<PAGE> 1
Registration No. 33-89188
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
PRE-EFFECTIVE AMENDMENT NO. 1 TO
FORM S-6
FOR REGISTRATION
UNDER
THE SECURITIES ACT OF 1933 OF SECURITIES
OF UNIT INVESTMENT TRUSTS REGISTERED
ON FORM N-8B-2
----------------
NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT
(EXACT NAME OF TRUST)
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
(NAME OF DEPOSITOR)
720 EAST WISCONSIN AVENUE
MILWAUKEE, WISCONSIN 53202
(COMPLETE ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES)
JOHN M. BREMER, SENIOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
720 EAST WISCONSIN AVENUE
MILWAUKEE, WISCONSIN 53202
(NAME AND COMPLETE ADDRESS OF AGENT FOR SERVICE)
VARIABLE COMPLIFE INSURANCE POLICIES - REGISTRATION OF INDEFINITE AMOUNT OF
SECURITIES PURSUANT TO RULE 24f-2 UNDER THE INVESTMENT COMPANY ACT OF 1940
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
October 11, 1995
----------------
<PAGE> 2
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT
CROSS-REFERENCE SHEET
Cross reference sheet showing location in Prospectus of information
required by Form N-8B-2.
<TABLE>
<CAPTION>
Item Number Heading in Prospectus
----------- ---------------------
<S> <C>
1 . . . . . . . . . . . . Cover Page
2 . . . . . . . . . . . . Cover Page; Northwestern Mutual Life
3 . . . . . . . . . . . . Not Applicable
4 . . . . . . . . . . . . Distribution of the Policies
5 . . . . . . . . . . . . The Account and its Divisions
6 . . . . . . . . . . . . The Account and its Divisions
7 . . . . . . . . . . . . Not Applicable
8 . . . . . . . . . . . . Not Applicable
9 . . . . . . . . . . . . Legal Proceedings
10(a). . . . . . . . . . . Other Policy Provisions: Owner
10(b). . . . . . . . . . . Annual Dividends
10(c) and (d). . . . . . . Death Benefit, Cash Value, Loans
and Withdrawals, Right to Return Policy,
Right to Exchange for a Fixed Benefit
Policy, Payment Plans
10(e). . . . . . . . . . . Premiums, Paid-Up Insurance,
Reinstatement
10(f). . . . . . . . . . . Voting Rights
10(g). . . . . . . . . . . Voting Rights, Substitution of Fund
Shares and Other Changes
10(h). . . . . . . . . . . Voting Rights, Substitution of Fund
Shares and Other Changes
10(i). . . . . . . . . . . Premiums, Death Benefit, Annual
Dividends, Other Policy Provisions:
Payment Plans
11 . . . . . . . . . . . . The Account, The Fund, Index 500 Stock
Portfolio, Select Bond Portfolio, Money
Market Portfolio, Balanced Portfolio,
Growth and Income Stock Portfolio, Growth
Stock Portfolio, Aggressive Growth Stock
Portfolio, High Yield Bond Portfolio and
International Equity Portfolio
12 . . . . . . . . . . . . The Fund
13 . . . . . . . . . . . . Summary, The Fund, Deductions and
Charges, Distribution of the Policies
14 . . . . . . . . . . . . Requirements for Insurance
15 . . . . . . . . . . . . Premiums, Allocations to the Account
16 . . . . . . . . . . . . The Account, The Fund, Allocations to
the Account
17 . . . . . . . . . . . . Same Captions as Items 10(a), (c),
and (d)
18 . . . . . . . . . . . . The Account, Annual Dividends
19 . . . . . . . . . . . . Reports
20 . . . . . . . . . . . . Not Applicable
</TABLE>
-ii-
<PAGE> 3
<TABLE>
<S> <C>
21 . . . . . . . . . . . . Loans and Withdrawals
22 . . . . . . . . . . . . Not Applicable
23 . . . . . . . . . . . . Not Applicable
24 . . . . . . . . . . . . Not Applicable
25 . . . . . . . . . . . . Northwestern Mutual Life
26 . . . . . . . . . . . . The Fund, Deductions and Charges
27 . . . . . . . . . . . . Northwestern Mutual Life
28 . . . . . . . . . . . . Management
29 . . . . . . . . . . . . Not Applicable
30 . . . . . . . . . . . . Not Applicable
31 . . . . . . . . . . . . Not Applicable
32 . . . . . . . . . . . . Not Applicable
33 . . . . . . . . . . . . Not Applicable
34 . . . . . . . . . . . . Not Applicable
35 . . . . . . . . . . . . Northwestern Mutual Life
36 . . . . . . . . . . . . Not Applicable
37 . . . . . . . . . . . . Not Applicable
38 . . . . . . . . . . . . Distribution of the Policies
39 . . . . . . . . . . . . Distribution of the Policies
40 . . . . . . . . . . . . The Fund
41 . . . . . . . . . . . . The Fund, Distribution of the Policies
42 . . . . . . . . . . . . Not Applicable
43 . . . . . . . . . . . . Not Applicable
44 . . . . . . . . . . . . The Fund, Requirements for Insurance,
Premiums, Death Benefit, Cash Value
45 . . . . . . . . . . . . Not Applicable
46 . . . . . . . . . . . . Same Captions as Items 10(c) and (d)
47 . . . . . . . . . . . . Not Applicable
48 . . . . . . . . . . . . Not Applicable
49 . . . . . . . . . . . . Not Applicable
50 . . . . . . . . . . . . The Account
51 . . . . . . . . . . . . Numerous Captions
52 . . . . . . . . . . . . Substitution of Fund Shares and
Other Changes
53 . . . . . . . . . . . . Not Applicable
54 . . . . . . . . . . . . Not Applicable
55 . . . . . . . . . . . . Not Applicable
56 . . . . . . . . . . . . Not Applicable
57 . . . . . . . . . . . . Not Applicable
58 . . . . . . . . . . . . Not Applicable
59 . . . . . . . . . . . . Financial Statements
</TABLE>
-iii-
<PAGE> 4
October 11, 1995
P R O S P E C T U S
Northwestern Mutual Variable CompLife(R)
This prospectus describes the Variable CompLife(R) Policy (the "Policy")
offered by The Northwestern Mutual Life Insurance Company. The Policy is
designed to provide lifetime insurance coverage on the insured named in the
Policy. Both the death benefit and the cash value provided by the Policy will
vary daily to reflect the investment experience of Northwestern Mutual Variable
Life Account (the "Account").
The owner of a Policy may allocate the net premiums to one or more of the
nine divisions of the Account. The assets of each division will be invested in a
corresponding Portfolio of Northwestern Mutual Series Fund, Inc. (the "Fund").
The prospectus for the Fund, attached to this prospectus, describes the
investment objectives of the nine portfolios: the Index 500 Stock Portfolio, the
Select Bond Portfolio, the Money Market Portfolio, the Balanced Portfolio, the
Growth and Income Stock Portfolio, the Growth Stock Portfolio, the Aggressive
Growth Stock Portfolio, the High Yield Bond Portfolio and the International
Equity Portfolio.
Variable Whole Life Policy with Additional Protection
The Policy provides for a scheduled premium payable at least annually, but
the owner of a Policy may pay more than the scheduled amount. In some situations
the owner may pay less than the scheduled amount. Northwestern Mutual Life
guarantees that the death benefit will never be less than the Policy's initial
amount of whole life insurance, regardless of the Account's investment
experience, so long as scheduled premiums are paid when due and no Policy debt
is outstanding. The Policy may include insurance which is guaranteed for only a
specified number of years. There is no guaranteed minimum cash value.
In the early years of a Policy it is likely that the cash value will be less
than the premium amounts accumulated at interest. This is because of the sales
and insurance costs for a new Policy. Deductions for sales costs and
administrative expenses are made from the cash values of Policies surrendered
during the early Policy years. Therefore a Policy should be purchased only if
the purchaser intends to keep it in force for a reasonably long period.
A Policy may be returned for a full refund for a limited period of time. See
"Right to Return Policy", p.15.
COMPLIFE(R) IS A REGISTERED SERVICE MARK OF THE NORTHWESTERN MUTUAL LIFE
INSURANCE COMPANY.
The assets of the High Yield Bond Division of the Account are invested in
shares of the High Yield Bond Portfolio of the Fund, which invests primarily in
fixed income securities that are rated below investment grade by the major
rating agencies. Such securities are sometimes known as "junk bonds" and are
considered speculative. Investors should carefully consider the risks associated
with such investments, as described in the Fund's prospectus attached hereto,
and should understand that high yield fixed income securities are not
appropriate for short-term investment purposes.
IT MAY NOT BE ADVANTAGEOUS TO REPLACE EXISTING INSURANCE WITH A VARIABLE LIFE
INSURANCE POLICY. See DEDUCTIONS AND CHARGES and CASH VALUE.
THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED BY THE CURRENT PROSPECTUS FOR
NORTHWESTERN MUTUAL SERIES FUND, INC. WHICH IS ATTACHED HERETO, AND SHOULD
BE RETAINED FOR FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
[NORTHWESTERN MUTUAL LIFE LOGO]
720 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
(414) 271-1444
<PAGE> 5
CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Summary .................................................................. 3
Variable Life Insurance ................................................ 3
The Account and its Divisions .......................................... 3
The Policy ............................................................. 3
Premiums ............................................................. 3
Death Benefit ........................................................ 3
Cash Value ........................................................... 3
Deductions and Charges ............................................... 4
From Premiums ...................................................... 4
From Policy Value .................................................. 4
From the Assets of the Account and the Fund ........................ 4
Transaction Charges ................................................ 4
Surrender Charges .................................................. 4
The Northwestern Mutual Life Insurance Company,
Northwestern Mutual Variable Life Account and
Northwestern Mutual Series Fund, Inc. ................................ 5
Northwestern Mutual Life .............................................. 5
The Account ........................................................... 5
The Fund .............................................................. 5
Index 500 Stock Portfolio .......................................... 5
Select Bond Portfolio .............................................. 5
Money Market Portfolio ............................................. 6
Balanced Portfolio ................................................. 6
Growth and Income Stock Portfolio .................................. 6
Growth Stock Portfolio ............................................. 6
Aggressive Growth Stock Portfolio .................................. 6
High Yield Bond Portfolio .......................................... 6
International Equity Portfolio ..................................... 6
Detailed Information About the Policy .................................... 6
The Policy Design ..................................................... 6
Requirements for Insurance ............................................ 7
Premiums .............................................................. 7
Death Benefit ......................................................... 9
Policy Value and Paid-Up Additional Insurance ......................... 10
Allocations to the Account ............................................ 10
Deductions and Charges ................................................ 10
Deductions from Premiums ........................................... 10
Charges Against the Policy Value ................................... 11
Charges Against the Account Assets ................................. 11
Transaction Charges ................................................ 12
Surrender Charges .................................................. 12
Guarantee of Premiums, Deductions
and Charges .......................................................... 13
Cash Value ............................................................ 13
Annual Dividends ...................................................... 13
Loans and Withdrawals ................................................. 14
Excess Amount ......................................................... 15
Paid-Up Insurance ..................................................... 15
Reinstatement ......................................................... 15
Right to Return Policy ................................................ 15
Right to Exchange for a Fixed Benefit Policy .......................... 16
Other Policy Provisions ............................................... 16
Owner .............................................................. 16
Beneficiary ........................................................ 16
Incontestability ................................................... 16
Suicide ............................................................ 16
Misstatement of Age or Sex ......................................... 16
Collateral Assignment .............................................. 16
Payment Plans ...................................................... 16
Deferral of Determination and Payment .............................. 16
Voting Rights ......................................................... 16
Substitution of Fund Shares
and Other Changes .................................................... 17
Reports ............................................................... 17
Special Policy for Employers .......................................... 17
Distribution of the Policies .......................................... 18
Tax Treatment of Policy Benefits ...................................... 18
Other Information ........................................................ 18
Management ............................................................ 18
Regulation ............................................................ 21
Legal Proceedings ..................................................... 21
Registration Statement ................................................ 21
Experts ............................................................... 21
Financial Statements ..................................................... 22
Financial Statements of the Account
(for the six months ended June 30, 1995
-- unaudited) ........................................................ 22
Report of Independent Accountants
(for year ending December 31, 1994) .................................. 27
Financial Statements of the Account
(for year ending December 31, 1994) .................................. 28
Financial Statements of Northwestern Mutual Life
(for the three years ending
December 31, 1994) ................................................... 32
Report of Independent Accountants
(for the three years ending
December 31, 1994) ................................................... 44
Appendix ................................................................. 45
</TABLE>
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO PERSON IS AUTHORIZED TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS.
<PAGE> 6
SUMMARY
The following summary provides a brief overview of the Account and the
Policy. It omits details which are included elsewhere in this prospectus and the
attached Fund prospectus and in the terms of the Policy.
VARIABLE LIFE INSURANCE
Variable life insurance is cash value life insurance and is similar in many
ways to traditional fixed benefit life insurance. Variable life insurance allows
the policyowner to direct the premiums, after certain deductions, among a range
of investment options. The variable life insurance death benefit and cash value
vary daily to reflect the performance of the selected investments. Since a
substantial part of the premium pays for the insurance risk of death a variable
life insurance policy should not be considered unless the primary need is life
insurance protection.
THE ACCOUNT AND ITS DIVISIONS
Northwestern Mutual Variable Life Account is the investment vehicle for the
Policies. The Account has nine divisions. The owner of the Policy determines how
net premiums are to be apportioned. Up to six divisions may be selected at any
one point in time. The assets of each division are invested in a corresponding
Portfolio of Northwestern Mutual Series Fund, Inc. The nine Portfolios are the
Index 500 Stock Portfolio, the Select Bond Portfolio, the Money Market
Portfolio, the Balanced Portfolio, the Growth and Income Stock Portfolio, the
Growth Stock Portfolio, the Aggressive Growth Stock Portfolio, the High Yield
Bond Portfolio and the International Equity Portfolio. The investment objectives
of the Portfolios are briefly described herein. See "The Fund", p. 5. For
additional information see the attached prospectus for the Fund.
THE POLICY
PREMIUMS
The Policy provides for a scheduled premium for the Minimum Guaranteed Death
Benefit and any Additional Protection purchased as part of the Policy. The
Minimum Guaranteed Death Benefit is the initial amount of whole life insurance
provided by the Policy. Additional Protection is insurance which does not have a
lifetime guarantee, but is guaranteed for a specified period. The scheduled
premium may include additional amounts to purchase variable paid-up additional
insurance or to increase Policy Value. The scheduled premium also includes the
amount required for any additional benefits that are purchased with the Policy.
The Policy permits payment of optional unscheduled additional premiums, within
limits, to purchase variable paid-up additional insurance or to increase Policy
Value. Payment of premiums may be suspended if it is determined under a certain
set of assumptions that the Policy Value is already sufficient to cover future
insurance costs. Resumption of premiums may be required in the future if the
Policy Value becomes insufficient. The Policy Value reflects investment
experience as well as premiums paid and the cost of insurance and other charges.
After a Policy is issued the amount of scheduled premiums may be increased, or
decreased, within limits, at the option of the policyowner. Premiums are payable
at least annually.
DEATH BENEFIT
Northwestern Mutual Life guarantees that the Minimum Guaranteed Death
Benefit provided by a Policy will be paid upon the death of the insured,
regardless of investment experience, if scheduled premiums are paid when due and
no Policy debt is outstanding. The death benefit will be increased by the amount
of any Additional Protection in force. The Additional Protection is guaranteed
for a period which depends on the sex and risk classification and age of the
insured when the Policy is issued and on the proportions of Minimum Guaranteed
Death Benefit and Additional Protection. The death benefit will also be
increased by the amount of any variable paid-up additional insurance, any excess
Policy Value and any amount needed to meet federal income tax requirements for
life insurance.
CASH VALUE
The cash value of a Policy is not guaranteed and varies daily to reflect
investment experience. A Policy may be surrendered for its cash value. A
surrender charge applies during the first 15 policy years. Partial surrenders
are permitted by administrative practice if the remaining Policy meets minimum
size requirements.
3
<PAGE> 7
DEDUCTIONS AND CHARGES
FROM PREMIUMS
- Deduction of 3.5% for state and federal taxes attributable to premiums
- Sales load of 4.5%
- Annual Policy fee of $84, currently expected to be reduced to $60 after
ten years
- Annual charge of $0.12 per $1,000 of Minimum Guaranteed Death Benefit
- Annual expense charge of $0.12 per $1,000 of Minimum Guaranteed Death
Benefit and Additional Protection (currently expected to be charged for
ten years only)
- Any extra premium charged for insureds who do not qualify as select,
standard plus or standard risks
- Any extra premium for additional benefits purchased with the Policy
FROM POLICY VALUE
- An annual charge, based on the amount at risk and the attained age and
risk classification of the insured, with rates based on the 1980 CSO
Mortality Tables. This charge also applies for the values which support
any paid-up additional insurance.
- Any surrender charges, administrative charges or decrease in Policy
debt that may result from a withdrawal, a decrease in the face amount
of insurance or a transfer of Policy Value to paid-up insurance
FROM THE ASSETS OF THE ACCOUNT AND THE FUND
- A daily charge at the annual rate of .60% of the account assets for
mortality and expense risks
- A daily charge for investment advisory and other services provided to
the Fund. The total Fund expenses vary by Portfolio and currently fall
in an approximate range of .22% to .87% of assets on an annual basis.
TRANSACTION CHARGES
- Fee of up to $25 (currently waived) for transfers among the Account
Divisions
- Fee of up to $25 (currently waived) for withdrawals of Excess Amount
- Charge for administrative costs to process a partial surrender,
currently expected to be $250
SURRENDER CHARGES
- Surrender charges for sales and issuance expenses deducted from Policy
proceeds upon surrender of the Policy during the first 15 years
4
<PAGE> 8
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY,
NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT AND
NORTHWESTERN MUTUAL SERIES FUND, INC.
NORTHWESTERN MUTUAL LIFE
The Northwestern Mutual Life Insurance Company is a mutual life insurance
company organized by a special act of the Wisconsin Legislature in 1857. It is
the nation's seventh largest life insurance company, based on total assets in
excess of $48 billion on December 31, 1994 and is licensed to conduct a
conventional life insurance business in the District of Columbia and in all
states of the United States. Northwestern Mutual Life sells life and disability
insurance policies and annuity contracts through its own field force of
approximately 6,000 full time producing agents.
THE ACCOUNT
Northwestern Mutual Variable Life Account was established by the Trustees of
Northwestern Mutual Life on November 23, 1983, in accordance with the provisions
of Wisconsin insurance law. Under Wisconsin law the income, gains and losses,
realized or unrealized, of the Account are credited to or charged against the
assets of the Account without regard to other income, gains or losses of
Northwestern Mutual Life. The Account is used only for variable life insurance
policies. However, the policies issued prior to the date of this prospectus are
different from the Variable CompLife(R) Policies described herein. The older
policies are described in a separate prospectus and are offered only in states
where the Variable CompLife Policies are not yet available.
The Account is registered as a unit investment trust under the Investment
Company Act of 1940. Such registration does not involve supervision of
management or investment practices or policies. The Account has nine divisions.
All of the assets of each division are invested in shares of the corresponding
Portfolio of the Fund described below.
THE FUND
Northwestern Mutual Series Fund, Inc. is a mutual fund of the series type
registered under the Investment Company Act of 1940 as an open-end diversified
management investment company. Shares of each Portfolio of the Fund are
purchased by the corresponding division of the Account at their net asset value
without any sales charge.
The investment adviser for the Fund is Northwestern Mutual Investment
Services, Inc. ("NMIS"), a wholly-owned subsidiary of Northwestern Mutual Life.
