 9,324,692
Russell Insurance Funds
Multi-Style Equity Fund # .......... 1,705,658 N/A N/A N/A N/A
Russell Insurance Funds
Aggressive Equity Fund # ........... 351,582 N/A N/A N/A N/A
Russell Insurance Funds
Non-U.S. Fund # .................... 565,156 N/A N/A N/A N/A
Russell Insurance Funds
Real Estate Securities Fund # ...... 102,203 N/A N/A N/A N/A
Russell Insurance Funds
Core Bond Fund # ................... 384,069 N/A N/A N/A N/A
Due from Northwestern Mutual ........... 395,300 355,553 196,511 1,662,368 808,493
Due from Sale of Fund Shares ........... 798,688 495,042 2,927,350 52,909 36
Due from Participants .................. 232,623 0 0 0 0
------------ ------------ ------------ ------------ ------------
Total Assets ...................... $721,910,262 $645,937,092 $551,112,384 $428,367,848 $318,614,567
============ ============ ============ ============ ============
</TABLE>
- - - - - - - - - - - - - - - - - ------------------------
# Became an investment option under the Contracts effective April 30, 1999.
See Notes to Financial Statements on pages 37-38.
10
<PAGE> 12
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
FORM 10-K
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Liquidity
The assets of Account A and Account C are invested solely in shares of
Northwestern Mutual Series Fund, Inc. ("Series Fund") and the Russell
Insurance Funds ("Russell Funds," and collectively with the Series
Fund, the "Funds"). The Series Fund consists of the Small Cap Growth
Portfolio, Aggressive Growth Stock Portfolio, International Equity
Portfolio, Index 400 Stock Portfolio, Growth Stock Portfolio, Growth
and Income Stock Portfolio, Index 500 Stock Portfolio, Balanced
Portfolio, High Yield Bond Portfolio, Select Bond Portfolio and the
Money Market Portfolio. The Russell Funds consist of the Multi-Style
Equity Fund, Aggressive Equity Fund, Non-U.S. Fund, Real Estate
Securities Fund and Core Bond Fund. The Funds are open-end investment
companies registered under the Investment Company Act of 1940. In
order to pay annuity benefits and expenses, the Accounts redeem shares
in the Funds.
Capital Resources
All payments from Contract owners of Account A and Account C are
invested in shares of the Funds. The capital resources of Account A
and Account C are the equity in the respective Accounts. This consists
of payments from the Contract owners, plus unrealized and realized
appreciation on the investment of these payments, plus investment
income received from the Funds, minus payment of annuity benefits and
expenses.
Results of Operations
Accumulation units in Account A and Account C represent the interests
of Contract owners. The value of an accumulation unit in each division
varies with the investment experience of the division, which in turn
is determined by the investment experience of the corresponding
portfolio or fund. Set forth below for each of Account A and Account C
are accumulation unit values at December 31, 1999, 1998 and 1997 for
each division, and the percentage change in such values from year to
year.
ACCOUNT A
---------
Accumulation Unit Values
Contracts Issued Prior to December 17, 1981:
<TABLE>
<CAPTION>
DIVISION 12/31/99 % CHANGE 12/31/98 % CHANGE 12/31/97
- - - - - - - - - - - - - - - - - -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Small Cap Growth Stock #.......... $1.851783 85.18% $1.000000 N/A N/A
Aggressive Growth Stock........... 5.658407 42.71 3.964849 6.75% $3.714008
International Equity.............. 2.375600 21.98 1.947470 4.04 1.871861
Index 400 Stock #................. 1.122676 12.27 1.000000 N/A N/A
Growth Stock...................... 3.099518 21.58 2.549324 25.75 2.027359
Growth and Income Stock........... 2.600855 6.68 2.437983 22.22 1.994748
Index 500 Stock................... 5.043329 20.01 4.202480 27.76 3.289255
Balanced.......................... 8.136959 10.37 7.372322 17.99 6.248153
High Yield Bond................... 1.563339 -1.20 1.582307 -2.57 1.624115
Select Bond....................... 7.582833 -1.76 7.718724 6.27 7.263164
Money Market...................... 2.760791 4.32 2.646458 4.64 2.529098
Russell Multi-Style Equity #...... 1.070614 7.06 1.000000 N/A N/A
Russell Aggressive Equity #....... 1.103591 10.36 1.000000 N/A N/A
Russell Non-U.S. #................ 1.247160 24.72 1.000000 N/A N/A
Russell Real Estate Securities #.. 0.922768 -7.72 1.000000 N/A N/A
Russell Core Bond #............... 0.986452 -1.35 1.000000 N/A N/A
</TABLE>
- - - - - - - - - - - - - - - - - ------------------------
# Became an investment option under the Contracts effective April 30, 1999.
11
<PAGE> 13
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
FORM 10-K
ITEM 7. (continued)
Accumulation Unit Values
Contracts Issued After December 16, 1981 and Prior to March 31, 1995:
<TABLE>
<CAPTION>
DIVISION 12/31/99 % CHANGE 12/31/98 % OF CHANGE 12/31/97
- - - - - - - - - - - - - - - - - -------- -------- -------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
Small Cap Growth Stock #.......... $1.845580 84.56% $1.000000 N/A N/A
Aggressive Growth Stock........... 5.407959 42.00 3.808330 6.22% $3.585281
International Equity.............. 2.297694 21.38 1.893030 3.52 1.828649
Index 400 Stock #................. 1.118909 11.89 1.000000 N/A N/A
Growth Stock...................... 3.012947 20.98 2.490522 25.12 1.990509
Growth and Income Stock........... 2.528256 6.15 2.381813 21.61 1.958555
Index 500 Stock................... 4.820195 19.41 4.036666 27.13 3.175298
Balanced.......................... 7.436406 9.82 6.771353 17.40 5.767570
High Yield Bond................... 1.519653 -1.69 1.545816 -3.06 1.594619
Select Bond....................... 6.928532 -2.25 7.088069 5.74 6.703164
Money Market...................... 2.523294 3.80 2.430915 4.12 2.334748
Russell Multi-Style Equity #...... 1.067018 6.70 1.000000 N/A N/A
Russell Aggressive Equity #....... 1.099895 9.99 1.000000 N/A N/A
Russell Non-U.S. #................ 1.242993 24.30 1.000000 N/A N/A
Russell Real Estate Securities #.. 0.919674 -8.03 1.000000 N/A N/A
Russell Core Bond #............... 0.983142 -1.69 1.000000 N/A N/A
</TABLE>
Accumulation Unit Values
Contracts Issued On or After March 31, 1995 - Front Load Version:
<TABLE>
<CAPTION>
DIVISION 12/31/99 % CHANGE 12/31/98 % OF CHANGE 12/31/97
- - - - - - - - - - - - - - - - - -------- -------- -------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
Small Cap Growth Stock #.......... $1.856086 85.61% $1.000000 N/A N/A
Aggressive Growth Stock........... 2.661899 43.21 1.858751 7.12% $1.735135
International Equity.............. 1.964300 22.41 1.604722 4.40 1.537080
Index 400 Stock #................. 1.125296 12.53 1.000000 N/A N/A
Growth Stock...................... 2.898070 22.00 2.375383 26.18 1.882500
Growth and Income Stock........... 2.431081 7.05 2.270962 22.64 1.851666
Index 500 Stock................... 3.127888 20.43 2.597374 28.21 2.025922
Balanced.......................... 2.117903 10.75 1.912247 18.40 1.615054
High Yield Bond................... 1.483036 -0.86 1.495835 -2.24 1.530051
Select Bond....................... 1.331215 -1.42 1.350384 6.64 1.266282
Money Market...................... 1.259407 4.68 1.203067 5.01 1.145720
Russell Multi-Style Equity #...... 1.073107 7.31 1.000000 N/A N/A
Russell Aggressive Equity #....... 1.106159 10.62 1.000000 N/A N/A
Russell Non-U.S. #................ 1.250059 25.01 1.000000 N/A N/A
Russell Real Estate Securities #.. 0.924920 -7.51 1.000000 N/A N/A
Russell Core Bond #............... 0.988747 -1.13 1.000000 N/A N/A
</TABLE>
- - - - - - - - - - - - - - - - - ------------------------
# Became an investment option under the Contracts effective April 30, 1999.
12
<PAGE> 14
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
FORM 10-K
ITEM 7. (continued)
Accumulation Unit Values
Contracts Issued On or After March 31, 1995 - Back Load Version:
<TABLE>
<CAPTION>
DIVISION 12/31/99 % CHANGE 12/31/98 % OF CHANGE 12/31/97
- - - - - - - - - - - - - - - - - -------- -------- -------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
Small Cap Growth Stock #.......... $1.845580 84.56% $1.000000 N/A N/A
Aggressive Growth Stock........... 5.407959 42.00 3.808330 6.22% $3.585281
International Equity.............. 2.297694 21.38 1.893030 3.52 1.828649
Index 400 Stock #................. 1.118909 11.89 1.000000 N/A N/A
Growth Stock...................... 3.012947 20.98 2.490522 25.12 1.990509
Growth and Income Stock........... 2.528256 6.15 2.381813 21.61 1.958555
Index 500 Stock................... 4.820195 19.41 4.036666 27.13 3.175298
Balanced.......................... 7.436406 9.82 6.771353 17.40 5.767570
High Yield Bond................... 1.519653 -1.69 1.545816 -3.06 1.594619
Select Bond....................... 6.928532 -2.25 7.088069 5.74 6.703164
Money Market...................... 2.523294 3.80 2.430915 4.12 2.334748
Russell Multi-Style Equity #...... 1.067018 6.70 1.000000 N/A N/A
Russell Aggressive Equity #....... 1.099895 9.99 1.000000 N/A N/A
Russell Non-U.S. #................ 1.242993 24.30 1.000000 N/A N/A
Russell Real Estate Securities #.. 0.919674 -8.03 1.000000 N/A N/A
Russell Core Bond #............... 0.983142 -1.69 1.000000 N/A N/A
</TABLE>
<TABLE>
<CAPTION>
Total Equity:
12/31/99 12/31/98 12/31/97
-------- -------- --------
<S> <C> <C>
$784,204,415 $725,633,499 $648,394,089
</TABLE>
The changes in Total Equity are largely derived from investment
activities within the Account: A $108,667,147 increase for the year
ended December 31, 1999, a $100,041,767 increase for the year ended
December 31, 1998, and a $105,703,026 increase for the year ended
December 31, 1997. Net contributions (surrenders) from Contract owners
amounted to ($50,096,231) for the year ended December 31, 1999,
($22,802,357) for the year ended December 31, 1998, and ($4,828,977)
for the year ended December 31, 1997.
ACCOUNT C
---------
Accumulation Unit Values
Contracts Issued Prior to December 17, 1981 or between April 30, 1984 and
December 31, 1991:
<TABLE>
<CAPTION>
DIVISION 12/31/99 % CHANGE 12/31/98 % OF CHANGE 12/31/97
- - - - - - - - - - - - - - - - - -------- -------- -------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
Small Cap Growth Stock #.......... $18.610781 86.11% $10.000000 N/A N/A
Aggressive Growth Stock........... 57.304251 43.78 39.854126 7.56% $37.054456
International Equity.............. 2.497127 22.90 2.031842 4.82 1.938399
Index 400 Stock #................. 11.283278 12.83 10.000000 N/A N/A
Growth Stock...................... 32.336967 22.49 26.398692 26.69 20.837268
Growth and Income Stock........... 27.134671 7.48 25.245888 23.14 20.502206
Index 500 Stock................... 56.249780 20.91 46.522428 28.72 36.141676
Balanced.......................... 94.505378 11.20 84.986573 18.88 71.490869
High Yield Bond................... 16.310402 -0.46 16.385350 -1.84 16.692972
Select Bond....................... 88.954059 -1.02 89.873176 7.07 83.938645
Money Market...................... 30.399653 5.10 28.923541 5.43 27.434762
Russell Multi-Style Equity #...... 10.760032 7.60 10.000000 N/A N/A
Russell Aggressive Equity #....... 11.091435 10.91 10.000000 N/A N/A
Russell Non-U.S. #................ 12.534266 25.34 10.000000 N/A N/A
Russell Real Estate Securities #.. 9.274172 -7.26 10.000000 N/A N/A
Russell Core Bond #............... 9.914196 -0.86 10.000000 N/A N/A
</TABLE>
- - - - - - - - - - - - - - - - - ------------------------
# Became an investment option under the Contracts effective April 30, 1999.
13
<PAGE> 15
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
FORM 10-K
ITEM 7. (continued)
Accumulation Unit Values
Contracts Issued After December 16, 1981 and Prior to May 1, 1984:
<TABLE>
<CAPTION>
DIVISION 12/31/99 % CHANGE 12/31/98 % OF CHANGE 12/31/97
- - - - - - - - - - - - - - - - - -------- -------- -------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
Small Cap Growth Stock #.......... $18.548596 85.49% $10.000000 N/A N/A
Aggressive Growth Stock........... 54.800923 43.07 38.303948 7.02% $35.791674
International Equity.............. 2.415234 22.29 1.975051 4.30 1.893664
Index 400 Stock #................. 11.245478 12.45 10.000000 N/A N/A
Growth Stock...................... 31.433960 21.88 25.790044 26.06 20.458788
Growth and Income Stock........... 26.376796 6.95 24.663747 22.52 20.129770
Index 500 Stock................... 53.786850 20.31 44.708227 28.08 34.906216
Balanced.......................... 86.395292 10.65 78.082648 18.29 66.012286
High Yield Bond................... 15.854730 -0.95 16.007423 -2.33 16.389706
Select Bond....................... 81.280078 -1.52 82.531570 6.54 77.468103
Money Market...................... 27.823703 4.58 26.605346 4.90 25.362364
Russell Multi-Style Equity #...... 10.723983 7.24 10.000000 N/A N/A
Russell Aggressive Equity #....... 11.054275 10.54 10.000000 N/A N/A
Russell Non-U.S. #................ 12.492336 24.92 10.000000 N/A N/A
Russell Real Estate Securities #.. 9.243071 -7.57 10.000000 N/A N/A
Russell Core Bond #............... 9.880973 -1.19 10.000000 N/A N/A
</TABLE>
Accumulation Unit Values
Contracts Issued After December 31, 1991 - Front Load Version:
<TABLE>
<CAPTION>
DIVISION 12/31/99 % CHANGE 12/31/98 % OF CHANGE 12/31/97
- - - - - - - - - - - - - - - - - -------- -------- -------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
Small Cap Growth Stock #.......... $1.853001 85.30% $1.000000 N/A N/A
Aggressive Growth Stock........... 3.588119 42.85 2.511728 6.86% $2.350498
International Equity.............. 2.391284 22.10 1.958397 4.14 1.880500
Index 400 Stock #................. 1.123423 12.34 1.000000 N/A N/A
Growth Stock...................... 3.116901 21.70 2.561090 25.87 2.034708
Growth and Income Stock........... 2.615436 6.79 2.449237 22.34 2.001981
Index 500 Stock................... 3.938401 20.13 3.278539 27.89 2.563560
Balanced.......................... 2.520233 10.48 2.281157 18.11 1.931409
High Yield Bond................... 1.572112 -1.10 1.589625 -2.48 1.630023
Select Bond....................... 1.558775 -1.66 1.585144 6.38 1.490112
Money Market...................... 1.366307 4.42 1.308441 4.74 1.249188
Russell Multi-Style Equity #...... 1.071323 7.13 1.000000 N/A N/A
Russell Aggressive Equity #....... 1.104316 10.43 1.000000 N/A N/A
Russell Non-U.S. #................ 1.247967 24.80 1.000000 N/A N/A
Russell Real Estate Securities #.. 0.923380 -7.66 1.000000 N/A N/A
Russell Core Bond #............... 0.987105 -1.29 1.000000 N/A N/A
</TABLE>
- - - - - - - - - - - - - - - - - ------------------------
# Became an investment option under the Contracts effective April 30, 1999.
14
<PAGE> 16
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
FORM 10-K
ITEM 7. (continued)
Accumulation Unit Values
Contracts Issued After December 31, 1991 - Simplified Load Version:
<TABLE>
<CAPTION>
DIVISION 12/31/99 % CHANGE 12/31/98 % OF CHANGE 12/31/97
- - - - - - - - - - - - - - - - - -------- -------- -------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
Small Cap Growth Stock #.......... $1.845580 84.56% $1.000000 N/A N/A
Aggressive Growth Stock........... 5.427804 42.00 3.822308 6.22% $3.598431
International Equity.............. 2.297694 21.38 1.893030 3.52 1.828649
Index 400 Stock #................. 1.118909 11.89 1.000000 N/A N/A
Growth Stock...................... 3.012947 20.98 2.490522 25.12 1.990509
Growth and Income Stock........... 2.528256 6.15 2.381813 21.61 1.958555
Index 500 Stock................... 4.918509 19.41 4.119000 27.13 3.240055
Balanced.......................... 7.473141 9.82 6.804809 17.40 5.796067
High Yield Bond................... 1.519653 -1.69 1.545816 -3.06 1.594619
Select Bond....................... 6.996057 -2.25 7.157135 5.74 6.768475
Money Market...................... 2.528768 3.80 2.436196 4.12 2.339812
Russell Multi-Style Equity #...... 1.067018 6.70 1.000000 N/A N/A
Russell Aggressive Equity #....... 1.099895 9.99 1.000000 N/A N/A
Russell Non-U.S. #................ 1.242993 24.30 1.000000 N/A N/A
Russell Real Estate Securities #.. 0.919674 -8.03 1.000000 N/A N/A
Russell Core Bond #............... 0.983142 -1.69 1.000000 N/A N/A
</TABLE>
- - - - - - - - - - - - - - - - - ------------------------
# Became an investment option under the Contracts effective April 30, 1999.
<TABLE>
<CAPTION>
Total Equity:
12/31/99 12/31/98 12/31/97
-------- -------- --------
<S> <C> <C> <C>
$720,716,274 $645,086,497 $547,988,523
</TABLE>
The changes in Total Equity are largely derived from investment
activities within the Account: A $118,331,523 increase for the year
ended December 31, 1999, a $90,196,632 increase for the year ended
December 31, 1998, and an $88,114,906 increase for the year ended
December 31, 1997. Net contributions (surrenders) from Contract owners
amounted to ($42,701,746) for the year ended December 31, 1999,
$6,901,342 for the year ended December 31, 1998, and $33,221,044 for
the year ended December 31, 1997.
Year 2000
Northwestern Mutual has experienced no significant operational effects
as a result of the Year 2000 transition. For the four years ended
December 31, 1999, Northwestern Mutual incurred approximately $33.9
million of expense to address all phases of the Year 2000 issue,
including $13.8 million for the year ended December 31, 1999.
15
<PAGE> 17
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
FORM 10-K
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The assets of Account A and Account C consist entirely of shares of
the 11 portfolios of the Series Fund and 5 portfolios of the Russell
Funds, together with current amounts due from the sale of Series Fund
and Russell Funds shares and due from Northwestern Mutual. The
liabilities of each of Account A and Account C consist of current
amounts due to Contract owners, due to Northwestern Mutual and due on
purchase of Series Fund and Russell Funds shares. Neither of the
Accounts enters into any market risk sensitive instruments, either for
trading purposes or for purposes other than trading purposes.
Derivative Financial Instruments
In the normal course of business, the Series Fund and the Russell
Funds enter into transactions to reduce their exposure to fluctuations
in interest rates, foreign currency exchange rates and market
volatility. These hedging strategies include the use of forwards and
futures.
