Our Mutual Advantage

Of all the reasons policyowners and clients value Northwestern Mutual as their partner on the path to financial security, one is paramount. It’s often called the company’s “mutual advantage.”

Northwestern Mutual did not invent “mutuality.” Over time, however, and continuing today, our company has become what many point to as a pre-eminent example of the power inherent in the mutual form of corporate governance.

Indeed, Northwestern Mutual offers dramatic evidence that a company governed by mutual values can be, in its field, best in the nation. Northwestern Mutual is the World’s Most Admired life insurance company in FORTUNE® magazine’s 2011 annual survey. Further, during the period that FORTUNE® conducted its survey of America’s Most Admired companies, we were the only company to lead an industry for 25 consecutive years from 1983-2008.1

The mutual structure of Northwestern Mutual allows the company to act differently than most publicly traded stock companies, which typically must split their focus between customers and shareholders.

In the typical stock company, profits go to shareholders. In contrast, Northwestern Mutual manages the company in the best interests of its policyowners. After setting aside a safe margin for reserves and surplus each year, the company returns gains from operations, which would otherwise be “profits,” to its participating policyowners in the form of dividends. In other words, our mutual structure brings into alignment the interests of both policyowners and the company. For policyowners, that’s an enormous “mutual advantage.”

There are others. As a mutual, the company is free to employ a long-term investment approach when it comes to the general account assets that back our insurance products, rather than focus on meeting the short-sighted expectations of quarterly earnings reports.2 As a strategy, long-term investing has served us well in all economic environments. Respected experts praise the company’s mutual structure and values as underpinning a “very strong competitive position” within the U.S. individual life insurance market3—one in which Northwestern Mutual focuses on helping its policyowners and clients achieve financial security.

As practiced by Northwestern Mutual, mutuality extends well beyond these basic mutual advantages. The benefits of our mutuality are manifested in four key values:

• Doing what’s right for policyowners and other clients• Building long-term relationships to meet client needs• Building and preserving financial strength• Offering world-class products and expert guidance that serve changing needs over a lifetime

We invite you to explore these values on the following pages, to see how our brand of mutuality sets us apart. We believe you will find it to be … a mutual advantage.

1 FORTUNE® magazine survey, “World’s Most Admired Companies,” March 3, 2011, and FORTUNE® magazine survey, “America’s Most Admired Companies,” March 17, 2008

2 The vast majority of managed assets back the company’s surplus and most of the life, disability and long-term care insurance liabilities. The investment strategies described in this booklet apply to the investment of those assets. A portion of managed assets backs the remaining liabilities (including fixed-rate annuity liabilities) and have different investment exposures than described in the pages that follow.

3 Standard & Poor’s, June 29, 2011

As a mutual, Northwestern Mutual has no shareholders. The company focuses solely and directly on its customers.

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More than a Century and a Half of Doing the Right Thing for Policyowners

Our steadfast dedication to doing the right thing for policyowners is as old as the company itself. Since our beginnings in 1857, generations of company leaders have tested the merits of corporate decisions against only one standard: “Is what we’re doing in the best long-term interest of our policyowners?”

It’s an uncompromising focus on the customer, one that embraces a strong belief in fairness—equitable treatment for all.

Equitable treatment for all

Elsewhere in the life insurance industry, inequitable treatment of policyowners has become commonplace. To attract new customers, many companies have offered special benefits or attractive pricing unlike what is available to their current policyowners.

Such an approach is not the practice at Northwestern Mutual, which seeks to treat

all policyowners fairly and equitably. This guiding principle extends to all areas: pricing, underwriting, claims, dividend payouts, and more.

Equitable treatment at work

As our life and disability insurance products are enhanced or improved, our current policyowners are invited to share in the new benefits at no charge, whenever possible and practical. The same is true of policies offered by Northwestern Long Term Care Insurance Company.

Throughout the years, the company has offered several life insurance enhancements to existing policyowners—because doing so serves the best interests of our policyowners. One program alone offered life insurance policyowners $4.5 billion of additional insurance at no increase in premium.n

“… It (is) … pre-eminently the policyowner’s company.”

– Executive Committee of theBoard of Trustees, 1888

“The company is a mutual organization in the strictest and best sense … This is a company operated by the policyholders and for the best interests of the policyholders.”