The investment advisory agreements for the respective Portfolios provide that
NMIS will provide services and bear certain expenses of the Fund. For providing
investment advisory and other services and bearing Fund expenses, the Fund pays
NMIS a fee at an annual rate which ranges from .20% of the aggregate average
daily net assets of the Index 500 Stock Portfolio to a maximum of .69% for the
International Equity Portfolio, based on 1994 asset size. Other expenses borne
by the Portfolios range from 0% for the Select Bond, Money Market and Balanced
Portfolios to .18% for the International Equity Portfolio. Northwestern Mutual
Life provides certain personnel and facilities used by NMIS in performing its
investment advisory functions and is a party to the investment advisory
agreement. J.P. Morgan Investment Management, Inc. and Templeton Investment
Counsel, Inc. have been retained under investment sub-advisory agreements to
provide investment advice to the Growth and Income Stock Portfolio and the
International Equity Portfolio, respectively.
The investment objectives and types of investments for each of the nine
Portfolios of the Fund are set forth below. There can be no assurance that the
objectives of the Portfolios will be realized. For more information about the
investment objectives and policies, the attendant risk factors and expenses see
the Fund prospectus.
INDEX 500 STOCK PORTFOLIO. The investment objective of the Index 500 Stock
Portfolio is to achieve investment results that approximate the performance of
the Standard & Poor's 500 Composite Stock Price Index ("S&P 500 Index"). The
Portfolio will attempt to meet this objective by investing in stocks included in
the S&P 500 Index. Stocks generally are more volatile than debt securities and
involve greater investment risks.
SELECT BOND PORTFOLIO. The primary investment objective of the Select Bond
Portfolio is to provide as high a level of long-term total rate of return as is
consistent with prudent investment risk. A secondary objective is to seek
preservation of shareholders' capital. The Select Bond Portfolio will invest
primarily in debt securities. The value of debt securities will tend to rise and
fall inversely with the rise and fall of interest rates.
5
<PAGE> 9
MONEY MARKET PORTFOLIO. The investment objective of the Money Market Portfolio
is to realize maximum current income consistent with liquidity and stability of
capital. The Money Market Portfolio will invest in money market instruments and
other debt securities with maturities generally not exceeding one year. The
return produced by these securities will reflect fluctuations in short-term
interest rates.
BALANCED PORTFOLIO. The investment objective of the Balanced Portfolio is to
realize as high a level of long-term total rate of return as is consistent with
prudent investment risk. The Balanced Portfolio will invest in common stocks and
other equity securities, bonds and money market instruments. Investment in the
Balanced Portfolio necessarily involves the risks inherent in stocks and debt
securities of varying maturities, including the risk that the Portfolio may
invest too much or too little of its assets in each type of security at any
particular time.
GROWTH AND INCOME STOCK PORTFOLIO. The investment objective of the Growth and
Income Stock Portfolio is long-term growth of capital and income. Ordinarily the
Portfolio pursues its investment objectives by investing primarily in
dividend-paying common stock.
GROWTH STOCK PORTFOLIO. The investment objective of the Growth Stock Portfolio
is long-term growth of capital; current income is secondary. The Portfolio will
seek to achieve this objective by selecting investments in companies which have
above average earnings growth potential.
AGGRESSIVE GROWTH STOCK PORTFOLIO. The investment objective of the Aggressive
Growth Stock Portfolio is to achieve long-term appreciation of capital primarily
by investing in the common stocks of companies which can reasonably be expected
to increase their sales and earnings at a pace which will exceed the growth rate
of the nation's economy over an extended period.
HIGH YIELD BOND PORTFOLIO. The investment objective of the High Yield Bond
Portfolio is to achieve high current income and capital appreciation by
investing primarily in fixed income securities that are rated below investment
grade by the major rating agencies.
INTERNATIONAL EQUITY PORTFOLIO. The investment objective of the International
Equity Portfolio is long-term capital growth. It pursues its objective through a
flexible policy of investing in stocks and debt securities of companies and
governments outside the United States.
DETAILED INFORMATION ABOUT THE POLICY
THE POLICY DESIGN
The simplified description of the Variable CompLife(R) Policy design in this
section is intended to help the reader understand how the Policy is constructed.
It omits details and important qualifications which are discussed in the
following sections.
The Policy combines a Minimum Guaranteed Death Benefit with Additional
Protection in an integrated policy design. The Minimum Guaranteed Death Benefit
represents permanent life insurance guaranteed for the lifetime of the insured
if premiums are paid when due and no Policy debt is outstanding. The Additional
Protection is guaranteed for a period of years which depends on the sex and risk
classification and age of the insured when the Policy is issued and the relative
proportions of Minimum Guaranteed Death Benefit and Additional Protection. For
an insured aged less than 43 the guaranteed period is not less than ten years.
It is generally longer for younger insureds and shorter for insureds who are
older, but will not be less than six years.
Net premiums are invested in the Account divisions selected by the
Policyowner and increase the Policy Value. The Policy Value is the cumulative
amount invested, adjusted for investment results, reduced by the cost of
insurance. The cost of insurance is based on the net amount at risk. This is the
amount of insurance in force less the Policy Value. The cost of insurance also
reflects the attained age of the insured each year. If premiums are paid when
due and investment experience is favorable, the Policy Value will increase year
by year.
The Policy is designed so that the increase in Policy Value over time should
reduce the net amount at risk. The reduction in the net amount at risk offsets
the rising cost of the mortality risk as the age of the insured increases,
reducing the total cost of insurance which is subtracted from the Policy Value
each year. This scenario depends, however, on the investment experience which is
a principal factor in determining Policy Value. Investment experience is not
guaranteed. If investment experience does not produce a sufficient rate of
return, the amount of Additional Protection will be reduced in later Policy
years, or the Policyowner will need to pay additional premium to keep the
6
<PAGE> 10
Additional Protection from falling. For a typical Policy the average annual net
investment rate of return required to maintain the initial amount of Additional
Protection, without additional premium, should be between 4% and 6%, based on
the current charges and dividend scale. Any excess Policy Value (called the
"Excess Amount") is simply added to the death benefit and the cash value, dollar
for dollar, unless a greater increase in the death benefit is required to meet
tax requirements for life insurance. See "Excess Amount", p.15.
The Policy also allows the payment of additional premiums to purchase
variable paid up additional insurance. The values for the additional insurance
are calculated separately from those which support the initial amount of
insurance and do not affect the Policy Value. Unscheduled additional premiums to
purchase variable paid-up additional insurance are allowed, subject to
insurability of the insured when the premiums are accepted.
REQUIREMENTS FOR INSURANCE
The minimum amount required for the Minimum Guaranteed Death Benefit is
$100,000, reduced to $50,000 if the insured is below age 15 or over age 59. If
the initial premium is at least $10,000 ($5,000 for ages below 15) the required
minimum for the Minimum Guaranteed Death Benefit is $1,000. A lower minimum may
apply in some circumstances and will apply if the Policy is purchased for an
employer-sponsored benefit plan. See "Special Policy for Employers", p. 17. The
Minimum Guaranteed Death Benefit must always be at least $1,000.
Before issuing a Policy, Northwestern Mutual Life will require satisfactory
evidence of insurability. Non-smokers who meet preferred underwriting
requirements are considered select risks. Nonsmokers in the second best
classification are considered standard plus risks. The best class of smokers are
considered standard risks. The premium is different for each risk
classification. A higher premium is charged for insureds who do not qualify as
select, standard plus or standard risks. The amount of extra premium depends on
the risk classification in which the insured is placed.
PREMIUMS
The Policy provides for a level scheduled premium to be paid annually at the
beginning of each Policy year. By administrative practice, Northwestern Mutual
Life accepts premiums on a monthly, quarterly or semi-annual schedule. The owner
of the Policy may change the premium frequency. The change will be effective
when the premium on the new frequency is accepted. Premiums paid more often than
annually include an extra amount to compensate Northwestern Mutual Life for the
extra processing costs and loss of interest because the money is received later.
For example, the total of monthly premiums for a year is currently 3.56% plus
$6.00 higher than a premium paid annually. This reflects an annual interest rate
of 8% plus fifty cents for processing each of twelve monthly premium payments.
Premiums are payable at the Home Office or to an authorized agent of
Northwestern Mutual Life. Monthly premiums may be paid only through an automatic
payment plan arranged with the Policyowner's bank.
The scheduled premium includes the premium for the Minimum Guaranteed Death
Benefit and the premium for any Additional Protection. The amount of the premium
depends on the amount of the Minimum Guaranteed Death Benefit and the amount of
Additional Protection, as well as the insured's age and risk classification. The
amount of the premium also reflects the sex of the insured except where state or
federal law requires that premiums and other charges and values be determined
without regard to sex. A notice is sent to the Policyowner not less than two
weeks before each premium is due.
The purchaser of the Policy may select the proportions of Minimum Guaranteed
Death Benefit and Additional Protection, subject to the required minimum amount
for the Minimum Guaranteed Death Benefit. See "Requirements for Insurance",
above. The premium for the Additional Protection is described below the table on
the following page.
The following table shows representative annual premiums for a Policy with
an initial amount of $200,000, divided equally between Minimum Guaranteed Death
Benefit and Additional Protection, for male select, standard plus and standard
risks, at three ages.
7
<PAGE> 11
<TABLE>
<CAPTION>
MINIMUM PREMIUM
GUARANTEED FOR MINIMUM PREMIUM FOR
AGE AT DEATH GUARANTEED ADDITIONAL ADDITIONAL TOTAL
ISSUE BENEFIT DEATH BENEFIT PROTECTION PROTECTION PREMIUM
------------------------------------------------------------------------------------------
SELECT
<S> <C> <C> <C> <C> <C>
15 $100,000 $ 688 $100,000 $ 294 $ 982
35 100,000 1,347 100,000 505 1,852
55 100,000 3,351 100,000 1,660 5,011
STANDARD PLUS
15 $100,000 $ 745 $100,000 $ 304 $1,049
35 100,000 1,479 100,000 558 2,037
55 100,000 3,640 100,000 2,420 6,060
STANDARD
15 $100,000 $ 848 $100,000 $ 370 $1,218
35 100,000 1,723 100,000 656 2,379
55 100,000 4,367 100,000 3,190 7,557
</TABLE>
The premium for the Additional Protection is the greater of two times the
cost of term insurance for the insured's age when the Policy is issued, or an
amount such that the premium for the Policy (excluding the Policy fee) will be
70% of the combined premium which would be required if the Additional Protection
were Minimum Guaranteed Death Benefit instead. For example, the annual premium
for $100,000 of Additional Protection for a male select risk, at age 35, is
$505, as shown in the table above. Two times a term insurance premium for the
$100,000 of Additional Protection at age 35 equals $378. If the Additional
Protection had been Minimum Guaranteed Death Benefit, then 70% of the premium
for the Policy (excluding the Policy fee) would be 70% of $2,526, or $1,768. The
premium for the $100,000 of actual Minimum Guaranteed Death Benefit (excluding
the Policy fee) is $1,263. In order to have the premium for the Policy
(excluding the Policy fee) equal $1,768, the premium for Additional Protection
would be $1,768 minus $1,263, or $505. The premium for Additional Protection is
the greater of $378 and $505, that is, $505.
In addition to the premium required for the Minimum Guaranteed Death Benefit
and any Additional Protection, the scheduled premium may include additional
premium to purchase paid-up additional insurance or to increase the Policy
Value. The scheduled premium will also include the premium required for any
additional benefit included as part of the Policy.
After the Policy is issued the additional premium included in the scheduled
premium may be decreased at any time upon the request of the Policyowner. The
additional premium included in the scheduled premium may be increased, or
optional unscheduled additional premiums may be paid, at any time before the
Policy anniversary nearest to the insured's 85th birthday, subject to the
insurability requirements and issue limits of Northwestern Mutual Life.
If the Policy includes Additional Protection, an increased premium may be
required after the guaranteed period to prevent a reduction of the amount of
Additional Protection. The increased premium, if required, is determined each
year as of the date 25 days before the Policy anniversary. The Policyowner is
entitled to pay the increased premium required to keep the Additional Protection
from falling until the insured reaches age 80 but this right terminates as of
the first Policy anniversary on which the required increased premium is not paid
when due.
Payment of scheduled premiums may be suspended, at the option of the
Policyowner, if as of 25 days prior to the Policy anniversary on or before the
due date of the premium, (1) the Excess Amount exceeds one year's minimum
premium, and (2) the Policy Value exceeds the sum of the net single premium for
the amount of insurance then in force, plus the present value of future charges
for expenses, additional benefits, and any extra mortality. See "Excess Amount",
p. 15. The minimum premium is the sum of the premiums for the Minimum Guaranteed
Death Benefit, the Additional Protection and any additional benefit included in
the Policy. The net single premium and the present value of future charges will
be calculated using the mortality basis for the cost of insurance charges with
6% interest. See "Charges Against the Policy Value", p. 11. While payment of
premiums is suspended, certain charges ordinarily deducted from premiums will
reduce the Policy Value instead. Payment of scheduled premiums may be resumed as
of any Policy anniversary. Payment of scheduled premiums must be resumed as of
the next Policy anniversary if the
8
<PAGE> 12
Excess Amount, as of 25 days prior to the Policy anniversary, is determined to
be less than one year's minimum premium. Unscheduled additional premiums may be
paid while suspension of scheduled premiums is in effect, subject to the
insurability requirements and issue limits of Northwestern Mutual Life.
The Policy provides for a grace period of 31 days for any premium that is
not paid when due. The Policy remains in force during this period. If a premium
is paid during the grace period, the values for the Policy will be the same as
if the premium had been paid when due. If the premium is not paid within the
grace period, and the Policy does not qualify for premium suspension, the Policy
will terminate as of the date when the premium was due and will no longer be in
force, unless it is continued as paid-up insurance. See "Paid-Up Insurance", p.
15. If a Policy is surrendered, its cash value will be paid. See "Cash Value",
p. 13.
DEATH BENEFIT
The death benefit for a Policy includes the Minimum Guaranteed Death
Benefit, any Additional Protection in effect, any Excess Amount and any paid-up
additional insurance. It is reduced by the amount of any Policy debt outstanding
and by an adjustment for any unpaid premiums which have been applied to purchase
paid-up additional insurance.
The Minimum Guaranteed Death Benefit selected by the Policyowner when the
Policy is issued will neither increase nor decrease, regardless of the
investment experience of the Account divisions where assets for the Policy are
held, so long as scheduled premiums are paid when due and no Policy debt is
outstanding. In setting the premium rates for the Minimum Guaranteed Death
Benefit it has been assumed that the Account assets will grow at a net annual
rate of 4%. Northwestern Mutual Life bears the risk that the rate of growth will
be less. A higher rate of growth results in an increase in the Policy Value.
The Additional Protection included in a Policy when it is issued will not
increase by reason of investment experience more favorable than the assumed 4%
net annual rate of growth. It will not decrease, regardless of investment
experience, until expiration of the guaranteed period, so long as scheduled
premiums are paid when due and no Policy debt is outstanding. A condition for
this guarantee is that any dividends paid on the Policy must be used to increase
Policy Value until the end of the guaranteed period unless the Policy has an
Excess Amount. See "Excess Amount" p. 15. After the guaranteed period, the
Additional Protection may be reduced unless the Policy Value exceeds the amount
defined by the formula in the Policy. The amount of Policy Value, and the amount
of increased premium required to prevent a reduction in the Additional
Protection, are calculated 25 days before each Policy anniversary. The
Policyowner may pay any increased premium required to prevent a reduction in the
Additional Protection each year until the Policy anniversary nearest the
insured's 80th birthday, but this right terminates the first time any required
increased premium is not paid when it is due.
The Policy Value represents the total cumulative net premiums for the
Minimum Guaranteed Death Benefit and the Additional Protection, including any
additional net premiums or Policy dividends which have been used to increase the
Policy Value, adjusted for investment experience, less the cost of insurance
which is deducted from the Policy Value on each Policy anniversary. The Policy
Value may exceed the amount required to support the Minimum Guaranteed Death
Benefit and the Additional Protection. This may result from favorable investment
experience or from additional premium or Policy dividends used to increase the
Policy Value. The amount by which the Policy Value exceeds the amount needed to
support the Minimum Guaranteed Death Benefit and the Additional Protection under
a specified set of assumptions is called the Excess Amount. See "Excess Amount",
p. 15. Any Excess Amount will increase the death benefit for the Policy,
dollar-for-dollar, except as described in the next paragraph. The Policy Value
and any Excess Amount change daily.
The Policy is designed to meet the definitional requirements for life
insurance in Section 7702 of the Internal Revenue Code. See "Tax Treatment of
Policy Benefits," p. 18. These rules require that the death benefit will never
be less than the Policy Value divided by the net single premium per dollar of
death benefit. The required difference between the death benefit and the Policy
Value is higher at younger ages than at older ages. The Policy provides for an
increase in the death benefit to the extent required to meet this test. After
the death benefit has been increased to meet this requirement an increase in the
Policy Value will cause a greater than dollar-for-dollar increase in the death
benefit, and a decrease in the Policy Value will cause a greater than
dollar-for-dollar decrease in the death benefit.
The death benefit is increased by the amount of any paid-up additional
insurance purchased with additional premium or Policy dividends. The amount and
value of the paid-up additional insurance vary daily to reflect
9
<PAGE> 13
investment experience and are not guaranteed. The amount of any paid-up
additional insurance is its value used as a net single premium at the attained
age of the insured.
POLICY VALUE AND PAID-UP ADDITIONAL INSURANCE
The Policy Value and the value of any paid-up additional insurance are each
determined daily by separate calculations. An increase or decrease in the Policy
Value has no effect on the value of any paid-up additional insurance, and an
increase or decrease in the value of any paid-up additional insurance has no
effect on the Policy Value. The Policyowner may increase or decrease the amount
of scheduled additional premium which is being paid to increase the Policy Value
or to increase the amount of paid-up additional insurance, and may change the
allocation for applying this additional premium. Changes in the scheduled
additional premium and its allocation must be made by written request. Evidence
of insurability may be required. Increases in the scheduled additional premium
are not permitted after the Policy anniversary nearest the insured's 85th
birthday.
The value of paid-up additional insurance may be transferred to increase the
Policy Value by written request. This will generally result in a decrease in the
total death benefit. Policy Value may not be transferred to the value of paid-up
additional insurance.
ALLOCATIONS TO THE ACCOUNT
The first net annual premium for the Policy, including any net scheduled
additional premium, is placed in the Account on the Policy date. The net
scheduled annual premium is placed in the Account on each Policy anniversary
thereafter even if premiums are being paid on an other-than-annual frequency.
Net unscheduled premiums will be placed in the Account on the date received at
the Home Office of Northwestern Mutual Life. Net premiums are premiums less the
deductions from premiums. See "Deductions from Premiums", below.
Premiums placed in the Account prior to the initial allocation date are
invested in the Money Market Division of the Account. The initial allocation
date is identified in the Policy and is the latest of the Policy date, 45 days
after the date of the completed application or 32 days after the application is
approved by Northwestern Mutual Life. On the initial allocation date the amount
in the Money Market Division is invested in the Account divisions as directed in
the application for the Policy. The Policyowner may change the allocation for
future net premiums at any time by written request and the change will be
effective for premiums placed in the Account thereafter. If any portion of a
premium is allocated to a division, the division must receive at least 10% of
that premium.
The Account assets supporting a Policy may be apportioned among as many as
six divisions of the Account at any one time.
The Policyowner may transfer accumulated amounts from one division of the
Account to another as often as twelve times in a Policy year. Transfers are
effective on the date a written request is received at the Home Office of
Northwestern Mutual Life. Northwestern Mutual Life reserves the right to charge
a fee of up to $25 to cover administrative costs of transfers. No fee is
presently charged.
DEDUCTIONS AND CHARGES
DEDUCTIONS FROM PREMIUMS
A charge for taxes attributable to premiums is deducted from each premium.
