<PAGE> 1
As filed with the Securities and Exchange Commission.
'33 Act Registration No. 2-28596
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM N-3
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933
Post-Effective Amendment No. 38 [x]
SEPARATE ACCOUNT NO. 1
(Exact Name of Registrant)
NATIONWIDE LIFE INSURANCE COMPANY
(Name of Insurance Company)
ONE NATIONWIDE PLAZA, COLUMBUS, OHIO 43216
(Address of Insurance Company's Principal Executive Offices) (Zip Code)
Insurance Company's Telephone Number, including Area Code: (614) 249-7111
DENNIS W. CLICK, SECRETARY, ONE NATIONWIDE PLAZA, COLUMBUS, OHIO 43216
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering Continuously on and after May 1,
1998
It is proposed that this filing will become effective (check appropriate box):
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[x] on May 1, 1998 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
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] or (date) pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Title of Securities Being Registered: Group Common Stock Variable Annuity
Contracts.
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<PAGE> 2
SEPARATE ACCOUNT NO. 1
REFERENCE TO ITEMS
REQUIRED BY FORM N-3
<TABLE>
<CAPTION>
<S> <C> <C>
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
</TABLE>
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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 Group Common Stock Variable Annuity Contracts (the "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 or 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 Participant Accounts
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
this prospectus and in the Statement of Additional Information).
Nationwide Life Insurance Company (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 Contracts before investing. You should read it and keep it for future
reference. A Statement of Additional Information dated May 1, 1998, containing
additional information about the Contracts, the Company, and the Separate
Account has been filed with the Securities and Exchange Commission ("SEC"). You
can obtain a copy without charge from the Company by calling (614) 249-5346, or
by 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 SECURITIES AND EXCHANGE 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, 1998, 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, 1998.
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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 or Section 403(a) 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
<TABLE>
<CAPTION>
PARTICIPANT TRANSACTION EXPENSES
<S> <C>
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>
<TABLE>
<CAPTION>
=======================================================================================================================
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
=======================================================================================================================
<S> <C> <C> <C> <C>
If you cancel your Participant Account at the 83 121 161 209
end of the applicable time period:
You would pay the following expenses on
a $1,000 investment, assuming 5% annual
return on assets:
- ------------------------------------------------ ----------------- ------------------ ---------------- ----------------
If you do not cancel your Participant Account: 18 56 96 209
You would pay the following expenses on
a $1,000 investment, assuming 5% annual
return on assets:
- ------------------------------------------------ ----------------- ------------------ ---------------- ----------------
If you annuitize at the end of the applicable 90 133 178 305
time period:
You would pay the following expenses on
a $1,000 investment, assuming 5% annual
return on 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
JAN. 1, 1988 JAN. 1, 1989 JAN. 1, 1990
TO TO TO
DEC. 31, 1988 DEC. 31, 1989 DEC. 31, 1990
=====================================================================================
<S> <C> <C> <C>
Unit value at beginning of
period 7.7663472 9.1559374 12.2942826
--------------------------------- ---------------- ---------------- ----------------
NET INCOME .2546169 .4314503 .6862452
Investment Income
--------------------------------- ---------------- ---------------- ----------------
Change to Separate Account
for expenses, taxes and -0- -0- -0-
additions to surplus
--------------------------------- ---------------- ---------------- ----------------
Net Income .2546169 .4314503 .6862452
--------------------------------- ---------------- ---------------- ----------------
CAPITAL CHANGES
Net realized capital gains .8922013 1.0246383 .2962199
(losses)
--------------------------------- ---------------- ---------------- ----------------
Net unrealized capital gains .2427721 1.6822566 (.9802034)
(losses)
--------------------------------- ---------------- ---------------- ----------------
Unit Value at end of period 9.1559374 12.2942826 12.2965444
--------------------------------- ---------------- ---------------- ----------------
Number of Accumulation
Units outstanding at end of 1,644,078.96 1,526,288.77 1,436,543.92
period
--------------------------------- ---------------- ---------------- ----------------
Increase (decrease) in Unit 17.89% 34.27% .02%
Value during period
--------------------------------- ---------------- ---------------- ----------------
RATIOS
Expenses to average net .293% .246% .334%
assets
--------------------------------- ---------------- ---------------- ----------------
Net investment income to 3.20% 5.15% 3.24%
average net assets
--------------------------------- ---------------- ---------------- ----------------
Portfolio turnover rate 17.7% 20.4% 8.5%
=====================================================================================
</TABLE>
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
JAN. 1, 1991 JAN. 1, 1992 JAN. 1, 1993
TO TO TO
DEC 31, 1991 DEC. 31, 1992 DEC. 31, 1993
============================================================================================================================
<S> <C> <C> <C>
Unit value at beginning of period 12.2965444 16.2373889 16.7112913
- ----------------------------------------- --------------------------- ------------------------ --------------------
NET INCOME .4278250 .4656912 .4731035
Investment Income
- ----------------------------------------- --------------------------- ------------------------ --------------------
Change to Separate Account
for expenses, taxes and -0- -0- -0-
additions to surplus
- ----------------------------------------- --------------------------- ------------------------ --------------------
Net Income .4278250 .4656912 .4731035
- ----------------------------------------- --------------------------- ------------------------ --------------------
CAPITAL CHANGES
Net realized capital gains 1.1910187 .4577232 .4264519
(losses)
- ----------------------------------------- --------------------------- ------------------------ --------------------
Net unrealized capital gains 2.3220008 (.4495120) .2407792
(losses)
- ----------------------------------------- --------------------------- ------------------------ --------------------
Unit Value at end of period 16.2373889 16.7112913 17.8516259
- ----------------------------------------- --------------------------- ------------------------ --------------------
Number of Accumulation Units
outstanding at end of period 1,251,874.00 1,241,981.00 1,313,747.00
----------------------------------------- --------------------------- ------------------------ --------------------
Increase (decrease) in Unit 32.05% 2.92% 6.82%
Value during period
- ----------------------------------------- --------------------------- ------------------------ --------------------
RATIOS
Expenses to average net assets .225% .251% .815%
- ----------------------------------------- --------------------------- ------------------------ --------------------
Net investment income to 2.95% 2.60% 2.74%
average net assets
- ----------------------------------------- --------------------------- ------------------------ --------------------
Portfolio turnover rate 19.4% 6.1% 2.3%
============================================================================================================================
</TABLE>
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> 8
CONDENSED FINANCIAL INFORMATION
INCOME AND CAPITAL CHANGES PER ACCUMULATION UNIT* (CONTINUED)
<TABLE>
<CAPTION>
================================================================================================================================
FROM FROM FROM FROM
JAN. 1, 1994 JAN. 1, 1995 JAN. 1, 1996 JAN. 1, 1997
TO TO TO TO
DEC. 31, 1994 DEC. 31, 1995 DEC. 31, 1996 DEC. 31, 1997
================================================================================================================================
<S> <C> <C> <C> <C>
Unit value at beginning of 17.8516259 18.0013570 23.2833339 29.7602948
period
- ------------------------------ ---------------------- --------------------- --------------------- ------------------
NET INCOME .5052127 .5172590 .5542850 .5787980
Investment Income
- ------------------------------ ---------------------- --------------------- --------------------- ------------------
Change to Separate Account
for expenses, taxes and -0- -0- -0- -0-
additions to surplus
- ------------------------------ ---------------------- --------------------- --------------------- ------------------
Net Income .5052127 .5172590 .5542850 .5787980
- ------------------------------ ---------------------- --------------------- --------------------- ------------------
CAPITAL CHANGES
Net realized capital gains .0146140 1.5462550 1.5943390 3.3926523
(losses)
- ------------------------------ ---------------------- --------------------- --------------------- ------------------
Net unrealized capital (.3700956) 3.2184629 4.3283369 4.5926820
gains losses)
- ------------------------------ ---------------------- --------------------- --------------------- ------------------
Unit Value at end of period 18.0013570 23.2833339 29.7602948 38.3244271
- ------------------------------ ---------------------- --------------------- --------------------- ------------------
Number of Accumulation
Units outstanding at end 1,282,594 1,105,710 1,059,341 1,008,096
of period
- ------------------------------ ---------------------- --------------------- --------------------- ------------------
Increase (decrease) in Unit .84% 29.34% 27.82% 28.78%
Value during period
- ------------------------------ ---------------------- --------------------- --------------------- ------------------
RATIOS
Expenses to average net .568% .338% .435% .430%
assets
- ------------------------------ ---------------------- --------------------- --------------------- ------------------
Net investment income to 2.83% 2.49% 2.10% 1.72%
average net assets
- ------------------------------ ---------------------- --------------------- --------------------- ------------------
Portfolio turnover rate 2.1% 4.9% 9.6% 8.7%
================================================================================================================================
</TABLE>
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.