The Series Fund and Russell Funds held the following positions for
hedging purposes at December 31, 1999 and 1998:
<TABLE>
<CAPTION>
SERIES FUND
-----------
UNREALIZED APPRECIATION
DERIVATIVE FINANCIAL INSTRUMENT NOTIONAL VALUE (DEPRECIATION) RISKS REDUCED
- - - - - - - - - - - - - - - - - ------------------------------- -------------- ----------------------- -------------
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
---- ---- ---- ----
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Stock Future Contracts $289,268 $279,931 $11,332 $16,186 Stock market price fluctuation
Bond Future Contracts 16,416 6,003 (25) (3) Bond market price fluctuation
<CAPTION>
RUSSELL FUNDS
-------------
UNREALIZED APPRECIATION
DERIVATIVE FINANCIAL INSTRUMENT NOTIONAL VALUE (DEPRECIATION) RISKS REDUCED
- - - - - - - - - - - - - - - - - ------------------------------- -------------- ----------------------- -------------
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
---- ---- ---- ----
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Stock Future Contracts $49,706 $9,099 $2,592 $342 Stock market price fluctuation
Bond Future Contracts 3,068 0 (10) 0 Bond market price fluctuation
Foreign Currency Forward Contracts 22,740 0 10 0 Currency exposure on foreign-
denominated investments
</TABLE>
The notional or contractual amounts of derivative financial instruments
are used to denominate these types of transactions and do not represent
the amounts exchanged between the parties. Stock and bond futures and
foreign currency forwards are reported at fair value on a daily basis.
Resulting gains and losses on these contracts are unrealized until
expiration of the contract. All of the stock and bond future and
foreign currency forward contracts of the Funds reflected above expire
in 2000. Changes in the value of derivative investments are expected to
offset gains and losses on the hedged investments. The effect of
derivative instruments in 1999 and 1998 was not material to the Funds'
results of operations.
16
<PAGE> 18
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
FORM 10-K
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
NML VARIABLE ANNUITY ACCOUNT A
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
DECEMBER 31
-----------
ASSETS 1999 1998
---- ----
<S> <C> <C>
Investments at market value:
Northwestern Mutual Series Fund, Inc.
Small Cap Growth Stock #
1999: 2,701,963 shares (cost $4,384,369)........................... $ 4,846,983 N/A
Aggressive Growth Stock
1999: 21,708,005 shares (cost $63,876,558)......................... 104,344,155
1998: 25,396,541 shares (cost $66,276,258)......................... $ 87,973,307
International Equity
1999: 25,519,106 shares (cost $39,067,307)......................... 45,439,022
1998: 26,830,324 shares (cost $38,805,844)......................... 44,994,454
Index 400 Stock #
1999: 1,981,567 shares (cost $2,050,979)........................... 2,204,952 N/A
Growth Stock
1999: 14,699,227 shares (cost $29,389,393)......................... 39,031,078
1998: 11,915,620 shares (cost $20,533,350)......................... 26,774,398
Growth and Income Stock
1999: 22,898,038 shares (cost $34,014,600)......................... 35,735,343
1998: 22,438,287 shares (cost $31,395,228)......................... 36,439,779
Index 500 Stock
1999: 43,710,778 shares (cost $89,440,254)......................... 169,861,157
1998: 43,592,413 shares (cost $75,957,867)......................... 143,375,448
Balanced
1999: 143,907,127 shares (cost $230,277,308)....................... 319,677,680
1998: 146,262,322 shares (cost $214,781,294)....................... 325,287,407
High Yield Bond
1999: 8,444,761 shares (cost $8,362,273)........................... 6,939,731
1998: 9,922,388 shares (cost $10,685,890).......................... 9,287,355
Select Bond
1999: 19,599,330 shares (cost $23,331,292)......................... 22,161,495
1998: 20,792,528 shares (cost $24,420,052)......................... 25,969,868
Money Market
1999: 28,967,243 shares (cost $28,967,243)......................... 28,975,194
1998: 26,910,773 shares (cost $26,910,773)......................... 26,910,774
Russell Insurance Funds
Multi Style Equity #
1999: 148,936 shares (cost $2,437,889)............................. 2,500,013 N/A
Aggressive Equity #....................................................
1999: 85,535 shares (cost $1,024,233).............................. 1,142,441 N/A
Non-U.S. #
1999: 97,503 shares (cost $1,228,520).............................. 1,383,194 N/A
Real Estate Securities #
1999: 37,690 shares (cost $341,826)................................ 331,977 N/A
Core Bond #
1999: 71,866 shares (cost $716,227)................................ 692,598 N/A
----------------- ----------------
785,267,017 727,012,790
Due from Sales of Fund Shares................................................... 1,329,077 1,407,778
Due from Northwestern Mutual Life Insurance Company............................. 1,011,681 22,304
----------------- ----------------
Total Assets........................................................... $ 787,607,771 $ 728,442,872
================= ================
LIABILITIES
Due to Participants....................................................... $ 1,062,598 $ 1,374,691
Due to Northwestern Mutual Life Insurance Company......................... 1,329,077 1,407,778
Due from Purchase of Fund Shares.......................................... 1,011,681 26,904
----------------- ----------------
Total Liabilities...................................................... $ 3,403,356 $ 2,809,373
================= ================
</TABLE>
- - - - - - - - - - - - - - - - - -------------------------------
#Fund commenced on April 30, 1999.
The Accompanying Notes are an Integral Part of the Financial Statements.
17
<PAGE> 19
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
FORM 10-K
ITEM 8. (continued)
NML VARIABLE ANNUITY ACCOUNT A
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
DECEMBER 31
-----------
1999 1998
---- ----
<S> <C> <C>
EQUITY
Contracts Issued Prior to December 17, 1981:
Small Cap Growth Stock Division
1999: 95,329 Accumulation Units @ 1.851783............................. $ 176,529
1998: N/A.............................................................. $ 0
Annuity Reserves....................................................... 0
----------------- ----------------
176,529 0
----------------- ----------------
Aggressive Growth Stock Division
1999: 370,787 Accumulation Units @ 5.658407............................ 2,098,068
1998: 479,410 Accumulation Units @ 3.964849............................ 1,900,789
Annuity Reserves....................................................... 76,413 63,360
----------------- ----------------
2,174,481 1,964,149
----------------- ----------------
International Equity Division
1999: 630,123 Accumulation Units @ 2.375600............................ 1,496,920
1998: 647,766 Accumulation Units @ 1.947470............................ 1,261,505
Annuity Reserves....................................................... 2,519 143,068
----------------- ----------------
1,499,439 1,404,573
----------------- ----------------
Index 400 Stock Division
1999: 167,651 Accumulation Units @ 1.122676............................ 188,218
1998: N/A.............................................................. 0
Annuity Reserves....................................................... 0
----------------- ----------------
188,218 0
----------------- ----------------
Growth Stock Division
1999: 372,659 Accumulation Units @ 3.099518............................ 1,155,064
1998: 247,490 Accumulation Units @ 2.549324............................ 630,934
Annuity Reserves....................................................... 0 0
----------------- ----------------
1,155,064 630,934
----------------- ----------------
Growth and Income Stock Division
1999: 254,027 Accumulation Units @ 2.600855............................ 660,688
1998: 310,014 Accumulation Units @ 2.437983............................ 755,809
Annuity Reserves....................................................... 140,620 0
----------------- ----------------
801,308 755,809
----------------- ----------------
Index 500 Stock Division
1999: 6,687,759 Accumulation Units @ 5.043329.......................... 33,728,572
1998: 7,343,356 Accumulation Units @ 4.202480.......................... 30,860,310
Annuity Reserves....................................................... 1,665,594 1,568,449
----------------- ----------------
35,394,166 32,428,759
----------------- ----------------
Balanced Division
1999: 2,738,126 Accumulation Units @ 8.136959.......................... 22,280,021
1998: 3,013,625 Accumulation Units @ 7.372322.......................... 22,217,418
Annuity Reserves....................................................... 2,394,530 2,367,898
----------------- ----------------
24,674,551 24,585,316
----------------- ----------------
High Yield Bond Division
1999: 77,269 Accumulation Units @ 1.563339............................. 120,798
1998: 183,181 Accumulation Units @ 1.582307............................ 289,848
Annuity Reserves....................................................... 0 0
----------------- ----------------
120,798 289,848
----------------- ----------------
Select Bond Division
1999: 715,024 Accumulation Units @ 7.582833............................ 5,421,908
1998: 899,838 Accumulation Units @ 7.718724............................ 6,945,608
Annuity Reserves....................................................... 76,035 102,541
----------------- ----------------
5,497,943 7,048,149
----------------- ----------------
Money Market Division
1999: 898,198 Accumulation Units @ 2.760791............................ 2,479,738
1998: 1,723,331 Accumulation Units @ 2.646458.......................... 4,560,725
Annuity Reserves....................................................... 50,728 53,415
----------------- ----------------
2,530,466 4,614,140
----------------- ----------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
18
<PAGE> 20
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
FORM 10-K
ITEM 8. (continued)
<TABLE>
<CAPTION>
DECEMBER 31
-----------
1999 1998
---- ----
<S> <C> <C>
Russell Multi-Style Equity
1999: 7,554 Accumulation Units @ 1.070614.............................. $ 8,088
1998: N/A.............................................................. $ 0
Annuity Reserves....................................................... 0
----------------- ----------------
8,088 0
----------------- ----------------
Russell Aggressive Equity
1999: 7,374 Accumulation Units @ 1.103591.............................. 8,138
1998: N/A.............................................................. 0
Annuity Reserves....................................................... 0
----------------- ----------------
8,138 0
----------------- ----------------
Russell Non-U.S.
1999: 12,237 Accumulation Units @ 1.247160............................. 15,261
1998: N/A.............................................................. 0
Annuity Reserves....................................................... 0
----------------- ----------------
15,261 0
----------------- ----------------
Russell Real Estate Securities
1999: 4,656 Accumulation Units @ .922768............................... 4,297
1998: N/A.............................................................. 0
Annuity Reserves....................................................... 0
----------------- ----------------
4,297 0
----------------- ----------------
Russell Core Bond
1999: 2,617 Accumulation Units @ .986452............................... 2,582
1998: N/A.............................................................. 0
Annuity Reserves....................................................... 0
----------------- ----------------
2,582 0
----------------- ----------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
19
<PAGE> 21
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
FORM 10-K
ITEM 8. (continued)
NML VARIABLE ANNUITY ACCOUNT A
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
DECEMBER 31
-----------
1999 1998
---- ----
<S> <C> <C>
Contracts Issued After December 16, 1981 and Prior to March 31, 1995:
Small Cap Growth Stock Division
1999: 1,898,627 Accumulation Units @ 1.845580.......................... $ 3,504,067
1998: N/A.............................................................. $ 0
Annuity Reserves....................................................... 0
----------------- ----------------
3,504,067 0
----------------- ----------------
Aggressive Growth Stock Division
1999: 14,666,263 Accumulation Units @ 5.407959......................... 79,314,551
1998: 18,213,134 Accumulation Units @ 3.808330......................... 69,361,627
Annuity Reserves....................................................... 223,649 144,879
----------------- ----------------
79,538,200 69,506,506
----------------- ----------------
International Equity Division
1999: 15,307,814 Accumulation Units @ 2.297694......................... 35,172,671
1998: 19,261,447 Accumulation Units @ 1.893030......................... 36,462,499
Annuity Reserves....................................................... 243,445 214,477
----------------- ----------------
35,416,116 36,676,976
----------------- ----------------
Index 400 Stock Division
1999: 1,241,398 Accumulation Units @ 1.118909.......................... 1,389,011
1998: N/A.............................................................. 0
Annuity Reserves....................................................... 0
----------------- ----------------
1,389,011 0
----------------- ----------------
Growth Stock Division
1999: 8,576,102 Accumulation Units @ 3.012947.......................... 25,839,341
1998: 7,215,893 Accumulation Units @ 2.490522.......................... 17,971,343
Annuity Reserves....................................................... 32,115 28,537
----------------- ----------------
25,871,456 17,999,880
----------------- ----------------
Growth and Income Stock Division
1999: 9,502,862 Accumulation Units @ 2.528256.......................... 24,025,667
1998: 10,866,892 Accumulation Units @ 2.381813......................... 25,882,906
Annuity Reserves:...................................................... 493,929 476,032
----------------- ----------------
24,519,596 26,358,938
----------------- ----------------
Index 500 Stock Division
1999: 20,900,522 Accumulation Units @ 4.820195......................... 100,744,593
1998: 21,467,930 Accumulation Units @ 4.036666......................... 86,658,865
Annuity Reserves....................................................... 3,343,256 2,980,558
----------------- ----------------
104,087,849 89,639,423
----------------- ----------------
Balanced Division
1999: 35,440,432 Accumulation Units @ 7.436406......................... 263,549,442
1998: 40,487,925 Accumulation Units @ 6.771353......................... 274,158,039
Annuity Reserves....................................................... 5,012,937 4,964,030
----------------- ----------------
268,562,379 279,122,069
----------------- ----------------
High Yield Bond Division
1999: 2,904,325 Accumulation Units @ 1.519653.......................... 4,413,566
1998: 3,974,655 Accumulation Units @ 1.545816.......................... 6,144,087
Annuity Reserves....................................................... 55,610 60,760
----------------- ----------------
4,469,176 6,204,847
----------------- ----------------
Select Bond Division
1999: 1,914,749 Accumulation Units @ 6.928532.......................... 13,266,399
1998: 2,171,878 Accumulation Units @ 7.088069.......................... 15,394,427
Annuity Reserves....................................................... 542,772 593,977
----------------- ----------------
13,809,171 15,988,404
----------------- ----------------
Money Market Division
1999: 7,329,873 Accumulation Units @ 2.523294.......................... 18,495,423
1998: 6,699,738 Accumulation Units @ 2.430915.......................... 16,286,495
Annuity Reserves....................................................... 549,855 444,677
----------------- ----------------
19,045,278 16,731,172
----------------- ----------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
20
<PAGE> 22
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
FORM 10-K
ITEM 8. (continued)
<TABLE>
<CAPTION>
DECEMBER 31
-----------
1999 1998
---- ----
<S> <C> <C>
Russell Multi-Style Equity
1999: 1,475,825 Accumulation Units @ 1.067018.......................... $ 1,574,732
1998: N/A.............................................................. $ 0
Annuity Reserves....................................................... 1,033
----------------- ----------------
1,575,765 0
----------------- ----------------
Russell Aggressive Equity
1999: 760,721 Accumulation Units @ 1.099895............................ 836,714
1998: N/A.............................................................. 0
Annuity Reserves....................................................... 0
----------------- ----------------
836,714 0
----------------- ----------------
Russell Non-U.S.
1999: 813,542 Accumulation Units @ 1.242993............................ 1,011,227
1998: N/A.............................................................. 0
Annuity Reserves....................................................... 0
----------------- ----------------
1,011,227 0
----------------- ----------------
Russell Real Estate Securities
1999: 248,726 Accumulation Units @ .919674............................. 228,747
1998: N/A.............................................................. 0
Annuity Reserves....................................................... 0
----------------- ----------------
228,747 0
----------------- ----------------
Russell Core Bond
1999: 580,967 Accumulation Units @ .983142............................. 571,173
1998: N/A.............................................................. 0
Annuity Reserves....................................................... 0
----------------- ----------------
571,173 0
----------------- ----------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
21
<PAGE> 23
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
FORM 10-K
ITEM 8. (continued)
NML VARIABLE ANNUITY ACCOUNT A
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
DECEMBER 31
-----------
1999 1998
---- ----
<S> <C> <C>
Contracts Issued On or After March 31, 1995 - Back Load Version:
Small Cap Growth Stock Division
1999: 481,140 Accumulation Units @ 1.845580............................ $ 887,982
1998: N/A.............................................................. $ 0
Annuity Reserves....................................................... 0
----------------- ----------------
887,982 0
----------------- ----------------
Aggressive Growth Stock Division
1999: 3,585,337 Accumulation Units @ 5.407959.......................... 19,389,354
1998: 3,703,652 Accumulation Units @ 3.808330 ......................... 14,104,732
Annuity Reserves....................................................... 36,119 27,177
----------------- ----------------
19,425,473 14,131,909
----------------- ----------------
International Equity Division
1999: 3,063,127 Accumulation Units @ 2.297694.......................... 7,038,129
1998: 3,028,502 Accumulation Units @ 1.893030.......................... 5,733,046
Annuity Reserves....................................................... 0 0
----------------- ----------------
7,038,129 5,733,046
----------------- ----------------
Index 400 Stock Division
1999: 388,194 Accumulation Units @ 1.118909............................ 434,353
1998: N/A.............................................................. 0
Annuity Reserves....................................................... 0
----------------- ----------------
434,353 0
----------------- ----------------
Growth Stock Division
1999: 3,381,484 Accumulation Units @ 3.012947.......................... 10,188,233
1998: 2,761,432 Accumulation Units @ 2.490522.......................... 6,877,407
Annuity Reserves....................................................... 35,756 31,578
----------------- ----------------
10,223,989 6,908,985
----------------- ----------------
Growth and Income Stock Division
1999: 3,306,924 Accumulation Units @ 2.528256.......................... 8,360,751
1998: 3,046,516 Accumulation Units @ 2.381813.......................... 7,256,233
Annuity Reserves....................................................... 58,015 30,040
----------------- ----------------
8,418,766 7,286,273
----------------- ----------------
Index 500 Stock Division
1999: 5,417,756 Accumulation Units @ 4.820195.......................... 26,114,640
1998: 4,504,321 Accumulation Units @ 4.036666.......................... 18,182,442
Annuity Reserves....................................................... 136,610 112,142
----------------- ----------------
26,251,250 18,294,584
----------------- ----------------
Balanced Division
1999: 2,897,246 Accumulation Units @ 7.436406.......................... 21,545,097
1998: 2,565,265 Accumulation Units @ 6.771353.......................... 17,370,319
Annuity Reserves....................................................... 265,687 257,473
----------------- ----------------
21,810,784 17,627,792
----------------- ----------------
High Yield Bond Division
1999: 1,174,446 Accumulation Units @ 1.519653.......................... 1,784,751
1998: 1,400,603 Accumulation Units @ 1.545816.......................... 2,165,075
Annuity Reserves....................................................... 0 0
----------------- ----------------
1,784,751 2,165,075
----------------- ----------------
Select Bond Division
1999: 364,139 Accumulation Units @ 6.928532............................ 2,522,952
1998: 368,314 Accumulation Units @ 7.088069............................ 2,610,636
Annuity Reserves....................................................... 26,834 0
----------------- ----------------
2,549,786 2,610,636
----------------- ----------------
Money Market Division
1999: 1,892,502 Accumulation Units @ 2.523294.......................... 4,775,339
1998: 1,515,127 Accumulation Units @ 2.430915.......................... 3,683,147
Annuity Reserves....................................................... 0 0
----------------- ----------------
4,775,339 3,683,147
----------------- ----------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
22
<PAGE> 24
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
FORM 10-K
ITEM 8. (continued)
<TABLE>
<CAPTION>
DECEMBER 31
-----------
1999 1998
---- ----
<S> <C> <C>
Russell Multi-Style Equity
1999: 535,268 Accumulation Units @ 1.067018............................ $ 571,141
1998: N/A.............................................................. $ 0
Annuity Reserves....................................................... 0
----------------- ----------------
571,141 0
----------------- ----------------
Russell Aggressive Equity
1999: 182,385 Accumulation Units @ 1.099895............................ 200,604
1998: N/A.............................................................. 0
Annuity Reserves....................................................... 0
----------------- ----------------
200,604 0
----------------- ----------------
Russell Non-U.S.
