<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------------------
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1994 Commission File No. 2-28596
NATIONWIDE LIFE INSURANCE COMPANY
(Exact name of registrant as specified in its charter)
OHIO 31-4156830
(State or other jurisdiction of incorporation or (I.R.S. Employer
organization) Identification No.)
ONE NATIONWIDE PLAZA, COLUMBUS, OHIO 43215
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (614) 249-7111
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
NONE
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to the filing
requirements for at least the past 90 days. Yes X No
--- ---
All voting stock was held by affiliates of the registrant on February 28, 1995.
COMMON STOCK - 3,814,779 shares issued and outstanding as of
December 31, 1994
(Title of Class)
<PAGE> 2
PART I
ITEM 1. Business.
(a) Nationwide Life Insurance Company (the Company) was incorporated in
1929 and is an Ohio stock legal reserve life insurance company. The
Company offers a variety of forms of ordinary life, universal life,
variable universal life, term and endowment, group life, individual
and group annuities, and individual and group accident and health
coverage on a participating and a non-participating basis. On
December 30, 1993, the Company became a wholly owned subsidiary of
Nationwide Corporation when Nationwide Mutual Insurance Company and
Nationwide Mutual Fire Insurance Company sold their shares of the
Company to Nationwide Corporation for newly issued shares of
Nationwide Corporation. Nationwide Corporation continues to be owned
by Nationwide Mutual Insurance Company and Nationwide Mutual Fire
Insurance Company.
On April 7, 1988, the Company obtained ownership of the stock of
Financial Horizons Life Insurance Company from Nationwide Mutual
Insurance Company as part of a capital contribution. Financial
Horizons Life Insurance Company currently offers universal life,
variable universal life and annuity coverage on a non-participating
basis. On December 31, 1993, Nationwide Corporation contributed all
of the outstanding capital shares of West Coast Life Insurance
Company, National Casualty Company and Nationwide Financial
Services, Inc. to the Company. West Coast Life Insurance Company
currently offers individual life, group life, individual annuity and
group accident and health coverage on a participating and a
non-participating basis. National Casualty Company underwrites
individual and group accident and health insurance as well as
various property and casualty coverages. Nationwide Financial
Services, Inc., a non-insurance industry subsidiary, is a registered
broker-dealer providing investment management and administration
services. On December 31, 1994, the Company purchased all of the
outstanding shares of Employers Life Insurance Company of Wausau.
Employers Life Insurance Company of Wausau primarily offers group
annuity contracts and, through its wholly owned subsidiary Wausau
Preferred Health Insurance Company, group accident and health
insurance and group life insurance coverages.
During 1994, the Company received a $200,000,000 cash capital
contribution from Nationwide Corporation.
On March 1, 1995, Nationwide Corporation contributed all of the
outstanding shares of Farmland Life Insurance Company to Nationwide
Life Insurance Company.
(b) The Company and its subsidiaries operate in the life and accident
and health lines of business in the life insurance and property and
casualty insurance industries. Life insurance operations include
whole life, universal life, variable universal life, endowment and
term life insurance and annuity contracts issued to individuals and
groups. Accident and health operations also provide coverage to
individuals and groups. Industry segment data is presented in note
17 to the consolidated financial statements and Schedule V.
(c)(1)(i) Nationwide Life Insurance Company is licensed to do business
in all 50 states as well as the District of Columbia, Puerto
Rico and the Virgin Islands.
2
<PAGE> 3
The principal markets of Nationwide Life Insurance Company
based upon the direct premiums written in 1994 were the
following jurisdictions: California, Florida, Illinois,
Michigan, New Jersey, New York, Ohio, Pennsylvania and
Texas.
The Company sells its products through a variety of
distribution channels. The Company's annuity contracts are
sold by independent broker/dealers, third-party marketers,
regional pension plan administrators, affiliated marketing
companies and Nationwide Insurance Enterprise multi-line
career agents. Life insurance policies are sold by
Nationwide Insurance Enterprise career agents and
independent broker/dealers. Accident and health insurance
policies are sold by Nationwide Insurance Enterprise career
agents and brokers.
Public employees deferred compensation plans are sold
through insurance agencies and broker-dealers. Public
Employees Benefit Services Corporation, acquired by
Nationwide Corporation in 1982, is a major administrator in
the public employee deferred compensation market. Annuities
are distributed by Nationwide agents and independent
securities dealers. Financial Horizons Distributors Agency,
Inc., acquired by Nationwide Corporation in 1991, is a
distributor of individual annuities. Nationwide Corporation
formed NEA Valuebuilder Investor Services, Inc. in 1991 to
distribute individual annuity contracts marketed exclusively
to the members of the National Education Association.
(c)(1)(ii) Not applicable.
(c)(1)(iii) Not applicable.
(c)(1)(iv) The Company, in common with other insurance companies, is
subject to regulation and supervision by the regulatory
authorities of the states in which it is licensed to do
business. A license from the state insurance department is a
prerequisite to the issuance of insurance contracts in that
state. In general, all states have statutory administrative
powers. Such regulation relates to, among other things,
licensing of insurers and their agents, the approval of
policy forms, the methods of computing reserves, the form
and content of financial statements, the amount of
policyholders' and stockholder's dividends, and the type and
distribution of investments permitted.
(c)(1)(v) Not applicable.
(c)(1)(vi) Not applicable.
(c)(1)(vii) Not applicable.
(c)(1)(viii)Not applicable.
(c)(1)(ix) Not applicable.
(c)(1)(x) The Company operates in the highly competitive field of life
insurance. There are approximately 2,000 stock, mutual and
other types of insurers in the life insurance business in
the United States, and a large number of them compete with
the Company in the sale of insurance policies.
3
<PAGE> 4
According to A.M. Best Company's statistical study
released in the December 12, 1994 edition of BestWeek (an
insurance industry trade publication), Nationwide Life
Insurance Company ranked 16th among all life insurance
companies in the United States and Canada based on
reported statutory admitted assets as of September 30,
1994.
(c)(1)(xi) Not applicable.
(c)(1)(xii) Not applicable.
(c)(1)(xiii) As is customary in insurance company groups, employees are
shared with other insurance companies in the group. The
Company shares approximately 710 employees with Nationwide
Mutual Insurance Company and Nationwide Mutual Fire
Insurance Company. The Company does have 2,693 direct
salaried employees.
(d) Substantially all of the Company's premiums, operating profits
and assets are attributable to the United States of America, its
territories and possessions. Approximately .007% of premiums are
attributable to non-domestic geographic areas.
ITEM 2. Properties.
The Company leases all space used in conducting its operations. The
Company shares home office space and other facilities with affiliates in
a building owned by Nationwide Mutual Insurance Company. The Company
also leases various other branch offices. The terms of these leases are
not material to the consolidated financial statements.
ITEM 3. Legal Proceedings.
There are no material pending legal proceedings, other than ordinary
routine litigation incidental to the business, to which the Company and
its subsidiaries, are a party or of which any of its property is the
subject.
ITEM 4. Submission of Matters to a Vote of Security Holders.
Not applicable. See Item 5.
4
<PAGE> 5
PART II
ITEM 5. Market for Registrant's Common Equity and Related Shareholder Matters.
(a) There is no established public trading market for the Company's
capital shares.
(b) As of December 31, 1994, none of the 3,814,779 shares issued and
outstanding were held by public shareholders. Nationwide Corporation
is the sole shareholder of Nationwide Life Insurance Company.
(c) The Company paid no dividends to its shareholder during 1994.
Dividends paid in 1993 to the Company's shareholder, as reflected in
the 1993 consolidated financial statements, were made by three
wholly owned subsidiaries of Nationwide Corporation prior to the
capital contribution of their outstanding capital shares to the
Company. The payments, after retroactive restatement for the capital
contribution of the three wholly owned subsidiaries, are reflected
in the 1993 consolidated statement of shareholder's equity and
consist of the following:
<TABLE>
<S> <C>
West Coast Life Insurance Company $ 1,240,000
Nationwide Financial Services, Inc. 5,565,100
National Casualty Company 11,000,000
-----------
$17,805,100
===========
</TABLE>
Management of the Company has not yet determined if future cash
dividends will be paid to Nationwide Corporation from the Company.
Reference is made to Item 7 and note 13 of the consolidated
financial statements herein for information regarding dividend
restrictions.
ITEM 6. Selected Financial Data.
SELECTED FINANCIAL DATA
(000's omitted)
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990*
----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Total revenues $ 2,046,200 2,034,526 1,933,318 1,799,042 1,375,281
Benefits and claims 1,279,763 1,236,906 1,319,735 1,262,317 1,011,304
Income tax expense 89,504 106,758 33,742 36,595 18,657
Cumulative effect of changes
in accounting principles -0- 5,365 -0- -0- -0-
Net income 183,726 211,508 96,817 73,732 38,893
Total assets $31,112,133 25,406,361 20,954,338 17,426,046 12,879,645
</TABLE>
* Management of the Company has elected not to retroactively restate
1990 financial data for the capital contribution
of the outstanding capital shares of West Coast Life Insurance Company,
National Casualty Company and Nationwide Financial Services, Inc. from
Nationwide Corporation during 1993.
5
<PAGE> 6
ITEM 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Results of Operations
Consolidated net income for the Company was $184 million in 1994
compared to $212 million in 1993 and $97 million in 1992. During
1993, the Company adopted Statement of Financial Accounting
Standards Statement No. 106, Employers' Accounting for
Postretirement Benefits Other than Pensions, and Statement No. 109,
Accounting for Income Taxes. Excluding the effects of implementing
those new accounting standards, the Company earned $206 million in
1993.
Revenues: Total revenues for 1994 were $2,046 million compared to
$2,035 million in 1993 and $1,933 million in 1992. Excluding
realized gains and losses on investments, revenues were $2,063
million in 1994 compared to $1,921 million in 1993 and $1,953 in
1992. Universal life and investment product (primarily group and
individual annuities) policy charges increased 27% to $239 million
in 1994 from $188 million in 1993 ($148 million in 1992). This
growth in revenues is attributable to the increase in universal life
and investment product considerations received to $5.5 billion in
1994 from $4.0 billion in 1993 ($3.4 billion in 1992). Management
anticipates continued growth in universal life and investment
product revenues, although the growth will likely be at a slower
pace than the past three years.
A significant portion of the group annuity business is deferred
compensation products for public employees and educators sold
through two affiliated marketing companies, which are also
wholly-owned subsidiaries of Nationwide Corporation. Total new
considerations received through those distribution channels were
$158 million in 1994, $117 million in 1993 and $96 million in 1992.
Another significant, but declining, portion of this deposit-type
business is a result of a joint venture with another affiliated
marketing company to sell individual annuity products and life
insurance to the customers of banks and other financial
institutions. Total considerations received through this
distribution channel were $336 million in 1994, $411 million in 1993
and $608 million in 1992.
Accident and health insurance premiums increased to $325 million in
1994 from $313 million in 1993, but down from $430 million in 1992.
The increase in premiums from 1993 to 1994 is attributable to
moderate growth in the group accident and health insurance line. The
decrease in premiums in 1993 from 1992 is attributable to changing
the health insurance plan for Nationwide Insurance Enterprise
employees from an indemnity plan to an administrative services only
basis during 1993 and effective January 1, 1993 National Casualty
Company ceded 100% of all written premiums to Nationwide Mutual
Insurance Company, the majority shareholder of Nationwide
Corporation. National Casualty Company reported accident and health
insurance premiums in 1992 of $76 million. In 1992, West Coast Life
Insurance Company exited the credit life and accident and health
insurance business and ceded substantially all of its credit life
and accident and health insurance policies to an unaffiliated
insurer. West Coast Life Insurance Company earned $27 million of
ceding commissions on this transaction. See note 12 to the
consolidated financial statements for additional disclosures
regarding this transaction.
Traditional life insurance premiums continued a declining trend,
which began in 1991 as a result of the reduction in sales of single
premium policies.
6
<PAGE> 7
Net investment income increased 7.1% to $1,290 million in 1994 from
$1,204 million in 1993. Net investment income for 1993 was up 7.5%
from $1,120 million in 1992. The increases in both 1994 and 1993 are
attributable to the significant growth in invested assets, primarily
in annuity and pension products, offset by lower yields on
investments which is consistent with the overall decline in market
interest rates into the first quarter of 1994.
Realized losses on investments were $16 million in 1994 compared to
realized gains on investments of $114 million in 1993 and realized
losses of $19 million in 1992. A significant portion of the realized
gains reported in 1993 are attributable to the Company selling
substantially all of its non-affiliated equity securities to
Nationwide Mutual Insurance Company to improve its risk-based
capital ratio. The Company recognized a gain of $123 million of this
sale of equity securities to Nationwide Mutual Insurance Company.
Net realized losses on mortgage loans on real estate, real estate
and limited partnerships were $11 million, $36 million and $42
million in 1994, 1993 and 1992, respectively.
Benefits and expenses: Total benefits and expenses increased $51
million (3%) to $1,773 million in 1994. In 1993, total benefits and
expenses decreased $81 million (4.5%) to $1,722 million from $1,803
million in 1992. In 1994, benefits and claims incurred increased
$42.9 million due to increases for accident and health insurance
policies and group annuity contracts, which were offset by an $18.4
million decrease in benefits for single premium policies which is
consistent with the decrease in premiums discussed above. In 1993,
benefits and claims incurred decreased $82.8 million due to National
Casualty Company ceding all of its premiums to Nationwide Mutual
Insurance Company effective January 1, 1993, the conversion of the
health insurance plan for Nationwide Insurance Enterprise employees
from an indemnity plan to an administrative services only basis,
West Coast Life Insurance Company exiting the credit life and
accident and health lines and a decrease in benefits for single
premium policies.
Amortization of deferred policy acquisition costs decreased $7.4
million to $94.7 million in 1994 from $102.1 million in 1993 ($99.2
million in 1992). The decrease is primarily attributed to deferred
policy acquisition cost write-offs in 1993 and 1992. There were no
significant deferred policy acquisition cost write-offs in 1994. In
1993, $18.6 million of individual accident and health insurance
deferred policy acquisition costs were written-off due to National
Casualty Company ceding all inforce business to Nationwide Mutual
Insurance Company. Also in 1993, the group annuity line wrote-off
$11 million of deferred policy acquisition costs when a significant
contract was canceled. In 1992, West Coast Life Insurance Company
ceded essentially all of its credit life and credit accident and
health insurance business and wrote-off $34 million of deferred
policy acquisition costs. This transaction is further described in
note 12 to the consolidated financial statements. Excluding the
effects of deferred policy acquisition cost write-offs, amortization
of deferred policy acquisition costs increased in 1994 from 1993 due
to increased amortization for individual and group annuity products
due to the growth described above.
Other operating costs and expenses increased $23 million (7%) to
$352 million in 1994 from $329 million in 1993 ($322 million in
1992). In 1994, the individual annuity lines accounted for nearly
$17 million of the increase due to greater sales and administrative
expenses in support of the increased volume. In addition, other
operating costs for accident and health insurance lines increased $8
million. The 2.3% increase in other operating costs and expenses in
1993 over 1992 is mostly due to continued growth in the individual
and group annuity lines of business, partially offset by a reduction
in National Casualty Company's expenses as a result of the 100%
quota share reinsurance agreement with Nationwide Mutual Insurance
Company.