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<PAGE> 9
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 is a provider of life insurance, annuities, and retirement products.
It is admitted to do business in all states, the District of Columbia and Puerto
Rico.
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 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.
5. Freedom of action is reserved to invest as much as 10% of the assets in
real estate.
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<PAGE> 10
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.
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:
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<PAGE> 11
(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 canceled 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 canceled, 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.
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.
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<PAGE> 12
(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.
(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").
10
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<PAGE> 13
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.
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
11
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<PAGE> 14
favorable tax treatment under the provisions of sections 401 or 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.
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, Martin Luther King, Jr. 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 change in
Market Value of the underlying securities for the preceding 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
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<PAGE> 15
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.
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 29.7602948
Mar. 1976 1.5106830 Mar. 1983 3.8214250 Mar. 1990 11.7646683 Mar. 1997 30.5405969
June 1976 1.5671775 June 1983 4.1514343 June 1990 12.5345438 June 1997 35.4949453
Sept. 1976 1.6226746 Sept. 1983 4.2253097 Sept. 1990 11.1707863 Sept. 1997 37.7161659
Dec. 1976 1.6520855 Dec. 1983 4.3025179 Dec. 1990 12.2965444 Dec. 1997 38.3244271
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.
13
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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
===============================================================================================================================
</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.
(CONTINUED ON NEXT PAGE)
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 30,000.00 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
- ------------------- ------------------ ----------------- ------------------ ---------------- ----------------- ----------------
Mar. 31, 1997 31,000 3,841.09 15.00 27,944.21 3,055.79 291,622.08
- ------------------- ------------------ ----------------- ------------------ ---------------- ----------------- ----------------
Dec. 31, 1997 same -0- -0- -0- same 365,947.31
===============================================================================================================================
</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
16
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<PAGE> 19
Value for the second calendar month preceding the month in which the payment 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 Mar. 1997 12.7923164
June 1976 1.1938913 June 1983 2.5593550 June 1990 6.6219279 June 1997 14.7401862
Sept. 1976 1.2271288 Sept. 1983 2.5825910 Sept. 1990 5.8517062 Sept. 1997 15.5284743
Dec. 1976 1.2402329 Dec. 1983 2.6072616 Dec. 1990 6.3862002 Dec. 1997 15.6437791
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.
YEAR 2000 COMPLIANCE ISSUES
The Company has developed a plan to address issues related to the year 2000. The
problem relates to many existing computer programs using only two digits to
identify a year in the date field. These programs were designed and developed
without considering the impact of the upcoming change in the century. If not
corrected, many computer applications could fail or create erroneous results by
or at the Year 2000. The Company has been evaluating its exposure to the Year
2000 issue through a review of all of its operating systems as well as
dependencies on the systems of other users since 1996. The Company expects all
system changes and replacements needed to achieve Year 2000 compliance to be
completed by the end of 1998. Compliance testing will be completed in the first
quarter of 1999. The Company charges all costs associated with these system
changes as the costs are incurred.
Operating expenses in 1997 including approximately $45 million on technology
projects, which includes costs related to Year 2000 and the development of a new
policy administration system for traditional life insurance products and other
system enhancements. The Company anticipates spending a comparable amount in
1998 on technology projects, including Year 2000 initiatives. These expenses do
not have an effect on the assets of the Variable Account and are not charged
through to the Contract Owner.
LEGAL PROCEEDINGS
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 February 1997, Nationwide Life Insurance Company
was named as a
18
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<PAGE> 21
defendant in a lawsuit filed in New York Supreme Court related to the sale of
whole life policies on a "vanishing premium" basis (John H. Snyder v. 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 has not been certified as a class action. In
April, 1997, a motion to dismiss the Snyder complaint in its entirety was filed
by the defendants, and the plaintiff has opposed such motion.
In November 1997, two plaintiffs, one who was the owner of a variable life
insurance contract and the other who was the owner of a variable annuity
contract, commenced an action against Nationwide Life Insurance Company and the
American Century group of defendants (Robert Young and David D. Distad v.
Nationwide Life Insurance Company et al.). In this action, plaintiffs seek to
represent a class of variable life insurance contract owners and variable
annuity contract owners whom they claim were allegedly misled when purchasing
these variable contracts into believing that some portion of their premiums were
invested in a publicly traded mutual fund when, in fact, the premium monies were
invested in a mutual fund whose shares may only be purchased by insurance
companies. The complaint seeks unspecified compensatory, treble and punitive
damages. In January 1998, both Nationwide Life Insurance Company and American
Century filed motion to dismiss the entire complaint. Plaintiffs' counsel have
opposed these motions and the federal court in Texas heard arguments on the
motions to dismiss in April, 1998. This lawsuit is in an early stage and has not
been certified as a class action. Nationwide Life Insurance Company intends to
defend this case vigorously.
There can be no assurance that any litigation relating to pricing and sales
practices will not have a material adverse effect on the Company in the future.