The total amount of this deduction is 3.5% of the premium. Of this amount 2.25%
is for state premium taxes. Premium taxes vary from state to state and currently
range from .75% to 3.5% of life insurance premiums. The 2.25% rate is an
average. The tax rate for a particular state may be lower, higher, or equal to
the 2.25% deduction. Northwestern Mutual Life does not expect to profit from
this charge. The remainder of the deduction, 1.25% of each premium, is for
federal income taxes measured by premiums. Northwestern Mutual Life believes
that this charge does not exceed a reasonable estimate of an increase in its
federal income taxes resulting from a recent change in the Internal Revenue
Code.
A charge of 4.5% for sales costs is deducted from each premium. Northwestern
Mutual Life expects to recover its sales expenses from this amount, over the
period while the Policies are in force, and from the surrender charges described
below. The amounts deducted for sales costs in a Policy year are not
specifically related to sales costs incurred that year. To the extent that sales
expenses exceed the amounts deducted, Northwestern Mutual Life will pay the
expenses from its other assets. These assets may include, among other things,
any gain realized from the charge against the assets of the Account for the
mortality and expense risks assumed by Northwestern Mutual Life.
10
<PAGE> 14
See "Charges Against the Account Assets", page 11. To the extent that the
amounts deducted for sales costs exceed the amounts needed, Northwestern Mutual
Life will realize a gain.
An annual fee of $60 is deducted from premiums each year for administrative
costs to maintain the Policy. These expenses include costs of premium billing
and collection, processing claims, keeping records and communicating with
Policyowners. Northwestern Mutual Life retains the right to increase this charge
after 10 years, but it is guaranteed not to exceed $84 plus 12 cents per $1,000
of both the Minimum Guaranteed Death Benefit and the Additional Protection.
Northwestern Mutual Life does not expect to profit from this charge.
An annual charge is deducted from premiums each of the first 10 years to
compensate Northwestern Mutual Life for expenses, other than sales expenses,
incurred in conjunction with issuance of the Policy. These expenses include the
costs of processing applications, medical examinations, determining insurability
and establishing records. The annual amount of this charge is $24 plus 12 cents
per $1,000 of Minimum Guaranteed Death Benefit and Additional Protection. If the
Policy is surrendered before these charges have been deducted for 10 years, the
remaining charges will be reflected in the administrative surrender charge. See
"Surrender Charges", p. 12.
An annual charge of 12 cents per $1,000 of Minimum Guaranteed Death Benefit
is deducted from premiums each year to compensate Northwestern Mutual Life for
the risk assumed by guaranteeing the Minimum Guaranteed Death Benefit, as long
as all premiums are paid when due, no matter how unfavorable investment
performance may be.
Any extra amounts charged for insureds who do not qualify as select,
standard plus or standard risks, plus the cost of any additional benefits
purchased with the Policy, are also deducted to determine the net annual
premium.
CHARGES AGAINST THE POLICY VALUE
A cost of insurance charge is deducted from the Policy Value on each Policy
Anniversary. The amount is determined by multiplying the net amount at risk by
the cost of insurance rate. The net amount at risk is the projected insurance
amount, discounted at 4%, less the Policy Value. The projected insurance amount
is the amount of insurance at the end of the Policy year, assuming that the
Policy Value increases by the 4% annual growth rate assumed in constructing the
Policy. The cost of insurance rate reflects the attained age of the insured. For
select and standard risks, the cost of insurance rate is based on the
Commissioners 1980 Standard Ordinary Smoker and Non-Smoker Mortality Tables. For
other risks, the cost of insurance rate is based on the Commissioners 1980
Standard Ordinary Mortality Tables. The cost of insurance rates are included in
the Policy. A cost of insurance charge is also deducted from the cash value of
any paid-up additional insurance on each Policy anniversary. If an unscheduled
premium is received on a day other than a Policy anniversary and the net amount
at risk increases as a result, a cost of insurance charge will be deducted on
that day, reflecting the increase in the net amount at risk and the portion of
the Policy year remaining.
While payment of premiums is suspended, a portion of the annual charges
which would ordinarily be deducted from premiums will be deducted from the
Policy Value instead. This deduction will also be made on the Policy anniversary
each year.
The Policy Value will also be reduced by any surrender charges,
administrative charges or decrease in Policy debt that may result from a
withdrawal, a decrease in the face amount of insurance or a change to variable
benefit paid-up insurance.
CHARGES AGAINST THE ACCOUNT ASSETS
There is a daily charge to the Account for the mortality and expense risks
assumed by Northwestern Mutual Life. The charge is at the annual rate of .60% of
the assets of the Account. The mortality risk is that insureds may not live as
long as Northwestern Mutual Life estimated. The expense risk is that expenses of
issuing and administering the Policies may exceed the estimated costs.
Northwestern Mutual Life will realize a gain from this charge to the extent it
is not needed to provide benefits and pay expenses under the Policies. The
actual mortality and expense experience under the Policies will be the basis for
determining dividends. See "Annual Dividends", p. 13.
The Policies provide that a charge for taxes may be made against the assets
of the Account. Currently, a daily charge for federal income taxes incurred by
Northwestern Mutual Life is not being made. In no event will the charge for
taxes exceed that portion of the actual tax expenses of Northwestern Mutual Life
which is fairly allocable to the Policies.
11
<PAGE> 15
TRANSACTION CHARGES
The Policy provides for a fee of up to $25 for a transfer of assets among
the Account divisions and for a fee of up to $25 for a withdrawal of Excess
Amount. These charges are currently being waived.
SURRENDER CHARGES
If the Policy is surrendered before the premium due at the beginning of the
fifteenth year has been paid, surrender charges will be deducted from the Policy
Value. A table of surrender charges is in the Policy.
The surrender charges consist of an administrative surrender charge and a
premium surrender charge. The administrative surrender charge is equal to the
sum of the issue expense charges which have not been deducted. The
administrative surrender charge in the first Policy year is $216, plus $1.08 per
$1,000 of Minimum Guaranteed Death Benefit and Additional Protection. This
charge grades down linearly each year as the premium is paid (or payment of
premiums is suspended) and is zero after the premium due at the beginning of the
tenth Policy year has been paid (or suspended).
The premium surrender charge is a percentage (shown in the table below) of
the surrender charge base. If payment of the premium for a Policy year has been
suspended, the premium surrender charge percentage will be as if the annual
premium had been paid. During the first five policy years, if premiums are paid
more frequently than annually the premium surrender charge percentages will be
adjusted to reflect the actual period for which premiums have been paid.
If none of the premium payments during the first five Policy years have been
suspended, the surrender charge base equals the sum of an annual premium for the
Minimum Guaranteed Death Benefit (exclusive of the Policy fee and exclusive of
any charge for extra mortality) plus a term insurance premium for the initial
amount of Additional Protection.
If any of the premium payments during the first five Policy years have been
suspended, the surrender charge base equals the lesser of (1) the sum of an
annual premium for the Minimum Guaranteed Death Benefit (exclusive of the Policy
fee and exclusive of any charge for extra mortality) plus a term insurance
premium for the initial amount of Additional Protection, and (2) the sum of the
total premiums paid (exclusive of any premiums for additional benefits purchased
with the Policy, and premiums for extra mortality, and any extra amount for
premiums paid more often than annually) divided by the number of years
(including fractions), but not more than five, for which premiums have been paid
or suspended.
<TABLE>
<CAPTION>
For Policies surrendered after payment of Premium Surrender Charge Percentage
-----------------------------------
the premium due at the beginning of year: Issue age 65 and under Issue age 75
----------------------------------------- ---------------------- ------------
<S> <C> <C>
1 24% 24%
2 28% 25.5%
3 32% 27%
4 36% 28.5%
5 through 10 40% 30%
11 32% 24%
12 24% 18%
13 16% 12%
14 8% 6%
15 and later 0% 0%
</TABLE>
For issue ages 66 through 74, the percentages are determined by linear
interpolation between the percentages shown.
12
<PAGE> 16
GUARANTEE OF PREMIUMS, DEDUCTIONS AND CHARGES
Northwestern Mutual Life guarantees and may not increase the premiums for
the Minimum Guaranteed Death Benefit and the charge for mortality and expense
risks. These amounts will not increase regardless of future changes in longevity
or increases in expenses.
CASH VALUE
The cash value for the Policy will change daily in response to investment
results. No minimum cash value is guaranteed. The cash value is equal to the
Policy Value plus the value of any paid-up additional insurance, reduced by any
Policy debt outstanding and the surrender charges. If premiums are not being
paid on an annual basis the cash value is reduced for any premiums due later in
the Policy year.
The cash value for a Policy is determined at the end of each valuation
period. Each business day, together with any non-business days before it, is a
valuation period. A business day is any day on which the New York Stock Exchange
is open for trading. In accordance with the requirements of the Investment
Company Act of l940, the cash value for a Policy may also be determined on any
other day on which there is sufficient trading in securities to materially
affect the value of the securities held by the Portfolios of the Fund.
The owner of a Policy may surrender it for the cash value at any time during
the lifetime of the insured. Alternatively, the cash value may be applied to
provide a reduced amount of fixed or variable paid-up insurance. See "Paid-Up
Insurance", p.15.
Northwestern Mutual Life will permit partial surrenders of the Policies so
long as the Policy that remains meets the regular minimum size requirements. A
partial surrender will cause the Policy to be split into two Policies. One
Policy will be surrendered; the other will continue in force on the same terms
as the original Policy except that the premiums will be based on the reduced
amount of insurance. The owner will receive a new Policy document. The cash
value and the death benefit will be proportionately reduced. A deduction from
the Policy proceeds for a proportionate part of the surrender charges will be
made if a partial surrender takes place before the premium due at the beginning
of the fifteenth Policy year has been paid. A transaction charge will be made
when a partial surrender is effected. The amount of the transaction charge will
not exceed the actual administrative costs for the transaction. Northwestern
Mutual Life currently expects this charge to be $250.
ANNUAL DIVIDENDS
The Policies share in divisible surplus to the extent determined annually by
Northwestern Mutual Life. A Policy's share will be distributed annually as a
dividend payable on each Policy anniversary. Dividends under participating
policies may be described as refunds of premiums which adjust the cost of a
policy to the actual level of cost emerging over time after the policy's issue.
Thus participating policies generally have gross premiums which are higher than
those for comparable non-participating policies. Both federal and state tax law
recognize that a dividend is considered to be a refund of a portion of the
premium paid.
Dividend illustrations published at the time a life insurance policy is
issued reflect the actual recent experience of the issuing company with respect
to investment earnings, mortality and expenses. State law generally prohibits a
company from projecting or estimating future results. State law also requires
that dividends be paid out of surplus, after certain necessary amounts are set
aside, and that such surplus be apportioned equitably among participating
policies. In summary, dividends must be based on actual experience and cannot be
guaranteed at issue of a policy.
Northwestern Mutual Life's actuary annually examines current and recent
experience and compares these results with those which were assumed in
determining premium rates when each class of policies was issued. Classes are
determined by such factors as year of issue, age, plan of insurance and risk
classification. The actuary then determines the amount of dividends to be
equitably apportioned to each class of policies. Following the actuary's
recommendations, the Trustees of Northwestern Mutual Life adopt a dividend scale
each year, thereby authorizing the distribution of the dividend.
Northwestern Mutual Life has no significant actual mortality experience with
variable life insurance policies. For purposes of the current dividend scale
used for the illustrations in this prospectus, it has been assumed that
mortality experience in connection with the Policies will be comparable to that
actually experienced with fixed benefit life insurance.
13
<PAGE> 17
Dividends for variable life insurance are generally lower than those for
participating fixed benefit life insurance, primarily because a variable life
insurance policy provides a contractual mechanism for translation of investment
experience into a variable death benefit and variable cash value. For
participating fixed benefit life insurance the dividend includes amounts
produced by favorable investment results. Dividends based on the Minimum
Guaranteed Death Benefit for the Policies described in this prospectus are
expected be relatively low during the first 15 Policy years.
The prospectus illustrations show dividends being used to increase the
Policy Value. If the Policy has Additional Protection in force, the dividends
will be used to increase the Policy Value unless the Policy has Excess Amount.
See "Excess Amount", p.15. If the Policy has Excess Amount, or if no Additional
Protection is in force, dividends may be used to purchase variable benefit
paid-up additional insurance, used to pay premiums or paid in cash. If the
Policy is in force as fixed benefit paid-up insurance, dividends may be paid in
cash or used to purchase fixed benefit paid-up additional insurance. If the
Policy is in force as variable benefit paid-up insurance, dividends may be paid
in cash or used to purchase variable benefit paid-up additional insurance.
LOANS AND WITHDRAWALS
The owner of a Policy may borrow up to 90% of the Policy's cash value using
the Policy as security. If a Policy loan is already outstanding, the maximum
amount for any new loan is 90% of the amount of cash value the Policy would have
if there were no loan, less the amount already borrowed. Loan proceeds may be
taken in cash or may be applied to pay premiums on the Policy.
Interest on a Policy loan accrues and is payable on a daily basis. Unpaid
interest is added to the amount of the loan. If the amount of the loan equals or
exceeds the Policy's cash value, the Policy will terminate. The owner will be
given a notice at least 31 days before the termination date. The notice will
show how much must be repaid to keep the Policy in force.
The Policy loan interest rate is selected by the owner. A specified annual
effective rate of 5% is one choice. The other choice is a variable rate based on
a corporate bond yield index. The variable rate will be adjusted annually, but
will not be less than 5%.
The amount of a Policy loan, including interest as it accrues, will be taken
from the Account divisions in proportion to the amounts in the divisions. The
amounts withdrawn will be transferred to Northwestern Mutual Life's general
account and will be credited on a daily basis with an annual earnings rate equal
to the Policy loan interest rate less a charge for the mortality and expense
risks assumed by Northwestern Mutual Life and for expenses, including taxes. The
aggregate charge is currently at the annual rate of .90% for the 5% specified
Policy loan interest rate and .90% for the variable Policy loan interest rate.
For example, the earnings rate corresponding to the specified 5% Policy loan
interest rate is currently 4.10%. A Policy loan, even if it is repaid, will have
a permanent effect on the Policy Value and cash value because the amounts
borrowed will not participate in the Account's investment results while the loan
is outstanding. The effect may be either favorable or unfavorable depending on
whether the earnings rate credited to the loan amount is higher or lower than
the rate credited to the unborrowed amount left in the Account.
Except when the Policy is in force as fixed benefit paid-up insurance, a
Policy loan will be allocated between Policy Value and variable paid-up
additional insurance in proportion to the amount of cash value attributable to
each.
A Policy loan, and any accrued interest outstanding, may be repaid, in whole
or in part, at any time. Payments will be credited as of the date received and
will be transferred from the general account of Northwestern Mutual Life to the
Account divisions, in proportion to the amounts in the divisions, as of the same
date.
The Policyowner may make a withdrawal if the Excess Amount is sufficient.
See "Excess Amount", p. 15. A withdrawal may neither decrease the Excess Amount
to less than the surrender charge which would apply if the Policy were
surrendered nor reduce the loan value to less than any Policy debt outstanding.
The minimum amount for withdrawals is $250 and no more than four withdrawals may
be made in a Policy year. An administrative charge of up to $25 may apply, but
is currently being waived.
A withdrawal of Policy Value decreases the death benefit by the same
amount. If the death benefit for a Policy has been increased to meet the federal
tax requirements for life insurance, the decrease in the death benefit caused by
a subsequent withdrawal may be larger than the amount of the withdrawal.
14
<PAGE> 18
If cumulative withdrawals exceed the cumulative additional premiums which
have been used to increase the Policy Value, with both withdrawals and premiums
increased by 4% annual interest, subsequent unfavorable investment experience
may cause the Policy to lapse unless an additional unscheduled premium is paid
to increase the Policy Value. The due date for this premium is the Policy
anniversary following written notice to the Policyowner.
EXCESS AMOUNT
The Excess Amount is the amount by which the Policy Value exceeds the
Tabular Cash Value for the sum of the Minimum Guaranteed Death Benefit and any
Additional Protection in effect. The Tabular Cash Value is an amount equal to a
Policy Value calculated assuming (1) a whole life Policy with a face amount
equal to the sum of the Minimum Guaranteed Death Benefit and the Additional
Protection, (2) all premiums are paid when due, (3) no additional premiums or
dividends used to increase Policy Value, (4) a 4% level annual rate of return,
and (5) maximum Policy charges apply. If premiums are not being paid on an
annual basis, the Excess Amount is reduced for any premiums due later in the
Policy year.
PAID-UP INSURANCE
If a premium is not paid within the 31-day grace period, and the Policy does
not qualify for suspension of premium payments, the Policy will continue in
force as a reduced amount of fixed benefit paid-up insurance. Alternatively the
Policyowner may select a reduced amount of variable benefit paid-up insurance.
This selection must be made during the grace period or sooner.
If the Policy is in force as a reduced amount of fixed benefit paid-up
insurance the amount of the cash value will be transferred from the Account to
Northwestern Mutual Life's general account. Thereafter the Policy will not
participate in the Account's investment results unless the Policy is
subsequently reinstated. See "Reinstatement", below. The minimum cash value for
fixed benefit paid-up insurance is $1,000. If the cash value is less than $1,000
as of the last day of the grace period the Policy will be treated as
surrendered. Variable benefit paid-up insurance may be selected only if the cash
value of the Policy is at least $5,000.
The amount of paid-up insurance is determined by the applying amount of cash
value plus any Policy debt as a net single premium at the attained age. Paid-up
insurance has cash and loan values. For fixed benefit paid-up insurance the
amounts of these are guaranteed. For variable paid-up insurance neither the
death benefit or the cash value is guaranteed. Paid-up insurance remains in
force for the lifetime of the insured unless the Policy is surrendered or
terminated. While the Policy is in force as either fixed or variable benefit
paid-up insurance the Minimum Guaranteed Death Benefit and any Additional
Protection will not be in effect. Any Policy debt will continue.
REINSTATEMENT
If a premium is due and remains unpaid after the grace period expires, the
Policy may be reinstated while the insured is alive within three years after the
premium due date. The insured must provide satisfactory evidence of insurability
unless reinstatement takes place within 31 days after the end of the grace
period. A substantial payment may be required. Following reinstatement the
Policy will have the same Minimum Guaranteed Death Benefit, Additional
Protection, Policy Value and paid-up additional insurance as if minimum premiums
had been paid when due. A 4% rate of investment earnings will be credited for
the period from the due date of the overdue premium to the date of
reinstatement. An adjustment will be made for any Policy debt or the debt may be
reinstated. The Policy may not be reinstated if it has been surrendered for its
cash value.
RIGHT TO RETURN POLICY
A Policy may be returned for a full refund of the premium paid within 45
days after the application for insurance is signed, or within 10 days after the
Policy is received, or within 10 days after a Notice of Cancellation Right is
mailed or delivered to the owner, whichever date is latest. The Policy may be
mailed or delivered to the agent who sold it or to the Home Office of
Northwestern Mutual Life. If returned, the Policy will be considered void from
the beginning.
15
<PAGE> 19
RIGHT TO EXCHANGE FOR A FIXED BENEFIT POLICY
The owner may exchange a Policy for a whole life insurance policy with
benefits that do not vary with the investment experience of a separate account.
The exchange may be elected at any time within twenty-four months after the
issue date of the Policy provided premiums are duly paid. Evidence of
insurability is not required.
The new policy will be on the life of the same insured and will have the
same initial guaranteed death benefit, policy date and issue age. The premiums
and cash values will be the same as those for fixed benefit policies issued by
Northwestern Mutual Life on the issue date of the Policy.
The exchange will be subject to an equitable cash adjustment. The amount
will recognize the difference in premiums and investment performance of the two
policies.
An exchange will be effective when Northwestern Mutual Life receives a
proper written request, as well as the Policy and any amount due on the
exchange.
The owner of a Policy may also exchange it for a fixed benefit policy if
the Fund changes its investment adviser or if there is a material change in the
investment policies of a Fund portfolio. The owner will be given notice of any
such change and will have 60 days to make the exchange.