7
<PAGE> 8
See note 7 to the consolidated financial statements for analysis of
Federal income tax expense.
Effects of accounting standards to be adopted: The Financial
Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 114, Accounting by Creditors for Impairment
of a Loan, which was amended by Statement of Financial Accounting
Standards No. 118, Accounting by Creditors for Impairment of a Loan
- Income Recognition and Disclosures. These statements are not
expected to have a material impact on the consolidated financial
statements and are discussed in more detail in note 2(b) of the
consolidated financial statements.
Investment Portfolio: The Company does not invest in lower quality,
higher-risk fixed maturity securities. Non-investment grade
securities, all of which are the result of down grading since the
time of purchase by the Company, were 2.3% of total fixed maturity
securities as of December 31, 1994.
Effective January 1, 1994, the Company adopted Statement of
Financial Accounting Standards No. 115 - Accounting for Certain
Investments in Debt and Equity Securities (SFAS 115). See the
Capital Resources section below for a discussion of SFAS 115.
Private placement fixed maturity securities provide certain
advantages over public issues and are purchased when possible. As of
December 31, 1994, private placement fixed maturity securities were
32% of total fixed maturity securities. While they are less liquid
than public issues, private issues generally offer higher yields,
better call provisions, greater takeover protection, enhanced
protective covenants and the potential of specific collateral.
Collateralized mortgage obligations comprised 29.5% of fixed
maturity securities as of December 31, 1994. Substantially all
collateralized mortgage obligation holdings are in planned
amortization class tranches. The Company does not invest in
higher-risk collateralized mortgage obligations such as
interest-only, principal-only, inverse floater or support tranches.
The Company's mortgage loan on real estate portfolio consists of
first mortgages on existing income-producing properties. Higher-risk
loans, such as second mortgages, construction loans, participating
or convertible mortgages or land development loans are not made by
the Company. Realized losses on mortgage loans on real estate were
$20.5 million, $28.2 million and $36.3 million for 1994, 1993 and
1992, respectively. As of December 31, 1994, valuation allowances on
mortgage loans on real estate were $47.9 million, or 1.1% of the
portfolio, compared to $42.4 million, or 1.1% of the portfolio, as
of December 31, 1993. See note 9 to the consolidated financial
statements for disclosures of concentrations of risk by geographic
area and borrower.
The Company does not invest in swaps, forwards, futures, option
contracts or other financial instruments with similar
characteristics, and there are no plans to invest in such
instruments.
8
<PAGE> 9
Capital Resources and Liquidity
Capital Resources: Total consolidated shareholder's equity increased
to $1,908 million as of December 31, 1994 from $1,651 million as of
December 31, 1993 ($1,430 million as of December 31, 1992). SFAS 115
resulted in certain debt securities being recorded at fair value
with unrealized gains or losses, net of certain adjustments to
deferred policy acquisition costs and deferred Federal income taxes,
reported as a component of consolidated shareholder's equity. See
notes 2(b) and 3 to the consolidated financial statements for more
disclosures regarding SFAS 115. Excluding unrealized investment
gains and losses, consolidated shareholder's equity increased $384
million (23%) to $2,028 million as of December 31, 1994, from $1,644
million as of December 31, 1993 ($1,340 million as of December 31,
1992). The increases in consolidated shareholder's equity are
attributable to the Company's consolidated net income and capital
contributions from Nationwide Corporation. During 1994 and 1993, the
Company received capital contributions of $200 million and $111
million, respectively, from Nationwide Corporation to support the
Company's growth in operations. No significant capital contributions
from, or dividend payments to, Nationwide Corporation are
anticipated over the next year.
Each insurance company's state of domicile imposes minimum
risk-based capital requirements that were developed by the National
Association of Insurance Commissioners (NAIC). Risk-based capital
evaluates the adequacy of an insurer's statutory capital and surplus
in relation to the risks inherent in the insurer's business related
to asset quality, asset and liability matching, mortality and
morbidity, and other business factors. Regulatory compliance is
determined based on a ratio of a company's regulatory total adjusted
capital, as defined by the NAIC, to its authorized control level
risk-based capital, as defined by the NAIC. Companies with a ratio
below 200% (or below 250% with negative trends) are required to take
corrective action steps. As of December 31, 1994, Nationwide Life
Insurance Company's risk-based capital ratio was 758%. All insurance
subsidiaries of Nationwide Life Insurance Company exceed the minimum
risk-based capital requirements.
Effective December 31, 1994, the Company purchased all of the
outstanding shares of Employers Life Insurance Company of Wausau
from Wausau Service Corporation for an amount approximating $165
million, subject to specified adjustments, if any, subsequent to
year end. Wausau Service Corporation is a wholly-owned subsidiary of
Employers Insurance of Wausau A Mutual Company, which is affiliated
with the Company's ultimate parent, Nationwide Mutual Insurance
Company. The Company transferred fixed maturity securities and cash
with a fair value of $155 million to Wausau Service Corporation,
which resulted in a realized loss of $19.2 million of the
disposition of the securities. An accrual approximating $10 million
is reflected in the consolidated balance sheet. The purchase price
approximated both the historical cost basis and fair value of net
assets of Employers Life Insurance Company of Wausau.
On March 1, 1995, Nationwide Corporation contributed all of the
outstanding shares of Farmland Life Insurance Company to Nationwide
Life Insurance Company. Farmland Life Insurance Company's total
assets and shareholder's equity approximated $113 million and $41
million, respectively, which is 0.4% and 2.1% of the Company's total
assets and shareholder's equity, respectively, as of December 31,
1994.
The changes in ownership of Employers Life Insurance Company of
Wausau and Farmland Life Insurance Company were effected to align
essentially all life insurance operations of the Nationwide
Insurance Enterprise under Nationwide Life Insurance Company.
9
<PAGE> 10
Liquidity: The Company's operations have historically provided
substantial positive cash flow. The significant growth in new
business and the resulting increase in investments have provided the
Company with sufficient cash resources to meet all current
obligations for policyholder benefits, withdrawals, surrenders and
policy loans. As a member of the Nationwide Insurance Enterprise,
the Company also has quick access to available capital infusions and
to several billion dollars of liquid and readily marketable invested
assets in the event of extreme unexpected withdrawals. The Company
also participates in intercompany repurchase agreements with
affiliates to satisfy short-term cash needs. Transactions under the
agreements were not material in 1994 and 1993.
The Company employs a process to match the maturities of assets and
liabilities and to identify cash and investment needs for the
respective line of business investment strategies. The matching
process includes a provision for more rapid than expected cash
outflows. The Company's investment strategy involves the commitment
of funds which provide for meeting its responsibilities to
policyholders and to provide a return to its shareholder.
To mitigate the risks that actual withdrawals may exceed anticipated
amounts or that rising interest rates may cause a decline in the
value of the Company's fixed maturity investments, the Company
imposes market value adjustments or surrender charges on the
majority of its products and offers products where the investment
risk is transferred to the contract holder. As of December 31, 1994,
only 10% of the Company's annuity contracts were subject to
withdrawal without a surrender charge or market value adjustment. In
addition, liabilities related to separate accounts, where the
investment risk is transferred to the policyholder, comprise 42% of
policyholder-related liabilities as of December 31, 1994, compared
to 38% as of December 31, 1993.
As described in note 13 to the consolidated financial statements,
Nationwide Life Insurance Company and its insurance subsidiaries are
limited by law in the amount of dividends they can pay. That
condition poses no liquidity concerns to the Company due to
Nationwide Life Insurance Company's significant cash flow from
operations and extensive holdings of liquid investments. In
addition, the Company had $120 million confirmed but unused bank
lines of credit as of December 31, 1994, which support a $100
million commercial paper borrowing authorization. During 1993, the
Company temporarily increased available bank lines of credit to $365
million and borrowed $125 million. In addition, $175 million of
short-term securities were issued as repurchase agreements. All
amounts were repaid in 1993, with interest totaling $1.6 million.
See note 15 to the consolidated financial statements.
ITEM 8. Consolidated Financial Statements and Supplementary Data.
Consolidated Financial Statements.
The consolidated financial statements of Nationwide Life Insurance
Company and subsidiaries are submitted in a separate section of this
report which is indexed in Item 14.
Semi-annual and annual reports are sent to contract owners of the
variable contracts issued through registered Separate Accounts of
the Company.
ITEM 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
Not applicable.
10
<PAGE> 11
PART III
ITEM 10. Directors and Executive Officers of the Registrant.
(a) Identification of Directors
<TABLE>
<CAPTION>
Term
Expires
Director Annual
Name Age Since Meeting Business Experience
--------------------------- --- -------- ------- ---------------------------------------------
<S> <C> <C> <C> <C>
Lewis J. Alphin 46 1993 1997 Farm Owner and Operator (1)
Willard J. Engel 55 1994 1997 General Manager, Lyon County Cooperative Oil
Company (1)
Fred C. Finney * 48 1992 1995 Farm Owner and Operator (1)
Peter F. Frenzer 60 1991 1996 Executive Vice President - Investments,
Nationwide Insurance Companies (1); President
and Chief Operating Officer, Nationwide Life
and Financial Horizons Life Insurance
Companies (2)
Charles L. Fuellgraf, Jr. * 63 1969 1996 Chief Executive Officer, Fuellgraf Electric
Company, Electrical Construction and
Engineering Services (1)
Henry S. Holloway * 62 1986 1995 Farm Owner and Operator (1)
D. Richard McFerson 57 1988 1996 President and Chief Executive Officer,
Nationwide Mutual, Nationwide Mutual Fire,
Nationwide General and Nationwide Property and
Casualty Insurance Companies (12/92 to
present); President and Chief Executive
Officer - Nationwide Insurance Enterprise,
Nationwide Life and Financial Horizons Life
Insurance Companies (12/93 to present) (3)
David O. Miller * 56 1985 1997 President, Owen Potato Farm, Inc.; Partner,
M&M Enterprises (1)
C. Ray Noecker 48 1994 1997 Farm Owner and Operator (1)
James F. Patterson 52 1989 1995 President, Patterson Farms, Inc.; Vice
President, Pattersons, Inc. (1)
Robert H. Rickel * 65 1984 1996 Rancher (1)
</TABLE>
11
<PAGE> 12
<TABLE>
<CAPTION>
Term
Expires
Director Annual
Name Age Since Meeting Business Experience
--------------------------- --- -------- ------- ---------------------------------------------
<S> <C> <C> <C> <C>
Arden L. Shisler 53 1984 1996 President and Chief Executive Officer, K&B
Transport, Inc.; Partner, Sweetwater Beef
Farms (1)
Robert L. Stewart 58 1989 1995 Farm owner and operator; Owner, Sunnydale
Mining (1)
Nancy C. Thomas * 60 1986 1995 Farm Owner and Operator (1)
Harold W. Weihl 62 1990 1996 Farm Owner and Operator (1)
* Served as a member of the Salary and Compensation Committee during 1994.
</TABLE>
(1) Principal occupation for the last five years.
(2) Held this position since April, 1991.
(3) President and Chief Operating Officer, Nationwide
Mutual, Nationwide Mutual Fire, Nationwide General,
Nationwide Property and Casualty (04/91 to 12/92);
President and General Manager (04/88 to 04/91);
Executive Vice President Property/Casualty
Operations, Nationwide Insurance Companies (prior to
04/88); Chief Executive Officer, Nationwide Life and
Financial Horizons Life Insurance Companies (12/92 to
12/93).
12
<PAGE> 13
(b) Identification of Executive Officers
<TABLE>
<CAPTION>
Held
Position
Name Age Since Position
----------------------- --- -------- ----------------------------------------------------------
<S> <C> <C> <C>
Peter F. Frenzer 60 1991 President and Chief Operating Officer
Gordon E. McCutchan 59 1994 Executive Vice President - Law and Corporate Services and
Secretary
D. Richard McFerson 57 1993 President and Chief Executive Officer - Nationwide
Insurance Enterprise (12/93 to present); Chief Executive
Officer prior to 12/93
Galen R. Barnes 47 1989 Senior Vice President
James E. Brock 47 1990 Senior Vice President
Richard D. Crabtree 53 1993 Senior Vice President
William P. DeMeno 57 1989 Senior Vice President
W. Sidney Druen 52 1994 Senior Vice President and General Counsel and Assistant
Secretary
Mark E. Fiebrink 43 1993 Senior Vice President - Chief Actuary - Property and
Casualty
Harvey S. Galloway, Jr. 60 1993 Senior Vice President and Chief Actuary - Life, Health
and Annuities; Senior Vice President and Chief Actuary
Joseph J. Gasper 51 1992 Senior Vice President
Richard A. Karas 52 1993 Senior Vice President
Robert A. Oakley 48 1993 Senior Vice President - Chief Financial Officer
Carl J. Santillo 45 1993 Senior Vice President
Robert J. Woodward, Jr. 53 1991 Senior Vice President
Mark A. Folk 46 1993 Vice President and Treasurer
</TABLE>
The above listed executive officers hold office until the
date of the next regular annual meeting of the Board of
Directors and until their respective successors are elected
or appointed and qualified; however, any executive officer
may be removed from office with or without cause by vote of
two-thirds of the entire Board of Directors.
13
<PAGE> 14
Each of the executive officers listed above serve in the capacities
listed* for the following Nationwide Insurance Enterprise companies:
Nationwide Mutual Insurance Company
Nationwide Mutual Fire Insurance Company
Nationwide General Insurance Company
Nationwide Property and Casualty Insurance Company
Financial Horizons Life Insurance Company
* Mr. Frenzer serves as President of Nationwide
Corporation and Financial Horizons Life Insurance
Company and as Executive Vice President of
Nationwide Mutual Insurance Company, Nationwide
Mutual Fire Insurance Company, Nationwide General
Insurance Company and Nationwide Property and
Casualty Insurance Company.
Each of the executive officers listed above also serve in various
capacities as executive officers in numerous other affiliated
companies.
(c) Not applicable.
(d) Not applicable.
(e) In addition to the business experience of each of the directors
given in (a) above, Messrs. Frenzer, Fuellgraf, McFerson, Rickel,
Weihl and Mrs. Thomas are trustees of Nationwide Investing
Foundation, a registered investment company. Mr. Frenzer is also a
trustee of Financial Horizons Investment Trust, Nationwide Investing
Foundation II and Nationwide Separate Account Trust, registered
investment companies.
Each of the executive officers listed in (b) above, with the
exception of Mr. Fiebrink, Mr. Santillo and Mr. Folk, has been
associated with the Company for the past five years. Previous to
their present assignments, the following officers served the Company
in this capacity: Mr. Barnes, Vice President; Mr. Brock, Vice
President; Mr. Crabtree, Vice President; Mr. DeMeno, Vice President;
Mr. Druen, Vice President - Deputy General Counsel and Assistant
Secretary; Mr. Fiebrink, Senior Vice President, Employers Insurance
of Wausau A Mutual Company and Wausau Service Corporation; Mr. Folk,
Partner - KPMG Peat Marwick LLP; Mr. Frenzer, Executive Vice
President; Mr. Galloway, Senior Vice President - Chief Actuary; Mr.
Gasper, Vice President; Mr. Karas, Vice President; Mr. McCutchan,
Executive Vice President and General Counsel and Secretary; Mr.