– Examination of the Wisconsin Insurance Department, 1905

“Our beliefs are not the easy way— but we think they are the right way. We do not propose to change our philosophy of mutuality and fairness to all policyowner-members. This company is different.”

– Francis Ferguson, President and CEO, Northwestern Mutual, 1973

“Northwestern Mutual executives use a simple yardstick to measure every business venture, every business decision, every contract: Is it in the best interest of the 2.8 million policyowners …?”

– Best’s Review, 1999

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“We believe mutuality provides Northwestern Mutual with great competitive advantage and is one of the factors that has enabled the company to remain financially strong and to keep decisions focused on longer-term implications (rather than on reported quarterly earnings).”

– Report of the Policyowners’ Examining Committee, 2001

“A commitment to policyowners and the mutual structure are key aspects of Northwestern Mutual’s strategy. These principles underlie the company’s emphasis on efficiency, personalized ‘high-touch’ service and competitive dividends to policyowners.”

– Standard & Poor’s, 2011

“We believe mutuality is at the center of Northwestern Mutual’s success. We found a near obsessive focus on the long term to deliver the ‘promise’ to all policyowners.”

– Report of the Policyowners’Examining Committee, 2004

“… Northwestern Mutual has been able to stay the course, true to its founding principles and with policyowners’ interest as its guiding light.”

– Report of the Policyowners’Examining Committee, 2006

“Simply put, most mutual companies have more and better quality capital to absorb unexpected shocks—a vital distinguishing factor in today’s challenging economy.”

– Revenge of the Mutuals, Special Comment Moody’s Investors Service, August 2009

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The Benefits of Taking the Long-term ViewSteady, stable, superior value

Policyowners receive steady, stable, and excellent value, in part because of the long-term investment strategy we employ when it comes to the general account assets that back our insurance products. Long-term investments typically outperform short-term investments. In addition, focusing on long-term strategies gives us flexibility in selecting investments and asset classes while minimizing short-term risk and volatility.

It’s an approach that has worked. It’s the reason that we pay more than twice the life insurance dividends of our closest competitor. Our 2012 total dividend payout of nearly $5 billion includes:

• $4.5 billion in dividends on participating permanent life insurance policies;

• $252 million in dividends on individual disability income insurance policies;

• $12.8 million in dividends to long-term care policyowners through our subsidiary, Northwestern Long Term Care Insurance Company.

Customer loyalty that leads the industry

Our mutual business practices and the value they deliver create extraordinary loyalty among our policyowners. Northwestern Mutual

is commonly ranked as a leader in customer satisfaction. Again this year, we lead the industry among U.S. life insurers.4

So satisfied are policyowners that they not only keep their policies, they return for more. In a typical year, existing customers account for more than half of our life insurance sales.5

The comment we so often hear from clients who have watched the cash value of their policies grow over the years:

“I wish I had bought more back then.”

The same mutual principles that protect our financial strength and stability also provide policyowner value. We have paid outstanding dividends year after year, decade after decade.6 In fact, we have paid dividends every year since 1872, no matter the economic climate.

We work hard to secure customer loyalty: through our quality products, excellent value, consistent financial strength, and prudent yet productive investment practices—as well as through enduring customer relationships.

Lifetime customer relationships

It’s often said that we have what many others in our industry hope to create—lasting relationships built on confidence and trust.

These relationships begin with our well-trained network of financial representatives and the financial specialists who help them meet each client’s individual needs.

We have long been committed to maintaining and building our field force of financial representatives who make this profession their lifelong career.

4 American Customer Satisfaction Index, February 2011. Produced by the Ross School of Business at the University of Michigan, the American Society for Quality, and the international consulting firm CFI Group.

5 Source: Northwestern Mutual6 Neither the existence nor the amount of the dividend is guaranteed on any policy in any given policy year. For a fuller

explanation of dividends, see back cover.

“For our part, we have never lost sight of our need for financial strength— and never will. We will continue to build on a strength that is manifested in our industry-leading dividend payment and our exceptionally healthy surplus.” – John Schlifske, Chairman & CEO,

Northwestern Mutual, 2010

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“Thank you for the fine job you are doing during these difficult times. You have my 100% support.”