OTHER POLICY PROVISIONS
OWNER. The owner is identified in the Policy. The owner may exercise all rights
under the Policy while the insured is living. Ownership may be transferred to
another. Written proof of the transfer must be received by Northwestern Mutual
Life at its Home Office.
BENEFICIARY. The beneficiary is the person to whom the death benefit is
payable. The beneficiary is named in the application. After the Policy is
issued the owner may change the beneficiary in accordance with the Policy
provisions.
INCONTESTABILITY. Northwestern Mutual Life will not contest a Policy after it
has been in force during the lifetime of the insured for two years from the
date of issue.
SUICIDE. If the insured dies by suicide within one year from the date of issue,
the amount payable under the Policy will be limited to the premiums paid, less
the amount of any Policy debt and withdrawals and less the cash value of any
variable paid-up insurance surrendered.
MISSTATEMENT OF AGE OR SEX. If the age or sex of the insured has been
misstated, benefits under a Policy will be adjusted to reflect the correct age
and sex.
COLLATERAL ASSIGNMENT. The owner may assign a Policy as collateral security.
Northwestern Mutual Life is not responsible for the validity or effect of a
collateral assignment and will not be deemed to know of an assignment before
receipt of the assignment in writing at the Home Office.
PAYMENT PLANS. The Policy provides a variety of payment plans for Policy
benefits. Any Northwestern Mutual Life agent authorized to sell the Policies
can explain these provisions on request.
DEFERRAL OF DETERMINATION AND PAYMENT. So long as premiums have been paid when
due, Northwestern Mutual Life will ordinarily pay Policy benefits within seven
days after receipt of all required documents at its Home Office. However,
determination and payment of benefits may be deferred during any period when it
is not reasonably practicable to value securities because the New York Stock
Exchange is closed or an emergency exists or the Securities and Exchange
Commission, by order, permits deferral for the protection of Policyowners.
If a Policy is in force as fixed benefit paid-up insurance, Northwestern
Mutual Life has the right to defer payment of the cash value for up to six
months from the date of a Policy loan or surrender. If payment is deferred for
30 days or more interest will be paid at an annual effective rate of 4%.
VOTING RIGHTS
Northwestern Mutual Life is the owner of the Fund shares in which all
assets of the Account are invested. As the owner of the shares Northwestern
Mutual Life will exercise its right to vote the shares to elect directors of
the Fund, to vote on matters required to be approved or ratified by mutual fund
shareholders under the Investment Company Act of 1940 and to vote on any other
matters that may be presented to any Fund shareholders' meeting. However,
Northwestern Mutual Life will vote the Fund shares held in the Account in
accordance with instructions from owners
16
<PAGE> 20
of the Policies. Northwestern Mutual Life will vote the Fund shares held in its
general account in the same proportions as the shares for which voting
instructions are received. If the applicable laws or regulations change so as
to permit Northwestern Mutual Life to vote the Fund shares in its own
discretion, it may elect to do so.
The number of Fund shares for each division of the Account for which the
owner of a Policy may give instructions is determined by dividing the amount of
the Policy's cash value apportioned to that division, if any, by the per share
value for the corresponding Fund Portfolio. The number will be determined as of
a date chosen by Northwestern Mutual Life, but not more than 90 days before the
Fund shareholders' meeting. Fractional votes are counted. Voting instructions
will be solicited with written materials at least 14 days before the meeting.
Shares as to which no instructions have been received will be voted in the same
proportion as the shares as to which instructions have been received.
Northwestern Mutual Life may, if required by state insurance officials,
disregard voting instructions which would require Fund shares to be voted for a
change in the sub-classification or investment objectives of a Fund Portfolio,
or to approve or disapprove an investment advisory agreement for the Fund.
Northwestern Mutual Life may also disregard voting instructions that would
require changes in the investment policy or investment adviser for the Fund or
a Fund Portfolio, provided that Northwestern Mutual Life reasonably determines
to take this action in accordance with applicable federal law. If Northwestern
Mutual Life disregards voting instructions a summary of the action and reasons
therefor will be included in the next semiannual report to the owners of the
Policies.
SUBSTITUTION OF FUND SHARES AND OTHER CHANGES
If, in the judgment of Northwestern Mutual Life, a Fund Portfolio becomes
unsuitable for continued use with the Policies because of a change in
investment objectives or restrictions, shares of another Portfolio or another
mutual fund may be substituted. Any substitution of shares will be subject to
any required approval of the Securities and Exchange Commission, the Wisconsin
Commissioner of Insurance or other regulatory authority. Northwestern Mutual
Life has also reserved the right, subject to applicable federal and state law,
to operate the Account or any of its divisions as a management company under
the Investment Company Act of 1940, or in any other form permitted, or to
terminate registration of the Account if registration is no longer required,
and to change the provisions of the Policies to comply with any applicable
laws.
REPORTS
For each Policy year (unless a Policy is in force as fixed benefit paid-up
insurance) the owner of a Policy will receive a statement showing the death
benefit, cash value and any Policy loan (including interest charged) as of the
anniversary date. This report will show the apportionment of invested assets
among the Account divisions. Owners will also receive annual and semiannual
reports for the Account and the Fund, including financial statements.
SPECIAL POLICY FOR EMPLOYERS
A reduced minimum amount applies for Policies where the insurance involves
an employer sponsored benefit plan or arrangement. The sum of the Minimum
Guaranteed Death Benefit and the Additional Protection must be at least
$10,000, of which the Minimum Guaranteed Death Benefit must be at least $1,000.
The premium for the Additional Protection is two times the cost of term
insurance for the insured's age when the Policy is issued.
These Policies for employers may include a provision to permit the amount
of Additional Protection to increase after issue. Any such increase amount
must be based on the terms of the benefit plan or arrangement and may not be
subject to the discretion of the insured or the insured's beneficiary. A
description of the method of determining the amount of any increase is included
in the Policy. Changes to the amount of Additional Protection will be
effective on Policy anniversaries. The surrender charge and all charges for
issue and administrative expenses will be based on the initial amount of
Additional Protection.
For certain situations where the insurance involves an employer sponsored
benefit plan or arrangement, federal law and the laws of certain states may
require that premiums and annuity rates be determined without regard to sex.
Special Policies are available for this purpose. Prospective purchasers of
the Policies are urged to review any questions in this area with qualified
counsel.
17
<PAGE> 21
DISTRIBUTION OF THE POLICIES
The Policies will be sold through individuals who, in addition to being
licensed life insurance agents of Northwestern Mutual Life, are registered
representatives of Northwestern Mutual Investment Services, Inc. ("NMIS"), a
wholly-owned subsidiary of Northwestern Mutual Life. NMIS is a registered
broker-dealer under the Securities Exchange Act of 1934 and is a member of the
National Association of Securities Dealers.
Commissions paid to the agents will not exceed 40% of the premium for the
first year, 6% of the premium for the second through tenth years, and 2-3/4% of
the premium thereafter.
Agents who meet certain productivity and persistency standards receive
additional compensation. New agents may be paid differently during a training
period. General agents and district agents who are registered representatives
of NMIS and have supervisory responsibility for sales of the Policies receive
commission overrides and other compensation.
TAX TREATMENT OF POLICY BENEFITS
The Policies are "life insurance contracts" as that term is defined in
Sections 7702 and 817(h) of the Internal Revenue Code. Increases in cash value
under a Policy are not taxable until actual surrender of the Policy. Upon
surrender, the amount received is taxable at ordinary income rates under
Section 72(e) of the Code to the extent it exceeds the amount of the premiums
paid under the Policy less any dividends or other amounts previously received
tax-free (basis of the Policy). Death benefits are excludable from the
beneficiary's gross income under Section l0l(a) of the Code.
Under certain limited circumstances, all or part of a partial surrender or
a withdrawal during the first 15 years may be taxable on a "gain first basis"
to the extent that the cash value of the Policy exceeds the basis of the
Policy. This means the amount surrendered or withdrawn may be taxable even if
that amount is less than the basis of the Policy.
Northwestern Mutual Life believes that loans received under the Policies
(except modified endowment contracts as described below) will be construed as
indebtedness of an owner in the same manner as loans under a fixed benefit life
insurance policy and that no part of any loan under a Policy will constitute
income to the owner.
Policies will be classified as modified endowment contracts under Section
7702A of the Internal Revenue Code if the aggregate premium paid during the
first 7 years exceeds a defined "7-pay limit". Generally, this can occur if
significant additional premiums are paid or the death benefit is reduced within
the first 7 years or if additional benefits are added to the Policy.
For Policies that are modified endowment contracts, withdrawals, partial
surrenders, Policy loans and dividends paid in cash are taxable as income on a
gain first basis. The taxable portion of these distributions would also be
subject to a 10% penalty if received prior to age 59 1/2, disability or
annuitization. For purposes of determining taxable income, all Policies that
are modified endowment contracts (including any fixed dollar policies that are
modified endowment contracts) issued by Northwestern Mutual Life to the
Policyowner during the same calendar year are aggregated.
Federal estate and state and local estate, inheritance and other tax
consequences of ownership or receipt of Policy proceeds depend upon the
circumstances of each Policy owner or beneficiary.
The foregoing summary does not purport to be complete or to cover all
situations. Counsel and other competent advisers should be consulted for more
complete information.
OTHER INFORMATION
MANAGEMENT
Northwestern Mutual Life is managed by a Board of Trustees. The Trustees
and senior officers of Northwestern Mutual Life and their positions including
Board committee memberships, and their principal occupations, are as follows:
18
<PAGE> 22
TRUSTEES
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- ---- -------------------------------------------
<S> <C>
R. Quintus Anderson (A, IF) . . . . . . . . . . . Chairman, The Aarque Companies, Jamestown, NY
(diversified metal products manufacturing)
Edward E. Barr (HR) . . . . . . . . . . . . . . . President and Chief Executive Officer, Sun Chemical
Corporation, Fort Lee, New Jersey (graphic arts); and
President and Chief Executive Officer, DIC Americas,
Inc., Fort Lee, NJ
Gordon T. Beaham, III (A, IF) . . . . . . . . . . Chairman of the Board and President, Faultless
Starch/Bon Ami Company, Kansas City, MO (consumer
products manufacturer)
Frank H. Bertsch (IP) . . . . . . . . . . . . . . Chairman of the Executive Committee, Flexsteel
Industries, Inc., Dubuque, IA (upholstered furniture)
Robert C. Buchanan (E, F, IF) . . . . . . . . . . President and Chief Executive Officer, Fox Valley
Corporation, Appleton, WI (manufacturer of gift wrap
and writing paper)
Robert E. Carlson (E) . . . . . . . . . . . . . . Executive Vice President of Northwestern Mutual Life
George A. Dickerman (IP) . . . . . . . . . . . . President, Spalding Sports Worldwide, Chicopee, MA
(manufacturer of sporting equipment)
Thomas I. Dolan (HR) . . . . . . . . . . . . . . Retired since 1992; prior thereto, Chairman, A. O.
Smith Corporation, Milwaukee, WI
Pierre S. du Pont IV (IP) . . . . . . . . . . . . y, Richards, Layton aRceand Finger, Wilmington, DE
James D. Ericson (E, F, HR, IF, IP) . . . . . . . President and Chief Executive Officer of Northwestern
Mutual Life since 1993; President and Chief Operating
Officer, 1991-1993; President, 1990-1991; prior
thereto, Executive Vice President
J. E. Gallegos (A, IF) . . . . . . . . . . . . . Attorney at Law; President, Gallegos Law Firm, Santa
Fe, New Mexico
Patricia Albjerg Graham (IP) . . . . . . . . . . Professor, Graduate School of Education, Harvard
University, Cambridge, MA, and President, The Spencer
Foundation (social and behavioral sciences) since 1991
Richard H. Holton (IP) . . . . . . . . . . . . . Professor Emeritus, Haas School of Business
Administration, University of California, Berkeley, CA
Stephen F. Keller (A, IF) . . . . . . . . . . . . Chairman, Santa Anita Realty Enterprises since 1992;
President, Santa Anita Operating Company, Arcadia, CA
(thoroughbred racing and real estate investments)
since 1991; Attorney at Law, Fulbright & Jaworski, Los
Angeles, CA, January, 1991 to June, 1991; prior
thereto, Vice Chairman, Seidler Amdec Securities,
Inc., Los Angeles
J. Thomas Lewis (HR) . . . . . . . . . . . . . . Attorney, Monroe & Lemann, New Orleans, LA
Fred G. Luber (E, F, IF) . . . . . . . . . . . . Chairman and Chief Executive Officer, Super Steel
Products Corp., Milwaukee, WI
</TABLE>
19
<PAGE> 23
<TABLE>
<S> <C>
Daniel F. McKeithan, Jr. (E, F, HR) . . . . . . . President, Tamarack Petroleum Company, Inc.,
Milwaukee, WI (operator of oil and gas wells);
President, Active Investor Management, Inc.,
Milwaukee, WI
Guy A. Osborn (E, F, IF) . . . . . . . . . . . . Chairman and Chief Executive Officer of Universal
Foods Corporation, Milwaukee, WI since 1991; prior
thereto, President and CEO
Donald J. Schuenke (E, F, HR, IF, IP) . . . . . . Retired since 1994; Chairman of Northwestern Mutual
Life, 1993-1994; Chairman and Chief Executive
Officer, 1990-1993; prior thereto, President and
Chief Executive Officer
H. Mason Sizemore, Jr. (IP) . . . . . . . . . . . President and Chief Operating Officer, The Seattle
Times, Seattle, WA (publishing)
Harold B. Smith (IP) . . . . . . . . . . . . . . Chairman, Executive Committee, Illinois Tool Works,
Inc., Chicago, IL (engineered components and
industrial systems and consumables)
Sherwood H. Smith, Jr. (IP) . . . . . . . . . . . Chairman of the Board and Chief Executive Officer of
Carolina Power & Light since 1992; prior thereto,
Chairman, President and Chief Executive Officer
John E. Steuri (HR) . . . . . . . . . . . . . . . Chairman and Chief Executive Officer of ALLTEL
Information Services, Inc., Little Rock, AR
(application software) since 1991; prior thereto,
Chairman of the Board, President and Chief Executive
Officer
John J. Stollenwerk (E, F, IF) . . . . . . . . . President and Owner, Allen-Edmonds Shoe Corporation,
Port Washington, WI
Barry L. Williams (HR) . . . . . . . . . . . . . President and Chief Executive Officer, C.N. Flagg
Power, Inc., Meriden, CT (construction services for
electric power plants) and President, Williams Pacific
Ventures, Inc., Redwood City, CA (venture capital)
Kathryn D. Wriston (A, IF) . . . . . . . . . . . Director of various corporations, New York, NY
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
A - Member, Audit Committee HR - Member, Human Resources and Public Policy Committee
E - Member, Executive Committee IF - Member, Investment and Financial Policy Committee
F - Member, Finance Committee IP - Member, Insurance Product and Marketing Committee
</TABLE>
20
<PAGE> 24
SENIOR OFFICERS (OTHER THAN TRUSTEES)
<TABLE>
<CAPTION>
POSITION WITH
NAME NORTHWESTERN MUTUAL LIFE
-----------------------------------------------------------------
<S> <C>
Deborah A. Beck Senior Vice President
John M. Bremer Senior Vice President, General
Counsel and Secretary
Peter W. Bruce Executive Vice President
Mark G. Doll Senior Vice President
James W. Ehrenstrom Senior Vice President
Richard L. Hall Senior Vice President
William C. Koenig Senior Vice President and Chief
Actuary
Mason G. Ross Senior Vice President
Frederic H. Sweet Senior Vice President
Dennis Tamcsin Senior Vice President
Walter J. Wojcik Senior Vice President
Edward J. Zore Executive Vice President
Gary E. Long Vice President and Controller
</TABLE>
REGULATION
Northwestern Mutual Life is subject to the laws of Wisconsin governing
insurance companies and to regulation by the Wisconsin Commissioner of
Insurance. An annual statement in a prescribed form is filed with the
Department of Insurance on or before March 1 in each year covering operations
for the preceding year and including financial statements. Regulation by the
Wisconsin Insurance Department includes periodic examination to determine
solvency and compliance with insurance laws. Northwestern Mutual Life is also
subject to the insurance laws and regulations of the other jurisdictions in
which it is licensed to operate.
LEGAL PROCEEDINGS
Northwestern Mutual Life is engaged in litigation of various kinds which in
its judgment is not of material importance in relation to its total assets.
There are no legal proceedings pending to which the Account is a party.
REGISTRATION STATEMENT
A registration statement has been filed with the Securities and Exchange
Commission, Washington, D.C. by Northwestern Mutual Life under the Securities
Act of 1933, as amended, with respect to the Policies. This prospectus does not
contain all the information set forth in the registration statement. A copy of
the omitted material is available from the main office of the SEC in
Washington, D.C. upon payment of the prescribed fee. Further information about
the Policies is also available from the Home Office of Northwestern Mutual
Life. The address and telephone number are on the cover of this prospectus.
EXPERTS
The financial statements of Northwestern Mutual Life as of December 31,
1994 and 1993 and for each of the three years in the period ended December 31,
1994 and of the Account as of December 31, 1994 and for each of the two years
in the period ended December 31, 1994 included in this prospectus have been so
included in reliance on the reports of Price Waterhouse LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting. Actuarial matters included in this prospectus have been examined by
William C. Koenig, F.S.A., Senior Vice President and Chief Actuary of
Northwestern Mutual Life. His opinion is filed as an exhibit to the
registration statement.
21
<PAGE> 25
NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1995
(IN THOUSANDS)
<TABLE>
<S> <C> <C>
ASSETS
Investments at Market Value:
Northwestern Mutual Series Fund, Inc.