Oakley, Vice President; Mr. Santillo, Executive Vice President,
Employers Insurance of Wausau A Mutual Company and Wausau Service
Corporation; and Mr. Woodward, Vice President.
(f) Not applicable.
(g) Not applicable.
14
<PAGE> 15
ITEM 11. Executive Compensation.
The following information is given with respect to the Chief
Executive Officer, each of the four most highly compensated
executive officers of the Company as of December 31, 1994 and the
retired General Chairman.
<TABLE>
<CAPTION>
Summary Compensation Table (1)
---------------------------------------------------------------------------------
Long-term
Annual compensation compensation (2)
--------------------------------- ----------------
(a) (b) (c) (d) (e) (h)
Name and Other annual LTIP
principal position Year Salary Bonus compensation payouts
------------------- ---- -------- ------- ------------ ----------------
<S> <C> <C> <C> <C> <C>
D. R. McFerson 1994 $127,568 111,671 5,575 -
Chief Executive 1993 113,991 55,852 5,422 19,102
Officer 1992 10,283 3,996 385 -
P. F. Frenzer 1994 370,726 237,575 17,733 -
President and Chief 1993 381,571 165,419 10,820 62,386
Operating Officer 1992 271,851 118,125 10,607 -
C. J. Santillo 1994 237,400 14,707 23,650 -
Senior Vice 1993 160,731 - 4,638 -
President 1992 - - - -
R. J. Woodward, Jr. 1994 172,172 101,540 9,146 -
Senior Vice 1993 144,951 68,358 7,233 -
President 1992 151,401 40,120 7,905 -
R. A. Karas 1994 167,308 86,456 9,678 -
Senior Vice 1993 146,538 79,122 11,407 -
President 1992 124,039 33,840 12,591 -
J. E. Fisher 1994 157,908 150,727 49,607 -
General Chairman 1993 198,388 131,442 4,297 -
(Retired) 1992 165,450 44,844 3,792 -
</TABLE>
(1) The listed executive officers and other executive officers of the
Company not listed also serve as executive officers or otherwise
serve one or more of Nationwide Mutual Insurance Company,
Nationwide Mutual Fire Insurance Company, Nationwide General
Insurance Company, Nationwide Property and Casualty Insurance
Company, Nationwide Indemnity Company, Nationwide Corporation,
Scottsdale Indemnity Company, and Financial Horizons Life Insurance
Company, which together with the Company make up the Nationwide
Group of Insurance Companies. The amounts shown above relate only
to the Company.
15
<PAGE> 16
(2) Certain executive officers of the Company participate in a long
term sustained performance incentive plan. The plan provides the
opportunity for participants to earn an award for achieving
predetermined goals during a four-year performance period. The
performance measures include: profitability goals, growth in
selected product lines and geographic areas and strategic goals in
key competitive aspects of the business operations. The performance
periods overlap, such that awards are determined every two years,
with the most recent performance period ending December 31, 1994.
Payout of awards occurs in the year immediately following the end
of a performance period. The award may range from 0% to 20% of the
sum of the base salaries for the final two calendar years of the
performance period.
Included in the Summary Compensation Table shown above are contributions made to
the Company's Employee Incentive Savings Plan. Pursuant to the Plan, the Company
contributes on behalf of all eligible employees. Company contributions are
included in column (e). Employee contributions are included in column (c). Since
contributions under the Plan may be invested in a fixed income security fund, a
common stock fund, a guaranteed interest fund, a short-term interest fund or
shares of Nationwide Investing Foundation (Nationwide Growth Fund), it is not
possible to estimate the annual benefits therefrom upon retirement.
The Company participates in the Nationwide Insurance Companies' management
incentive plans. These plans provide for incentive compensation based upon
achieving or exceeding operating gain objectives and upon the achievement and
betterment of planned expense levels and/or ratios. Additional incentive
compensation is paid, subject to achievement of the operating gain objective,
for achievement of premium and/or revenue objectives. Incentive penalties are
assessed for exceeding planned expense levels and/or ratios. Directors do not
participate in the plan. Payments under the plan are included in the Summary
Compensation Table as LTIP payouts.
Nationwide Life Insurance Company participates in the Nationwide Insurance
Companies' and Affiliates' 1976 Restated Retirement Plan. This pension plan is a
defined benefit plan designed to qualify under applicable provisions of the
Internal Revenue Code. Employees generally become eligible to participate after
one year of service with the Company and after reaching age 21. The following
table represents annual benefits payable in the event of retirement on or after
age 65.
<TABLE>
<CAPTION>
Pension Plan Table (1)
---------------------------------------------------------------
Average of Last Years of Service
Three Years' -------------------------------------------------
Compensation 15 20 25 30 35
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$125,000 30,989 41,319 51,649 61,978 72,308
150,000 42,265 56,353 70,442 84,530 98,618
175,000 49,765 66,353 82,942 99,530 116,118
200,000 52,265 76,353 95,442 114,530 133,618
225,000 64,765 86,353 107,942 129,530 151,118
250,000 72,265 96,353 120,942 144,530 168,618
300,000 87,265 116,353 145,442 174,530 203,618
400,000 117,265 156,353 195,442 234,530 273,618
450,000 132,265 176,353 220,442 264,530 308,618
500,000 147,265 196,353 245,442 294,530 343,618
</TABLE>
16
<PAGE> 17
(1) The amounts shown are based on compensation amounts
as reported on the W-2 form for that year adjusted to
exclude severance pay, reimbursement of relocation
expenses and the value of a company car and to
include pre-tax employee contributions to any savings
plan, any group insurance plan or any medical and
dependent care reimbursement plans established by the
employer and workers compensation or state disability
income. Such amount for named executive officers are
included in columns (c), (d) and (e) of the Summary
Compensation Table.
(2) As of December 31, 1994, the named individuals had
the following respective years of service under the
pension plan: D. R. McFerson, 14 years; P. F.
Frenzer, 21 years; C. J. Santillo, 1 year; R. J.
Woodward, Jr., 30 years; R. A. Karas, 31 years; J. E.
Fisher, 43 years.
(3) The amounts shown represent annual benefits upon
retirement at age 65 for the years of service
indicated for retirement in 1994. Amounts for
retirement after 1994 will differ due to changes in
social security covered compensation.
Each of the Company's directors is compensated at an annual rate
of $26,196 for services as a director. Directors who are also
officers are excluded from this arrangement. Directors are also
reimbursed for out-of-pocket expenses.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management.
Security Ownership of Certain Beneficial Owners as of
December 31, 1994.
<TABLE>
<CAPTION>
Title of Name and Address Amount and Nature of Percent
Class of Beneficial Owner Beneficial Ownership of Class
------ ---------------------- ------------------------- --------
<S> <C> <C> <C>
Common Nationwide Corporation 3,814,779 Of record and 100.0%
Stock One Nationwide Plaza beneficially *
Columbus, Ohio 43216
</TABLE>
* Sole voting and investment power
ITEM 13. Certain Relationships and Related Transactions.
In 1994, the Company and its subsidiaries paid to the law firm of
Druen, Rath & Dietrich (McCutchan, Druen, Maynard, Rath and
Dietrich prior to September, 1994) approximately $1,020,000 for
legal services rendered to the Company. W. Sidney Druen, Senior
Vice President and General Counsel and Assistant Secretary; Joseph
P. Rath, Associate Vice President - Associate General Counsel; and
Thomas W. Dietrich, Associate Vice President - Associate General
Counsel, are all partners in that firm, and all members of the
firm are employees of Nationwide Mutual Insurance Company.
17
<PAGE> 18
The Company leases space in a building owned by Nationwide Mutual
Insurance Company. Nationwide Mutual Insurance Company acts as
disbursing agent for many of the expenses incurred by the Company.
Nationwide Mutual Insurance Company also provides some operational
and administrative functions at cost, such as sales, advertising,
personnel and general management services. For the year 1994,
reimbursements by the Company for its funds disbursed by
Nationwide Mutual Insurance Company and the costs of services
provided approximated $270,118,000.
The Company participates in a common employee benefit program with
Nationwide Mutual Insurance Company and its subsidiaries. Included
in this program are accident and health, disability income and
life insurance benefits and a retirement plan. The retirement plan
is funded in the Company's Separate Accounts and its general
account, earning a guaranteed rate of return. Contributions to the
retirement plan by the participating companies approximated
$55,076,000 in 1994.
The Company also participates in a life and health care defined
benefit plan for qualifying retirees with Nationwide Mutual
Insurance Company and its subsidiaries. The plan is funded in
amounts determined at the discretion of management. Contributions
to the plan by the participating companies are invested in group
annuity contracts of the Company and approximated $47,391,000 in
1994.
During 1994, the Company received a $200,000,000 cash capital
contribution from Nationwide Corporation.
Reference is made to note 14 of the consolidated financial
statements herein for additional information regarding
transactions with affiliates.
18
<PAGE> 19
PART IV
ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) (1) Consolidated Financial Statements:
Independent Auditors' Report
Consolidated Balance Sheets, December 31, 1994 and
1993
Consolidated Statements of Income, years ended
December 31, 1994, 1993 and 1992
Consolidated Statements of Shareholder's Equity,
years ended December 31, 1994, 1993 and 1992
Consolidated Statements of Cash Flows, years ended
December 31, 1994, 1993 and 1992
Notes to Consolidated Financial Statements
(2) Financial Statement Schedules:
Schedule I Summary of Investments - Other Than
Investments in Related Parties,
December 31, 1994
Schedule V Supplementary Insurance Information,
December 31, 1994, 1993 and 1992
Schedule VI Reinsurance, years ended December 31,
1994, 1993 and 1992
All other schedules to the consolidated financial
statements referenced by Article 7 of Regulation S-X
are not required under the related instructions or
are inapplicable and therefore have been omitted.
(3) Exhibits:
Exhibit 21 Subsidiaries of the Registrant
Exhibit 27 Financial Data Schedule
All other exhibits referenced by Item 601 of
Regulation S-K are not required under the related
instructions or are inapplicable and therefore have
been omitted.
(b) No reports on Form 8-K have been filed during the year ended
December 31, 1994.
19
<PAGE> 20
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
-----------------------------------------------------
Consolidated Financial Statements
December 31, 1994, 1993 and 1992
For Inclusion in Form 10-K
To Securities and Exchange Commission
20
<PAGE> 21
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Nationwide Life Insurance Company:
We have audited the consolidated financial statements of Nationwide Life
Insurance Company (a wholly owned subsidiary of Nationwide Corporation) and
subsidiaries as listed in the accompanying index. In connection with our audits
of the consolidated financial statements, we also have audited the financial
statement schedules as listed in the accompanying index. These consolidated
financial statements and financial statement schedules are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
consolidated financial statements and financial statement schedules based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
Participating insurance and the related surplus are discussed in note 13. The
Company and its counsel are of the opinion that the ultimate ownership of the
participating surplus in excess of the contemplated equitable policyholder
dividends belongs to the shareholder. The accompanying consolidated financial
statements are presented on such basis.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Nationwide Life
Insurance Company and subsidiaries as of December 31, 1994 and 1993, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1994, in conformity with generally accepted
accounting principles. Also in our opinion, the related financial statement
schedules, when considered in relation to the basic consolidated financial
statements taken as a whole, present fairly, in all material respects, the
information set forth therein.
As discussed in note 2 to the consolidated financial statements, in 1994 the
Company adopted the provisions of the Financial Accounting Standards Board's
Statement of Financial Accounting Standards (SFAS) No. 115, Accounting for
Certain Investments in Debt and Equity Securities.
In 1993, the Company adopted the provisions of SFAS No. 109, Accounting for
Income Taxes and SFAS No. 106, Employers' Accounting for Postretirement
Benefits Other Than Pensions.
KPMG PEAT MARWICK LLP
Columbus, Ohio
February 27, 1995
21
<PAGE> 22
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
<TABLE>
Consolidated Balance Sheets
December 31, 1994 and 1993
(000's omitted)
<CAPTION>
Assets 1994 1993
------ ----------- ----------
<S> <C> <C>
Investments (notes 5, 8 and 9):
Securities available-for-sale, at fair value:
Fixed maturities (cost $8,318,865 in 1994) $ 8,045,906 -
Equity securities (cost $18,373 in 1994; $8,263 in 1993) 24,713 16,593
Fixed maturities held-to-maturity, at amortized cost (fair value $3,602,310
in 1994; $10,886,820 in 1993) 3,688,787 10,120,978
Mortgage loans on real estate 4,222,284 3,871,560
Real estate 252,681 253,831
Policy loans 340,491 315,898
Other long-term investments 63,914 118,490
Short-term investments (note 14) 131,643 41,797
----------- -----------
16,770,419 14,739,147
----------- -----------
Cash 7,436 21,835
Accrued investment income 220,540 190,886
Deferred policy acquisition costs 1,064,159 811,944
Deferred Federal income tax 36,515 -
Other assets 790,603 636,161
Assets held in Separate Accounts (note 8) 12,222,461 9,006,388
----------- -----------
$31,112,133 25,406,361
=========== ===========
Liabilities and Shareholder's Equity
------------------------------------
Future policy benefits and claims (notes 6 and 8) 16,321,461 14,092,255
Policyholders' dividend accumulations 338,058 322,686
Other policyholder funds 72,770 71,959
Accrued Federal income tax (note 7):
Current 13,126 12,294
Deferred - 31,659
----------- -----------
13,126 43,953
----------- -----------
Other liabilities 235,778 217,952
Liabilities related to Separate Accounts (note 8) 12,222,461 9,006,388
----------- -----------
29,203,654 23,755,193
----------- -----------
Shareholder's equity (notes 3, 4, 7 and 13):
Capital shares, $1 par value. Authorized 5,000 shares, issued and
outstanding 3,815 shares 3,815 3,815
Paid-in additional capital 622,753 422,753
Unrealized gains (losses) on securities available-for-sale, net of adjustment
to deferred policy acquisition costs of $82,525 ($0 in 1993) and net of
deferred Federal income tax benefit of $64,425 ($1,583 expense in 1993) (119,668) 6,747
Retained earnings 1,401,579 1,217,853
----------- -----------
1,908,479 1,651,168
----------- -----------
Commitments and contingencies (notes 9 and 16)
$31,112,133 25,406,361
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
22
<PAGE> 23
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Consolidated Statements of Income
Years ended December 31, 1994, 1993 and 1992
(000's omitted)
<TABLE>
<CAPTION>
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Revenues (note 17):
Traditional life insurance premiums $ 209,538 215,715 226,888
Accident and health insurance premiums 324,524 312,655 430,009
Universal life and investment product policy charges 239,021 188,057 148,464
Net investment income (note 5) 1,289,501 1,204,426 1,120,157
Net ceded commissions from disposition of credit life and
credit accident and health business (note 12) - - 27,115
Realized gains (losses) on investments (notes 5 and 14) (16,384) 113,673 (19,315)
---------- ---------- ----------
2,046,200 2,034,526 1,933,318
---------- ---------- ----------
Benefits and expenses:
Benefits and claims 1,279,763 1,236,906 1,319,735
Provision for policyholders' dividends on participating
policies (note 13) 46,061 53,189 61,834
Amortization of deferred policy acquisition costs 94,744 102,134 99,197
Other operating costs and expenses 352,402 329,396 321,993
---------- ---------- ----------
1,772,970 1,721,625 1,802,759
---------- ---------- ----------
Income before Federal income tax and cumulative
effect of changes in accounting principles 273,230 312,901 130,559
---------- ---------- ----------
Federal income tax (note 7):
Current expense 79,847 75,124 47,402
Deferred expense (benefit) 9,657 31,634 (13,660)
---------- ---------- ----------
89,504 106,758 33,742
---------- ---------- ----------
Income before cumulative effect of changes in
accounting principles 183,726 206,143 96,817
Cumulative effect of changes in accounting principles,
net of tax (note 3) - 5,365 -
---------- ---------- ----------
Net income $ 183,726 211,508 96,817
========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
23
<PAGE> 24
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Consolidated Statements of Shareholder's Equity
Years ended December 31, 1994, 1993 and 1992
(000's omitted)
<TABLE>
<CAPTION>
Unrealized
gains (losses)
Paid-in on securities Total
Capital additional available-for- Retained shareholder's
shares capital sale, net earnings equity
--------- ----------- -------------- ---------- -------------
<S> <C> <C> <C> <C> <C>
1992:
Balance, beginning of year $ 3,815 311,753 96,048 933,179 1,344,795
Dividends paid to shareholder - - - (5,846) (5,846)
Net income - - - 96,817 96,817
Unrealized losses on equity
securities, net of deferred
Federal income tax - - (5,524) - (5,524)
--------- ----------- -------------- ---------- -------------
Balance, end of year $ 3,815 311,753 90,524 1,024,150 1,430,242
========= =========== ============== ========== =============
1993:
Balance, beginning of year 3,815 311,753 90,524 1,024,150 1,430,242
Capital contributions - 111,000 - - 111,000
Dividends paid to shareholder - - - (17,805) (17,805)
Net income - - - 211,508 211,508
Unrealized losses on equity
securities, net of deferred
Federal income tax - - (83,777) - (83,777)
--------- ----------- -------------- ---------- -------------
Balance, end of year $ 3,815 422,753 6,747 1,217,853 1,651,168
========= =========== ============== ========== =============
1994:
Balance, beginning of year 3,815 422,753 6,747 1,217,853 1,651,168
Capital contribution - 200,000 - - 200,000
Net income - - - 183,726 183,726
Adjustment for change in
accounting for certain
investments in debt and
equity securities, net of
adjustment to deferred policy
acquisition costs and deferred
Federal income tax (note 3) - - 216,915 - 216,915
Unrealized losses on securities
available-for-sale, net of
adjustment to deferred policy
acquisition costs and deferred
Federal income tax - - (343,330) - (343,330)
--------- ----------- -------------- ---------- -------------
Balance, end of year $ 3,815 622,753 (119,668) 1,401,579 1,908,479
========= =========== ============== ========== =============
</TABLE>
See accompanying notes to consolidated financial statements.