<TABLE>
<CAPTION>
TABLE OF CONTENTS OF STATEMENT
OF ADDITIONAL INFORMATION
<S> <C>
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...................................................................4
Underwriters.......................................................................................................4
Calculation of Yield Quotations of Money Market Sub-Accounts ......................................................4
Annuity Payments .................................................................................................4
Financial Statements...............................................................................................5
</TABLE>
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<PAGE> 22
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 1998
GROUP COMMON STOCK VARIABLE ANNUITY CONTRACTS
ISSUED BY
NATIONWIDE LIFE INSURANCE COMPANY
This Statement of Additional Information is not a prospectus. It contains
additional information than set forth in the prospectus and should be read in
conjunction with the prospectus dated May 1, 1998. The prospectus may be
obtained from Nationwide Life Insurance Company by writing P. O. Box 16766, One
Nationwide Plaza, Columbus, Ohio 43216, or by calling 1-800-545-4730.
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
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
</TABLE>
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. All of the Company's common stock is owned by Nationwide
Financial Services, Inc. ("NFS"), a holding company. NFS has two classes of
common stock outstanding with different voting rights enabling Nationwide
Corporation (the holder of all the outstanding Class B Common Stock) to control
NFS. 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.
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.
During fiscal years 1997, 1996 and 1995, the portfolio turnover rates were 8.7%,
9.6% and 4.9%, 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, 1997, December 31, 1996 and
December 31, 1995,
2
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<PAGE> 24
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.
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 audited financial statements and schedule 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.
4
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<PAGE> 26
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, 1997, 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, 1997, 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 20, 1998
<PAGE> 27
NATIONWIDE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT NO. 1
Statement of Assets, Liabilities
and Contract Owners' Equity
December 31, 1997
<TABLE>
<S> <C>
Assets:
Cash $ 6,607
Investments in securities at market value, per accompanying
schedule of investments (cost $19,541,863) 47,458,319
Dividends receivable 44,039
Accounts receivable 2,062,558
-----------
Total assets 49,571,523
-----------
Liabilities:
Accounts payable to Nationwide Life Insurance Company 277,935
-----------
Contract owners' equity (note 2) $49,293,588
===========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 28
NATIONWIDE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT NO. 1
Statements of Operations and Changes
in Contract Owners' Equity
Years ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Investment activity:
Dividends and interest $ 788,152 820,866
Mortality and expense charges (note 3)
100% and 95% reserve (29,468) (25,822)
Other - variable (38,611) (43,880)
Other - accumulation (535) (576)
------------ -----------
Net investment activity 719,538 750,588
------------ -----------
Proceeds from sales of investments 8,216,571 4,357,501
Cost of investments sold 3,374,802 2,205,527
------------ -----------
Realized gain on investments 4,841,769 2,151,974
Change in unrealized gain on investments 6,554,372 5,842,213
------------ -----------
Net gain on investments 11,396,141 7,994,187
------------ -----------
Net increase in contract owners' equity resulting
from operations 12,115,679 8,744,775
------------ -----------
Equity transactions:
Deposits received from contract owners 2,075,995 1,206,004
Contract withdrawals and transfers (6,473,289) (3,949,692)
Annuity payments (89,084) (94,208)
Adjustment to maintain annuity reserves (370,185) 716,524
Contract charges (note 3) (196,773) (169,676)
------------ -----------
Net equity transactions (5,053,336) (2,291,048)
------------ -----------
Net change in contract owners' equity 7,062,343 6,453,727
Contract owners' equity:
At beginning of year 42,231,245 35,777,518
------------ -----------
At end of year $ 49,293,588 42,231,245
============ ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 29
NATIONWIDE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT NO. 1
Notes to Financial Statements
December 31, 1997 and 1996
(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, 1997, the Separate Account has 5 variable
annuity contracts (100% reserve contracts, 95% reserve
contracts, other - variable contracts, HR-10 contracts, and
other - accumulation contracts). In addition to these
contracts, there are 25 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 payout
annuity 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, 1997. 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
Under current 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 information has been reclassified to conform
with current year presentation.
(Continued)
<PAGE> 30
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 $574,173 for annuities in the payout phase) as of
December 31, 1997 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 -- 156,799 37.710356 $ 5,912,946
95% reserve -- 54,543 37.710356 2,056,836
Other - variable -- 79,435 32.613242 2,590,633
HR-10 1,008,096 -- 38.324427 38,634,702
Other - accumulation 2,779 -- 35.433862 98,471
========= ======= ========= ===========
$49,293,588
===========
</TABLE>
* Reserve value per unit represents redemption value.
The components of each of these unit values are as follows:
<TABLE>
<CAPTION>
95% and
100% Other Other
reserve variable HR-10 accumulation
------- -------- ----- ------------
<S> <C> <C> <C> <C>
1997:
Beginning unit value - Jan.1 $29.386238 25.692205 29.760295 27.653613
Reinvested dividends and interest 0.571081 0.499970 0.578798 0.540347
Realized and unrealized gain 7.870978 6.842901 7.985334 7.398331
Mortality and expense charges (0.117941) (0.421834) 0.000000 (0.158429)
---------- --------- --------- ---------
Ending unit value - Dec. 31 $37.710356 32.613242 38.324427 35.433862
========== ========= ========= =========
Percentage increase in unit value 28% 27% 29% 28%
1996:
Beginning unit value - Jan.1 $23.072052 20.394191 23.283334 21.744507
Reinvested dividends and interest 0.550018 0.483471 0.554285 0.519023
Realized and unrealized gain 5.854205 5.140112 5.922676 5.511210
Mortality and expense charges (0.090037) (0.325569) 0.000000 (0.121127)
---------- --------- --------- ---------
Ending unit value - Dec. 31 $29.386238 25.692205 29.760295 27.653613
========== ========= ========= =========
Percentage increase in unit value 27% 26% 28% 27%
</TABLE>
(Continued)
<PAGE> 31
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 6.5% 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 6.5% 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 $15 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 following represents funds
invested in NCMC throughout 1997 and is included in the
investments in the accompanying financial statements:
Investment in NCMC, beginning of year $ 2,269,837
Purchases 6,742,945
Sales (8,820,983)
-----------
Investment in NCMC, end of year $ 191,799
===========
<PAGE> 32
NATIONWIDE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT NO. 1
Schedule of Portfolio Investments
December 31, 1997
<TABLE>
<CAPTION>
Number Market
Name of issuer and title of issue of shares Cost (1) Value
--------------------------------- --------- -------- -----
COMMON STOCKS (99.6%)
<S> <C> <C> <C>
BROADCASTING (1.3%)
Cox Communications, Inc., Class A(2) 8,630 $ 81,688 $ 345,744
US West, Inc. Media Group(2) 10,100 213,993 291,638
------ ---------- ----------
18,730 295,681 637,382
------ ---------- ----------
BUILDING MATERIALS (3.9%)
Vulcan Materials Co. 18,000 87,908 1,838,250
------ ---------- ----------
18,000 87,908 1,838,250
------ ---------- ----------
CHEMICAL (7.6%)
IMC Global, Inc. 22,800 586,973 746,700
Monsanto Company 37,500 281,757 1,575,000
Morton International, Inc. 37,500 330,005 1,289,063
------ ---------- ----------
97,800 1,198,735 3,610,763
------ ---------- ----------
COMPUTERS AND SEMICONDUCTORS (6.5%)
Cisco Systems, Inc. 7,350 387,993 409,763
Intel Corporation 17,000 487,150 1,194,250
International Business Machines
Corporation 14,000 830,493 1,464,750
------ ---------- ----------
38,350 1,705,636 3,068,763
------ ---------- ----------
DRUGS AND COSMETICS (17.6%)
American Home Products Corp. 16,000 593,720 1,224,000
Bristol-Myers Squibb Company 18,000 257,293 1,703,250
Pfizer, Inc. 10,000 179,266 745,630
Schering-Plough Corporation 30,800 204,872 1,913,450
Warner-Lambert Company 21,800 474,463 2,707,298
------ ---------- ----------
96,600 1,709,614 8,293,628
------ ---------- ----------
ENTERTAINMENT (2.1%)
Walt Disney Company 10,000 241,875 990,000
------ ---------- ----------
10,000 241,875 990,000
------ ---------- ----------
</TABLE>
---------------
(1) Also represents cost for federal income tax purposes.