-- South Dakota policyowner, 2010

“Keep up the good work. [You’re] what other insurance companies wish they were. ”

-- Florida policyowner, 2010

“The Policyowners’ Examining Committee is an extraordinary thing. I don’t know of any company, insurance or not, that opens up its entire shop, in intimate detail, to its customers. The ultimate winners are the policyowners.”

– George Dickerman, Policyowner,Former Trustee and former member,

Policyowners’ Examining Committee;Chairman (Retired), Spalding Sports Worldwide

“Over the years, we have always thought in terms of the individual rather than the mass and have consciously built toward a personal relationship between the policyholder, the agent, and the company.”

– Edmund Fitzgerald, President and CEO, Northwestern Mutual, 1958

Rooted in the Northwestern Mutual culture, our representatives—

• Develop lifetime clients, not one-time customers.

• Identify each client’s long-term needs to help people build sound plans aimed at ensuring financial security.

Only Northwestern Mutual financial representatives can sell our products, and these representatives share our values.

A long history of listening to customers

For more than a century, we have listened to our policyowners. We still do. Our Policyowners’ Examining Committee is unique in our industry.

Since 1907, our Board of Trustees has annually named a group of three to five policyowners to produce an independent and unrestricted evaluation of company operations, management, and strategic plans. We publish the committee’s report each year in our Annual Report. Read the entire report at www.northwesternmutual.com.

Over the years, these reports have kept us sensitive to customer needs and prompted important improvements in company structure and operations. n

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Page HeadingsMaintaining Financial StrengthOur mutuality sets us apart financially. We are built to withstand the good times and bad.

On a basic level, of course, financial strength is an obligation. It arises from our commitment to policyowners, from the personal security they entrust with us. Company founders pioneered a culture of scrupulous responsibility for policyowner funds—to keep long-term financial promises.

Very few companies have the highest financial strength ratings awarded to any life insurer by all four of the major credit rating agencies, let alone during the most trying economic times.

Our approach to mutuality, including our long-term investment strategy and sharp focus on operating fundamentals, helps us maintain the highest industry financial strength ratings.

A.M. Best A++ (Superior)

Fitch Ratings AAA (Exceptionally Strong)

Moody’s Aaa (Exceptional)

Standard & Poor’s AA+ (Very Strong)

Financial Strength Ratings

Ratings are for The Northwestern Mutual Life Insurance Company and Northwestern Long Term Care Insurance Company. n

A.M. Best Company, A++ (highest), 2/2011; Moody’s Investors’ Service Aaa (highest), 6/2011; Standard & Poor’s AA+ (second highest), 8/2011; and Fitch Ratings, AAA (highest), 8/2011. Third-party ratings are subject to change.

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Page Headings

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“Northwestern Mutual’s Aaa insurance financial strength rating is based upon the company’s exceptional franchise in individual participating life insurance, which is demonstrated by its excellent persistency, mortality, and expense management, as well as by its solid capitalization.”

– Moody’s Investors Service, 2010

“Northwestern [Mutual] maintains conservative financial management, as its very strong liquidity and very strong capitalization demonstrate.”

– Standard & Poor’s, 2011

“If you find a client with an existing Northwestern Mutual Life policy, simply insist on retention of that policy. Northwestern Mutual is, by quite a margin, the best. So it was in 1955 when I went into the business. So it will likely be long after I’m dead.”– James Hunt, Consumer Federation of America website

(www.consumerfed.org), September 2001

“Everything we do must be done wisely. We won’t invest unless we can do it prudently. We won’t grow unless it’s by our values. And we may not follow the industry if we see opportunity differently. We remain financially strong because we make good decisions. And because we’re financially strong, it gives us the power to avoid poor decisions.”

– Ed Zore, Chairman and CEO, Northwestern Mutual, 2009

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How the Building Blocks of Mutuality WorkWe are able to offer policyowners superior value because, as a mutual company, we diligently monitor our business practices and results in four vital areas:

• Mortality

• Expenses

• Customer Loyalty

• Portfolio Management

These building blocks lay the groundwork for a mutual company and create advantages for our customers. As you’ll see in the four sections that follow, we excel in these areas—and frequently surpass the industry averages by a wide margin.