24
<PAGE> 25
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Consolidated Statements of Cash Flows
Years ended December 31, 1994, 1993 and 1992
(000's omitted)
<TABLE>
<CAPTION>
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 183,726 211,508 96,817
Adjustments to reconcile net income to net cash provided by
operating activities:
Capitalization of deferred policy acquisition costs (264,434) (191,994) (177,928)
Amortization of deferred policy acquisition costs 94,744 102,134 99,197
Amortization and depreciation 6,207 11,156 5,607
Realized losses (gains) on invested assets, net 15,949 (113,648) 19,092
Deferred Federal income tax benefit (2,166) (6,006) (13,105)
Increase in accrued investment income (29,654) (4,218) (11,518)
(Increase) decrease in other assets (112,566) (549,277) 6,132
Increase in policyholder account balances 1,038,641 509,370 19,087
Increase in policyholders' dividend accumulations 15,372 17,316 18,708
Increase (decrease) in accrued Federal income tax payable 832 16,838 (15,723)
Increase in other liabilities 17,826 26,958 73,512
Other, net (19,303) (11,745) (10,586)
---------- ---------- ----------
Net cash provided by operating activities 945,174 18,392 109,292
---------- ---------- ----------
Cash flows from investing activities:
Proceeds from maturity of securities available-for-sale 579,067 - -
Proceeds from sale of securities available-for-sale 247,876 247,502 27,844
Proceeds from maturity of fixed maturities held-to-maturity 516,003 1,192,093 1,030,397
Proceeds from sale of fixed maturities - 33,959 123,422
Proceeds from repayments of mortgage loans on real estate 220,744 146,047 259,659
Proceeds from sale of real estate 46,713 23,587 22,682
Proceeds from repayments of policy loans and
sale of other invested assets 134,998 59,643 99,189
Cost of securities available-for-sale acquired (2,569,672) (12,550) (12,718)
Cost of fixed maturities held-to-maturity acquired (675,835) (2,016,831) (2,687,975)
Cost of mortgage loans on real estate acquired (627,025) (475,336) (654,403)
Cost of real estate acquired (15,962) (8,827) (137,843)
Policy loans issued and other invested assets acquired (118,012) (76,491) (97,491)
---------- ---------- ----------
Net cash used in investing activities (2,261,105) (887,204) (2,027,620)
---------- ---------- ----------
Cash flows from financing activities:
Proceeds from capital contributions 200,000 111,000 -
Dividends paid to shareholder - (17,805) (5,846)
Increase in universal life and investment product account balances 3,640,958 2,249,740 2,468,236
Decrease in universal life and investment product account balances (2,449,580) (1,458,504) (575,180)
---------- ---------- ----------
Net cash provided by financing activities 1,391,378 884,431 1,887,210
---------- ---------- ----------
Net increase (decrease) in cash and cash equivalents 75,447 15,619 (31,118)
Cash and cash equivalents, beginning of year 63,632 48,013 79,131
---------- ---------- ----------
Cash and cash equivalents, end of year $ 139,079 63,632 48,013
========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
25
<PAGE> 26
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements
December 31, 1994, 1993 and 1992
(000 s omitted)
(1) Organization and Description of Business
----------------------------------------
Nationwide Life Insurance Company (NLIC) is a wholly owned
subsidiary of Nationwide Corporation (Corp.). Wholly-owned
subsidiaries of NLIC include Financial Horizons Life Insurance
Company (FHLIC), West Coast Life Insurance Company (WCLIC), National
Casualty Company and subsidiaries (NCC), Nationwide Financial
Services, Inc. (NFS), and effective December 31, 1994, Employers Life
Insurance Company of Wausau and subsidiary (ELICW). NLIC and its
subsidiaries are collectively referred to as "the Company".
NLIC, FHLIC, WCLIC and ELICW are life and accident and health
insurers and NCC is a property and casualty insurer. The Company is
licensed in all 50 states, the District of Columbia, the Virgin
Islands and Puerto Rico. The Company offers a full range of life,
health and annuity products through exclusive agents and other
distribution channels and is subject to competition from other
insurers throughout the United States. The Company is subject to
regulation by the Insurance Departments of states in which it is
licensed, and undergoes periodic examinations by those departments.
The following is a description of the most significant risks facing
life and health insurers and how the Company mitigates those risks:
LEGAL/REGULATORY RISK is the risk that changes in the legal
or regulatory environment in which an insurer operates will create
additional expenses not anticipated by the insurer in pricing
its products. That is, regulatory initiatives designed to
reduce insurer profits, new legal theories or insurance
company insolvencies through guaranty fund assessments may create
costs for the insurer beyond those recorded in the consolidated
financial statements. The Company mitigates this risk by offering
a wide range of products and by operating throughout the United
States, thus reducing its exposure to any single product or
jurisdiction, and also by employing underwriting practices
which identify and minimize the adverse impact of this risk.
CREDIT RISK is the risk that issuers of securities owned by the
Company or mortgagors on mortgage loans on real estate owned by the
Company will default or that other parties, including reinsurers,
which owe the Company money, will not pay. The Company minimizes
this risk by adhering to a conservative investment strategy, by
maintaining sound reinsurance and credit and collection policies
and by providing for any amounts deemed uncollectible.
INTEREST RATE RISK is the risk that interest rates will change
and cause a decrease in the value of an insurer's investments.
This change in rates may cause certain interest-sensitive
products to become uncompetitive or may cause disintermediation.
The Company mitigates this risk by charging fees for
non-conformance with certain policy provisions, by offering
products that transfer this risk to the purchaser, and/or by
attempting to match the maturity schedule of its assets with the
expected payouts of its liabilities. To the extent that
liabilities come due more quickly than assets mature, an insurer
would have to borrow funds or sell assets prior to maturity and
potentially recognize a gain or loss.
(2) Summary of Significant Accounting Policies
------------------------------------------
The significant accounting policies followed by the Company that
materially affect financial reporting are summarized below. The
accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles (GAAP) which
differ from statutory accounting practices prescribed or permitted by
regulatory authorities. See note 4.
In preparing the consolidated financial statements, management is
required to make estimates and assumptions that affect the reported
amounts of assets and liabilities as of the date of the consolidated
financial statements and revenues and expenses for the period. Actual
results could differ significantly from those estimates.
The estimates susceptible to significant change are those used in
determining the liability for future policy benefits and claims and
those used in determining valuation allowances for mortgage loans on
real estate and real estate. Although some variability is inherent in
these estimates, management believes the amounts provided are adequate.
26
<PAGE> 27
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
(a) Consolidation Policy
--------------------
The December 31, 1994, 1993 and 1992 consolidated
financial statements include the accounts of NLIC and its
wholly owned subsidiaries FHLIC, WCLIC, NCC and NFS. The
December 31, 1994 consolidated balance sheet also
includes the accounts of ELICW, which was acquired by
NLIC effective December 31, 1994. See Note 14. All
significant intercompany balances and transactions have
been eliminated.
(b) Valuation of Investments and Related Gains and Losses
-----------------------------------------------------
Prior to January 1, 1994, the Company classified fixed
maturities in accordance with the then existing accounting
standards, and accordingly, fixed maturity securities were
carried at amortized cost, adjusted for amortization of
premium or discount, since the Company had both the
ability and intent to hold those securities until
maturity. Equity securities were carried at fair value
with the unrealized gains and losses, net of deferred
Federal income tax, reported as a separate component of
shareholder's equity.
In May 1993, the Financial Accounting Standards Board
(FASB) issued STATEMENT OF FINANCIAL ACCOUNTING
STANDARDS NO. 115 - ACCOUNTING FOR CERTAIN INVESTMENTS IN
DEBT AND EQUITY SECURITIES (SFAS 115). SFAS 115
requires fixed maturities and equity securities to be
classified as either held-to-maturity, available-for-sale,
or trading. The Company has no trading securities. The
Company adopted SFAS 115 as of January 1, 1994, with no
effect on consolidated net income. See note 3 regarding
the effect on consolidated shareholder's equity.
Fixed maturity securities are classified as held-to-
maturity when the Company has the positive intent
and ability to hold the securities to maturity and are
stated at amortized cost. Fixed maturity securities not
classified as held-to-maturity and all equity securities
are classified as available-for-sale and are stated at
fair value, with the unrealized gains and losses, net of
adjustments to deferred policy acquisition costs and
deferred Federal income tax, reported as a separate
component of shareholder's equity. The adjustment to
deferred policy acquisition costs represents the change
in amortization of deferred policy acquisition costs that
would have been required as a charge or credit to
operations had such unrealized amounts been realized.
Mortgage loans on real estate are carried at the unpaid
principal balance less valuation allowances. The Company
provides valuation allowances for impairments of
mortgage loans on real estate based on a review by
portfolio managers. Loans in foreclosure and loans
considered in-substance foreclosed as of the balance
sheet date are placed on non-accrual status and written
down to the fair value of the existing property to
derive a new cost basis. Real estate is carried at
cost less accumulated depreciation and valuation
allowances. Other long-term investments are carried on
the equity basis, adjusted for valuation allowances.
Realized gains and losses on the sale of investments are
determined on the basis of specific security
identification. Estimates for valuation allowances and
other than temporary declines are included in realized
gains and losses on investments.
In May, 1993, the FASB issued STATEMENT OF FINANCIAL
ACCOUNTING STANDARDS NO. 114 - ACCOUNTING BY CREDITORS
FOR IMPAIRMENT OF A LOAN (SFAS 114). SFAS 114, which
was amended by STATEMENT OF FINANCIAL ACCOUNTING
STANDARDS NO. 118 - ACCOUNTING BY CREDITORS FOR
IMPAIRMENT OF A LOAN - INCOME RECOGNITION AND
DISCLOSURE in October, 1994, requires the measurement of
impaired loans be based on the present value of expected
future cash flows discounted at the loan's effective
interest rate or, as a practical expedient, at the
loan's observable market price or the fair value of the
collateral if the loan is collateral dependent. The
impact on the consolidated financial statements of
adopting SFAS 114 as amended is not expected to be
material. Previously issued consolidated financial
statements shall not be restated. The Company will adopt
SFAS 114 as amended in 1995.
27
<PAGE> 28
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
(c) Revenues and Benefits
---------------------
TRADITIONAL LIFE INSURANCE PRODUCTS: Traditional life
insurance products include those products with fixed and
guaranteed premiums and benefits and consist primarily of
whole life, limited-payment life, term life and certain
annuities with life contingencies. Premiums for
traditional life insurance products are recognized as
revenue when due and collected. Benefits and expenses
are associated with earned premiums so as to result in
recognition of profits over the life of the contract.
This association is accomplished by the provision for
future policy benefits and the deferral and amortization
of policy acquisition costs.
UNIVERSAL LIFE AND INVESTMENT PRODUCTS: Universal life
products include universal life, variable universal life
and other interest-sensitive life insurance policies.
Investment products consist primarily of individual and
group deferred annuities, annuities without life
contingencies and guaranteed investment contracts.
Revenues for universal life and investment products
consist of cost of insurance, policy administration and
surrender charges that have been earned and assessed
against policy account balances during the period.
Policy benefits and claims that are charged to expense
include benefits and claims incurred in the period in
excess of related policy account balances and interest
credited to policy account balances.
ACCIDENT AND HEALTH INSURANCE: Accident and health
insurance premiums are recognized as revenue over the
terms of the policies. Policy claims are charged to
expense in the period that the claims are incurred.
(d) Deferred Policy Acquisition Costs
---------------------------------
The costs of acquiring new business, principally
commissions, certain expenses of the policy issue
and underwriting department and certain variable
agency expenses have been deferred. For traditional
life and individual health insurance products, these
deferred acquisition costs are predominantly being
amortized with interest over the premium paying period
of the related policies in proportion to the ratio of
actual annual premium revenue to the anticipated total
premium revenue. Such anticipated premium revenue was
estimated using the same assumptions as were used for
computing liabilities for future policy benefits. For
universal life and investment products, deferred policy
acquisition costs are being amortized with interest over
the lives of the policies in relation to the present
value of estimated future gross profits from projected
interest margins, cost of insurance, policy
administration and surrender charges. For years in
which gross profits are negative, deferred policy
acquisition costs are amortized based on the present
value of gross revenues. Beginning January 1, 1994,
deferred policy acquisition costs are adjusted to
reflect the impact of unrealized gains and losses on
fixed maturity securities available-for-sale. See note
2(b).