(2) Denotes non-income producing securities.
(Continued)
<PAGE> 33
NATIONWIDE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT NO. 1
Schedule of Portfolio Investments, Continued
December 31, 1997
<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 (11.0%)
Chubb Corporation 20,800 $ 287,872 $1,573,000
Citicorp 13,000 574,665 1,643,694
First Chicago NBD Corporation 11,250 150,267 939,375
Wells Fargo & Co. 3,200 931,392 1,086,202
------- ---------- ----------
48,250 1,944,196 5,242,271
------- ---------- ----------
FOODS AND BEVERAGES (6.2%)
Anheuser-Busch Companies 24,800 508,748 1,091,200
PEPSICO 32,000 374,959 1,160,000
Ralston Purina Group 7,429 313,582 690,436
------- ---------- ----------
64,229 1,197,289 2,941,636
------- ---------- ----------
HEALTH SERVICES (3.0%)
Allegiance Corp. 320 3,460 11,340
Baxter International, Inc. 1,600 42,409 80,700
Columbia/HC Healthcare Corp. 18,000 659,220 533,250
Humana, Inc. 37,000 779,458 767,750
MedPartners, Inc.(2) 484 4,635 10,830
------- ---------- ----------
57,404 1,489,182 1,403,870
------- ---------- ----------
HOUSEHOLD PRODUCTS (9.5%)
Avon Products, Inc. 22,000 503,535 1,350,250
Gillette Company 15,200 267,648 1,526,658
Procter & Gamble Company 20,400 432,384 1,628,185
------- ---------- ----------
57,600 1,203,567 4,505,093
------- ---------- ----------
MISCELLANEOUS (9.7%)
Caterpillar, Inc. 14,000 469,140 679,000
Corning, Inc. 23,000 650,652 853,875
Halter Marine Group, Inc. 8,533 45,087 246,390
IKON Office Solutions, Inc. 23,600 516,294 663,750
Mattel, Inc. 15,140 60,448 563,965
Minnesota Mining & Mfg Company 13,800 605,348 1,132,469
Solutia, Inc. 7,500 26,343 200,160
The Singer Company 33,000 761,337 282,579
------- ---------- ----------
138,573 3,134,649 4,622,188
------- ---------- ----------
</TABLE>
---------------
(1) Also represents cost for federal income tax purposes.
(2) Denotes non-income producing securities.
<PAGE> 34
NATIONWIDE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT NO. 1
Schedule of Portfolio Investments, Continued
December 31, 1997
<TABLE>
<CAPTION>
Number Market
Name of issuer and title of issue of shares Cost (1) Value
--------------------------------- --------- -------- -----
Common Stocks, Continued
<S> <C> <C> <C>
MEDICAL EQUIPMENT (4.1%)
Medtronic, Inc. 19,800 $ 613,893 $ 1,039,500
Millipore Corp. 27,200 1,185,395 923,114
------- ----------- -----------
47,000 1,799,288 1,962,614
------- ----------- -----------
OIL AND GAS (5.8%)
Mobil Corporation 16,000 554,780 1,155,008
Schlumberger Limited 20,000 557,660 1,610,000
------- ----------- -----------
36,000 1,112,440 2,765,008
------- ----------- -----------
PRINTING AND PUBLISHING (8.9%)
ACNielsen Corp.(2) 1,466 15,506 35,734
American Greetings Corp., Class A 19,000 318,142 743,375
Cognizant Corp. 4,400 94,411 196,350
Dun & Bradstreet Corporation 4,400 65,758 136,127
Gannett, Inc. 24,000 405,748 1,483,512
Gibson Greetings, Inc.(2) 27,500 614,062 601,563
Knight-Ridder, Inc. 20,000 381,919 1,040,000
------- ----------- -----------
100,766 1,895,546 4,236,661
------- ----------- -----------
TRANSPORTATION EQUIPMENT (2.4%)
Autoliv, Inc. 12,787 129,863 418,774
Trinity Industries 16,350 204,595 729,619
------- ----------- -----------
29,137 334,458 1,148,393
------- ----------- -----------
Total common stocks 858,439 19,350,064 47,266,520
------- ----------- -----------
SHORT-TERM SECURITIES (0.4%)
Nationwide Cash Management Company
Participation 191,799 191,799
----------- -----------
TOTAL INVESTMENTS $19,541,863 $47,458,319
=========== ===========
</TABLE>
See accompanying notes to financial statements.
---------------
(1) Also represents cost for federal income tax purposes.
(2) Denotes non-income producing securities.
