<PAGE> 1
As filed with the Securities and Exchange Commission.
'33 Act Registration No. 2-28596
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM N-3
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933
Post-Effective Amendment No. 37 [x]
SEPARATE ACCOUNT NO. 1
(Exact Name of Registrant)
NATIONWIDE LIFE INSURANCE COMPANY
(Name of Depositor)
One Nationwide Plaza, Columbus, Ohio 43216
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code: (614) 249-7111
Gordon E. McCutchan, Secretary, One Nationwide Plaza, Columbus, Ohio 43216
(Name and Address of Agent for Service)
This Post-Effective Amendment amends the Registration Statement by the
registration of additional securities, and updating of the prospectus, Statement
of Additional Information and financial statements.
It is proposed that this filing will become effective (check appropriate space)
|_| immediately upon filing pursuant to paragraph (b) of Rule 485
|X| on May 1, 1997 pursuant to paragraph (b) of Rule 485
|_| 60 days after filing pursuant to paragraph (a)(1)of Rule 485
|_| on (date), pursuant to paragraph (a)(1) of Rule 485
================================================================================
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<PAGE> 2
SEPARATE ACCOUNT NO. 1
REFERENCE TO ITEMS
REQUIRED BY FORM N-3
Part A INFORMATION REQUIRED IN A PROSPECTUS
Item 1. Cover Page.................................................. 3
Item 2. Definitions................................................. 4
Item 3. Synopsis ................................................... 5
Item 4. Condensed Financial Information............................. 6
Item 5. General Description of Registrant and Insurance Company..... 8
Item 6. Management..................................................10
Item 7. Deductions and Expenses.....................................10
Item 8. General Description of Variable Annuity Contracts...........13
Item 9. Annuity Period..............................................18
Item 10. Death Benefit...............................................12
Item 11. Purchases and Contract Value................................18
Item 12. Redemptions.................................................12
Item 13. Taxes.......................................................12
Item 14. Legal Proceedings...........................................20
Item 15. Table of Contents of the Statement of Additional
Information...............................................21
Part B INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
Item 16. Cover Page..................................................22
Item 17. Table of Contents...........................................22
Item 18. General Information and History.............................22
Item 19. Investment Objectives and Policies..........................22
Item 20. Management..................................................24
Item 21. Investment Advisory and Other Services......................24
Item 22. Brokerage Allocation........................................24
Item 23. Purchase and Pricing of Securities Being Offered............24
Item 24. Underwriters................................................25
Item 25. Calculation of Yield Quotations of Money Market
Sub-Accounts..............................................25
Item 26. Annuity Payments............................................25
Item 27. Financial Statements........................................26
Part C OTHER INFORMATION
Item 28. Financial Statements and Exhibits...........................26
Item 29. Directors and Officers of the Insurance Company.............61
Item 30. Persons Controlled by or Under Common Control with the
Insurance Company or Registrant.............................63
Item 31. Number of Contract Owners...................................72
Item 32. Indemnification.............................................72
Item 33. Business and Other Connections of Investment Adviser........72
Item 34. Principal Underwriters......................................72
Item 35. Location of Accounts and Records............................72
Item 36. Management Services.........................................72
Item 37. Undertakings................................................72
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<PAGE> 3
NATIONWIDE LIFE INSURANCE COMPANY
Home Office
P.O. Box 16738
One Nationwide Plaza
Columbus, Ohio 43216
(614) 249-5346
GROUP COMMON STOCK VARIABLE ANNUITY CONTRACTS
Issued by
NATIONWIDE LIFE INSURANCE COMPANY
(The "Company")
The Group Common Stock Variable Annuity Contracts (the "Contract" or
"Contracts") described in this prospectus are sold to corporations and
unincorporated businesses for use with pension, profit sharing, and other
retirement plans (collectively referred to as the "Plan"). The Plan must qualify
for special federal tax treatment under sections 401 and 403(a) of the Internal
Revenue Code (the "Code") (see "Federal Income Tax Status").
The Contracts permit the Contractholder to accumulate Plan Contributions
on a variable basis. Plan Contributions will be credited to the accounts of
Participants in the form of Accumulation Units, the value of which will vary to
reflect the results of Separate Account No. 1 (the "Separate Account"). The
assets of the Separate Account will be held for the sole benefit of the holders
of, and persons entitled to benefits under, Contracts issued pursuant to this
prospectus. The investments of the Separate Account are intended to be composed
primarily of common stocks. The value of the interests of Participants under the
Contracts and the dollar amount of the Variable Annuity payments thereunder
will, therefore, vary with the dividends and interest and fluctuations in the
market value of the securities held in the Separate Account, and will be subject
to the same risks as are inherent in the ownership of common stocks. The
composition of the investments held will be determined from the long-term view
of an investor concerned with the preservation of his or her capital and with
the growth of his or her capital in relation to the growth of the economy and
the changing value of the dollar (see "Investment Objectives and Policies" in
the prospectus and in the "Statement of Additional Information").
The Company may sell Fixed Dollar Annuity Contracts (the "Companion Fixed
Contracts") and other variable annuity contracts to the same Contractholder if
the Plan permits investment flexibility to the Contractholder or Participants.
This prospectus provides you with the basic information you should know
about the Group Common Stock Variable Annuity Contracts issued by the Company
before investing. You should read it and keep it for future reference. A
Statement of Additional Information dated May 1, 1997, containing further
information about the Contracts, the Company, and Separate Account No. 1 has
been filed with the Securities and Exchange Commission. You can obtain a copy
without charge from The Company by calling the number listed above, or writing
P.O. Box 16738, One Nationwide Plaza, Columbus, Ohio 43216.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
THE STATEMENT OF ADDITIONAL INFORMATION, DATED MAY 1, 1997, IS
INCORPORATED HEREIN BY REFERENCE. THE TABLE OF CONTENTS FOR THE STATEMENT OF
ADDITIONAL INFORMATION APPEARS ON PAGE 19 OF THIS PROSPECTUS.
THE DATE OF THIS PROSPECTUS IS MAY 1, 1997.
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<PAGE> 4
GLOSSARY OF SPECIAL TERMS
Accumulation Unit - A statistical index measuring the net investment results of
the Separate Account. It is the unit of measurement used to determine the value
of a Contract and each Participant's Account.
Annuitant - The person actually receiving annuity payments and upon whose
continuation of life any annuity payment involving life contingencies depends.
Annuity Unit - An accounting unit of measure used to calculate the value of
Variable Annuity payments.
Beneficiary - The person named by the Contractholder to receive certain benefits
under the Contract upon the death of the Participant. The Beneficiary can be
changed by the Contractholder as set forth in the Contract.
Code - The Internal Revenue Code of 1986, as amended.
Company - Nationwide Life Insurance Company.
Contract Anniversary - An anniversary of the Date of Issue of the Contract.
Contractholder - The Contract Owner.
Contributions - Amounts paid to the Company pursuant to the Contract in order to
provide retirement income benefits.
Distribution - Any payment by the Company of part or all of the Participant
Account Value under the Contract.
Participant - An eligible employee who is entitled to benefits under the Plan.
Such persons are determined and reported to the Company by the Contractholder.
Participant Account - An account established by the Company for each Participant
in which all financial transactions occurring with respect to a Participant
under the Contract, other than the purchase and payment of an annuity, are
recorded.
Plan - The document referred to in the Contract as the Plan.
Qualified Plans - Retirement plans which receive favorable tax treatment under
Section 401 of the Code.
Retired Participant - A Participant who is receiving retirement income in the
form of an annuity.
Variable Annuity - An annuity providing for payments which vary in amount with
the investment experience of the Separate Account.
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<PAGE> 5
SUMMARY OF CONTRACT EXPENSES
Participant Transaction Expenses
Maximum Contingent Deferred Sales Charge
(as a percentage of contributions) 6.5%
------
Surrender Fees (as a percentage of surrender value) 7%
------
Exchange Fee $ 15
------
Participant Account Charge $ 15
------
Annual Expenses
(as a percentage of average net assets)
(Contract Maintenance Charge) 1.30 %
------
Total Annual Expenses 1.30 %
------
<TABLE>
<CAPTION>
================================================================================================================
Example 1 Year 3 Years 5 Years 10 Years
================================================================================================================
<S> <C> <C> <C> <C>
If you cancel your Participant Account at
the end of the applicable time period:
You would pay the following
expenses on a $1,000 investment,
assuming 5% annual return on $83 $121 $161 $209
assets:
- ----------------------------------------------------------------------------------------------------------------
If you do not cancel your Participant
Account:
You would pay the following
expenses on a $1,000 investment,
assuming 5% annual return on $18 $56 $96 $209
assets:
- ----------------------------------------------------------------------------------------------------------------
If you annuitize at the end of the
applicable time period:
You would pay the following
expenses on a $1,000 investment,
assuming 5% annual return on $90 $133 $178 $305
assets:
================================================================================================================
</TABLE>
This Example should not be considered a representation of past or future
expenses. Actual expenses may be greater or lesser than those shown.
The purpose of the preceding table is to assist the Participant in understanding
the various costs and expenses that a Participant will bear directly or
indirectly when investing in the Contract. A Contingent Deferred Sales Charge of
not more than 6.5% is imposed only on Contributions made within 96 months of the
date of withdrawal. No Contingent Deferred Sales Charge is imposed if part or
all of a Participant's Account is used for purchase of an annuity, redemption
upon death, or transfer to a Companion Fixed Contract. A Participant Account
Charge of not more than $15 is deducted from each Participant's Account on each
Contract Anniversary and upon cancellation of all or part of a Participant's
Account unless the cancellation is for the purpose of purchasing an annuity or
making a redemption upon death. The Surrender Charge is a one-time charge
deducted from the Participant's Account upon the purchase of an annuity. In
addition to the expenses shown above, premium taxes may also be charged,
depending upon where the Contract is sold. For a more detailed explanation of
these expenses, see "Charges And Other Deductions."
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<PAGE> 6
CONDENSED FINANCIAL INFORMATION
Income And Capital Changes Per Accumulation Unit*
<TABLE>
<CAPTION>
=====================================================================================================
From From From From
Jan. 1, 1987 Jan. 1, 1988 Jan. 1, 1989 Jan. 1, 1990
to to to to
Dec. 31, 1987 Dec. 31, 1988 Dec. 31, 1989 Dec. 31, 1990
=====================================================================================================
<S> <C> <C> <C> <C>
Unit value at beginning of
period 7.6185156 7.7663472 9.1559374 12.2942826
-----------------------------------------------------------------------------------------------------
NET INCOME .2337846 .2546169 .4314503 .6862452
Investment Income
-----------------------------------------------------------------------------------------------------
Change to Separate Account
for expenses, taxes and -0- -0- -0- -0-
additions to surplus
-----------------------------------------------------------------------------------------------------
Net Income .2337846 .2546169 .4314503 .6862452
-----------------------------------------------------------------------------------------------------
CAPITAL CHANGES
Net realized capital gains .7980317 .8922013 1.0246383 .2962199
(losses)
-----------------------------------------------------------------------------------------------------
Net unrealized capital gains (.8839849) .2427721 1.6822566 (.9802034)
(losses)
-----------------------------------------------------------------------------------------------------
Unit Value at end of period 7.7663472 9.1559374 12.2942826 12.2965444
-----------------------------------------------------------------------------------------------------
Number of Accumulation
Units outstanding at end of 1,844,372.64 1,644,078.96 1,526,288.77 1,436,543.92
period
-----------------------------------------------------------------------------------------------------
Increase (decrease) in Unit 1.94% 17.89% 34.27% .02%
Value during period
-----------------------------------------------------------------------------------------------------
RATIOS
Expenses to average net .239% .293% .246% .334%
assets
-----------------------------------------------------------------------------------------------------
Net investment income to 2.62% 3.20% 5.15% 3.24%
average net assets
-----------------------------------------------------------------------------------------------------
Portfolio turnover rate 23.8% 31.8% 28.6% 15.1%
=====================================================================================================
</TABLE>
All adjustments necessary to a fair statement of the results of such period have
been included.
Due to changes in the Contracts described in this prospectus, the historical
data supplied above should not be relied upon for future trends and results.
*The product of the ending unit values and the number of Accumulation Units will
not balance to the total market value of the assets in the Separate Account. The
difference is accounted for by the fact that a portion of the annuity reserve,
and hence the net assets, of the Separate Account relate to Contracts not
described in this prospectus.
(Continued on next page)
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<PAGE> 7
CONDENSED FINANCIAL INFORMATION
Income And Capital Changes Per Accumulation Unit* (Continued)
<TABLE>
<CAPTION>
================================================================================================================================
From From From From From From
Jan. 1, 1991 Jan. 1, 1992 Jan. 1, 1993 Jan. 1, 1994 Jan. 1, 1995 Jan. 1, 1996
to to to to to to
Dec. 31, 1991 Dec. 31, 1992 Dec. 31, 1993 Dec. 31, 1994 Dec. 31, 1995 Dec. 31, 1996
================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Unit value at beginning of 12.2965444 16.2373889 16.7112913 17.8516259 18.0013570 23.2833339
period
--------------------------------------------------------------------------------------------------------------------------------
NET INCOME .4278250 .4656912 .4480584 2.9687004 .4955136 .554285
Investment Income
--------------------------------------------------------------------------------------------------------------------------------
Change to Separate Account
for expenses, taxes and -0- -0- -0- -0- -0- -0-
additions to surplus
--------------------------------------------------------------------------------------------------------------------------------
Net Income .4278250 .4656912 .4480584 2.9687004 .4955136 .554285
--------------------------------------------------------------------------------------------------------------------------------
CAPITAL CHANGES
Net realized capital gains 1.1910187 .4577232 .4424591 .1158852 1.5533117 1.5811875
(losses)
--------------------------------------------------------------------------------------------------------------------------------
Net unrealized capital gains 2.3220008 (.4495120) .2498171 (2.9348545) 3.2331516 4.3414884
(losses)
--------------------------------------------------------------------------------------------------------------------------------
Unit Value at end of period 16.2373889 16.7112913 17.8516259 18.0013570 23.2833339 29.7602948
--------------------------------------------------------------------------------------------------------------------------------
Number of Accumulation
Units outstanding at end of 1,251,874.00 1,241,981.00 1,313,747.00 1,282,594.00 1,111,254.00 1,059,341
period
--------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in Unit 32.05% 2.92% 6.82% .84% 29.34% 27.82%
Value during period
--------------------------------------------------------------------------------------------------------------------------------
RATIOS
Expenses to average net .225% .251% .239% .189% .190% .180%
assets
--------------------------------------------------------------------------------------------------------------------------------
Net investment income to 2.95% 2.60% 2.74% 2.83% 2.49% 2.10%
average net assets
--------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 25.8% 9.10% 9.2% 2.1% 20.4% 11.7%
================================================================================================================================
</TABLE>
All adjustments necessary to a fair statement of the results of such period have
been included.
Due to changes in the Contracts described in this prospectus, the historical
data supplied above should not be relied upon for future trends and results.
*The product of the ending unit values and the number of Accumulation Units will
not balance to the total market value of the assets in the Separate Account. The
difference is accounted for by the fact that a portion of the annuity reserve,
and hence the net assets, of the Separate Account relate to Contracts not
described in this prospectus.
5
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<PAGE> 8
NATIONWIDE LIFE INSURANCE COMPANY
The Company is a stock life insurance company organized under the laws of
the State of Ohio in March, 1929. The Company is a member of the "Nationwide
Insurance Enterprise" with its Home Office at One Nationwide Plaza, Columbus,
Ohio 43216.
The Company offers a complete line of life insurance, including annuities,
and accident and health insurance. It is admitted to do business in the District
of Columbia, Puerto Rico, the Virgin Islands and in all states.
The Separate Account
The Separate Account, which was established pursuant to Ohio insurance law
on April 1, 1967, is administered and accounted for as part of the Company's
business. All contractual obligations arising under the Contracts (e.g., the
making of the payments provided for thereunder, the manner in which the amount
of those payments will be determined, and the promise that the payments will
continue for the lifetime of the Annuitant) will be general corporate
obligations of the Company. The Company will be responsible for the safekeeping
of the assets of the Separate Account.
The Separate Account will be legally segregated from the Company's other
assets, i.e., the assets of the Separate Account will not be subject to claims
of any persons except those investing in the Separate Account.
As explained below, the Contracts described in this prospectus provide for
benefits that vary according to the investment results of a separate investment
portfolio. This portfolio is a Separate Account of the Company. This prospectus
will be devoted primarily to a description of the manner of operation of the
Separate Account. The assets of the Separate Account will be held for the sole
benefit of the holders of, and persons entitled to benefits under, the Contracts
described in this prospectus, and other variable contracts issued by the Company
which provide for the dollar amount of payments or values to vary in order to
reflect the investment results of the Separate Account. A Participant has no
voice in the investment policies of the Separate Account.
Except to the extent of their interest in the Separate Account, as
described in "Experience Credits", Participants in the Contracts offered herein
do not participate in the experience of the Company.
Investment Objectives and Policies
The Separate Account is an open-end managed separate account of the
Company. It is a diversified portfolio of common stock, segregated from the
general assets of the Company. The objectives of the Company and its policy in
making investments for the Separate Account are as follows:
1. The composition of the investments held will be determined from the
long-term view as a prudent investor concerned with the preservation
and growth of his capital in relation to the growth of the economy and
the changing value of the dollar. Since earned income and realized
capital gains will be compounded through reinvestment, account will be
taken of the combination of current income and the possibilities of
capital appreciation.
2. The assets usually will be invested in a diversified portfolio of
equities which, for the foreseeable future, will be primarily common
stocks, with such changes as from time to time may be advisable, to
take into account changes in the outlook of particular industries or
companies. A relatively small percentage of the assets may be held in
the form of preferred stocks, government bonds and corporate bonds or
debentures, whether or not convertible into stock or with stock
warrants. A reserve of cash and short-term debt securities may be held
pending investment in accordance with investment policies.
3. Purchases will be made for investment and not for trading purposes.
Generally, long-range performances will be emphasized with minor
concern for short-term market fluctuations, except to the extent that
such fluctuations may provide attractive buying or selling levels for
the portfolio. However, freedom of action is reserved to dispose of any
investment, however short a time held, if its appreciation
possibilities appear to have been substantially realized, or if the
market risks have become such as to make its retention unwise.
Furthermore, complete freedom is retained to dispose of investments
whether gains or losses are thereby realized.
4. All investments made must be restricted to those authorized by the laws
of the State of Ohio in effect at the time such investments are made,
with respect to separate account investments.
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<PAGE> 9
5. Freedom of action is reserved to invest as much as 10% of the assets in
real estate.
6. The following practices will be prohibited: maintenance of a "short" or
a "margin" trading position in any security, commodity trading,
speculative trading in foreign exchange, the making of loans of cash or
of securities to officers or directors of the Company, the purchase of
securities of any type for the purpose of thereby gaining control or
influencing the management of any other company, or engaging in
underwriting the Distribution of securities.
With respect to item 4 of the above investment policy, the current
restrictions under Ohio law are as follows:
A) Except in the case of securities of investment companies
registered under the Investment Company Act of 1940, or in the
case of annuities or funding agreements issued by a life
insurance company authorized to do business in this state from
its general account, or in the case of the transfer of any
investment or other asset in any separate account to any other
account or to the general assets of the Company or any investment
among the general assets of the Company transferred to any
separate account not more than 25% of the amounts allocated to
the separate account and the accumulations thereon shall be
invested in the stocks, notes, debentures, bonds, or other
securities of any one corporation or issuer.
B) Not more than 25% of the issued and outstanding voting securities
of any one corporation or issuer may be acquired by all separate
accounts of the insurer.
C) No security of any corporation which is a subsidiary of or which
is affiliated through stock ownership with the insurer shall be
allocated to any such account.
D) No investment or other asset in any separate account shall be
transferred to any other separate account or to the general
assets of the insurer and no investment among the general assets
of the insurer shall be transferred to any such separate account
unless:
(a) Such transfer is made solely:
(1) to establish a separate account or support
contract guarantees,
(2) to withdraw amounts no longer needed to support
guarantees, and
(b) Such transfer is of cash or securities having a readily
determinable market value or unless
(c) Such transfer is approved by the Superintendent of Insurance.
In light of investment policy restrictions, neither the Company nor the
Separate Account intend to invest more than 25% of the value of their respective
assets in any one industry.
By investing in securities that are subject to financial and market risk,
the Separate Account is subject to great fluctuations in its market value and
involves the assumption of a higher degree of risk as compared to a portfolio
investing in government obligations or instruments guaranteed by agencies of the
U.S. Government.
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<PAGE> 10
Management
The Separate Account does not have a Board of Managers, but is managed by
the Investment Department of the Company. The Investment Department of the
Company acts as its own investment adviser. All individuals working in the
Investment Department are employees of the Company, and no investment adviser
fees or brokerage commissions are involved in the operation of the Separate
Account.
CHARGES AND OTHER DEDUCTIONS
The Contingent Deferred Sales Charge, Participant's Account Charge,
Contract Maintenance Charge, and Purchase Rate Charge are not deducted from a
Participant's Account maintained under the Nationwide Agents' Retirement Plan.
All of the following charges and deductions apply to other Plans:
(a) Contingent Deferred Sales Charge
No deduction for a sales charge is made from Contributions to these
Contracts. However, the Contingent Deferred Sales Charge, when it is
applicable, will be used to cover expenses relating to the sale of the
Contracts, including commissions paid to sales personnel, the costs of
sales literature, promotional activity, and other acquisition expenses.
The Company expects to recover most of its Distribution costs relating to
the sale of these Contracts by this Contingent Deferred Sales Charge. Any
shortfall will be incurred by the Company. Gross commissions paid on the
sale of these Contracts are not more than 5% of Contributions.
If part or all of a Participant's Account is cancelled for any reason
other than purchase of an annuity, redemption upon death, or transfer to a
Companion Fixed Contract, the Company will deduct from the Participant's
Account a Contingent Deferred Sales Charge. This charge will be stated in
the Contract and will not be more than (i) total Contributions made to
this Contract and all Companion Fixed Contracts, on behalf of the
Participant, during the 96-month period preceding the date of
cancellation, or (ii) the amount cancelled, whichever is less, multiplied
by 6.5%.
The amount of the Contingent Deferred Sales Charge will be reduced
when the sale of a Contract to a Plan results in savings of acquisition
expenses. Entitlement to a reduction in Contingent Deferred Sales Charges
will be determined by the Company in the following manner:
1. The number of Participants will be considered. Generally, the sales
expenses for a larger group are less than for a smaller group because
of the ability to cover a larger number of Participants with fewer
sales contacts.
2. The total amount of Contributions to be received from the Plan will
be considered. Per Contract sales expenses are likely to be less on
larger Contributions than on smaller ones.
3. The nature of the employee group covered by the Plan will be
considered. Certain types of employee groups are more likely to
continue Plan and Contract participation for longer periods than are
other groups. Such stability reduces the number of sales contacts
required; thus, sales expenses are reduced.
4. There may be other circumstances of which the Company is not
presently aware which could result in reduced sales expenses.
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<PAGE> 11
No Contingent Deferred Sales Charge will be assessed against any
Contribution made to Contracts issued by the Company prior to May 1, 1982,
and subsequently transferred to this class of Contracts. No Contingent
Deferred Sales Charge will be assessed when an annuity is purchased; the
Purchase Rate Charge is assessed.
(b) Participant Account Charge
Each year on the Contract Anniversary, the Company deducts a charge,
not to exceed $15, from each Participant Account. This Participant Account
Charge is to reimburse the Company for expenses incurred in maintaining
the Participant Accounts and reporting the values thereof to Participants.
The Participant Account Charge will also be deducted upon cancellation of
all or part of a Participant Account unless the cancellation is for the
purpose of purchasing an annuity or making a redemption upon death.
The Participant Account Charge may be reduced to the extent that the
Contractholder assumes responsibility for maintaining Participant Account
records and reporting values thereof to Participants.
The amount of the Participant Account Charge will be stated in the
Contract.
(c) Contract Maintenance Charge
A Contract Maintenance Charge will be deducted from each Participant
Account daily at an annual rate not to exceed 1.30% of the value of such
Participant Account. The amounts charged will be used to cover the
Company's expense incurred in administering the Contract, Separate
Account, and Plan.
The Contract Maintenance Charge may be reduced to the extent that the
Contractholder assumes responsibility for Plan administration services.
Generally, these services include drafting Plan documents, preparation of
Plan descriptions for Participants, and completion of government filings
and reports.
The Contract Maintenance Charge will be stated in the Contract.
(d) Purchase Rate Charge
A Purchase Rate Charge of not more than 7% is charged against the
annuity purchase rates. The Purchase Rate Charge covers the Company's
expense of processing and paying annuities, calculating and reporting
amounts payable under various annuity forms, calculating and reporting
taxable income, and sales commissions paid on the purchase of an annuity
which are not more than 3% of the amount applied to purchase the annuity.
The Purchase Rate Charge may be reduced to the extent that sales
commissions are less than 3%. The charge may also be reduced to the extent
that the Contractholder assumes responsibility for calculating and
reporting amounts payable under various annuity forms, and calculating and
reporting taxable income.