(e) Separate Accounts
-----------------
Separate Account assets and liabilities represent
contractholders' funds which have been segregated into
accounts with specific investment objectives. The
investment income and gains or losses of these accounts
accrue directly to the contractholders. The activity of
the Separate Accounts is not reflected in the
consolidated statements of income and cash flows except
for the fees the Company receives for administrative
services and risks assumed.
(f) Future Policy Benefits
----------------------
Future policy benefits for traditional life and individual
health policies have been calculated using a net level
premium method based on estimates of mortality,
morbidity, investment yields and withdrawals which were
used or which were being experienced at the time the
policies were issued, rather than the assumptions
prescribed by state regulatory authorities. See note 6.
Future policy benefits for annuity policies in the
accumulation phase, universal life and variable universal
life policies have been calculated based on participants'
contributions plus interest credited less applicable
contract charges.
Future policy benefits and claims for group long-term
disability policies are the present value (primarily
discounted at 5.5%) of amounts not yet due on reported
claims and an estimate of amounts to be paid on incurred
but unreported claims. The impact of reserve discounting
is not material. Future policy benefits and claims on
other group health policies are not discounted.
28
<PAGE> 29
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
(g) Participating Business
----------------------
Participating business represents approximately 45%
(48% in 1993 and 1992) of the Company's ordinary
life insurance in force, 72% (72% in 1993; 71% in 1992)
of the number of policies in force, and 41% (45% in 1993
and 1992) of life insurance premiums. The provision for
policyholder dividends is based on current dividend
scales. Future dividends are provided for ratably in
future policy benefits based on dividend scales in effect
at the time the policies were issued. Dividend scales are
approved by the Board of Directors.
Income attributable to participating policies in excess
of policyholder dividends is accounted for as belonging to
the shareholder. See note 13.
(h) Federal Income Tax
------------------
NLIC, FHLIC, WCLIC and NCC file a consolidated Federal
income tax return with Nationwide Mutual Insurance Company
(NMIC), the majority shareholder of Corp. Through 1994,
ELICW filed a consolidated Federal income tax return with
Employers Insurance of Wausau A Mutual Company.
Beginning in 1995, ELICW will file a separate Federal
income tax return.
In 1993, the Company adopted STATEMENT OF FINANCIAL
ACCOUNTING STANDARDS NO. 109 - ACCOUNTING FOR INCOME
TAXES, which required a change from the deferred method
of accounting for income tax of APB Opinion 11 to the
asset and liability method of accounting for income tax.
Under the asset and liability method, deferred tax
assets and liabilities are recognized for the future
tax consequences attributable to differences between
the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases
and operating loss and tax credit carryforwards.
Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in
the years in which those temporary differences are
expected to be recovered or settled. Under this
method, the effect on deferred tax assets and
liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
Valuation allowances are established when necessary to
reduce the deferred tax assets to the amounts expected to
be realized.
Prior to 1993, the Company applied the deferred method
of accounting for income tax which recognized deferred
income tax for income and expense items that are reported
in different years for financial reporting purposes and
income tax purposes using the tax rate applicable for
the year of calculation. Under the deferred method,
deferred tax is not adjusted for subsequent changes in tax
rates. See note 7.
The Company has reported the cumulative effect of the
change in method of accounting for income tax in the
1993 consolidated statement of income. See note 3.
(i) Reinsurance Ceded
-----------------
Reinsurance premiums ceded and reinsurance recoveries
on benefits and claims incurred are deducted from the
respective income and expense accounts. Assets and
liabilities related to reinsurance ceded are reported on
a gross basis.
(j) Cash Equivalents
----------------
For purposes of the consolidated statements of cash
flows, the Company considers all short-term investments
with original maturities of three months or less to be
cash equivalents.
(k) Reclassification
----------------
Certain items in the 1993 and 1992 consolidated financial
statements have been reclassified to conform to the 1994
presentation.
29
<PAGE> 30
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
(3) Changes in Accounting Principles
--------------------------------
Effective January 1, 1994, the Company changed its method of
accounting for certain investments in debt and equity securities in
connection with the issuance of a new accounting standard by the FASB
as described in Note 2(b). As of January 1, 1994, the company
classified fixed maturity securities with amortized cost and fair value
of $6,593,844 and $7,024,736, respectively, as available-for-sale
and recorded the securities at fair value. Previously, these
securities were recorded at amortized cost. The effect as of January
1, 1994 has been recorded as a direct credit to shareholder's equity
as follows:
<TABLE>
<S> <C>
Excess of fair value over amortized cost of fixed maturity
securities available-for-sale $430,892
Adjustment to deferred policy acquisition costs (97,177)
Deferred Federal income tax (116,800)
--------
$216,915
========
</TABLE>
During 1993, the Company adopted accounting principles in
connection with the issuance of two accounting standards by the FASB.
The effect as of January 1, 1993, the date of adoption, has been
recognized in the 1993 consolidated statement of income as the
cumulative effect of changes in accounting principles, as follows:
<TABLE>
<S> <C>
Asset/liability method of recognizing income tax (note 7) $ 26,344
Accrual method of recognizing postretirement benefits other
than pensions (net of tax benefit of $11,296), (note 11) (20,979)
--------
Net cumulative effect of changes in accounting principles $ 5,365
========
</TABLE>
(4) Basis of Presentation
---------------------
The consolidated financial statements have been prepared in
accordance with GAAP. Annual Statements for NLIC and FHLIC, WCLIC,
ELICW and NCC, filed with the Department ofInsurance of the State of
Ohio, California Department of Insurance, Wisconsin Insurance
Department and Michigan Bureau of Insurance, respectively, are prepared
on the basis of accounting practices prescribed or permitted by
such regulatory authorities. Prescribed statutory accounting
practices include a variety of publications of the National Association
of Insurance Commissioners (NAIC), as well as state laws, regulations
and general administrative rules. Permitted statutory accounting
practices encompass all accounting practices not so prescribed. The
Company has no material permitted statutory accounting practices.
The following reconciles the statutory net income of NLIC as
reported to regulatory authorities to the net income as shown
in the accompanying consolidated financial statements:
<TABLE>
<CAPTION>
1994 1993 1992
-------- ------- -------
<S> <C> <C> <C>
Statutory net income $ 76,532 185,943 33,812
Adjustments to restate to the basis of GAAP:
Consolidating statutory net income of subsidiaries 14,350 19,545 21,519
Increase in deferred policy acquisition costs, net 167,166 89,860 78,731
Future policy benefits (76,310) (70,640) (63,355)
Deferred Federal income tax (expense) benefit (9,657) (31,634) 13,660
Equity in earnings of affiliates 1,013 7,121 4,618
Valuation allowances and other than temporary
declines accounted for directly in surplus 6,275 (6,638) 3,402
Interest maintenance reserve (7,332) 13,754 7,588
Cumulative effect of changes in accounting principles,
net of tax - 5,365 -
Other, net 11,689 (1,168) (3,158)
-------- ------- -------
Net income per accompanying consolidated
statements of income $183,726 211,508 96,817
======== ======= =======
</TABLE>
30
<PAGE> 31
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
The following reconciles the statutory capital shares and
surplus of NLIC as reported to regulatory authorities to the
shareholder's equity as shown in the accompanying consolidated
financial statements:
<TABLE>
<CAPTION>
1994 1993 1992
---------- -------- --------
<S> <C> <C> <C>
Statutory capital shares and surplus $1,262,861 992,631 647,307
Add (deduct) cumulative effect of adjustments:
Deferred policy acquisition costs 1,064,159 811,944 722,084
Nonadmitted assets and furniture and equipment charged to
income in the year of acquisition, net of accumulated
depreciation 16,120 22,573 15,712
Asset valuation reserve 153,387 105,596 138,727
Interest maintenance reserve 18,843 21,069 7,315
Future policy benefits (310,302) (238,231) (167,591)
Deferred Federal income tax, including effect of changes in
accounting principles in 1993 36,515 (31,659) (82,724)
Cumulative effect of change in accounting principles for
postretirement benefits other than pensions, gross - (32,275) -
Difference between amortized cost and fair value of fixed
maturity securities available-for-sale, gross (272,959) - -
Other, net (60,145) (480) 149,412
---------- ---------- ----------
Shareholder's equity per accompanying consolidated
balance sheets $1,908,479 1,651,168 1,430,242
========== ========== ==========
</TABLE>
(5) Investments
-----------
An analysis of investment income by investment type follows for the
years ended December 31:
<TABLE>
<CAPTION>
1994 1993 1992
---------- -------- --------
<S> <C> <C> <C>
Gross investment income:
Securities available-for-sale:
Fixed maturities $ 674,346 - -
Equity securities 550 7,230 6,949
Fixed maturities held-to-maturity 193,009 800,255 754,876
Mortgage loans on real estate 376,783 364,810 334,769
Real estate 40,280 39,684 27,410
Short-term 6,990 5,080 7,298
Other 42,831 33,832 30,717
---------- -------- --------
Total investment income 1,334,789 1,250,891 1,162,019
Less investment expenses 45,288 46,465 41,862
---------- ---------- ----------
Net investment income $1,289,501 1,204,426 1,120,157
========== ========== ==========
</TABLE>
An analysis of the change in gross unrealized gains (losses) on
securities available-for-sale and fixed maturities held-to-maturity
follows for the years ended December 31:
<TABLE>
<CAPTION>
1994 1993 1992
---------- -------- --------
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturities $ (703,851) - -
Equity securities (1,990) (128,837) (9,195)
Fixed maturities held-to-maturity (421,427) 223,392 17,774
----------- -------- --------
$(1,127,268) 94,555 8,579
=========== ======== ========
</TABLE>
31
<PAGE> 32
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
An analysis of realized gains (losses) on investments by investment
type follows for the years ended December 31:
<TABLE>
<CAPTION>
1994 1993 1992
---------- -------- --------
<S> <C> <C> <C>
Realized on disposition of investments:
Securities available-for-sale:
Fixed maturities $(13,720) - -
Equity securities 1,427 129,728 7,215
Fixed maturities - 21,159 13,399
Mortgage loans on real estate (16,130) (17,763) (30,334)
Real estate and other 5,765 (12,813) (12,997)
---------- -------- --------
(22,658) 120,311 (22,717)
---------- -------- --------
Valuation allowances:
Securities available-for-sale:
Fixed maturities 6,600 - -
Fixed maturities - (934) 1,792
Mortgage loans on real estate (4,332) (10,478) (5,969)
Real estate and other 4,006 4,774 7,579
---------- -------- --------
6,274 (6,638) 3,402
---------- -------- --------
$(16,384) 113,673 (19,315)
========== ======== ========
</TABLE>
The amortized cost and estimated fair value of securities
available-for-sale and fixed maturities held-to-maturity were as
follows as of December 31, 1994:
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Estimated
cost gains losses fair value
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Securities available-for-sale
-----------------------------
Fixed maturities:
US Treasury securities and obligations of US
government corporations and agencies $ 393,156 1,794 (18,941) 376,009
Obligations of states and political
subdivisions 2,202 55 (21) 2,236
Debt securities issued by foreign governments 177,910 872 (9,205) 169,577
Corporate securities 4,201,738 50,405 (128,698) 4,123,445
Mortgage-backed securities 3,543,859 18,125 (187,345) 3,374,639
----------- ---------- ---------- ----------
Total fixed maturities 8,318,865 71,251 (344,210) 8,045,906
Equity securities 18,373 6,636 (296) 24,713
----------- ---------- ---------- ----------
$8,337,238 77,887 (344,506) 8,070,619
=========== ========== ========== ==========
Fixed maturity securities held-to-maturity
------------------------------------------
Obligations of states and political
subdivisions $ 11,613 92 (255) 11,450
Debt securities issued by foreign governments 16,131 111 (39) 16,203
Corporate securities 3,661,043 34,180 (120,566) 3,574,657
----------- ---------- ---------- ----------
$3,688,787 34,383 (120,860) 3,602,310
=========== ========== ========== ==========
</TABLE>
32
<PAGE> 33
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
The amortized cost and estimated fair value of investments of fixed
maturity securities were as follows as of December 31, 1993:
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Estimated
cost gains losses fair value
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
US Treasury securities and obligations of US
government corporations and agencies $ 287,738 18,204 (392) 305,550
Obligations of states and political
subdivisions 16,519 2,700 (5) 19,214
Debt securities issued by foreign governments 137,092 7,719 (1,213) 143,598
Corporate securities 6,819,355 647,778 (15,648) 7,451,485
Mortgage-backed securities 2,860,274 121,721 (15,022) 2,966,973
----------- ---------- ---------- ----------
$10,120,978 798,122 (32,280) 10,886,820
=========== ========== ========== ==========
</TABLE>
As of December 31, 1993 the net unrealized gain on equity
securities, before providing for deferred Federal income tax, was
$8,330, comprised of gross unrealized gains of $8,345 and gross
unrealized losses of $15.
The amortized cost and estimated fair value of fixed maturity
securities available-for-sale and fixed maturity securities
held-to-maturity as of December 31, 1994, by contractual maturity,
are shown below. Expected maturities will differ from contractual
maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Amortized Estimated
cost fair value
---------- -----------
<S> <C> <C>
Fixed maturity securities available-for-sale
--------------------------------------------
Due in one year or less $ 294,779 294,778
Due after one year through five years 2,553,825 2,490,886
Due after five years through ten years 1,382,311 1,327,089
Due after ten years 544,091 558,514
---------- -----------
4,775,006 4,671,267
Mortgage-backed securities 3,543,859 3,374,639
---------- -----------
$8,318,865 8,045,906
========== ===========
Fixed maturity securities held-to-maturity
------------------------------------------
Due in one year or less $ 333,517 333,000
Due after one year through five years 1,953,179 1,942,260
Due after five years through ten years 1,080,069 1,013,083
Due after ten years 322,022 313,967
---------- -----------
$3,688,787 3,602,310
========== ===========
</TABLE>
Proceeds from the sale of securities available-for-sale during
1994 were $247,876, while proceeds from sales of investments in
fixed maturity securities during 1993 were $33,959 ($123,422 during
1992). Gross gains of $3,406 ($2,413 in 1993 and $3,194 in 1992) and
gross losses of $21,866 ($39 in 1993 and $513 in 1992) were realized
on those sales.
Investments that were non-income producing for the twelve month
period preceding December 31, 1994 amounted to $11,513 ($13,158 for
1993) and consisted of $11,111 ($10,907 in 1993) in real estate and
$402 ($2,251 in 1993) in other long-term investments.
Real estate is presented at cost less accumulated depreciation of
$29,275 in 1994 ($24,717 in 1993) and valuation allowances of $27,330
in 1994 ($31,357 in 1993). Other valuation allowances are $0 in 1994
($6,680 in 1993) on fixed maturities and $47,892 in 1994 ($42,350 in
1993) on mortgage loans on real estate.
33
<PAGE> 34
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
The Company generally initiates foreclosure proceedings on all
mortgage loans on real estate delinquent sixty days. Foreclosures
of mortgage loans on real estate were $37,187 in 1994 ($39,281 in
1993) and mortgage loans on real estate in process of foreclosure or
in-substance foreclosed as of December 31, 1994 totaled $19,878
($24,658 as of December 31, 1993), which approximates fair value.
Investments with an amortized cost of $11,137 and $11,383 as of
December 31, 1994 and 1993, respectively, were on deposit with various
regulatory agencies as required by law.