Superior mortality results

Selective underwriting of our typically high-quality clientele (which has more access to health care) helps drive our superior mortality results. The outcome is that Northwestern Mutual has

some of the best mortality results in the industry.7 For example, when we pay a death claim, on average the policy has been in force for about 40 years. Because our policyowners tend to live longer, our overall costs of claims is lower than the industry. This is one factor that enables us to have more to pay in the form of dividends.

The chart below represents an industry study that compares the mortality rate of Northwestern Mutual and 20 of its major competitors over a period of years. It includes all ages and the best classes of smokers and non-smokers, the vast majority of our policyowners. The chart shows that our policyowners tend to live longer—producing a mortality experience about 35 percent better than the inter-company average.

This is only one building block that contributes to the long-term value we offer policyowners.

Source: Society of Actuaries Intercompany Mortality StudiesPrepared and calculated by The Northwestern Mutual Life Insurance Company, Milwaukee, WIIntercompany Average data is currently available only through 2007.

7 Society of Actuaries: 2005-2007 Individual Life Experience Report – Intercompany Mortality Study.

Society of Actuaries | Intercompany Mortality StudyAll Ages, Select Period.

Intercompany Average Northwestern Mutual

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80

100

120

140

160

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SOA Intercompany Mortality StudyAll Ages, Select Period, Excludes 9/11

0

20

40

60

69-74 71-76 73-78 75-80 77-82 79-84 81-86 83-88 85-90 87-92 89-94 91-96 93-98 95-00 97-02 99-04 01-06 03-08 05-10

Mor

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Intercompany Average Northwestern Mutual

SOURCE: Society of Actuaries Intercompany Mortality StudiesFor Internal or Financial Representative use only, Not for use with the general public

160

140

120

100

80

60

40

20

069-74

71-76

73-78

75-80

77-82

79-84

81-86

83-88

85-90

87-92

89-94

91-96

93-98

95-00

97-02

99-04

01-06

03-08

05-10

(5-year Periods)

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Keeping expenses lowTaken together, our careful approach to managing expenses and our favorable claims experience account for more than one-half of the total dividends to be paid during 2011.

Our vigilance in keeping costs down has been a hallmark of ours for decades and gives us a strong competitive advantage today. It’s another important factor that contributes to the value we offer clients.

The chart below makes this case by comparing the expenses on our principal product line with the industry average. We consistently spend about one-third less on expenses than other companies. These savings can contribute to dividend and surplus, providing more value to policyowners.

“Thanks Northwestern Mutual for being who you are—dependable, sound, trustworthy. In these times of economic uncertainty, it is nice to have at least one place where I am sure my principal is safe.”

– Alabama policyowner, 2010

“The company has a long-held reputation for safety, stability, and performance during difficult times ...”

– Business Management magazine, 2008

“Our character means 108 years of adherence to principles and practices that have produced outstanding results. Our record of quality performance and integrity gives this company unique character.”

– Donald Slichter, President and CEO, Northwestern Mutual, 1965

Ordinary Life Expenses as Percent of Premium*

Company** 2006 2008 2010

Northwestern Mutual 18% 17% 18%

Ameriprise Financial Group 31 25 20John Hancock/Manulife(1) 27 26 21Guardian Life 24 23 22AXA/Equitable(2) 27 28 23State Farm Life Group 26 26 23Lincoln National Corporation 29 28 24Prudential of America Group 25 24 24New York Life Group 29 27 25Principal Life Group 26 30 26Metropolitan Life and Affiliated Companies(3) 26 28 28Genworth Financial Group 33 27 29Mass Mutual Financial Group 27 24 29AEGON USA, Inc. 21 29 31

Industry Average 28 28 26

* Direct premiums measured at 100%, excluding dividends to additions** Family data(1) Primary Companies – John Hancock, John Hancock USA(2) Primary Companies – Equitable, MONY(3) Primary Companies – Metropolitan Life, New England, General AmericanSource: SNL FinancialPrepared and calculated by The Northwestern Mutual Life Insurance Company, Milwaukee, WI

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“As it happens, Northwestern Mutual, the master of loyalty, is also famous for its careful cost management … yet all of Northwestern Mutual’s savings would not sustain superior production if they weren’t reinvested in the delivery of superior value to customers and agents, earning their loyalty in the process.”