The Purchase Rate Charge is a part of the purchase rate and is not
separately stated in the Contracts. It is a one-time charge deducted from
the Participant's Account upon the purchase of an annuity.
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<PAGE> 12
(e) Premium Taxes
The Company will charge against the Contract value the amount of any
premium taxes levied by a state or any other government entity upon
contributions received by the Company. To the best of the Company's
present knowledge, premium taxes currently imposed by certain states range
from 0% to 3.5%. The Company is currently deducting such taxes from a
Participant Account value at the time of Annuitization, except in those
states which require such taxes to be paid during the accumulation phase.
(f) Federal Income Taxes And State Excise Taxes
The operation of the Separate Account may result in taxable income to
the Company. The Company reserves the right to deduct from the Separate
Account an amount necessary to reimburse itself for all or a portion of
its federal income and state excise tax liability. Any deductions made
will occur when the tax is incurred.
The amount of tax which may be incurred by the Company cannot be
determined in advance and is subject to applicable federal and state laws
and regulations.
No charges other than those described in this prospectus will be made
under these Contracts. If the amounts charged are in excess of allocated
expenses, then after provision for a surplus deemed sufficient to provide
adequately for the fulfillment of the Company's contractual obligations, the
excess may be used to provide additional benefits (see "Experience Credits"). If
the amounts charged are insufficient to defray the expenses and to provide for
the fulfillment of the contractual obligations, the deficiency will be met out
of the Company's general surplus.
After the Contracts have been in effect, the charges, as well as other
Contract provisions, may be changed by the Company (see "Additional Contractual
Obligations of the Company and Changes Which May Be Made Without the Consent of
the Contractholder, Participant, or Participating Employer").
If the Plan permits, the Contractholder or an employer may pay, in
addition to Contributions, any or all of the expense charges directly to the
Company. In this event, the charges so paid will not be deducted from the
Participant's Account.
Surrender (Redemption)
If the Plan permits, redemption of a Participant Account will be made (a)
upon the death of a Participant before an annuity is purchased, or (b) upon the
request of the Contractholder for the benefit of the Participant.
Upon the death of a Participant, the amount redeemed will be the dollar
value of the Participant Account (the Accumulation Units multiplied by the
Accumulation Unit Value on the date of redemption). The timing of the redemption
will be determined by the terms of the Plan, but not before the Company's
receipt of proof of death. Some Plans may permit the Beneficiary to elect
annuity payments in lieu of surrender. If a Beneficiary elects, the Participant
Account may be applied to purchase a Variable Annuity (see "Purchase Of Variable
Annuity").
Upon a request for surrender by the Contractholder for the benefit of a
Participant, all or a portion of a Participant Account will be redeemed usually
within 7 days of the Company's receipt of the request, by canceling a number of
Accumulation Units in the Participant Account subject to any applicable charges.
10
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<PAGE> 13
Restrictions and penalties are imposed on some Qualified Plan withdrawals
before specified conditions are met. Also, there are possible adverse tax
consequences resulting from withdrawals. Contractholders, employers, and
Participants are cautioned to consult a competent tax advisor before requesting
a withdrawal.
No redemption will be made after an annuity has been purchased. The
Company reserves the right to suspend or postpone the date of any redemption
beyond the usual 7-day period during any period (1) when the New York Stock
Exchange is closed, (2) when trading on the Exchange is restricted, (3) when an
emergency exists as a result of which disposal of securities held in the
Separate Account is not reasonably practicable or it is not reasonably
practicable to determine the value of the Separate Account's net assets, or (4)
during any other period when the Securities and Exchange Commission, by order,
so permits for the protection of security holders; provided that applicable
rules and regulations of the Securities and Exchange Commission shall govern as
to whether the conditions prescribed in (2) and (3) exist.
Additional Contractual Obligations of the Company and Changes
Which May Be Made Without the Consent of the Contractholder,
Participant, or Participating Employer
The Contract does not contain a promise that the dollar value of a
Participant Account will be equal to or more than the sum of the Contributions
made to the Participant Account. The Contracts provide that certain provisions
cannot be changed during the first 5 years. These are: the basis for crediting
Accumulation Units, the basis for determining the Accumulation Unit Value and
the Annuity Unit Value, the tables of annuity purchase rates, expense charges,
and the basis for determining the amount of single- sum payments and transfer
payments. After the Contracts have been in effect for 5 years, the Company
reserves the right to make changes in the amount of the charges and in the
annuity purchase rate.
Experience Credits
In the event that Participant Account Charges and Contract Maintenance
Charges made under this Contract accrue to the Company in excess of an amount
deemed necessary, such excess may be allocated to the Contract by purchasing
additional Accumulation Units and crediting such additional units to the
Participant Accounts. There have not been any Experience Credits to date. The
Company cannot offer any assurance that there will be Experience Credits in the
future.
GENERAL DESCRIPTION OF THE CONTRACTS
The Contracts described in this prospectus are designed to fund and
provide benefits (which will vary in dollar amount) under Qualified Plans. A
Qualified Plan is a pension, profit sharing, or other retirement plan which
receives favorable tax treatment under the provisions of sections 401 and 403(a)
of the Code. Generally, Plans are maintained by employers for the benefit of
eligible employees ("Participants") and their Beneficiaries.
The Role of the Contracts in Funding and Providing Retirement
Income Payments Under Qualified Plans
In an attempt to keep pace with the cost of living, the Contracts are
designed to provide retirement income that varies with changing economic
conditions. Under the Contracts, periodic payments do not remain fixed in dollar
amount, but vary according to the investment results of a designated portfolio
of securities. There is no assurance that the Contracts, either alone or in
conjunction with other means of providing retirement income, will accomplish
this purpose.
11
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<PAGE> 14
These Contracts provide for the accumulation of Contributions primarily in
common stocks investments to provide variable retirement income payments. The
Company offers, in addition to the Contracts, Companion Fixed Contracts, which
are not described in this prospectus. Under all contracts, the Company assumes
the mortality risk. A significant difference, however, is that the Company
assumes the investment risk under the Companion Fixed Contracts, but not under
the Contracts described herein.
The mortality risk is that the actuarial estimate of the mortality rates
among Participants under the Contracts may prove higher than the mortality
actually experienced. Thus, under all contracts, the Company promises that the
annuity payments payable under such contracts will continue for the lifetimes of
the Participants. Under the Companion Fixed Contracts, the promised payments are
in a specified dollar amount per month. Under the Contracts described herein,
the promised payments will be equal to the varying value of a specified number
of Annuity Units per month, varying to reflect the investment results obtained
from the segregated portfolio of investments.
How Accumulation Units Are Credited
The minimum initial Contribution to a Participant Account is $250.00.
There are no minimum requirements for subsequent Contributions. The Accumulation
Unit is the basis on which records under the Contracts will be kept and the
payments thereunder determined. When a Contribution is made by or on behalf of a
Participant, 100% thereof will be credited to the Participant Account in the
form of Accumulation Units.
The number of Accumulation Units credited will be determined by dividing
the amount credited by the Accumulation Unit Value for the date on which the
Accumulation Units are credited. Accumulation Units will be credited on the
Business Day coinciding with or next following the date the Contribution is
received by the Company. "Business Day" means any day on which the Company's
Home Office in Columbus, Ohio, and the New York Stock Exchange are both open for
business. Accumulation units will not be credited on the following nationally
recognized holidays: New Year's Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Presidents' Day, Thanksgiving and Christmas.
Accumulation Unit Value
The Accumulation Unit Value at the end of March, 1967, was fixed at $1.00.
The Accumulation Unit Value for any subsequent Business Day is determined by
multiplying the Accumulation Change Factor for that Business Day by the
Accumulation Unit Value for the preceding Business Day. The Accumulation Change
Factor for any Business Day reflects the investment results of the Separate
Account since the last Business Day. Accordingly, the Accumulation Unit Value
will go up or down each Business Day in accordance with the investment results
of the Separate Account. Market determination, the value of the portfolio
securities at the close of the New York Stock Exchange, is the method used to
value the Company's assets.
The factors taken into account in determining the investment results of
the Separate Account are investment income and realized and unrealized capital
gains and losses.
The Accumulation Unit Values shown below, for each quarter, were
calculated to reflect hypothetical investment results of the Separate Account
since March, 1975. While this period was one of generally rising common stock
prices, it also included some interim periods of substantial market decline. It
should not be assumed that the results shown are representative of those that
might be realized upon Contributions made today and in the future. There is no
assurance that favorable investment results will be attained in the future. The
Accumulation Unit Value is likely to fall when common stock value declines
generally.
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<PAGE> 15
ACCUMULATION UNIT VALUES* AT THE END OF EACH QUARTER
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Mar. 1975 1.2323180 Mar. 1982 2.6983907 Mar. 1989 9.9636435 Mar. 1996 24.7848955
June 1975 1.3904027 June 1982 2.7121107 June 1989 10.6742854 June 1996 25.3255737
Sept. 1975 1.2246980 Sept. 1982 3.0397381 Sept. 1989 11.9347701 Sept. 1996 26.8565096
Dec. 1975 1.3423913 Dec. 1982 3.4783376 Dec. 1989 12.2942826 Dec. 1996 29.76029480
Mar. 1976 1.5106830 Mar. 1983 3.8214250 Mar. 1990 11.7646683
June 1976 1.5671775 June 1983 4.1514343 June 1990 12.5345438
Sept. 1976 1.6226746 Sept. 1983 4.2253097 Sept. 1990 11.1707863
Dec. 1976 1.6520855 Dec. 1983 4.3025179 Dec. 1990 12.2965444
Mar. 1977 1.6014589 Mar. 1984 4.2234741 Mar. 1991 14.2006556
June 1977 1.6487669 June 1984 4.1987538 June 1991 14.0854417
Sept. 1977 1.6345287 Sept. 1984 4.5821032 Sept. 1991 14.5603900
Dec. 1977 1.6612530 Dec. 1984 4.6253768 Dec. 1991 16.2373889
Mar. 1978 1.6161771 Mar. 1985 5.1569491 Mar. 1992 15.3685232
June 1978 1.7508039 June 1985 5.6386079 June 1992 15.4486637
Sept. 1978 1.8934789 Sept. 1985 5.5241146 Sept. 1992 15.9783810
Dec. 1978 1.8241798 Dec. 1985 6.5259213 Dec. 1992 16.7112913
Mar. 1979 1.9317751 Mar. 1986 7.5932573 Mar. 1993 16.3132491
June 1979 2.0099303 June 1986 8.0905822 June 1993 16.6761553
Sept. 1979 2.1456834 Sept. 1986 7.3220521 Sept. 1993 16.9286930
Dec. 1979 2.1093074 Dec. 1986 7.6185156 Dec. 1993 17.8516259
Mar. 1980 2.0179971 Mar. 1987 9.1073826 Mar. 1994 17.0998701
June 1980 2.2449442 June 1987 9.4745614 June 1994 17.3439309
Sept. 1980 2.4343502 Sept. 1987 9.9845837 Sept. 1994 18.2996496
Dec. 1980 2.5509427 Dec. 1987 7.7663472 Dec. 1994 18.0013570
Mar. 1981 2.7120916 Mar. 1988 8.3888862 Mar. 1995 19.0619759
June 1981 2.7593172 June 1988 8.8571798 June 1995 20.3702707
Sept. 1981 2.5313853 Sept. 1988 8.9607960 Sept. 1995 21.8627328
Dec. 1981 2.7659801 Dec. 1988 9.1559374 Dec. 1995 23.2833339
</TABLE>
*Hypothetical unit values if a Group Common Stock Variable Annuity Contract had
been issued March 31, 1975.
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<PAGE> 16
HISTORICAL TABLE SHOWING HYPOTHETICAL VALUES OF $1,000 DEPOSITED
TO A PARTICIPANT ACCOUNT EACH YEAR IF A GROUP COMMON STOCK
VARIABLE ANNUITY CONTRACT HAD BEEN ISSUED APRIL 1, 1967
<TABLE>
<CAPTION>
===============================================================================================================================
Accumulated Value* Of
Contract Participant Deposits Account
Accumulated Maintenance Account Accumulated Less Expense On Date
Date Deposits Charge Charge Charges Charges Shown
===============================================================================================================================
$1,000 Deposit Made April 1, 1967 and Each March 31 thereafter
===============================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Apr. 1, 1967 $1,000.00 -0- -0- -0- 1,000.00 1,000.00
- -------------------------------------------------------------------------------------------------------------------------------
Mar. 31, 1968 2,000.00 13.17 30.00 43.17 1,956.83 1,969.84
- -------------------------------------------------------------------------------------------------------------------------------
Mar. 31, 1969 3,000.00 29.38 30.00 102.55 2,897.45 3,200.73
- -------------------------------------------------------------------------------------------------------------------------------
Mar. 31, 1970 4,000.00 39.34 30.00 171.89 3,828.11 3,956.81
- -------------------------------------------------------------------------------------------------------------------------------
Mar. 31, 1971 5,000.00 62.02 30.00 263.91 4,736.09 5,679.02
- -------------------------------------------------------------------------------------------------------------------------------
Mar. 31, 1972 6,000.00 85.29 30.00 379.20 5,620.80 7,445.13
- -------------------------------------------------------------------------------------------------------------------------------
Mar. 31, 1973 7,000.00 100.72 30.00 509.92 6,490.08 8,616.88
- -------------------------------------------------------------------------------------------------------------------------------
Mar. 31, 1974 8,000.00 90.34 30.00 630.26 7,369.74 7,828.57
- -------------------------------------------------------------------------------------------------------------------------------
Mar. 31, 1975 9,000.00 97.64 30.00 757.90 8,242.10 8,382.77
- -------------------------------------------------------------------------------------------------------------------------------
Mar. 31, 1976 10,000.00 133.59 30.00 921.49 9,078.51 11,112.71
- -------------------------------------------------------------------------------------------------------------------------------
Mar. 31, 1977 11,000.00 153.15 30.00 1,104.64 9,895.36 12,597.32
- -------------------------------------------------------------------------------------------------------------------------------
Mar. 31, 1978 12,000.00 165.27 30.00 1,299.91 10,700.09 13,517.82
- -------------------------------------------------------------------------------------------------------------------------------
Mar. 31, 1979 13,000.00 210.04 30.00 1,539.95 11,460.05 16,917.46
- -------------------------------------------------------------------------------------------------------------------------------
Mar. 31, 1980 14,000.00 229.75 30.00 1,799.70 12,200.30 18,412.79
- -------------------------------------------------------------------------------------------------------------------------------
Mar. 31, 1981 15,000.00 321.71 30.00 2,151.41 12,848.59 25,394.21
- -------------------------------------------------------------------------------------------------------------------------------
Mar. 31, 1982 16,000.00 328.45 30.00 2,509.86 13,490.14 25,907.46
- -------------------------------------------------------------------------------------------------------------------------------
Mar. 31, 1983 17,000.00 476.95 30.00 3,016.81 13,983.19 37,182.85
- -------------------------------------------------------------------------------------------------------------------------------
Mar. 31, 1984 18,000.00 534.23 30.00 3,581.04 14,418.96 41,530.60
- -------------------------------------------------------------------------------------------------------------------------------
Mar. 31, 1985 19,000.00 659.21 30.00 4,270.25 14,729.75 51,020.53
- -------------------------------------------------------------------------------------------------------------------------------
*In the event of a refund to a Participant or transfer to funding successor, the
value is reduced by the Contingent Deferred Sales Charge.
(Continued on next page)
===============================================================================================================================
</TABLE>
14
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<PAGE> 17
HISTORICAL TABLE SHOWING HYPOTHETICAL VALUES OF $1,000 DEPOSITED
TO A PARTICIPANT ACCOUNT EACH YEAR IF A GROUP COMMON STOCK
VARIABLE ANNUITY CONTRACT HAD BEEN ISSUED APRIL 1, 1967
<TABLE>
<CAPTION>
===============================================================================================================================
Accumulated Value* Of
Contract Participant Deposits Account
Accumulated Maintenance Account Accumulated Less Expense On Date
Date Deposits Charge Charge Charges Charges Shown
===============================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Mar. 31, 1986 20,000.00 976.64 30.00 5,276.89 14,723.11 75,117.59
- -------------------------------------------------------------------------------------------------------------------------------
Dec. 31, 1986 same -0- -0- -0- same 75,367.46
- -------------------------------------------------------------------------------------------------------------------------------
Mar. 31, 1987 21,000.00 1,171.21 30.00 6,478.10 14,521.90 89,895.15
- -------------------------------------------------------------------------------------------------------------------------------
Dec. 31, 1987 same -0- -0- -0- same 76,658.35
- -------------------------------------------------------------------------------------------------------------------------------
Mar. 31, 1988 22,000.00 1,076.46 30.00 7,584.56 14,415.44 82,696.72
- -------------------------------------------------------------------------------------------------------------------------------
Dec. 31, 1988 same -0- -0- -0- same 90,258.22
- -------------------------------------------------------------------------------------------------------------------------------
Mar. 31, 1989 23,000.00 1,275.15 30.00 8,889.71 14,110.29 97,913.62
- -------------------------------------------------------------------------------------------------------------------------------
Dec. 31, 1989 same -0- -0- -0- same 120,817.02
- -------------------------------------------------------------------------------------------------------------------------------
Mar. 31, 1990 24,000.00 1,515.52 30.00 10,435.23 13,564.77 115,066.93
- -------------------------------------------------------------------------------------------------------------------------------
Dec. 31, 1990 same -0- -0- -0- same 120,269.06
- -------------------------------------------------------------------------------------------------------------------------------
Mar. 31, 1991 25,000.00 1,841.97 30.00 12,307.20 12,692.80 139,850.04
- -------------------------------------------------------------------------------------------------------------------------------
Dec. 31, 1991 same -0- -0- -0- same 159,908.08
- -------------------------------------------------------------------------------------------------------------------------------
Mar. 31, 1992 26,000.00 1,961.31 30.00 14,268.51 11,731.49 148,431.81
- -------------------------------------------------------------------------------------------------------------------------------
Dec. 31, 1992 same -0- -0- -0- same 161,400.49
- -------------------------------------------------------------------------------------------------------------------------------
Mar. 31, 1993 27,000.00 2,060.85 30.00 16,359.36 10,640.64 156,465.27
- -------------------------------------------------------------------------------------------------------------------------------
Dec. 31, 1993 same -0- -0- -0- same 171,220.30
- -------------------------------------------------------------------------------------------------------------------------------
Mar. 31, 1994 28,000.00 2,144.67 30.00 18,534.03 9,465.97 162,835.39
- -------------------------------------------------------------------------------------------------------------------------------
Dec. 31, 1994 same -0- -0- -0- same 171,316.13
- -------------------------------------------------------------------------------------------------------------------------------
Mar. 31, 1995 29,000.00 2,389.42 30.00 20,953.45 8,046.55 181,409.77
- -------------------------------------------------------------------------------------------------------------------------------
Dec. 31, 1995 same -0- -0- -0- same 221,583.76
- -------------------------------------------------------------------------------------------------------------------------------
Mar. 31, 1996 30,000 3,119.67 15.00 24,088.12 5,911.88 236,845.95
- -------------------------------------------------------------------------------------------------------------------------------
Dec. 31, 1996 same -0- -0- -0- same 284,391.16
===============================================================================================================================
</TABLE>
*In the event of a refund to a Participant or transfer to funding successor, the
value is reduced by the Contingent Deferred Sales Charge.
15
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<PAGE> 18
Participant's Account Value
The total number of Accumulation Units credited to a Participant's
Account, as of any date, multiplied by the Accumulation Unit Value less any
applicable charges and taxes constitutes the Participant Account Value as of
such date.
There is no assurance that the value of any Participant interest in the
Contract will equal or exceed the Contributions made to the Participant Account.
The circumstances under which withdrawals from a Participant Account are
permitted are described under "Surrender (Redemption)."
Transfers
A Contractholder may transfer a portion of such Contractholder's
investment in the Contract to a Companion Contract or to another investment
option under the Plan. Such transfers are permitted one time per year, so long
as at least $1,000 remains in the Contract on behalf of such Contractholder. The
Company will assess a $15 charge against the transferred amount.
Transfers to the Contracts from a Companion Contract can be made at 25% of
the value of such Companion Contract. If $500 or less would remain in the
Companion Contract after such transfer, the entire value of the Companion
Contract will be transferred to the Contracts.
The number, amount, and timing of transfers permitted to each Participant
are determined by the Plan under which he or she is covered (see the "Statement
of Additional Information").
Purchase Of Variable Annuity
When a Retired Participant wishes to have a Variable Annuity purchased to
provide retirement income payments under the Plan, written notice must be mailed
to the Company at its Home Office at the address on page 1 of this prospectus
specifying the date on which annuity payments are to begin and the form of
annuity, furnishing proof of the Participant's date of birth and that of any
other person on whose life the continuation of payments may be conditioned. The
Contracts contain four standard options which may be selected by a Participant:
(1) Straight Life Annuity, (2) Life Annuity with Period Certain, (3) Joint and
Survivor Annuity, or (4) Annuity for a 10-year Period Certain. Under the first
option, the Variable Annuity will be paid monthly to the Retired Participant
during his or her lifetime. Under the second option, the Variable Annuity will
be paid monthly during the lifetime of the Retired Participant, but with a
minimum period of 10 years. If the Retired Participant should die prior to the
end of the 10-year period, the unpaid monthly annuity payments for the remainder
of the 10-year period will be payable to the Beneficiary. If the Beneficiary is
other than a natural person or is an estate, the commuted value of the unpaid
monthly annuity payments certain will be payable in one sum. Under the third
option, the Variable Annuity or a portion thereof will be paid monthly so long
as either the Retired Participant or another designated individual is living.
Under the fourth option, the Variable Annuity will be payable for a 10-year
period. As explained below, the monthly annuity payments will differ depending
upon the option selected, in addition to varying with the investment results of
the Separate Account. Each option selected will have varying advantages and
disadvantages. Participants are urged to consult a qualified tax advisor.
The basis for determining the amount of each monthly payment is the
Annuity Unit. Like the Accumulation Unit, the Annuity Unit has an Annuity Unit
Value (see "Annuity Unit Value"). The Participant's Accumulation Units will be
converted into their equivalent in "Premium Units" by multiplying the number of
Accumulation Units by the ratio of the Accumulation Unit Value to the Annuity
Unit Value for the last Business Day of the second calendar month preceding the
date of conversion.
The Premium Units will be applied to purchase a Variable Annuity in the
form selected, with the first monthly payment made on the date on which the
Premium Units are so applied. The number of Annuity Units in each monthly
annuity payment will depend upon the number of Premium Units applied and the
appropriate annuity rate which is determined from tables set forth in the
Contracts, taking into account the option selected, and the age of the Annuitant
and any other designated individual. The dollar amount of each monthly payment
of the Variable Annuity will be equal to the number of Annuity Units in each
Variable Annuity payment multiplied by the Annuity Unit Value for the second
calendar month preceding the month in which the payment
16
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<PAGE> 19
is payable. The annuity rate tables for any particular Contract are also subject
to a percentage charge, which is made once, when an annuity is purchased, and
reduces the annuity purchase rates (see "Purchase Rate Charge"). As disclosed
previously, these tables may be changed after the Contracts have been in effect
for 5 years.
Annuity Unit Value
The Annuity Unit Value for March, 1967, was fixed at $1.00. The Annuity
Unit Value for any subsequent month is determined by multiplying the Annuity
Change Factor for that month by the Annuity Unit Value for the preceding month.
The Annuity Change Factor for any month reflects the extent to which the
investment return of the Separate Account for that month differs from an assumed
effective investment return at the rate of 3.5% per year. Accordingly, the
Annuity Unit Value will go up or down each month depending upon whether the
actual effective investment return in that month is at an annual rate greater or
less than the 3.5% assumption.
If the 3.5% investment increment assumption were changed to some other
assumption, such as 2% or 5% (with an equal change in the 3.5% assumption used
to determine the Annuity Change Factor), this would result in changing both the
amount of the initial payment and the manner in which the subsequent payments
would vary. A higher assumption would mean a higher initial payment, but a more
slowly rising series of subsequent payments (or a more rapidly falling series,
if there were adverse investment results). A lower assumption would have the
opposite effect. If a Contractholder wishes to adopt an assumption different
from the 3.5% assumption described above, the Company is willing to issue a
Contract with an assumption which is higher or lower than the 3.5% assumption.