<PAGE> 35
<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), a wholly owned
subsidiary of Nationwide Financial Services, Inc., as of December 31, 1997 and
1996, 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,
1997. 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, 1997 and 1996, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1997, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Columbus, Ohio
January 30, 1998
<PAGE> 2
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Balance Sheets
(in millions of dollars)
<TABLE>
<CAPTION>
December 31,
-----------------------------------
ASSETS 1997 1996
------
----------------- ---------------
<S> <C> <C>
Investments:
Securities available-for-sale, at fair value:
Fixed maturity securities $13,204.1 $12,304.6
Equity securities 80.4 59.1
Mortgage loans on real estate, net 5,181.6 5,272.1
Real estate, net 311.4 265.8
Policy loans 415.3 371.8
Other long-term investments 25.2 28.7
Short-term investments 358.4 4.8
---------- ---------
19,576.4 18,306.9
---------- ---------
Cash 175.6 43.8
Accrued investment income 210.5 210.2
Deferred policy acquisition costs 1,665.4 1,366.5
Investment in subsidiaries classified as discontinued operations - 485.7
Other assets 438.4 426.5
Assets held in Separate Accounts 37,724.4 26,926.7
---------- ---------
$59,790.7 $47,766.3
========== =========
LIABILITIES AND SHAREHOLDER'S EQUITY
------------------------------------
Future policy benefits and claims $18,702.8 $17,600.6
Other liabilities 885.6 1,101.1
Liabilities related to Separate Accounts 37,724.4 26,926.7
---------- ---------
57,312.8 45,628.4
---------- ---------
Commitments and contingencies (notes 7 and 13)
Shareholder's equity:
Common stock, $1 par value. Authorized 5.0 million shares;
3.8 million shares issued and outstanding 3.8 3.8
Additional paid-in capital 914.7 527.9
Retained earnings 1,312.3 1,432.6
Unrealized gains on securities available-for-sale, net 247.1 173.6
---------- ---------
2,477.9 2,137.9
---------- ---------
$59,790.7 $47,766.3
========== =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 3
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Statements of Income
(in millions of dollars)
<TABLE>
<CAPTION>
Years ended December 31,
---------------------------------------------
1997 1996 1995
------------- ------------- --------------
<S> <C> <C> <C>
Revenues:
Investment product and universal life insurance product policy charges $ 545.2 $ 400.9 $ 286.6
Traditional life insurance premiums 205.4 198.6 199.1
Net investment income 1,409.2 1,357.8 1,294.0
Realized gains (losses) on investments 11.1 (0.3) (1.7)
Other 46.5 35.9 20.7
---------- ---------- ----------
2,217.4 1,992.9 1,798.7
---------- ---------- ----------
Benefits and expenses:
Interest credited to policyholder account balances 1,016.6 982.3 950.3
Other benefits and claims 178.2 178.3 165.2
Policyholder dividends on participating policies 40.6 41.0 39.9
Amortization of deferred policy acquisition costs 167.2 133.4 82.7
Other operating expenses 384.9 342.4 273.0
---------- ---------- ----------
1,787.5 1,677.4 1,511.1
---------- ---------- ----------
Income from continuing operations before federal income tax expense 429.9 315.5 287.6
Federal income tax expense 150.2 110.9 99.8
---------- ---------- ----------
Income from continuing operations 279.7 204.6 187.8
Income from discontinued operations (less federal income tax expense
of $4.5 and $7.4 in 1996 and 1995, respectively) - 11.3 24.7
---------- ---------- ----------
Net income $ 279.7 $ 215.9 $ 212.5
========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 4
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Statements of Shareholder's Equity
(in millions of dollars)
<TABLE>
<CAPTION>
Unrealized
gains
(losses)
Additional on securities Total
Common paid-in Retained available- shareholder's
stock capital earnings for-sale, net equity
----------- ------------- -------------- ---------------- -------------
<S> <C> <C> <C> <C> <C>
December 31, 1994 $3.8 $ 606.2 $1,378.2 $(119.7) $1,868.5
Capital contribution - 51.0 - (4.1) 46.9
Net income - - 212.5 - 212.5
Dividends to shareholder - - (7.5) - (7.5)
Unrealized gains on securities available-
for-sale, net - - - 508.1 508.1
-------- -------- -------- -------- ---------
December 31, 1995 3.8 657.2 1,583.2 384.3 2628.5
Net income - - 215.9 - 215.9
Dividends to shareholder - (129.3) (366.5) (39.8) (535.6)
Unrealized losses on securities available-
for-sale, net - - - (170.9) (170.9)
-------- -------- -------- -------- ---------
December 31, 1996 3.8 527.9 1,432.6 173.6 2,137.9
Capital contribution - 836.8 - - 836.8
Net income - - 279.7 - 279.7
Dividends to shareholder - (450.0) (400.0) - (850.0)
Unrealized gains on securities available-
for-sale, net - - - 73.5 73.5
-------- -------- -------- -------- ---------
December 31, 1997 $3.8 $ 914.7 $1,312.3 $ 247.1 $2,477.9
======== ======== ======== ======== =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 5
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Statements of Cash Flows
(in millions of dollars)
<TABLE>
<CAPTION>
Years ended December 31,
----------------------------------------------
1997 1996 1995
------------------------------ ---------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 279.7 $ 215.9 $ 212.5
Adjustments to reconcile net income to net cash provided by operating
activities:
Interest credited to policyholder account balances 1,016.6 982.3 950.3
Capitalization of deferred policy acquisition costs (487.9) (422.6) (321.3)
Amortization of deferred policy acquisition costs 167.2 133.4 82.7
Amortization and depreciation (2.0) 7.0 10.2
Realized (gains) losses on invested assets, net (11.1) (0.3) 3.3
(Increase) decrease in accrued investment income (0.3) 2.8 (16.9)
(Increase) decrease in other assets (12.7) (38.9) 39.9
(Decrease) increase in policy liabilities (23.1) (151.0) 123.9
Increase in other liabilities 230.6 191.4 27.0
Other, net (10.9) (61.7) 1.8
----------- --------- --------
Net cash provided by operating activities 1,146.1 858.3 1,113.4
----------- --------- --------
Cash flows from investing activities:
Proceeds from maturity of securities available-for-sale 993.4 1,162.8 634.6
Proceeds from sale of securities available-for-sale 574.5 299.6 107.3
Proceeds from maturity of fixed maturity securities held-to-maturity - - 564.4
Proceeds from repayments of mortgage loans on real estate 437.3 309.0 207.8
Proceeds from sale of real estate 34.8 18.5 48.3
Proceeds from repayments of policy loans and sale of other invested assets 22.7 22.8 53.6
Cost of securities available-for-sale acquired (2,828.1) (1,573.6) (1,942.4)
Cost of fixed maturity securities held-to-maturity acquired - - (593.6)
Cost of mortgage loans on real estate acquired (752.2) (972.8) (796.0)
Cost of real estate acquired (24.9) (7.9) (10.9)
Policy loans issued and other invested assets acquired (62.5) (57.7) (75.9)
Short-term investments, net (354.8) 28.0 77.8
----------- --------- --------
Net cash used in investing activities (1,959.8) (771.3) (1,725.0)
----------- --------- --------
Cash flows from financing activities:
Proceeds from capital contributions 836.8 - -
Cash dividends paid - (50.0) (7.5)
Increase in investment product and universal life insurance
product account balances 2,488.5 1,781.8 1,883.7
Decrease in investment product and universal life insurance
product account balances (2,379.8) (1,784.5) (1,258.7)
----------- --------- --------
Net cash provided by (used in) financing activities 945.5 (52.7) 617.5
----------- --------- --------
Net increase in cash 131.8 34.3 5.9
Cash, beginning of year 43.8 9.5 3.6
----------- --------- --------
Cash, end of year $ 175.6 $ 43.8 $ 9.5
=========== ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 6
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements
December 31, 1997, 1996 and 1995
(1) ORGANIZATION AND DESCRIPTION OF BUSINESS
Prior to January 27, 1997, Nationwide Life Insurance Company (NLIC) was
wholly owned by Nationwide Corporation (Nationwide Corp.). On that
date, Nationwide Corp. contributed the outstanding shares of NLIC's
common stock to Nationwide Financial Services, Inc. (NFS), a holding
company formed by Nationwide Corp. in November 1996 for NLIC and the
other companies within the Nationwide Insurance Enterprise that offer
or distribute long-term savings and retirement products. On March 11
1997, NFS completed an initial public offering of its Class A common
stock.