(6) Future Policy Benefits and Claims
---------------------------------
The liability for future policy benefits for traditional life and
individual health policies has been established based upon the
following assumptions:
Interest rates: Interest rates vary as follows:
<TABLE>
<CAPTION>
Year of issue Life Health
------------- ---- ------
<S> <C> <C>
1994 7.2 %, not graded - permanent contracts with loan provisions; 5.0%
6.0%, not graded - all other contracts
1984-1993 7.4% to 10.5%, not graded 5.0% to 6%
1966-1983 6% to 8.1%, graded over 20 years to 4% to 6.6% 3.5% to 6%
1965 and prior generally lower than post 1965 issues 3.5% to 4%
</TABLE>
Withdrawals: Rates, which vary by issue age, type of coverage
and policy duration, are based on Company experience.
Mortality: Mortality and morbidity rates are based on
published tables, modified for the Company's actual experience.
The liability for future policy benefits for investment contracts
(approximately 81% and 80% of the total liability for future policy
benefits as of December 31, 1994 and 1993, respectively) has been
established based on policy term, interest rates and various contract
provisions. The average interest rate credited on investment product
policies was 6.5%, 7.0% and 7.5% for the years ended December 31, 1994,
1993 and 1992, respectively.
Future policy benefits and claims for group long-term disability
policies are the present value (primarily discounted at 5.5%) of
amounts not yet due on reported claims and an estimate of amounts to be
paid on incurred but unreported claims. The impact of reserve
discounting is not material. Future policy benefits and claims on
other group health policies are not discounted.
Activity in the liability for unpaid claims and claim adjustment
expenses is summarized for the years ended December 31:
<TABLE>
<CAPTION>
1994 1993 1992
--------- -------- --------
<S> <C> <C> <C>
Balance as of January 1 $591,258 760,312 672,581
Less reinsurance recoverables 429,798 547,786 445,934
--------- -------- --------
Net balance as of January 1 161,460 212,526 226,647
--------- -------- --------
Incurred related to:
Current year 273,299 309,721 360,545
Prior years (26,156) (26,248) (17,433)
--------- -------- --------
Total incurred 247,143 283,473 343,112
--------- -------- --------
Paid related to:
Current year 175,700 208,978 226,886
Prior years 73,889 125,561 130,347
--------- -------- --------
Total paid 249,589 334,539 357,233
--------- -------- --------
Unpaid claims of ELICW (note 14) 40,223 - -
--------- -------- --------
Net balance as of December 31 199,237 161,460 212,526
Plus reinsurance recoverables 457,694 429,798 547,786
--------- -------- --------
Balance as of December 31 $656,931 591,258 760,312
======== ======== ========
</TABLE>
34
<PAGE> 35
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
As a result of changes in estimates for insured events of prior
years, the provision for claims and claim adjustment expenses
decreased in each of the three years ended December 31, 1994 due to
lower-than-anticipated costs to settle accident and health claims.
(7) Federal Income Tax
------------------
Prior to 1984, the Life Insurance Company Income Tax Act of 1959 as
amended by the Deficit Reduction Act of 1984 (DRA), permitted the
deferral from taxation of a portion of statutory income under certain
circumstances. In these situations, the deferred income was
accumulated in the Policyholders' Surplus Account (PSA). Management
considers the likelihood of distributions from the PSA to be remote;
therefore, no Federal income tax has been provided for such
distributions in the consolidated financial statements. The DRA
eliminated any additional deferrals to the PSA. Any distributions
from the PSA, however, will continue to be taxable at the then current
tax rate. The balance of the PSA is approximately $35,344 as of
December 31, 1994.
The Company adopted STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO.
109 - ACCOUNTING FOR INCOME TAXES (SFAS 109), as of January 1, 1993.
See note 3. The 1992 consolidated financial statements have not
been restated to apply the provisions of SFAS 109.
The significant components of deferred income tax expense for the years
ended December 31 are as follows:
<TABLE>
<CAPTION>
1994 1993
------ ------
<S> <C> <C>
Deferred income tax expense (exclusive of the
effects of other components listed below) $9,657 29,930
Adjustments to deferred income tax assets and
liabilities for enacted changes in tax laws
and rates - 1,704
------ ------
$9,657 31,634
====== ======
</TABLE>
For the year ended December 31, 1992, the deferred income tax
benefit results from timing differences in the recognition of
income and expense for income tax and financial reporting purposes.
The primary sources of those timing differences were deferred policy
acquisition costs (deferred expense of $16,457) and reserves for future
policy benefits (deferred benefit of $32,045).
Total Federal income tax expense for the years ended December 31,
1994, 1993 and 1992 differs from the amount computed by applying the
U.S. Federal income tax rate to income before tax as follows:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
Amount % Amount % Amount %
------- ---- -------- ---- ------- ----
<S> <C> <C> <C> <C> <C> <C>
Computed (expected) tax expense $95,631 35.0 $109,515 35.0 $44,390 34.0
Tax exempt interest and dividends
received deduction (194) (0.1) (2,322) (0.7) (4,172) (3.2)
Current year increase in U.S. Federal
income tax rate - - 1,704 0.5 - -
Real estate valuation allowance
adjustment - - - - (3,463) (2.7)
Other, net (5,933) (2.1) (2,139) (0.7) (3,013) (2.3)
------- ---- -------- ---- ------- ----
Total (effective rate of each
year) $89,504 32.8 $106,758 34.1 $33,742 25.8
======= ==== ======== ==== ======= ====
</TABLE>
Total Federal income tax paid was $87,576, $58,286 and $63,124 during
the years ended December 31, 1994, 1993 and 1992, respectively.
35
<PAGE> 36
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
The tax effects of temporary differences that give rise to significant
components of the net deferred tax asset (liability) as of December 31,
1994 and 1993 are as follows:
<TABLE>
<CAPTION>
1994 1993
-------- ---------
<S> <C> <C>
Deferred tax assets:
Future policy benefits $124,044 129,995
Fixed maturity securities available-for-sale 95,536 -
Liabilities in Separate Accounts 94,783 64,722
Mortgage loans on real estate and real estate 25,632 24,020
Other policyholder funds 7,137 7,759
Other assets and other liabilities 57,528 41,390
-------- ---------
Total gross deferred tax assets 404,660 267,886
-------- ---------
Deferred tax liabilities:
Deferred policy acquisition costs 317,224 243,731
Fixed maturities, equity securities and other
long-term investments 3,620 11,137
Other 47,301 44,677
-------- ---------
Total gross deferred tax liabilities 368,145 299,545
-------- ---------
Net deferred tax asset (liability) $ 36,515 (31,659)
======== =========
</TABLE>
The Company has determined that valuation allowances are not
necessary as of December 31, 1994 and 1993 and January 1, 1993 (date of
adoption of SFAS 109) based on its analysis of future deductible
amounts. All future deductible amounts can be offset by future
taxable amounts or recovery of Federal income tax paid within the
statutory carryback period. In addition, for future deductible
amounts for securities available-for-sale, affiliates of the Company
which are included in the same consolidated Federal income tax return
hold investments that could be sold for capital gains that could offset
capital losses realized by the Company should securities
available-for-sale be sold at a loss.
(8) Disclosures about Fair Value of Financial Instruments
-----------------------------------------------------
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 107 - DISCLOSURES ABOUT
FAIR VALUE OF FINANCIAL INSTRUMENTS (SFAS 107) requires disclosure of
fair value information about existing on and off-balance sheet financial
instruments. In cases where quoted market prices are not available,
fair value is based on estimates using present value or other valuation
techniques.
These techniques are significantly affected by the assumptions used,
including the discount rate and estimates of future cash flows.
Although fair value estimates are calculated using assumptions that
management believes are appropriate, changes in assumptions could cause
these estimates to vary materially. In that regard, the derived fair
value estimates cannot be substantiated by comparison to independent
markets and, in many cases, could not be realized in the immediate
settlement of the instruments. SFAS 107 excludes certain assets and
liabilities from its disclosure requirements. Accordingly, the
aggregate fair value amounts presented do not represent the underlying
value of the Company.
Although insurance contracts, other than policies such as annuities that
are classified as investment contracts, are specifically exempted from
SFAS 107 disclosures, estimated fair value of policy reserves on
insurance contracts are provided to make the fair value disclosures more
meaningful.
The tax ramifications of the related unrealized gains and losses can
have a significant effect on fair value estimates and have not been
considered in the estimates.
The following methods and assumptions were used by the Company in
estimating its fair value disclosures:
CASH, SHORT-TERM INVESTMENTS AND POLICY LOANS: The carrying
amount reported in the balance sheets for these instruments
approximate their fair value.
36
<PAGE> 37
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
INVESTMENT SECURITIES: Fair value for fixed maturity
securities is based on quoted market prices, where available.
For fixed maturity securities not actively traded, fair value is
estimated using values obtained from independent pricing services
or, in the case of private placements, is estimated by
discounting expected future cash flows using a current market rate
applicable to the yield, credit quality and maturity of the
investments. The fair value for equity securities is based on quoted
market prices.
SEPARATE ACCOUNT ASSETS AND LIABILITIES: The fair value of assets
held in Separate Accounts is based on quoted market prices.
The fair value of liabilities related to Separate Accounts is the
amount payable on demand.
MORTGAGE LOANS ON REAL ESTATE: The fair value for mortgage loans on
real estate is estimated using discounted cash flow analyses,
using interest rates currently being offered for similar loans
to borrowers with similar credit ratings. Loans with similar
characteristics are aggregated for purposes of the calculations.
Fair value for mortgages in default is valued at the estimated fair
value of the underlying collateral.
INVESTMENT CONTRACTS: Fair value for the Company's liabilities
under investment type contracts is disclosed using two methods.
For investment contracts without defined maturities, fair value
is the amount payable on demand. For investment contracts with
known or determined maturities, fair value is estimated using
discounted cash flow analysis. Interest rates used are similar
to currently offered contracts with maturities consistent with
those remaining for the contracts being valued.
POLICY RESERVES ON INSURANCE CONTRACTS: Included are disclosures
for individual life, universal life and supplementary contracts with
life contingencies for which the estimated fair value is the
amount payable on demand. Also included are disclosures for the
Company's limited payment policies, which the Company has used
discounted cash flow analyses similar to those used for investment
contracts with known maturities to estimate fair value.
POLICYHOLDERS DIVIDEND ACCUMULATIONS AND OTHER POLICYHOLDER
FUNDS: The carrying amount reported in the consolidated
balance sheets for these instruments approximates their fair value.
Carrying amount and estimated fair value of financial instruments
subject to SFAS 107 and policy reserves on insurance contracts were as
follows as of December 31:
<TABLE>
<CAPTION>
1994 1993
---- ----
Carrying Estimated Carrying Estimated
amount fair value amount fair value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Assets
------
Investments:
Securities available-for-sale:
Fixed maturities $ 8,045,906 8,045,906 - -
Equity securities 24,713 24,713 16,593 16,593
Fixed maturities held-to-maturity 3,688,787 3,602,310 10,120,978 10,886,820
Mortgage loans on real estate 4,222,284 4,173,284 3,871,560 4,175,271
Policy loans 340,491 340,491 315,898 315,898
Short-term investments 131,643 131,643 41,797 41,797
Cash 7,436 7,436 21,835 21,835
Assets held in Separate Accounts 12,222,461 12,222,461 9,006,388 9,006,388
Liabilities
-----------
Investment contracts 12,189,894 11,657,556 10,332,661 10,117,288
Policy reserves on insurance contracts 3,170,085 2,934,384 2,945,120 2,873,503
Policyholders' dividend accumulations 338,058 338,058 322,686 322,686
Other policyholder funds 72,770 72,770 71,959 71,959
Liabilities related to Separate Accounts 12,222,461 11,807,331 9,006,388 8,714,586
</TABLE>
37
<PAGE> 38
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
(9) Additional Financial Instruments Disclosures
--------------------------------------------
FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK: The Company is a
party to financial instruments with off-balance-sheet risk in the
normal course of business through management of its investment
portfolio. These financial instruments include commitments to
extend credit in the form of loans. These instruments involve, to
varying degrees, elements of credit risk in excess of amounts
recognized on the consolidated balance sheets.
Commitments to fund fixed rate mortgage loans on real estate are
agreements to lend to a borrower, and are subject to conditions
established in the contract. Commitments generally have fixed
expiration dates or other termination clauses and may require
payment of a deposit. Commitments extended by the Company are based on
management's case-by-case credit evaluation of the borrower and
the borrower's loan collateral. The underlying mortgage property
represents the collateral if the commitment is funded. The Company's
policy for new mortgage loans on real estate is to lend no more than
80% of collateral value. Should the commitment be funded, the
Company's exposure to credit loss in the event of nonperformance by
the borrower is represented by the contractual amounts of these
commitments less the net realizable value of the collateral. The
contractual amounts also represent the cash requirements for all
unfunded commitments. Commitments on mortgage loans on real estate
of $243,200 extending into 1995 were outstanding as of December 31,
1994.
SIGNIFICANT CONCENTRATIONS OF CREDIT RISK: The Company grants mainly
commercial mortgage loans on real estate to customers throughout the
United States. The Company has a diversified portfolio with no more
than 22% (23% in 1993) in any geographic area and no more than 2%
(2% in 1993) with any one borrower. The summary below depicts loans
by remaining principal balance as of each December 31:
<TABLE>
<CAPTION>
Apartment
Office Warehouse Retail & other Total
-------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
1994:
East North Central $109,233 103,499 540,686 191,489 944,907
East South Central 24,298 10,803 127,845 76,897 239,843
Mountain 3,150 13,770 140,358 39,682 196,960
Middle Atlantic 61,299 53,285 140,847 30,111 285,542
New England 10,536 43,282 139,131 4 192,953
Pacific 195,393 210,930 397,911 68,768 873,002
South Atlantic 87,150 81,576 424,150 210,354 803,230
West North Central 127,760 11,766 80,854 4,738 225,118
West South Central 51,013 84,796 184,923 194,788 515,520
-------- --------- --------- --------- ----------
$669,832 613,707 2,176,705 816,831 4,277,075
======== ========= ========= =========
Less valuation allowances and unamortized discount 54,791
----------
Total mortgage loans on real estate, net $4,222,284
==========
1993:
East North Central $109,208 108,478 470,755 158,964 847,405
East South Central 27,562 1,460 117,341 69,991 216,354
Mountain 3,228 4,742 105,560 23,065 136,595
Middle Atlantic 56,664 52,766 132,821 15,414 257,665
New England 10,565 48,398 142,530 8 201,501
Pacific 174,409 185,116 389,428 65,497 814,450
South Atlantic 112,640 58,165 391,102 238,337 800,244
West North Central 104,933 13,458 78,408 3,917 200,716
West South Central 50,955 47,103 183,420 161,033 442,511
-------- --------- ------- --------- ----------
$650,164 519,686 2,011,365 736,226 3,917,441
======== ========= ========= =========
Less valuation allowances and unamortized discount 45,881
----------
Total mortgage loans on real estate, net $3,871,560
==========
</TABLE>
38
<PAGE> 39
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
(10) Pension Plan
------------
NLIC, FHLIC, WCLIC, NCC, and NFS participate together with other
affiliated companies, in a pension plan covering all employees who
have completed at least one thousand hours of service within a
twelve-month period and who have met certain age requirements. Plan
contributions are invested in a group annuity contract of NLIC.