– Frederick Reichheld, “The Loyalty Effect,” 1996

“A commandment that flows from our credo is a policy of aggressive fairness. We treat all of our policyowners with the same thorough respect.”

– Donald J. Schuenke, President and CEO, Northwestern Mutual, 1988

“Our company has embraced mutuality for 143 years. But ironically, today, as more and more companies abandon the mutual form, the advantage of mutuality is finally getting its rightful attention. We like being a mutual company.”

– James D. Ericson, President and CEO, Northwestern Mutual, 2000

Customer satisfaction—our customers keep what they buy

Satisfied policyowners are loyal—they keep what they have purchased. In the insurance world, this is called “persistency.”

We lead the industry in persistency, and that’s important to you.

• Persistency is perhaps the truest measure of customer satisfaction—people voting with their dollars, so to speak.

• Persistency acts as an indicator that the products “fit.” They were properly bought and sold in the first place.

Persistency benefits the company in two ways. First, incoming premiums create a steady cash flow that adds to our investment portfolio. Second, retaining clients gives us a larger base over which to spread expenses. Both can contribute to the dividend payout, resulting in greater value for our policyowners.

In the insurance industry, the “lapse ratio” is the inverse of persistency. Policies lapse when people stop paying their premiums. The latest available data show Northwestern Mutual’s annual life insurance lapse ratio is about half the industry average. Persistency and lapse ratios are two sides of the same coin.

The Power of Our Portfolio

How we manage our general account investment portfolio is the final building block of superior value.

The following investment principles guide us to perform well both in good times and in bad.

• Maintain a balance between high-quality fixed income investments and higher-risk assets.

• Diversify among and within asset classes and specific investments.

• Participate in all major asset classes and market sectors.

• Manage risk across the entire investment portfolio and preserve capital to assure financial strength.

• Seek opportunity in investment activity.

• Manage portfolios to maximize total returns.

The vast majority of managed assets back the company’s surplus and most of the life, disability, and long-term care insurance liabilities. The investment strategies described in this booklet apply to the investment of those assets. A portion of managed assets back the remaining liabilities (including fixed-rate annuity liabilities) and have different investment exposures than described in the pages that follow.

This strategy has enabled us to maximize total returns with reduced volatility. To learn more about how we invest to create additional value for policyowners (pie chart at right), visit northwesternmutual.com | About Us | Investment Information | The Power of the Portfolio.8 n

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Public Bonds and Preferred Stock 55%

Private Bonds and Preferred Stock 16%

Mortgage Loans 14%

Private Equities & Subsidiaries 5%

Public Common Stock 5%

Real Estate Equities 4%

Money Market 1%

Portfolio Composition

55%

16%

14%

5%5%

4% 1%1%

Fixed Income: 88%Equities: 12%Public Bonds and Preferred Stock 55%

Private Bonds and Preferred Stock 16%

Mortgage Loans 14%

Private Equities & Subsidiaries 5%

Public Common Stock 5%

Real Estate Equities 4%

Money Market 1%

Portfolio Composition

55%

16%

14%

5%5%

4% 1%1%

Fixed Income: 88%Equities: 12%

Portfolio CompositionDecember 31, 2010 | Total Managed Assets: $141.7 Billion (Statement Value)

8 Available upon request, Northwestern Mutual’s brochure “The Power of the Portfolio”contains a fuller explanation of the investment portfolio. The vast majority of managed assets back the company’s surplus and most of the life, disability, and long-term care insurance liabilities. The investment strategies described in this booklet apply to the investment of those assets. A portion of managed assets backs the remaining liabilities (including fixed-rate annuity liabilities) and has different investment exposures than described in the pages that follow.

9 A low lapse ratio means a company has a high retention rate, referred to as persistency. Northwestern Mutual views this as an indicator of policyowner satisfaction with the performance of their policies.