ANNUITY UNIT VALUES* AT THE END OF EACH QUARTER
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Mar. 1975 .9739300 Mar. 1982 1.7359408 Mar. 1989 5.4933407 Mar. 1996 10.7448305
June 1975 1.0908130 June 1982 1.7305361 June 1989 5.8356153 June 1996 10.8852039
Sept. 1975 .9537858 Sept. 1982 1.9229774 Sept. 1989 6.4688440 Sept. 1996 11.4443637
Dec. 1975 1.0377989 Dec. 1982 2.1815971 Dec. 1989 6.6076882 Dec. 1996 12.5731502
Mar. 1976 1.1593476 Mar. 1983 2.3762545 Mar. 1990 6.2688926
June 1976 1.1938913 June 1983 2.5593550 June 1990 6.6219279
Sept. 1976 1.2271288 Sept. 1983 2.5825910 Sept. 1990 5.8517062
Dec. 1976 1.2402329 Dec. 1983 2.6072616 Dec. 1990 6.3862002
Mar. 1977 1.1934020 Mar. 1984 2.5374442 Mar. 1991 7.2568733
June 1977 1.2196532 June 1984 2.5009891 June 1991 7.1903870
Sept. 1977 1.2002773 Sept. 1984 2.7059580 Sept. 1991 7.3691860
Dec. 1977 1.2109632 Dec. 1984 2.7081212 Dec. 1991 8.0818179
Mar. 1978 1.1694732 Mar. 1985 2.9934951 Mar. 1992 7.6455389
June 1978 1.2576072 June 1985 3.2450574 June 1992 7.6195924
Sept. 1978 1.3501253 Sept. 1985 3.1519399 Sept. 1992 7.8133694
Dec. 1978 1.2911817 Dec. 1985 3.6916616 Dec. 1992 8.1017796
Mar. 1979 1.3573209 Mar. 1986 4.2586598 Mar. 1993 7.8410758
June 1979 1.4018878 June 1986 4.4987245 June 1993 7.9468659
Sept. 1979 1.4856076 Sept. 1986 4.0365210 Sept. 1993 7.9981244
Dec. 1979 1.4497808 Dec. 1986 4.1639886 Dec. 1993 8.3619441
Mar. 1980 1.3768583 Mar. 1987 4.9351179 Mar. 1994 7.9412180
June 1980 1.5204793 June 1987 5.0901180 June 1994 7.9855824
Sept. 1980 1.6367040 Sept. 1987 5.3181853 Sept. 1994 8.3040963
Dec. 1980 1.7025496 Dec. 1987 4.1012392 Dec. 1994 8.1469286
Mar. 1981 1.7968159 Mar. 1988 4.3916141 Mar. 1995 8.5530561
June 1981 1.8147096 June 1988 5.0036811 June 1995 9.0618110
Sept. 1981 1.6526309 Sept. 1988 5.0188653 Sept. 1995 9.6424504
Dec. 1981 1.7925811 Dec. 1988 5.0916250 Dec. 1995 10.1810574
</TABLE>
*Hypothetical unit values if a Group Common Stock Variable Annuity Contract had
been issued March 31, 1975.
17
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<PAGE> 20
FEDERAL INCOME TAX STATUS
The Company does not make any guarantee regarding the tax status of any
Contract or any transaction involving the Contracts.
Section 72 of the Code governs taxation of annuities in general. That
section sets forth specific rules for annuities purchased by Qualified Plans
(including corporate pension and profit sharing plans and retirement plans for
proprietorships and partnerships). The Contracts are designed for use with
Qualified Plans. The tax rules applicable to Participants in such Plans vary
according to the terms and conditions of the Plan itself. Therefore, no attempt
is made herein to provide more than general information about the use of the
Contracts with the various types of Plans. Participants under such plans as well
as Contractholders, employers, and Beneficiaries are cautioned that the rights
of any person to any benefits under such Plans are subject to the terms and
conditions of the Plans themselves regardless of the terms and conditions of the
Contracts issued in connection therewith.
The Tax Reform Act of 1986 and subsequent legislation changed some of the
rules regarding the tax treatment of Distributions from Qualified Plans and of
annuities purchased by Qualified Plans. You should consult your financial
consultant or legal or tax advisor to discuss in detail your particular tax
situation and the use of the Contracts. For additional information regarding
eligibility, limitations on permissible amounts of purchase payments, and tax
consequences on Distribution from Qualified Plans, the purchasers of the
Contracts should seek competent tax advice.
The Code permits the rollover of most Distributions from Qualified Plans
and Tax Sheltered Annuities to other Qualified Plans, Individual Retirement
Accounts, or Individual Retirement Annuities. Distributions which may not be
rolled over are those which are:
1. one of a series of substantially equal annual (or more frequent)
payments made: a) over the life (or life expectancy) of the employee,
b) the joint lives (or joint life expectancies) of the employee and
the employee's designated beneficiary, or c) for a specified period of
ten years or more, and
2. a required minimum Distribution.
Any eligible rollover Distribution will be subject to federal tax
withholding at a 20% rate unless the Distribution is transferred directly to a
Qualified Plan, Individual Retirement Account or Individual Retirement Annuity.
Contracts issued in Puerto Rico are subject to rules which vary from those
described above. If considering the purchase of a contract in connection with a
plan affected by Puerto Rican law, you should seek legal counsel.
LEGAL PROCEEDINGS
From time to time the Company is a party to litigation and arbitration
proceedings in the ordinary course of its business, none of which is expected to
have a material adverse effect on the Company.
In recent years, life insurance companies have been named as defendants in
lawsuits, including class action lawsuits, relating to life insurance pricing
and sales practices. A number of these lawsuits have resulted in substantial
jury awards or settlements. In October 1996, a policyholder of Nationwide Life
filed a complaint in Alabama state court against Nationwide Life and an agent of
Nationwide Life (Wayne M. King v. Nationwide Life Insurance Company and Danny
Nix), related to the sale of a whole life policy on a "vanishing premium" basis
and seeking unspecified compensatory and punitive damages. In February 1997,
Nationwide Life was named as a defendant in a lawsuit filed in New York Supreme
Court also related to the sale of whole life policies on a "vanishing premium"
basis (John H. Snyder v. Nationwide Mutual Insurance Company, Nationwide Mutual
Insurance Co. and Nationwide Life Insurance Co.). The plaintiff in such lawsuit
seeks to represent a national class of Nationwide Life policyholders and claims
unspecified compensatory and punitive damages. This lawsuit is in an early stage
and has not been certified as a class action. Nationwide Life intends to defend
these cases vigorously. There can be no assurance that any future litigation
relating to pricing and sales practices will not have a material adverse effect
on the Company.
18
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<PAGE> 21
TABLE OF CONTENTS OF STATEMENT
OF ADDITIONAL INFORMATION
General Information and History................................................1
Investment Objectives and Policies.............................................1
Management.....................................................................3
Investment Advisory and Other Services.........................................3
Brokerage Allocation...........................................................3
Purchase and Pricing of Securities Being Offered...............................3
Underwriters...................................................................4
Calculation of Yield Quotations of Money Market Sub-Accounts...................4
Annuity Payments...............................................................4
Financial Statements...........................................................5
19
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<PAGE> 22
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 1997
GROUP COMMON STOCK VARIABLE ANNUITY CONTRACTS
ISSUED BY
NATIONWIDE LIFE INSURANCE COMPANY
This Statement of Additional Information is not a prospectus. It contains
information in addition to and more detailed than set forth in the prospectus
and should be read in conjunction with the prospectus dated May 1, 1997. The
prospectus may be obtained from Nationwide Life Insurance Company by writing P.
O. Box 16766, One Nationwide Plaza, Columbus, Ohio 43216, or calling
1-800-545-4730.
TABLE OF CONTENTS
General Information and History................................................1
Investment Objectives and Policies.............................................1
Management.....................................................................3
Investment Advisory and Other Services.........................................3
Brokerage Allocation...........................................................3
Purchase and Pricing of Securities Being Offered...............................3
Underwriters...................................................................4
Calculation of Yield Quotations of Money Market Sub-Accounts...................4
Annuity Payments...............................................................4
Financial Statements...........................................................5
General Information and History
Separate Account No. 1 is a separate investment account of Nationwide Life
Insurance Company (the "Company"). The Company is a member of the Nationwide
Insurance Enterprise and all of the Company's common stock is owned by
Nationwide Advisory Services, Inc. ("NAS"), a holding company. NAS has two
classes of common stock outstanding with different voting rights enabling
Nationwide Corporation (the holder of all the outstanding Class & Common Stock)
to control NAS. Nationwide Corporation is a holding company as well. All of its
common stock is held by Nationwide Mutual Insurance Company (95.2%) and
Nationwide Mutual Fire Insurance Company (4.8%), the ultimate controlling
persons of Nationwide Insurance Enterprise.
Investment Objectives and Policies
The objectives of the Company and its policy in making investments for the
Separate Account are as follows:
1. The composition of the investments held will be determined from the
long-term view as a prudent investor concerned with the preservation
and growth of his capital in relation to the growth of the economy and
the changing value of the dollar. Since earned income and realized
capital gains will be compounded through reinvestment, account will be
taken of the combination of current income and the possibilities of
capital appreciation.
2. The assets usually will be invested in a diversified portfolio of
equities which, for the foreseeable future, will be primarily common
stocks, with such changes as from time to time may be advisable, to
take into account changes in the outlook of particular industries or
companies. A relatively small percentage of the assets may be held in
the form of preferred stocks, government bonds and corporate bonds or
debentures, whether or not convertible into stock or with or without
stock warrants. A reserve of cash and short-term debt securities may
be held pending investment in accordance with investment policies.
1
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<PAGE> 23
3. Purchases will be made for investment and not for trading purposes.
Generally, long-range performances will be emphasized with minor
concern for short-term market fluctuations, except to the extent that
such fluctuations may provide attractive buying or selling levels for
the portfolio. However, freedom of action is reserved to dispose of
any investment, however short a time held, if its appreciation
possibilities appear to have been substantially realized, or if the
market risks have become such as to make its retention unwise.
Furthermore, complete freedom is retained to dispose of investments
whether gains or losses are thereby realized.
4. All investments made must be restricted to those authorized by the
laws of the State of Ohio in effect at the time such investments are
made, with respect to separate account investments.
5. Freedom of action is reserved to invest as much as 10% of the assets
in real estate.
6. The following practices will be prohibited: maintenance of a "short"
or a "margin" trading position in any security, commodity trading,
speculative trading in foreign exchange, the making of loans of cash
or of securities to officers or directors of the Company, the purchase
of securities of any type for the purpose of thereby gaining control
or influencing the management of any other company, or engaging in
underwriting the Distribution of securities.
With respect to item 4 of the above investment policy, the current
restrictions under Ohio law are as follows:
A) Except in the case of securities of investment companies registered
under the Investment Company Act of 1940, or in the case of annuities
or funding agreements issued by a life insurance company authorized to
do business in this state from its general account, or in the case of
the transfer of any investment or other asset in any separate account
to any other account or to the general assets of the Company or any
investment among the general assets of the Company transferred to any
separate account not more than 25% of the amounts allocated to the
separate account and the accumulations thereon shall be invested in
the stocks, notes, debentures, bonds, or other securities of any one
corporation or issuer.
B) Not more than 25% of the issued and outstanding voting securities of
any one corporation or issuer may be acquired by all separate accounts
of the insurer.
C) No security of any corporation which is a subsidiary of or which is
affiliated through stock ownership with the insurer shall be allocated
to any such account.
D) No investment or other asset in any separate account shall be
transferred to any other separate account or to the general assets of
the insurer and no investment among the general assets of the insurer
shall be transferred to any such separate account unless:
(a) Such transfer is made solely:
(1) to establish a separate account or support Contract
guarantees,
(2) to withdraw amounts no longer needed to support guarantees,
and
(b) Such transfer is of cash or securities having a readily
determinable market value or unless
(c) Such transfer is approved by the Superintendent of Insurance.
In light of investment policy restrictions, neither the Company nor the
Separate Account intend to invest more than 25% of the value of their respective
assets in any one industry.
During fiscal years 1996, 1995 and 1994, the portfolio turnover rates were
11.7%, 20.4% and 2.1%, respectively. A portfolio turnover rate of 100% would
occur if all the portfolio securities were replaced in one fiscal year. The
turnover rates experienced in the years ending December 31, 1996, December 31,
1995 and December 31, 1994, were based upon the replacement of existing stocks
with stocks of higher investment quality, and buying and selling to take
advantage of favorable market conditions.
2
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<PAGE> 24
Management
The Separate Account is managed by the Investment Department of the
Company, and all involved individuals are employees of the Company. There is no
Board of Managers associated with the Separate Account.
Investment Advisory and Other Services
The Company acts as its own investment adviser and pays no fees for
investment advisory services to any non-affiliated entity. All individuals
involved in any advisory capacity are full-time employees of the Company without
other affiliation.
The financial statements and schedules have been included herein in
reliance upon the reports of KPMG Peat Marwick LLP, independent certified public
accountants, Two Nationwide Plaza, Columbus, Ohio 43215, and upon the authority
of said firm as experts in accounting and auditing.
Brokerage Allocation
Transactions in portfolio securities are not conducted through brokerage
concerns, therefore no brokerage commissions are paid in such transactions. The
full-time employees of the Investment Department of the Company constantly
evaluate the relative values of the investments of the Separate Account.
Investments of the Separate Account are placed where, in the judgment of the
Investment Department, the best price and executions can be obtained. The
objective results of this process are measured quarterly by the Company against
the investment objectives of the Separate Account. Although brokers are not used
for purposes of investment advice, brokers are used to place orders once the
Investment Department determines its purchases.
Purchase and Pricing of Securities Being Offered
The Contracts will be sold by licensed insurance agents in the states
where the Contracts may be lawfully sold. Such agents will be registered
representatives of broker-dealers registered under the Securities Exchange Act
of 1934 who are members of the National Association of Securities Dealers, Inc.
("NASD").
A Participant under a Plan which utilizes the Contracts and one or more
Companion Fixed Contracts as the funding media will, at the outset, inform the
Company of the proportion of his or her Contributions that are to be paid under
the Contracts. The remainder, less any amount applied toward insurance coverage,
will be credited under the Companion Fixed Contracts. This proportion may be
changed, as new Contributions are made, by notice to the Company.
Transfers of amounts accumulated under the Contracts may be made to the
Companion Fixed Contracts. Similarly, transfers may be made into the Contracts
from a Companion Fixed Contract. The number, amount, and timing of such
transfers permitted to each Participant are determined by the Plan under which
he or she is covered. However, the Company reserves the right not to issue a
Contract in any case where, in its judgment, the transfer provisions of the Plan
appear to the Company to be inconsistent with long-term retirement objectives.
The transfer arrangement would permit a Participant to adjust the balance
between the Contracts and Companion Fixed Contract balances to take account of
changes in the Participant's financial circumstances. It might also enable the
Participant to split contributions among the Contracts during the period before
retirement, but at retirement to elect to receive retirement income under the
Contracts in the form of either a Variable Annuity or a Fixed-Dollar Annuity, or
any reasonable combination of both. If the Plan so provides, a Participant may
elect to receive his or her retirement benefits in the form of a single lump sum
payment. A single lump sum payment could create possible adverse tax
consequences. Some employers may not wish their employees to have this much
flexibility. If so, they may design their Plans accordingly. Any request to
transfer part of a Participant's Account under the Contracts which would leave a
balance less than $500.00 will be treated as a request for a complete transfer.
3
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<PAGE> 25
The Contracts give the Contractholder or a participating employer the right to
notify the Company that future Contributions under the Plan involved are to be
paid instead to another funding agency (such as a trustee or another insurance
company), in which case no further Contributions will be due or payable on
behalf of the Participants affected thereby unless otherwise agreed to by the
Company and the Contractholder. Following the receipt of such a notice, the
value of the accumulations of affected Participants will continue to reflect the
investment results of the Separate Account until they are paid to the persons
entitled thereto in accordance with the Plan and the Contract.
The Contracts also provide that the Contractholder or a participating
employer may transfer the value of the accumulation of all the Participants
under a Plan to another funding agency. Such transfer payments will commence on
a Transfer Date, which is the later to occur of: (a) the first Business Day of
the calendar month specified in the request, or (b) the first Business Day of
the first calendar month which begins at least thirty days after receipt of the
request by the Company. The Company reserves the right, if such a request is
made by a Contractholder, to transfer, in any one-month period commencing on the
Transfer Date, no more than $1,000,000 or 5% of the value on the Transfer Date
of all Accumulation Units under the Contract on that date, whichever is greater.
It may be advisable to consult tax counsel before making such a transfer. The
amount of any transfer payment will be equal to the product of the number of
Accumulation Units allocated for transfer and the Accumulation Unit Value as of
the Business Day on which any transfer is made, less the Contingent Deferred
Sales Charge.
Underwriters
The Company is the principal underwriter of the Contracts which are
offered continuously. No underwriting commissions are paid.
Calculation of Yield Quotations of Money Market Sub-Accounts
The Separate Account does not include Money Market Sub-Accounts.
Annuity Payments
See "Purchase of Variable Annuity" and "Annuity Unit Value" in the
prospectus.
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<PAGE> 26
<PAGE> 1
INDEPENDENT AUDITORS' REPORT
The Board of Directors of Nationwide Life Insurance Company
and Contract Owners of
Nationwide Life Insurance Company
Separate Account No. 1:
We have audited the accompanying statement of assets, liabilities and contract
owners' equity of Nationwide Life Insurance Company Separate Account No. 1,
including the schedule of portfolio investments, as of December 31, 1996, and
the related statements of operations and changes in contract owners' equity for
each of the years in the two-year period then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit 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 audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Nationwide Life Insurance
Company Separate Account No. 1 as of December 31, 1996, and the results of its
operations and its changes in contract owners' equity for each of the years in
the two-year period then ended in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Columbus, Ohio
February 26, 1997
<PAGE> 2
NATIONWIDE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT NO. 1
Statement of Assets, Liabilities
and Contract Owners' Equity
December 31, 1996
<TABLE>
<CAPTION>
<S> <C>
Assets:
Investments in securities at market value, per accompanying
schedule of investments (cost $20,540,627) $41,902,596
Dividends receivable 39,048
Accounts receivable 541,813
-----------
Total assets 42,483,457
-----------
Liabilities:
Accounts payable to Nationwide Life Insurance Company 252,212
-----------
Contract owners' equity (note 2) $42,231,245
===========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 3
NATIONWIDE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT NO. 1
Statements of Operations and Changes
in Contract Owners' Equity
Years ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Investment activity:
Dividends and interest $820,866 834,471
Mortality and expense charges (note 4) (70,278) (63,895)
------------ -----------
Net investment activity 750,588 770,576
------------ -----------
Proceeds from sales of investments 4,357,501 6,276,421
Cost of investments sold 2,205,527 3,660,562
------------ -----------
Realized gain on investments 2,151,974 2,615,859
Change in unrealized gain on investments 5,842,213 5,444,798
------------ -----------
Net gain on investments 7,994,187 8,060,657
------------ -----------
Net increase in contract owners' equity resulting
from operations 8,744,775 8,831,233
------------ -----------
Equity transactions:
Deposits received from contract owners 1,206,004 1,453,862
Contract withdrawals and transfers (3,949,692) (5,162,163)
Annuity payments (94,208) (156,461)
Adjustment to maintain annuity reserves 716,524 (342,751)
Contract charges (note 4) (169,676) (175,517)
------------ -----------
Net equity transactions (2,291,048) (4,383,030)
------------ -----------
Net change in contract owners' equity 6,453,727 4,448,203
Contract owners' equity:
At beginning of year 35,777,518 31,329,315
------------ -----------
At end of year $42,231,245 35,777,518
============ ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 4
NATIONWIDE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT NO. 1
Notes to Financial Statements
December 31, 1996 and 1995
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) ACCOUNTING ENTITY AND NATURE OF OPERATIONS
Effective April 1, 1967, Separate Account No. 1
(Separate Account) of Nationwide Life Insurance
Company (NLIC) was established in accordance
with the laws of the State of Ohio. The
Separate Account is the accounting entity
wherein all segregated variable annuity account
transactions of the contract owners are to be
reflected. This account contains the contract
owners' equity and reflects the variable
annuity reserves of the contract owners
receiving variable annuity payments. The assets
and liabilities of the Separate Account are
clearly identifiable and distinguished from the
other assets and liabilities of NLIC.
NLIC offers tax qualified Group Flexible Fund
Retirement Contracts through the Separate
Account. The primary distribution for the
contracts is with corporate pension plans
through Pension Plan Administrators.
(b) ANNUITY CONTRACTS
As of December 31, 1996, the Separate Account has
5 variable annuity contracts. In addition to
these contracts, there are 39 active annuity
contracts which provide for fixed-dollar
annuity benefits. During the accumulation
phase, no guarantees are made regarding amounts
which will ultimately be available in the form
of annuity payments to participants under the
fixed or variable contracts.
(c) SECURITY VALUATION, TRANSACTIONS AND RELATED INVESTMENT INCOME
Common Stocks are valued at market prices which are
based on published quotations on December 31,
1996. Short-term investments through Nationwide
Cash Management Company (NCMC), an affiliate of
NLIC, are valued at amoritized cost, which
approximates market. Security transactions are
accounted for on the trade date (date the order
to buy or sell is executed) and dividend income
is recorded on the ex-dividend date.
(d) FEDERAL INCOME TAXES
Undercurrent IRC statutes, no federal income taxes
are provided on the earnings or appreciation of
funds held for qualified plans in the Separate
Account. Taxes are the responsibilty of the
contract owner receiving payments.
(e) USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in
conformity with generally accepted accounting
principles may require management to make
estimates and assumptions that affect the
reported amounts of assets and liabilities and
disclosure of contingent assets and
liabilities, if any, at the date of the
financial statements and the reported amounts
of revenues and expenses during the reporting
period. Actual results could differ from those
estimates.
(f) RECLASSIFICATIONS
Certain prior year amounts have been reclassified to
conform with the current year presentation.
(Continued)
<PAGE> 5
NATIONWIDE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT NO. 1
Notes to Financial Statements, Continued
(2) ACCUMULATION AND EQUITY UNITS
The number of accumulation and equity units, reserve value per
unit and related amount of contract owners' equity in
annuity reserve (including $524,042 for annuities in the
payout phase) as of December 31, 1996 are:
<TABLE>
<CAPTION>
Reserve Contract owners'
Accumulation Equity value equity in
Contracts units units per unit* annuity reserves
--------- ----- ----- --------- ----------------
<S> <C> <C> <C> <C>
100% reserve ---- 193,921 29.386238 5,698,609
95% reserve ---- 68,134 29.386238 2,002,202
Other - Payout ---- 112,518 25.692205 2,890,836
HR-10 1,059,341 ---- 29.760295 31,526,301
Other - Accumulation 4,097 ---- 27.653613 113,297
========== ======= ========== ===========
$ 42,231,245
===========
<FN>
* Reserve value per unit represents redemption value.
</TABLE>
The components of each of these unit values are as follows:
<TABLE>
<CAPTION>
95% and
100% Other Other
Reserve Payout HR-10 Accumulation
------- ------ ----- ------------
<S> <C> <C> <C> <C>
1996:
Beginning unit value - Jan.1 $23.072052 20.394191 23.283334 21.744507
Reinvested capital gains and dividends 0.550018 0.483471 0.554285 0.519023
Unrealized gain (loss) 5.854205 5.140112 5.922676 5.511210
Asset charges (0.090037) (0.325569) 0.000000 (0.121127)
---------- --------- --------- ---------
Ending unit value - Dec. 31 $29.386238 25.692205 29.760295 27.653613
========== ========= ========= =========
Percentage increase (decrease) in unit value 27% 26% 28% 27%
</TABLE>
(Continued)
<PAGE> 6
NATIONWIDE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT NO. 1
Notes to Financial Statements, Continued
(3) CONTRACT CHARGES
Contracts participating in the Separate Account currently
provide for the following contract charges to cover such
expenses as administrative costs and other expenses
incurred by NLIC for administering the Separate Account.
These charges may be deducted from participants' contracts
or paid directly to NLIC by participants:
(a) Fixed-dollar contracts provide for periodic charges for
expenses established for each contract.
(b) Variable-dollar contracts issued prior to May
1, 1982 provide for: (i) a percentage of each
participant's contributions to be used to cover
expenses (including commissions of the sales
representatives) and contingencies (the
percentage is 5% for participants whose
employers adopted the plan prior to May 1, 1973
and 6 1/2% for other participants); (ii) a
daily expense charge at the effective rate of
0.5% of each participant's account balance; and
(iii) an annual charge of not more than $25 for
the first year of participation and $10
thereafter.
(c) Variable-dollar contracts issued on or after
May 1, 1982 provide for: (i) a contingent
deferred sales charge not to exceed 7% of total
contributions during the 96-month period
preceding the date of withdrawal; (ii) a
contract maintenance charge at the effective
annual rate of 1.3% of each participant's
account; and (iii) an annual charge not to
exceed $30 for each participant's account.
(4) RELATED PARTY TRANSACTIONS
In 1982, the Separate Account entered into an agreement with
NCMC, an affiliate, under which NCMC acts as a common agent
in handling the purchase and sale of short-term securities
for the respective accounts of the participants. The amount
of Separate Account funds invested in NCMC was $2,269,837
as of December 31, 1996, and is included in the investments
in the accompanying financial statements.