Index 500 Stock
19,246 shares (cost $25,562)........................................... $28,965
Growth Stock
3,681 shares (cost $3,789)............................................. 4,178
Growth and Income Stock
5,308 shares (cost $5,443)............................................. 6,073
Aggressive Growth Stock
4,902 shares (cost $9,710)............................................. 11,264
International Equity
8,388 shares (cost $10,306)............................................ 10,745
Select Bond
3,361 shares (cost $4,166)............................................. 4,188
High Yield Bond
1,444 shares (cost $1,464)............................................. 1,506
Money Market
4,330 shares (cost $4,330)............................................. 4,330
Balanced
54,467 shares (cost $71,960)........................................... 79,195 $150,444
-------
Due from Sale of Fund Shares............................................................. 224
Due from Northwestern Mutual Life Insurance Company...................................... 28
--------
Total Assets..................................................................... $150,696
=========
LIABILITIES
Due to Northwestern Mutual Life Insurance Company........................................ $ 224
Due on Purchase of Fund Shares........................................................... 28
--------
Total Liabilities................................................................ 252
--------
EQUITY..................................................................................... 150,444
--------
Total Liabilities and Equity..................................................... $150,696
=========
</TABLE>
Equity Represented By:
<TABLE>
<CAPTION>
EQUITY OF
-----------------------
POLICYOWNERS NML
------------ -------
<S> <C> <C> <C>
Index 500 Stock Division.......................................... $ 24,063 $ 4,902 $ 28,965
Growth Stock Division............................................. 3,358 820 4,178
Growth and Income Stock Division.................................. 4,879 1,194 6,073
Aggressive Growth Stock Division.................................. 8,978 2,286 11,264
International Equity Division..................................... 8,387 2,358 10,745
Select Bond Division.............................................. 3,633 555 4,188
High Yield Bond Division.......................................... 1,223 283 1,506
Money Market Division............................................. 3,964 366 4,330
Balanced Division................................................. 72,267 6,928 79,195
------------ ------- --------
$130,752 $19,692 $150,444
============= ======== =========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
(Prepared from Unaudited Figures)
22
<PAGE> 26
NORTHWESTERN MUTUAL LIFE VARIABLE LIFE ACCOUNT
STATEMENT OF OPERATIONS AND CHANGES IN EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
INDEX 500
COMBINED STOCK DIVISION GROWTH STOCK DIVISION#
------------------------ ------------------------ --------------------------
PERIOD PERIOD PERIOD EIGHT MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED ENDED ENDED
JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31,
-------- ------------ -------- ------------ -------- --------------
1995 1994 1995 1994 1995 1994
-------- ------------ -------- ------------ -------- --------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend Income...................... $ 3,281 $ 2,062 $ 282 $ 611 $ 31 $ 34
Mortality and Expense Risks.......... 326 510 62 103 8 5
Taxes................................ 138 219 26 44 3 2
-------- ------------ -------- ------------ -------- -------
Net Investment Income (Loss)......... 2,817 1,333 194 464 20 27
-------- ------------ -------- ------------ -------- -------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Realized Gain (Loss)
on Investments..................... 459 14 102 543 4 3
Unrealized Appreciation
(Depreciation)
of Investments
During the Year.................... 15,198 (1,493) 4,527 (907) 413 (25)
-------- ------------ -------- ------------ -------- -------
Net Gain (Loss) on Investments....... 15,657 (1,479) 4,629 (364) 417 (22)
-------- ------------ -------- ------------ -------- -------
Increase (Decrease) in Equity
Derived from Investment Activity... 18,474 (146) 4,823 100 437 5
-------- ------------ -------- ------------ -------- -------
EQUITY TRANSACTIONS
Policyowners' Net Payments........... 22,859 38,517 5,582 12,089 1,020 696
Policy Loans, Surrenders, and
Death Benefits..................... (4,586) (7,695) (912) (2,126) (87) (51)
Mortality and Other (net)............ (4,197) (6,812) (989) (2,221) (178) (112)
Transfers from Other Divisions....... 6,317 18,069 456 941 584 1,976
Transfers to Other Divisions......... (6,317) (18,069) (1,666) (6,161) (68) (44)
-------- ------------ -------- ------------ -------- -------
Increase in Equity Derived from Equity
Transactions......................... 14,076 24,010 2,471 2,522 1,271 2,465
-------- ------------ -------- ------------ -------- -------
Net Increase in Equity................. 32,254 23,864 6,998 2,622 1,708 2,470
Equity
Beginning of Year.................... 118,190 94,326 21,967 19,345 2,470 0
-------- ------------ -------- ------------ -------- -------
End of Year.......................... $150,444 $118,190 $ 28,965 $ 21,967 $4,178 $2,470
======== =========== ======= =========== ======= ===========
</TABLE>
# The initial investments in the Growth Stock, Growth and Income Stock,
Aggressive Growth Stock and International Equity Divisions were made on May 3,
1994.
The Accompanying Notes are an Integral Part of the Financial Statements
(Prepared from Unaudited Figures)
23
<PAGE> 27
NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT
STATEMENT OF OPERATIONS AND CHANGES IN EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
GROWTH & INCOME STOCK AGGRESSIVE GROWTH STOCK INTERNATIONAL EQUITY
DIVISION# DIVISION# DIVISION# SELECT BOND DIVISION
------------------------- ------------------------- ------------------------- -------------------------
PERIOD EIGHT MONTHS PERIOD EIGHT MONTHS PERIOD EIGHT MONTHS PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED ENDED YEAR ENDED
JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31,
-------- ------------ -------- ------------ -------- ------------ -------- ------------
1995 1994 1995 1994 1995 1994 1995 1994
-------- ------------ -------- ------------ -------- ------------ -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 45 $ 62 $ 54 $ 1 $ 67 $ 170 $ 110 $ 195
12 7 21 12 21 13 10 17
5 3 9 5 9 6 4 7
-------- ------------ -------- ------------ -------- ------------ -------- ------------
28 52 24 (16) 37 151 96 171
-------- ------------ -------- ------------ -------- ------------ -------- ------------
4 1 20 11 (6) 1 1 11
720 (90) 1,254 301 707 (267) 327 (288)
-------- ------------ -------- ------------ -------- ------------ -------- ------------
724 (89) 1,274 312 701 (266) 328 (277)
-------- ------------ -------- ------------ -------- ------------ -------- ------------
752 (37) 1,298 296 738 (115) 424 (106)
-------- ------------ -------- ------------ -------- ------------ -------- ------------
1,320 1,307 2,784 2,044 2,822 2,308 637 1,286
(159) (37) (287) (144) (177) (109) (123) (250)
(259) (159) (489) (316) (508) (362) (107) (229)
810 2,731 1,862 4,412 1,173 5,376 149 322
(94) (102) (122) (74) (368) (33) (351) (896)
-------- ------------ -------- ------------ -------- ------------ -------- ------------
1,618 3,740 3,748 5,922 2,942 7,180 205 233
-------- ------------ -------- ------------ -------- ------------ -------- ------------
2,370 3,703 5,046 6,218 3,680 7,065 629 127
3,703 0 6,218 0 7,065 0 3,559 3,432
-------- ------------ -------- ------------ -------- ------------ -------- ------------
$6,073 $3,703 $ 11,264 $6,218 $ 10,745 $7,065 $4,188 $3,559
======= =========== ======= =========== ======= =========== ======= ===========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
(Prepared from Unaudited Figures)
24
<PAGE> 28
NORTHWESTERN MUTUAL LIFE VARIABLE LIFE ACCOUNT
STATEMENT OF OPERATIONS AND CHANGES IN EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
HIGH YIELD
BOND DIVISION# MONEY MARKET DIVISION BALANCED DIVISION
---------------------- ---------------------- ----------------------
PERIOD EIGHT MONTHS PERIOD PERIOD
ENDED ENDED ENDED YEAR ENDED ENDED YEAR ENDED
JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31,
-------- ------------ -------- ------------ -------- ------------
1995 1994 1995 1994 1995 1994
-------- ------------ -------- ------------ -------- ------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend Income.................... $ 55 $ 52 $ 116 $ 127 $ 2,521 $ 810
Mortality and Expense Risks........ 3 2 10 15 179 336
Taxes.............................. 1 1 4 7 77 144
-------- ------ -------- ------------ -------- ------------
Net Investment Income.............. 51 49 102 105 2,265 330
-------- ------ -------- ------------ -------- ------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Realized Gain (Loss) on
Investments...................... 2 2 -- -- 332 (558)
Unrealized Appreciation
(Depreciation) of Investments
During the Year.................. 84 (41) -- -- 7,166 (176)
-------- ------ -------- ------------ -------- ------------
Net Gain (Loss) on Investments..... 86 (39) 0 0 7,498 (734)
-------- ------ -------- ------------ -------- ------------
Increase (Decrease) in Equity
Derived from Investment
Activity......................... 137 10 102 105 9,763 (404)
-------- ------ -------- ------------ -------- ------------
EQUITY TRANSACTIONS
Policyowners' Net Payments......... 303 327 374 847 8,017 17,613
Policy Loans, Surrenders, and Other
(net)............................ (74) (33) (128) (102) (2,639) (4,843)
Mortality and Other (net).......... (66) (43) (64) (101) (1,537) (3,269)
Transfers from Other
Divisions........................ 343 746 796 1,271 144 294
Transfers to Other Divisions....... (70) (74) (571) (856) (3,007) (9,829)
-------- ------ -------- ------------ -------- ------------
Increase (Decrease) in Equity Derived
from Equity Transactions........... 436 923 407 1,059 978 (34)
-------- ------ -------- ------------ -------- ------------
Net Increase (Decrease) in Equity.... 573 933 509 1,164 10,741 (438)
Equity
Beginning of Year.................. 933 0 3,821 2,657 68,454 68,892
-------- ------ -------- ------------ -------- ------------
End of Year........................ $1,506 $933 $4,330 $3,821 $ 79,195 $ 68,454
======= =========== ======= =========== ======= ===========
</TABLE>
# The initial investment in the High Yield Bond Division was made on May 3,
1994.
The Accompanying Notes are an Integral Part of the Financial Statements
(Prepared from Unaudited Figures)
25
<PAGE> 29
NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995
Note 1 -- Northwestern Mutual Variable Life Account (the "Account") is
registered as a unit investment trust under the Investment Company Act of 1940
and is a segregated asset account of The Northwestern Mutual Life Insurance
Company ("Northwestern Mutual Life") used to fund variable life insurance
policies. Principal accounting policies are summarized below.
Note 2 -- All assets of each Division of the Account are invested in shares of
the corresponding Portfolio of Northwestern Mutual Series Fund, Inc. (the
"Fund"). The shares are valued at the Fund's offering and redemption price per
share. The Northwestern Mutual Series Fund, Inc. (formerly Northwestern Mutual
Variable Life Series Fund, Inc.) is a diversified open-end investment company
registered under the Investment Company Act of 1940.
Note 3 -- Dividend income from the Fund is recorded on the record date of the
dividends. Transactions in Fund shares are accounted for on the trade date. The
basis for determining cost on sale of Fund shares is identified cost. Purchases
and sales of Fund shares for the period ended June 30, 1995 by each Division are
shown below:
<TABLE>
<CAPTION>
PURCHASES SALES
---------- ----------
<S> <C> <C>
Index 500 Stock Division... $3,463,515 $ 799,399
Growth Stock Division...... 1,357,892 66,221
Growth and Income Stock
Division................. 1,723,262 78,056
Aggressive Growth
Division................. 3,933,035 160,360
International Equity
Division................. 3,191,612 212,002
Select Bond Division....... 573,812 273,619
High Yield Bond Division... 575,113 88,483
Money Market Division...... 1,121,963 614,260
Balanced Division.......... 5,403,390 2,160,837
</TABLE>
Note 4 -- A deduction for mortality and expense risks is determined daily and
paid to Northwestern Mutual Life. The deduction is at an annual rate of .50% of
the net assets of the Account. The mortality risk is that insureds may not live
as long as estimated. The expense risk is that expenses of issuing and
administering the policies may exceed the estimated costs.
Certain deductions are also made from the annual or single premiums before
amounts are allocated to the Account. These deductions are for (1) sales load,
(2) administrative expenses, (3) state premium taxes and (4) a risk charge for
the guaranteed minimum death benefit.
Additional mortality costs are deducted from the policy and are paid to
Northwestern Mutual Life to cover the cost of providing insurance protection.
This cost is actuarially calculated based upon the insured's age, the 1980
Commissioners Standard Ordinary Mortality Table and the amount of insurance
provided under the policy.
Note 5 -- Northwestern Mutual Life is taxed as a "life insurance company" under
the Internal Revenue Code. The variable life insurance policies which are funded
in the Account are taxed as part of the operations of Northwestern Mutual Life.
Policies provide that a charge for taxes may be made against the assets of the
Account. Northwestern Mutual Life charges the Account at an annual rate of .20%
of the Account's net assets and reserves the right to increase, decrease or
eliminate the charge for taxes in the future.
Note 6 -- The Account is credited for the policyowners' net annual premiums at
the respective policy anniversary dates regardless of when policyowners actually
pay their premiums. Northwestern Mutual Life's equity represents any unpaid
portion of net annual premiums.
26
<PAGE> 30
[PRICE WATERHOUSE LLP LETTERHEAD]
REPORT OF INDEPENDENT ACCOUNTANTS
To The Northwestern Mutual Life Insurance Company and
Policyowners of Northwestern Mutual Variable Life Account
In our opinion, the accompanying combined statement of assets and liabilities
and the related combined and separate statements of operations and changes in
equity present fairly, in all material respects, the financial position of
Northwestern Mutual Variable Life Account and the Index 500 Stock Division,
Aggressive Growth Stock Division, International Equity Division, Select Bond
Division, Money Market Division, Balanced Division, Growth Stock Division,
Growth and Income Stock Division and High Yield Bond Division thereof at
December 31, 1994, the results of their operations and the changes in their
equity for each of the two years in the period then ended for Northwestern
Mutual Variable Life Account and Index 500 Stock Division, Select Bond Division,
Money Market Division and Balanced Division and for the period from May 3, 1994
(commencement of operations) through December 31, 1994 for the Aggressive Growth
Stock Division, International Equity Division, Growth Stock Division, Growth and
Income Stock Division, and High Yield Bond Division, all in conformity with
generally accepted accounting principles. 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 generally accepted auditing standards 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, which included direct confirmation of the number of
shares owned at December 31, 1994 with Northwestern Mutual Series Fund, Inc.
provide a reasonable basis for the opinion expressed above.
[Price Waterhouse LLP]
Milwaukee, Wisconsin
January 25, 1995
27
<PAGE> 31
NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1994
(IN THOUSANDS)
<TABLE>
<S> <C> <C>
ASSETS
Investments at Market Value:
Northwestern Mutual Series Fund, Inc.
Index 500 Stock
17,338 shares (cost $22,796)........................................... $21,967
Aggressive Growth Stock
3,111 shares (cost $5,917)............................................. 6,218
International Equity
5,932 shares (cost $7,333)............................................. 7,065
Select Bond
3,361 shares (cost $3,865)............................................. 3,559
Money Market
3,821 shares (cost $3,821)............................................. 3,821
Balanced
52,136 shares (cost $68,385)........................................... 68,454
Growth Stock
2,472 shares (cost $2,494)............................................. 2,470
Growth and Income Stock
3,763 shares (cost $3,793)............................................. 3,703
High Yield Bond
961 shares (cost $974)................................................. 933 $118,190
-------
Due from Sale of Fund Shares............................................................. 233
Due from Northwestern Mutual Life Insurance Company...................................... 205
--------
Total Assets..................................................................... $118,628
=========
LIABILITIES
Due to Northwestern Mutual Life Insurance Company........................................ $ 233
Due on Purchase of Fund Shares........................................................... 205
--------
Total Liabilities................................................................ 438
--------
EQUITY..................................................................................... 118,190
--------
Total Liabilities and Equity..................................................... $118,628
=========
</TABLE>
Equity Represented By:
<TABLE>
<CAPTION>
EQUITY OF
-----------------------
POLICYOWNERS NML
------------ -------
<S> <C> <C> <C>
Index 500 Stock Division.......................................... $ 17,726 $ 4,241 $ 21,967
Aggressive Growth Stock Division.................................. 4,944 1,274 6,218
International Equity Division..................................... 5,530 1,535 7,065
Select Bond Division.............................................. 3,102 457 3,559
Money Market Division............................................. 3,507 314 3,821
Balanced Division................................................. 62,083 6,371 68,454
Growth Stock Division............................................. 2,000 470 2,470
Growth and Income Stock Division.................................. 2,985 718 3,703
High Yield Bond Division.......................................... 742 191 933
------------ ------- --------
$102,619 $15,571 $118,190
============= ======== =========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
28
<PAGE> 32
NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT
STATEMENT OF OPERATIONS AND CHANGES IN EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
AGGRESSIVE
INDEX 500 GROWTH INTERNATIONAL
COMBINED STOCK DIVISION STOCK EQUITY
-------------------- ------------------ DIVISION* DIVISION*
------------ ------------
YEAR ENDED YEAR ENDED EIGHT MONTHS EIGHT MONTHS
DECEMBER 31, DECEMBER 31, ENDED ENDED
-------------------- ------------------ DECEMBER 31, DECEMBER 31,
1994 1993 1994 1993 1994 1994
-------- -------- ------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend Income.......................... $ 2,062 $ 11,953 $ 611 $ 2,243 $ 1 $ 170
Mortality and Expense Risks.............. 510 404 103 74 12 13
Taxes.................................... 219 173 44 32 5 6
-------- -------- ------- ------- ------------ ------------
Net Investment Income (Loss)............. 1,333 11,376 464 2,137 (16) 151
-------- -------- ------- ------- ------------ ------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Realized Gain (Loss)
on Investments......................... 14 246 543 124 11 1
Unrealized Appreciation (Depreciation)
of Investments
During the Year........................ (1,493) (4,599) (907) (970) 301 (267)
-------- -------- ------- ------- ------------ ------------
Net Gain (Loss) on Investments........... (1,479) (4,353) (364) (846) 312 (266)
-------- -------- ------- ------- ------------ ------------
Increase (Decrease) in Equity
Derived from Investment Activity......... (146) 7,023 100 1,291 296 (115)
-------- -------- ------- ------- ------------ ------------
EQUITY TRANSACTIONS
Policyowners' Net Payments............... 38,517 23,693 12,089 7,673 2,044 2,308
Policy Loans, Surrenders, and
Death Benefits......................... (7,695) (5,674) (2,126) (1,055) (144) (109)
Mortality and Other (net)................ (6,812) (4,340) (2,221) (1,324) (316) (362)
Transfers from Other Divisions........... 18,069 3,886 941 2,163 4,412 5,376
Transfers to Other Divisions............. (18,069) (3,886) (6,161) (369) (74) (33)
-------- -------- ------- ------- ------------ ------------
Increase (Decrease) in Equity
Derived from Equity Transactions......... 24,010 13,679 2,522 7,088 5,922 7,180
-------- -------- ------- ------- ------------ ------------
Net Increase (Decrease) in Equity.......... 23,864 20,702 2,622 8,379 6,218 7,065
Equity
Beginning of Year........................ 94,326 73,624 19,345 10,966 -- --
-------- -------- ------- ------- ------------ ------------
End of Year.............................. $118,190 $ 94,326 $21,967 $19,345 $6,218 $7,065
======== ======== ======= ======= =========== ===========
</TABLE>
* The initial investments in the Aggressive Growth Stock, International Equity,
Growth Stock, Growth and Income Stock, and High Yield Bond Divisions were made
on May 3, 1994.
The Accompanying Notes are an Integral Part of the Financial Statements
29
<PAGE> 33
NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT
STATEMENT OF OPERATIONS AND CHANGES IN EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
GROWTH
SELECT BOND MONEY MARKET GROWTH AND INCOME HIGH YIELD
DIVISION DIVISION BALANCED DIVISION STOCK STOCK BOND
----------------- ----------------- ------------------- DIVISION* DIVISION* DIVISION*
------------ ------------ ------------
YEAR ENDED YEAR ENDED YEAR ENDED EIGHT MONTHS EIGHT MONTHS EIGHT MONTHS
DECEMBER 31, DECEMBER 31, DECEMBER 31, ENDED ENDED ENDED
----------------- ----------------- ------------------- DECEMBER 31, DECEMBER 31, DECEMBER 31,
1994 1993 1994 1993 1994 1993 1994 1994 1994
------ ------ ------ ------ ------- ------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 195 $ 337 $ 127 $ 89 $ 810 $ 9,284 $ 34 $ 62 $ 52
17 17 15 15 336 298 5 7 2
7 7 7 6 144 128 2 3 1
------ ------ ------ ------ ------- ------- ------------ ------------ ------
171 313 105 68 330 8,858 27 52 49
------ ------ ------ ------ ------- ------- ------------ ------------ ------
11 44 -- -- (558) 78 3 1 2
(288) (34) -- -- (176) (3,595) (25) (90) (41)
------ ------ ------ ------ ------- ------- ------------ ------------ ------
(277) 10 -- -- (734) (3,517) (22) (89) (39)
------ ------ ------ ------ ------- ------- ------------ ------------ ------
(106) 323 105 68 (404) 5,341 5 (37) 10
------ ------ ------ ------ ------- ------- ------------ ------------ ------
1,286 793 847 251 17,613 14,976 696 1,307 327
(250) (222) (102) (169) (4,843) (4,228) (51) (37) (33)
(229) (165) (101) (49) (3,269) (2,802) (112) (159) (43)
322 93 1,271 571 294 1,059 1,976 2,731 746
(896) (560) (856) (2,106) (9,829) (851) (44) (102) (74)
------ ------ ------ ------ ------- ------- ------------ ------------ ------
233 (61) 1,059 (1,502) (34) 8,154 2,465 3,740 923
------ ------ ------ ------ ------- ------- ------------ ------------ ------
127 262 1,164 (1,434) (438) 13,495 2,470 3,703 933
3,432 3,170 2,657 4,091 68,892 55,397 -- -- --
------ ------ ------ ------ ------- ------- ------------ ------------ ------
$3,559 $3,432 $3,821 $2,657 $68,454 $68,892 $2,470 $3,703 $933
====== ====== ====== ====== ======= ======= =========== =========== ===========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
30
<PAGE> 34
NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994
Note 1 -- Northwestern Mutual Variable Life Account (the "Account") is
registered as a unit investment trust under the Investment Company Act of 1940
and is a segregated asset account of The Northwestern Mutual Life Insurance
Company ("Northwestern Mutual Life") used to fund variable life insurance
policies. Principal accounting policies are summarized below.