Benefits are based upon the highest average annual salary of any
three consecutive years of the last ten years of service. The Company
funds pension costs accrued for direct employees plus an allocation of
pension costs accrued for employees of affiliates whose work efforts
benefit the Company.
Pension costs charged to operations by the Company during the years
ended December 31, 1994, 1993 and 1992 were $10,451, $6,702 and
$4,613, respectively.
The Company's net accrued pension expense as of December 31, 1994
and 1993 was $1,836 and $1,472, respectively.
The net periodic pension cost for the plan as a whole for the years
ended December 31, 1994, 1993 and 1992 follows:
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Service cost (benefits earned during the period) $64,740 47,694 44,343
Interest cost on projected benefit obligation 73,951 70,543 68,215
Actual return on plan assets (21,495) (105,002) (62,307)
Net amortization and deferral (62,150) 20,832 (24,281)
-------- -------- --------
Net periodic pension cost $55,046 34,067 25,970
======== ======== ========
Basis for measurements, net periodic pension cost:
Weighted average discount rate 5.75% 6.75% 7.25%
Rate of increase in future compensation levels 4.50% 4.75% 5.25%
Expected long-term rate of return on plan assets 7.00% 7.50% 8.00%
</TABLE>
Information regarding the funded status of the plan as a whole as of
December 31, 1994 and 1993 follows:
<TABLE>
<CAPTION>
1994 1993
---------- ----------
<S> <C> <C>
Accumulated benefit obligation:
Vested $ 914,850 972,475
Nonvested 7,570 10,227
---------- ----------
$ 922,420 982,702
========== ==========
Projected benefit obligation for
services rendered to date 1,305,547 1,292,477
Plan assets at fair value 1,241,771 1,208,007
---------- ----------
Plan assets less than projected benefit
obligation (63,776) (84,470)
Unrecognized prior service cost 46,201 49,551
Unrecognized net losses 39,408 55,936
Unrecognized net assets at January 1, 1987 (21,994) (24,146)
---------- ----------
Net accrued pension expense $ (161) (3,129)
========== ==========
Basis for measurements, funded status of plan:
Weighted average discount rate 7.50% 5.75%
Rate of increase in future compensation levels 6.75% 4.50%
</TABLE>
39
<PAGE> 40
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
(11) Postretirement Benefits Other Than Pensions
-------------------------------------------
In addition to the defined benefit pension plan, NLIC, FHLIC, WCLIC,
NCC and NFS participate with other affiliated companies in life and
health care defined benefit plans for qualifying retirees.
Postretirement life and health care benefits are contributory and
available to full time employees who have attained age 55 and
have accumulated 15 years of service with the Company after reaching
age 40. Postretirement life insurance contributions are based on age
and coverage amount of each retiree. Postretirement health care
benefit contributions are adjusted annually and contain cost-sharing
features such as deductibles and coinsurance. The accounting for the
health care plan anticipates future cost-sharing changes to the
written plan that are consistent with the Company's expressed intent
to increase the retiree contribution amount annually for expected
health care inflation. The Company's policy is to fund the cost of
health care benefits in amounts determined at the discretion of
management. The Company began funding in 1994. Plan assets are
invested in group annuity contracts of NLIC.
Effective January 1, 1993, the Company adopted the provisions of
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 106 - EMPLOYERS'
ACCOUNTING FOR POSTRETIREMENT BENEFITS OTHER THAN PENSIONS (SFAS 106),
which requires the accrual method of accounting for postretirement
life and health care insurance benefits based on actuarially
determined costs to be recognized over the period from the date of
hire to the full eligibility date of employees who are expected to
qualify for such benefits. Postretirement benefit cost for 1992, which
was recorded on a cash basis, has not been restated.
The Company elected to immediately recognize its estimated accumulated
postretirement benefit obligation as of January 1, 1993. Accordingly,
a noncash charge of $32,275 ($20,979 net of related income tax
benefit) was recorded in the consolidated statement of income as a
cumulative effect of a change in accounting principle. See note 3.
The adoption of SFAS 106, including the cumulative effect of the
change in accounting principle, increased the expense for
postretirement benefits by $35,277 to $36,544 in 1993. Net periodic
postretirement benefit cost for 1994 was $4,627. The Company's
accrued postretirement benefit obligation as of December 31, 1994 and
1993 was $36,001 and $35,277, respectively.
Actuarial assumptions for the measurement of the December 31, 1994
accumulated postretirement benefit obligation include a discount rate
of 8% and an assumed health care cost trend rate of 11%, uniformly
declining to an ultimate rate of 6% over 12 years.
Actuarial assumptions for the measurement of the December 31, 1993
accumulated postretirement benefit obligation and the 1994 net
periodic postretirement benefit cost include a discount rate of 7% and
an assumed health care cost trend rate of 12%, uniformly declining to
an ultimate rate of 6% over 12 years.
Actuarial assumptions used to determine the accumulated postretirement
benefit obligation as of January 1, 1993 and the 1993 net periodic
postretirement benefit cost include a discount rate of 8% and an
assumed health care cost trend rate of 14%, uniformly declining to an
ultimate rate of 6% over 12 years.
Information regarding the funded status of the plan as a whole as of
December 31, 1994 and 1993 follows:
<TABLE>
<CAPTION>
1994 1993
--------- ---------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $ 76,677 90,312
Fully eligible, active plan participants 22,013 24,833
Other active plan participants 59,089 84,103
--------- ---------
Accumulated postretirement benefit obligation 157,779 199,248
Plan assets at fair value 49,012 -
--------- ---------
Plan assets less than accumulated postretirement benefit
obligation (108,767) (199,248)
Unrecognized net (gains) losses (41,497) 15,128
--------- ---------
Accrued postretirement benefit obligation $(150,264) (184,120)
========= =========
</TABLE>
40
<PAGE> 41
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
The amount of net periodic postretirement benefit cost for the plan as
a whole for the years ended December 31, 1994 and 1993 is as follows:
<TABLE>
<CAPTION>
1994 1993
------- -------
<S> <C> <C>
Net periodic postretirement benefit cost:
Service cost - benefits attributed to employee service during the year $ 8,586 7,090
Interest cost on accumulated postretirement benefit obligation 14,011 13,928
Actual return on plan assets (1,622) -
Net amortization and deferral 1,622 -
------- ------
Net periodic postretirement benefit cost $22,597 21,018
======= ======
</TABLE>
The health care cost trend rate assumption has a significant effect
on the amounts reported. A one percentage point increase in the
assumed health care cost trend rate would increase the accumulated
postretirement benefit obligation as of December 31, 1994 and 1993 by
$8,109 and $15,621, respectively, and the net periodic postretirement
benefit cost for the years ended December 31, 1994 and 1993 by $866 and
$2,377, respectively.
(12) Portfolio Transfer of Credit Life and Credit Accident and Health
----------------------------------------------------------------
On March 13, 1992, WCLIC entered into an assignment and assumption
agreement with American Bankers Life Assurance Company of Florida
(ABLAC) under which ABLAC assumed, by portfolio transfer, substantially
all of WCLIC's credit life and accident and health policies in force as
of January 1, 1992. A pre-tax loss of approximately $15,000 was
recognized from this transaction in 1992. The loss represents
approximately $34,000 of amortization of deferred policy acquisition
costs, less approximately $27,000 in ceded commissions earned, plus
death benefits incurred and other expenses. Under the terms defined in
the assignment and assumption agreement, WCLIC is contingently liable
for adverse development of claims activity up to a defined limit. As
of December 31, 1994, WCLIC has provided for a contingent liability
based on the development of claims experience through December 31,
1994. As of December 31, 1993, WCLIC had provided for the maximum
contingent liability in the absence of conclusive claims experience
development.
(13) Regulatory Risk-Based Capital, Retained Earnings and Dividend
-------------------------------------------------------------
Restrictions
------------
Each insurance company's state of domicile imposes minimum risk-based
capital requirements that were developed by the NAIC. The
formulas for determining the amount of risk-based capital specify
various weighting factors that are applied to financial balances or
various levels of activity based on the perceived degree of risk.
Regulatory compliance is determined by a ratio of the company's
regulatory total adjusted capital, as defined by the NAIC, to its
authorized control level risk-based capital, as defined by the NAIC.
Companies below specific trigger points or ratios are classified
within certain levels, each of which requires specified corrective
action. NLIC and each of its insurance subsidiaries exceed the minimum
risk-based capital requirements.
In accordance with the requirements of the New York statutes, the
Company has agreed with the Superintendent of Insurance of that state
that so long as participating policies and contracts are held by
residents of New York, no profits on participating policies and
contracts in excess of the larger of (a) ten percent of such profits or
(b) fifty cents per year per thousand dollars of participating life
insurance in force, exclusive of group term, at the year-end shall
inure to the benefit of the shareholders. Such New York statutes
further provide that so long as such agreement is in effect, such
excess of profits shall be exhibited as "participating policyholders'
surplus" in annual statements filed with the Superintendent and shall be
used only for the payment or apportionment of dividends to participating
policyholders at least to the extent required by statute or for the
purpose of making up any loss on participating policies.
In the opinion of counsel for the Company, the ultimate ownership of
the entire surplus, however classified, of the Company resides with the
shareholder, subject to the usual requirements under state laws and
regulations that certain deposits, reserves and minimum surplus be
maintained for the protection of the policyholders until all policy
contracts are discharged.
41
<PAGE> 42
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
Based on the opinion of counsel with respect to the ownership of its
surplus, the Company is of the opinion that the earnings attributable
to participating policies in excess of the amounts paid as dividends
to policyholders belong to the shareholder rather than the
policyholders, and such earnings are so treated by the Company.
The amount of shareholder's equity other than capital shares
was $1,904,664, $1,647,353, and $1,426,427 as of December 31,
1994, 1993 and 1992, respectively. The amount thereof not
presently available for dividends to the shareholder due to the New
York restrictions and to adjustments relating to GAAP was $929,934,
$954,037 and $841,583 as of December 31, 1994, 1993 and 1992,
respectively.
Ohio law limits the payment of dividends to shareholders. The
maximum dividend that may be paid by the Company without prior
approval of the Director of the Department of Insurance of the State
of Ohio is limited to the greater of statutory gain from operations of
the preceding calendar year or 10% of statutory shareholder's surplus
as of the prior December 31. Therefore, $1,707,110, of shareholder's
equity, as presented in the accompanying consolidated financial
statements, is restricted as to dividend payments in 1995.
California law limits the payment of dividends to shareholders of
WCLIC. The maximum dividend that may be paid by WCLIC without
prior approval of the Commissioner of the State of California
Department of Insurance is limited to the greater of WCLIC's
statutory net income of the preceding calendar year or 10% of
WCLIC's statutory shareholder's surplus as of the prior December 31.
Therefore, $126,489 of WCLIC's shareholder's equity is restricted as
to dividend payments in 1995.
Wisconsin law limits the payment of dividends to shareholders of ELICW.
The maximum dividend that may be paid by ELICW without prior approval
of the Commissioner of the State of Wisconsin is limited to the greater
of ELICW's statutory net income of the preceding calendar year or 10%
of ELICW s statutory surplus as of the prior December 31, Therefore,
$135,369 of ELICW's shareholder's equity is restricted as to dividend
payments in 1995.
Michigan law limits the payment of dividends to shareholders of NCC.
The maximum dividend that may be paid by NCC without prior approval
of the Commissioner of the State of Michigan Bureau of Insurance is
limited to the greater of NCC's statutory net income, not including
realized capital gains, of the preceding calendar year or 10% of
NCC's statutory shareholder's surplus as of the prior December 31.
Therefore, $66,564 of NCC's shareholder's equity is restricted as to
dividend payments in 1995. In addition, prior approval is not required
for a dividend which does not increase gross leverage to a point in
excess of the United States consolidated industry average for the most
recent available year.
(14) Transactions With Affiliates
----------------------------
Effective December 31, 1994, NLIC purchased all of the outstanding
shares of ELICW from Wausau Service Corporation (WSC) for an
amount approximating $165,000, subject to specified adjustments, if
any, subsequent to year end. NLIC transferred fixed maturity
securities and cash with a fair value of $155,000 to WSC on
December 28, 1994, which resulted in a realized loss of $19,239 on
the disposition of the securities. An accrual approximating $10,000
is reflected in the accompanying consolidated balance sheet. The
purchase price approximated both the historical cost basis and fair
value of net assets of ELICW. ELICW has and will continue to share
home office, other facilities, equipment and common management and
administrative services with WSC.
The deferred compensation annuity line of business of the Company
is primarily sold through Public Employees Benefit Services
Corporation (PEBSCO). The Company paid PEBSCO commissions and
administrative fees of $26,699, $22,681 and $20,146 in 1994, 1993 and
1992, respectively. PEBSCO is a wholly owned subsidiary of Corp.
The Company and NEA Valuebuilder Investor Services, Inc. (NEAVIS) have
contracted with the National Education Association (NEA) to provide
individual annuity contracts to be marketed exclusively to members of
the NEA. The Company paid NEAVIS a marketing development fee of
$11,095, $9,229 and $6,426 in 1994, 1993 and 1992, respectively.
NEAVIS is a wholly owned subsidiary of Corp.
The Company shares home office, other facilities, equipment and
common management and administrative services with affiliates.
42
<PAGE> 43
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
The Company participates in intercompany repurchase agreements
with affiliates whereby the seller will transfer securities to the
buyer at a stated value. Upon demand or a stated period, the
securities will be repurchased by the seller at the original sales
price plus a price differential. Transactions under the agreements
during 1994 and 1993 were not material.
During 1993, the Company sold equity securities with a market value
$194,515 to NMIC, resulting in a realized gain of $122,823. With the
proceeds, the Company purchased securities with a market value of
$194,139 and cash of $376 from NMIC.
Intercompany reinsurance contracts exist between NLIC and NMIC,
NLIC and WCLIC, NLIC and NCC, WCLIC and NMIC and WCLIC and
ELICW as of December 31, 1994. These contracts are immaterial to
the consolidated financial statements.
NCC participates in several 100% quota share reinsurance agreements
with NMIC. NCC serves as the licensed insurer as required for an
affiliated excess and surplus lines company and cedes 100% of direct
written premiums to NMIC. In 1989, NCC transferred 100% of assets and
unearned premiums and loss reserves related to a discontinued block of
assumed reinsurance to NMIC (95.3%) and Nationwide Mutual Fire
Insurance Company (4.7%). Effective January 1, 1993, NCC entered into
a 100% quota share reinsurance agreement to cede to NMIC 100% of all
written premiums not subject to any other reinsurance agreements.
As a result of these agreements, and in accordance with STATEMENT OF
FINANCIAL ACCOUNTING STANDARDS NO. 113 - ACCOUNTING AND REPORTING FOR
REINSURANCE OF SHORT-DURATION AND LONG-DURATION CONTRACTS, the
following amounts are included in the consolidated financial statements
as of December 31, 1994 and 1993 for reinsurance ceded:
<TABLE>
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
Reinsurance recoverable $575,721 533,401
Unearned premium reserves (118,092) (102,644)
Loss and claim reserves (371,974) (352,303)
Loss and expense reserves (85,655) (78,454)
-------- --------
$ 0 0
======== ========
</TABLE>
The ceding of reinsurance does not discharge the original insurer
from primary liability to its policyholder. The insurer which assumes
the coverage assumes the related liability and it is the practice of
insurers to treat insured risks, to the extent of reinsurance ceded,
as though they were risks for which the original insurer is not liable.