<PAGE> 7
NATIONWIDE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT NO. 1
Schedule of Portfolio Investments
December 31, 1996
<TABLE>
<CAPTION>
Number Market
Name of issuer and title of issue of shares Cost(1) Value
- --------------------------------- --------- --------- -----
<S> <C> <C> <C>
COMMON STOCKS (94.6%)
BROADCASTING (2.0%)
Cox Communications, Inc., Class A (2) 8,630 $ 81,688 199,569
TCI Satellite Entertainment Service A 2,190 21,791 21,626
Tele-Comm Liberty Media Group (2) 5,475 80,850 156,380
Tele-Communications, Inc, Class A (2) 21,900 228,684 286,068
US West, Inc. Media Group 10,100 213,993 185,587
--------- ---------- ---------
48,295 627,006 849,230
--------- ---------- ---------
BUILDING MATERIALS (2.6%)
Vulcan Materials Co. 18,000 87,908 1,095,750
--------- ---------- ---------
18,000 87,908 1,095,750
--------- ---------- ---------
CHEMICAL (10.2%)
Avery Dennison Corp. 11,800 120,609 417,425
IMC Global, Inc. 22,800 586,973 892,050
Monsanto Company 37,500 308,100 1,457,813
Morton International, Inc. 37,500 459,873 1,528,125
--------- ---------- ---------
109,600 1,475,555 4,295,413
--------- ---------- ---------
COMPUTERS AND SEMICONDUCTORS (5.2%)
Intel Corporation 8,500 487,150 1,112,969
International Business Machines Corporation 7,000 830,493 1,060,500
--------- ---------- ---------
15,500 1,317,643 2,173,469
--------- ---------- ---------
DRUGS AND COSMETICS (11.8%)
American Home Products Corp. 16,000 593,720 938,000
Bristol-Myers Squibb Company 9,000 257,293 981,000
Pfizer, Inc. 5,000 179,266 415,000
Schering-Plough Corporation 15,400 204,872 997,150
Warner-Lambert Company 21,800 474,463 1,635,000
--------- ---------- ---------
67,200 1,709,614 4,966,150
--------- ---------- ---------
ENTERTAINMENT (1.7%)
Walt Disney Company 10,000 241,875 697,500
--------- ---------- ---------
10,000 241,875 697,500
--------- ---------- ---------
<FN>
- ----------
(1) Also represents cost for federal income tax purposes.
(2) Denotes non-income producing securities.
(Continued)
</TABLE>
<PAGE> 8
NATIONWIDE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT NO. 1
Schedule of Portfolio Investments, Continued
December 31, 1996
<TABLE>
<CAPTION>
Number Market
Name of issuer and title of issue of shares Cost (1) Value
- --------------------------------- --------- -------- -----
Common Stocks, Continued
<S> <C> <C> <C>
FINANCIAL SERVICES (9.7%)
Chubb Corporation 20,800 $ 287,872 1,118,000
Citicorp 13,000 574,665 1,339,000
Corestates Financial Corporation 15,600 363,700 809,250
First Chicago NBD Corporation 11,250 150,267 604,688
KeyCorp 3,620 96,500 182,810
--------- ---------- ---------
64,270 1,473,004 4,053,748
--------- ---------- ---------
FOODS AND BEVERAGES (6.1%)
Anheuser-Busch Companies 24,800 508,748 992,000
Earthgrains Company 496 9,220 25,916
PEPSICO 32,000 405,770 936,000
Ralcorp Holdings (2) 2,433 39,479 51,093
Ralston-Ralston Purina Group 7,429 313,582 545,103
--------- ---------- ---------
67,158 1,276,799 2,550,112
--------- ---------- ---------
HEALTH SERVICES (2.0%)
Allegiance Corp. 320 3,460 8,840
Baxter International, Inc. 1,600 42,409 65,600
Columbia/HC Healthcare Corp. 18,000 659,220 733,500
MedPartners, Inc. 484 4,635 10,043
--------- ---------- ---------
20,404 709,724 817,983
--------- ---------- ---------
HOUSEHOLD PRODUCTS (10.1%)
Avon Products, Inc. 22,000 503,535 1,256,750
Gillette Company 24,200 426,849 1,881,550
Procter & Gamble Company 10,200 432,384 1,097,775
--------- ---------- ---------
56,400 1,362,768 4,236,075
--------- ---------- ---------
- --------------------------
<FN>
(1) Also represents cost for federal income tax purposes.
(2) Denotes non-income producing securities.
</TABLE>
(Continued)
<PAGE> 9
NATIONWIDE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT NO. 1
Schedule of Portfolio Investments, Continued
December 31, 1996
<TABLE>
<CAPTION>
Number Market
Name of issuer and title of issue of shares Cost (1) Value
- --------------------------------- --------- -------- -----
Common Stocks, Continued
<S> <C> <C> <C>
MISCELLANEOUS (9.9%)
Caterpillar, Inc. 10,000 $ 670,200 752,500
Corning, Inc. 23,000 782,504 1,063,750
Imation Corp. 1,380 24,836 38,813
Mattel, Inc. 15,140 60,448 420,135
Minnesota Mining & Mfg Company 13,800 605,348 1,145,400
The Singer Company 33,000 761,337 738,375
--------- ---------- ---------
96,320 2,904,673 4,158,973
--------- ---------- ---------
OIL AND GAS (6.8%)
Mobil Corporation 8,000 554,780 978,000
Schlumberger Limited 10,000 557,660 998,750
Unocal Corporation 21,400 490,336 872,050
--------- ---------- ---------
39,400 1,602,776 2,848,800
--------- ---------- ---------
PAPER AND PAPER PRODUCTS (6.0%)
Alco Standard Corp. 22,400 591,920 1,156,400
Temple-Inland, Inc. 24,900 454,425 1,347,712
--------- ---------- ---------
47,300 1,046,345 2,504,112
--------- ---------- ---------
<FN>
- ----------
(1) Also represents cost for federal income tax purposes.
</TABLE>
(Continued)
<PAGE> 10
NATIONWIDE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT NO. 1
Schedule of Portfolio Investments, Continued
December 31, 1996
<TABLE>
<CAPTION>
Number Market
Name of issuer and title of issue of shares Cost (1) Value
--------------------------------- --------- -------- -----
Common Stocks, Continued
<S> <C> <C> <C>
PRINTING AND PUBLISHING (7.2%)
ACNielsen Corp. 1,466 $ 15,506 22,357
American Greetings Corp., Class A 19,000 318,142 539,125
Cognizant Corp. 4,400 94,411 145,200
Dun & Bradstreet Corporation 4,400 65,758 104,500
Gannett, Inc. 12,000 405,748 898,500
Gibson Greetings, Inc. (2) 27,500 614,062 539,687
Knight-Ridder, Inc. 20,000 381,919 765,000
----------- ----------- ----------
88,766 1,895,546 3,014,369
----------- ----------- ----------
RETAIL TRADE (1.8%)
Kroger Company (2) 16,300 289,864 757,950
----------- ----------- ----------
16,300 289,864 757,950
----------- ----------- ----------
TRANSPORTATION EQUIPMENT (1.5%)
Trinity Industries 16,350 249,689 613,125
----------- ----------- ----------
16,350 249,689 613,125
----------- ----------- ----------
Total common stocks 781,263 18,270,789 39,632,759
----------- ----------- ----------
SHORT-TERM SECURITIES (5.4%)
Nationwide Cash Management Company
Participation 2,269,837 2,269,837
----------- ----------
TOTAL INVESTMENTS $20,540,626 41,902,596
=========== ==========
<FN>
See accompanying independent auditors' report.
--------------------------
(1) Also represents cost for federal income tax purposes.
(2) Denotes non-income producing securities.
</TABLE>
<PAGE> 27
<PAGE> 1
INDEPENDENT AUDITORS' REPORT
----------------------------
The Board of Directors
Nationwide Life Insurance Company:
We have audited the accompanying consolidated balance sheets of Nationwide Life
Insurance Company and subsidiaries (collectively the Company) as of December 31,
1996 and 1995, and the related consolidated statements of income, shareholder's
equity and cash flows for each of the years in the three-year period ended
December 31, 1996. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with 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.
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, 1996 and 1995, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1996, in conformity with generally accepted
accounting principles.
In 1994, the Company adopted the provisions of the Financial Accounting
Standards Board's Statement of Financial Accounting Standards No. 115,
Accounting for Certain Investments in Debt and Equity Securities.
KPMG Peat Marwick LLP
Columbus, Ohio
January 31, 1997
<PAGE> 2
<TABLE>
<CAPTION>
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1996 and 1995
($000's omitted)
Assets 1996 1995
------ ----------------- ----------------
<S> <C> <C>
Investments (notes 5, 8 and 9):
Securities available-for-sale, at fair value:
Fixed maturity securities (cost $11,970,878 in 1996; $11,862,556 in 1995) $12,304,639 12,485,564
Equity securities (cost $43,890 in 1996; $23,617 in 1995) 59,131 29,953
Mortgage loans on real estate, net 5,272,119 4,602,764
Real estate, net 265,759 229,442
Policy loans 371,816 336,356
Other long-term investments 28,668 61,989
Short-term investments (note 13) 4,789 32,792
----------------- ----------------
18,306,921 17,778,860
----------------- ----------------
Cash 43,784 9,455
Accrued investment income 210,182 212,963
Deferred policy acquisition costs 1,366,509 1,020,356
Investment in subsidiaries classified as discontinued operations (notes 1 and 2) 485,707 506,677
Other assets (note 6) 426,441 388,214
Assets held in Separate Accounts (note 8) 26,926,702 18,591,108
----------------- ----------------
$47,766,246 38,507,633
================= ================
Liabilities and Shareholder's Equity
------------------------------------
Future policy benefits and claims (notes 6 and 8) $17,179,060 16,358,614
Policyholders' dividend accumulations 361,401 348,027
Other policyholder funds 60,073 65,297
Accrued federal income tax (note 7):
Current 30,170 35,301
Deferred 162,212 246,627
----------------- ----------------
192,382 281,928
----------------- ----------------
Dividend payable to shareholder (notes 1 and 2) 485,707 -
Other liabilities 423,047 234,147
Liabilities related to Separate Accounts (note 8) 26,926,702 18,591,108
----------------- ----------------
45,628,372 35,879,121
----------------- ----------------
Commitments and contingencies (notes 6, 9 and 15)
Shareholder's equity (notes 3, 4, 5, 12 and 13):
Capital shares, $1 par value. Authorized 5,000,000 shares, issued and
outstanding 3,814,779 shares 3,815 3,815
Additional paid-in capital 527,874 657,118
Retained earnings 1,432,593 1,583,275
Unrealized gains on securities available-for-sale, net 173,592 384,304
----------------- ----------------
2,137,874 2,628,512
----------------- ----------------
$47,766,246 38,507,633
================= ================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 3
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Consolidated Statements of Income
Years ended December 31, 1996, 1995 and 1994
($000's omitted)
<TABLE>
<CAPTION>
1996 1995 1994
--------------- -------------- -------------
<S> <C> <C> <C>
Revenues (note 16):
Investment product and universal life insurance product policy charges $ 400,902 286,534 217,245
Traditional life insurance premiums 198,642 199,106 176,658
Net investment income (note 5) 1,357,759 1,294,033 1,210,811
Realized losses on investments (note 5) (326) (1,724) (16,527)
Other income 35,861 20,702 11,312
--------------- -------------- -------------
1,992,838 1,798,651 1,599,499
--------------- -------------- -------------
Benefits and expenses:
Benefits and claims 1,160,580 1,115,493 992,667
Provision for policyholders' dividends on participating policies (note 12) 40,973 39,937 38,754
Amortization of deferred policy acquisition costs 133,394 82,695 85,568
Other operating expenses (note 13) 342,394 272,954 240,652
--------------- -------------- -------------
1,677,341 1,511,079 1,357,641
--------------- -------------- -------------
Income from continuing operations before federal income tax expense 315,497 287,572 241,858
--------------- -------------- -------------
Federal income tax expense (benefit) (note 7):
Current 116,512 88,700 73,559
Deferred (5,623) 11,108 5,030
--------------- -------------- -------------
110,889 99,808 78,589
--------------- -------------- -------------
Income from continuing operations 204,608 187,764 163,269
Income from discontinued operations (less federal income tax expense of
$4,453, $7,446 and $10,915 in 1996, 1995 and 1994, respectively) (note 2) 11,324 24,714 20,459
--------------- -------------- -------------
Net income $ 215,932 212,478 183,728
=============== ============== =============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 4
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Consolidated Statements of Shareholder's Equity
Years ended December 31, 1996, 1995 and 1994
($000's omitted)
<TABLE>
<CAPTION>
Unrealized
gains (losses)
Additional on securities Total
Capital paid-in Retained available-for- shareholder's
shares capital earnings sale, net equity
----------- ------------- --------------- ----------------- ---------------
<S> <C> <C> <C> <C> <C>
1994:
Balance, beginning of year $3,815 406,089 1,194,519 6,745 1,611,168
Capital contribution - 200,000 - - 200,000
Net income - - 183,728 - 183,728
Adjustment for change in accounting for
certain investments in debt and equity
securities, net (note 4) - - - 212,553 212,553
Unrealized losses on securities available-
for-sale, net - - - (338,971) (338,971)
----------- ------------- --------------- ----------------- ---------------
Balance, end of year $3,815 606,089 1,378,247 (119,673) 1,868,478
=========== ============= =============== ================= ===============
1995:
Balance, beginning of year 3,815 606,089 1,378,247 (119,673) 1,868,478
Capital contribution (note 13) - 51,029 - (4,111) 46,918
Dividends to shareholder - - (7,450) - (7,450)
Net income - - 212,478 - 212,478
Unrealized gains on securities available-
for-sale, net - - - 508,088 508,088
----------- ------------- --------------- ----------------- ---------------
Balance, end of year $3,815 657,118 1,583,275 384,304 2,628,512
=========== ============= =============== ================= ===============
1996:
Balance, beginning of year 3,815 657,118 1,583,275 384,304 2,628,512
Capital contribution (note 13) - 25 5 - 30
Dividends to shareholder - (129,269) (366,619) (39,819) (535,707)
Net income - - 215,932 - 215,932
Unrealized losses on securities available-
for-sale, net - - - (170,893) (170,893)
----------- ------------- --------------- ----------------- ---------------
Balance, end of year $3,815 527,874 1,432,593 173,592 2,137,874
=========== ============= =============== ================= ===============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 5
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 1996, 1995 and 1994
($000's omitted)
<TABLE>
<CAPTION>
1996 1995 1994
---------------- --------------- ---------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 215,932 212,478 183,728
Adjustments to reconcile net income to net cash provided by operating
activities:
Capitalization of deferred policy acquisition costs (422,572) (321,327) (242,431)
Amortization of deferred policy acquisition costs 133,394 82,695 85,568
Amortization and depreciation 6,962 10,234 3,603
Realized (gains) losses on invested assets, net (284) 3,250 16,094
Deferred federal income tax expense (benefit) 7,603 (30,673) 9,946
Decrease (increase) in accrued investment income 2,781 (16,999) (12,808)
(Increase) decrease in other assets (38,876) 39,880 (102,676)
Increase in policy liabilities 305,755 135,937 118,361
Increase in policyholders' dividend accumulations 13,374 12,639 15,298
(Decrease) increase in accrued federal income tax payable (5,131) 30,836 (5,714)
Increase in other liabilities 188,900 26,851 506
Other, net (61,679) 1,832 (29,595)
--------------- --------------- ---------------
Net cash provided by operating activities 346,159 187,633 39,880
---------------- --------------- ---------------
Cash flows from investing activities:
Proceeds from maturity of securities available-for-sale 1,162,766 634,553 544,843
Proceeds from sale of securities available-for-sale 299,558 107,345 228,308
Proceeds from maturity of fixed maturity securities held-to-maturity - 564,450 491,862
Proceeds from repayments of mortgage loans on real estate 309,050 207,832 190,574
Proceeds from sale of real estate 18,519 48,331 46,713
Proceeds from repayments of policy loans and sale of other invested assets 22,795 53,587 120,506
Cost of securities available-for-sale acquired (1,573,640) (1,942,413) (1,816,370)
Cost of fixed maturity securities held-to-maturity acquired - (593,636) (410,379)
Cost of mortgage loans on real estate acquired (972,776) (796,026) (471,570)
Cost of real estate acquired (7,862) (10,928) (6,385)
Policy loans issued and other invested assets acquired (57,740) (75,910) (65,302)
Short-term investments, net 28,003 77,837 (89,376)
Purchase of affiliate (note 13) - - (155,000)
---------------- --------------- ---------------
Net cash used in investing activities (771,327) (1,724,978) (1,391,576)
---------------- --------------- ---------------
Cash flows from financing activities:
Proceeds from capital contributions 30 - 200,000
Dividends paid to shareholder (50,000) (7,450) -
Increase in investment product and universal life insurance
product account balances 2,293,933 2,809,385 3,547,976
Decrease in investment product and universal life insurance
product account balances (1,784,466) (1,258,758) (2,412,595)
---------------- --------------- --------------
Net cash provided by financing activities 459,497 1,543,177 1,335,381
---------------- --------------- --------------
Net increase (decrease) in cash 34,329 5,832 (16,315)
---------------- --------------- ---------------
Cash, beginning of year 9,455 3,623 19,938
---------------- --------------- ---------------
Cash, end of year $ 43,784 9,455 3,623
================ =============== ===============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 6
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1996, 1995 and 1994
($000's omitted)
(1) Organization and Description of Business
----------------------------------------
Nationwide Life Insurance Company (NLIC) is a wholly owned subsidiary
of Nationwide Corporation (Nationwide Corp.). Wholly owned subsidiaries
of NLIC include Nationwide Life and Annuity Insurance Company (NLAIC),
Employers Life Insurance Company of Wausau and subsidiaries (ELICW),
National Casualty Company (NCC), West Coast Life Insurance Company
(WCLIC), Nationwide Advisory Services, Inc. (formerly Nationwide
Financial Services, Inc.), Nationwide Investment Services Corporation
(formerly PEBSCO Securities Corporation) (NISC) and NWE, Inc. NLIC and
its subsidiaries are collectively referred to as "the Company."
Nationwide Corp. formed Nationwide Financial Services, Inc. (NFS) in
November 1996 as a holding company for NLIC and the other companies of
the Nationwide Insurance Enterprise that offer or distribute long-term
savings and retirement products. On January 27, 1997, Nationwide Corp.
contributed to NFS the common stock of NLIC and three marketing and
distribution companies. NFS is planning an initial public offering of
its Class A common stock during the first quarter of 1997.
In anticipation of the restructuring described above, on September 24,
1996, NLIC's Board of Directors declared a dividend payable January 1,
1997 to Nationwide Corp. consisting of the outstanding shares of common
stock of certain subsidiaries (ELICW, NCC and WCLIC) that do not offer
or distribute long-term savings and retirement products. In addition,
during 1996, NLIC entered into two reinsurance agreements whereby all
of NLIC's accident and health and group life insurance business was
ceded to ELICW and another affiliate effective January 1, 1996. These
subsidiaries and all accident and health and group life insurance
business have been accounted for as discontinued operations for all
periods presented. See notes 2 and 13.
In addition, as part of the restructuring described above, NLIC intends
to make an $850,000 distribution to NFS which will then make an
equivalent distribution to Nationwide Corp.
The Company is a leading provider of long-term savings and retirement
products to retail and institutional customers and is subject to
competition from other financial services providers 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 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, new legal theories or
insurance company insolvencies through guaranty fund assessments
may create costs for the insurer beyond those currently 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 reinsurance and credit and collection
policies and by providing for any amounts deemed uncollectible.
<PAGE> 7
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
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) Discontinued Operations
-----------------------
As discussed in note 1, NFS is a holding company for NLIC and certain
other companies that offer or distribute long-term savings and
retirement products. Prior to the contribution by Nationwide Corp. to
NFS of the outstanding common stock of NLIC and other companies, NLIC
effected certain transactions with respect to certain subsidiaries and
lines of business that were unrelated to long-term savings and
retirement products.
On September 24, 1996, NLIC's Board of Directors declared a dividend to
Nationwide Corp. consisting of the outstanding shares of common stock
of three subsidiaries: ELICW, NCC and WCLIC. ELICW writes group
accident and health and group life insurance business and maintains it
offices in Wausau, Wisconsin. NCC is a property and casualty company
that serves as a fronting company for a property and casualty
subsidiary of Nationwide Mutual Insurance Company (NMIC), an affiliate.
NCC maintains its offices in Scottsdale, Arizona. WCLIC writes high
dollar term life insurance policies and is located in San Francisco,
California. ELICW, NCC and WCLIC have been accounted for as
discontinued operations for all periods presented. NLIC did not
recognize any gain or loss on the disposal of these subsidiaries.
A summary of the combined results of operations, including the results
of the accident and health and group life insurance business ELICW
assumed from NLIC in 1996, and assets and liabilities of ELICW, NCC and
WCLIC as of and for the years ended December 31, 1996, 1995 and 1994 is
as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------------ ----------- -----------
<S> <C> <C> <C>
Revenues $ 668,870 422,149 84,226
Net income 11,324 26,456 11,753
Assets, consisting primarily of investments 3,029,293 2,967,326 2,537,692
Liabilities, consisting primarily of policy benefits and claims 2,543,586 2,460,649 2,179,263
</TABLE>
During 1996, NLIC entered into two reinsurance agreements whereby all
of NLIC's accident and health and group life insurance business was
ceded to ELICW and NMIC, effective January 1, 1996. See note 13 for a
complete discussion of the reinsurance agreements. NLIC has
discontinued its accident and health and group life insurance business
and in connection therewith has entered into reinsurance agreements to
cede all existing and any future writings to other affiliated companies
and will cease writing any new business prior to December 31, 1997.
NLIC's accident and health and group life insurance business is
accounted for as discontinued operations for all periods presented.
NLIC did not recognize any gain or loss on the disposal of the accident
and health and group life insurance business. The assets, liabilities,
results of operations and activities of discontinued operations are
distinguished physically, operationally and for financial reporting
purposes from the remaining assets, liabilities, results of operations
and activities of NLIC.
<PAGE> 8
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
A summary of the results of operations, net of amounts ceded to ELICW
and NMIC in 1996, and assets and liabilities of NLIC's accident and
health and group life insurance business as of and for the years ended
December 31, 1996, 1995 and 1994 is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------------ ----------- -----------
<S> <C> <C> <C>
Revenues $ - 354,788 362,476
Net income (loss) - (1,742) 8,706
Assets, consisting primarily of investments 259,185 239,426 234,082
Liabilities, consisting primarily of policy benefits and claims 259,185 239,426 234,082
</TABLE>
(3) 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. Annual Statements for NLIC and its insurance
subsidiaries, filed with the department of insurance of each insurance
company's state of domicile, are prepared on the basis of accounting
practices prescribed or permitted by each department. 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.
In preparing the consolidated financial statements, management is
required to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosures of contingent
assets and liabilities as of the date of the consolidated financial
statements and the reported amounts of revenues and expenses for the
reporting period. Actual results could differ significantly from those
estimates.
The most significant estimates include those used in determining
deferred policy acquisition costs, valuation allowances for mortgage
loans on real estate and real estate investments and the liability for
future policy benefits and claims. Although some variability is
inherent in these estimates, management believes the amounts provided
are adequate.
(a) Consolidation Policy
--------------------
The consolidated financial statements include the accounts of NLIC
and its wholly owned subsidiaries. Subsidiaries that are
classified and reported as discontinued operations are not
consolidated but rather are reported as "Investment in
Subsidiaries Classified as Discontinued Operations" in the
accompanying consolidated balance sheets and "Income for
Discontinued Operations" in the accompanying consolidated
statements of income. All significant intercompany balances and
transactions have been eliminated.
(b) Valuation of Investments and Related Gains and Losses
-----------------------------------------------------
The Company is required to classify its fixed maturity securities
and equity securities as either held-to-maturity,
available-for-sale or trading. 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. The Company has no fixed
maturity securities classified as held-to-maturity or trading as
of December 31, 1996 or 1995.
<PAGE> 9
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
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. The measurement of impaired
loans is 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 fair value of the collateral, if the
loan is collateral dependent. Loans in foreclosure and loans
considered to be impaired are placed on non-accrual status.
Interest received on non-accrual status mortgage loans on real
estate are included in interest income in the period received.
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. Impairment
losses are recorded on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the
assets' carrying amount.
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.
(c) Revenues and Benefits
---------------------
INVESTMENT PRODUCTS AND UNIVERSAL LIFE INSURANCE PRODUCTS:
Investment products consist primarily of individual and group
variable and fixed annuities, annuities without life contingencies
and guaranteed investment contracts. Universal life insurance
products include universal life insurance, variable universal life
insurance and other interest-sensitive life insurance policies.
Revenues for investment products and universal life insurance
products consist of net investment income, asset fees, 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 interest credited to policy account balances and benefits
and claims incurred in the period in excess of related policy
account balances.
TRADITIONAL LIFE INSURANCE PRODUCTS: Traditional life insurance
products include those products with fixed and guaranteed premiums
and benefits and consist primarily of whole life insurance,
limited-payment life insurance, term life insurance and certain
annuities with life contingencies. Premiums for traditional life
insurance products are recognized as revenue when due. 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.
ACCIDENT AND HEALTH INSURANCE PRODUCTS: 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. All accident and health insurance
business is accounted for as discontinued operations. See note 2.