Note 2 -- All assets of each Division of the Account are invested in shares of
the corresponding Portfolio of Northwestern Mutual Series Fund, Inc. (the
"Fund"). The shares are valued at the Fund's offering and redemption price per
share. The Northwestern Mutual Series Fund, Inc. (formerly Northwestern Mutual
Variable Life Series Fund, Inc.) is a diversified open-end investment company
registered under the Investment Company Act of 1940.
Note 3 -- Dividend income from the Fund is recorded on the record date of the
dividends. Transactions in Fund shares are accounted for on the trade date. The
basis for determining cost on sale of Fund shares is identified cost. Purchases
and sales of Fund shares for the year ended December 31, 1994 by each Division
are shown below:
<TABLE>
<CAPTION>
PURCHASES SALES
---------- ----------
<S> <C> <C>
Index 500 Stock Division... $7,025,219 $4,039,211
Aggressive Growth Stock
Division................. 6,116,273 210,189
International Equity
Division................. 7,468,011 136,987
Select Bond Division....... 1,164,306 760,136
Money Market Division...... 1,940,911 776,314
Balanced Division.......... 7,740,345 7,444,499
Growth Stock Division...... 2,551,851 60,219
Growth and Income Stock
Division................. 3,938,474 146,276
High Yield Bond Division... 1,071,912 99,074
</TABLE>
Note 4 -- A deduction for mortality and expense risks is determined daily and
paid to Northwestern Mutual Life. The deduction is at an annual rate of .50% of
the net assets of the Account. The mortality risk is that insureds may not live
as long as estimated. The expense risk is that expenses of issuing and
administering the policies may exceed the estimated costs.
Certain deductions are also made from the annual or single premiums before
amounts are allocated to the Account. These deductions are for (1) sales load,
(2) administrative expenses, (3) state premium taxes and (4) a risk charge for
the guaranteed minimum death benefit.
Additional mortality costs are deducted from the policy and are paid to
Northwestern Mutual Life to cover the cost of providing insurance protection.
This cost is actuarially calculated based upon the insured's age, the 1980
Commissioners Standard Ordinary Mortality Table and the amount of insurance
provided under the policy.
Note 5 -- Northwestern Mutual Life is taxed as a "life insurance company" under
the Internal Revenue Code. The variable life insurance policies which are funded
in the Account are taxed as part of the operations of Northwestern Mutual Life.
Policies provide that a charge for taxes may be made against the assets of the
Account. Northwestern Mutual Life charges the Account at an annual rate of .20%
of the Account's net assets and reserves the right to increase, decrease or
eliminate the charge for taxes in the future.
Note 6 -- The Account is credited for the policyowners' net annual premiums at
the respective policy anniversary dates regardless of when policyowners actually
pay their premiums. Northwestern Mutual Life's equity represents any unpaid
portion of net annual premiums.
Note 7 -- Certain prior period amounts have been reclassified to conform to
current year presentation.
31
<PAGE> 35
NORTHWESTERN MUTUAL LIFE
INSURANCE COMPANY AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
- ---------------------------------
The following financial statements of Northwestern Mutual should be considered
only as bearing upon the ability of Northwestern Mutual Life to meet its
obligations under the Policies.
NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
<TABLE>
<CAPTION>
December 31,
(In millions)
1994 1993
----------------------
<S> <C> <C>
ASSETS
BONDS
United States Government $ 3,501 $ 2,372
Industrial and other 19,232 18,077
----------------------
22,733 20,449
----------------------
STOCKS
Common 2,192 2,091
Unconsolidated subsidiaries 504 416
Preferred 511 459
----------------------
3,207 2,966
----------------------
MORTGAGE LOANS 7,099 6,505
REAL ESTATE
Investment 1,072 1,068
Home office 141 148
----------------------
1,213 1,216
----------------------
LOANS ON POLICIES 6,144 5,846
OTHER INVESTMENTS 1,301 1,257
CASH AND TEMPORARY INVESTMENTS 803 783
DUE AND ACCRUED INVESTMENT INCOME 650 690
----------------------
Total invested assets 43,150 39,712
----------------------
SEPARATE ACCOUNT BUSINESS 3,806 3,483
OTHER ASSETS 1,156 866
----------------------
Total Assets $48,112 $ 44,061
======================
LIABILITIES AND RESERVES
LIABILITY FOR POLICY BENEFITS
Insurance and annuity reserves $36,124 $ 32,861
Policy benefits left for future payments 866 829
Premium deposits 419 403
Policy benefits in process of payment 138 108
Policyowner dividends payable 1,950 1,785
----------------------
39,497 35,986
----------------------
OTHER LIABILITIES
Interest maintenance reserve 11 279
Income taxes 561 411
Miscellaneous 822 645
----------------------
1,394 1,335
----------------------
SEPARATE ACCOUNT BUSINESS 3,806 3,483
----------------------
ASSET VALUATION RESERVE 1,190 1,227
----------------------
Total liabilities and asset valuation reserve 45,887 42,031
----------------------
GENERAL CONTINGENCY RESERVE 2,225 2,030
----------------------
Total Liabilities and Contingency Reserves $48,112 $ 44,061
======================
</TABLE>
The accompanying notes are an integral part of the financial statements.
32
<PAGE> 36
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the year ended
December 31,
(In millions)
1994 1993 1992
----------------------------
<S> <C> <C> <C>
INCOME
PREMIUMS $ 5,743 $ 5,295 $ 4,889
NET INVESTMENT INCOME 3,106 2,913 2,753
POLICY BENEFITS LEFT WITH COMPANY
AND OTHER INCOME 636 570 523
----------------------------
Total income 9,485 8,778 8,165
----------------------------
DISPOSITION OF INCOME
COSTS
Agents' compensation 492 487 443
Other insurance costs 334 361 303
Premium and other taxes or assessments 120 116 112
----------------------------
946 964 858
----------------------------
BENEFITS TO POLICYOWNERS AND BENEFICIARIES
Death benefits 609 526 459
Matured endowments 54 44 49
Annuity benefits 94 85 75
Disability benefits 151 126 111
Surrender benefits 904 837 762
Payments from policy benefits
left with Company 568 498 482
Net transfers to
separate accounts 344 302 258
Net additions to policy reserves 3,313 3,078 2,870
----------------------------
6,037 5,496 5,066
----------------------------
Total disposition of income 6,983 6,460 5,924
----------------------------
SAVINGS FROM OPERATIONS BEFORE
INCOME TAXES AND DIVIDENDS 2,502 2,318 2,241
INCOME TAX EXPENSE 281 208 242
----------------------------
SAVINGS FROM OPERATIONS BEFORE DIVIDENDS 2,221 2,110 1,999
POLICYOWNER DIVIDENDS 1,942 1,780 1,755
----------------------------
NET SAVINGS FROM OPERATIONS 279 330 244
NET REALIZED CAPITAL GAINS, LESS
TAX EXPENSE OF $85, $82, AND
$64 RESPECTIVELY 119 180 105
----------------------------
CONTRIBUTION TO GENERAL
CONTINGENCY RESERVE
FROM OPERATIONS $ 398 $ 510 $ 349
============================
</TABLE>
The accompanying notes are an integral part of the financial statements.
33
<PAGE> 37
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENT OF GENERAL CONTINGENCY RESERVE
<TABLE>
<CAPTION>
For the year ended
December 31,
(In millions)
1994 1993 1992
------------------------------------------
<S> <C> <C> <C>
BEGINNING OF YEAR BALANCE $ 2,030 $ 1,850 $ 1,655
Contribution to general contingency
reserve from operations 398 510 349
Net unrealized capital losses (242) (89) (110)
Change in asset valuation reserve 37 (157) (119)
Transfer from voluntary investment reserve - - 106
Other -- net 2 (84) (31)
-----------------------------------------
END OF YEAR BALANCE $ 2,225 $ 2,030 $ 1,850
=========================================
</TABLE>
NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
For the year ended
December 31,
(In millions)
1994 1993 1992
-----------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Insurance premiums, annuities
and other considerations $ 6,299 $ 5,777 $ 5,342
Net investment income received 3,013 2,813 2,666
Net loans on policies (297) (143) (159)
Benefits paid to policyholders and
beneficiaries (2,357) (2,116) (1,927)
Net transfers to separate accounts (344) (302) (258)
Policyowner dividends paid (1,777) (1,759) (1,596)
Expenses and taxes (1,033) (1,135) (1,071)
Other -- net 89 (81) 45
-----------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 3,593 3,054 3,042
CASH FLOWS FROM INVESTING ACTIVITIES
PROCEEDS FROM INVESTMENTS SOLD OR MATURED
Bonds 27,096 20,221 13,884
Stocks 1,469 1,122 1,027
Mortgage loans 512 394 300
Real estate 164 43 71
Other invested assets 213 132 24
Capital gain (tax) benefit 28 (124) (82)
-----------------------------------------
29,482 21,788 15,224
COST OF INVESTMENTS ACQUIRED
Bonds 29,674 22,393 16,446
Stocks 1,606 1,288 755
Mortgage loans 1,356 970 510
Real estate 6 46 63
Other invested assets 413 152 238
-----------------------------------------
33,055 24,849 18,012
NET CASH USED IN INVESTING ACTIVITIES (3,573) (3,061) (2,788)
-----------------------------------------
NET INCREASE (DECREASE) IN CASH AND
TEMPORARY INVESTMENTS 20 (7) 254
CASH AND TEMPORARY INVESTMENTS,
BEGINNING OF YEAR 783 790 536
-----------------------------------------
CASH AND TEMPORARY INVESTMENTS, END OF YEAR $ 803 $ 783 $ 790
=========================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
34
<PAGE> 38
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993, AND 1992
NOTE 1 - PRINCIPAL ACCOUNTING POLICIES
The accompanying consolidated financial statements include the accounts of The
Northwestern Mutual Life Insurance Company (the "Company") and its wholly-owned
life insurance subsidiary. The consolidated financial statements have been
prepared using accounting policies prescribed or permitted by the Insurance
Departments of the states in which the Company and its subsidiary are
domiciled. These policies are considered generally accepted accounting
principles for mutual life insurance companies.
In April 1993, the Financial Accounting Standards Board issued Interpretation
No. 40, "Applicability of Generally Accepted Accounting Principles to Mutual
Life Insurance and Other Enterprises", which establishes a different definition
of generally accepted accounting principles for mutual life insurance
companies. Under the Interpretation, financial statements of mutual life
insurance companies for periods beginning after December 15, 1995 which are
prepared on the basis of statutory accounting will no longer be characterized
as in conformity with generally accepted accounting principles.
Management of the Company has not yet determined the effect on its December 31,
1994 financial statements of applying the Interpretation. The Company is
considering application of the accounting changes required to present its
financial statements in conformity with generally accepted accounting
principles. If the Company chooses to adopt the required accounting changes,
the effect of the changes would be reported retroactively through restatement
of all previously issued financial statements beginning with the earliest year
presented. The cumulative effect of adopting these changes would be included
in the earliest year presented.
INVESTMENTS
The Company's investments are valued on the following bases:
Bonds -Amortized cost using the interest method,
except for loan-backed and structured securities
which are amortized to estimated prepayment
dates using the prospective method
Common Stocks -Market value
Preferred Stocks -Cost
Unconsolidated
Subsidiaries -Equity in subsidiaries' net assets
Mortgage Loans -Amortized cost
Investment Real Estate -Lower of cost, less depreciation and
encumbrances, or estimated net realizable value
Home Office Real Estate -Cost, less depreciation
Loans on Policies -Cost
Other Investments-
Joint Ventures -Equity in ventures' net assets
35
<PAGE> 39
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT BUSINESS
This business consists of annuities funded by specific assets held in separate
accounts. The assets in these accounts are carried at market value. The
policy values reflect the investment performance of the respective accounts.
INSURANCE, ANNUITY AND DISABILITY INCOME RESERVES
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 policy reserves are based primarily on the
net level premium method employing various mortality tables at interest rates
ranging from 2% to 4-1/2%.
Deferred annuity reserves on policies issued since 1985 are valued 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 the
contract value. Immediate annuity reserves are present values of expected
benefit payments at interest rates ranging from 3-1/2% to 8-1/4%.
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. Previous DI business used the net level premium method, using a 3%
or 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 using primarily the 1985 CIDA (modified for Company
experience in first two years of disability) with interest rates ranging from
3% to 5-1/2%.
INTEREST MAINTENANCE RESERVE
The Company is required to maintain an interest maintenance reserve ("IMR").
The IMR establishes a reserve for realized gains and losses, net of tax,
resulting from changes in interest rates on short and long-term fixed income
investments. Net realized gains and losses charged to the IMR are amortized
into investment income over the approximate remaining life of the investment
sold.
ASSET VALUATION RESERVE
The Company is also required to maintain an asset valuation reserve ("AVR").
The AVR establishes a reserve for certain invested assets held by the Company.
In the aggregate, AVR was 84% and 91% of the allowable maximum at December 31,
1994 and 1993, respectively.
PREMIUM INCOME
Life insurance premiums are recognized as income at the beginning of each
policy year.
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
reinsurance to other insurance enterprises or reinsurers under excess coverage
and co-insurance contracts.
36
<PAGE> 40
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
As of December 31, 1994 and 1993, total life insurance inforce approximated
$347 billion and $313 billion, respectively, of which approximately $104
billion and $96 billion, respectively, comprised principally of term insurance,
had been ceded to various reinsurers. The Company retains a maximum of $10
million of coverage per individual life.
OPERATING COSTS
Operating costs, including costs of acquiring new policies, are charged to
operations as incurred.
INCOME TAXES
Provisions for income taxes are based on current income tax returns without
recognition of deferred taxes due to timing differences. The portion of the
federal income tax based on mutual life insurance company equity is reflected
as a component of income tax expense, including related adjustments for prior
years.
The Company files a consolidated life-nonlife federal income tax return.
Federal income tax returns for years through 1988 are closed as to further
assessment of taxes. Adequate provision has been made in the financial
statements for any additional taxes which may become due with respect to the
open years.
The Company's effective tax rate on savings from operations before income tax
expense (after dividends) in 1994 was approximately 50.2%. Two significant
factors cause the Company's effective rate to exceed the federal corporate rate
of 35%. First, the Company pays "surplus tax", a tax that is assessed only on
mutual life insurance companies, which is an amount that proports to equate a
portion of policyholder dividends with nondeductible dividends paid to
shareholders of stock companies. Second, the Company must capitalize and
amortize (as opposed to immediately deducting) an amount deemed to represent
the cost of acquiring new business ("DAC tax").
POLICYOWNER DIVIDENDS
Dividends payable in the following year are charged to current operations.
NOTE 2 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following summarizes the bases used by the Company in estimating its fair
value disclosures for financial instruments:
BONDS AND PREFERRED STOCKS - Fair values 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.
MORTGAGE LOANS - Fair values are derived by discounting the future
estimated cash flows using current interest rates for debt securities with
similar credit risk and maturities, or utilizing net realizable values.
LOANS ON POLICIES - The carrying amount reported in the statement of
financial position approximates fair value since loans on policies reduce
the amount payable at death or at surrender of the contract.
37
<PAGE> 41
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
Cash and temporary investments and due and accrued investment income - The
carrying amounts reported in the statement of financial position
approximate fair value.
Annuity reserves (without mortality/morbidity features) - Fair values are
derived by discounting the future estimated cash flows using current
interest rates with similar maturities.
Other deposit liabilities - The carrying amounts reported in the statement
of financial position approximate fair value.
NOTE 3 - INVESTMENTS
NET INVESTMENT INCOME
The Company's net investment income for the years ended December 31, 1994, 1993
and 1992 consists of the following:
<TABLE>
<CAPTION>
(In millions)
1994 1993 1992
----------------------------
<S> <C> <C> <C>
Interest, dividends, rents, equity
in unconsolidated
subsidiaries' earnings and joint
venture income $ 3,395 $ 3,215 $ 3,039
Less: Investment expenses and
depreciation (289) (302) (286)
----------------------------
Net Investment Income $ 3,106 $ 2,913 $ 2,753
============================
</TABLE>
REALIZED GAINS AND LOSSES
During 1994, 1993 and 1992, the Company, in its normal course of business, sold
certain invested assets realizing gains and losses before transfer to the IMR
and capital gains tax from such sales as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE YEAR ENDED FOR THE YEAR ENDED
DECEMBER 31, 1994 DECEMBER 31, 1993 DECEMBER 31, 1992
----------------------------------------------------------------------------------------------------
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 $171 $(535) $(364) $438 $(133) $305 $263 $ (90) $173
Stocks 499 (291) 208 297 (36) 261 266 (53) 213
Mortgage loans - (37) (37) 1 (12) (11) - (3) (3)
Real estate 16 (7) 9 13 (2) 11 15 (11) 4
Other invested assets 110 (98) 12 100 (54) 46 87 (131) (44)
----------------------------------------------------------------------------------------------------
$796 $(968) $(172) $849 $(237) $612 $631 $(288) $343
====================================================================================================
</TABLE>
38
<PAGE> 42
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
DEBT SECURITIES
Debt securities consist of all bonds, fixed maturity preferred stocks and short
term fixed income investments.
The statement values, which principally represent amortized cost, and estimated
market values of the Company's debt securities at December 31, 1994 and 1993
are as follows:
<TABLE>
<CAPTION>
December 31, 1994 RECONCILIATION TO ESTIMATED MARKET VALUE
- -------------------------------------------------------------------------------
GROSS GROSS ESTIMATED
STATEMENT UNREALIZED UNREALIZED MARKET
VALUE APPRECIATION DEPRECIATION VALUE
- -------------------------------------------------------------------------------
(IN MILLIONS)
<S> <C> <C> <C> <C>
US Government and
political obligations $ 3,334 $ 61 $ (41) $ 3,354
Mortgage-backed
securities 5,652 53 (321) 5,384
Corporate and other
debt securities 14,488 203 (515) 14,176
-----------------------------------------------------
23,474 317 (877) 22,914
Preferred stocks 71 1 (7) 65
-----------------------------------------------------
Total $23,545 $ 318 $ (884) $22,979
=====================================================
</TABLE>
<TABLE>
<CAPTION>
December 31, 1993 RECONCILIATION TO ESTIMATED MARKET VALUE
- -------------------------------------------------------------------------------
GROSS GROSS ESTIMATED
STATEMENT UNREALIZED UNREALIZED MARKET
VALUE APPRECIATION DEPRECIATION VALUE
- -------------------------------------------------------------------------------
(IN MILLIONS)
<S> <C> <C> <C> <C>
US Government and
political obligations $ 3,005 $ 230 $ (8) $ 3,227
Mortgage-backed
securities 4,894 212 (22) 5,084
Corporate and other
debt securities 13,260 1,076 (46) 14,290
-----------------------------------------------------
21,159 1,518 (76) 22,601
Preferred stocks 91 3 (2) 92
-----------------------------------------------------
Total $21,250 $ 1,521 $ (78) $ 22,693
=====================================================
</TABLE>
The amortized cost and estimated market value of debt securities at December
31, 1994 and 1993, by contractual maturity, are 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.