During 1996 and 1997, Nationwide Corp. and NFS completed certain
transactions in anticipation of the initial public offering that
focused the business of NFS on long-term savings and retirement
products. On September 24, 1996, NLIC declared a dividend payable to
Nationwide Corp. on January 1, 1997 consisting of the outstanding
shares of common stock of certain subsidiaries that do not offer or
distribute long-term savings or 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 two affiliates effective January 1, 1996. These subsidiaries,
through December 31, 1996, and all accident and health and group life
insurance business have been accounted for as discontinued operations
for all periods presented. See notes 11 and 15. Additionally, NLIC paid
$900.0 million of dividends, $50.0 million to Nationwide Corp. on
December 31, 1996 and $850.0 million to NFS, which then made an
equivalent dividend to Nationwide Corp., on February 24, 1997.
NFS contributed $836.8 million to the capital of NLIC during March
1997.
Wholly owned subsidiaries of NLIC include Nationwide Life and Annuity
Insurance Company (NLAIC), Nationwide Advisory Services, Inc.,
Nationwide Investment Services Corporation and NWE, Inc. NLIC and its
subsidiaries are collectively referred to as "the Company."
The Company is a leading provider of long-term savings and retirement
products. The Company is subject to regulation by the Insurance
Departments of states in which it is licensed, and undergoes periodic
examinations by those departments.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies followed by the Company that
materially affect financial reporting are summarized below. The
accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles, which differ
from statutory accounting practices prescribed or permitted by
regulatory authorities. Annual Statements for NLIC and NLAIC, filed
with the Department of Insurance of the State of Ohio (the Department),
are prepared on the basis of accounting practices prescribed or
permitted by the 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.
<PAGE> 7
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
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 from
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, 1997 or 1996.
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 is 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.
<PAGE> 8
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(c) REVENUES AND BENEFITS
INVESTMENT PRODUCTS AND UNIVERSAL LIFE INSURANCE PRODUCTS:
Investment products consist primarily of individual and group
variable and fixed annuities. 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.
(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 sales 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. 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 2(b). For traditional life insurance 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.
(e) SEPARATE ACCOUNTS
Separate Account assets and liabilities represent contractholders'
funds which have been segregated into accounts with specific
investment objectives. For all but $365.5 million of separate
account assets, 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 4.
<PAGE> 9
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(g) PARTICIPATING BUSINESS
Participating business represents approximately 50% in 1997 (52%
in 1996 and 54% in 1995) of the Company's life insurance in force,
77% in 1997 (78% in 1996 and 79% in 1995) of the number of life
insurance policies in force, and 27% in 1997 (40% in 1996 and 47%
in 1995) of life insurance statutory premiums. The provision for
policyholder dividends is based on current dividend scales and is
included in "Future policy benefits and claims" in the
accompanying consolidated balance sheets.
(h) FEDERAL INCOME TAX
The Company files a consolidated federal income tax return with
Nationwide Mutual Insurance Company (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.
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.
(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 11 and 15.
(j) RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 130 - REPORTING
COMPREHENSIVE INCOME was issued in June 1997 and is effective for
fiscal years beginning after December 15, 1997. The statement
establishes standards for reporting and display of comprehensive
income and its components in a full set of financial statements.
Comprehensive income includes all changes in equity during a
period except those resulting from investments by shareholders and
distributions to shareholders and includes net income.
Comprehensive income would be reported in addition to earnings
amounts currently presented. The Company will adopt the statement
and begin reporting comprehensive income in the first quarter of
1998.
(k) RECLASSIFICATION
Certain items in the 1996 and 1995 consolidated financial
statements have been reclassified to conform to the 1997
presentation.
<PAGE> 10
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(3) INVESTMENTS
The amortized cost, gross unrealized gains and losses and estimated
fair value of securities available-for-sale as of December 31, 1997 and
1996 were:
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Estimated
(in millions of dollars) cost gains losses fair value
-------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
December 31, 1997:
Fixed maturity securities:
U.S. Treasury securities and obligations of U.S.
government corporations and agencies $ 305.1 $ 8.6 $ - $ 313.7
Obligations of states and political subdivisions 1.6 - - 1.6
Debt securities issued by foreign governments 93.3 2.7 (0.2) 95.8
Corporate securities 8,698.7 355.5 (11.5) 9,042.7
Mortgage-backed securities 3,634.2 118.6 (2.5) 3,750.3
------------ --------- --------- -----------
Total fixed maturity securities 12,732.9 485.4 (14.2) 13,204.1
Equity securities 67.8 12.9 (0.3) 80.4
------------ --------- --------- -----------
$ 12,800.7 $ 498.3 $ (14.5) $ 13,284.5
============ ========= ========= ===========
December 31, 1996:
Fixed maturity securities:
U.S. Treasury securities and obligations of U.S.
government corporations and agencies $ 275.7 $ 4.8 $ (1.3) $ 279.2
Obligations of states and political subdivisions 6.2 0.5 - 6.7
Debt securities issued by foreign governments 100.7 2.1 (0.9) 101.9
Corporate securities 7,999.3 285.9 (33.7) 8,251.5
Mortgage-backed securities 3,589.0 91.4 (15.1) 3,665.3
------------ --------- --------- -----------
Total fixed maturity securities 11,970.9 384.7 (51.0) 12,304.6
Equity securities 43.9 15.6 (0.4) 59.1
------------ --------- --------- -----------
$ 12,014.8 $ 400.3 $ (51.4) $ 12,363.7
============ ========= ========= ===========
</TABLE>
The amortized cost and estimated fair value of fixed maturity
securities available-for-sale as of December 31, 1997, 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
(in millions of dollars) cost fair value
-------------- ----------
<S> <C> <C>
Fixed maturity securities available for sale:
Due in one year or less $ 419.2 $ 422.1
Due after one year through five years 4,573.5 4,708.4
Due after five years through ten years 2,772.6 2,879.7
Due after ten years 1,333.4 1,443.6
----------- -----------
9,098.7 9,453.8
Mortgage-backed securities 3,634.2 3,750.3
----------- -----------
$ 12,732.9 $ 13,204.1
=========== ===========
</TABLE>
<PAGE> 11
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
The components of unrealized gains on securities available-for-sale,
net, were as follows as of December 31:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996
----------- ----------
<S> <C> <C>
Gross unrealized gains $ 483.8 $349.0
Adjustment to deferred policy acquisition costs (103.7) (81.9)
Deferred federal income tax (133.0) (93.5)
-------- -------
$ 247.1 $173.6
======== =======
</TABLE>
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>
(in millions of dollars) 1997 1996 1995
----------- ------------- -----------
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturity securities $137.5 $(289.2) $876.3
Equity securities (2.7) 8.9 -
Fixed maturity securities held-to-maturity - - 75.6
------- ------- -------
$134.8 $(280.3) $ 951.9
======= ======= =======
</TABLE>
Proceeds from the sale of securities available-for-sale during 1997,
1996 and 1995 were $574.5 million, $299.6 million and $107.3 million,
respectively. During 1997, gross gains of $9.9 million ($6.6 million
and $4.8 million in 1996 and 1995, respectively) and gross losses of
$18.0 million ($6.9 million and $2.1 million in 1996 and 1995,
respectively) were realized on those sales. In addition, gross gains of
$15.1 million and gross losses of $0.7 million were realized in 1997
when the Company paid a dividend to NFS, which then made an equivalent
dividend to Nationwide Corp., consisting of securities having an
aggregate fair value of $850.0 million.