(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
investment products and universal life insurance 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, asset fees, 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. For traditional life products,
these deferred policy 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. Deferred policy acquisition costs are adjusted to
reflect the impact of unrealized gains and losses on fixed
maturity securities available-for-sale as described in note 3(b).
<PAGE> 10
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(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.
(f) Future Policy Benefits
----------------------
Future policy benefits for investment products in the accumulation
phase, universal life insurance and variable universal life
insurance policies have been calculated based on participants'
contributions plus interest credited less applicable contract
charges.
Future policy benefits for traditional life insurance 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 and claims for collectively renewable
long-term disability policies and group long-term disability
policies are the present value 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
insurance policies are not discounted. All health insurance
business is accounted for as discontinued operations. See note 2.
(g) Participating Business
----------------------
Participating business represents approximately 52% in 1996 (54%
in 1995 and 55% in 1994) of the Company's life insurance in force,
78% in 1996 (79% in 1995 and 79% in 1994) of the number of life
insurance policies in force, and 40% in 1996 (47% in 1995 and 51%
in 1994) 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.
(h) Federal Income Tax
------------------
The Company, with the exception of ELICW, files a consolidated
federal income tax return with NMIC, the majority shareholder of
Nationwide Corp. The members of the consolidated tax return group
have a tax sharing arrangement which provides, in effect, for each
member to bear essentially the same federal income tax liability
as if separate tax returns were filed. Through 1994, ELICW filed a
consolidated federal income tax return with Employers Insurance of
Wausau A Mutual Company, an affiliate. Beginning in 1995, ELICW
files a separate federal income tax return.
The Company utilizes the asset and liability method of accounting
for income tax. Under this 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.
<PAGE> 11
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(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. All of the Company's accident
and health and group life insurance business is ceded to
affiliates and is accounted for as discontinued operations. See
notes 2 and 13.
(j) Reclassification
----------------
Certain items in the 1995 and 1994 consolidated financial
statements have been reclassified to conform to the 1996
presentation.
(4) Change in Accounting Principle
------------------------------
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 STATEMENT OF FINANCIAL ACCOUNTING STANDARDS (SFAS)
NO. 115 - ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND EQUITY
SECURITIES. As of January 1, 1994, the Company classified fixed
maturity securities with amortized cost and fair value of $6,299,665
and $6,721,714, 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>
<CAPTION>
<S> <C>
Excess of fair value over amortized cost of fixed maturity
securities available-for-sale $ 422,049
Adjustment to deferred policy acquisition costs (95,044)
Deferred federal income tax (114,452)
--------------
$ 212,553
==============
</TABLE>
(5) Investments
-----------
The amortized cost and estimated fair value of securities
available-for-sale were as follows as of December 31, 1996:
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Estimated
cost gains losses fair value
------------ ---------- ----------- -----------
<S> <C> <C> <C> <C>
1996:
Fixed maturity securities:
U.S. Treasury securities and obligations of
U.S. government corporations and agencies $ 275,696 4,795 (1,340) 279,151
Obligations of states and political subdivisions 6,242 450 (2) 6,690
Debt securities issued by foreign governments 100,656 2,141 (857) 101,940
Corporate securities 7,999,310 285,946 (33,686) 8,251,570
Mortgage-backed securities 3,588,974 91,438 (15,124) 3,665,288
------------ ---------- ------------ ------------
Total fixed maturity securities 11,970,878 384,770 (51,009) 12,304,639
Equity securities 43,890 15,571 (330) 59,131
------------ ---------- ------------ ------------
$12,014,768 400,341 (51,339) 12,363,770
============ ========== ============ ============
</TABLE>
<PAGE> 12
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
The amortized cost and estimated fair value of securities
available-for-sale were as follows as of December 31, 1995:
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Estimated
cost gains losses fair value
------------ ---------- ----------- ---------------
<S> <C> <C> <C> <C>
1995:
Fixed maturity securities:
U.S. Treasury securities and obligations of
U.S. government corporations and agencies $ 310,186 12,764 (1) 322,949
Obligations of states and political subdivisions 8,655 1,205 (1) 9,859
Debt securities issued by foreign governments 101,414 4,387 (66) 105,735
Corporate securities 7,888,440 473,681 (25,742) 8,336,379
Mortgage-backed securities 3,553,861 165,169 (8,388) 3,710,642
------------ ---------- ----------- ---------------
Total fixed maturity securities 11,862,556 657,206 (34,198) 12,485,564
Equity securities 23,617 6,382 (46) 29,953
------------ ---------- ----------- ---------------
$11,886,173 663,588 (34,244) 12,515,517
============ ========== =========== ===============
</TABLE>
The amortized cost and estimated fair value of fixed maturity
securities available-for-sale as of December 31, 1996, 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 $ 440,235 444,214
Due after one year through five years 3,937,010 4,053,152
Due after five years through ten years 2,809,813 2,871,806
Due after ten years 1,194,846 1,270,179
--------------- --------------
8,381,904 8,639,351
Mortgage-backed securities 3,588,974 3,665,288
--------------- --------------
$11,970,878 12,304,639
=============== ==============
</TABLE>
The components of unrealized gains on securities available-for-sale,
net, were as follows as of December 31:
<TABLE>
<CAPTION>
1996 1995
--------------- --------------
<S> <C> <C>
Gross unrealized gains $349,002 629,344
Adjustment to deferred policy acquisition costs (81,939) (138,914)
Deferred federal income tax (93,471) (171,649)
--------------- --------------
173,592 318,781
Unrealized gains on securities available-for-sale, net, of
subsidiaries classified as discontinued operations (note 2) - 65,523
--------------- --------------
$173,592 384,304
=============== ==============
</TABLE>
<PAGE> 13
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
An analysis of the change in gross unrealized gains (losses) on
securities available-for-sale and fixed maturity securities
held-to-maturity follows for the years ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
--------------- ------------- --------------
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturity securities $(289,247) 876,332 (675,373)
Equity securities 8,905 (26) (1,927)
Fixed maturity securities held-to-maturity - 75,626 (398,183)
--------------- ------------- --------------
$(280,342) 951,932 (1,075,483)
=============== ============= ==============
</TABLE>
Proceeds from the sale of securities available-for-sale during 1996,
1995 and 1994 were $299,558, $107,345 and $228,308, respectively.
During 1996, gross gains of $6,606 ($4,838 and $3,045 in 1995 and 1994,
respectively) and gross losses of $6,925 ($2,147 and $21,280 in 1995
and 1994, respectively) were realized on those sales.
During 1995, the Company transferred fixed maturity securities
classified as held-to-maturity with amortized cost of $25,429 to
available-for-sale securities due to evidence of a significant
deterioration in the issuer's creditworthiness. The transfer of those
fixed maturity securities resulted in a gross unrealized loss of
$3,535.
As permitted by the Financial Accounting Standards Board's Special
Report, A GUIDE TO IMPLEMENTATION OF STATEMENT 115 ON ACCOUNTING FOR
CERTAIN INVESTMENTS IN DEBT AND EQUITY SECURITIES, issued in November
1995 the Company transferred all of its fixed maturity securities
previously classified as held-to-maturity to available-for-sale. As of
December 14, 1995, the date of transfer, the fixed maturity securities
had amortized cost of $3,320,093, resulting in a gross unrealized gain
of $155,940.
Investments that were non-income producing for the twelve month period
preceding December 31, 1996 amounted to $26,805 ($27,712 in 1995) and
consisted of $248 ($6,982 in 1995) in fixed maturity securities,
$20,633 ($14,740 in 1995) in real estate and $5,924 ($5,990 in 1995) in
other long-term investments.
Real estate is presented at cost less accumulated depreciation of
$30,338 as of December 31, 1996 ($30,482 as of December 31, 1995) and
valuation allowances of $15,219 as of December 31, 1996 ($25,819 as of
December 31, 1995).
The recorded investment of mortgage loans on real estate considered to
be impaired (under SFAS NO. 114 - ACCOUNTING BY CREDITORS FOR
IMPAIRMENT OF A LOAN as amended by SFAS NO. 118 - ACCOUNTING BY
CREDITORS FOR IMPAIRMENT OF A LOAN-INCOME RECOGNITION AND DISCLOSURE)
as of December 31, 1996 was $51,765 ($44,409 as of December 31, 1995),
which includes $41,663 ($23,975 as of December 31, 1995) of impaired
mortgage loans on real estate for which the related valuation allowance
was $8,485 ($5,276 as of December 31, 1995) and $10,102 ($20,434 as of
December 31, 1995) of impaired mortgage loans on real estate for which
there was no valuation allowance. During 1996, the average recorded
investment in impaired mortgage loans on real estate was approximately
$39,674 ($22,181 in 1995) and interest income recognized on those loans
was $2,103 ($387 in 1995), which is equal to interest income recognized
using a cash-basis method of income recognition.
Activity in the valuation allowance account for mortgage loans on real
estate is summarized for the years ended December 31:
<TABLE>
<CAPTION>
1996 1995
------------- --------------
<S> <C> <C>
Allowance, beginning of year $49,128 46,381
Additions charged to operations 4,497 7,433
Direct write-downs charged against the allowance (2,587) (4,686)
------------- -------------
Allowance, end of year $51,038 49,128
============= ==============
</TABLE>
<PAGE> 14
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
An analysis of investment income by investment type follows for the
years ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
--------------- ------------- ------------
<S> <C> <C> <C>
Gross investment income:
Securities available-for-sale:
Fixed maturity securities $ 917,135 685,787 647,927
Equity securities 1,291 1,330 509
Fixed maturity securities held-to-maturity - 201,808 185,938
Mortgage loans on real estate 432,815 395,478 372,734
Real estate 44,332 38,344 40,170
Short-term investments 4,155 10,576 6,141
Other 3,998 7,239 2,121
--------------- ------------- --------------
Total investment income 1,403,726 1,340,562 1,255,540
Less investment expenses 45,967 46,529 44,729
--------------- ------------- ---------------
Net investment income $1,357,759 1,294,033 1,210,811
=============== ============= ==============
</TABLE>
An analysis of realized gains (losses) on investments, net of valuation
allowances, by investment type follows for the years ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturity securities $(3,462) 4,213 (7,296)
Equity securities 3,143 3,386 1,422
Mortgage loans on real estate (4,115) (7,091) (20,446)
Real estate and other 4,108 (2,232) 9,793
------------ ------------ ------------
$ (326) (1,724) (16,527)
============ ============ ============
</TABLE>
Fixed maturity securities with an amortized cost of $6,161 and $5,592
as of December 31, 1996 and 1995, 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 investment contracts
represents approximately 87% and 87% of the total liability for future
policy benefits as of December 31, 1996 and 1995, respectively. The
average interest rate credited on investment product policies was
approximately 6.3%, 6.6% and 6.5% for the years ended December 31,
1996, 1995 and 1994, respectively.
The liability for future policy benefits for traditional life insurance
policies has been established based upon the following assumptions:
Interest rates: Interest rates vary as follows:
--------------
<TABLE>
<CAPTION>
Year of issue Interest rates
----------------- ----------------------------------------
<S> <C>
1996 6.6%, not graded
1984-1995 6.0% to 10.5%, not graded
1966-1983 6.0% to 8.1%, graded over 20 years to 4.0% to 6.6%
1965 and prior generally lower than post 1965 issues
</TABLE>
<PAGE> 15
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
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 Company has entered into a reinsurance contract to cede a portion
of its general account individual annuity business to The Franklin Life
Insurance Company (Franklin). Total recoveries due from Franklin were
$240,451 and $245,255 as of December 31, 1996 and 1995, respectively.
The contract is immaterial to the Company's results of operations. The
ceding of risk does not discharge the original insurer from its primary
obligation to the policyholder. Under the terms of the contract,
Franklin has established a trust as collateral for the recoveries. The
trust assets are invested in investment grade securities, the market
value of which must at all times be greater than or equal to 102% of
the reinsured reserves.
The Company has reinsurance agreements with certain affiliates as
described in note 13. All other reinsurance agreements are not material
to either premiums or reinsurance recoverables.
(7) Federal Income Tax
-------------------
The tax effects of temporary differences that give rise to significant
components of the net deferred tax liability as of December 31, 1996
and 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
----------------- ---------------
<S> <C> <C>
Deferred tax assets:
Future policy benefits $175,571 149,192
Liabilities in Separate Accounts 188,426 129,120
Mortgage loans on real estate and real estate 23,366 25,165
Other policyholder funds 7,407 7,424
Other assets and other liabilities 53,757 41,847
----------------- ---------------
Total gross deferred tax assets 448,527 352,748
Less valuation allowances (7,000) (7,000)
----------------- ---------------
Net deferred tax assets 441,527 345,748
================= ===============
Deferred tax liabilities:
Deferred policy acquisition costs 399,345 299,579
Fixed maturity securities 133,210 227,345
Deferred tax on realized investment gains 37,597 40,634
Equity securities and other long-term investments 8,210 3,780
Other 25,377 21,037
----------------- ---------------
Total gross deferred tax liabilities 603,739 592,375
----------------- ---------------
$162,212 246,627
================= ===============
</TABLE>
In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion of the
total gross deferred tax assets will not be realized. Nearly all future
deductible amounts can be offset by future taxable amounts or recovery
of federal income tax paid within the statutory carryback period. There
has been no change in the valuation allowance for the years ended
December 31, 1996, 1995 and 1994.
<PAGE> 16
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Total federal income tax expense for the years ended December 31, 1996,
1995 and 1994 differs from the amount computed by applying the U.S.
federal income tax rate to income before tax as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---------------------- ---------------------- ----------------------
Amount % Amount % Amount %
---------------------- ---------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
Computed (expected) tax expense $110,424 35.0 $100,650 35.0 $84,650 35.0
Tax exempt interest and dividends
received deduction (212) (0.1) (18) (0.0) (130) (0.1)
Other, net 677 0.3 (824) (0.3) (5,931) (2.5)
------------ -------- ------------- -------- ------------- --------
Total (effective rate of each year) $110,889 35.2 $ 99,808 34.7 $78,589 32.5
============ ======== ============= ======== ============= ========
</TABLE>
Total federal income tax paid was $115,839, $51,840 and $83,239
during the years ended December 31, 1996, 1995 and 1994,
respectively.
(8) Disclosures about Fair Value of Financial Instruments
-----------------------------------------------------
SFAS 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. SFAS 107 defines the
fair value of a financial instrument as the amount at which the
financial instrument could be exchanged in a current transaction
between willing parties. 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
life insurance contracts is 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 consolidated balance sheets for these instruments
approximates their fair value.
FIXED MATURITY AND EQUITY 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, which includes certain surrender
charges.
<PAGE> 17
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
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 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 analyses. Interest rates used are similar to currently
offered contracts with maturities consistent with those remaining
for the contracts being valued.
POLICY RESERVES ON LIFE INSURANCE CONTRACTS: Included are
disclosures for individual life insurance, universal life
insurance 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.
COMMITMENTS TO EXTEND CREDIT: Commitments to extend credit have
nominal fair value because of the short-term nature of such
commitments. See note 9.
Carrying amount and estimated fair value of financial instruments
subject to SFAS 107 and policy reserves on life insurance contracts
were as follows as of December 31, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
------------------------------ -------------------------------
Carrying Estimated Carrying Estimated
amount fair value amount fair value
------------------------------ --------------- ---------------
<S> <C> <C> <C> <C>
Assets
------
Investments:
Securities available-for-sale:
Fixed maturity securities $12,304,639 12,304,639 12,485,564 12,485,564
Equity securities 59,131 59,131 29,953 29,953
Mortgage loans on real estate, net 5,272,119 5,397,865 4,602,764 4,961,655
Policy loans 371,816 371,816 336,356 336,356
Short-term investments 4,789 4,789 32,792 32,792
Cash 43,784 43,784 9,455 9,455
Assets held in Separate Accounts 26,926,702 26,926,702 18,591,108 18,591,108
Liabilities
-----------
Investment contracts 13,914,441 13,484,526 13,229,360 12,876,798
Policy reserves on life insurance contracts 2,971,337 2,775,991 2,836,323 2,733,486
Policyholders' dividend accumulations 361,401 361,401 348,027 348,027
Other policyholder funds 60,073 60,073 65,297 65,297
Liabilities related to Separate Accounts 26,926,702 26,164,213 18,591,108 18,052,362
</TABLE>
(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.
<PAGE> 18
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
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 75% 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 $327,456 extending into
1997 were outstanding as of December 31, 1996.
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 21% (20% in 1995) in any geographic area and no more than 2% (2%
in 1995) with any one borrower as of December 31, 1996.
The Company had a significant reinsurance recoverable balance from one
reinsurer as of December 31, 1996 and 1995. See note 6.
The summary below depicts loans by remaining principal balance as of
December 31, 1996 and 1995:
<TABLE>
<CAPTION>
Apartment
Office Warehouse Retail & other Total
------------ ------------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
1996:
East North Central $139,518 119,069 549,064 215,038 1,022,689
East South Central 33,267 22,252 172,968 90,623 319,110
Mountain 17,972 43,027 113,292 73,390 247,681
Middle Atlantic 129,077 54,046 160,833 18,498 362,454
New England 33,348 43,581 161,960 - 238,889
Pacific 202,562 325,046 424,295 110,108 1,062,011
South Atlantic 103,889 134,492 482,934 385,185 1,106,500
West North Central 126,467 2,441 75,180 40,529 244,617
West South Central 104,877 120,314 197,090 304,256 726,537
------------- ------------- ------------- -------------- ------------
$890,977 864,268 2,337,616 1,237,627 5,330,488
============ ============= ============= =============
Less valuation allowances and unamortized discount 58,369
--------------
Total mortgage loans on real estate, net $5,272,119
==============
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
1995:
East North Central $138,965 101,925 514,995 175,213 931,098
East South Central 21,329 13,053 180,858 82,383 297,623
Mountain - 17,219 138,220 45,274 200,713
Middle Atlantic 116,187 64,813 158,252 10,793 350,045
New England 9,559 39,525 148,449 1 197,534
Pacific 183,206 233,186 374,915 105,419 896,726
South Atlantic 106,246 73,541 446,800 278,265 904,852
West North Central 133,899 14,205 78,065 36,651 262,820
West South Central 69,140 92,594 190,299 267,268 619,301
------------ ------------ ------------- ------------- --------------
$778,531 650,061 2,230,853 1,001,267 4,660,712
============ ============= ============= =============
Less valuation allowances and unamortized discount 57,948
--------------
Total mortgage loans on real estate, net $4,602,764
==============
</TABLE>
<PAGE> 19
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(10) Pension Plan
------------
The Company is a participant, 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. Benefits are based upon the highest
average annual salary of a specified number of 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.
Effective January 1, 1995, the plan was amended to provide enhanced
benefits for participants who met certain eligibility requirements and
elected early retirement no later than March 15, 1995. The entire cost
of the enhanced benefit was borne by NMIC and certain of its property
and casualty insurance company affiliates.
Effective December 31, 1995, the Nationwide Insurance Companies and
Affiliates Retirement Plan was merged with the Farmland Mutual
Insurance Company Employees' Retirement Plan and the Wausau Insurance
Companies Pension Plan to form the Nationwide Insurance Enterprise
Retirement Plan. Immediately prior to the merger, the plans were
amended to provide consistent benefits for service after January 1,
1996. These amendments had no significant impact on the accumulated
benefit obligation or projected benefit obligation as of December 31,
1995.
Pension costs charged to operations by the Company during the years
ended December 31, 1996, 1995 and 1994 were $7,381, $10,478 and
$10,063, respectively.
The Company's net accrued pension expense as of December 31, 1996 and
1995 was $1,075 and $1,392, respectively.
The net periodic pension cost for the Nationwide Insurance Enterprise
Retirement Plan as a whole for the year ended December 31, 1996 and for
the Nationwide Insurance Companies and Affiliates Retirement Plan as a
whole for the years ended December 31, 1995 and 1994 follows:
<TABLE>
<CAPTION>
1996 1995 1994
--------------- --------------- ---------------
<S> <C> <C> <C>
Service cost (benefits earned during the period) $ 75,466 64,524 64,740
Interest cost on projected benefit obligation 105,511 95,283 73,951
Actual return on plan assets (210,583) (249,294) (21,495)
Net amortization and deferral 101,795 143,353 (62,150)
--------------- --------------- ---------------
$ 72,189 53,866 55,046
=============== =============== ===============
</TABLE>
Basis for measurements, net periodic pension cost:
<TABLE>
<CAPTION>
1996 1995 1994
--------------- --------------- ---------------
<S> <C> <C> <C>
Weighted average discount rate 6.00% 7.50% 5.75%
Rate of increase in future compensation levels 4.25% 6.25% 4.50%
Expected long-term rate of return on plan assets 6.75% 8.75% 7.00%
</TABLE>
<PAGE> 20
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Information regarding the funded status of the Nationwide Insurance
Enterprise Retirement Plan as a whole as of December 31, 1996 and 1995
follows:
<TABLE>
<CAPTION>
1996 1995
--------------- ---------------
<S> <C> <C>
Accumulated benefit obligation:
Vested $1,338,554 1,236,730
Nonvested 11,149 26,503
--------------- ---------------
$1,349,703 1,263,233
=============== ===============
Net accrued pension expense:
Projected benefit obligation for services rendered to
date $1,847,828 1,780,616
Plan assets at fair value 1,947,933 1,738,004
--------------- ---------------
Plan assets in excess of (less than) projected benefit
obligation 100,105 (42,612)
Unrecognized prior service cost 37,870 42,845
Unrecognized net gains (201,952) (63,130)
Unrecognized net asset at transition 37,158 41,305
--------------- ---------------
$ (26,819) (21,592)
=============== ===============
</TABLE>
Basis for measurements, funded status of plan:
<TABLE>
<CAPTION>
1996 1995
--------------- ---------------
<S> <C> <C>
Weighted average discount rate 6.50% 6.00%
Rate of increase in future compensation levels 4.75% 4.25%
</TABLE>
Assets of the Nationwide Insurance Enterprise Retirement Plan are
invested in group annuity contracts of NLIC and ELICW.
(11) Postretirement Benefits Other Than Pensions
-------------------------------------------
In addition to the defined benefit pension plan, the Company, together
with other affiliated companies, participates in life and health care
defined benefit plans for qualifying retirees. Postretirement life and
health care benefits are contributory and generally 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
health care benefit contributions are adjusted annually and contain
cost-sharing features such as deductibles and coinsurance. In addition,
there are caps on the Company's portion of the per-participant cost of
the postretirement health care benefits. These caps can increase
annually, but not more than three percent. The Company's policy is to
fund the cost of health care benefits in amounts determined at the
discretion of management. Plan assets are invested primarily in group
annuity contracts of NLIC.
The Company elected to immediately recognize its estimated accumulated
postretirement benefit obligation; however, certain affiliated
companies elected to amortize their initial transition obligation over
periods ranging from 10 to 20 years.
The Company's accrued postretirement benefit expense as of December 31,
1996 and 1995 was $34,884 and $33,537, respectively, and the net
periodic postretirement benefit cost (NPPBC) for 1996, 1995 and 1994
was $3,286, $3,132 and $4,284, respectively.
<PAGE> 21
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
The amount of NPPBC for the plan as a whole for the years ended
December 31, 1996, 1995 and 1994 was as follows:
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Service cost (benefits attributed to employee service during the year) $ 6,541 6,235 8,586
Interest cost on accumulated postretirement benefit obligation 13,679 14,151 14,011
Actual return on plan assets (4,348) (2,657) (1,622)
Amortization of unrecognized transition obligation of affiliates 173 2,966 568
Net amortization and deferral 1,830 (1,619) 1,622
----------- ----------- -----------
$17,875 19,076 23,165
=========== =========== ===========
</TABLE>
Information regarding the funded status of the plan as a whole as of
December 31, 1996 and 1995 follows:
<TABLE>
<CAPTION>
1996 1995
--------------- ---------------
<S> <C> <C>
Accrued postretirement benefit expense:
Retirees $ 92,954 88,680
Fully eligible, active plan participants 23,749 28,793
Other active plan participants 83,986 90,375
--------------- ---------------
Accumulated postretirement benefit obligation (APBO) 200,689 207,848
Plan assets at fair value 63,044 54,325
--------------- ---------------
Plan assets less than accumulated postretirement benefit obligation (137,645) (153,523)
Unrecognized transition obligation of affiliates 1,654 1,827
Unrecognized net gains (23,225) (1,038)
--------------- ---------------
$(159,216) (152,734)
=============== ===============
</TABLE>
Actuarial assumptions used for the measurement of the APBO as of
December 31, 1996 and 1995 and the NPPBC for 1996, 1995 and 1994 were
as follows:
<TABLE>
<CAPTION>
1996 1996 1995 1995 1994
APBO NPPBC APBO NPPBC NPPBC
------------ ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Discount rate 7.25% 6.65% 6.75% 8.00% 7.00%
Long-term rate of return on plan
assets, net of tax - 4.80% - 8.00% N/A
Assumed health care cost trend rate:
Initial rate 11.00% 11.00% 11.00% 10.00% 12.00%
Ultimate rate 6.00% 6.00% 6.00% 6.00% 6.00%
Uniform declining period 12 Years 12 Years 12 Years 12 Years 12 Years
</TABLE>
The health care cost trend rate assumption has an effect on the amounts
reported. For the plan as a whole, a one percentage point increase in
the assumed health care cost trend rate would increase the APBO as of
December 31, 1996 by $701 and the NPPBC for the year ended December 31,
1996 by $83.