39
<PAGE> 43
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
<TABLE>
<CAPTION>
DECEMBER 31, 1994 DECEMBER 31, 1993
- --------------------------------------------------------------------------------
ESTIMATED ESTIMATED
STATEMENT MARKET STATEMENT MARKET
VALUE VALUE VALUE VALUE
- --------------------------------------------------------------------------------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Due in one year or less $ 1,102 $ 1,100 $ 976 $ 981
Due after one year
through five years 4,491 4,444 3,568 3,804
Due after five years
through ten years 5,787 5,711 5,714 6,172
Due after ten years 6,513 6,340 6,098 6,652
------------------------------------------------------
17,893 17,595 16,356 17,609
Mortgage-backed
securities 5,652 5,384 4,894 5,084
------------------------------------------------------
$23,545 $22,979 $21,250 $22,693
======================================================
</TABLE>
The fair value of perpetual preferred stocks as of December 31, 1994 and 1993
approximates $440 million and $415 million, respectively, compared to the
statement values of $440 million and $368 million, respectively.
MORTGAGE LOANS
As of December 31, 1994 and 1993, the mortgage loan portfolio was distributed
as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1994 DECEMBER 31, 1993
- --------------------------------------------------------------------------------
STATEMENT % OF STATEMENT % OF
GEOGRAPHIC LOCATION VALUE TOTAL VALUE TOTAL
- --------------------------------------------------------------------------------
(IN MILLIONS) (IN MILLIONS)
<S> <C> <C> <C> <C>
Middle Atlantic $ 738 10.4% $ 518 8.0%
South Atlantic 1,943 27.4 1,492 22.9
North Central 1,289 18.2 1,341 20.6
South Central 921 13.0 1,014 15.6
Pacific Northwest 355 5.0 289 4.4
Pacific 1,531 21.5 1,508 23.2
Canada 322 4.5 343 5.3
------------------------------------------------------
$7,099 100.0% $6,505 100.0%
======================================================
PROPERTY TYPE
- --------------------------------------------------------------------------------
Retail $2,475 34.9% $2,561 39.4%
Office Building 2,176 30.6 2,079 32.0
Residential 1,526 21.5 1,013 15.5
Commercial 745 10.5 687 10.6
Other 177 2.5 165 2.5
------------------------------------------------------
$7,099 100.0% $6,505 100.0%
======================================================
</TABLE>
40
<PAGE> 44
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
The fair value of mortgage loans as of December 31, 1994 and 1993 approximates
$6,879 million and $6,900 million, respectively. Increases in current interest
rates were a major reason for the decline in fair value relative to statement
value in 1994. Loans with fair values that are less than statement values for
reasons other than changes in interest rates are adequately covered by normal
AVR reserves and by a $45 million special reserve established by the Company
for mortgage loans.
AFFILIATES
Since 1991, the Company has periodically sold shares of MGIC Investment
Corporation ("MGIC"), an affiliate. In 1992, the Company sold 6.6 million
shares of MGIC for $175 million, generating a realized capital gain of $88
million. In 1993, the Company sold 0.9 million shares for $52 million,
generating a realized capital gain of $38 million. In 1994, the Company sold
5.8 million shares for $51 million, generating a realized capital gain of $3
million. Of the shares sold in 1994, 5.7 million were sold to a subsidiary of
the Company in accordance with an option agreement with the subsidiary; no gain
or loss was realized on this sale. At December 31, 1994, the estimated market
value of the Company's remaining 19.96% investment in MGIC exceeded the
statement value by $214 million.
REAL ESTATE
For real estate and joint venture properties acquired subsequent to December
1990, the Company calculates depreciation using the straight-line method in
accordance with guidelines established by the National Association of Insurance
Commissioners. For properties acquired prior to December 1990, the Company
calculates depreciation using either the straight-line method or the
constant-yield method. Home office real estate is depreciated using the
straight-line method. At December 31, 1994 and 1993, investment real estate
includes $146 million and $126 million, respectively, of real estate acquired
through foreclosure.
DERIVATIVE FINANCIAL INSTRUMENTS
The Company's current utilization of derivative financial instruments is
limited. Most of the Company's derivative transactions are used to reduce or
modify risks of volatility related to currency or interest rate movements.
These hedging strategies use forwards, futures and swaps. At December 31,
1994, the Company held foreign currency forward contracts with a notional value
of $605 million as a partial hedge against foreign currency exposure of foreign
denominated investments. Changes in the market value of these contracts offset
currency gains and losses on the hedged investments. The capital gains or
losses are unrealized before contract settlement and realized on settlement.
These currency hedges represent most of the Company's derivative positions.
The effect of derivative transactions is not significant to the Company's
results from operations or financial position.
NOTE 4 - ANNUITIES AND OTHER DEPOSIT LIABILITIES
The fair value of annuities and other deposit liabilities as of December 31,
1994 and 1993 are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1994 DECEMBER 31, 1993
- ---------------------------------------------------------------------------
STATEMENT FAIR STATEMENT FAIR
VALUE VALUE VALUE VALUE
- ---------------------------------------------------------------------------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Annuities $2,474 $2,203 $2,263 $ 2,079
Other deposit liabilities 727 727 707 707
</TABLE>
41
<PAGE> 45
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
NOTE 5 - BENEFIT PLANS
The Company maintains non-contributory defined benefit retirement plans for all
eligible employees and agents as well as a non-contributory defined
contribution plan for all full-time agents. These plans are funded currently
and plan assets of $939 million at December 31, 1994 are primarily included in
the separate accounts of the Company. As of January 1, 1994, the most recent
actuarial valuation date available, the defined benefit plans were fully
funded.
In addition to pension 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 expenses, which includes the expected cost of
postretirement benefits for newly eligible and vested employees and interest
costs, was $7 million and $9 million for the years ended December 31, 1994 and
1993, respectively. At December 31, 1994 and 1993, the unfunded postretirement
benefit obligation for retirees and other fully eligible or vested employees
was $47 million and $50 million, respectively. The estimated postretirement
benefit obligation for active non-vested employees was $44 million and $45
million at December 31, 1994 and 1993, respectively. The discount rate used to
determine the postretirement benefit obligation was 8% and the health care cost
trend rate was 12% in 1994, declining by 1% per year to an ultimate rate of 6%
over 7 years. If the health care cost trend rate assumptions were increased by
1%, the postretirement benefit obligation as of December 31, 1994 would be
increased by $6 million.
At December 31, 1994 and 1993, plan assets attributable to postretirement
health care benefits totalled $25 million.
NOTE 6 - REINSURANCE
The amounts shown in the accompanying consolidated financial statements are net
of reinsurance activity. The effect of reinsurance on premiums and benefits
for the years ended December 31, 1994 and 1993 are as follows (in millions):
<TABLE>
<CAPTION>
1994 1993
----------------------
<S> <C> <C>
DIRECT PREMIUMS $ 5,977 $ 5,508
REINSURANCE CEDED (234) (213)
---------------------
NET PREMIUMS $ 5,743 $ 5,295
=====================
BENEFITS TO POLICYHOLDERS
AND BENEFICIARIES $ 6,178 $ 5,600
REINSURANCE RECOVERIES (141) (104)
---------------------
NET BENEFITS TO POLICYHOLDERS AND
BENEFICIARIES $ 6,037 $ 5,496
=====================
</TABLE>
In addition, during 1994 and 1993 the Company received credits of $63 million
and $59 million, respectively from reinsurers representing reimbursements of
commissions and other expenses. These credits are included in other income in
the consolidated summary of operations.
42
<PAGE> 46
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
Reinsurance contracts do not relieve the Company from its obligations to
policyholders. 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.
NOTE 7 - CONTINGENCIES
In the normal course of business, the Company enters into transactions to
reduce its exposure to fluctuations in interest rates and market volatility.
These instruments may involve credit risk and may also be subject to risk of
loss due to interest rate fluctuations.
The Company has guaranteed certain obligations of its affiliates. These
guarantees totalled approximately $83 million and $95 million at December 31,
1994 and 1993, respectively, and are generally supported by the underlying net
asset values of the affiliates.
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 condition.
43
<PAGE> 47
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
100 East Wisconsin Avenue Telephone 414 276 9500
Suite 1500
Milwaukee, WI 53202
[Price Waterhouse LLP Letterhead]
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Board of Trustees and Policyowners of
The Northwestern Mutual Life Insurance Company
In our opinion, the accompanying consolidated statement of financial position
and the related consolidated statement of operations, statement of general
contingency reserve and statement of cash flows present fairly, in all material
respects, the financial position of The Northwestern Mutual Life Insurance
Company and its subsidiary at December 31, 1994 and 1993, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1994, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards 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.
Price Waterhouse LLP
January 25, 1995
44
<PAGE> 48
APPENDIX
ILLUSTRATIONS OF DEATH BENEFITS, CASH VALUES AND ACCUMULATED PREMIUMS. The
tables on the following pages illustrate how the death benefit and cash value
for a Policy would vary over time based on hypothetical investment results. The
tables assume gross (after tax) investment return rates of 0%, 6% and 12% on
assets of the Account. The Policies illustrated are for male insureds, select
risks, age 35. The first two illustrations, on pages 46-47, are for a policy
with a Minimum Guaranteed Death Benefit of $100,000 and no Additional
Protection, based (1) on current charges and the current dividend scale and (2)
on maximum charges and zero dividends. The other two illustrations are for a
Policy with a Minimum Guaranteed Death Benefit of $100,000 and Additional
Protection of $100,000.
The death benefits and cash values would be different from those shown if
the gross investment return rate averaged 0%, 6% or 12%, but fluctuated over
and under the average rate at various points in time. The values would also be
different, depending on the Account divisions selected by the owner of the
Policy, if the return rate for the nine Fund Portfolios averaged 0%, 6% or 12%,
but the rates for each individual Portfolio varied over and under the average.
The amounts shown as the death benefits and cash values reflect the
deductions from premiums, deductions from Policy Value and the charge at the
annual rate of .60% of the Account's assets for mortality and expense risks.
The amounts shown as the cash values reflect the deduction of the surrender
charge during the first fifteen Policy years. The amounts shown also reflect
the average of the investment advisory fees and other Fund expenses
applicable to each of the nine Portfolios of the Fund during 1994 at the annual
rate of .53% of the Fund's net assets. See "The Fund", p. 5. Thus the 0%, 6%
and 12% gross hypothetical return rates on the Fund's assets are equivalent to
the net rates of -1.13%, 4.87% and 10.87% on the assets of the Account.
The second column of each table shows the amount which would accumulate if
an amount equal to the annual premium were invested to earn interest, after
taxes, at a 5% interest rate compounded annually.
The death benefits and corresponding cash values shown on pages 46 and 48
illustrate benefits which would be paid if investment returns of 0%, 6% and 12%
are realized, if mortality and expense experience in the future is as currently
experienced and if the current dividend scale remains unchanged. See "Annual
Dividends," p. 13. HOWEVER, THERE IS NO GUARANTEE AS TO THE AMOUNT OF
DIVIDENDS, IF ANY, THAT WILL BE PAID UNDER A POLICY. Although the tables are
based on the assumption that dividends will be used to increase the Policy
Value, other dividend options are available. The use of dividends for other
purposes during the guaranteed period for Additional Protection may cause the
guaranteed period to terminate. See "Death Benefit", page 9.
A comparable illustration based on a proposed insured's age, sex and risk
classification and proposed face amount or premium is available upon request.
45
<PAGE> 49
VARIABLE WHOLE LIFE WITH ADDITIONAL PROTECTION INSURANCE POLICY
MALE ISSUE AGE 35 -- SELECT UNDERWRITING RISK
$100,000 VARIABLE WHOLE LIFE, $0 ADDITIONAL PROTECTION
$1,347 ANNUAL PREMIUM (1)
CURRENT CHARGES AND DIVIDEND SCALE (2)
DIVIDENDS USED TO INCREASE POLICY VALUE
<TABLE>
<CAPTION>
DEATH BENEFIT (3) CASH SURRENDER VALUE (3)
------------------------------------------- -------------------------------------------
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
PREMIUMS
ACCUMULATED
END OF AT 5% INTEREST 0% 6% 12% 0% 6% 12%
POLICY YEAR PER YEAR -------- -------- -------- -------- -------- --------
----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 1,414 $100,000 $100,008 $ 100,067 $ 340 $ 399 $ 458
2 2,899 100,000 100,027 100,212 1,277 1,455 1,640
3 4,459 100,000 100,056 100,445 2,194 2,555 2,944
4 6,096 100,000 100,094 100,776 3,092 3,699 4,380
5 7,815 100,000 100,146 101,222 3,969 4,888 5,964
6 9,620 100,000 100,208 101,797 4,874 6,176 7,765
7 11,516 100,000 100,288 102,524 5,755 7,514 9,750
8 13,506 100,000 100,387 103,420 6,614 8,906 11,939
9 15,595 100,000 100,504 104,506 7,447 10,351 14,353
10 17,790 100,000 100,637 105,802 8,255 11,850 17,015
15 30,520 100,000 102,334 117,310 12,791 21,244 36,220
20 46,767 100,000 106,009 156,746 16,795 33,007 68,468
25 67,503 100,000 111,605 240,586 19,652 47,394 121,406
30 (age 65) 93,968 100,000 120,205 360,614 21,181 65,259 207,753
35 127,745 100,000 135,005 536,267 20,622 87,460 347,410
40 170,853 100,000 158,570 791,906 14,957 113,597 567,305
45 225,872 100,000 183,680 1,162,373 0 142,649 902,722
</TABLE>
(1) If premiums are paid more frequently than annually the payments would be
$687.78 semiannually, $348.58 quarterly, or $116.75 monthly.
(2) Dividends illustrated are based on current scale and experience and are not
guaranteed.
(3) Assumes no policy loan has been made.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RESULTS ARE ILLUSTRATIVE ONLY
AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS.
ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND
UPON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER
AND THE DIFFERENT RATES OF RETURN OF THE FUND PORTFOLIOS. THE DEATH BENEFIT AND
CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL
INVESTMENT RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT
FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER A PERIOD OF TIME.
46
<PAGE> 50
VARIABLE WHOLE LIFE WITH ADDITIONAL PROTECTION INSURANCE POLICY
MALE ISSUE AGE 35 -- SELECT UNDERWRITING RISK
$100,000 VARIABLE WHOLE LIFE, $0 ADDITIONAL PROTECTION
$1,347 ANNUAL PREMIUM (1)
MAXIMUM CHARGES AND ZERO DIVIDENDS
<TABLE>
<CAPTION>
DEATH BENEFIT (2) CASH SURRENDER VALUE (2)
------------------------------------------- -------------------------------------------
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
PREMIUMS
ACCUMULATED
END OF AT 5% INTEREST 0% 6% 12% 0% 6% 12%
POLICY YEAR PER YEAR -------- -------- -------- -------- -------- --------
----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 1,414 $100,000 $100,008 $100,067 $ 340 $ 399 $ 458
2 2,899 100,000 100,027 100,212 1,277 1,455 1,640
3 4,459 100,000 100,056 100,445 2,194 2,555 2,944
4 6,096 100,000 100,094 100,776 3,092 3,699 4,380
5 7,815 100,000 100,146 101,220 3,969 4,888 5,963
6 9,620 100,000 100,208 101,789 4,874 6,176 7,757
7 11,516 100,000 100,284 102,502 5,755 7,510 9,728
8 13,506 100,000 100,375 103,376 6,614 8,894 11,895
9 15,595 100,000 100,481 104,431 7,446 10,328 14,278
10 17,790 100,000 100,603 105,687 8,254 11,816 16,899
15 30,520 100,000 101,498 115,957 12,177 20,408 34,867
20 46,767 100,000 102,989 144,899 14,655 29,987 63,293
25 67,503 100,000 105,273 214,552 15,622 41,062 108,269
30 (age 65) 93,968 100,000 108,589 308,486 14,131 53,643 177,722
35 127,745 100,000 113,224 436,273 8,090 67,576 282,631
40 170,853 100,000 119,524 611,000 0 82,761 437,708
45 225,872 100,000 127,896 850,660 0 98,941 660,640
</TABLE>
(1) If premiums are paid more frequently than annually the payments would be
$687.78 semiannually, $348.58 quarterly, or $116.75 monthly.
(2) Assumes no policy loan has been made.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RESULTS ARE ILLUSTRATIVE ONLY
AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS.
ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND
UPON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER
AND THE DIFFERENT RATES OF RETURN OF THE FUND PORTFOLIOS. THE DEATH BENEFIT AND
CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL
INVESTMENT RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT
FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER A PERIOD OF TIME.
47
<PAGE> 51
VARIABLE WHOLE LIFE WITH ADDITIONAL PROTECTION INSURANCE POLICY
MALE ISSUE AGE 35 -- SELECT UNDERWRITING RISK
$100,000 VARIABLE WHOLE LIFE PLUS $100,000 ADDITIONAL PROTECTION(1)
$1,852 ANNUAL PREMIUM (2)
CURRENT CHARGES AND DIVIDEND SCALE (3)
DIVIDENDS USED TO INCREASE POLICY VALUE
<TABLE>
<CAPTION>
DEATH BENEFIT (4) CASH SURRENDER VALUE (4)
------------------------------------------- -------------------------------------------
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
PREMIUMS
ACCUMULATED
END OF AT 5% INTEREST 0% 6% 12% 0% 6% 12%
POLICY YEAR PER YEAR -------- -------- -------- -------- -------- --------
----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 1,945 $200,000 $200,000 $ 200,000 $ 534 $ 610 $ 687
2 3,986 200,000 200,000 200,000 1,820 2,055 2,299
3 6,130 200,000 200,000 200,000 3,087 3,565 4,082
4 8,381 200,000 200,000 200,000 4,330 5,142 6,054
5 10,745 200,000 200,000 200,000 5,551 6,788 8,234
6 13,227 200,000 200,000 200,000 6,802 8,560 10,700
7 15,833 200,000 200,000 200,000 8,024 10,401 13,417
8 18,569 200,000 200,000 200,000 9,214 12,315 16,414
9 21,442 200,000 200,000 200,000 10,369 14,300 19,718
10 24,459 200,000 200,000 200,504 11,482 16,354 23,360
15 41,962 200,000 200,000 211,416 17,351 28,817 49,236
20 64,300 200,000 200,000 238,251 21,931 43,836 92,247
25 92,810 200,000 200,000 324,225 24,058 61,330 163,613
30 (age 65) 129,197 181,746 200,000 486,652 23,775 82,180 280,365
35 175,637 171,656 200,000 724,269 19,907 107,268 469,203
40 234,907 151,927 210,041 1,070,028 8,140 136,515 766,546
45 310,553 105,636 226,781 1,571,054 0 168,871 1,220,112
</TABLE>
(1) Additional Protection is guaranteed to be $100,000 for at least 15 years,
so long as all premiums are paid when due and all dividends are used to
increase Policy Value.
(2) If premiums are paid more frequently than annually the payments would be
$945.13 semiannually, $478.52 quarterly, or $160.33 monthly.
(3) Dividends illustrated are based on current scale and experience and are not
guaranteed.
(4) Assumes no policy loan has been made.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RESULTS ARE ILLUSTRATIVE ONLY
AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS.
ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND
UPON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER
AND THE DIFFERENT RATES OF RETURN OF THE FUND PORTFOLIOS. THE DEATH BENEFIT AND
CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL
INVESTMENT RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT
FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER A PERIOD OF TIME.