During 1995, the Company transferred fixed maturity securities
classified as held-to-maturity with amortized cost of $25.4 million 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 $3.5
million.
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 nearly 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 $3.32 billion,
resulting in a gross unrealized gain of $155.9 million.
The recorded investment of mortgage loans on real estate considered to
be impaired as of December 31, 1997 was $19.9 million ($51.8 million as
of December 31, 1996), which includes $3.9 million ($41.7 million as of
December 31, 1996) of impaired mortgage loans on real estate for which
the related valuation allowance was $0.1 million ($8.5 million as of
December 31, 1996) and $16.0 million ($10.1 million as of December 31,
1996) of impaired mortgage loans on real estate for which there was no
valuation allowance. During 1997, the average recorded investment in
impaired mortgage loans on real estate was approximately $31.8 million
($39.7 million in 1996) and interest income recognized on those loans
was $1.0 million ($2.1 million in 1996), which is equal to interest
income recognized using a cash-basis method of income recognition.
<PAGE> 12
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Activity in the valuation allowance account for mortgage loans on real
estate is summarized for the years ended December 31:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996
------------- -------------
<S> <C> <C>
Allowance, beginning of year $51.0 $49.1
(Reductions) additions charged to operations (1.2) 4.5
Direct write-downs charged against the allowance (7.3) (2.6)
------ ------
Allowance, end of year $42.5 $51.0
====== ======
</TABLE>
Real estate is presented at cost less accumulated depreciation of $45.1
million as of December 31, 1997 ($30.3 million as of December 31, 1996)
and valuation allowances of $11.1 million as of December 31, 1997
($15.2 million as of December 31, 1996).
Investments that were non-income producing for the twelve month period
preceding December 31, 1997 amounted to $19.4 million ($26.8 million
for 1996) and consisted of $3.0 million ($0.2 million in 1996) in
securities available-for-sale, $16.4 million ($20.6 million in 1996) in
real estate and none ($5.9 million in 1996) in other long-term
investments.
An analysis of investment income by investment type follows for the
years ended December 31:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996 1995
----------- --------- ---------
<S> <C> <C> <C>
Gross investment income:
Securities available-for-sale:
Fixed maturity securities $ 911.6 $ 917.1 $ 685.8
Equity securities 0.8 1.3 1.3
Fixed maturity securities held-to-maturity - - 201.8
Mortgage loans on real estate 457.7 432.8 395.5
Real estate 42.9 44.3 38.3
Short-term investments 22.7 4.2 10.6
Other 21.0 4.0 7.2
-------- -------- --------
Total investment income 1,456.7 1,403.7 1,340.5
Less investment expenses 47.5 45.9 46.5
-------- -------- --------
Net investment income $1,409.2 $1,357.8 $1,294.0
======== ======== ========
</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>
(in millions of dollars) 1997 1996 1995
--------- --------- --------
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturity securities $ 3.6 $(3.5) $ 4.2
Equity securities 2.7 3.2 3.4
Mortgage loans on real estate 1.6 (4.1) (7.1)
Real estate and other 3.2 4.1 (2.2)
------ ------ ------
$11.1 $(0.3) $(1.7)
====== ====== ======
</TABLE>
Fixed maturity securities with an amortized cost of $6.2 million as
of December 31, 1997 and 1996 were on deposit with various
regulatory agencies as required by law.
<PAGE> 13
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(4) FUTURE POLICY BENEFITS AND CLAIMS
The liability for future policy benefits for investment contracts
represents approximately 86% and 87% of the total liability for future
policy benefits as of December 31, 1997 and 1996, respectively. The
average interest rate credited on investment product policies was
approximately 6.1%, 6.3% and 6.6% for the years ended December 31,
1997, 1996 and 1995, 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 by issue year and were 6.9%
and 6.6% in 1997 and 1996, respectively. Interest rates have
generally ranged from 6.0% to 10.5% for previous issue years.
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
$220.2 million and $240.5 million as of December 31, 1997 and 1996,
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 11. All other reinsurance agreements are not material
to either premiums or reinsurance recoverables.
(5) FEDERAL INCOME TAX
The Company's current federal income tax liability was $60.1 million
and $30.2 million as of December 31, 1997 and 1996, respectively.
<PAGE> 14
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
The tax effects of temporary differences that give rise to significant
components of the net deferred tax liability as of December 31, 1997
and 1996 are as follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996
---------- ----------
<S> <C> <C>
Deferred tax assets:
Future policy benefits $200.1 $183.0
Liabilities in Separate Accounts 242.0 188.4
Mortgage loans on real estate and real estate 19.0 23.4
Other assets and other liabilities 59.2 53.7
------- ------
Total gross deferred tax assets 520.3 448.5
Less valuation allowance (7.0) (7.0)
------- ------
Net deferred tax assets 513.3 441.5
------- ------
Deferred tax liabilities:
Deferred policy acquisition costs 480.5 399.3
Fixed maturity securities 193.3 133.2
Deferred tax on realized investment gains 40.1 37.6
Equity securities and other long-term investments 7.5 8.2
Other 22.2 25.4
------- ------
Total gross deferred tax liabilities 743.6 603.7
------- ------
Net deferred tax liability $230.3 $162.2
======= ======
</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, 1997, 1996 and 1995.
Federal income tax expense attributable to income from continuing
operations for the years ended December 31 was as follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Currently payable $121.7 $116.5 $88.7
Deferred tax expense (benefit) 28.5 (5.6) 11.1
------ ------ ------
$150.2 $110.9 $99.8
====== ====== ======
</TABLE>
Total federal income tax expense for the years ended December 31, 1997,
1996 and 1995 differs from the amount computed by applying the U.S.
federal income tax rate to income before tax as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---------------------- ---------------------- ----------------------
(in millions of dollars) Amount % Amount % Amount %
---------------------- ------------- -------- ------------- --------
<S> <C> <C> <C> <C> <C> <C>
Computed (expected) tax expense $150.5 35.0 $110.4 35.0 $100.6 35.0
Tax exempt interest and dividends
received deduction - 0.0 (0.2) (0.1) - 0.0
Other, net (0.3) (0.1) 0.7 0.3 (0.8) (0.3)
------ ---- ------ ---- ------ ----
Total (effective rate of each year) $150.2 34.9 $110.9 35.2 $ 99.8 34.7
====== ==== ====== ==== ====== ====
</TABLE>
Total federal income tax paid was $91.8 million, $115.8 million and
$51.8 million during the years ended December 31, 1997, 1996 and 1995,
respectively.
<PAGE> 15
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(6) FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosures summarize the carrying amount and estimated
fair value of the Company's financial instruments. Certain assets and
liabilities are specifically excluded from the disclosure requirements
of financial instruments. Accordingly, the aggregate fair value amounts
presented do not represent the underlying value of the Company.