(12) Shareholder's Equity, 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 company subsidiaries exceed the minimum risk-based capital
requirements.
<PAGE> 22
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
The statutory capital shares and surplus of NLIC as of December 31,
1996, 1995 and 1994 was $1,000,647, $1,363,031 and $1,262,861,
respectively. The statutory net income of NLIC for the years ended
December 31, 1996, 1995 and 1994 was $73,218, $86,529 and $76,532,
respectively.
NLIC is limited in the amount of shareholder dividends it may pay
without prior approval by the Department of Insurance of the State of
Ohio (the Department). NLIC's dividend of the outstanding shares of
common stock of certain companies which was declared on September 24,
1996 and the anticipated $850,000 dividend (as discussed in note 1) are
deemed extraordinary under Ohio insurance laws. As a result of such
dividends, any dividend paid by NLIC during the 12-month period
immediately following the $850,000 dividend would also be an
extraordinary dividend under Ohio insurance laws. Accordingly, no such
dividend could be paid without prior regulatory approval.
In addition, the payment of dividends by NLIC may also be subject to
restrictions set forth in the insurance laws of New York that limit the
amount of statutory profits on NLIC's participating policies (measured
before dividends to policyholders) that can inure to the benefit of the
Company and its stockholder.
The Company currently does not expect such regulatory requirements to
impair its ability to pay operating expenses and stockholder dividends
in the future.
(13) Transactions With Affiliates
----------------------------
The Company leases office space from NMIC and certain of its
subsidiaries. For the years ended December 31, 1996, 1995 and 1994, the
Company made lease payments to NMIC and its subsidiaries of $9,065,
$8,986 and $8,133, respectively.
Pursuant to a cost sharing agreement among NMIC and certain of its
direct and indirect subsidiaries, including the Company, NMIC provides
certain operational and administrative services, such as sales support,
advertising, personnel and general management services, to those
subsidiaries. Expenses covered by this agreement are subject to
allocation among NMIC, the Company and other affiliates. Amounts
allocated to the Company were $101,584, $107,112, and $100,601 in 1996,
1995 and 1994, respectively. The allocations are based on techniques
and procedures in accordance with insurance regulatory guidelines.
Measures used to allocate expenses among companies include individual
employee estimates of time spent, special cost studies, salary expense,
commissions expense and other methods agreed to by the participating
companies that are within industry guidelines and practices. The
Company believes these allocation methods are reasonable. In addition,
the Company does not believe that expenses recognized under the
intercompany agreements are materially different than expenses that
would have been recognized had the Company operated on a stand alone
basis. Amounts payable to NMIC from the Company under the cost sharing
agreement were $15,111 and $1,186 as of December 31, 1996 and 1995,
respectively.
The Company also 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 1996 and
1995 were not material. The Company believes that the terms of the
repurchase agreements are materially consistent with what the Company
could have obtained with unaffiliated parties.
<PAGE> 23
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Intercompany reinsurance contracts exist between NLIC and, respectively
NMIC and ELICW whereby all of NLIC's accident and health and group life
insurance business is ceded on a modified coinsurance basis. NLIC
entered into the reinsurance agreements during 1996 because the
accident and health and group life insurance business was unrelated to
NLIC's long-term savings and retirement products. Accordingly, the
accident and health and group life insurance business has been
accounted for as discontinued operations for all periods presented.
Under modified coinsurance agreements, invested assets are retained by
the ceding company and investment earnings are paid to the reinsurer.
Under the terms of NLIC's agreements, the investment risk associated
with changes in interest rates is borne by NMIC or ELICW, as the case
may be. Risk of asset default is retained by NLIC, although a fee is
paid by NMIC or ELICW, as the case may be, to NLIC for the NLIC's
retention of such risk. The agreements will remain in force until all
policy obligations are settled. However, with respect to the agreement
between NLIC and NMIC, either party may terminate the contract on
January 1 of any year with prior notice. The ceding of risk does not
discharge the original insurer from its primary obligation to the
policyholder. NLIC believes that the terms of the modified coinsurance
agreements are consistent in all material respects with what NLIC could
have obtained with unaffiliated parties.
Amounts ceded to ELICW in 1996 are included in ELICW's results of
operations for 1996 which, combined with the results of WCLIC and NCC,
are summarized in note 2. Amounts ceded to ELICW in 1996 include
premiums of $224,224, net investment income and other revenue of
$14,833, and benefits, claims and other expenses of $246,641. Amounts
ceded to NMIC in 1996 include premiums of $97,331, net investment
income of $10,890, and benefits, claims and other expenses of $100,476.
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 $4,789 and $9,654 as of December 31,
1996 and 1995, respectively, and are included in short-term investments
on the accompanying consolidated balance sheets.
On April, 5 1996, Nationwide Corp. contributed all of the outstanding
shares, with shareholder equity value of $30, of NISC to NLIC. NLIC
contributed an additional $500 to NISC on August 30, 1996.
On March 1, 1995, Nationwide Corp. contributed all of the outstanding
shares of common stock of Farmland Life Insurance Company (Farmland) to
NLIC. Farmland merged into WCLIC effective June 30, 1995. The
contribution resulted in a direct increase to consolidated
shareholder's equity of $46,918. As discussed in note 2, WCLIC is
accounted for as discontinued operations.
Effective December 31, 1994, NLIC purchased all of the outstanding
shares of common stock of ELICW from Wausau Service Corporation (WSC)
for $155,000. 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. 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. As discussed in note 2, ELICW is
accounted for as discontinued operations.
Certain annuity products are sold through three affiliated companies
which are also subsidiaries of Nationwide Corp. Total commissions and
fees paid to these affiliates for the years ended December 31, 1996,
1995 and 1994 were $76,922, $57,280 and $50,168, respectively.
(14) Bank Lines of Credit
--------------------
In August 1996, NLIC, along with NMIC, established a $600,000 revolving
credit facility which provides for a $600,000 loan over a five year
term on a fully revolving basis with a group of national financial
institutions. The credit facility provides for several and not joint
liability with respect to any amount drawn by either NLIC or NMIC. NLIC
and NMIC pay facility and usage fees to the financial institutions to
maintain the revolving credit facility. All previously existing line of
credit agreements were canceled.
<PAGE> 24
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(15) 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.
(16) Segment Information
-------------------
The Company has three primary segments: Variable Annuities, Fixed
Annuities and Life Insurance. The Variable Annuities segment consists
of annuity contracts that provide the customer with the opportunity to
invest in mutual funds managed by the Company and independent
investment managers, with the investment returns accumulating on a
tax-deferred basis. The Fixed Annuities segment consists of annuity
contracts that generate a return for the customer at a specified
interest rate, fixed for a prescribed period, with returns accumulating
on a tax-deferred basis. The Life Insurance segment consists of
insurance products that provide a death benefit and may also allow the
customer to build cash value on a tax-deferred basis. In addition, the
Company reports corporate expenses and investments, and the related
investment income supporting capital not specifically allocated to its
product segments in a Corporate and Other segment. In addition, all
realized gains and losses, investment management fees and other revenue
earned from mutual funds, other than the portion allocated to the
variable annuities and life insurance segments, are reported in the
Corporate and Other segment.
During 1996, the Company changed its reporting segments to better
reflect the way the businesses are managed. Prior periods have been
restated to reflect these changes.
The following table summarizes the revenues and income from continuing
operations before federal income tax expense for the years ended
December 31, 1996, 1995 and 1994 and assets as of December 31, 1996,
1995 and 1994, by business segment.
<TABLE>
<CAPTION>
1996 1995 1994
----------------- --------------- ---------------
<S> <C> <C> <C>
Revenues:
Variable Annuities $ 284,638 189,071 132,687
Fixed Annuities 1,092,566 1,051,970 939,868
Life Insurance 435,657 409,135 383,150
Corporate and Other 179,977 148,475 143,794
----------------- --------------- ---------------
$ 1,992,838 1,798,651 1,599,499
================= =============== ===============
Income from continuing operations before federal income tax
expense:
Variable Annuities 90,244 50,837 24,574
Fixed Annuities 135,405 137,000 138,950
Life Insurance 67,242 67,590 53,046
Corporate and Other 22,606 32,145 25,288
----------------- --------------- ---------------
$ 315,497 287,572 241,858
================= =============== ===============
Assets:
Variable Annuities 25,069,725 17,333,039 11,146,465
Fixed Annuities 13,994,715 13,250,359 11,668,973
Life Insurance 3,353,286 3,027,420 2,752,283
Corporate and Other 5,348,520 4,896,815 3,678,303
----------------- --------------- ---------------
$47,766,246 38,507,633 29,246,024
================= =============== ===============
</TABLE>
<PAGE> 25
<TABLE>
SCHEDULE I
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Consolidated Summary of Investments -
Other Than Investments in Related Parties
As of December 31, 1996
($000's omitted)
<CAPTION>
- --------------------------------------------------------------- --------------- -------------- -----------------
Column A Column B Column C Column D
- --------------------------------------------------------------- --------------- -------------- -----------------
Amount at which
shown in the
consolidated
Type of Investment Cost Market value balance sheet
- --------------------------------------------------------------- --------------- -------------- -----------------
<S> <C> <C> <C>
Fixed maturity securities available-for-sale:
Bonds:
U.S. Government and government agencies and authorities $ 3,757,887 3,834,762 3,834,762
States, municipalities and political subdivisions 6,242 6,690 6,690
Foreign governments 100,656 101,940 101,940
Public utilities 1,798,736 1,843,938 1,843,938
All other corporate 6,307,357 6,517,309 6,517,309
--------------- -------------- -----------------
Total fixed maturity securities available-for-sale 11,970,878 12,304,639 12,304,639
--------------- -------------- -----------------
Equity securities available-for-sale:
Common stocks:
Industrial, miscellaneous and all other 43,501 50,405 50,405
Non-redeemable preferred stock 389 8,726 8,726
--------------- -------------- -----------------
Total equity securities available-for-sale 43,890 59,131 59,131
--------------- -------------- -----------------
Mortgage loans on real estate, net 5,327,317 5,272,119 (1)
Real estate, net:
Investment properties 253,383 217,611 (1)
Acquired in satisfaction of debt 57,933 48,148 (1)
Policy loans 371,816 371,816
Other long-term investments 27,370 28,668 (2)
Short-term investments 4,789 4,789
--------------- ----------------
Total investments $18,057,376 18,306,921
=============== ================
<FN>
- ----------
(1) Difference from Column B is primarily due to valuation allowances due to
impairments on mortgage loans on real estate and due to accumulated
depreciation and valuation allowances due to impairments on real estate.
See note 5 to the consolidated financial statements.
(2) Difference from Column B is primarily due to operating gains of investments
in limited partnerships.
</TABLE>
See accompanying independent auditors' report.
<PAGE> 26
<TABLE>
<CAPTION>
SCHEDULE III
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Supplemental Insurance Information
As of December 31, 1996, 1995 and 1994
and for each of the years then ended
($000's omitted)
- ----------------------------------- -------------- ------------------ ----------------- ------------------ ---------------
Column A Column B Column C Column D Column E Column F
- ----------------------------------- -------------- ------------------ ----------------- ----------------- ---------------
Deferred Future policy Other policy
policy benefits, losses, claims and
acquisition claims and Unearned premiums benefits payable Premium
Segment costs loss expenses (1) (2) revenue
- ----------------------------------- -------------- ------------------ ----------------- ---------------- --------------
<C> <C> <C> <C> <C> <C>
1996: Variable Annuities $ 791,611 - - -
Fixed Annuities 242,421 14,952,877 687 24,030
Life Insurance 414,417 1,995,802 395,739 174,612
Corporate and Other (81,940) 230,381 25,048 -
-------------- ------------------ ---------------- --------------
Total $1,366,509 17,179,060 421,474 198,642
============== ================== ================ ==============
1995: Variable Annuities 571,283 - - -
Fixed Annuities 221,111 14,221,622 455 32,774
Life Insurance 366,876 1,898,641 383,983 166,332
Corporate and Other (138,914) 238,351 28,886 -
-------------- ------------------ ---------------- --------------
Total $1,020,356 16,358,614 413,324 199,106
============== ================== ================ ==============
1994: Variable Annuities 395,397 - - -
Fixed Annuities 198,639 12,633,253 240 20,134
Life Insurance 327,079 1,806,762 371,984 156,524
Corporate and Other 74,445 233,569 26,927 -
-------------- ------------------ ---------------- --------------
Total $ 995,560 14,673,584 399,151 176,658
============== ================== ================ ==============
<CAPTION>
- ----------------------------------- -------------- ------------------- ----------------- ---------------- --------------
Column A Column G Column H Column I Column J Column K
- ----------------------------------- -------------- ------------------- ----------------- ---------------- --------------
Net Amortization Other
investment Benefits, claims, of deferred operating
income losses and policy expenses Premiums
Segment (3) settlement expenses acquisition costs (3) written
- ----------------------------------- -------------- ------------------- ----------------- ----------------- --------------
1996: Variable Annuities $ (21,449) 4,624 57,412 132,357
Fixed Annuities 1,050,557 838,533 38,635 79,737
Life Insurance 174,002 211,386 37,347 78,965
Corporate and Other 154,649 106,037 - 51,335
-------------- ------------------- ----------------- -----------------
Total $1,357,759 1,160,580 133,394 342,394
============== =================== ================= =================
1995: Variable Annuities (17,640) 2,881 26,264 109,089
Fixed Annuities 1,002,718 804,980 29,499 80,260
Life Insurance 171,255 201,986 31,021 68,832
Corporate and Other 137,700 105,646 (4,089) 14,773
-------------- ------------------- ----------------- -----------------
Total $1,294,033 1,115,493 82,695 272,954
============== =================== ================= =================
1994: Variable Annuities (13,415) 2,277 22,135 83,701
Fixed Annuities 903,572 702,082 29,849 69,975
Life Insurance 166,329 191,006 29,495 69,861
Corporate and Other 154,325 97,302 4,089 17,115
-------------- ------------------- ----------------- -----------------
Total $1,210,811 992,667 85,568 240,652
============== =================== ================= =================
<FN>
- ----------
(1) Unearned premiums are included in Column C amounts.
(2) Column E agrees to the sum of the 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 segment if different methods were applied.
</TABLE>
See accompanying independent auditors' report.
<PAGE> 27
SCHEDULE IV
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Reinsurance
As of December 31, 1996, 1995 and 1994
and for each of the years then ended
($000's omitted)
<TABLE>
<CAPTION>
- ------------------------------- ----------------- ----------------- ---------------- ---------------- ---------------
Column A Column B Column C Column D Column E Column F
- ------------------------------- ----------------- ----------------- ---------------- ---------------- ---------------
Percentage
Ceded to Assumed from of amount
Gross amount other companies other companies Net amount assumed to net
----------------- ----------------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C>
1996:
Life insurance in force $47,071,264 6,633,567 288,593 40,726,290 0.7%
================= ================= ================ ================ ===============
Premiums:
Life insurance 225,615 29,282 2,309 198,642 1.2%
Accident and health insurance 291,871 305,789 13,918 - N/A
----------------- ----------------- ---------------- ---------------- ---------------
Total $ 517,486 335,071 16,227 198,642 8.2%
================= ================= ================ ================ ===============
1995:
Life Insurance in force $41,087,025 8,935,743 391,174 32,542,456 1.2%
================= ================= ================ ================ ===============
Premiums:
Life insurance 221,257 24,360 2,209 199,106 1.1%
Accident and health insurance 298,058 313,036 14,978 - N/A
----------------- ----------------- ---------------- ---------------- ---------------
Total $ 519,315 337,396 17,187 199,106 8.6%
================= ================= ================ ================ ===============
1994:
Life Insurance in force $35,926,633 7,550,623 829,742 29,205,752 2.8%
================= ================= ================ ================ ===============
Premiums:
Life insurance 198,705 24,912 2,865 176,658 1.6%
Accident and health insurance 303,435 321,696 18,261 - N/A
----------------- ----------------- ---------------- ---------------- ---------------
Total $ 502,140 346,608 21,126 176,658 12.0%
================= ================= ================ ================ ===============
<FN>
- ----------
Note: The life insurance caption represents principally premiums from
traditional life insurance and life-contingent immediate annuities and
excludes deposits on invesment products and universal life insurance
products.
</TABLE>
See accompanying independent auditors' report.
<PAGE> 28
<TABLE>
<CAPTION>
SCHEDULE V
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Valuation and Qualifying Accounts
Years ended December 31, 1996, 1995 and 1994
($000's omitted)
- ------------------------------------------------- ------------ ----------------------------- ------------ -------------
Column A Column B Column C Column D Column E
- ------------------------------------------------- ------------ ----------------------------- ------------ -------------
Balance at Charged to Balance at
beginning of costs and Charged to Deductions end of
Description period expenses other accounts (1) period
- ------------------------------------------------- ------------ ------------ -------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
1996:
Valuation allowances - mortgage loans on real
estate $49,128 4,497 - 2,587 51,038
Valuation allowances - real estate 25,819 (10,600) - - 15,219
------------ ------------ -------------- ------------ -------------
Total $74,947 (6,103) - 2,587 66,257
============ ============ ============== ============ =============
1995:
Valuation allowances - fixed maturity securities - 8,908 - 8,908 -
Valuation allowances - mortgage loans on real
estate 46,381 7,433 - 4,686 49,128
Valuation allowances - real estate 27,330 (1,511) - - 25,819
------------ ------------ -------------- ------------ -------------
Total $73,711 14,830 - 13,594 74,947
============ ============ ============== ============ =============
1994:
Valuation allowances - fixed maturity securities 4,800 (4,800) - - -
Valuation allowances - mortgage loans on real
estate 42,150 20,445 - 16,214 46,381
Valuation allowances - real estate 31,357 (4,027) - - 27,330
------------ ------------ -------------- ------------ -------------
Total $78,307 11,618 - 16,214 73,711
============ ============ ============== ============ =============
<FN>
- ----------
(1) Amounts represent direct write-downs charged against the valuation allowance.
</TABLE>
See accompanying independent auditors' report.
<PAGE> 28
PART C. OTHER INFORMATION
Item 28. Financial Statements and Exhibits
(a)Financial Statements:
(1)Financial statements and schedule included Page
in Prospectus (Part A):
Condensed Financial Information. 6
(2)Financial statements and schedule included
in Part B:
Those financial statements and schedule
required by Item 27 to be included in Part B
have been incorporated therein by reference
to the Prospectus (Part A). 26
Nationwide Life Insurance Company Separate Account No. 1:
Independent Auditors' Report. 26
Statement of Assets, Liabilities and Contract
Owners' Equity as of December 31, 1996. 27
Statements of Operations and Changes in
Contract Owners' Equity for the years ended
December 31, 1996 and 1995. 28
Notes to Financial Statements. 29
Schedule of Portfolio Investments. 32
Nationwide Life Insurance Company:
Independent Auditors' Report. 36
Consolidated Balance Sheets as of December
31, 1996 and 1995. 37
Consolidated Statements of Income for the
years ended December 31, 1996, 1995 and
1994. 38
Consolidated Statements of Shareholders
Equity for the years ended December 31,
1996, 1995 and 1994. 39
Consolidated Statements of Cash Flows for
the years ended December 31, 1996, 1995
and 1994. 40
Notes to Consolidated Financial Statements. 41
Schedule I - Consolidated Summary of Investments -
Other Than Investments in Related Parties 75
Schedule III - Supplementary Insurance Information 76
Schedule IV - Reinsurance 77
Schedule V - Valuation and Qualifying Accounts 78
60 of 79
<PAGE> 29
Item 29. Directors and Officers of the Depositor
Name and Principal Positions and Offices
Business Address With Depositor
Lewis J. Alphin Director
519 Bethel Church Road
Mount Olive, NC 28365
Keith W. Eckel
1647 Falls Road
Clarks Summit, PA 18411 Director
Willard J. Engel Director
1100 East Main Street
Marshall, MN 56258
Fred C. Finney Director
1558 West Moreland Road
Wooster, OH 44691
Charles L. Fuellgraf, Jr. Director
600 South Washington Street
Butler, PA 16001
Joseph J. Gasper President and Chief Operating Officer
One Nationwide Plaza and Director
Columbus, OH 43215
Henry S. Holloway Chairman of the Board
1247 Stafford Road and Director
Darlington, MD 21034
Dimon Richard McFerson Chairman and Chief Executive Officer-
One Nationwide Plaza Nationwide Insurance Enterprise
Columbus, OH 43215 and Director
David O. Miller Director
115 Sprague Drive
Hebron, OH 43025
C. Ray Noecker Director
2770 Winchester Southern S.
Ashville, OH 43103
James F. Patterson Director
8765 Mulberry Road
Chesterland, OH 44026
61 of 79
<PAGE> 30
Name and Principal Positions and Offices
Business Address With Depositor
Arden L. Shisler Director
1356 North Wenger Road
Dalton, OH 44618
Robert L. Stewart Director
88740 Fairview Road
Jewett, OH 43986
Nancy C. Thomas Director
10835 Georgetown Street NE
Louisville, OH 44641
Harold W. Weihl Director
14282 King Road
Bowling Green, OH 43402
Gordon E. McCutchan Executive Vice President,
One Nationwide Plaza Law and Corporate Services
Columbus, OH 43215 and Secretary
Robert A. Oakley Executive Vice President-
One Nationwide Plaza Chief Financial Officer
Columbus, OH 43215
Robert J. Woodward, Jr. Executive Vice President -
One Nationwide Plaza Chief Investment Officer
Columbus, OH 43215
James E. Brock Senior Vice President -
One Nationwide Plaza Life Company Operations
Columbus, OH 43215
W. Sidney Druen Senior Vice President and General
One Nationwide Plaza Counsel and Assistant Secretary
Columbus, OH 43215
Harvey S. Galloway, Jr. Senior Vice President-Chief Actuary-
One Nationwide Plaza Life, Health and Annuities
Columbus, OH 43215
Richard A. Karas Senior Vice President - Sales -
One Nationwide Plaza Financial Services
Columbus, OH 43215
Michael D. Bleiweiss Vice President-
One Nationwide Plaza Individual Annuity Operations
Columbus, OH 43215
62 of 79
<PAGE> 31
Name and Principal Positions and Offices
Business Address With Depositor
Matthew S. Easley Vice President -
One Nationwide Plaza Life Marketing and Administrative Service
Columbus, OH 43215
Ronald L. Eppley Vice President-
One Nationwide Plaza Applications Services
Columbus, OH 43215
Timothy E. Murphy Vice President-
One Nationwide Plaza Strategic Marketing
Columbus, Ohio 43215
R. Dennis Noice Vice President-
One Nationwide Plaza Retail Operations
Columbus, OH 43215
Joseph P. Rath Vice President - Compliance
One Nationwide Plaza
Columbus, OH 43215
Item 30. Persons Controlled by or Under Common Control with the Depositor or
Registrant.
* Subsidiaries for which separate financial statements are filed
** Subsidiaries included in the respective consolidated financial
statements
*** Subsidiaries included in the respective group financial
statements filed for unconsolidated subsidiaries
**** other subsidiaries
63 of 79
<PAGE> 32
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
(see Attached
STATE Chart) unless
OF otherwise
COMPANY ORGANIZATION indicated PRINCIPAL BUSINESS
<S> <C> <C>
Affiliate Agency of Ohio, Inc. Ohio Life Insurance Agency
Affiliate Agency, Inc. Delaware Life Insurance Agency
Allnations, Inc. Ohio Promotes cooperative insurance
corporations worldwide
American Marine Underwriters, Inc. Florida Underwriting Manager
Auto Direkt Insurance Company Germany Insurance Company
California Cash Management Company California Investment Securities Agent
Colonial County Mutual insurance Texas Insurance Company
Company
Colonial Insurance Company of California Insurance Company
California
Columbus Insurance Brokerage and Germany Insurance Broker
Service GMBH
Companies Agency Insurance Services California Insurance Broker
of California
Companies Agency of Alabama, Inc. Alabama Insurance Broker
Companies Agency of Idaho, Inc. Idaho Insurance Broker
Companies Agency of Illinois, Inc. Illinois Acts as Collection Agent for Policies
placed through Brokers
Companies Agency of Kentucky, Inc. Kentucky Insurance Broker
Companies Agency of Massachusetts, Massachusetts Insurance Broker
Inc.
Companies Agency of New York, Inc. New York Insurance Broker
Companies Agency of Pennsylvania, Inc. Pennsylvania Insurance Broker
Companies Agency of Phoenix, Inc. Arizona Insurance Broker
Companies Agency of Texas, Inc. Texas Insurance Broker
Companies Agency, Inc. Wisconsin Insurance Broker
Companies Annuity Agency of Texas, Texas Insurance Broker
Inc.