1999: 205,407 Accumulation Units @ 1.242993............................ 255,320
1998: N/A.............................................................. 0
Annuity Reserves....................................................... 0
----------------- ----------------
255,320 0
----------------- ----------------
Russell Real Estate Securities
1999: 88,176 Accumulation Units @ .919674.............................. 81,093
1998: N/A.............................................................. 0
Annuity Reserves....................................................... 0
----------------- ----------------
81,093 0
----------------- ----------------
Russell Core Bond
1999: 93,910 Accumulation Units @ .983142.............................. 92,326
1998: N/A.............................................................. 0
Annuity Reserves....................................................... 0
----------------- ----------------
92,326 0
----------------- ----------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
23
<PAGE> 25
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
FORM 10-K
ITEM 8. (continued)
NML VARIABLE ANNUITY ACCOUNT A
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
DECEMBER 31
-----------------------
1999 1998
---- ----
<S> <C> <C>
Contracts Issued On or After March 31, 1995 - Front Load Version:
Small Cap Growth Stock Division
1999: 149,996 Accumulation Units @ 1.856086............................ $ 278,405
1998: N/A.............................................................. $ 0
Annuity Reserves....................................................... 0
----------------- ----------------
278,405 0
----------------- ----------------
Aggressive Growth Stock Division
1999: 1,185,824 Accumulation Units @ 2.661899.......................... 3,156,543
1998: 1,195,051 Accumulation Units @ 1.858751.......................... 2,221,302
Annuity Reserves....................................................... 74,685 55,688
----------------- ----------------
3,231,228 2,276,990
----------------- ----------------
International Equity Division
1999: 727,940 Accumulation Units @ 1.964300............................ 1,429,893
1998: 669,024 Accumulation Units @ 1.604722............................ 1,073,598
Annuity Reserves....................................................... 27,130 23,666
----------------- ----------------
1,457,023 1,097,264
----------------- ----------------
Index 400 Stock Division
1999: 162,971 Accumulation Units @ 1.125296............................ 183,391
1998: N/A.............................................................. 0
Annuity Reserves....................................................... 0
----------------- ----------------
183,391 0
----------------- ----------------
Growth Stock Division
1999: 613,097 Accumulation Units @ 2.898070............................ 1,776,797
1998: 447,934 Accumulation Units @ 2.375383............................ 1,064,015
Annuity Reserves....................................................... 0 0
----------------- ----------------
1,776,797 1,064,015
----------------- ----------------
Growth and Income Stock Division
1999: 757,434 Accumulation Units @ 2.431081............................ 1,841,384
1998: 736,836 Accumulation Units @ 2.270962............................ 1,673,327
Annuity Reserves....................................................... 154,290 153,898
----------------- ----------------
1,995,674 1,827,225
----------------- ----------------
Index 500 Stock Division
1999: 1,247,611 Accumulation Units @ 3.127888.......................... 3,902,386
1998: 1,057,935 Accumulation Units @ 2.597374.......................... 2,747,852
Annuity Reserves....................................................... 73,446 65,122
----------------- ----------------
3,975,832 2,812,974
----------------- ----------------
Balanced Division
1999: 1,800,477 Accumulation Units @ 2.117903.......................... 3,813,235
1998: 1,768,956 Accumulation Units @ 1.912247.......................... 3,382,680
Annuity Reserves....................................................... 72,136 84,632
----------------- ----------------
3,885,371 3,467,312
----------------- ----------------
High Yield Bond Division
1999: 380,690 Accumulation Units @ 1.483036............................ 564,577
1998: 400,132 Accumulation Units @ 1.495835............................ 598,531
Annuity Reserves....................................................... 0 0
----------------- ----------------
564,577 598,531
----------------- ----------------
Select Bond Division
1999: 214,565 Accumulation Units @ 1.331215............................ 285,633
1998: 159,609 Accumulation Units @ 1.350384............................ 215,534
Annuity Reserves....................................................... 0 0
----------------- ----------------
285,633 215,534
----------------- ----------------
Money Market Division
1999: 1,980,615 Accumulation Units @ 1.259407.......................... 2,494,401
1998: 1,564,597 Accumulation Units @ 1.203067.......................... 1,882,315
Annuity Reserves....................................................... 0 0
----------------- ----------------
2,494,401 1,882,315
----------------- ----------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
24
<PAGE> 26
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
FORM 10-K
ITEM 8. (continued)
<TABLE>
<CAPTION>
DECEMBER 31
-----------
1999 1998
---- ----
<S> <C> <C>
Russell Multi-Style Equity
1999: 321,514 Accumulation Units @ 1.073107............................ $ 345,019
1998: N/A.............................................................. $ 0
Annuity Reserves....................................................... 0
----------------- ----------------
345,019 0
----------------- ----------------
Russell Aggressive Equity
1999: 87,678 Accumulation Units @ 1.106159............................. 96,984
1998: N/A.............................................................. 0
Annuity Reserves....................................................... 0
----------------- ----------------
96,984 0
----------------- ----------------
Russell Non-U.S.
1999: 81,105 Accumulation Units @ 1.250059............................. 101,385
1998: N/A.............................................................. 0
Annuity Reserves....................................................... 0
----------------- ----------------
101,385 0
----------------- ----------------
Russell Real Estate Securities
1999: 19,288 Accumulation Units @ .924920.............................. 17,840
1998: N/A.............................................................. 0
Annuity Reserves....................................................... 0
----------------- ----------------
17,840 0
----------------- ----------------
Russell Core Bond
1999: 26,817 Accumulation Units @ .988747.............................. 26,515
1998: N/A.............................................................. 0
Annuity Reserves....................................................... 0
----------------- ----------------
26,515 0
----------------- ----------------
Total Equity........................................................... $ 784,204,415 $ 725,633,499
----------------- ----------------
Total Liabilities and Equity........................................... $ 787,607,771 $ 728,442,872
================= ================
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
25
<PAGE> 27
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
FORM 10-K
ITEM 8. (continued)
NML VARIABLE ANNUITY ACCOUNT A
COMBINED STATEMENT OF OPERATIONS AND CHANGES IN EQUITY
FOR THE YEARS ENDED DECEMBER 31
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Investment Income
Dividend Income.............................................. $ 56,819,783 $ 34,233,423 $ 33,252,128
Annuity Rate and Expense Guarantees.......................... 8,723,746 8,068,865 7,048,888
---------------- ---------------- ---------------
Net Investment Income........................................ 48,096,037 26,164,558 26,203,240
---------------- ---------------- ---------------
Realized and Unrealized Gain on Investments
Realized Gain on Investments................................. 51,300,014 37,627,804 23,135,675
Unrealized Appreciation During the Year...................... 9,271,096 36,249,405 56,364,111
---------------- ---------------- ---------------
Net Gain on Investments...................................... 60,571,110 73,877,209 79,499,786
---------------- ---------------- ---------------
Increase in Equity Derived from Investment Activity............. 108,667,147 100,041,767 105,703,026
---------------- ---------------- ---------------
Equity Transactions
Contract Owners' Net Payments................................ 55,484,960 62,320,941 61,964,558
Annuity Payments............................................. (1,467,552) (1,305,331) (1,046,956
Surrenders and Other (Net)................................... (104,113,639) (83,817,967) (65,746,579)
---------------- ---------------- ---------------
(Decrease) in Equity Derived from Equity
Transactions................................................. (50,096,231) (22,802,357) (4,828,977)
---------------- ---------------- ---------------
Net Increase in Equity.......................................... 58,570,916 77,239,410 100,874,049
Equity, Beginning of Year....................................... 725,633,499 648,394,089 547,520,040
---------------- ---------------- ---------------
Equity, End of Year............................................. $ 784,204,415 $ 725,633,499 $ 648,394,089
================ ================ ===============
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
26
<PAGE> 28
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
FORM 10-K
ITEM 8. (continued)
NML VARIABLE ANNUITY ACCOUNT A
NOTES TO FINANCIAL STATEMENTS
Note 1--NML Variable Annuity Account A (the "Account") is a segregated asset
account of The Northwestern Mutual Life Insurance Company ("Northwestern Mutual
Life") used to fund variable annuity contracts ("contracts") for HR-10 and
corporate pension and profit-sharing plans which qualify for special tax
treatment under the Internal Revenue Code. Beginning March 31, 1995, two
versions of the contract are offered: Front Load contracts with a sales charge
up to 4% of purchase payments and Back Load contracts with a withdrawal charge
of 0-8%.
Note 2--The preparation of the financial statements in conformity with generally
accepted accounting principles 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 revenues and expenses during the
reporting period. Actual results could differ from those estimates. Principal
accounting policies are summarized below.
Note 3--All assets of each Division of the Account are invested in shares of the
corresponding Portfolio of Northwestern Mutual Series Fund, Inc. and the Russell
Insurance Funds (the "Funds"). The shares are valued at the Funds' offering and
redemption price per share.
On May 3, 1994, five new portfolios commenced operations in the Fund: Aggressive
Growth Stock Portfolio, International Equity Portfolio, Growth Stock Portfolio,
Growth and Income Stock Portfolio and High Yield Bond Portfolio. Additionally,
on May 3, 1994, the assets of Northwestern Mutual Life's Variable Annuity funds
were merged into the respective portfolio of the Fund in a tax-free exchange of
shares.
On April 30, 1999, seven new portfolios commenced operations in the Funds: Small
Cap Growth Stock Portfolio, Index 400 Stock Portfolio, Russell Multi-Style
Equity Portfolio, Russell Aggressive Equity Portfolio, Russell Non-U.S.
Portfolio, Russell Real Estate Securities Portfolio, and Russell Core Bond
Portfolio.
The Funds are open-end investment companies registered under the Investment
Company Act of 1940.
Note 4--Annuity reserves are based on published annuity tables with age
adjustment and benefit payments which reflect actual investment experience. For
variable payment plans issued prior to January 1, 1974, annuity reserves are
based on the 1955 American Annuity Table with assumed interest rates of 3%,
3-1/2% or 5%. For variable payment plans issued on or after January 1, 1974 and
before January 1, 1985, annuity reserves are based on the 1971 Individual
Annuity Table with assumed interest rates of 3-1/2% or 5%. For variable payment
plans issued on or after January 1, 1985, annuity reserves are based on the 1983
Table with assumed interest rates of 3-1/2% or 5%.
Note 5--Dividend income from the Funds is recorded on the record date of the
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.
Purchases and sales of the Funds shares for the years ended December 31 by each
Division are shown below:
<TABLE>
<CAPTION>
PURCHASES 1999 1998 1997
- - - - - - - - - - - - - - - - - --------- ---- ---- ----
<S> <C> <C> <C>
Small Cap Growth Stock Division...................... $ 7,208,705 $ N/A $ N/A
Aggressive Growth Division........................... 9,958,208 10,360,035 13,774,024
International Equity Division........................ 7,974,310 6,698,885 9,401,229
Index 400 Stock Division............................. 2,853,810 N/A N/A
Growth Stock Division................................ 11,793,727 9,097,053 6,679,256
Growth & Income Stock Division....................... 9,919,814 10,667,937 13,074,930
Index 500 Stock Division............................. 20,410,794 18,355,852 14,059,126
Balanced Division.................................... 44,419,512 28,049,864 21,076,301
High Yield Bond Division............................. 2,095,955 5,801,403 5,687,823
Select Bond Division................................. 4,931,954 5,372,185 4,506,469
Money Market Division................................ 20,905,226 24,597,925 13,132,202
Russell Multi-Style Division......................... 2,666,402 N/A N/A
Russell Aggressive Equity Division................... 1,593,605 N/A N/A
Russell Non-U.S. Division............................ 1,498,221 N/A N/A
Russell Real Estate Securities Division.............. 357,723 N/A N/A
Russell Core Bond Division........................... 758,431 N/A N/A
</TABLE>
27
<PAGE> 29
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
FORM 10-K
<TABLE>
<CAPTION>
ITEM 8. (continued)
SALES 1999 1998 1997
- - - - - - - - - - - - - - - - - ----- ---- ---- ----
<S> <C> <C> <C>
Small Cap Growth Stock Division...................... $ 3,374,541 $ N/A $ N/A
Aggressive Growth Division........................... 22,717,778 14,639,276 8,367,827
International Equity Division........................ 10,228,782 11,198,223 4,431,627
Index 400 Stock Division............................. 821,170 N/A N/A
Growth Stock Division................................ 5,237,895 4,198,359 1,576,559
Growth & Income Stock Division....................... 9,006,288 3,780,324 2,076,927
Index 500 Stock Division............................. 20,135,029 13,607,476 8,104,812
Balanced Division.................................... 50,211,717 40,333,474 32,274,893
High Yield Bond Division............................. 3,579,846 4,113,088 1,516,721
Select Bond Division................................. 6,390,659 4,608,524 6,636,325
Money Market Division................................ 18,848,756 19,273,286 14,926,292
Russell Multi-Style Division......................... 225,476 N/A N/A
Russell Aggressive Equity Division................... 535,192 N/A N/A
Russell Non-U.S. Division............................ 279,802 N/A N/A
Russell Real Estate Securities Division.............. 13,625 N/A N/A
Russell Core Bond Division........................... 41,756 N/A N/A
</TABLE>
Note 6--On April 30, 1993, Northwestern Mutual Capital Appreciation Stock Fund
was merged into the Northwestern Mutual Index 500 Stock Fund in a tax-free
exchange of fund shares. 21,689,286 shares of Northwestern Mutual Capital
Appreciation Stock Fund, Inc. were exchanged for 22,749,651 shares of
Northwestern Mutual Index 500 Stock Fund, Inc. The shares exchanged were valued
at $30,719,638 for each Division.
Note 7--A deduction for annuity rate and expense guarantees is determined daily
and paid to Northwestern Mutual Life 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 Life may be insufficient to cover the actual costs
incurred in connection with the contracts.
For contracts issued on or after March 31, 1995, for the Front Load version and
the Back Load version, the deduction for annuity rate and expense guarantees is
determined daily at annual rates of 4/10 of 1% and a 1-1/4%, respectively, of
the net assets of each Division attributable to these contracts and is paid to
Northwestern Mutual Life. For these contracts, the rates may be increased or
decreased by the Board of Trustees of Northwestern Mutual Life not to exceed 3/4
of 1% and 1-1/2%, respectively.
For contracts issued after December 16, 1981 and prior to March 31, 1995, the
deduction is at an annual rate of 1-1/4% of the net assets of each Division
attributable to these contracts. For these contracts, the rate may be increased
or decreased by the Board of Trustees of Northwestern Mutual Life not to exceed
a 1-1/2% annual rate.
For contracts issued prior to December 17, 1981, the deduction is at an annual
rate of 3/4 of 1% of the net assets of each Division attributable to these
contracts. For these contracts, the rate may be increased or decreased by the
Board of Trustees of Northwestern Mutual Life not to exceed a 1% annual rate.
Since 1995, Northwestern Mutual has paid a dividend to certain contracts. The
dividend is reinvested in the Account and has been reflected as a Contract
Owners' Net Payment in the accompanying financial statements.
Note 8--Northwestern Mutual is taxed as a "life insurance company" under the
Internal Revenue Code and the operations of the Account form a part of and are
taxed with those of Northwestern Mutual. Under current law, no federal income
taxes are payable with respect to the Account. Accordingly, no provision for any
such liability has been made.
28
<PAGE> 30
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
FORM 10-K
Report of Independent Accountants
To The Northwestern Mutual Life Insurance Company and
Contract Owners of NML Variable Annuity Account A
In our opinion, the statements appearing on pages 17 through 28 present fairly,
in all material respects, the financial position of NML Variable Annuity Account
A at December 31, 1999 and 1998, and the results of its operations and the
changes in its equity for each of the three years in the period ended December
31, 1999, in conformity with accounting principles generally accepted in the
United States. These financial statements are the responsibility of The
Northwestern Mutual Life Insurance Company's management; our responsibility is
to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with auditing
standards generally accepted in the United States which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/ PRICEWATERHOUSECOOPERS LLP
Milwaukee, Wisconsin
January 27, 2000
29
<PAGE> 31
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
FORM 10-K
ITEM 8. (continued)
NML VARIABLE ANNUITY ACCOUNT C
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
DECEMBER 31
-----------------------
ASSETS 1999 1998
---- ----
<S> <C> <C>
Investments at Market Value:
Northwestern Mutual Series Fund, Inc.
Small Cap Growth Stock #
1999: 529,175 shares (cost $746,064)............................... $ 949,166 N/A
Aggressive Growth Stock
1999: 29,072,234 shares (cost $89,365,021)......................... 139,738,783
1998: 32,435,113 shares (cost $90,546,838)......................... $ 112,355,230
International Equity
1999: 36,249,699 shares (cost $57,059,536)......................... 64,556,193
1998: 35,339,851 shares (cost $52,600,652)......................... 59,264,930
Index 400 Stock #
1999: 425,398 shares (cost $442,230)............................... 473,356 N/A
Growth Stock
1999: 14,976,894 shares (cost $30,335,095)......................... 39,775,147
1998: 12,380,682 shares (cost $21,943,825)......................... 27,819,393
Growth and Income Stock
1999: 26,336,018 shares (cost $39,527,301)......................... 41,105,386
1998: 24,848,484 shares (cost $35,764,080)......................... 40,353,938
Index 500 Stock
1999: 56,622,314 shares (cost $120,506,073)........................ 220,074,926
1998: 55,739,165 shares (cost $103,423,250)........................ 183,326,114
Balanced
1999: 75,364,260 shares (cost $128,710,511)........................ 167,443,550
1998: 77,775,095 shares (cost $122,950,926)........................ 172,971,811
High Yield Bond
1999: 7,762,704 shares (cost $7,872,845)........................... 6,380,157
1998: 9,200,196 shares (cost $10,065,238).......................... 8,611,383
Select Bond
1999: 15,507,986 shares (cost $18,559,097)......................... 17,537,190
1998: 16,617,246 shares (cost $19,964,276)......................... 20,754,940
Money Market
1999: 19,345,920 shares (cost $19,345,920)......................... 19,341,129
1998: 19,628,758 shares (cost $19,628,758)......................... 19,628,758
Russell Insurance Funds
Multi-Style Equity #
1999: 101,611 shares (cost $1,641,897)............................. 1,705,658 N/A
Aggressive Equity #
1999: 26,321 shares (cost $325,516)................................ 351,582 N/A
Non-U.S. #
1999: 39,836 shares (cost $492,817)................................ 565,156 N/A
Real Estate #
1999: 11,601 shares (cost $108,462)................................ 102,203 N/A
Core Bond #
1999: 39,849 shares (cost $398,722)................................ 384,069 N/A
----------------- ----------------
720,483,652 645,086,497
Due from Sales of Fund Shares................................................... 798,688 495,042
Due from Northwestern Mutual Life Insurance Company............................. 395,300 355,553
Due from Participants........................................................... 232,623 0
----------------- ----------------
Total Assets....................................................... $ 721,910,262 $ 645,937,092
================= ================
LIABILITIES
Due to Northwestern Mutual Life Insurance Company......................... $ 798,688 $ 495,042
Due from Purchase of Fund Shares.......................................... 395,300 355,553
----------------- ----------------
Total Liabilities.................................................. $ 1,193,988 $ 850,595
================= ================
</TABLE>
- - - - - - - - - - - - - - - - - ------------------------------
# Fund commenced on April 30, 1999.
The Accompanying Notes are an Integral Part of the Financial Statements.
30
<PAGE> 32
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
FORM 10-K
ITEM 8. (continued)
NML VARIABLE ANNUITY ACCOUNT C
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
DECEMBER 31
-----------------------
EQUITY 1999 1998
---- ----
<S> <C> <C>
Contracts Issued Before December 17, 1981 or Between April 30, 1984 and December
31, 1991:
Small Cap Growth Stock Division
1999: 7,543 Accumulation Units @ 18.610781............................. $ 140,375
1998: N/A.............................................................. $ 0
Aggressive Growth Stock Division
1999: 1,627,058 Accumulation Units @ 57.304251......................... 93,237,331
1998: 1,801,179 Accumulation Units @ 39.854126......................... 71,784,423
International Equity Division
1999: 18,571,580 Accumulation Units @ 2.497127......................... 46,375,593
1998: 20,139,789 Accumulation Units @ 2.031842......................... 40,920,871
Index 400 Stock Division
1999: 1,071 Accumulation Units @ 11.283278............................. 12,082
1998: N/A.............................................................. 0
Growth Stock Division
1999: 792,443 Accumulation Units @ 32.336967........................... 25,625,190
1998: 651,555 Accumulation Units @ 26.398692........................... 17,200,222
Growth and Income Stock Division
1999: 798,290 Accumulation Units @ 27.134671........................... 21,661,354
1998: 801,963 Accumulation Units @ 25.245888........................... 20,246,304
Index 500 Stock Division
1999: 2,756,358 Accumulation Units @ 56.249780......................... 155,044,524
1998: 2,699,180 Accumulation Units @ 46.522428......................... 125,572,411
Balanced Division
1999: 1,066,999 Accumulation Units @ 94.505378......................... 100,837,077
1998: 1,211,838 Accumulation Units @ 84.986573......................... 102,989,851
High Yield Bond Division
1999: 205,407 Accumulation Units @ 16.310402........................... 3,350,268
1998: 301,661 Accumulation Units @ 16.385350........................... 4,942,825
Select Bond Division
1999: 72,427 Accumulation Units @ 88.954059............................ 6,442,736
1998: 84,033 Accumulation Units @ 89.873176............................ 7,552,345
Money Market Division
1999: 7,939 Accumulation Units @ 30.399653............................. 241,341
1998: 45,208 Accumulation Units @ 28.923541............................ 1,307,598
Russell Multi-Style Equity
1999: 17,246 Accumulation Units @ 10.760032............................ 185,568
1998: N/A.............................................................. 0
Russell Aggressive Equity
1999: 950 Accumulation Units @ 11.091435............................... 10,539
1998: N/A.............................................................. 0
Russell Non-U.S.