48
<PAGE> 52
VARIABLE WHOLE LIFE WITH ADDITIONAL PROTECTION INSURANCE POLICY
MALE ISSUE AGE 35 -- SELECT UNDERWRITING RISK
$100,000 VARIABLE WHOLE LIFE PLUS $100,000 ADDITIONAL PROTECTION(1)
$1,852 ANNUAL PREMIUM (2)
MAXIMUM CHARGES AND ZERO DIVIDENDS
<TABLE>
<CAPTION>
DEATH BENEFIT (3) CASH SURRENDER VALUE (3)
------------------------------------------- -------------------------------------------
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
PREMIUMS
ACCUMULATED
END OF AT 5% INTEREST 0% 6% 12% 0% 6% 12%
POLICY YEAR PER YEAR -------- -------- -------- -------- -------- --------
----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 1,945 $200,000 $200,000 $ 200,000 $ 475 $ 551 $ 628
2 3,986 200,000 200,000 200,000 1,694 1,925 2,165
3 6,130 200,000 200,000 200,000 2,881 3,347 3,851
4 8,381 200,000 200,000 200,000 4,034 4,818 5,700
5 10,745 200,000 200,000 200,000 5,151 6,337 7,726
6 13,227 200,000 200,000 200,000 6,287 7,963 10,007
7 15,833 200,000 200,000 200,000 7,381 9,635 12,499
8 18,569 200,000 200,000 200,000 8,434 11,356 15,228
9 21,442 200,000 200,000 200,000 9,439 13,123 18,216
10 24,459 200,000 200,000 200,000 10,399 14,940 21,492
15 41,962 200,000 200,000 205,833 14,696 25,044 43,653
20 64,300 166,976 200,000 224,225 17,100 35,462 78,221
25 92,810 141,701 200,000 264,725 18,019 45,844 133,588
30 (age 65) 129,197 125,250 200,000 382,769 16,544 54,551 220,517
35 175,637 115,340 200,000 543,135 10,644 57,853 351,859
40 234,907 109,111 112,380 762,235 0 66,857 546,050
45 310,553 105,629 112,380 1,062,627 0 78,591 825,257
</TABLE>
(1) Additional Protection is guaranteed to be $100,000 for at least 15 years,
so long as all premiums are paid when due and all dividends are used to
increase Policy Value.
(2) If premiums are paid more frequently than annually the payments would be
$945.13 semiannually, $478.52 quarterly, or $160.33 monthly.
(3) Assumes no policy loan has been made.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RESULTS ARE ILLUSTRATIVE ONLY
AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS.
ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND
UPON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER
AND THE DIFFERENT RATES OF RETURN OF THE FUND PORTFOLIOS. THE DEATH BENEFIT AND
CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL
INVESTMENT RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT
FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER A PERIOD OF TIME.
49
<PAGE> 53
NORTHWESTERN MUTUAL VARIABLE COMPLIFE(R)
NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT
NORTHWESTERN MUTUAL SERIES FUND, INC.
P R O S P E C T U S
<PAGE> 54
PART II
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that section.
UNDERTAKING WITH RESPECT TO INDEMNIFICATION
Reference is made to the indemnification provisions contained in
Article VII of the By-laws of the Depositor, The Northwestern Mutual Life
Insurance Company, filed as part of Exhibit 1-A-(6) to the Registration
Statement. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
CONTENTS OF REGISTRATION STATEMENT
This amendment to the registration statement comprises the following
papers and documents:
The facing sheet
The cross-reference sheet
The prospectus consisting of 50 pages
The undertaking to file reports
The undertaking with respect to indemnification
The signatures
Written consents of the following persons:
Price Waterhouse LLP (filed herewith as Exhibit 99.C1)
John M. Bremer, Esq. (filed herewith as Exhibit 99.2)
William C. Koenig, F.S.A. (filed herewith as Exhibit 99.C6)
II-1
<PAGE> 55
The following exhibits:
The following exhibits correspond to those required by Paragraph A of
the instructions as to exhibits in Form N-8B-2:
Distributing Contracts:
99.A3C Schedules of sales commissions.
99.C1 Consent of Independent Accountants.
99.2 Opinion and Consent of John M. Bremer, Esq.
99.C6 Opinion and consent of William C. Koenig, F.S.A.
27 Financial Data Schedule for period ending December 31, 1994.
27-a Financial Data Schedule for period ending June 30, 1995.
II-2
<PAGE> 56
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, Northwestern Mutual Variable Life Account, has duly caused this
amended Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Milwaukee, and State of Wisconsin, on
the 28th day of September, 1995.
NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT
(Registrant)
By THE NORTHWESTERN MUTUAL LIFE
INSURANCE COMPANY
(Depositor)
Attest: JOHN M. BREMER By: JAMES D. ERICSON
--------------------------- -------------------------------
John M. Bremer, Senior Vice James D. Ericson, President and
President, General Counsel Chief Executive Officer
and Secretary
By NORTHWESTERN MUTUAL INVESTMENT
SERVICES, INC.
(Depositor)
Attest: MERRILL C. LUNDBERG By: MARK G. DOLL
---------------------------- ----------------------------------
Merrill C. Lundberg,Secretary Mark G. Doll, President
Pursuant to the requirements of the Securities Act of 1933, the
depositors have duly caused this amended Registration Statement to be signed on
their behalf by the undersigned, thereunto duly authorized, and their seals to
be hereunto affixed, all in the City of Milwaukee, and State of Wisconsin, on
the 28th day of September, 1995.
THE NORTHWESTERN MUTUAL LIFE INSURANCE
COMPANY (Depositor)
Attest: JOHN M. BREMER By: JAMES D.ERICSON
---------------------------- ----------------------------------
John M. Bremer, Senior Vice James D. Ericson, President and
President, General Counsel Chief Executive Officer
and Secretary
NORTHWESTERN MUTUAL INVESTMENT
SERVICES, INC. (Depositor)
Attest: MERRILL C. LUNDBERG By: MARK G. DOLL
---------------------------- ----------------------------------
Merrill C. Lundberg, Secretary Mark G. Doll, President
Pursuant to the requirements of the Securities Act of 1933, this
amended Registration Statement has been signed by the following persons in the
capacities with the depositor and on the dates indicated:
Signature Title
JAMES D. ERICSON Trustee, President and Dated
- ---------------------------- Principal Executive September 28, 1995
James D. Ericson and Financial Officer
II-3
<PAGE> 57
GARY E. LONG Vice President, Controller and
- ---------------------------- Principal Accounting Officer
Gary E. Long
RICHARD H. HOLTON* Trustee
- ----------------------------
Richard H. Holton
HAROLD B. SMITH* Trustee
- ----------------------------
Harold B. Smith
J. THOMAS LEWIS* Trustee
- ----------------------------
J. Thomas Lewis
FRANK H. BERTSCH* Trustee Dated September 28, 1995
- ----------------------------
Frank H. Bertsch
PATRICIA ALBJERG GRAHAM* Trustee
- ----------------------------
Patricia Albjerg Graham
DONALD J. SCHUENKE* Trustee
- ----------------------------
Donald J. Schuenke
FRED G. LUBER* Trustee
- ----------------------------
Fred G. Luber
R. QUINTUS ANDERSON* Trustee
- ----------------------------
R. Quintus Anderson
STEPHEN F. KELLER* Trustee
- ----------------------------
Stephen F. Keller
II-4
<PAGE> 58
PIERRE S. du PONT IV* Trustee
- ----------------------------
Pierre S. du Pont IV
J. E. GALLEGOS* Trustee
- ----------------------------
J. E. Gallegos
THOMAS I. DOLAN* Trustee
- ----------------------------
Thomas I. Dolan
KATHRYN D. WRISTON* Trustee
- ----------------------------
Kathryn D. Wriston
BARRY L. WILLIAMS* Trustee
- ----------------------------
Barry L. Williams
GORDON T. BEAHAM III* Trustee
- ----------------------------
Gordon T. Beaham III
DANIEL F. McKEITHAN, JR.* Trustee Dated September 28, 1995
- ----------------------------
Daniel F. McKeithan, Jr.
ROBERT E. CARLSON* Trustee
- ----------------------------
Robert E. Carlson
Trustee
____________________________
Edward E. Barr
ROBERT C. BUCHANAN* Trustee
- ----------------------------
Robert C. Buchanan
SHERWOOD H. SMITH, JR.* Trustee
- ----------------------------
Sherwood H. Smith, Jr.
II-5
<PAGE> 59
H. MASON SIZEMORE, JR.* Trustee
- ----------------------------
H. Mason Sizemore, Jr.
JOHN J. STOLLENWERK* Trustee
- ----------------------------
John J. Stollenwerk
GEORGE A. DICKERMAN* Trustee Dated September 28, 1995
- ----------------------------
George A. Dickerman
GUY A. OSBORN* Trustee
- ----------------------------
Guy A. Osborn
JOHN E. STEURI* Trustee
- ----------------------------
John E. Steuri
*By: JAMES D. ERICSON
----------------------------
James D. Ericson, Attorney in fact,
pursuant to the Power of Attorney
attached hereto
II-6
<PAGE> 60
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, 1995 to be filed under the Securities
Exchange Act of 1934 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. "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 26th day of July, 1995.
R. QUINTUS ANDERSON Trustee
-------------------------------
R. Quintus Anderson
Trustee
_______________________________
Edward E. Barr
GORDON T. BEAHAM III Trustee
-------------------------------
Gordon T. Beaham III
FRANK H. BERTSCH Trustee
-------------------------------
Frank H. Bertsch
ROBERT C. BUCHANAN Trustee
-------------------------------
Robert C. Buchanan
II-7
<PAGE> 61
ROBERT E. CARLSON Trustee
-------------------------------
Robert E. Carlson
GEORGE A. DICKERMAN Trustee
-------------------------------
George A. Dickerman
THOMAS I. DOLAN Trustee
-------------------------------
Thomas I. Dolan
PIERRE S. du PONT IV Trustee
-------------------------------
Pierre S. du Pont IV
JAMES D. ERICSON Trustee
-------------------------------
James D. Ericson
J. E. GALLEGOS Trustee
-------------------------------
J. E. Gallegos
PATRICIA ALBJERG GRAHAM Trustee
-------------------------------
Patricia Albjerg Graham
RICHARD H. HOLTON Trustee
-------------------------------
Richard H. Holton
STEPHEN F. KELLER Trustee
-------------------------------
Stephen F. Keller
J. THOMAS LEWIS Trustee
-------------------------------
J. Thomas Lewis
FRED G. LUBER Trustee
-------------------------------
Fred G. Luber
II-8
<PAGE> 62
DANIEL F. McKEITHAN, JR. Trustee
-------------------------------
Daniel F. McKeithan, Jr.
GUY A. OSBORN Trustee
-------------------------------
Guy A. Osborn
DONALD J. SCHUENKE Trustee
-------------------------------
Donald J. Schuenke
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.
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
II-9
<PAGE> 63
EXHIBIT INDEX
EXHIBITS FILED WITH FORM S-6
PRE-EFFECTIVE AMENDMENT NO.1 TO
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
FOR
NORTHWESTERN MUTUAL VARIABLE COMPLIFE
Exhibit Number Exhibit Name
- -------------- ------------
EX-99.A3C Standard Full-Time Special and
Soliciting Agents' Commission and
Fee Schedule Section II - CompLife.
EX-99.C1 Consent of Independent Accountants.
EX-99.2 Opinion of John M. Bremer.
EX-99.C6 Opinion of William C. Koenig,
F.S.A.
EX-27 Financial Data Schedule for period
ending December 31, 1994.
EX-27-a Financial Data Schedule for period
ending June 30, 1995.
<PAGE> 1
EX-99.A3C
STANDARD FULL-TIME SPECIAL AND SOLICITING AGENTS' COMMISSION AND FEE SCHEDULE
SECTION II - COMPLIFE(R)
L. VARIABLE COMPLIFE(R)
1. For purposes of this Subsection L:
(a) "Writing Agent" means the Agent whose name appears on the
application as Agent of Record.
(b) "Servicing Agent" means the Writing Agent unless his contract
has terminated or he is no longer servicing the business, or
the Agent who has been appointed to service the business in the
event the Writing Agent has terminated or is no longer able to
service the business.
(c) Variable Whole Life, Initial Term, Initial Additional Premiums
The Writing Agent will receive the compensation unless he is
terminated and not vested according to his contractual vesting
schedule.
(d) Term Increases
Term increases, where available, may be scheduled only at
issue. The current active Servicing Agent will receive the
compensation listed in Subsection L.5. of this Section II.
(e) Additional Premium Increases
The current active Servicing Agent will receive the
compensation listed in Subsection L.6. of this Section II.
2. Variable Whole Life and Initial Term
(a) Commissions
The Writing Agent shall be entitled to receive first year
commissions equal to percentages (commission rates) of Variable
Whole Life and Initial Term premiums collected on Variable
CompLife(R) policies and contracts issued upon applications
procured by him pursuant to his Agent's contract as set forth
below:
<PAGE> 2
<TABLE>
<CAPTION>
Issue First Year Issue First Year
Age Commission Age Commission
--- ---------- --- ----------
<S> <C> <C> <C>
0-55 40.0% 66 34.5%
56 39.5 67 34.0
57 39.0 68 33.5
58 38.5 69 33.0
59 38.0 70 32.5
60 37.5
61 37.0 71 31.5
62 36.5 72 30.5
63 36.0 73 29.5
64 35.5 74 28.5
65 35.0 75 27.5
</TABLE>
The Writing Agent shall be entitled to receive renewal
commissions equal to 6% of the Variable Whole Life and Initial
Term premium in policy years 2 through 10.
(b) Quality Incentive Compensation
The Writing Agent shall be entitled to receive Quality
Incentive Compensation equal to a percentage of Variable Whole
Life and Initial Term renewal commissions paid on Variable
CompLife(R) policies issued upon applications procured by him
in accordance with policies and procedures as from time to time
amended by the Company and published in the Agents Benefits and
Compensation Manual. The Company reserves the right to change
such policies and procedures not only with respect to future
business, but also to existing business.
(c) Persistency Fees
A persistency fee shall be paid in an amount equal to 2% of
Variable Whole Life and Initial Term premiums collected by the
Company which fall due in the eleventh and subsequent policy
years on Variable CompLife(R) policies issued on applications
on which the Writing Agent's name appears as Solicitor. No
persistency fee shall be paid after he ceases to be under an
agency contract providing for such fees.
STANDARD FULL-TIME SPECIAL AND SOLICITING AGENTS' COMMISSION AND FEE SCHEDULE
SECTION II - COMPLIFE(R)
3. Lump Sums
Agent shall be entitled to receive a 2 3/4% fee on Lump Sum premiums
collected on Variable CompLife(R) policies and contracts where Lump
Sums are procured by him pursuant to his Agent's contract.
<PAGE> 3
4. Initial Additional Premium
Agent (as determined in Subsection 1.c. above) shall be entitled to
receive fees in the amount of 2 3/4% of premiums collected under the
terms of the Initial Additional Premium.
5. Term Increases
Agent (as determined in Subsection 1.d. above) shall be entitled to
receive compensation on Term Increase premiums as follows:
(a) In the year of premium increase, Agent will receive a first
year commission equal to 10% of the premium increase.
(b) Subsequent to the year of increase, a 6% renewal fee will be
paid on such premiums in the first 10 policy years, and a 2%
renewal fee will be paid on such premiums in policy years 11
and later.
Optional Term premiums may be required after issue to maintain the
Term face amount. Agent will be entitled to a 6% renewal fee on such
premiums in the first 10 policy years and a 2% renewal fee on such
premiums in policy years 11 and later.
6. Additional Premium Increases
Agent (as determined in Subsection 1.e. above) shall be entitled to
receive fees in the amount of 2 3/4% of premiums collected under the
terms of the Additional Premium.
7. Classified Policies
(a) The commission rates applicable to extra premiums payable for
the Variable Whole Life, and Initial Term components because a
Variable CompLife(R) policy is classified, will be the same as
those for a select or standard policy unless the class extra
exceeds $10 per $1,000, aviation or avocation extras are
involved, or extra premiums are involved which are payable for
less than ten years. In such cases the rate shall be in
accordance with policies and procedures as determined from time
to time by the Company.
(b) The commission rates applicable in the year of increase for
extra premiums payable for Term Increases because a Variable
CompLife(R) policy is classified will be in accordance with
policies and procedures as from time to time amended by the
Company and published in the Agents Manual of Information.
<PAGE> 1
EX-99.C1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of
this Pre-Effective Amendment No. 1 to the Registration Statement on Form S-6
(the "Registration Statement") of our report dated January 25, 1995, relating to
the financial statements of The Northwestern Mutual Life Insurance Company, and
to our report dated January 25, 1995, relating to the financial statements of
Northwestern Mutual Variable Life Account, which appear in such Prospectus. We
also consent to the reference to us under the heading "Experts" in such
Prospectus.
PRICE WATERHOUSE LLP
Milwaukee, Wisconsin
September 28, 1995
<PAGE> 1
EX-99.2
September 21, 1995
Board of Trustees
The Northwestern Mutual Life
Insurance Company
Milwaukee, Wisconsin 53202
Gentlemen:
As Senior Vice President, General Counsel and Secretary of The
Northwestern Mutual Life Insurance Company (the "Company") I have general
supervision of the Law Department of such Company and its legal affairs. In such
capacity I have supervised the corporate proceedings relating to the
establishment of Northwestern Mutual Variable Life Account (the "Account")
pursuant to the provisions of the Wisconsin Statutes and the proposed issuance
in connection therewith of certain variable CompLife insurance policies (the
"Policies"). I have also participated in the preparation of Pre-Effective
Amendment No. 1 to the Registration Statement on Form S-6 (the "Registration
Statement") which is to be filed with the Securities and Exchange Commission
with respect to the Policies. In addition, I have examined such other documents
and such questions of law as, in my judgment, are necessary or appropriate for
purposes of this opinion. Based on the foregoing, it is my opinion that:
1. The Company is a duly organized and validly existing mutual life
insurance corporation under the laws of the State of Wisconsin, duly
authorized under such laws to issue and sell life insurance and
annuity contracts.
2. The Account is a separate account of the Company duly created and
validly existing pursuant to Wisconsin law.
3. The issuance and sale of the Policies have been duly authorized by the
Company and duly approved by the Commissioner of Insurance of the
State of Wisconsin. When issued and sold in compliance with local law
and in the manner stated in the Prospectus constituting a part of the
Registration Statement the Policies will be valid and legally binding
obligations of the Company in accordance with their terms.
I hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
JOHN M. BREMER
John M. Bremer
Senior Vice President,
General Counsel and
Secretary
<PAGE> 1
EX-99.C6
September 21, 1995
The Northwestern Mutual Life Insurance Company
720 East Wisconsin Avenue
Milwaukee, WI 53202
Gentlemen:
This opinion is furnished in connection with Pre-Effective Amendment No. 1
to the Registration Statement on Form S-6 of Northwestern Mutual Variable Life
Account. The prospectus included in the Registration Statement ("Prospectus")
describes the Variable CompLife insurance policies to be issued in connection
with the Account ("Policies"). The Policy form was prepared under my direction,
and I am familiar with the Registration Statement and Exhibits thereto. In my
opinion:
1. The illustrations of cash values and death benefits included on pages 46
through 49 of the Prospectus, in the Appendix thereto, based on the
assumptions stated in the illustrations, are consistent with the provisions
of the Policies and current dividend scale and experience. The rate
structure of the Policies has not been designed so as to make the
relationship between premiums and benefits, as shown in the illustrations,
appear more favorable to a prospective purchaser of a Policy for male age
35, than to prospective purchasers of Policies for a male at other ages or
for a female.
2. With respect to the charge of 1.25% of premiums for federal income taxes
measured by premiums, described on page 10 of the Prospectus,
(a) the charge is reasonable in relation to the issuer's increased federal
tax burden under Section 848 of the Internal Revenue Code of 1986;
(b) the targeted rate of return (11%) used in calculating the charge is
reasonable; and
(c) the factors taken into account in determining such targeted rate of
return are appropriate.
I hereby consent to the use of this opinion as an exhibit to the
Registration Statement and to the reference to my name under the heading
"Experts" in the Prospectus.
Sincerely,
WILLIAM C. KOENIG
William C. Koenig
Senior Vice President
and Chief Actuary
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