Countrywide Services Corporation Delaware Products Liability, Investigative and
Claims Management Services
Employers Insurance of Wausau A Wisconsin Insurance Company
Mutual Company
** Employers Life Insurance Company of Wisconsin Life Insurance Company
Wausau
F & B, Inc. Iowa Insurance Agency
</TABLE>
64 of 79
<PAGE> 33
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
(see Attached
STATE Chart) unless
OF otherwise
COMPANY ORGANIZATION indicated PRINCIPAL BUSINESS
<S> <C> <C>
Farmland Mutual Insurance Company Iowa Insurance Company
Financial Horizons Distributors Alabama Life Insurance Agency
Agency of Alabama, Inc.
Financial Horizons Distributors Ohio Life Insurance Agency
Agency of Ohio, Inc.
Financial Horizons Distributors Oklahoma Life Insurance Agency
Agency of Oklahoma, Inc.
Financial Horizons Distributors Texas Life Insurance Agency
Agency of Texas, Inc.
* Financial Horizons Investment Trust Massachusetts Investment Company
Financial Horizons Securities Oklahoma Broker Dealer
Corporation
Gates, McDonald & Company Ohio Cost Control Business
Gates, McDonald & Company of Nevada Nevada Self-Insurance Administration Claims
Examinations and Data Processing Services
Gates, McDonald & Company of New New York Workers Compensation Claims Administration
York, Inc.
Gates, McDonald Health Plus, Inc. Ohio Managed Care Organization
Greater La Crosse Health Plans, Inc. Wisconsin Writes Commercial Health and Medicare
Supplement Insurance
Insurance Intermediaries, Inc. Ohio Insurance Broker and Insurance Agency
Key Health Plan, Inc. California Pre-paid health plans
Landmark Financial Services of New New York Life Insurance Agency
York, Inc.
Leben Direkt Insurance Company Germany Life Insurance Company
Lone Star General Agency, Inc. Texas Insurance Agency
** MRM Investments, Inc. Ohio Owns and operates a Recreational Ski Facility
** National Casualty Company Michigan Insurance Company
National Casualty Company of America, Great Britain Insurance Company
Ltd.
** National Premium and Benefit Delaware Insurance Administrative Services
Administration Company
** Nationwide Advisory Services, Inc. Ohio Registered Broker-Dealer, Investment Manager
and Administrator
Nationwide Agency, Inc. Ohio Insurance Agency
Nationwide Agribusiness Insurance Iowa Insurance Company
Company
Nationwide Cash Management Company Ohio Investment Securities Agent
Nationwide Communications, Inc. Ohio Radio Broadcasting Business
Nationwide Community Urban Ohio Redevelopment of blighted areas within the
Redevelopment Corporation City of Columbus, Ohio
</TABLE>
65 of 79
<PAGE> 34
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
(see Attached
STATE Chart) unless
OF otherwise
COMPANY ORGANIZATION indicated PRINCIPAL BUSINESS
<S> <C> <C>
Nationwide Corporation Ohio Organized for the purpose of acquiring,
holding, encumbering, transferring, or
otherwise disposing of shares, bonds, and
other evidences of indebtedness,
securities, and contracts of other persons,
associations, corporations, domestic or
foreign and to form or acquire the control
of other corporations
* Nationwide Development Company Ohio Owns, leases and manages commercial real estate
Nationwide Financial Institution Delaware Insurance Agency
Distributors Agency, Inc.
Nationwide Financial Services, Inc. Delaware Holding Company
Nationwide General Insurance Company Ohio Insurance Company
Nationwide HMO, Inc. Ohio Health Maintenance Organization
* Nationwide Indemnity Company Ohio Reinsurance Company
Nationwide Insurance Enterprise Ohio Membership Non-Profit Corporation
Foundation
Nationwide Insurance Golf Charities, Ohio Membership Non-Profit Corporation
Inc.
* Nationwide Investing Massachusetts Investment Company
Foundation II
Nationwide Investing Foundation Michigan Investment Company
Nationwide Investment Services Oklahoma Registered Broker-Dealer in Deferred
Corporation Compensation Market
Nationwide Investors Services, Inc. Ohio Stock Transfer Agent
** Nationwide Life and Annuity Insurance Ohio Life Insurance Company
Company
** Nationwide Life Insurance Company Ohio Life Insurance Company
Nationwide Lloyds Texas Texas Lloyds Company
Nationwide Management Systems, Inc. Ohio Develops and operates Managed Care Delivery
System
Nationwide Mutual Fire Insurance Ohio Insurance Company
Company
Nationwide Mutual Insurance Company Ohio Insurance Company
Nationwide Properties, Ltd. Ohio Develops, owns and operates real estate and
real estate investments.
Nationwide Property and Casualty Ohio Insurance Company
Insurance Company
Nationwide Realty Investors, Ltd. Ohio Develops, owns and operates real estate and
real estate investments.
* Nationwide Separate Account Trust Massachusetts Investment Company
NEA Valuebuilder Investor Services of Alabama Life Insurance Agency
Alabama, Inc.
NEA Valuebuilder Investor Services of Arizona Life Insurance Agency
Arizona, Inc.
</TABLE>
66 of 79
<PAGE> 35
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
(see Attached
STATE Chart) unless
OF otherwise
COMPANY ORGANIZATION indicated PRINCIPAL BUSINESS
<S> <C> <C>
NEA Valuebuilder Investor Services of Montana Life Insurance Agency
Montana, Inc.
NEA Valuebuilder Investor Services of Nevada Life Insurance Agency
Nevada, Inc.
NEA Valuebuilder Investor Services of Ohio Life Insurance Agency
Ohio, Inc.
NEA Valuebuilder Investor Services of Oklahoma Life Insurance Agency
Oklahoma, Inc.
NEA Valuebuilder Investor Services of Texas Life Insurance Agency
Texas, Inc.
NEA Valuebuilder Investor Services of Wyoming Life Insurance Agency
Wyoming, Inc.
NEA Valuebuilder Investor Services, Delaware Life Insurance Agency
Inc.
NEA Valuebuilder Services Insurance Massachusetts Life Insurance Agency
Agency, Inc.
Neckura General Insurance Company Germany Insurance Company
Neckura Holding Company Germany Administrative Service for Neckura Insurance
Group
Neckura Insurance Company Germany Insurance Company
Neckura Life Insurance Company Germany Life Insurance Company
NWE, Inc. Ohio Special Investments
PEBSCO of Massachusetts Insurance Massachusetts Markets and Administers Deferred Compensation
Agency, Inc. Plans for Public Employees
PEBSCO of Texas, Inc. Texas Markets and Administers Deferred Compensation
Plans for Public Employees
Pension Associates of Wausau, Inc. Wisconsin Pension plan administration, record keeping
and consulting and compensation consulting
Physicians Plus Insurance Corporation Wisconsin Health Maintenance organization
Prevea Health Insurance Plan, Inc. Wisconsin Health Maintenance organization
Public Employees Benefit Services Delaware Markets and Administrates Deferred
Corporation Compensation Plans for Public Employees
Public Employees Benefit Services Alabama Markets and Administers Deferred Compensation
Corporation of Alabama Plans for Public Employees
Public Employees Benefit Services Arkansas Markets and Administers Deferred Compensation
Corporation of Arkansas Plans for Public Employees
Public Employees Benefit Services Montana Markets and Administers Deferred Compensation
Corporation of Montana Plans for Public Employees
Public Employees Benefit Services New Mexico Markets and Administers Deferred Compensation
Corporation of New Mexico Plans for Public Employees
Scottsdale Indemnity Company Ohio Insurance Company
</TABLE>
67 of 79
<PAGE> 36
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
(see Attached
STATE Chart) unless
OF otherwise
COMPANY ORGANIZATION indicated PRINCIPAL BUSINESS
<S> <C> <C>
Scottsdale Insurance Company Ohio Excess and surplus lines insurance company
Scottsdale Surplus Lines Insurance Arizona Excess and surplus lines insurance company
Company
SVM Sales GmbH, Neckura Insurance Germany Sales support for Neckura Insurance Group
Group
The Beak and Wire Corporation Ohio Radio Tower Joint Venture
Wausau Business Insurance Company Wisconsin Insurance Company
Wausau General Insurance Company Illinois Insurance Company
Wausau Insurance Company (U.K.) United Kingdom Insurance and Reinsurance Company
Limited
Wausau International Underwriters California Special Risks, Excess and Surplus Lines
Insurance Underwriting Manager
** Wausau Preferred Health Insurance Wisconsin Insurance and Reinsurance Company
Company
Wausau Service Corporation Wisconsin Holding Company
Wausau Underwriters Insurance Company Wisconsin Insurance Company
** West Coast Life Insurance Company California Life Insurance Company
</TABLE>
68 of79
<PAGE> 37
<TABLE>
<CAPTION>
NO. VOTING SECURITIES
STATE (see Attached Chart) unless
COMPANY OF ORGANIZATION otherwise indicated PRINCIPAL BUSINESS
<S> <C> <C> <C>
* MFS Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* NACo Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide DC Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide DCVA-II Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Life Separate Account No. 1 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Multi-Flex Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide VA Separate Account-A Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Separate Account
* Nationwide VA Separate Account-B Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Separate Account
Nationwide VA Separate Account-C Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Separate Account
* Nationwide VA Separate Account-Q Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Separate Account
* Nationwide Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-II Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-3 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-4 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-5 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Fidelity Advisor Variable Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account Account
* Nationwide Variable Account-6 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-8 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide VL Separate Ohio Nationwide Life and Annuity Issuer of Life Insurance Policies
Account-A Separate Account
Nationwide VL Separate Ohio Nationwide Life and Annuity Issuer of Life Insurance Policies
Account-B Separate Account
* Nationwide VLI Separate Account Ohio Nationwide Life Separate Issuer of Life Insurance Policies
Account
* Nationwide VLI Separate Account-2 Ohio Nationwide Life Separate Issuer of Life Insurance Policies
Account
* Nationwide VLI Separate Account-3 Ohio Nationwide Life Separate Issuer of Life Insurance Policies
Account
</TABLE>
69 of 79
<PAGE> 38
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE(R) (left side)
<S> <C> <C> <C>
- ------------------------
| NATIONWIDE INSURANCE |
| GOLF CHARITIES, INC. |
| |
| MEMBERSHIP |
| NONPROFIT |
| CORPORATION |
- ------------------------
------------------------------------------
| EMPLOYERS INSURANCE OF WAUSAU |
| A MUTUAL COMPANY |
| (EMPLOYERS) |
| |========================================
| Contribution Note Cost |
| ----------------- ---- |
| Casualty $400,000,000 |
------------------------------------------
|
-----------------------------------------------------------------------
| | |
- --------------------------- --------------------------- ---------------------------- ---------------------------
| SAN DIEGO LOTUS | | WAUSAU INSURANCE CO. | | WAUSAU SERVICE | | |
| CORPORATION | | (U.K.) LIMITED | | CORPORATION (WSC) | | NATIONWIDE LLOYDS |
|Common Stock: 748,212 | |Common Stock: 8,506,800 | |Common Stock: 1,000 Shares| | |
|------------ Shares | |------------ Shares | |------------ | | |
| | | | | |=========| |
| Cost | | Cost | | Cost | || | A TEXAS LLOYDS |
| ---- | | ---- | | ---- | || | |
|Employers- | |Employers- | |Employers- | || | |
|100% $29,000,000| |100% $18,683,300| |100% $176,763,000| || | |
- --------------------------- --------------------------- ---------------------------- || ---------------------------
| ||
--------------------------------------------------------------------- ||
| | | ||
- --------------------------- | --------------------------- | ---------------------------- | || ---------------------------
| WAUSAU BUSINESS | | | COMPANIES AGENCY | | | COUNTRYWIDE SERVICES | | || | |
| INSURANCE COMPANY | | | OF KENTUCKY, INC. | | | CORPORATION | | || | |
|Common Stock: 10,900,000 | | |Common Stock: 1,000 | | |Common Stock: 100 Shares | | || | COMPANIES |
|------------ Shares | | |------------ Shares | | |------------ | | || | AGENCY OF |
| |---|---| | |---| | | ||==| TEXAS, INC. |
| Cost | | | Cost | | | Cost | | || | |
| ---- | | | ---- | | | ---- | | || | |
|WSC-100% $33,800,000| | |WSC-100% $1,000 | | |WSC-100% $145,852 | | || | |
- --------------------------- | --------------------------- | ---------------------------- | || ---------------------------
| | | ||
- --------------------------- | --------------------------- | ---------------------------- | || ---------------------------
| WAUSAU UNDERWRITERS | | | COMPANIES AGENCY | | | WAUSAU GENERAL | | || | |
| INSURANCE COMPANY | | | OF MASSACHUSETTS, INC. | | | INSURANCE COMPANY | | || | |
|Common Stock: 8,750 | | |Common Stock: 1,000 | | |Common Stock: 200,000 | | || | COMPANIES ANNUITY |
|------------ Shares | | |------------ Shares | | |------------ Shares | | || | AGENCY OF |
| |---|---| | |---| | | ====| TEXAS, INC. |
| Cost | | | Cost | | | Cost | | | |
| ---- | | | ---- | | | ---- | | | |
|WSC-100% $69,560,006| | |WSC-100% $1,000 | | |WSC-100% $39,000,000 | | | |
- --------------------------- | --------------------------- | ---------------------------- | ---------------------------
| | |
- --------------------------- | --------------------------- | ---------------------------- | ---------------------------
| GREATER LA CROSSE | | | COMPANIES AGENCY | | | WAUSAU INTERNATIONAL | | | AMERICAN MARINE |
| HEALTH PLANS, INC. | | | OF NEW YORK, INC. | | | UNDERWRITERS | | | UNDERWRITERS, INC. |
|Common Stock: 3,000 | | |Common Stock: 1,000 | | |Common Stock: 1,000 | | |Common Stock: 20 |
|------------ Shares | | |------------ Shares | | |------------ Shares | | |------------ Shares |
| |---|---| | |---| | |------| |
| Cost | | | Cost | | | Cost | | | Cost |
| ---- | | | ---- | | | ---- | | | ---- |
|WSC-33.3% $861,761 | | |WSC-100% $1,000 | | |WSC-100% $10,000 | | |WSC-100% $248,222 |
- --------------------------- | --------------------------- | ---------------------------- | ---------------------------
| | |
- --------------------------- | --------------------------- | ---------------------------- | ---------------------------
| COMPANIES AGENCY | | | COMPANIES AGENCY | | | COMPANIES AGENCY | | | COMPANIES AGENCY |
| OF ALABAMA, INC. | | | OF PENNSYLVANIA, INC. | | | INSURANCE SERVICES | | | OF ILLINOIS, INC. |
| | | | | | | OF CALIFORNIA | | | |
|Common Stock: 1,000 | | |Common Stock: 1,000 | | |Common Stock: 1,000 | | |Common Stock: 250 |
|------------ Shares | | |------------ Shares | |---|------------ Shares | |------|------------ Shares |
| |---|---| | | | | | | |
| Cost | | | Cost | | | Cost | | | Cost |
| ---- | | | ---- | | | ---- | | | ---- |
|WSC-100% $100 | | |WSC-100% $100 | | |WSC-100% $1,000 | | |WSC-100% $2,500 |
- --------------------------- | --------------------------- | ---------------------------- | ---------------------------
| | |
- --------------------------- | --------------------------- | ---------------------------- | ---------------------------
| COMPANIES AGENCY | | | COMPANIES AGENCY | | | PHYSICIANS PLUS | | | COMPANIES |
| OF IDAHO, INC. | | | OF PHOENIX, INC. | | | INSURANCE | | | AGENCY, INC. |
| | | | | | | CORPORATION | | | |
|Common Stock: 1,000 | | |Common Stock: 1,000 | | |Common Stock: 7,150 | | |Common Stock: 100 |
|------------ Shares | | |------------ Shares | | |------------ Shares | | |------------ Shares |
| |-------| | |---|Preferred Stock: 11,540 | |------| |
| | | | | |--------------- Shares | | | |
| | | | | | | | | |
| Cost | | Cost | | | Cost | | | Cost |
| ---- | | ---- | | | ---- | | | ---- |
|WSC-100% $1,000 | |WSC-100% $1,000 | | |WSC-33 1/3% $6,215,459| | |WSC-100% $10,000 |
- --------------------------- --------------------------- | ---------------------------- | ---------------------------
| |
| ---------------------------- | ---------------------------
| | PREVEA HEALTH | | | PENSION ASSOCIATES |
| | INSURANCE PLAN, INC. | | | OF WAUSAU, INC. |
| |Common Stock: 3,000 Shares| | |Common Stock: 1,000 |
| |------------ | | |------------ Shares |
----| | -------| |
| | | |
| Cost | |Companies Cost |
| ---- | |Agency, Inc. ---- |
|WSC-33 1/3% $500,000 | |(Wisconsin)-100% $10,000 |
---------------------------- ---------------------------
</TABLE>
<PAGE> 39
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE(R) (middle)
<S> <C> <C>
-----------------------------------------------------------------------------
| |
| |
| NATIONWIDE MUTUAL |
=======| INSURANCE COMPANY |================================================
| (CASUALTY) |
| |
| |
-----------------------------------------------------------------------------
| || |
| || -------------------------------------------------------------
| || ---------------------------------------------------------------------------------------
| || | |
- -------------------------------- || | -------------------------------- --------------------------------
| ALLNATIONS, INC. | || | | NATIONWIDE GENERAL | | NECKURA HOLDING |
|Common Stock: 3,136 Shares | || | | INSURANCE COMPANY | | COMPANY (NECKURA) |
|------------ | || | | | | |
| Cost | || | |Common Stock: 20,000 | |Common Stock: 10,000 |
| ---- | || | |------------ Shares | |------------ Shares |
|Casualty-24.5% $88,320 | || | | Cost | | Cost |
|Fire-24.5% $88,463 | || | | ---- | | ---- |
|Preferred Stock: 1,466 Shares | || |----|Casualty-100% $5,944,422 | ---------|Casualty-100% $87,943,140 |
|--------------- | || | | | | | |
| Cost | || | | | | | |
| ---- | || | | | | | |
|Casualty-7.7% $100,000 | || | | | | | |
|Fire-7.7% $100,000 | || | | | | | |
- -------------------------------- || | -------------------------------- | --------------------------------
|| | |
- -------------------------------- || | -------------------------------- | --------------------------------
| FARMLAND MUTUAL | || | | NATIONWIDE PROPERTY | | | NECKURA |
| INSURANCE COMPANY | || | | AND CASUALTY | | | INSURANCE COMPANY |
|Guaranty Fund | || | | INSURANCE COMPANY | | | |
|------------ |========= |----|Common Stock: 60,000 | |--------|Common Stock: 6,000 |
|Certificate | | |------------ Shares | | |------------ Shares |
|----------- Cost | | | Cost | | | Cost |
| ---- | | | ---- | | |Neckura- ---- |
|Casualty $500,000 | | |Casualty-100% $6,000,000 | | |100% DM 6,000,000 |
- -------------------------------- | -------------------------------- | --------------------------------
| | |
- -------------------------------- | -------------------------------- | --------------------------------
| F & B, INC. | | | COLONIAL INSURANCE | | | NECKURA LIFE |
| | | | COMPANY OF CALIFORNIA | | | INSURANCE COMPANY |
|Common Stock: 1 Share | | | (COLONIAL) | | | |
|------------ | |----|Common Stock: 1,750 | |--------|Common Stock: 4,000 |
| Cost | | |------------ Shares | | |------------ Shares |
| ---- | | | Cost | | | Cost |
|Farmland | | | ---- | | | ---- |
|Mutual-100% $10 | | |Casualty-100% $11,750,000 | | |Neckura-100% DM 15,825,681 |
- -------------------------------- | -------------------------------- | --------------------------------
| |
- -------------------------------- | -------------------------------- | --------------------------------
| NATIONWIDE AGRIBUSINESS | | | SCOTTSDALE | | | NECKURA GENERAL |
| INSURANCE COMPANY | | | INSURANCE COMPANY | | | INSURANCE COMPANY |
|Common Stock: 1,000,000 | | | | | | |
|------------ Shares | | |Common Stock: 30,136 | | |Common Stock: 1,500 |
| Cost |------------------|------------ Shares | |--------|------------ Shares |
| ---- | | Cost | | | Cost |
|Casualty-99.9% $26,714,335 | | ---- | | | ---- |
|Other Capital: | |Casualty-100% $150,000,000 | | |Neckura-100% DM 1,656,925 |
|------------- | | | | | |
|Casualty-Ptd. $ 713,567 | | | | | |
- -------------------------------- -------------------------------- | --------------------------------
| |
-------------------------------- | --------------------------------
| SCOTTSDALE | | | COLUMBUS INSURANCE |
| SURPLUS LINES | | | BROKERAGE AND SERVICE |
| INSURANCE COMPANY | | | GmbH |
| | | |Common Stock: 1 Share |
| | |--------|------------ |
| "NEWLY FORMED" | | | Cost |
| | | | ---- |
| | | |Neckura-100% DM 51,639 |
| | | | |
| | | | |
-------------------------------- | --------------------------------
| |
-------------------------------- | --------------------------------
| NATIONAL PREMIUM & | | | LEBEN DIREKT |
| BENEFIT ADMINISTRATION | | | INSURANCE COMPANY |
| COMPANY | | | |
|Common Stock: 10,000 | | |Common Stock: 4,000 Shares |
|------------ Shares |------------------|------------ |
| Cost | | Cost |
| ---- | | ---- |
|Scottsdale-100% $10,000 | |Neckura-100% DM 4,000,000 |
| | | |
| | | |
-------------------------------- --------------------------------
-------------------------------- --------------------------------
| SVM SALES | | AUTO DIREKT |
| GmbH | | INSURANCE COMPANY |
| | | |
|Common Stock: 50 Shares | |Common Stock: 1,500 Shares |
|------------ | |------------ |
| Cost | | Cost |
| ---- | | ---- |
|Neckura-100% DM 50,000 | |Neckura-100% DM 1,643,149 |
| | | |
| | | |
-------------------------------- --------------------------------
</TABLE>
<PAGE> 40
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE(R) (right side)
<S> <C> <C> <C>
------------------------
| NATIONWIDE INSURANCE |
| ENTERPRISE FOUNDATION|
| |
| MEMBERSHIP |
| NONPROFIT |
| CORPORATION |
------------------------
-----------------------------------------------------------------------------
| |
| |
| NATIONWIDE MUTUAL |
=======| FIRE INSURANCE COMPANY |
| (FIRE) |
| |
| |
-----------------------------------------------------------------------------
|
- --------------- --------------------------------------------------
| |
- ----------------------------------------------------------------------------------------------------------------- |
| | | |
| -------------------------------- | -------------------------------- ----------------------------------
| | SCOTTSDALE | | | NATIONWIDE | | NATIONWIDE |
| | INDEMNITY COMPANY | | | COMMUNITY URBAN | | CORPORATION |
| | | | | REDEVELOPMENT | | |
| | | | | CORPORATION | |Common Stock: Control: |
| |Common Stock: 50,000 | | |Common Stock: 10 Shares | |------------ ------- |
|-----|------------ Shares | |----|------------ | |$13,642,432 100% |
| | Cost | | | Cost | | Shares Cost |
| | ---- | | | ---- | | ------ ---- |
| |Casualty-100% $8,800,000 | | |Casualty-100% $1,000 | |Casualty 12,992,922 $751,352,485|
| | | | | | |Fire 649,510 24,007,936|
| | | | | | | (See Page 2) |
| -------------------------------- | -------------------------------- ----------------------------------
| |
| -------------------------------- | --------------------------------
| | NATIONWIDE | | | INSURANCE |
| | INDEMNITY COMPANY | | | INTERMEDIARIES, INC. |
| | | | | |
|-----|Common Stock: 28,000 | |----|Common Stock: 1,615 |
| |------------ Shares | | |------------ Shares |
| | Cost | | | Cost |
| | ---- | | | ---- |
| |Casualty-100% $294,529,000 | | |Casualty-100% $1,615,000 |
| -------------------------------- | --------------------------------
| |
| -------------------------------- | --------------------------------
| | LONE STAR | | | NATIONWIDE CASH |
| | GENERAL AGENCY, INC. | | | MANAGEMENT COMPANY |
| | | | |Common Stock: 100 Shares |
------|Common Stock: 1,000 | |----|------------ |
|------------ Shares | | | Cost |
| Cost | | | ---- |
| ---- | | |Casualty-90% $9,000 |
|Casualty-100% $5,000,000 | | |NW Adv. Serv. 1,000 |
-------------------------------- | --------------------------------
|| |
-------------------------------- | --------------------------------
| COLONIAL COUNTY MUTUAL | | | CALIFORNIA CASH |
| INSURANCE COMPANY | | | MANAGEMENT |
| | | | |
|Surplus Debentures | | |Common Stock: 90 Shares |
|------------------ | |----|------------ |
| Cost | | | Cost |
| ---- | | | ---- |
|Colonial $500,000 | | |Casualty-100% $9,000 |
|Lone Star 150,000 | | | |
-------------------------------- | --------------------------------
|
| -------------------------------- --------------------------------
| | NATIONWIDE | | THE BEAK AND |