1999: 0 Accumulation Units @ 12.534266................................. 0
1998: N/A.............................................................. 0
Russell Real Estate Securities
1999: 3,723 Accumulation Units @ 9.274172.............................. 34,529
1998: N/A.............................................................. 0
Russell Core Bond
1999: 0 Accumulation Units @ 9.914196.................................. 0
1998: N/A.............................................................. 0
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
31
<PAGE> 33
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
FORM 10-K
ITEM 8. (continued)
NML VARIABLE ANNUITY ACCOUNT C
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
DECEMBER 31
1999 1998
---- ----
<S> <C> <C>
Contracts Issued After December 16, 1981 and Prior to May 1, 1984:
Small Cap Growth Stock Division
1999: 420 Accumulation Units @ 18.548596............................... $ 7,795
1998: N/A.............................................................. $ 0
Annuity Reserves....................................................... 0
----------------- ----------------
7,795 0
----------------- ----------------
Aggressive Growth Stock Division
1999: 1,438 Accumulation Units @ 54.800923............................. 78,796
1998: 1,469 Accumulation Units @ 38.303948............................. 56,266
Annuity Reserves....................................................... 53,746 33,440
----------------- ----------------
132,542 89,706
----------------- ----------------
International Equity Division
1999: 24,296 Accumulation Units @ 2.415234............................. 58,680
1998: 119,120 Accumulation Units @ 1.975051............................ 235,268
Annuity Reserves....................................................... 25,861 16,925
----------------- ----------------
84,541 252,193
----------------- ----------------
Index 400 Stock Division
1999: 0 Accumulation Units @ 11.245478................................. 0
1998: N/A.............................................................. 0
Annuity Reserves................................................... 0
----------------- ----------------
0 0
----------------- ----------------
Growth Stock Division
1999: 137 Accumulation Units @ 31.433960............................... 4,310
1998: 137 Accumulation Units @ 25.790044............................... 3,536
Annuity Reserves....................................................... 54,469 48,049
----------------- ----------------
58,779 51,585
----------------- ----------------
Growth and Income Stock Division
1999: 1,381 Accumulation Units @ 26.376796............................. 36,430
1998: 4,298 Accumulation Units @ 24.663747............................. 105,994
Annuity Reserves....................................................... 0 0
----------------- ----------------
36,430 105,994
----------------- ----------------
Index 500 Stock Division
1999: 8,293 Accumulation Units @ 53.786850............................. 446,068
1998: 13,564 Accumulation Units @ 44.708227............................ 606,427
Annuity Reserves....................................................... 63,516 51,080
----------------- ----------------
509,584 657,507
----------------- ----------------
Balanced Division
1999: 37,494 Accumulation Units @ 86.395292............................ 3,239,303
1998: 80,125 Accumulation Units @ 78.082648............................ 6,256,421
Annuity Reserves....................................................... 558,169 539,064
----------------- ----------------
3,797,472 6,795,485
----------------- ----------------
High Yield Division
1999: 214 Accumulation Units @ 15.854730............................... 3,398
1998: 157 Accumulation Units @ 16.007423............................... 3,536
Annuity Reserves....................................................... 16,961 0
----------------- ----------------
20,359 3,536
----------------- ----------------
Select Bond Division
1999: 456 Accumulation Units @ 81.280078............................... 37,103
1998: 480 Accumulation Units @ 82.531570............................... 39,623
Annuity Reserves....................................................... 53,213 40,052
----------------- ----------------
90,316 79,675
----------------- ----------------
Money Market Division
1999: 0 Accumulation Units @ 27.823703................................. 0
1998: 946 Accumulation Units @ 26.605346............................... 25,162
Annuity Reserves....................................................... 228,793 7,371
----------------- ----------------
228,793 32,533
----------------- ----------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
32
<PAGE> 34
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
FORM 10-K
ITEM 8. (continued)
<TABLE>
<CAPTION>
DECEMBER 31
1999 1998
---- ----
<S> <C> <C>
Russell Multi-Style Equity
1999: 0 Accumulation Units @ 10.723983................................. 0
1998: N/A.............................................................. 0
Annuity Reserves....................................................... 0
----------------- ----------------
0 0
----------------- ----------------
Russell Aggressive Equity
1999: 0 Accumulation Units @ 11.054275................................. 0
1998: N/A.............................................................. 0
Annuity Reserves....................................................... 0
----------------- ----------------
0 0
----------------- ----------------
Russell Non-U.S.
1999: 480 Accumulation Units @ 12.492336............................... 6,007
1998: N/A.............................................................. 0
Annuity Reserves....................................................... 0
----------------- ----------------
6,007 0
----------------- ----------------
Russell Real Estate Securities
1999: 0 Accumulation Units @ 9.243071.................................. 0
1998: N/A.............................................................. 0
Annuity Reserves....................................................... 0
----------------- ----------------
0 0
----------------- ----------------
Russell Core Bond
1999: 0 Accumulation Units @ 9.880973.................................. 0
1998: N/A.............................................................. 0
Annuity Reserves....................................................... 0
----------------- ----------------
0 0
----------------- ----------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
33
<PAGE> 35
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
FORM 10-K
ITEM 8. (continued)
NML VARIABLE ANNUITY ACCOUNT C
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
DECEMBER 31
1999 1998
---- ----
<S> <C> <C>
Contracts Issued After December 31, 1991 - Front Load Version:
Small Cap Growth Stock Division
1999: 73,643 Accumulation Units @ 1.853001............................. $ 136,461
1998: N/A.............................................................. $ 0
Aggressive Growth Stock Division
1999: 2,776,961 Accumulation Units @ 3.588119.......................... 9,964,067
1998: 2,921,308 Accumulation Units @ 2.511728.......................... 7,337,533
International Equity Division
1999: 2,301,771 Accumulation Units @ 2.391284.......................... 5,504,188
1998: 2,807,888 Accumulation Units @ 1.958397.......................... 5,498,960
Index 400 Stock Division
1999: 13,563 Accumulation Units @ 1.123423............................. 15,237
1998: N/A.............................................................. 0
Growth Stock Division
1999: 995,796 Accumulation Units @ 3.116901............................ 3,103,799
1998: 845,190 Accumulation Units @ 2.561090............................ 2,164,608
Growth and Income Stock Division
1999: 1,704,699 Accumulation Units @ 2.615436.......................... 4,458,532
1998: 2,452,149 Accumulation Units @ 2.449237.......................... 6,005,593
Index 500 Stock Division
1999: 4,131,824 Accumulation Units @ 3.938401.......................... 16,272,782
1998: 4,231,423 Accumulation Units @ 3.278539.......................... 13,872,886
Balanced Division
1999: 6,183,051 Accumulation Units @ 2.520233.......................... 15,582,729
1998: 6,324,559 Accumulation Units @ 2.281157.......................... 14,427,311
High Yield Bond Division
1999: 409,857 Accumulation Units @ 1.572112............................ 644,342
1998: 441,272 Accumulation Units @ 1.589625............................ 701,458
Select Bond Division
1999: 2,264,883 Accumulation Units @ 1.558775.......................... 3,530,442
1998: 2,718,375 Accumulation Units @ 1.585144.......................... 4,309,016
Money Market Division
1999: 1,879,181 Accumulation Units @ 1.366307.......................... 2,567,539
1998: 1,905,815 Accumulation Units @ 1.308441.......................... 2,493,647
Russell Multi-Style Equity
1999: 297,016 Accumulation Units @ 1.071323............................ 318,200
1998: N/A.............................................................. 0
Russell Aggressive Equity
1999: 79,144 Accumulation Units @ 1.04316.............................. 87,400
1998: N/A.............................................................. 0
Russell Non-U.S.
1999: 151,721 Accumulation Units @ 1.247967............................ 189,343
1998: N/A.............................................................. 0
Russell Real Estate Securities
1999: 36,624 Accumulation Units @ .923380.............................. 33,818
1998: N/A.............................................................. 0
Russell Core Bond
1999: 239,265 Accumulation Units @ .987105............................. 236,180
1998: N/A.............................................................. 0
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
34
<PAGE> 36
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
FORM 10-K
ITEM 8. (continued)
NML VARIABLE ANNUITY ACCOUNT C
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
DECEMBER 31
1999 1998
---- ----
<S> <C> <C>
Contracts Issued After December 31, 1991 - Simplified Load Version:
Small Cap Growth Stock Division
1999: 360,069 Accumulation Units @ 1.845580............................ $ 664,535
1998: N/A.............................................................. $ 0
Aggressive Growth Stock Division
1999: 6,707,103 Accumulation Units @ 5.427804.......................... 36,404,843
1998: 8,671,088 Accumulation Units @ 3.822308.......................... 33,143,567
International Equity Division
1999: 5,480,221 Accumulation Units @ 2.297694.......................... 12,591,871
1998: 6,652,248 Accumulation Units @ 1.893030.......................... 12,592,906
Index 400 Stock Division
1999: 398,635 Accumulation Units @ 1.118909............................ 446,037
1998: N/A.............................................................. 0
Growth Stock Division
1999: 3,646,722 Accumulation Units @ 3.012947.......................... 10,987,379
1998: 3,373,983 Accumulation Units @ 2.490522.......................... 8,402,978
Growth and Income Stock Division
1999: 5,912,799 Accumulation Units @ 2.528256.......................... 14,949,070
1998: 5,876,089 Accumulation Units @ 2.381813.......................... 13,995,745
Index 500 Stock Division
1999: 9,809,484 Accumulation Units @ 4.918509.......................... 48,248,037
1998: 10,493,642 Accumulation Units @ 4.119000......................... 43,223,310
Balanced Division
1999: 6,319,468 Accumulation Units @ 7.473141.......................... 47,226,272
1998: 7,165,398 Accumulation Units @ 6.804809.......................... 48,759,164
High Yield Bond Division
1999: 1,556,400 Accumulation Units @ 1.519653.......................... 2,365,187
1998: 1,917,813 Accumulation Units @ 1.545816.......................... 2,964,586
Select Bond Division
1999: 1,068,272 Accumulation Units @ 6.996057.......................... 7,473,695
1998: 1,231,485 Accumulation Units @ 7.157135.......................... 8,813,904
Money Market Division
1999: 6,539,184 Accumulation Units @ 2.528768.......................... 16,536,079
1998: 6,483,460 Accumulation Units @ 2.436196.......................... 15,794,980
Russell Multi-Style Equity
1999: 1,126,401 Accumulation Units @ 1.067018.......................... 1,201,891
1998: N/A............................................................. 0
Russell Aggressive Equity
1999: 230,607 Accumulation Units @ 1.099895............................ 253,643
1998: N/A............................................................. 0
Russell Non-U.S.
1999: 297,512 Accumulation Units @ 1.242993............................ 369,806
1998: N/A............................................................. 0
Russell Real Estate Securities
1999: 36,814 Accumulation Units @ .919674.............................. 33,857
1998: N/A............................................................. 0
Russell Core Bond
1999: 150,425 Accumulation Units @ .983142............................. 147,888
1998: N/A............................................................. 0
--------------------- ----------------
Total Equity....................................................... $ 720,716,274 $ 645,087,216
----------------- ----------------
Total Liabilities and Equity....................................... $ 721,910,262 $ 645,937,811
================= ================
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
35
<PAGE> 37
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
FORM 10-K
ITEM 8. (continued)
NML VARIABLE ANNUITY ACCOUNT C
COMBINED STATEMENT OF OPERATIONS AND CHANGES IN EQUITY
FOR THE YEARS ENDED DECEMBER 31
<TABLE>
<CAPTION>
Investment Income 1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Dividend Income........................................... $ 43,814,500 $ 26,995,272 $ 27,689,163
Annuity Rate and Expense Guarantees....................... 3,445,294 3,154,687 2,501,975
---------------- ---------------- ---------------
Net Investment Income..................................... 40,369,206 23,840,585 25,187,188
---------------- ---------------- ---------------
Realized and Unrealized Gain on Investments
Realized Gain on Investments.............................. 41,105,768 29,250,486 18,686,284
Unrealized Appreciation During the Year................... 36,856,549 37,105,561 44,241,434
---------------- ---------------- ---------------
Net Gain on Investments................................... 77,962,317 66,356,047 62,927,718
---------------- ---------------- ---------------
Increase in Equity Derived from Investment Activity.......... 118,331,523 90,196,632 88,114,906
---------------- ---------------- ---------------
Equity Transactions
Contract Owners' Net Payments............................. 74,901,848 93,658,882 91,195,224
Surrenders and Other (Net)................................ (117,603,594) (86,757,540) (57,974,180)
---------------- ---------------- ---------------
Increase (Decrease) in Equity Derived from
Equity Transactions....................................... (42,701,746) 6,901,342 33,221,044
---------------- ---------------- ---------------
Net Increase in Equity....................................... 75,629,777 97,097,974 121,335,950
Equity, Beginning of Year.................................... 645,086,497 547,988,523 426,652,573
---------------- ---------------- ---------------
Equity, End of Year.......................................... $ 720,716,274 $ 645,086,497 $ 547,988,523
================ ================ ===============
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
36
<PAGE> 38
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
FORM 10-K
ITEM 8. (continued)
NML VARIABLE ANNUITY ACCOUNT C
NOTES TO FINANCIAL STATEMENTS
Note 1--NML Variable Annuity Account C (the "Account") is a segregated asset
account of The Northwestern Mutual Life Insurance Company ("Northwestern Mutual
Life" or "Sponsor") used to fund variable annuity contracts ("contracts") for
HR-10 and corporate pension and profit-sharing plans which qualify for special
tax treatment under the Internal Revenue Code. Beginning December 31, 1991, two
versions of the contract are offered: Front Load contracts with a sales charge
up to 4.5% of purchase payments and Simplified Load contracts with an
installation fee of $750.
Note 2--The preparation of the financial statements in conformity with generally
accepted accounting principles 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 revenues and expenses during the
reporting period. Actual results could differ from those estimates. Principal
accounting policies are summarized below.
Note 3--All assets of each Division of the Account are invested in shares of the
corresponding Portfolio of Northwestern Mutual Series Fund, Inc. and the Russell
Insurance Funds (the "Funds"). The shares are valued at the Funds' offering and
redemption price per share.
On May 3, 1994, five new portfolios commenced operations in the Fund: Aggressive
Growth Stock Portfolio, International Equity Portfolio, Growth Stock Portfolio,
Growth and Income Stock Portfolio and High Yield Bond Portfolio. Additionally,
on May 3, 1994, the assets of Northwestern Mutual Life's Variable Annuity funds
were merged into the respective portfolio of the Fund in a tax-free exchange of
shares.
On April 30, 1999 seven new portfolios commenced operations in the Funds: Small
Cap Growth Stock Portfolio, Index 400 Stock Portfolio, Russell Multi-Style
Equity, Russell Aggressive Equity Portfolio, Russell Non-U.S. Portfolio, Russell
Real Estate Securities Portfolio, and Russell Core Bond Portfolio.
The Funds are open-end investment companies registered under the Investment
Company Act of 1940.
Note 4--Annuity reserves are based on published annuity tables with age
adjustment and benefit payments which reflect actual investment experience.
Annuity reserves are based on the 1983 Table with assumed interest rates of
3-1/2% or 5%.
Note 5--Dividend income from the Funds is recorded on the record date of the
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.
Purchases and sales of the Funds shares for the years ended December 31 by each
Division are shown below:
<TABLE>
<CAPTION>
PURCHASES 1999 1998 1997
- - - - - - - - - - - - - - - - - --------- ---- ---- ----
<S> <C> <C> <C>
Small Cap Growth Division................................... $ 759,215 $ N/A $ N/A
Aggressive Growth Division.................................. 12,206,930 15,042,444 21,563,810
International Equity Division............................... 13,196,712 10,115,335 14,484,423
Index 400 Stock Division.................................... 468,108 N/A N/A
Growth Stock Division....................................... 11,622,415 11,736,176 5,929,895
Growth & Income Stock Division.............................. 12,666,073 12,220,296 18,445,529
Index 500 Stock Division.................................... 24,489,112 27,128,970 22,292,577
Balanced Division........................................... 27,037,531 25,547,459 18,920,420
High Yield Bond Division.................................... 1,696,507 4,842,682 4,398,102
Select Bond Division........................................ 3,699,428 7,219,542 4,295,571
Money Market Division....................................... 22,540,096 28,689,880 20,035,837
Russell Multi-Style Division................................ 1,676,900 N/A N/A
Russell Aggressive Equity Division.......................... 763,162 N/A N/A
Russell Non-U.S. Division................................... 494,961 N/A N/A
Russell Real Estate Securities Division..................... 109,105 N/A N/A
Russell Core Bond Division.................................. 403,049 N/A N/A
</TABLE>
37
<PAGE> 39
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
FORM 10-K
<TABLE>
<CAPTION>
SALES 1999 1998 1997
- - - - - - - - - - - - - - - - - ----- ---- ---- ----
<S> <C> <C> <C>
Small Cap Growth Stock Division............................. $ 13,802 $ N/A $ N/A
Aggressive Growth Division.................................. 23,468,462 18,315,682 12,675,291
International Equity Division............................... 11,938,339 13,861,624 4,352,840
Index 400 Stock Division.................................... 26,390 N/A N/A
Growth Stock Division....................................... 5,373,768 4,445,344 2,395,716
Growth & Income Stock Division.............................. 10,170,106 6,047,669 2,674,188
Index 500 Stock Division.................................... 21,511,153 12,386,814 10,114,507
Balanced Division........................................... 32,467,107 24,616,712 17,783,563
High Yield Bond Division.................................... 3,114,104 1,661,445 480,911
Select Bond Division........................................ 5,152,171 4,504,138 4,561,008
Money Market Division....................................... 22,822,933 25,961,429 16,919,905
Russell Multi-Style Division................................ 35,224 N/A N/A
Russell Aggressive Equity Division.......................... 443,034 N/A N/A
Russell Non-U.S. Division................................... 2,369 N/A N/A
Russell Real Estate Securities Division..................... 569 N/A N/A
Russell Core Bond Division.................................. 4,229 N/A N/A
</TABLE>
Note 6--On April 30, 1993, Northwestern Mutual Capital Appreciation Stock Fund
was merged into the Northwestern Mutual Index 500 Stock Fund in a tax-free
exchange of fund shares. 23,586,477 shares of Northwestern Mutual Capital
Appreciation Stock Fund, Inc. were exchanged for 24,739,593 shares of
Northwestern Mutual Index 500 Stock Fund, Inc. The shares exchanged were valued
at $33,406,725 for each Division.
Note 7--A deduction for annuity rate and expense guarantees is determined daily
and paid to Northwestern Mutual Life 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 Life may be insufficient to cover the actual costs
incurred in connection with the contracts.
Generally, for contracts issued after December 31, 1991, for the Front Load
Version and the Simplified Load Version, the deduction for annuity rate and
expense guarantees is determined daily at annual rates of 6.5/10 of 1% and
1-1/4%, respectively, of the net assets of each Division attributable to these
contracts and is paid to Northwestern Mutual Life. For these contracts, the
rates may be increased or decreased by the Board of Trustees of Northwestern
Mutual Life not to exceed 1% and 1-1/2% annual rates, respectively.
Generally, the deduction for contracts issued before December 17, 1981 or
between April 30, 1984 and December 31, 1991, as provided for in the contracts
has been waived by the Board of Trustees of Northwestern Mutual Life. For these
contracts, the rate may be determined by the Board of Trustees of Northwestern
Mutual Life not to exceed a 1/4 of 1% annual rate.
