2007 Financial Results

Northwestern Mutual's primary financial goal remains unchanged: to pay a level of dividends that delivers the highest product value to policyowners, without compromising superior financial strength.

Policyowner Value
A participating policy's ultimate value depends on dividends to policyowners, which reflect the company's underlying investment performance, claims experience and expense structure. Dividends payable to policyowners during 2008 are expected to be more than $5.0 billion, an increase of 8% from the previous year. The dividend interest rate credited on most unborrowed life insurance funds will remain at 7.5% during 2008. Total dividends paid on individual disability insurance policies are expected to reach $160 million during 2008, an increase of 45%. Most long-term care policyowners will receive a dividend during 2008, with total dividends expected to reach $6 million.

Superior product value contributes to policyowner satisfaction and loyalty. The company's persistency rate for life insurance in force was more than 96% during 2007 and is expected to remain among the best in the industry. More than 75% of life insurance dividends available during 2007 were used by policyowners to purchase additional insurance protection, helping increase total life insurance in force by 7% to $1.1 trillion at year-end 2007.

Operating Results
Premium revenue increased 9% to $13.2 billion, including growth in each of life, disability, long-term care and annuity premiums. Net investment income of $7.6 billion was 7% higher than 2006, primarily reflecting a $9.3 billion increase in the company's investment portfolios during 2007 and continued strong credit quality of its bond and mortgage loan portfolios.

Insurance benefits paid to policyowners or their beneficiaries totaled $5.6 billion, while reserves for future policy benefits increased $8.3 billion during 2007. Life, disability and long-term care claim experience each remained favorable, a reflection of the company's careful assessment of insurance risk. Commissions and expenses increased 6% during 2007, reflecting both strong sales growth and the company's ongoing commitment to efficiency and cost control.

After provision for dividends to policyowners, net gain from operations was $381 million in 2007, a decrease from $419 million in the prior year. Net income, which includes net realized capital gains, was $1.0 billion, an increase from $829 million in 2006.

Investment Performance
The company's investment portfolios, well diversified and managed for superior long-term return, performed well in a challenging investment climate during 2007. In addition to 7% growth in net investment income, these portfolios generated $1.0 billion in net realized and unrealized capital gains (before taxes and deferrals) in 2007. These gains were primarily attributable to public common stocks and private equity investments, including significant contributions from investments made outside the United States.

The bond portfolio of public and private debt remained high quality, with 89% rated as investment grade. The portfolio is also highly diversified, resulting in limited exposure to credit loss from any single issuer. The company was largely unaffected by problems in the sub-prime residential mortgage market, with the exposure to below-prime mortgages (sub-prime and Alt-A) of about 0.6% of invested assets. Short-term investments of $2.5 billion provided a strong liquidity position at year-end 2007.

Mortgage loans continue to be diversified by property type, geographic location and borrower. The ratio of total amounts loaned to the fair value of collateral properties of 58% reflects the credit strength of the company's loan portfolio.

Equity investments remain an important part of the company's diversified investment strategy. These investments, including public common stocks, real estate, private equities and investment subsidiaries, are not immune from short-term market volatility. Over the long term, these equity investments provide attractive returns while diversifying overall portfolio risk.

Financial Strength
Surplus provides the company and its policyowners with protection against the unexpected, while an asset valuation reserve (AVR) supports a long-term investment strategy by cushioning surplus against market volatility.

Surplus and AVR increased $1.0 billion, or 7%, to $15.8 billion at year-end 2007. The ratio of surplus and AVR to general account insurance reserves decreased slightly to 14.5% from 14.7% at year-end 2006.

Northwestern Mutual's continued focus on superior product value and financial strength assures that the company can meet its promise of financial security to its policyowners.