Management believes the financial strength of NMIC reduces to an
acceptable level any risk to NCC under these intercompany reinsurance
agreements.
The Company and various affiliates entered into agreements with
Nationwide Cash Management Company (NCMC) and California Cash
Management Company (CCMC), both affiliates, under which NCMC and CCMC
act as common agents in handling the purchase and sale of short-term
securities for the respective accounts of the participants. Amounts on
deposit with NCMC and CCMC were $92,531 and $28,683 at December 31,
1994 and 1993, respectively, and are included in short-term
investments on the accompanying consolidated balance sheets.
(15) Bank Lines of Credit
--------------------
As of December 31, 1994 and 1993, NLIC had $120,000 of confirmed but
unused bank lines of credit which support a $100,000 commercial paper
borrowing authorization. Additionally, NFS had $27,000 of confirmed
but unused bank lines of credit.
43
<PAGE> 44
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
(16) Contingencies
-------------
The Company is a defendant in various lawsuits. In the
opinion of management, the effects, if any, of such lawsuits
are not expected to be material to the Company's financial
position or results of operations.
(17) Major Lines of Business
-----------------------
The Company operates in the life and accident and health lines of
business in the life insurance and property and casualty insurance
industries. Life insurance operations include whole life, universal
life, variable universal life, endowment and term life insurance and
annuity contracts issued to individuals and groups. Accident and
health operations also provide coverage to individuals and groups.
The following table summarizes the revenues and income before Federal
income tax and cumulative effect of changes in accounting principles
for the years ended December 31, 1994, 1993 and 1992 and assets as of
December 31, 1994, 1993 and 1992, by line of business.
<TABLE>
<CAPTION>
1994 1993 1992
----------- ---------- ----------
<S> <C> <C> <C>
Revenues:
Life insurance $ 1,577,809 1,479,956 1,406,417
Accident and health 345,544 339,764 475,290
Investment income allocated to capital and surplus 122,847 214,806 51,611
----------- --------- ---------
Total $ 2,046,200 2,034,526 1,933,318
=========== ========= =========
Income before Federal income tax and cumulative
effect of changes in accounting principles:
Life insurance 141,650 83,917 78,627
Accident and health 13,220 15,043 436
Investment income allocated to capital and surplus 118,360 213,941 51,496
----------- --------- ---------
Total $ 273,230 312,901 130,559
=========== ========= =========
Assets:
Life insurance 28,351,628 22,982,186 19,180,561
Accident and health 852,026 773,007 343,535
Capital and surplus 1,908,479 1,651,168 1,430,242
----------- --------- ---------
Total $31,112,133 25,406,361 20,954,338
=========== ========= =========
</TABLE>
Included in life insurance revenues are premiums from certain annuities
with life contingencies of $20,134 ($35,341 and $54,066 for the years
ended December 31, 1993 and 1992, respectively) as well as universal
life and investment product policy charges of $239,021 ($188,057 and
$148,464 for the years ended December 31, 1993 and 1992 respectively)
for the year ended December 31, 1994.
Allocations of investment income and certain general expenses were
based on a number of assumptions and estimates, and reported operating
results would change by line if different methods were applied.
Investment income and realized gains allocable to policyholders in 1994
were $1,193,292 and $1,775, respectively.
(18) Subsequent Event
----------------
On January 30, 1995, FHLIC received approval from the Ohio Secretary of
State to change its name to Nationwide Life and Annuity Insurance
Company.
44
<PAGE> 45
Schedule I
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Summary of Investments - Other Than Investments in Related Parties
December 31, 1994
(000's omitted)
<TABLE>
<CAPTION>
----------- ------------ ---------------
Column B Column C Column D
----------- ------------ ---------------
Amount at which
shown in the
consolidated
Cost Market value balance sheet
----------- ------------ ---------------
<S> <C> <C> <C>
Fixed maturities available-for-sale:
Bonds and notes:
U.S. Government and government agencies and authorities $ 3,689,068 3,500,974 3,500,974
States, municipalities and political subdivisions 2,202 2,236 2,236
Foreign governments 177,910 169,577 169,577
Public utilities 1,125,827 1,081,778 1,081,778
All other corporate 3,323,858 3,291,341 3,291,341
----------- ------------ -------------
Total fixed maturities available-for-sale 8,318,865 8,045,906 8,045,906
----------- ------------ -------------
Equity securities available-for-sale:
Common stocks:
Industrial, miscellaneous and all other 17,571 23,933 23,933
Non-redeemable preferred stock 802 780 780
----------- ------------ -------------
Total equity securities available-for-sale 18,373 24,713 24,713
----------- ------------ -------------
Fixed maturities held-to-maturity:
Bonds and notes:
States, municipalities and political subdivisions 11,613 11,450 11,613
Foreign governments 16,131 16,203 16,131
Public utilities 637,223 628,479 637,223
All other corporate 3,023,820 2,946,178 3,023,820
----------- ------------ -------------
Total fixed maturities held-to-maturity 3,688,787 3,602,310 3,688,787
----------- ------------ -------------
Mortgage loans on real estate 4,270,175 4,222,284*
Real estate:
Investment properties 205,454 164,765*
Acquired in satisfaction of debt 103,829 87,916*
Policy loans 340,491 340,491
Other long-term investments 78,641 63,914#
Short-term investments 131,643 131,643
----------- --------------
Total investments $17,156,258 $16,770,419
=========== ==============
</TABLE>
* Difference from Column B is primarily due to accumulated depreciation
and realized losses due to impairments on real estate and realized
losses due to impairments on mortgage loans on real estate. See Item
7, Results of Operations and note 5 of the consolidated financial
statements.
# Difference from Column B is primarily due to operating losses of
investments in limited partnerships.
45
<PAGE> 46
Schedule V
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Supplementary Insurance Information
December 31, 1994, 1993 and 1992
(000's omitted)
<TABLE>
<CAPTION>
--------------------------- --------------- ----------------- -------- ------------- ---------
Column A Column B Column C Column D Column E Column F
--------------------------- --------------- ----------------- -------- ------------- ---------
Other policy
Future policy claims
Deferred policy benefits, losses, Unearned and benefits
acquisition claims and premiums payable Premium
Segment costs loss expenses (1) (2) revenue
--------------------------- --------------- ----------------- -------- ------------- ---------
<S> <C> <C> <C> <C> <C>
1994: Life insurance $1,051,040 15,545,970 397,414 209,538
Accident and
health 13,119 775,491 13,414 324,524
Capital and
surplus - - - -
--------------- ----------------- ------------- ---------
Total $1,064,159 16,321,461 410,828 534,062
=============== ================= ============= =========
1993: Life insurance 797,926 13,355,868 380,050 215,715
Accident and
health 14,018 736,387 14,595 312,655
Capital and
surplus - - - -
--------------- ----------------- ------------- ---------
Total $ 811,944 14,092,255 394,645 528,370
=============== ================= ============= =========
1992: Life insurance 687,923 12,480,914 365,340 226,888
Accident and
health 34,161 280,617 42,107 430,009
Capital and
surplus - - - -
--------------- ----------------- ------------- ---------
Total $ 722,084 12,761,531 407,447 656,897
=============== ================= ============= =========
</TABLE>
<TABLE>
<CAPTION>
---------------------- -------------- --------------------- ------------------ ------------------ ---------
Column A Column G Column H Column I Column J Column K
---------------------- -------------- --------------------- ------------------ ------------------ ---------
Net investment Benefits, claims, Amortization Other
income losses and settlement of deferred policy operating expenses Premiums
Segment (3) expenses acquisition costs (3) written
---------------------- -------------- --------------------- ------------------ ------------------ ---------
<S> <C> <C> <C> <C> <C>
1994: Life insurance $1,129,251 1,044,881 89,164 261,573
Accident and
health 21,020 234,882 5,580 90,829 315,688
Capital and
surplus 139,230 - - -
---------- --------- ------- -------
Total $1,289,501 1,279,763 94,744 352,402
========== ========= ======= =======
1993: Life insurance 1,076,617 1,028,171 78,511 246,542
Accident and
health 27,108 208,735 23,623 82,854 263,117
Capital and
surplus 100,701 - - -
---------- --------- ------- -------
Total $1,204,426 1,236,906 102,134 329,396
========== ========= ======= =======
1992: Life insurance 1,020,420 1,001,071 74,169 202,902
Accident and
health 28,809 318,664 25,028 119,091 403,778
Capital and
surplus 70,928 - - -
---------- --------- ------- -------
Total $1,120,157 1,319,735 99,197 321,993
========== ========= ======= =======
<FN>
(1) Unearned premiums are included in Column C amounts.
(2) Column E agrees to the sum of the consolidated balance sheet captions,
"Policyholders' dividend accumulations" and "Other policyholder funds".
(3) Allocations of net investment income and certain general expenses are
based on a number of assumptions and estimates, and reported operating
results would change by line if different methods were applied.
</TABLE>
46
<PAGE> 47
Schedule VI
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Reinsurance
Years ended December 31, 1994, 1993 and 1992
(000's omitted)
<TABLE>
<CAPTION>
Percentage
Ceded to Assumed from of amount
Gross amount other companies other companies Net amount assumed to net
------------ --------------- --------------- ---------- --------------
<S> <C> <C> <C> <C> <C>
1994:
Life insurance in force $46,262,595 5,289,259 819,799 41,793,135 2.0%
=========== ========= ======= ========== ====
Premiums:
Life insurance 209,918 7,551 7,171 209,538 3.4%
Accident and
health insurance 389,573 69,095 4,046 324,524 1.2%
----------- --------- ------- ---------- ----
Total $ 599,491 76,646 11,217 534,062 2.1%
=========== ========= ======= ========== ====
1993:
Life insurance in force $39,417,116 4,352,071 180,739 35,245,784 0.5%
=========== ========= ======= ========== ====
Premiums:
Life insurance 218,764 6,161 3,112 215,715 1.4%
Accident and
health insurance 398,289 88,506 2,872 312,655 0.9%
----------- --------- ------- ---------- ----
Total $ 617,053 94,667 5,984 528,370 1.1%
=========== ========= ======= ========== ====
1992:
Life insurance in force $35,153,024 3,404,154 222,099 31,970,969 0.7%
=========== ========= ======= ========== ====
Premiums:
Life insurance 227,338 4,139 3,689 226,888 1.6%
Accident and
health insurance 458,844 38,462 9,627 430,009 2.2%
----------- --------- ------- ---------- ----
Total $ 686,182 42,601 13,316 656,897 2.0%
=========== ========= ======= ========== ====
</TABLE>
47
<PAGE> 48
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
NATIONWIDE LIFE INSURANCE COMPANY (Registrant)
By D. Richard McFerson
---------------------------------------
D. Richard McFerson, President and
Chief Executive Officer -
Nationwide Insurance Enterprise
Date: March 1, 1995
48
<PAGE> 49
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities indicated on March 1, 1995.
<TABLE>
<S> <C>
D. Richard McFerson Peter F. Frenzer
------------------------------------------------------ -----------------------------------------------
D. Richard McFerson, President and Chief Executive Peter F. Frenzer, President and Chief Operating
Officer - Nationwide Insurance Enterprise and Director Officer and Director
Lewis J. Alphin Willard J. Engel
------------------------------------------------------ -----------------------------------------------
Lewis J. Alphin, Director Willard J. Engel, Director
Frederick C. Finney Charles L. Fuellgraf, Jr.
------------------------------------------------------ -----------------------------------------------
Frederick C. Finney, Director Charles L. Fuellgraf, Jr., Director
Henry S. Holloway David O. Miller
------------------------------------------------------ -----------------------------------------------
Henry S. Holloway, Director David O. Miller, Director
C. Ray Noecker James F. Patterson
------------------------------------------------------ -----------------------------------------------
C. Ray Noecker, Director James F. Patterson, Director
Robert H. Rickel Arden L. Shisler
------------------------------------------------------ -----------------------------------------------
Robert H. Rickel, Director Arden L. Shisler, Director
Robert L. Stewart Nancy C. Thomas
------------------------------------------------------ -----------------------------------------------
Robert L. Stewart, Director Nancy C. Thomas, Director
Harold W. Weihl Robert A. Oakley
------------------------------------------------------ -----------------------------------------------
Harold W. Weihl, Director Robert A. Oakley, Senior Vice President - Chief
Financial Officer
David A. Diamond
------------------------------------------------------
David A. Diamond, Vice President - Controller
</TABLE>
49
<PAGE> 1
Exhibit 21
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Subsidiaries of the Registrant
December 31, 1994
<TABLE>
<CAPTION>
State of
Subsidiary Incorporation
----------------------------------------- -------------
<S> <C>
Financial Horizons Life Insurance Company Ohio
West Coast Life Insurance Company California
Employers Life Insurance Company of Wausau Wisconsin
National Casualty Company Michigan
Nationwide Financial Services, Inc. Ohio
</TABLE>
All business operations of Nationwide Life Insurance Company and all of its
subsidiaries are conducted using each company's legally registered name.
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
This schedule contains summary financial information extracted from the
Nationwide Life Insurance Company and Subsidiaries consolidated financial
statements and is qualified in its entirety by reference to such consolidated
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<DEBT-HELD-FOR-SALE> 8,045,906
<DEBT-CARRYING-VALUE> 3,688,787
<DEBT-MARKET-VALUE> 3,602,310
<EQUITIES> 24,713
<MORTGAGE> 4,222,284
<REAL-ESTATE> 252,681
<TOTAL-INVEST> 16,770,419
<CASH> 139,079
<RECOVER-REINSURE> 564,721
<DEFERRED-ACQUISITION> 1,064,159
<TOTAL-ASSETS> 31,112,133
<POLICY-LOSSES> 16,321,461
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 338,058
<POLICY-HOLDER-FUNDS> 72,770
<NOTES-PAYABLE> 0
<COMMON> 3,815
0
0
<OTHER-SE> 1,904,664
<TOTAL-LIABILITY-AND-EQUITY> 31,112,133
534,062
<INVESTMENT-INCOME> 1,289,501
<INVESTMENT-GAINS> (16,384)
<OTHER-INCOME> 0
<BENEFITS> 1,279,763
<UNDERWRITING-AMORTIZATION> 94,744
<UNDERWRITING-OTHER> 352,402
<INCOME-PRETAX> 273,230
<INCOME-TAX> 89,504
<INCOME-CONTINUING> 183,726
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 183,726
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<RESERVE-OPEN> 161,460
<PROVISION-CURRENT> 273,299
<PROVISION-PRIOR> (26,156)
<PAYMENTS-CURRENT> 175,700
<PAYMENTS-PRIOR> 73,889
<RESERVE-CLOSE> 199,237
<CUMULATIVE-DEFICIENCY> 0
<FN>
The amounts presented above related to the liability for unpaid claims and
claim adjustment expenses represent amounts for Nationwide Life Insurance
Company and its insurance subsidiaries as included in note 6 to the
consolidated financial statements in accordance with the American Institute of
Certified Public Accountants Statement of Position 94-5, Disclosures of Certain
Matters in the Financial Statements of Insurance Enterprises.
</FN>
</TABLE>