For contracts issued after December 16, 1981, and prior to May 1, 1984, the
deduction is determined daily at an annual rate of 1/2 of 1% of the net assets
of each Division attributable to these contracts and is paid to Northwestern
Mutual Life. For these contracts, the rate may be increased or decreased by the
Board of Trustees of Northwestern Mutual Life not to exceed a 3/4 of 1% annual
rate.
Since 1996, Northwestern Mutual has paid a dividend to certain contracts. The
dividend is re-invested in the Account and has been reflected as a Contract
Owners' Net Payment in the accompanying financial statements.
Note 8--Northwestern Mutual is taxed as a "life insurance company" under the
Internal Revenue Code and the operations of the Account form a part of and are
taxed with those of Northwestern Mutual. Under current law, no federal income
taxes are payable with respect to the Account. Accordingly, no provision for any
such liability has been made.
38
<PAGE> 40
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
FORM 10-K
Report of Independent Accountants
To The Northwestern Mutual Life Insurance Company and
Contract Owners of NML Variable Annuity Account C
In our opinion, the statements appearing on pages 30 through 38 present fairly,
in all material respects, the financial position of NML Variable Annuity Account
C at December 31, 1999 and 1998, and the results of its operations and the
changes in its equity for each of the three years in the period ended December
31, 1999, in conformity with accounting principles generally accepted in the
United States. These financial statements are the responsibility of The
Northwestern Mutual Life Insurance Company's management; our responsibility is
to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with auditing
standards generally accepted in the United States which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/ PRICEWATERHOUSECOOPERS LLP
Milwaukee, Wisconsin
January 27, 2000
39
<PAGE> 41
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
FORM 10-K
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
40
<PAGE> 42
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
FORM 10-K
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Neither Account A nor Account C have any directors or executive officers. The
following information as of March 1, 2000, is provided with respect to each
director, including persons chosen to become directors, of Northwestern Mutual.
Northwestern Mutual uses the title of Trustee to denote the directors.
<TABLE>
<CAPTION>
YEAR EXPIRATION OF
TRUSTEE AGE ELECTED TERM OF OFFICE OTHER POSITIONS PRESENTLY HELD WITH REGISTRANT
------- --- ------- -------------- ----------------------------------------------
<S> <C> <C> <C> <C>
R. Quintus Anderson............ 69 1984 May 2003 Chairman, Audit Committee
Edward E. Barr................. 63 1991 May 2003 Member, Human Resources and Public Policy Committee
Gordon T. Beaham, III.......... 68 1988 May 2001 Member, Operations and Technology Committee
Robert C. Buchanan............. 59 1991 May 2003 Member, Audit, Executive and Finance Committees
George A. Dickerman............ 61 1994 May 2000 (1) Member, Agency and Marketing Committee
Pierre S. du Pont.............. 65 1985 May 2002 Member, Agency and Marketing Committee
James D. Ericson............... 64 1989 May 2000 (1) President and C.E.O.; Member, Agency and Marketing,
Human Resources and Public Policy, and Operations
and Technology Committees; Chairman, Executive and
Finance Committees (2)
J. E. Gallegos................. 64 1985 May 2000 (1) Member, Audit Committee
Stephen N. Graff............... 65 1996 May 2000 (1) Member, Audit, Executive, and Finance Committees
Patricia Albjerg Graham........ 65 1980 May 2000 (1) Member, Human Resources and Public Policy Committee
Stephen F. Keller.............. 61 1984 May 2003 Member, Human Resources and Public Policy Committee
Barbara A. King................ 53 1996 May 2002 Member, Agency and Marketing Committee
J. Thomas Lewis................ 63 1978 May 2002 Chairman, Human Resources and Public Policy Committee
Daniel F. McKeithan, Jr........ 64 1988 May 2003 Member, Executive, Finance, and Human Resources
and Public Policy Committees
Guy A. Osborn.................. 64 1994 May 2001 Member, Executive, Finance and Operations and Technology
Committees
Timothy D. Proctor............. 50 1997 May 2001 Member, Audit Committee
H. Mason Sizemore, Jr.......... 58 1993 May 2003 Member, Agency and Marketing Committee
Harold B. Smith................ 66 1973 May 2000 (1) Member, Operations and Technology Committee
Sherwood H. Smith, Jr.......... 65 1992 May 2002 Chairman, Agency and Marketing Committee
Peter M. Sommerhauser.......... 57 1999 May 2002 Member, Executive, Finance and Operations and Technology
Committees
John E. Steuri................. 60 1994 May 2003 Chairman, Operations and sTechnology Committee
</TABLE>
41
<PAGE> 43
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
FORM 10-K
<TABLE>
<CAPTION>
YEAR EXPIRATION OF
TRUSTEE AGE ELECTED TERM OF OFFICE OTHER POSITIONS PRESENTLY HELD WITH REGISTRANT
------- --- ------- -------------- ----------------------------------------------
<S> <C> <C> <C> <C>
John J. Stollenwerk............ 60 1993 May 2001 Member, Agency and Marketing, Executive and Finance
Committees
Barry L. Williams.............. 55 1987 May 2001 Member, Human Resources and Public Policy Committee
Kathryn D. Wriston............. 61 1986 May 2001 Member, Audit Committee
Edward J. Zore (3)............. 54 2000 May 2001 Executive Vice President (Life and Disability Income
Insurance)(4)
</TABLE>
- - - - - - - - - - - - - - - - - ----------------------
(1) Candidate proposed for re-election by the Board of Trustees for the
election to be held at the May 2000 Annual meeting of Policyowners. If
re-elected, these Trustees' terms will expire in May 2004.
(2) Effective March 31, 2000, Mr. Ericson will assume the position of Chairman
and C.E.O. of Northwestern Mutual.
(3) Mr. Zore was appointed as a Trustee by the Board of Trustees effective
February 1, 2000.
(4) Effective March 31, 2000, Mr. Zore will assume the position of President of
Northwestern Mutual and will serve as a member of the Agency and Marketing,
Executive, Finance, Human Resources and Public Policy, and Operations and
Technology Committees.
42
<PAGE> 44
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
FORM 10-K
The business experience and directorships of Northwestern Mutual's Trustees are
as follows:
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
TRUSTEE DURING PAST FIVE YEARS DIRECTORSHIPS
------- ---------------------- -------------
<S> <C> <C>
R. Quintus Anderson Chairman, The Aarque Capital Corporation Cold Metal Products Company, Inc.
(diversified metal products manufacturing), Oneida, Ltd.
Lakewood, New York, since 1997. Prior
thereto, Chairman, The Aarque Companies.
Edward E. Barr Chairman, Sun Chemical Group, B.V. (graphic First Union Corporation
arts), Fort Lee, New Jersey, since 1998. United Water Resources, Inc.
Chairman and CEO, 1997-1998. Prior thereto,
President and Chief Executive Officer,
1987-1997.
Gordon T. Beaham, III Chairman and President,
Faultless Starch/Bon Ami Company (consumer
products manufacturer), Kansas City,
Missouri, since 1987.
Robert C. Buchanan President and Chief Executive Officer, Fox W. H. Brady Corporation
Valley Corporation (manufacturer of gift wrap
and writing paper), Appleton, Wisconsin,
since 1980.
George A. Dickerman Chairman Emeritus, Spalding Sports Worldwide
(manufacturer of sporting equipment),
Chicopee, Massachusetts, since 1999. Prior
thereto, Chairman, 1997-1998, and President,
1981-1997.
Pierre S. du Pont Partner with Richards, Layton & Finger (law Whitman Corporation
firm), Wilmington, Delaware, since 1985.
James D. Ericson President and Chief Executive Officer of Consolidated Papers, Inc.
Northwestern Mutual since 1993. Green Bay Packaging, Inc.
Kohl's Corporation
Mason Street Funds, Inc.
MGIC Investment Corporation
Northwestern Mutual Series
Fund, Inc.
J. E. Gallegos Attorney, Gallegos Law Firm, Santa Fe, New
Mexico, since 1988.
Stephen N. Graff Office Managing Partner (retired), Arthur Mason Street Funds, Inc.
Andersen LLP, Milwaukee, Wisconsin, 1981-1994. Northwestern Mutual Series
Fund, Inc.
Regal-Beloit Corporation
Patricia Albjerg Graham President, Spencer Foundation (social and
behavioral sciences), Chicago, Illinois,
since 1991; and Professor of the History of
American Education, Harvard University,
Cambridge, Massachusetts, since 1974.
Stephen F. Keller Attorney, Los Angeles, California, since
1962. Chairman, The Santa Anita Companies,
Arcadia, California, 1993-1996.
Barbara A. King President, Landscape Structures, Inc.
(manufacturer of playground equipment),
Delano, Minnesota, since 1973.
</TABLE>
43
<PAGE> 45
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
FORM 10-K
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
TRUSTEE DURING PAST FIVE YEARS DIRECTORSHIPS
------- ---------------------- -------------
<S> <C> <C>
J. Thomas Lewis Attorney (sole practitioner), New Orleans,
Louisiana, since 1998. Prior thereto,
associated with Monroe & Lemann (law firm),
New Orleans, Louisiana, 1965-1998.
Daniel F. McKeithan, Jr. President, Tamarack Petroleum Co., Inc. Firstar Corporation
(operator of oil and gas wells), Milwaukee, The Marcus Corporation
Wisconsin, since 1982. WICOR, Inc.
Guy A. Osborn Retired Chairman, Universal Foods Corp., Fleming Companies, Inc.
Milwaukee, Wisconsin, since 1997. Chairman, WICOR, Inc.
1996-1997. Chairman and Chief Executive
Officer, 1990-1996.
Timothy D. Proctor Group General Counsel, Diageo PLC
(manufacturer, marketer and distributor of
food and beverage products), London, England,
since 2000. Prior thereto, Director,
Worldwide Human Resources, Glaxo Wellcome
plc, 1998-1999; Senior Vice President Human
Resources, General Counsel and Secretary,
Glaxo Wellcome Inc., 1996-1998; and Senior
Vice President, General Counsel and
Secretary, 1994-1996.
H. Mason Sizemore, Jr. President and Chief Operating Officer, The
Seattle Times, Seattle, Washington, since
1985.
Harold B. Smith Chairman, Executive Committee, Illinois Tool Illinois Tool Works Inc.
Works Inc. (engineered components and Northern Trust Corporation
industrial systems and consumables), W. W. Grainger, Inc.
Glenview, Illinois, since 1982.
Sherwood H. Smith, Jr. Chairman Emeritus, Carolina Power & Light Carolina Power & Light Company
Company, Raleigh, North Carolina, since May Nortel Networks Corporation
1999. Prior thereto, Chairman, 1996-1999, Springs Industries, Inc.
and Chairman and Chief Executive Officer, Wachovia Corporation
1992-1996.
Peter M. Sommerhauser Attorney, Shareholder, Vice President and Kohl's Corporation
Member of the Management Committee, Godfrey &
Kahn, S.C. (law firm), Milwaukee, Wisconsin,
since 1969.
John E. Steuri Chairman, Advanced Thermal Technologies National Computer Systems Inc.
(heating, air conditioning and humidity Superior Financial Corp.
control), Little Rock, Arkansas, since 1997.
Prior thereto, Chairman and CEO, ALLTEL
Information Services, Inc., Little Rock,
Arkansas, since 1989.
John J. Stollenwerk President and Chief Executive Officer, Badger Meter, Inc.
Allen-Edmonds Shoe Corporation, Port Firstar Corporation
Washington, Wisconsin, since 1998. Prior Koss Corporation
thereto, President and Owner, 1980-1998.
</TABLE>
44
<PAGE> 46
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
FORM 10-K
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
TRUSTEE DURING PAST FIVE YEARS DIRECTORSHIPS
------- ---------------------- -------------
<S> <C> <C>
Barry L. Williams President and Chief Executive Officer, CH2M Hill Companies, Ltd.
Williams Pacific Ventures, Inc. (venture Comp USA, Inc.
capital), San Francisco, California, since Pacific Gas & Electric Company
1993. R. H. Donnelly Corporation
Simpson Manufacturing Co., Inc.
The Newhall Land and Farming
Company
Kathryn D. Wriston Director of various corporations. Homeplace of America Inc.
The Stanley Works
Santa Fe Snyder Corporation
Edward J. Zore Executive Vice President (Life and Disability MGIC Investment Corporation
Income Insurance) of Northwestern Mutual
since 1998. Prior thereto, Executive Vice
President (Finance and Investments) since
1995.
</TABLE>
45
<PAGE> 47
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
FORM 10-K
The following information as of March 1, 2000, is provided with respect to each
Executive Officer of Northwestern Mutual. The term of office for all Executive
Officers is one year expiring May 31, 2000.
<TABLE>
<CAPTION>
NAME AGE POSITION
- - - - - - - - - - - - - - - - - ---- --- --------
<S> <C> <C>
James D. Ericson (1)............... 64 President and Chief Executive Officer; Trustee
John M. Bremer (1)................. 52 Executive Vice President, General Counsel and Secretary
(Administration and Law)
Peter W. Bruce (1)................. 54 Executive Vice President (Accumulation Products and Long Term Care)
Edward J. Zore (1)................. 54 Executive Vice President (Life and Disability Income Insurance); Trustee
Deborah A. Beck (1)................ 52 Senior Vice President (Insurance Operations/Chief Compliance Officer)
William H. Beckley (1)............. 52 Senior Vice President (Agencies)
Mark G. Doll....................... 50 Senior Vice President (Public Markets)
Richard L. Hall (1)................ 54 Senior Vice President (Life Marketing)
William C. Koenig.................. 52 Senior Vice President and Chief Actuary
Donald L. Mellish.................. 61 Senior Vice President (Field Financial Services)
Bruce L. Miller (1)................ 57 Senior Vice President (Corporate Planning and Development)
Mason G. Ross...................... 56 Senior Vice President and Chief Investment Officer
John E. Schlifske.................. 40 Senior Vice President (Securities and Real Estate)
Leonard F. Stecklein (1)........... 53 Senior Vice President
Frederic H. Sweet.................. 56 Senior Vice President (Corporate and Government Relations)
Walt J. Wojcik..................... 60 Senior Vice President (Information Systems)
Robert J. Berdan (1)............... 53 Vice President (Compliance/Best Practices)
Steven T. Catlett.................. 50 Vice President (New Business)
Thomas E. Dyer..................... 54 Vice President (Corporate Services)
Gary E. Long....................... 55 Vice President and Controller
Susan A. Lueger.................... 46 Vice President (Human Resources)
Meridee J. Maynard (1)............. 44 Vice President (Annuity and Accumulation Products)
Gregory C. Oberland................ 42 Vice President (Disability Income)
Barbara F. Piehler................. 49 Vice President (Policyowner Services)
James F. Reiskytl.................. 62 Vice President (Tax and Financial Planning)
J. Edward Tippetts................. 55 Vice President (Field Training and Development)
Martha M. Valerio (1).............. 53 Vice President (Corporate Research and Analysis)
W. Ward White...................... 60 Vice President (Communications)
</TABLE>
- - - - - - - - - - - - - - - - - ----------------------
(1) Effective March 31, 2000, the following individuals will assume the
positions indicated: James D. Ericson - Chairman and Chief Executive
Officer; John M. Bremer - Senior Executive Vice President
(Administration/Chief Compliance Officer) and Secretary; Peter W. Bruce -
Senior Executive Vice President (Insurance); Edward J. Zore - President;
Deborah A. Beck - Executive Vice President (Planning and Technology);
William H. Beckley - Executive Vice President (Agencies); Richard L. Hall -
Senior Vice President (Life Insurance); Bruce L. Miller - Executive Vice
President (Marketing); Leonard F. Stecklein - Senior Vice President
(Annuities and Accumulation Products); Robert J. Berdan - Vice President
and General Counsel; Meridee J. Maynard - Vice President (Marketing); and
Martha M. Valerio - Vice President. Messrs. Ericson and Zore will continue
to serve on Northwestern Mutual's Board of Trustees.
All of the Executive Officers, except Bruce L. Miller, have been associated with
Northwestern Mutual, although not necessarily in their present positions, for
more than five years. Bruce L. Miller has been a Senior Vice President of
Northwestern Mutual since July, 1996. Prior thereto he participated in private
equity investing, operating and serving as a consultant to various firms in the
financial services and healthcare industries since 1989.
46
<PAGE> 48
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
FORM 10-K
ITEM 11. EXECUTIVE COMPENSATION
Not applicable. Account A and Account C have no directors or executive
officers, the Executive Officers and Trustees of Northwestern Mutual
spend no substantial portion of their time on matters relating to
Accounts A and C, and the amounts of compensation received by the
Executive Officers and Trustees of Northwestern Mutual have no bearing
on the values associated with the Contracts issued in connection with
Accounts A and C.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Not applicable. As segregated asset accounts, Account A and Account C
have no shareholders. As a mutual life insurance company, Northwestern
Mutual has no shareholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Northwestern Mutual's subsidiary, NMIS, serves as the investment
advisor to the Series Fund. Northwestern Mutual is party to investment
advisory agreements with the Series Fund. The investment advisory
agreements were entered into or renewed during 1999. Various Trustees
and Executive Officers of Northwestern Mutual serve as directors and
officers of the Series Fund and may be deemed to have a direct or
indirect material interest in the existence of the investment advisory
agreements.
Northwestern Mutual's subsidiary, Frank Russell, provides the Russell
Funds and its investment adviser, Frank Russell Investment Management
Company ("FRIMCo"), a subsidiary of Frank Russell, with asset
management consulting services that it provides to its other consulting
clients. The Russell Funds do not compensate Frank Russell for these
services. FRIMCo is party to an investment management agreement with
the Russell Funds. That investment management agreement took effect
during 1999. Certain Trustees and Executive Officers of Northwestern
Mutual serve as directors of Frank Russell and may be deemed to have a
direct or indirect material interest in the existence of the investment
management agreement.
Various Trustees and Executive Officers of Northwestern Mutual have
securities accounts with Baird and effected transactions through such
accounts during the fiscal year, including transactions in mutual funds
sponsored by Frank Russell.
Loans are made to Northwestern Mutual's Trustees and Executive Officers
(and their family members and associates) in accordance with the
provisions of insurance policies which they may own. Such loans are
made in the ordinary course of business and are administered solely in
accordance with the terms of such policies.
In the ordinary course of its business, Northwestern Mutual makes loans
to its general agents in connection with their business operations.
Interest on such loans is tied to Northwestern Mutual's cost of funds
or the prime rate, depending upon the purpose of the loan. On occasion,
a general agent who has incurred such loans may assume an Executive
Officer position at Northwestern Mutual. In such circumstances, the
outstanding loans remain in place and are satisfied in accordance with
the terms of the underlying loan documentation.
Peter M. Sommerhauser, a Northwestern Mutual Trustee since May 1999, is
a Shareholder, Vice President and a Member of the Management Committee
of Godfrey & Kahn, S.C. Godfrey & Kahn provided a de minimis amount of
legal services to Northwestern Mutual during 1999 with respect to a
matter that dates to 1996, when the firm was retained by Northwestern
Mutual. Mr. Sommerhauser was not personally involved in rendering such
legal services to Northwestern Mutual during 1999.
Mr. Sommerhauser is the beneficial owner of approximately 10.3% of the
outstanding common stock of Kohl's Corporation, primarily by virtue of
his serving as a trustee of several trusts for the benefit of the
families of current and former executive officers of Kohl's Corporation
and as a director of charitable foundations established by executive
officers of Kohl's Corporation. While Mr. Sommerhauser has sole or
shared voting and investment power over such shares held in the trusts
and foundations, he has no pecuniary interest in those shares. In 1994,
a number of years prior to Mr. Sommerhauser becoming a Northwestern
Mutual Trustee, Northwestern Mutual lent (as part of its normal
portfolio investment activities) to Kohl's Department Stores, Inc., a
subsidiary of Kohl's Corporation, $40,000,000 and received a 6.75%
Senior Note, guaranteed by Kohl's Corporation, due March 31, 2004. The
entire principal amount of the Senior Note remained outstanding during
1999 and at March 1, 2000.