| | COMMUNICATIONS, INC. | | WIRE CORPORATION |
| |Common Stock: 14,750 | | |
| |------------ Shares | |Common Stock: 750 Shares |
-----| Cost |------------------|------------ |
| ---- | | Cost |
|Casualty-100% $11,510,000 | | ---- |
|Other Capital: | |NW Comm-100% $531,000 |
|------------- | | |
|Casualty-Ptd. 1,000,000 | | |
-------------------------------- --------------------------------
Subsidiary Companies -- Solid Line
Contractual Association -- Double Lines
March 6, 1997
</TABLE>
<PAGE> 41
<TABLE>
<CAPTION>
(Left Side)
NATIONWIDE INSURANCE ENTERPRISE(R)
------------------------------------------------
| EMPLOYERS INSURANCE |
| OF WAUSAU |==========================================
| A MUTUAL COMPANY |
------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------
| | |
--------------------------- --------------------------- ---------------------------
| NATIONWIDE LIFE INSURANCE | | NATIONWIDE | | NATIONWIDE FINANCIAL |
| COMPANY (NW LIFE) | | FINANCIAL SERVICES | | INSTITUTION DISTRIBUTORS |
| | | CAPITAL TRUST | | AGENCY, INC. (NFIDAI) |
| Common Stock: 3,814,779 | | Preferred Stock: | | Common Stock: 1,000 |
| ------------ Shares | | --------------- | | ------------ Shares |
| | | | | |
| NFS--100% | | NFS--100% | | NFS--100% |
--------------------------- --------------------------- ---------------------------
| ||
--------------------------- | --------------------------- --------------------------- || --------------------------
| NATIONWIDE LIFE AND | | | NATIONWIDE | | FINANCIAL HORIZONS | || | |
| ANNUITY INSURANCE COMPANY | | | ADVISORY SERVICES | | DISTRIBUTORS AGENCY | || | |
| (NW LIFE) | | | (NW ADV. SERV.) | | OF ALABAMA, INC. | || | |
| Common Stock: 68,000 | | | Common Stock: 7,676 | | Common Stock: 10,000 | || | FINANCIAL HORIZONS |
| ------------ Shares |--|--| ------------ Shares |==|| | ------------ Shares |--||==| DISTRIBUTORS AGENCY |
| | | | | || | | || | OF OHIO, INC. |
| Cost | | | Cost | || | Cost | || | |
| ---- | | | ---- | || | ---- | || | |
| NW Life--100% $58,070,003 | | | NW Life--100% $5,996,261 | || | NFIDIA--100% $100 | || | |
--------------------------- | --------------------------- || --------------------------- || --------------------------
| || ||
--------------------------- | --------------------------- || --------------------------- || --------------------------
| NWE, INC. | | | NATIONWIDE | || | LANDMARK FINANCIAL | || | |
| | | | INVESTOR SERVICES, INC. | || | SERVICES OF | || | |
| | | | | || | NEW YORK, INC. | || | |
| Common Stock: 100 | | | Common Stock: 5 | || | Common Stock: 10,000 | || | FINANCIAL HORIZONS |
| ------------ Shares |--| | ------------ Shares |==|| | ------------ Shares | ||==| DISTRIBUTORS AGENCY |
| | | | | || | | || | OF OKLAHOMA, INC. |
| Cost | | | Cost | || | Cost | || | |
| ---- | | | ---- | || | ---- | || | |
| NW Life--100% $35,971,375 | | | NW Adv. Serv.--100% $5,000| || | NFIDIA--100% $10,100 | || | |
--------------------------- | --------------------------- || --------------------------- || --------------------------
| || ||
--------------------------- | --------------------------- || --------------------------- || --------------------------
| NATIONWIDE INVESTMENT | | | FINANCIAL HORIZONS | || | FINANCIAL HORIZONS | || | |
| SERVICES CORPORATION | | | INVESTMENT TRUST | || | SECURITIES CORP. | || | |
| | | | | || | | || | |
| Common Stock: 5,000 | | | | || | Common Stock: 10,000 | || | FINANCIAL HORIZONS |
| ------------ Shares |--| | |==|| | ------------ Shares | ||==| DISTRIBUTORS AGENCY |
| | | | | || | | || | OF TEXAS, INC. |
| Cost | | | | || | Cost | || | |
| ---- | | | | || | ---- | || | |
| NW Life--100% $529,728 | | | COMMON LAW TRUST | || | NFIDIA--100% $153,000 | || | |
--------------------------- | --------------------------- || --------------------------- || --------------------------
| || ||
--------------------------- | --------------------------- || --------------------------- || --------------------------
| NATIONWIDE LIFE INSURANCE | | | NATIONWIDE | || | AFFILIATE AGENCY, INC. | || | |
| COMPANY OF NEW YORK | | | INVESTING | || | | || | |
| | | | FOUNDATION | || | | || | |
| Common Stock: | | | | || | Common Stock: 100 | || | AFFILIATE |
| ------------ Shares |--| | |==|| | ------------ Shares |__||==| AGENCY OF |
| Cost | | | | || | | | OHIO, INC. |
| ---- | | | | || | Cost | | |
| NW Life--100% | | | | || | ---- | | |
| (Proposed) | | | COMMON LAW TRUST | || | NFIDIA--100% $100 | | |
--------------------------- | --------------------------- || --------------------------- --------------------------
| ||
--------------------------- | --------------------------- ||
| NATIONWIDE REALTY | | | NATIONWIDE | ||
| INVESTORS, LTD. | | | INVESTING | ||
| | | | FOUNDATION II | ||
| Units: | | | | ||
| ------ | | | |==||
| | | | | ||
| | | | | ||
| NW Life--90% | | | | ||
| NW Mutual--10% | | | COMMON LAW TRUST | ||
--------------------------- | --------------------------- ||
| ||
--------------------------- | --------------------------- ||
| NATIONWIDE REALTY | | | NATIONWIDE | ||
| INVESTORS, LTD. | | | SEPARATE ACCOUNT | ||
| | | | TRUST | ||
| Units: | | | | ||
| ------ |__| | |__||
| | | |
| | | |
| NW Life--97.6% | | |
| NW Mutual--2.4% | | COMMON LAW TRUST |
--------------------------- ---------------------------
</TABLE>
<PAGE> 42
<TABLE>
<CAPTION>
(Center)
<S> <C> <C> <C> <C> <C> <C>
------------------------------------------------
| NATIONWIDE MUTUAL |
========================================| INSURANCE COMPANY |==========================================
| (CASUALTY) |
------------------------------------------------
|
| ----------------------------------------------------
| |
---------------------------------------
| NATIONWIDE CORPORATION (NW CORP) |
| Common Stock: Control |
| ------------ ------- |
| 13,642,432 100% |
| Shares Cost |
| ------ ---- |
| Casualty 12,992,922 $751,352,485 |
| Fire 649,510 24,007,936 |
---------------------------------------
|
----------------------------------------------------------------------------------------------------------------------
| | | |
--------------------------- -------------------------- ----------------------------- ----------------------------
| NATIONWIDE FINANCIAL | | MRM INVESTMENTS, INC. | | WEST COAST LIFE | | NATIONAL CASUALTY |
| SERVICES, INC. (NFS) | | | | INSURANCE COMPANY | | COMPANY |
| | | | | | | (NC) |
| Common Stock: Control | | Common Stock: 1 | | Common Stock: 1,000,000 | | Common Stock: 100 |
| ------------ ------- | | ------------ Share | | ------------ Shares | | ------------ Shares |
| | | | | | | |
| | | Cost | | Cost | | Cost |
| Class A Public--100% | | ---- | | ---- | | ---- |
| Class B NW Corp--100% | | NW Corp.--100% $1,339,218 | | NW Corp.--100% $152,946,930 | | NW Corp.--100% $73,442,439 |
--------------------------- --------------------------- ----------------------------- ----------------------------
| |
- -------------------------------------------------------------------------------- |
| | |
--------------------------- --------------------------- ----------------------------
| PUBLIC EMPLOYEES BENEFIT | | NEA VALUEBUILDER | | NCC OF AMERICA, INC. |
| SERVICES CORPORATION | | INVESTOR SERVICES, INC. | | (INACTIVE) |
| (PEBSCO) | | (NEA) | | |
| Common Stock: 236,494 |==|| | Common Stock: 500 | | |
| ------------ Shares | || | ------------ Shares | | |
| | || | | | |
| NFS--100% | || | NFS--100% | | NFS--100% |
--------------------------- || ----------------------------- ----------------------------
|| ||
--------------------------- || --------------------------- ||
| PEBSCO OF | || | NEA VALUEBUILDER | ||
| ALABAMA | || | INVESTOR SERVICES | ||
| | || | OF ALABAMA, INC. | ||
| Common Stock: 100,000 | || | Common Stock: 500 | ||
| ------------ Shares |--|| | ------------ Shares |--||
| | || | | ||
| Cost | || | Cost | ||
| ---- | || | ---- | ||
| PEBSCO--100% $1,000 | || | NEA--100% $5,000 | ||
--------------------------- || --------------------------- ||
|| ||
--------------------------- || --------------------------- ||
| PEBSCO OF | || | NEA VALUEBUILDER | ||
| ARKANSAS | || | INVESTOR SERVICES | ||
| | || | OF ARIZONA, INC | ||
| Common Stock: 50,000 | || | Common Stock: 100 | ||
| ------------ Shares |--|| | ------------ Shares |--||
| | || | | ||
| Cost | || | Cost | ||
| ---- | || | ---- | ||
| PEBSCO--100% $500 | || | NEA--100% $1,000 | ||
--------------------------- || --------------------------- ||
|| ||
--------------------------- || --------------------------- ||
| PEBSCO OF MASSACHUSETTS | || | NEA VALUEBUILDER | ||
| INSURANCE AGENCY, INC. | || | INVESTOR SERVICES | ||
| | || | OF MONTANA, INC. | ||
| Common Stock: 1,000 | || | Common Stock: 500 | ||
| ------------ Shares |--|| | ------------ Shares |--||
| | || | | ||
| Cost | || | Cost | ||
| ---- | || | ---- | ||
| PEBSCO--100% $1,000 | || | NEA--100% $500 | ||
--------------------------- || --------------------------- ||
|| ||
--------------------------- || --------------------------- || ---------------------------
| PEBSCO OF | || | NEA VALUEBUILDER | || | |
| MONTANA | || | INVESTOR SERVICES | || | |
| | || | OF NEVADA, INC. | || | NEA VALUEBUILDER |
| Common Stock: 500 | || | Common Stock: 500 | || | INVESTOR SERVICES |
| ------------ Shares |--|| | ------------ Shares | ||==| OF OHIO, INC. |
| | || | | || | |
| Cost | || | Cost | || | |
| ---- | || | ---- | || | |
| PEBSCO--100% $500 | || | NEA--100% $500 | || | |
--------------------------- || --------------------------- || ---------------------------
|| ||
--------------------------- || --------------------------- || ---------------------------
| PEBSCO OF | || | NEA VALUEBUILDER | || | |
| NEW MEXICO | || | INVESTOR SERVICES | || | |
| | || | OF WYOMING, INC. | || | NEA VALUEBUILDER |
| Common Stock: 1,000 | || | Common Stock: 500 | || | INVESTOR SERVICES |
| ------------ Shares |--|| | ------------ Shares | ||==| OF OKLAHOMA, INC. |
| | || | | || | |
| Cost | || | Cost | || | |
| ---- | || | ---- | || | |
| PEBSCO--100% $1,000 | || | NEA--100% $500 | || | |
--------------------------- || --------------------------- || ---------------------------
|| ||
--------------------------- || --------------------------- || ----------------------------
| | || | NEA VALUEBUILDER | || | |
| | || | SERVICES INSURANCE | || | |
| PEBSCO OF | || | AGENCY, INC. | || | NEA VALUEBUILDER |
| TEXAS, INC. | || | Common Stock: 100 | || | INVESTOR SERVICES |
| |==|| | ------------ Shares |__||==| OF TEXAS, INC. |
| | | | | |
| | | Cost | | |
| | | ---- | | |
| | | NEA--100% $1,000 | | |
--------------------------- --------------------------- ----------------------------
</TABLE>
<PAGE> 43
<TABLE>
<CAPTION>
(Right)
<S> <C> <C> <C> <C> <C> <C>
------------------------------------------------
| NATIONWIDE MUTUAL |
========================================| FIRE INSURANCE COMPANY |
| (FIRE) |
------------------------------------------------
|
- -----------------------------------------------------------------|
- ----------------------------------------------------------------------------------------------
| | |
--------------------------- ------------------------------ ------------------------------
| GATES, MCDONALD | | EMPLOYERS LIFE INSURANCE | | NATIONWIDE HMO, INC. |
| & COMPANY (GATES) | | OF WAUSAU (ELIOW) | | (NW HMO) |
| | | | | |
| Common Stock: 254 | | Common Stock: 250,000 | | Common Stock: 100 |
|-- | ------------ Shares | |--| ------------ Shares | |--| ------------ Shares |
| | | | | | | | |
| | Cost | | | Cost | | | Cost |
| | ---- | | | ---- | | | ---- |
| | NW CORP.--100% $25,683,532 | | | NW CORP.--100% $126,509,480 | | | NW CORP.--100% $14,603,732 |
| ----------------------------- | ------------------------------ | ------------------------------
| | |
| --------------------------- | ------------------------------ | ------------------------------
| | GATES, MCDONALD & COMPANY | | | WAUSAU PREFERRED | | | NATIONWIDE MANAGEMENT |
| | OF NEW YORK, INC. | | | HEALTH INSURANCE CO. | | | SYSTEMS, INC. |
| | | | | | | | |
| | Common Stock: 3 | | | Common Stock: 250,000 | | | Common Stock: 100 |
|-- | ------------ Shares | |--| ------------ Shares | |--| ------------ Shares |
| | | | | | | | |
| | Cost | | | Cost | | | NW HMO Cost |
| | ---- | | | ---- | | | ---- |
| | GATES--100% $106,947 | | | NW CORP.--100% $57,413,193 | | | Inc.--100% $25,149 |
| ----------------------------- | ------------------------------ | ------------------------------
| | |
| ----------------------------- | ------------------------------ | ------------------------------
| | GATES, MCDONALD & COMPANY | | | KEY HEALTH PLAN, INC. | | | NATIONWIDE |
| | OF NEVADA | | | | | | AGENCY, INC. |
| | | | | | | | |
| | Common Stock: 40 | | | Common Stock: 1,000 | | | Common Stock: 100 |
|-- | ------------ Shares | |--| ------------ Shares | |--| ------------ Shares |
| | | | | | | |
| | Cost | | Cost | | | NW HMO Cost |
| | ---- | | ---- | | | ---- |
| | Gates--100% $93,750 | | ELIOPW--80% $2,700,000 | | | Inc.--99% $116,077 |
| ----------------------------- ------------------------------ | ------------------------------
|
| -----------------------------
| | GATES, MCDONALD |
| | HEALTH PLUS, INC. |
| | |
| | Common Stock: 200 |
|-- | ------------ Shares |
| |
| Cost |
| ---- |
| NW CORP.--100% $2,000,000 |
-----------------------------
Subsidiary Companies -- Solid Line
Contractual Association -- Double Line
Partnership Interest -- Dotted Line
March 6, 1997
Page 2
</TABLE>
<PAGE> 44
Item 31. Number of Contract Owners
The number of contract Owners of Qualified and Non-Qualified
Contracts as of March 1, 1997, was 5 and 0, respectively.
Item 32. Indemnification
Provision is made in the Company's Amended Code of Regulations and
expressly authorized by the General Corporation Law of the State
of Ohio, for indemnification by the Company of any person who was
or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative by reason
of the fact that such person is or was a director, officer or
employee of the Company, against expenses, including attorneys'
fees, judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action,
suit or proceeding, to the extent and under the circumstances
permitted by the General Corporation Law of the State of Ohio.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 ("Act") may be permitted to directors,
officers or persons controlling the Company pursuant to the
foregoing provisions, the Company has been informed that in the
opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable
Item 33. Business and Other Connections of Investment Advisers
Not Applicable.
Item 34. Principal Underwriter
Not Applicable.
Item 35. Location of Accounts and Records
Robert O. Cline
Nationwide Life Insurance Company
One Nationwide Plaza
Columbus, OH 43216
Item 36. Management Services
Not Applicable
Item 37. Undertakings
The Registrant hereby undertakes to:
(a) File a post-effective amendment to this registration
statement as frequently as is necessary to ensure that the
audited financial statements in the registration statement
are never more than 16 months old for so long as payments
under the variable annuity contracts may be accepted;
(b) Include either (1) as part of any application to purchase a
contract offered by the prospectus, a space that an
applicant can check to request a Statement of Additional
Information, or (2) a post card or similar written
communication affixed to or included in the prospectus that
the applicant can remove to send for a Statement of
Additional Information; and
(c) Deliver any Statement of Additional Information and any
financial statements required to be made available under
this Form promptly upon written or oral request.
(d) Represent that the fees and charges deducted under the
Contract in the aggregate are reasonable in relation to the
services rendered, the expenses expected to be incurred, and
the risks assumed by the Company.
72 of 79
<PAGE> 45
OFFERED BY
NATIONWIDE
LIFE INSURANCE COMPANY
Group Common Stock
Variable Annuity Contracts
Separate Account No. 1
PROSPECTUS
MAY 1, 1997
73 of 79
<PAGE> 46
Accountants' Consent and Independent Auditors' Report on
Financial Statement Schedules
The Board of Directors of Nationwide Life Insurance Company and
Contract Owners of Nationwide Life Insurance Company Separate Account No. 1:
The audits referred to in our report on Nationwide Life Insurance Company (the
Company) dated January 31, 1997, included the related financial statement
schedules as of December 31, 1996, and for each of the years in the three-year
period ended December 31, 1996, included in the registration statement. These
financial statement schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statement schedules based on our audits. In our opinion, such 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.
We consent to the use of our reports included herein and to the reference to
our firm under the heading "Investment Advisory and Other Services" in the
Statement of Additional Information.
KPMG Peat Marwick LLP
Columbus, Ohio
April 28, 1997
74 of 79
<PAGE> 47
(Stamped sheet 039)
<PAGE> 48
(Stamped sheet 040)
<PAGE> 49
(Stamped sheet 041)
<PAGE> 50
(Stamped sheet 042)
<PAGE> 51
SIGNATURES
As required by the Securities Act of 1933, the Registrant, SEPARATE
ACCOUNT NO. 1, certifies that it meets the requirements of Securities Act Rule
485(b) for effectiveness of this Post-Effective Amendment and has caused this
Post-Effective Amendment to be signed on its behalf in the City of Columbus, and
State of Ohio, on this 28th day of April, 1997.
SEPARATE ACCOUNT NO. 1
-----------------------------------------------
(Registrant)
NATIONWIDE LIFE INSURANCE COMPANY
-----------------------------------------------
(Depositor)
By/s/JOSEPH P. RATH
-----------------------------------------------
Joseph P. Rath
Vice President and
Associate General Counsel
As required by the Securities Act of 1933, this Post-Effective Amendment has
been signed by the following persons in the capacities indicated on the 28th day
of April, 1997.
Signature Title
LEWIS J. ALPHIN Director
- -----------------------------
Lewis J. Alphin
KEITH W. ECKEL Director
- -----------------------------
Keith W. Eckel
WILLARD J. ENGEL Director
- -----------------------------
Willard J. Engel
FRED C. FINNEY Director
- -----------------------------
Fred C. Finney
CHARLES L. FUELLGRAF, JR. Director
- -----------------------------
Charles L. Fuellgraf, Jr.
JOSEPH J. GASPER President/Chief Operating Officer and Director
- -----------------------------
Joseph J. Gasper
HENRY S. HOLLOWAY Chairman of the Board and Director
- -----------------------------
Henry S. Holloway
Chairman and Chief Executive Officer--Nationwide
D. RICHARD MCFERSON Insurance Enterprise and Director
- -----------------------------
D. Richard McFerson
DAVID O. MILLER Director
- -----------------------------
David O. Miller
C. RAY NOECKER Director
- -----------------------------
C. Ray Noecker
ROBERT A. OAKLEY Executive Vice President-Chief Financial Officer
- -----------------------------
Robert A. Oakley
JAMES F. PATTERSON Director By/s/JOSEPH P. RATH
- ----------------------------- --------------------------
James F. Patterson Joseph P. Rath
ARDEN L. SHISLER Director
- -----------------------------
Arden L. Shisler
ROBERT L. STEWART Director
- -----------------------------
Robert L. Stewart
NANCY C. THOMAS Director
- -----------------------------
Nancy C. Thomas
HAROLD W. WEIHL Director
- -----------------------------
Harold W. Weihl
79 of 79
<PAGE> 52
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that each of the undersigned as
directors and/or officers of NATIONWIDE LIFE INSURANCE COMPANY, and NATIONWIDE
LIFE AND ANNUITY INSURANCE COMPANY, both Ohio corporations, which have filed or
will file with the U.S. Securities and Exchange Commission under the provisions
of the Securities Act of 1933, as amended, various Registration Statements and
amendments thereto for the registration under said Act of Individual Deferred
Variable Annuity Contracts in connection with MFS Variable Account, Nationwide
Variable Account, Nationwide Variable Account-II, Nationwide Variable Account-3,
Nationwide Variable Account-4, Nationwide Variable Account-5, Nationwide
Variable Account-6, Nationwide Fidelity Advisor Variable Account, Nationwide
Multi-Flex Variable Account, Nationwide Variable Account-8, Nationwide VA
Separate Account-A, Nationwide VA Separate Account-B, Nationwide VA Separate
Account-C and Nationwide VA Separate Account-Q; and the registration of fixed
interest rate options subject to a market value adjustment offered under some or
all of the aforementioned individual Variable Annuity Contracts in connection
with Nationwide Multiple Maturity Separate Account and Nationwide Multiple
Maturity Separate Account-A, and the registration of Group Flexible Fund
Retirement Contracts in connection with Nationwide DC Variable Account,
Nationwide DCVA-II, and NACo Variable Account; and the registration of Group
Common Stock Variable Annuity Contracts in connection with Separate Account No.
1; and the registration of variable life insurance policies in connection with
Nationwide VLI Separate Account, Nationwide VLI Separate Account-2, Nationwide
VLI Separate Account-3, Nationwide VL Separate Account-A and Nationwide VL
Separate Account-B, hereby constitutes and appoints Dimon Richard McFerson,
Joseph J. Gasper, W. Sidney Druen, and Joseph P. Rath, and each of them with
power to act without the others, his/her attorney, with full power of
substitution and resubstitution, for and in his/her name, place and stead, in
any and all capacities, to approve, and sign such Registration Statements and
any and all amendments thereto, with power to affix the corporate seal of said
corporation thereto and to attest said seal and to file the same, with all
exhibits thereto and other documents in connection therewith, with the U.S.
Securities and Exchange Commission, hereby granting unto said attorneys, and
each of them, full power and authority to do and perform all and every act and
thing requisite to all intents and purposes as he/she might or could do in
person, hereby ratifying and confirming that which said attorneys, or any of
them, may lawfully do or cause to be done by virtue hereof. This instrument may
be executed in one or more counterparts.
IN WITNESS WHEREOF, the undersigned have herewith set their names and
seals as of this 2nd day of April, 1997.
<TABLE>
<CAPTION>
<S> <C>
/s/ Lewis J. Alphin /s/ David O. Miller
- ------------------------------------------------- --------------------------------------------------
Lewis J. Alphin, Director David O. Miller, Director
/s/ Keith W. Eckel /s/ C. Ray Noecker
- ------------------------------------------------- -------------------------------------------------
Keith W. Eckel, Director C. Ray Noecker, Director
/s/ Willard J. Engel /s/ Robert A. Oakley
- ------------------------------------------------- --------------------------------------------------
Willard J. Engel, Director Robert A. Oakley, Executive Vice President and Chief
Financial Officer
/s/ Fred C. Finney /s/ James F. Patterson
- ------------------------------------------------- --------------------------------------------------
Fred C. Finney, Director James F. Patterson, Director
/s/ Charles L. Fuellgraf /s/ Arden L. Shisler
- ------------------------------------------------- --------------------------------------------------
Charles L. Fuellgraf, Jr., Director Arden L. Shisler, Director
/s/ Joseph J. Gasper /s/ Robert L. Stewart
- ------------------------------------------------- --------------------------------------------------
Joseph J. Gasper, President and Chief Operating Officer Robert L. Stewart, Director
and Director
/s/ Henry S. Holloway /s/ Nancy C. Thomas
- ------------------------------------------------- --------------------------------------------------
Henry S. Holloway, Chairman of the Board, Director Nancy C. Thomas, Director
/s/ Dimon Richard McFerson /s/ Harold W. Weihl
- ------------------------------------------------- --------------------------------------------------
Dimon Richard McFerson, Chairman and Chief Executive Harold W. Weihl, Director
Officer-Nationwide Insurance Enterprise and Director
</TABLE>