Source: Northwestern Mutual Investment Report

Lapse Ratio by Amount, Combining New Business & In-Force Business9

Company* 2006 2008 2010

Northwestern Mutual 3.5 3.9 4.0

Metropolitan Life & Affiliated Companies(1) 5.3 4.6 4.2Genworth 5.1 4.9 5.0Ameriprise 5.0 6.3 5.2Guardian Life 5.6 6.1 5.6MassMutual Financial Group 4.7 5.2 5.6Prudential of America Group 5.1 5.9 5.6Principal Life Insurance Company 5.0 6.1 5.9AXA/Equitable(2) 6.9 6.5 6.2Lincoln National Corporation 6.0 5.8 6.3John Hancock/ManuLife (3) 5.8 6.7 6.4New York Life Group 5.5 5.9 6.4State Farm Group 6.4 7.4 6.8AEGON USA, Inc. 7.1 8.5 7.1

Industry Average 6.3 7.6 6.8

* Family data(1) Primary Companies – Metropolitan Life, New England, General American(2) Primary Companies – Equitable, MONY(3) Primary Companies – John Hancock, John Hancock USASource: SNL FinancialPrepared and calculated by The Northwestern Mutual Life Insurance Company, Milwaukee, WI

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Meeting Changing Needs—For LifeNorthwestern Mutual’s world-class insurance products result from a vision and passion to be “simply the best” in quality and value. We have always aimed to:

• Provide superior products

• Avoid fads and gimmicks

• Upgrade our policies in both the scope of coverage and ability to provide better benefits at lower costs

In recent decades, policyowners have brought to us a broader range of financial security needs. Northwestern Mutual has answered with more complementary products and services. While keeping our focus on world-class insurance, we also offer a careful selection of related financial products.

Our financial representatives

These financial products are presented to customers through Northwestern Mutual’s network of financial representatives, who develop enduring relationships with clients by providing expert guidance for a lifetime of financial security.

With access to a network of specialists, financial representatives take a holistic approach to identifying client needs, including:

• Asset and income protection

• Education funding

• Business needs analysis

• Investment services

• Employee and executive benefits

• Retirement solutions

• Estate analysis

And our “mutual advantage” thrives. As we continue to do what’s right for policyowners, we will draw upon the benefits of the culture and values that have defined our company over time: build long-term relationships to meet client needs, build and preserve financial strength, and provide expert guidance. n

“This insurance and financial firm has zero new-economy glamour, and that’s just fine. It’s only gaining market share, boosting sales, and successfully retaining its top-performing sales agents.”

– Sales and Marketing Management, #1 Sales Force: Co-Winner, July 2001

“ We are one of a few companies who pay dividends on term life, long-term care, and disability insurance. It’s another example of how we live by a set of mutual values unlike anyone else in the industry.”

– John Schlifske, Chairman & Chief Executive Officer, Northwestern Mutual, 2011

Page Headings

Charts contained in this brochure were prepared and calculated by The Northwestern Mutual Life Insurance Company, Milwaukee, WI.

The Northwestern Mutual Life Insurance Company • Milwaukee, WIwww.northwesternmutual.com

6 Dividends for Northwestern Mutual policies are distributions of the company’s surplus. They arise when premiums plus investment income are more than enough to cover company operating expenses (including taxes), claim costs, guaranteed increases in policy cash values, and additions to surplus. Dividends are paid annually to policyowners in proportion to company earnings on their policies. However, decisions with respect to the determination and allocation of divisible surplus are at the discretion and sound business judgment of the company’s board of trustees. There is no guaranteed specific method or formula for the determination and allocation of divisible surplus. Accordingly, the company’s approach is subject to change. Also, there is no guarantee that any dividend will be paid on an individual policy in any given year.

Northwestern Mutual is the marketing name for The Northwestern Mutual Life Insurance Company, Milwaukee, WI, and its subsidiaries.

Securities are offered through Northwestern Mutual Investment Services, LLC, 1-866-664-7737, a wholly owned company of Northwestern Mutual, broker-dealer and member FINRA and SIPC.

Northwestern Long Term Care Insurance Company, Milwaukee, WI, (long-term care insurance) is a subsidiary of Northwestern Mutual.

“ Northwestern Mutual is committed to retaining its mutuality, which Moody’s believes can be a competitive advantage in today’s market. While stock companies have greater access to capital, there are significant advantages of remaining a mutual company. These advantages include extremely competitive returns to participating policyowners in the form of dividends, and a greater tolerance of short-term earnings volatility, thereby permitting the company to take a longer-term planning horizon and benefit from more favorable long-term equity and alternative market returns.”

– Moody’s Investors Service, October 2011

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