47
<PAGE> 49
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
FORM 10-K
<TABLE>
<CAPTION>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K PAGE
<S> <C> <C>
(a) Financial Statements and Exhibits
(1) NML Variable Annuity Account A (in Part II, Item 8) .................................... 17
Statement of Assets and Liabilities at December 31, 1999 and 1998
Combined Statement of Operations and Changes in Equity
for years ended December 31, 1999, 1998 and 1997
Notes to Financial Statements
Report of Independent Accountants
(2) NML Variable Annuity Account C (in Part II, Item 8)..................................... 30
Statement of Assets and Liabilities at December 31, 1999 and 1998
Combined Statement of Operations and Changes in Equity
for years ended December 31, 1999, 1998 and 1997
Notes to Financial Statements
Report of Independent Accountants
(3) The Northwestern Mutual Life Insurance Company.......................................... 49
Immediately following this page are:
Report of Independent Accountants
Consolidated Statement of Financial Position at
December 31, 1999 and 1998
Consolidated Statement of Operations for years ended
December 31, 1999, 1998 and 1997
Consolidated Statement of Changes in Surplus for
years ended December 31, 1999, 1998 and 1997
Consolidated Statement of Cash Flows for years ended
December 31, 1999, 1998 and 1997
Notes to Consolidated Statutory Financial Statements
(b) No reports on Form 8-K have been filed during the last quarter
of the year ended December 31, 1999.
(c) See Index to Exhibits on page 67, which is incorporated herein
by reference .................................................................................... 67
</TABLE>
48
<PAGE> 50
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
FORM 10-K
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees and Policyowners of
The Northwestern Mutual Life Insurance Company
We have audited the accompanying consolidated statement of financial position of
The Northwestern Mutual Life Insurance Company and its subsidiary as of December
31, 1999 and 1998, and the related consolidated statements of operations, of
changes in surplus and of cash flows for each of the three years in the period
ended December 31, 1999. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
As described in Note 1 to the financial statements, the Company prepared these
consolidated financial statements using accounting practices prescribed or
permitted by the Office of the Commissioner of Insurance of the State of
Wisconsin (statutory basis of accounting), which practices differ from
accounting principles generally accepted in the United States. Accordingly, the
consolidated financial statements are not intended to represent a presentation
in accordance with generally accepted accounting principles. The effects on the
consolidated financial statements of the variances between the statutory basis
of accounting and generally accepted accounting principles, although not
reasonably determinable, are presumed to be material.
In our opinion, the consolidated financial statements audited by us (1) do not
present fairly in conformity with generally accepted accounting principles, the
financial position of The Northwestern Mutual Life Insurance Company and its
subsidiary as of December 31, 1999 and 1998, or the results of their operations
or their cash flows for each of the three years in the period ended December 31,
1999 because of the effects of the variances between the statutory basis of
accounting and generally accepted accounting principles referred to in the
preceding paragraph and (2) do present fairly, in all material respects, the
financial position of The Northwestern Mutual Life Insurance Company and its
subsidiary as of December 31, 1999 and 1998 and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1999, on the basis of accounting described in Note 1.
/s/ PricewaterhouseCoopers LLP
Milwaukee, Wisconsin
January 24, 2000
49
<PAGE> 51
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
FORM 10-K
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(IN MILLIONS)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1999 1998
---- ----
ASSETS
<S> <C> <C>
Bonds ............................................................................... $ 36,792 $ 34,888
Common and preferred stocks............................................................. 7,108 6,062
Mortgage loans.......................................................................... 13,416 12,250
Real estate............................................................................. 1,666 1,481
Policy loans............................................................................ 7,938 7,580
Other investments....................................................................... 3,443 2,353
Cash and temporary investments.......................................................... 1,159 1,275
------------- ------------
Total investments.............................................................. 71,522 65,889
Due and accrued investment income....................................................... 893 827
Other assets............................................................................ 1,409 1,313
Separate account assets................................................................. 12,161 9,966
------------- ------------
Total assets................................................................... $ 85,985 $ 77,995
============= ============
LIABILITIES AND SURPLUS
Reserves for policy benefits............................................................ $ 56,246 $ 51,815
Policy benefit and premium deposits..................................................... 1,746 1,709
Policyowner dividends payable........................................................... 3,100 2,870
Interest maintenance reserve............................................................ 491 606
Asset valuation reserve................................................................. 2,371 1,994
Income taxes payable.................................................................... 1,192 1,161
Other liabilities....................................................................... 3,609 3,133
Separate account liabilities............................................................ 12,161 9,966
------------- ------------
Total liabilities.............................................................. 80,916 73,254
Surplus ............................................................................... 5,069 4,741
------------- ------------
Total liabilities and surplus.................................................. $ 85,985 $ 77,995
============= ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
50
<PAGE> 52
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
FORM 10-K
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENT OF OPERATIONS
(IN MILLIONS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
--------------------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Revenue
Premiums and deposits............................................. $ 8,344 $ 8,021 $ 7,294
Net investment income............................................. 4,766 4,536 4,171
Other income...................................................... 970 922 861
------------- ------------ -----------
Total revenue............................................... 14,080 13,479 12,326
------------- ------------ -----------
Benefits and expenses
Benefit payments to policyowners and beneficiaries................ 4,023 3,602 3,329
Net additions to policy benefit reserves.......................... 4,469 4,521 4,026
Net transfers to separate accounts................................ 516 564 566
------------- ------------ -----------
Total benefits.............................................. 9,008 8,687 7,921
Operating expenses................................................ 1,287 1,297 1,138
------------- ------------ -----------
Total benefits and expenses................................. 10,295 9,984 9,059
------------- ------------ -----------
Gain from operations before dividends and taxes...................... 3,785 3,495 3,267
Policyowner dividends................................................ 3,091 2,869 2,636
------------- ------------ -----------
Gain from operations before taxes.................................... 694 626 631
Income tax expense................................................... 203 301 356
------------- ------------ -----------
Net gain from operations............................................. 491 325 275
Net realized capital gains........................................... 846 484 414
------------- ------------ -----------
Net income........................................................ $ 1,337 $ 809 $ 689
============= ============ ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
51
<PAGE> 53
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
FORM 10-K
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENT OF CHANGES IN SURPLUS
(IN MILLIONS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
------------------------------------
1999 1998 1997
---- ---- -----
<S> <C> <C> <C>
Beginning of year balance................................................ $ 4,741 $ 4,101 $ 3,515
Net income............................................................ 1,337 809 689
Increase (decrease) in net unrealized gains........................... 213 (147) 576
Increase in investment reserves....................................... (377) (20) (526)
Charge-off of goodwill (Note 7)....................................... (842) - -
Other, net............................................................ (3) (2) (153)
----------- ----------- -----------
Net increase in surplus.................................................. 328 640 586
---------- ----------- ----------
End of year balance...................................................... $ 5,069 $ 4,741 $ 4,101
========== =========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
52
<PAGE> 54
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
FORM 10-K
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN MILLIONS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------
1999 1998 1997
---- ---- -----
<S> <C> <C> <C>
Cash flows from operating activities
Insurance and annuity premiums........................................ $ 9,260 $ 8,876 $ 8,093
Investment income received ........................................... 4,476 4,216 3,928
Disbursement of policy loans, net of repayments....................... (358) (416) (360)
Benefits paid to policyowners and beneficiaries....................... (4,012) (3,572) (3,316)
Net transfers to separate accounts.................................... (516) (564) (565)
Policyowner dividends paid............................................ (2,862) (2,639) (2,347)
Operating expenses and taxes.......................................... (1,699) (1,749) (1,722)
Other, net............................................................ (56) (83) 124
----------- ----------- ----------
Net cash provided by operating activities.......................... 4,233 4,069 3,835
---------- ----------- ----------
Cash flows from investing activities
Proceeds from investments sold or matured
Bonds.............................................................. 20,788 28,720 38,284
Common and preferred stocks........................................ 13,331 10,359 9,057
Mortgage loans..................................................... 1,356 1,737 1,012
Real estate........................................................ 216 159 302
Other investments.................................................. 830 768 398
---------- ----------- ----------
36,521 41,743 49,053
---------- ----------- ----------
Cost of investments acquired
Bonds.............................................................. 22,849 30,873 41,169
Common and preferred stocks........................................ 13,794 9,642 9,848
Mortgage loans..................................................... 2,500 3,135 2,309
Real estate........................................................ 362 268 202
Other investments.................................................. 1,864 567 359
---------- ----------- ----------
41,369 44,485 53,887
---------- ----------- ----------
Net increase (decrease) in securities lending and other.................. 499 (624) 440
---------- ----------- ----------
Net cash used in investing activities................................. (4,349) (3,366) (4,394)
----------- ----------- ----------
Net (decrease) increase in cash and temporary investments............. (116) 703 (559)
Cash and temporary investments, beginning of year........................ 1,275 572 1,131
---------- ----------- ----------
Cash and temporary investments, end of year.............................. $ 1,159 $ 1,275 $ 572
========== =========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
53
<PAGE> 55
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
FORM 10-K
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED STATUTORY FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying consolidated statutory financial statements include
the accounts of The Northwestern Mutual Life Insurance Company
("Company") and its wholly-owned subsidiary, Northwestern Long Term
Care Insurance Company ("Subsidiary"). The Company and its Subsidiary
offer life, annuity, disability income and long-term care products to
the personal, business, estate and tax-qualified markets.
The consolidated financial statements have been prepared using
accounting policies prescribed or permitted by the Office of the
Commissioner of Insurance of the State of Wisconsin ("statutory basis
of accounting").
In 1998, the National Association of Insurance Commissioners ("NAIC")
adopted the Codification of Statutory Accounting Principles
("Codification") guidance, which will replace the current Accounting
Practices and Procedures manual as the NAIC's primary guidance on
statutory accounting. The NAIC is now considering amendments to the
Codification that would also be effective upon implementation.
Codification provides guidance for areas where statutory accounting has
been silent and changes current statutory accounting in some areas
(e.g., deferred income taxes are recorded). The Office of the
Commissioner of Insurance of the State of Wisconsin ("OCI") intends to
adopt Codification effective January 1, 2001. The Company has not
determined the potential effect of Codification, and the eventual
effect of adoption could differ if changes are made prior to the
effective date of January 1, 2001.
Financial statements prepared on the statutory basis of accounting vary
from financial statements prepared on the basis of generally accepted
accounting principles ("GAAP") primarily because on a GAAP basis: (1)
policy acquisition costs are deferred and amortized, (2) investment
valuations and insurance reserves are based on different assumptions,
(3) funds received under deposit-type contracts are not reported as
premium revenue, and (4) deferred taxes are provided for temporary
differences between book and tax basis of certain assets and
liabilities. The effects on the financial statements of the differences
between the statutory basis of accounting and GAAP are material to the
Company.
The preparation of financial statements in conformity with the
statutory basis of accounting requires management to make estimates and
assumptions 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 reporting period. Actual future
results could differ from these estimates.
54
<PAGE> 56
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
FORM 10-K
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED STATUTORY FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
INVESTMENTS
The Company's investments are valued on the following bases:
<TABLE>
<S> <C>
Bonds - Amortized cost using the interest method;
loan-backed and structured securities are
amortized using estimated prepayment rates and,
generally, the prospective adjustment method
Common and preferred stocks - Common stocks are carried at fair value,
preferred stocks are generally carried at cost,
and unconsolidated subsidiaries are recorded
using the equity method
Mortgage loans - Amortized cost
Real estate - Lower of cost, less depreciation and
encumbrances, or estimated net realizable value
Policy loans - Unpaid principal balance, which approximates fair
value
Other investments - Consists primarily of joint venture investments
which are valued at equity in ventures' net
assets
Cash and temporary investments - Amortized cost, which approximates fair value
</TABLE>
TEMPORARY INVESTMENTS
Temporary investments consist of debt securities that have maturities
of one year or less at acquisition.
NET INVESTMENT INCOME AND CAPITAL GAINS
Net investment income includes interest and dividends received or due
and accrued on investments, equity in unconsolidated subsidiaries'
earnings and the Company's share of joint venture income. Net
investment income is reduced by investment management expenses, real
estate depreciation, depletion related to energy assets and costs
associated with securities lending.
Realized investment gains and losses are reported in income based upon
specific identification of securities sold. Unrealized investment gains
and losses include changes in the fair value of common stocks and
changes in valuation allowances made for bonds, preferred stocks,
mortgage loans and other investments considered by management to be
impaired.
INTEREST MAINTENANCE RESERVE
The Company is required to maintain an interest maintenance reserve
("IMR"). The IMR is used to defer realized gains and losses, net of
tax, on fixed income investments resulting from changes in interest
rates. Net realized gains and losses deferred to the IMR are amortized
into investment income over the approximate remaining term to maturity
of the investment sold.
55
<PAGE> 57
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
FORM 10-K
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED STATUTORY FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
INVESTMENT RESERVES
The Company is required to maintain an asset valuation reserve ("AVR").
The AVR establishes a general reserve for invested asset valuation
using a formula prescribed by state regulations. The AVR is designed to
stabilize surplus against potential declines in the value of
investments. In addition, the Company maintained a $200 million
voluntary investment reserve at each of December 31, 1999 and 1998 to
absorb potential investment losses exceeding those considered by the
AVR formula. Increases or decreases in these investment reserves are
recorded directly to surplus.
SEPARATE ACCOUNTS
Separate account assets and related policy liabilities represent the
segregation of funds deposited by "variable" life insurance and annuity
policyowners. Policyowners bear the investment performance risk
associated with variable products. Separate account assets are invested
at the direction of the policyowner in a variety of Company-managed
mutual funds. Variable product policyowners also have the option to
invest in a fixed interest rate annuity in the general account of the
Company. Separate account assets are reported at fair value.
PREMIUM REVENUE AND OPERATING EXPENSES
Life insurance premiums are recognized as revenue at the beginning of
each policy year. Annuity and disability income premiums are recognized
when received by the Company. Operating expenses, including costs of
acquiring new policies, are charged to operations as incurred.
OTHER INCOME
Other income includes considerations on supplementary contracts, ceded
reinsurance expense allowances and miscellaneous policy charges.
BENEFIT PAYMENTS TO POLICYOWNERS AND BENEFICIARIES
Benefit payments to policyowners and beneficiaries include death,
surrender and disability benefits, matured endowments and supplementary
contract payments.
RESERVES FOR POLICY BENEFITS
Reserves for policy benefits are determined using actuarial estimates
based on mortality and morbidity experience tables and valuation
interest rates prescribed by the OCI. (See Note 3.)
POLICYOWNER DIVIDENDS
Almost all life insurance policies, and certain annuity and disability
income policies issued by the Company are participating. Annually, the
Company's Board of Trustees approves dividends payable on participating
policies in the following fiscal year, which are accrued and charged to
operations when approved.
RECLASSIFICATION
Certain financial statement balances for 1998 and 1997 have been
reclassified to conform to the current year presentation.
56
<PAGE> 58
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
FORM 10-K
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED STATUTORY FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
2. INVESTMENTS
DEBT SECURITIES
Debt securities consist of all bonds and fixed-maturity preferred
stocks. The estimated fair values of debt securities are based upon
quoted market prices, if available. For securities not actively traded,
fair values are estimated using independent pricing services or
internally developed pricing models.
Statement value, which principally represents amortized cost, and
estimated fair value of the Company's debt securities at December 31,
1999 and 1998 were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1999 RECONCILIATION TO ESTIMATED FAIR VALUE (IN MILLIONS)
----------------- ----------------------------------------------------
GROSS GROSS ESTIMATED
STATEMENT UNREALIZED UNREALIZED FAIR
VALUE GAINS LOSSES VALUE
----- ----- ------ -----
<S> <C> <C> <C> <C>
US Government and political obligations......... $ 3,855 $ 72 $ (167) $ 3,760
Mortgage-backed securities...................... 7,736 65 (256) 7,545
Corporate and other debt securities............. 25,201 249 (1,088) 24,362
------------ ----------- ------------ -----------
36,792 386 (1,511) 35,667
Preferred stocks................................ 85 2 - 87
------------ ----------- ------------ -----------
Total........................................... $ 36,877 $ 388 $ (1,511) $ 35,754
============ =========== ============ ===========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1998 RECONCILIATION TO ESTIMATED FAIR VALUE (IN MILLIONS)
----------------- ----------------------------------------------------
GROSS GROSS ESTIMATED
STATEMENT UNREALIZED UNREALIZED FAIR
VALUE GAINS LOSSES VALUE
----- ----- ------ -----
<S> <C> <C> <C> <C>
US Government and political obligations......... $ 3,904 $ 461 $ (11) $ 4,354
Mortgage-backed securities...................... 7,357 280 (15) 7,622
Corporate and other debt securities............. 23,627 1,240 (382) 24,485
------------ ----------- ------------ -----------
34,888 1,981 (408) 36,461
Preferred stocks................................ 189 4 (1) 192
------------ ----------- ------------ -----------
Total........................................... $ 35,077 $ 1,985 $ (409) $ 36,653
============ =========== ============ ===========
</TABLE>
57
<PAGE> 59
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
FORM 10-K
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED STATUTORY FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
The statement value and estimated fair value of debt securities by
contractual maturity at December 31, 1999 is shown below. Expected
maturities may differ from contractual maturities because borrowers may
have the right to call or prepay obligations with or without call or
prepayment penalties.
<TABLE>
<CAPTION>
STATEMENT ESTIMATED
VALUE FAIR VALUE
----- ----------
(IN MILLIONS)
<S> <C> <C>
Due in one year or less........................................................ $ 931 $ 942
Due after one year through five years.......................................... 5,420 5,412
Due after five years through ten years......................................... 11,168 10,796
Due after ten years............................................................ 11,622 11,059
------------ ----------
29,141 28,209
Mortgage-backed securities..................................................... 7,736 7,545
------------ ----------
$ 36,877 $ 35,754
============ ==========
</TABLE>
STOCKS
The estimated fair values of common and perpetual preferred stocks are
based upon quoted market prices, if available. For securities not
actively traded, fair values are estimated using independent pricing
services or internally developed pricing models.
The adjusted cost of common and preferred stock held by the Company at
December 31, 1999 and 1998 was $4.9 billion and $4.3 billion,
respectively.
MORTGAGE LOANS AND REAL ESTATE
Mortgage loans are collateralized by properties located throughout the
United States and Canada. The Company attempts to minimize mortgage
loan investment risk by diversification of geographic locations and
types of collateral properties.
The fair value of mortgage loans as of December 31, 1999 and 1998 was
approximately $13.2 billion and $12.9 billion, respectively. The fair
value of the mortgage loan portfolio is estimated by discounting the
future estimated cash flows using current interest rates of debt
securities with similar credit risk and maturities, or utilizing net
realizable values.
At December 31, 1999 and 1998, real estate includes $39 million and $61
million, respectively, acquired through foreclosure and $114 million
and $120 million, respectively, of home office real estate.
58
<PAGE> 60
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
FORM 10-K
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED STATUTORY FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
REALIZED AND UNREALIZED GAINS AND LOSSES
Realized investment gains and losses for the years ended December 31,
1999, 1998 and 1997 were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE YEAR ENDED FOR THE YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998 DECEMBER 31, 1997
----------------- ----------------- -----------------
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)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Bonds.......................... $ 219 $ (404) $ (185) $ 514 $ (231) $ 283 $ 518 $ (269) $ 249
Common and preferred stocks.... 1,270 (255) 1,015 885 (240) 645 533 (150) 383
Mortgage loans................. 22 (12) 10 18 (11) 7 14 (14) -
Real estate.................... 92 - 92 41 - 41 100 (2) 98
Other invested assets.......... 308 (189) 119 330 (267) 63 338 (105) 233
------ ------- ------ ------ ------- ------- ------ ------- -------
1,911 (860) 1,051 1,788 (749) 1,039 1,503 (540) 963
------ ------- ------ ------ ------- ------- ------ ------- -------
Less: Capital gains taxes...... 244 358 340
Less: IMR (losses) gains....... (39) 197 209
------ ------- -------
Net realized capital gains..... $ 846 $ 484 $ 414
====== ======= =======
</TABLE>
Changes in unrealized net investment gains and losses for the years
ended December 31, 1999, 1998 and 1997 were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
1999 1998 1997
---- ---- ----
(in millions)
<S> <C> <C> <C>
Bonds........................................................... $ (178) $ (97) $ 43
Common and preferred stocks..................................... 415 29 528
Mortgage loans.................................................. (10) (16) (7)
Real estate..................................................... (2) - -
Other........................................................... (12) (63) 12
---------- ----------- ----------
$ 213 $ (147) $ 576
========== =========== ===========
</TABLE>
59
<PAGE> 61
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
FORM 10-K
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED STATUTORY FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
SECURITIES LENDING
The Company has entered into securities lending agreements whereby
certain securities are loaned to third parties, primarily major
brokerage firms. The Company's policy requires a minimum of 102% of the
fair value of the loaned securities as collateral, calculated on a
daily basis in the form of either cash or securities. Collateral assets
received and related liability due to counterparties of $2.1 billion
and $1.5 billion, respectively, are included in the consolidated
statements of financial position at December 31, 1999 and 1998, and
approximate the statement value of securities loaned at those dates.
INVESTMENT IN MGIC
The Company owns 11.3% (11.9 million shares) of the outstanding common
stock of MGIC Investment Corporation ("MGIC"). This investment is
accounted for using the equity method. At December 31, 1999 and 1998,
the fair value of the Company's investment in MGIC exceeded the
statement value of $201 million and $180 million, respectively, by $518
million and $296 million, respectively.
In August 1998, the Company delivered 8.9 million shares of MGIC to a
brokerage firm to settle a forward contract. In conjunction with the
settlement, the Company recorded a $114 million realized gain.
DERIVATIVE FINANCIAL INSTRUMENTS
In the normal course of business, the Company enters into transactions
to reduce its exposure to fluctuations in interest rates, foreign
currency exchange rates and market volatility. These hedging strategies
include the use of forwards, futures, options and swaps.
The Company held the following positions for hedging purposes at
December 31, 1999 and 1998:
<TABLE>
<CAPTION>
DERIVATIVE FINANCIAL INSTRUMENT NOTIONAL AMOUNTS RISKS REDUCED
------------------------------ ---------------- -------------
(IN MILLIONS)
DECEMBER 31, DECEMBER 31,
1999 1998
---- ----
<S> <C> <C> <C>
Foreign Currency
Forward Contracts $967 $601 Currency exposure on foreign-
denominated investments
Common Stock Futures 620 657 Stock market price fluctuation.
Bond Futures 50 379 Bond market price fluctuation.
Options to Acquire Interest
Rate Swaps 419 419 Interest rates payable on certain
annuity and insurance contracts.
Foreign Currency and
Interest Rate Swaps 203 94 Interest rates on variable rate notes
and currency exposure on
foreign-denominated bonds.
Default Swaps 52 - Default exposure on certain bond
investments.
</TABLE>
60
<PAGE> 62
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
FORM 10-K
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED STATUTORY FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
The notional or contractual amounts of derivative financial instruments
are used to denominate these types of transactions and do not represent
the amounts exchanged between the parties.
In addition to the use of derivatives for hedging purposes, equity
swaps were held for investment purposes during 1999 and 1998. The
notional amount of equity swaps outstanding at December 31, 1999 and
1998 was $136 million and $138 million, respectively.
Foreign currency forwards, foreign currency swaps, stock futures and
equity swaps are reported at fair value. Resulting gains and losses on
these contracts are unrealized until expiration of the contract. There
is no statement value reported for interest rate swaps, bond futures
and options to acquire interest rate swaps prior to the settlement of
the contract, at which time realized gains and losses are deferred to
IMR. Changes in the value of derivative instruments are expected to
offset gains and losses on the hedged investments. During 1999 and
1998, net realized and unrealized gains on investments were partially
offset by net realized losses of $55 million and $104 million,
respectively, and net unrealized gains (losses) of $17 million and
$(58) million, respectively, on derivative instruments. The effect of
derivative instruments in 1997 was not material to the Company's
results of operations.
3. RESERVES FOR POLICY BENEFITS
Life insurance reserves on substantially all policies issued since 1978
are based on the Commissioner's Reserve Valuation Method with interest
rates ranging from 3-1/2% to 5-1/2%. Other life policy reserves are
primarily based on the net level premium method employing various
mortality tables at interest rates ranging from 2% to 4-1/2%.
Deferred annuity reserves on contracts issued since 1985 are valued
primarily using the Commissioner's Annuity Reserve Valuation Method
with interest rates ranging from 3-1/2% to 6-1/4%. Other deferred
annuity reserves are based on contract value. Immediate annuity
reserves are based on present values of expected benefit payments at
interest rates ranging from 3-1/2% to 7-1/2%.
Active life reserves for disability income ("DI") policies issued since
1987 are primarily based on the two-year preliminary term method using
a 4% interest rate and the 1985 Commissioner's Individual Disability
Table A ("CIDA") for morbidity. Active life reserves for prior DI
policies are based on the net level premium method, a 3% to 4% interest
rate and the 1964 Commissioner's Disability Table for morbidity.
Disabled life reserves for DI policies are based on the present values
of expected benefit payments primarily using the 1985 CIDA (modified
for Company experience in the first four years of disability) with
interest rates ranging from 3% to 5-1/2%.
Use of these actuarial tables and methods involves estimation of future
mortality and morbidity. Actual future experience could differ from
these estimates.
61
<PAGE> 63
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
FORM 10-K
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED STATUTORY FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
4. EMPLOYEE AND AGENT BENEFIT PLANS
The Company sponsors noncontributory defined benefit retirement plans
for all eligible employees and agents. The expense associated with
these plans is generally recorded by the Company in the period
contributions are funded. As of January 1, 1999, the most recent
actuarial valuation date available, the qualified defined benefit plans
were fully funded. The Company recorded a liability of $109 million and
$98 million for nonqualified defined benefit plans at December 31, 1999
and 1998, respectively. In addition, the Company has a contributory
401(k) plan for eligible employees and a noncontributory defined
contribution plan for all full-time agents. The Company's contributions
are expensed in the period contributions are made to the plans. The
Company recorded $31 million, $29 million and $27 million of total
expense related to its defined benefit and defined contribution plans
for the years ended December 31, 1999, 1998 and 1997, respectively. The
defined benefit and defined contribution plans' assets of $2.2 billion
and $1.9 billion at December 31, 1999 and 1998, respectively, were
primarily invested in the separate accounts of the Company.
In addition to pension and retirement benefits, the Company provides
certain health care and life insurance benefits ("postretirement
benefits") for retired employees. Substantially all employees may
become eligible for these benefits if they reach retirement age while
working for the Company. Postretirement benefit costs for the years
ended December 31, 1999, 1998 and 1997 were a net expense (benefit) of
$5.0 million, $1.8 million and ($1.3) million, respectively.
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1999 1998
---- ----
<S> <C> <C>
Unfunded postretirement benefit obligation
for retirees and other fully eligible employees $40 million $35 million
(Accrued in statement of financial position)
Estimated postretirement benefit obligation
for active non-vested employees (Not accrued
until employee vests) $68 million $56 million
Discount rate 7% 7%
Health care cost trend rate 10% to an ultimate 10% to an ultimate
5%, declining 1% 5%, declining 1%
for 5 years for 5 years
</TABLE>
If the health care cost trend rate assumptions were increased by 1%,
the accrued postretirement benefit obligation as of December 31, 1999
and 1998 would have been increased by $6 million and $5 million,
respectively.
At December 31, 1999 and 1998, the recorded postretirement benefit
obligation was reduced by $28 million and $23 million, respectively,
for health care benefit plan assets. These assets were primarily
invested in separate accounts of the Company.
62
<PAGE> 64
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
FORM 10-K
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED STATUTORY FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
5. REINSURANCE
In the normal course of business, the Company seeks to limit its
exposure to loss on any single insured and to recover a portion of
benefits paid by ceding to reinsurers under excess coverage and
coinsurance contracts. The Company retains a maximum of $25 million of
coverage per individual life and $35 million maximum of coverage per
joint life. The Company has an excess reinsurance contract for
disability income policies with retention limits varying based upon
coverage type.
The amounts shown in the accompanying consolidated financial statements
are net of reinsurance. Reserves for policy benefits at December 31,
1999 and 1998 were reported net of ceded reserves of $584 million and
$518 million, respectively. The effect of reinsurance on premiums and
benefits for the years ended December 31, 1999, 1998 and 1997 was as
follows:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
(IN MILLIONS)
<S> <C> <C> <C>
Direct premiums and deposits ................. $ 8,785 $ 8,426 $ 7,647
Premiums ceded ............................... (441) (405) (353)
------- ------- -------
Net premium and deposits ..................... $ 8,344 $ 8,021 $ 7,294
======= ======= =======
Benefits to policyowners and beneficiaries ... $ 9,205 $ 8,869 $ 8,057
Benefits ceded ............................... (197) (182) (136)
------- ------- -------
Net benefits to policyowners and beneficiaries $ 9,008 $ 8,687 $ 7,921
======= ======= =======
</TABLE>
In addition, the Company received $133 million, $121 million and $115
million for the years ended December 31, 1999, 1998 and 1997,
respectively, from reinsurers representing allowances for reimbursement
of commissions and other expenses. These amounts are included in other
income in the consolidated statement of operations.
Reinsurance contracts do not relieve the Company from its obligations
to policyowners. Failure of reinsurers to honor their obligations could
result in losses to the Company; consequently, allowances are
established for amounts deemed uncollectible. The Company evaluates the
financial condition of its reinsurers and monitors concentrations of
credit risk arising from similar geographic regions, activities or
economic characteristics of the reinsurers to minimize its exposure to
significant losses from reinsurer insolvencies.
6. INCOME TAXES
Provisions for income taxes are based on current income tax payable
without recognition of deferred taxes. The Company files a consolidated
life-nonlife federal income tax return. Federal income tax returns for
years through 1995 are closed as to further assessment of tax. Adequate
provision has been made in the financial statements for any additional
taxes, which may become due with respect to the open years.
63
<PAGE> 65
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
FORM 10-K
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED STATUTORY FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
The Company's taxable income can vary significantly from gain from
operations before taxes due to differences between book and tax
valuation of assets and liabilities (e.g., investments and policy
benefit reserves). The Company pays a tax that is assessed only on the
surplus of mutual life insurance companies ("equity tax"), and also,
the Company must capitalize and amortize, as opposed to immediately
deducting, an amount deemed to represent the cost of acquiring new
business ("DAC tax").
The Company's effective tax rate on gains from operations before taxes
for the years ended December 31, 1999, 1998 and 1997 was 29%, 48%, and
56% respectively. In 1999, the effective rate was less than the federal
corporate rate of 35% due primarily to differences between book and tax
investment income. In 1998 and 1997, the effective rate was greater
than 35% due primarily to the equity tax and DAC tax.
7. RELATED PARTY TRANSACTIONS
The Company acquired Frank Russell Company ("Frank Russell") effective
January 1, 1999 for a purchase price of approximately $950 million.
Frank Russell is a leading investment management and consulting firm,
providing investment advice, analytical tools and investment vehicles
to institutional and individual investors in more than 30 countries.
This investment is accounted for using the equity method and is
included in common stocks in the consolidated statement of financial
position. In 1999, the Company charged-off directly from surplus
approximately $842 million, representing the total goodwill associated
with the acquisition. The Company has received permission from the OCI
for this charge-off. The Company has unconditionally guaranteed certain
debt obligations of Frank Russell, including $350 million of senior
notes and up to $150 million of other credit facilities.
During 1999, the Company transferred appreciated equity investments to
a wholly-owned subsidiary as a capital contribution to the subsidiary.
A realized capital gain of $287 million was recorded on this
transaction based on the fair value of the assets upon transfer.
8. CONTINGENCIES
The Company has guaranteed certain obligations of its other affiliates.
These guarantees totaled approximately $101 million at December 31,
1999 and are generally supported by the underlying net asset values of
the affiliates.
In addition, the Company routinely makes commitments to fund mortgage
loans or other investments in the normal course of business. These
commitments aggregated to $1.9 billion at December 31, 1999 and were
extended at market interest rates and terms.
The Company is engaged in various legal actions in the normal course of
its investment and insurance operations. In the opinion of management,
any losses resulting from such actions would not have a material effect
on the Company's financial position.
64
<PAGE> 66
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
FORM 10-K
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
THE NORTHWESTERN MUTUAL LIFE
INSURANCE COMPANY
In respect of NML Variable Annuity Account A
and NML Variable Annuity Account C
(Registrant)
By /s/ James D. Ericson
-----------------------------------------
James D. Ericson
President and Chief Executive Officer
Date: March 23, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
TITLE
-----
<S> <C>
JAMES D. ERICSON Trustee, President and Chief Executive Officer
- - - - - - - - - - - - - - - - - -----------------------------
James D. Ericson
GARY E. LONG Vice President and Controller
- - - - - - - - - - - - - - - - - ----------------------------- (Principal Financial and Accounting Officer)
Gary E. Long
R. QUINTUS ANDERSON* Trustee
- - - - - - - - - - - - - - - - - -----------------------------
R. Quintus Anderson
EDWARD E. BARR* Trustee
- - - - - - - - - - - - - - - - - -----------------------------
Edward E. Barr
GORDON T. BEAHAM, III* Trustee
- - - - - - - - - - - - - - - - - -----------------------------
Gordon T. Beaham, III
ROBERT C. BUCHANAN* Trustee
- - - - - - - - - - - - - - - - - -----------------------------
Robert C. Buchanan
GEORGE A. DICKERMAN* Trustee
- - - - - - - - - - - - - - - - - -----------------------------
George A. Dickerman
PIERRE S. DU PONT* Trustee
- - - - - - - - - - - - - - - - - -----------------------------
Pierre S. Du Pont
J. E. GALLEGOS* Trustee
- - - - - - - - - - - - - - - - - -----------------------------
J. E. Gallegos
STEPHEN N. GRAFF* Trustee
- - - - - - - - - - - - - - - - - -----------------------------
Stephen N. Graff
PATRICIA ALBJERG GRAHAM* Trustee
- - - - - - - - - - - - - - - - - -----------------------------
Patricia Albjerg Graham
</TABLE>
65
<PAGE> 67
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
FORM 10-K
<TABLE>
<CAPTION>
TITLE
-----
<S> <C>
STEPHEN F. KELLER* Trustee
- - - - - - - - - - - - - - - - - -----------------------------
Stephen F. Keller
BARBARA A. KING* Trustee
- - - - - - - - - - - - - - - - - -----------------------------
Barbara A. King
J. THOMAS LEWIS* Trustee
- - - - - - - - - - - - - - - - - -----------------------------
J. Thomas Lewis
DANIEL F. McKEITHAN, JR.* Trustee
- - - - - - - - - - - - - - - - - -----------------------------
Daniel F. McKeithan, Jr.
GUY A. OSBORN* Trustee
- - - - - - - - - - - - - - - - - -----------------------------
Guy A. Osborn
TIMOTHY D. PROCTOR* Trustee
- - - - - - - - - - - - - - - - - -----------------------------
Timothy D. Proctor
H. MASON SIZEMORE, JR.* Trustee
- - - - - - - - - - - - - - - - - -----------------------------
H. Mason Sizemore, Jr.
HAROLD B. SMITH* Trustee
- - - - - - - - - - - - - - - - - -----------------------------
Harold B. Smith
SHERWOOD H. SMITH, JR.* Trustee
- - - - - - - - - - - - - - - - - -----------------------------
Sherwood H. Smith, Jr.
PETER M. SOMMERHAUSER* Trustee
- - - - - - - - - - - - - - - - - -----------------------------
Peter M. Sommerhauser
JOHN E. STEURI* Trustee
- - - - - - - - - - - - - - - - - -----------------------------
John E. Steuri
JOHN J. STOLLENWERK* Trustee
- - - - - - - - - - - - - - - - - -----------------------------
John J. Stollenwerk
BARRY L. WILLIAMS* Trustee
- - - - - - - - - - - - - - - - - -----------------------------
Barry L. Williams
KATHRYN D. WRISTON* Trustee
- - - - - - - - - - - - - - - - - -----------------------------
Kathryn D. Wriston
EDWARD J. ZORE Trustee
- - - - - - - - - - - - - - - - - -----------------------------
Edward J. Zore
</TABLE>
Each of the above signatures is affixed as of March 23, 2000
*By /s/ JAMES D. ERICSON
---------------------------------------
James D. Ericson, Attorney in fact, pursuant to
the Power of Attorney attached as exhibit 24.1
hereto.
66
<PAGE> 68
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
FORM 10-K
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE
- - - - - - - - - - - - - - - - - ------- ----------- ----
<S> <C> <C>
3.1 Restated Articles of Incorporation of The Northwestern Mutual
Life Insurance Company. (This exhibit was filed in electronic
format with Post-Effective Amendment No. 6 on Form N-4 for NML
Variable Annuity Account A, File No. 33-58476, CIK 0000790162,
dated November 13, 1995, and is incorporated herein by
reference.)
3.2 Amended By-Laws of The Northwestern Mutual Life Insurance Company. (This
exhibit was filed in electronic format with the Registration Statement on Form S-6 for
Northwestern Mutual Variable Life Account, File No. 333-59103, CIK 0000742277,
dated July 15, 1998, and is incorporated herein by reference.)
3.3 Resolution of the Board of Trustees of The Northwestern Mutual Life Insurance
Company creating "Northwestern Mutual Variable Annuity Account A". (This exhibit was
filed in electronic format with the Registration Statement on Form N-4 for NML Variable
Annuity Account A, File No. 333-22455, CIK 0000790162, dated February 27, 1997,
and is incorporated herein by reference.)
3.4 Resolution of the Board of Trustees of The Northwestern Mutual Life Insurance
Company creating Separate Account C............................................................... 69
3.5 Resolution of the Board of Trustees of The Northwestern Mutual Life Insurance
Company to use Separate Account C to facilitate the issuance and maintenance of the
Contracts and renaming the Account "NML Variable Annuity Account C"............................... 70
10.1 Flexible Payment Variable Annuity Front Load Contract, RR.V.A. (032000) (sex neutral).
(This exhibit was filed in electronic format with the Registration Statement on Form N-4
for NML Variable Annuity Account A, File No. 333-72913, CIK 0000790162,
dated January 27, 2000, and is incorporated herein by reference.)
10.2 Flexible Payment Variable Annuity Back Load Contract, RR.V.A. (032000) (sex neutral).
(This exhibit was filed in electronic format with the Registration Statement on Form N-4
for NML Variable Annuity Account A, File No. 333-72913, CIK 0000790162,
dated January 27, 2000, and is incorporated herein by reference.)
10.3 Variable Annuity Front Load and Back Load Contract Payment
Rate Tables, RR.V.A.B (032000), included in Exhibits 10.1 and
10.2 above (sex distinct).
10.4 Enhanced Death Benefit for Front Load and Back Load Contracts, VA. EDB. (032000),
included in Exhibits 10.1 and 10.2 above.
10.5 Waiver of Withdrawal Charge for Back Load Contract, VA.WWC. (032000), included
in Exhibit 10.2 above.
10.6 Application forms for Front Load and Back Load Contracts, included in Exhibits 10.1
and 10.2 above.
</TABLE>
67
<PAGE> 69
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
FORM 10-K
<TABLE>
<S> <C> <C>
10.7 Form of Participation Agreement Among Russell Insurance Funds, Russell Fund
Distributors, Inc. and The Northwestern Mutual Life Insurance Company. (This exhibit
was filed in electronic format with the Registration Statement on Form N-4 for NML
Variable Annuity Account A, File No. 333-72913, CIK 0000790162, dated
February 25, 1999, and is incorporated herein by reference.)
10.8 Form of Administrative Service Fee Agreement between The
Northwestern Mutual Life Insurance Company and Frank Russell
Company. (This exhibit was filed in electronic format with the
Registration Statement on Form N-4 for NML Variable Annuity
Account A, File No. 333-72913, CIK 0000790162, dated February
25, 1999, and is incorporated herein by reference.)
10.9 Distribution Contract. (This exhibit was filed in electronic format with the
Registration Statement on Form N-4 for NML Variable Annuity Account A,
File No. 333-22455, CIK 0000790162, dated February 27, 1997, and
is incorporated herein by reference.)
10.10 Group Combination Annuity Contract, NVP.1C.(0594), with
amended application, including Contract amendment (sex
neutral). (This exhibit was filed in electronic format with
Post-Effective Amendment No. 19 on Form N-4 for NML Variable
Annuity Account C, File No. 2-89905-01, CIK 0000790163, dated
February 25, 1999, and is incorporated herein by reference.)
10.11 Application Form for Group Combination Annuity Contract, included in Exhibit 10.10 above.
21.1 Subsidiaries of The Northwestern Mutual Life Insurance Company.................................... 72
24.1 Power of Attorney................................................................................. 74
27.1 NML Variable Annuity Account A Financial Data Schedule............................................ 76
27.2 NML Variable Annuity Account C Financial Data Schedule............................................ 77
27.3 The Northwestern Mutual Life Insurance Company Financial Data Schedule............................ 78
</TABLE>
68
<PAGE> 1
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
FORM 10-K
EXHIBIT 3.4
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
BOARD OF TRUSTEES
RESOLUTION ESTABLISHING SEPARATE ACCOUNT C
JULY 22, 1970
BE IT RESOLVED by the Board of Trustees of The Northwestern Mutual Life
Insurance Company (the "Company") that:
1. The Company shall and does hereby establish a separate account ("NML
Separate Account C") in accordance with the provisions of Section 206.385 of the
Wisconsin Statutes of 1967 to facilitate the issuance of certain agreements (the
"Agreements") which may be offered by the Company to the trustees of certain
pension and profit sharing plans in connection with the purchase of life
insurance policies and annuity contracts.
2. The amounts paid to the Company in connection with the Agreements,
less stated amounts as set forth therein, shall be allocated to Account C.
3. The income, if any, and gains or losses, realized or unrealized, of
Account C shall be credited to or charged against the amount so allocated to
Account C in accordance with the terms and conditions of the Agreements without
regard to the other income, gains or losses of the Company, and the assets
thereof shall not be chargeable with any liabilities arising out of any other
separate account or any other business of the Company.
4. Amounts paid to the Company in connection with the Agreements and
allocated to Account C shall be invested in shares of NML Fund, Inc. (the
"Fund") at the net asset value of such shares, except that other securities may
be substituted for the shares of the Fund as provided in the Agreements, and the
Company shall make appropriate arrangements with the Fund for the purchase by
Account C or shares of the Fund at the net asset value thereof.
5. Account C shall be registered as a unit investment trust under the
Investment Company Act of 1940.
6. $50,000,000 offering price of the Agreements or Units thereof or
such lesser amount as may be designated by the President of the Company, shall
be registered for sale under the Securities Act of 1933.
7. The officers of the Company are hereby authorized and directed to
take all action necessary or desirable to comply with the Investment Company Act
of 1940 and the Securities Act of 1933 and other applicable state and federal
laws in connection with offering the Agreements for sale and operation of
Account C, including, without limitation, the filing of registration statements,
and amendments and exhibits thereto and the securing of such exemptions from
such state and federal laws as they deem advisable.
BE IT FURTHER RESOLVED, that the President of the Company and other
officers of the Company are authorized and directed, under such directions as
may be specified, from time to time, by the Executive Committee to execute and
deliver such instruments and to do such acts and things as may be necessary or
desirable to carry out the purpose and intent of the foregoing resolution in the
form or substantially the form as adopted, including, without limitation,
determination of the terms and conditions of the Agreements; determination of
the state or states in which appropriate action shall be taken to obtain the
requisite qualification, registration and/or authorization for the sale of the
Agreements; performance on behalf of the Company of any and all such acts as
they may deem necessary or advisable to comply with applicable securities,
insurance and other laws of any such states and in connection therewith to
execute and file all requisite documents, including, but not limited to,
contracts, applications, reports, surety bonds, and irrevocable consents and
appointments of attorneys for service or process; and execution of such
contracts on behalf of the Company as may be necessary or desirable to
efficiently engage in the sale and distribution of the Agreements including,
without limitation, such contracts for custodial, safekeeping, transfer,
accounting, legal or disbursing services as may be necessary or desirable. The
execution by such officers of any document or the performance of any act in
connection with the foregoing matters shall conclusively establish their
authority therefore from the Company and the approval and ratification by the
Company of the documents so executed and the action so taken.
69
<PAGE> 1
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
FORM 10-K
EXHIBIT 3.5
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
BOARD OF TRUSTEES
RESOLUTION FOR GROUP VARIABLE ANNUITY CONTRACTS
ACCOUNT C
NOVEMBER 23, 1983
WHEREAS, NML Separate Account C ("Account C") was established by a
Resolution of the Board of Trustees on July 22, 1970 in accordance with the
Wisconsin Insurance Laws to facilitate the issuance of certain agreements (the
"Agreements") which have been offered and sold to certain pension and
profit-sharing plans; and
WHEREAS, the operations of Account C and the terms of the Agreements
have been modified from time to time as authorized by Committees of the Board of
Trustees and officers of the Company acting pursuant to delegated authority; and
WHEREAS, it is desired to offer group variable annuity contracts (the
"Contracts") for use in connection with (a) corporate pension and profit-sharing
plans meeting the requirements of Section 401(a) of the Internal Revenue Code of
1954, as amended (the "Code"), and (b) plans (commonly referred to as "H.R.-10
Plans") providing retirement benefits to self-employed individuals and their
employees and meeting the requirements of Section 401 or 403(a) of the Code.
NOW, THEREFORE, BE IT RESOLVED as follows:
1. Account C shall be operated by the Company to facilitate the
issuance and maintenance of the Agreements and the Contracts in accordance with
their terms, and the amounts paid to the Company in connection with the
Agreements and Contracts, less stated amounts as set forth therein, shall be
allocated to Account C.
2. The income, if any, and gains or losses, realized or unrealized, of
Account C shall be credited to or charged against the amounts so allocated to
Account C in accordance with the terms and conditions of the Agreements and the
Contracts without regard to the other income, gains or losses of the Company,
and the assets thereof shall not be chargeable with any liabilities arising out
of any other separate account or any other business of the Company.
3. Amounts allocated to Account C shall continue to be invested in
shares of NML Stock Fund, Inc., NML Bond Fund, Inc., NML Money Market Fund, Inc.
and NML One Fund, Inc. (the "Funds") at the net asset value of such shares,
except that other securities may be substituted for the shares of the Funds as
provided in the Agreements and the Contracts, and the Company shall maintain
appropriate arrangements with the Funds for the purchase by Account C of shares
of the Funds at the net asset value thereof.
4. $250,000,000 offering price of the Contracts, or units thereof, or
such lesser amount as may be designated by the President of the Company, to be
offered in connection with H.R.-10 Plans, shall be registered for sale under the
Securities Act of 1933.
5. The offering of the Agreements and the Contracts shall be limited to
H.R.-10 Plans and corporate pension and profit-sharing plans which meet the
requirements of Section 401(a) of the Code so as to preclude the necessity for
registration of Account C as a unit investment trust or otherwise under the
Investment Company Act of 1940, as amended.
6. The officers of the Company are hereby authorized and directed to
take all action necessary or desirable to comply with the Securities Act of 1933
and other applicable state and federal laws in connection with the offering of
Contracts for sale and the operation of Account C, including, without
limitation, the filing of registration statements, and amendments and exhibits
thereto; and the securing of such exemptions from and determinations and rulings
as to the application of state and federal laws as they deem advisable. The
Secretary of the Company is hereby appointed the agent of the Company to receive
any and all notices and communications from the Securities and Exchange
Commission in relation to such registration statements and amendments and
applications for such exemptions.
70
<PAGE> 2
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
FORM 10-K
7. The officers of the Company are authorized and directed, under such
directions as may be specified from time to time by the Insurance Products and
Marketing Committee, to execute and deliver such instruments and to do such acts
and things as may be necessary or desirable to carry out the purpose and intent
of the foregoing resolution in the form or substantially the form as adopted,
including, without limitation, determination of the terms and conditions of the
Contracts; determination of the state or states in which appropriate action
shall be taken to obtain the requisite qualification, registration and/or
authorization for the sale of the Contracts as such officers may deem advisable;
performance on behalf of the Company of any and all such acts as they may deem
necessary or advisable to comply with applicable securities, insurance and other
laws of any such states and in connection therewith to execute and file all
requisite documents, including, but not limited to, contracts, applications,
reports, surety bonds, and irrevocable consents and appointments of attorneys
for service of process; and execution of such Contracts on behalf of the Company
as may be necessary or desirable to efficiently engage in the sale and
distribution of the Contracts including, without limitation, such contracts for
custodial, safekeeping, transfer, accounting, legal or disbursing services as
may be necessary or desirable. The execution by such officers of any document or
the performance of any act in connection with the foregoing matters shall
conclusively establish their authority therefor from the Company and the
approval and ratification by the Company of the documents so executed and the
actions so taken.
8. The name of Account C is hereby changed to "NML Variable Annuity
Account C".
9. To the extent that this resolution is inconsistent with the
resolution which established Account C, this resolution shall control. In all
other respects, the resolution which established Account C shall remain in full
force and effect.
71
<PAGE> 1
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
FORM 10-K
EXHIBIT 21.1
SUBSIDIARIES OF THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
(as of December 31, 1999)
The following sets forth the name and jurisdiction of incorporation of the
subsidiaries of The Northwestern Mutual Life Insurance Company.
<TABLE>
<CAPTION>
Name of Subsidiary Jurisdiction of Incorporation
- - - - - - - - - - - - - - - - - ------------------ -----------------------------
<S> <C>
Alexandra International Sales, Inc. U.S. Virgin Islands
Amber, Inc. Delaware
Baird Financial Corporation Wisconsin
Baraboo, Inc. Delaware
Bayridge, Inc. Delaware
Bradford, Inc. Delaware
Brendan International Sales, Inc. U.S. Virgin Islands
Brian International Sales, Inc. U.S. Virgin Islands
Buffalo Promotions, Inc. Texas
Burgundy, Inc. Delaware
Carlisle Ventures, Inc. Delaware
Cass Corporation Delaware
Chateau, Inc. Delaware
Coral, Inc. Delaware
Diversey, Inc. Delaware
Eiger Corporation Wisconsin
Elderwood International Sales, Inc. U.S. Virgin Islands
Elizabeth International Sales, Inc. U.S. Virgin Islands
Frank Russell Company Washington
Greenway Sports, Inc. Texas
Hazel, Inc. Delaware
Higgins, Inc. Delaware
Highbrook International Sales, Inc. U.S. Virgin Islands
Hobby, Inc. Delaware
INV Corp. Delaware
Jack International Sales, Inc. U.S. Virgin Islands
Justin International FSC, Inc. U.S. Virgin Islands
KerryAnne International Sales, Inc. U.S. Virgin Islands
Klode, Inc. Delaware
Kristiana International Sales, Inc. U.S. Virgin Islands
Lake Bluff, Inc. Delaware
Larkin, Inc. Delaware
Logan, Inc. Delaware
Lydell, Inc. Delaware
Mallon International Sales, Inc. U.S. Virgin Islands
Marina Pacific, Ltd. California
Maroon, Inc. Delaware
Mason & Marshall, Inc. Delaware
Mason Street Funds, Inc. Maryland
Mitchell, Inc. Delaware
NML-CBO, LLC Delaware
NML Development Corporation Delaware
NML/Mid-Atlantic, Inc. New Jersey
NML Real Estate Holdings, LLC Wisconsin
NML Securities Holdings, LLC Wisconsin
</TABLE>
72
<PAGE> 2
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
FORM 10-K
<TABLE>
<S> <C>
NML/Tallahassee, Inc. Florida
NW Greenway #1, Inc. Texas
NW Greenway #9, Inc. Texas
NW Pipeline, Inc. Texas
Nicolet, Inc. Delaware
North Van Buren, Inc. Delaware
Northwestern Financial Group, L.L.C. Wisconsin
Northwestern Foreign Holdings B.V. Netherlands
Northwestern International Holdings, Inc. Delaware
Northwestern Investment Management Company Wisconsin
Northwestern Long Term Care Insurance Company Illinois
Northwestern Mutual Investment Services, LLC Wisconsin
Northwestern Mutual Las Vegas, Inc. Nevada
Northwestern Mutual Life International, Inc. Delaware
Northwestern Mutual Series Fund, Inc. Maryland
Northwestern Reinsurance Holdings N.V. Netherlands
Olive, Inc. Delaware
PBClub, Inc. Delaware
Painted Rock Development Corporation Arizona
Park Forest Northeast, Inc. Delaware
Pembrook, Inc. Delaware
RE Corporation Delaware
Regina International Sales, Inc. U.S. Virgin Islands
Robert W. Baird & Co. Incorporated Wisconsin
Rocket Sports, Inc. Texas
Russet, Inc. Delaware
Ryan, Inc. Delaware
Saskatoon Centre, Limited Ontario, Canada
Sean International Sales, Inc. U.S. Virgin Islands
Solar Resources, Inc. Wisconsin
Stadium and Arena Management, Inc. Delaware
Summit Sports, Inc. Texas
The Grand Avenue Corporation Wisconsin
Travers International Sales, Inc. U.S. Virgin Islands
Tupelo, Inc. Delaware
White Oaks, Inc. Delaware
</TABLE>
Certain non-insurance subsidiaries are omitted on the basis that,
considered in the aggregate, they did not constitute a significant subsidiary as
defined by Regulation S-X at December 31, 1999.
73
<PAGE> 1
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
FORM 10-K
EXHIBIT 24.1
POWER OF ATTORNEY
The undersigned Trustees of THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
hereby constitute and appoint James D. Ericson and Robert E. Carlson, or either
of them, their true and lawful attorneys and agents to sign the names of the
undersigned Trustees to (1) the registration statement or statements to be filed
under the Securities Act of 1933 and to any instrument or document filed as part
thereof or in connection therewith or in any way related thereto, and any and
all amendments thereto in connection with variable contracts issued or sold by
The Northwestern Mutual Life Insurance Company or any separate account credited
therein and (2) the Form 10-K Annual Report or Reports of The Northwestern
Mutual Life Insurance Company and/or its separate accounts for its or their
fiscal year ended December 31, 1999 to be filed under the Securities Exchange
Act of 1934 and to any instrument or document as part thereof or in connection
therewith or in any way related thereto, and any and all amendments thereto.
"Variable contracts" as used herein means any contracts providing for benefits
or values which may vary according to the investment experience of any separate
account maintained by The Northwestern Mutual Life Insurance Company, including
variable annuity contracts and variable life insurance policies. Each of the
undersigned hereby ratifies and confirms all that said attorneys and agents
shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, each of the undersigned has subscribed these
presents this 28th day of July, 1999.
R. QUINTUS ANDERSON Trustee
------------------------------------
R. Quintus Anderson
EDWARD E. BARR Trustee
------------------------------------
Edward E. Barr
GORDON T. BEAHAM, III Trustee
------------------------------------
Gordon T. Beaham, III
ROBERT C. BUCHANAN Trustee
------------------------------------
Robert C. Buchanan
ROBERT E. CARLSON Trustee
------------------------------------
Robert E. Carlson
GEORGE A. DICKERMAN Trustee
------------------------------------
George A. Dickerman
PIERRE S. DU PONT Trustee
------------------------------------
Pierre S. Du Pont
JAMES D. ERICSON Trustee
------------------------------------
James D. Ericson
J. E. GALLEGOS Trustee
------------------------------------
J. E. Gallegos
STEPHEN N. GRAFF Trustee
------------------------------------
Stephen N. Graff
PATRICIA ALBJERG GRAHAM Trustee
------------------------------------
Patricia Albjerg Graham
74
<PAGE> 2
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
FORM 10-K
STEPHEN F. KELLER Trustee
------------------------------------
Stephen F. Keller
BARBARA A. KING Trustee
------------------------------------
Barbara A. King
J. THOMAS LEWIS Trustee
------------------------------------
J. Thomas Lewis
DANIEL F. McKEITHAN, JR. Trustee
------------------------------------
Daniel F. McKeithan, Jr.
GUY A. OSBORN Trustee
------------------------------------
Guy A. Osborn
TIMOTHY D. PROCTOR Trustee
------------------------------------
Timothy D. Proctor
H. MASON SIZEMORE, JR. Trustee
------------------------------------
H. Mason Sizemore, Jr.
HAROLD B. SMITH Trustee
------------------------------------
Harold B. Smith
SHERWOOD H. SMITH, JR. Trustee
------------------------------------
Sherwood H. Smith, Jr.
PETER M. SOMMERHAUSER Trustee
------------------------------------
Peter M. Sommerhauser
JOHN E. STEURI Trustee
------------------------------------
John E. Steuri
JOHN J. STOLLENWERK Trustee
------------------------------------
John J. Stollenwerk
BARRY L. WILLIAMS Trustee
------------------------------------
Barry L. Williams
KATHRYN D. WRISTON Trustee
------------------------------------
Kathryn D. Wriston
75
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NML
VARIABLE ANNUITY ACCOUNT A DECEMBER 31, 1999 FINANCIAL STATEMENTS AND IS
QUALIFIED IN IS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<CIK>0000790162
<NAME>NML VARIABLE ANNUITY ACCOUNT A
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<INVESTMENTS-AT-COST> 558,910
<INVESTMENTS-AT-VALUE> 785,267
<RECEIVABLES> 2,341
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 787,608
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,403
<TOTAL-LIABILITIES> 3,403
<SENIOR-EQUITY> 784,204
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 784,204
<DIVIDEND-INCOME> 56,820
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 8,724
<NET-INVESTMENT-INCOME> 48,096
<REALIZED-GAINS-CURRENT> 51,300
<APPREC-INCREASE-CURRENT> 9,271
<NET-CHANGE-FROM-OPS> 108,667
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NML
VARIABLE ANNUITY ACCOUNT C DECEMBER 31, 1999 FINANCIAL STATEMENTS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000790163
<NAME> NML VARIABLE ANNUITY ACCOUNT C
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<INVESTMENTS-AT-COST> 515,437
<INVESTMENTS-AT-VALUE> 720,484
<RECEIVABLES> 1,427
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 721,910
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,194
<TOTAL-LIABILITIES> 1,194
<SENIOR-EQUITY> 720,716
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 720,716
<DIVIDEND-INCOME> 43,815
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 3,445
<NET-INVESTMENT-INCOME> 40,369
<REALIZED-GAINS-CURRENT> 41,106
<APPREC-INCREASE-CURRENT> 36,857
<NET-CHANGE-FROM-OPS> 118,332
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY DECEMBER 31, 1999 FINANCIAL
STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS
</LEGEND>
<CIK> 0000073076
<NAME> The Northwestern Mutual Life Insurance Company
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1
<DEBT-HELD-FOR-SALE> 0
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 36,792
<EQUITIES> 7,108
<MORTGAGE> 13,416
<REAL-ESTATE> 1,666
<TOTAL-INVEST> 71,522
<CASH> 1,159
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 0
<TOTAL-ASSETS> 85,985
<POLICY-LOSSES> 59,108
<UNEARNED-PREMIUMS> 1,746
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 3,100
<NOTES-PAYABLE> 0
0
0
<COMMON> 0
<OTHER-SE> 5,069
<TOTAL-LIABILITY-AND-EQUITY> 85,985
8,344
<INVESTMENT-INCOME> 4,766
<INVESTMENT-GAINS> 0
<OTHER-INCOME> 970
<BENEFITS> 9,008
<UNDERWRITING-AMORTIZATION> 1,287
<UNDERWRITING-OTHER> 3,091
<INCOME-PRETAX> 694
<INCOME-TAX> 203
<INCOME-CONTINUING> 491
<DISCONTINUED> 0
<EXTRAORDINARY> 846
<CHANGES> 0
<NET-INCOME> 1,337
<EPS-BASIC> 0
<EPS-DILUTED> 0
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