The fair value of a financial instrument is defined 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 to be based on estimates using
present value or other valuation techniques. Many of the Company's
assets and liabilities subject to the disclosure requirements are not
actively traded, requiring fair values to be estimated by management
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.
Although insurance contracts, other than policies such as annuities
that are classified as investment contracts, are specifically exempted
from the disclosure requirements, 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:
FIXED MATURITY AND EQUITY SECURITIES: The 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.
MORTGAGE LOANS ON REAL ESTATE, NET: 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 mortgage loans in default is the estimated fair
value of the underlying collateral.
POLICY LOANS, SHORT-TERM INVESTMENTS AND CASH: The carrying amount
reported in the consolidated balance sheets for these instruments
approximates their fair value.
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.
INVESTMENT CONTRACTS: The fair value for the Company's liabilities
under investment type contracts is disclosed using two methods.
For investment contracts without defined maturities, fair value is
the amount payable on demand. For investment contracts with known
or determined maturities, fair value is estimated using discounted
cash flow analysis. Interest rates used are similar to currently
offered contracts with maturities consistent with those remaining
for the contracts being valued.
<PAGE> 16
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
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.
COMMITMENTS TO EXTEND CREDIT: Commitments to extend credit have
nominal fair value because of the short-term nature of such
commitments. See note 13.
Carrying amount and estimated fair value of financial instruments
subject to disclosure requirements and policy reserves on life
insurance contracts were as follows as of December 31:
<TABLE>
<CAPTION>
1997 1996
------------------------------ -------------------------------
Carrying Estimated Carrying Estimated
(in millions of dollars) amount fair value amount fair value
------------------------------ --------------- ---------------
<S> <C> <C> <C> <C>
Assets:
Investments:
Securities available-for-sale:
Fixed maturity securities $13,204.1 $13,204.1 $12,304.6 $12,304.6
Equity securities 80.4 80.4 59.1 59.1
Mortgage loans on real estate, net 5,181.6 5,509.7 5,272.1 5,397.9
Policy loans 415.3 415.3 371.8 371.8
Short-term investments 358.4 358.4 4.8 4.8
Cash 175.6 175.6 43.8 43.8
Assets held in Separate Accounts 37,724.4 37,724.4 26,926.7 26,926.7
Liabilities:
Investment contracts 14,708.2 14,322.1 13,914.4 13,484.5
Policy reserves on life insurance contracts 3,345.4 3,182.4 3,392.8 3,197.5
Liabilities related to Separate Accounts 37,724.4 36,747.0 26,926.7 26,164.2
</TABLE>
(7) RISK DISCLOSURES
The following is a description of the most significant risks facing
life insurers and how the Company mitigates those risks:
LEGAL/REGULATORY RISK: The risk that changes in the legal or regulatory
environment in which an insurer operates will result in increased
competition, reduce demand for a company's products, or create
additional expenses not anticipated by the insurer in pricing its
products. 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: 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> 17
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
INTEREST RATE RISK: 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.
FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK: The Company is a
party to financial instruments with off-balance-sheet risk in the
normal course of business through management of its investment
portfolio. These financial instruments include commitments to extend
credit in the form of loans. These instruments involve, to varying
degrees, elements of credit risk in excess of amounts recognized on the
consolidated balance sheets.
Commitments to fund fixed rate mortgage loans on real estate are
agreements to lend to a borrower, and are subject to conditions
established in the contract. Commitments generally have fixed
expiration dates or other termination clauses and may require payment
of a deposit. Commitments extended by the Company are based on
management's case-by-case credit evaluation of the borrower and the
borrower's loan collateral. The underlying mortgage property represents
the collateral if the commitment is funded. The Company's policy for
new mortgage loans on real estate is to lend no more than 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 $341.4 million
extending into 1998 were outstanding as of December 31, 1997. The
Company also had $63.9 million of commitments to purchase fixed
maturity securities outstanding as of December 31, 1997.
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 20% (21% in 1996) in any geographic area and no more than 2% (2%
in 1996) with any one borrower as of December 31, 1997. As of December
31, 1997, 46% (44% in 1996) of the remaining principal balance of the
Company's commercial mortgage loan portfolio financed retail
properties.
The Company had a significant reinsurance recoverable balance from one
reinsurer as of December 31, 1997 and 1996. See note 4.
(8) 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 year of service. 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.
<PAGE> 18
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
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 (the 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, 1997, 1996 and 1995 were $7.5 million, $7.4
million and $10.5 million, respectively.
The Company had no net accrued pension expense as of December 31, 1997
($1.1 million as of December 31, 1996).
The net periodic pension cost for the Retirement Plan as a whole for
the years ended December 31, 1997 and 1996 and for the Nationwide
Insurance Companies and Affiliates Retirement Plan as a whole for the
year ended December 31, 1995 follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Service cost (benefits earned during the period) $ 77.3 $ 75.5 $ 64.5
Interest cost on projected benefit obligation 118.6 105.5 95.3
Actual return on plan assets (328.0) (210.6) (249.3)
Net amortization and deferral 196.4 101.8 143.4
-------- -------- --------
$ 64.3 $ 72.2 $ 53.9
======== ======== ========
</TABLE>
Basis for measurements, net periodic pension cost:
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Weighted average discount rate 6.50% 6.00% 7.50%
Rate of increase in future compensation levels 4.75% 4.25% 6.25%
Expected long-term rate of return on plan assets 7.25% 6.75% 8.75%
</TABLE>
Information regarding the funded status of the Retirement Plan as a
whole as of December 31, 1997 and 1996 follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996
----------- -----------
<S> <C> <C>
Accumulated benefit obligation:
Vested $1,547.5 $1,338.6
Nonvested 13.5 11.1
-------- ---------
$1,561.0 $1,349.7
======== =========
Net accrued pension expense:
Projected benefit obligation for services rendered to date $2,033.8 $1,847.8
Plan assets at fair value 2,212.9 1,947.9
--------- ---------
Plan assets in excess of projected benefit obligation 179.1 100.1
Unrecognized prior service cost 34.7 37.9
Unrecognized net gains (330.7) (202.0)
Unrecognized net asset at transition 33.3 37.2
--------- ---------
$ (83.6) $ (26.8)
========= =========
</TABLE>
<PAGE> 19
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Basis for measurements, funded status of plan:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Weighted average discount rate 6.00% 6.50%
Rate of increase in future compensation levels 4.25% 4.75%
</TABLE>
Assets of the Retirement Plan are invested in group annuity contracts
of NLIC and Employers Life Insurance Company of Wausau (ELICW).
(9) 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 (APBO), 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,
1997 and 1996 was $36.5 million and $34.9 million, respectively, and
the net periodic postretirement benefit cost (NPPBC) for 1997, 1996 and
1995 was $3.0 million, $3.3 million and $3.1 million, respectively.
Information regarding the funded status of the plan as a whole as of
December 31, 1997 and 1996 follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996
----------- -----------
<S> <C> <C>
Accrued postretirement benefit expense:
Retirees $ 93.3 $ 93.0
Fully eligible, active plan participants 31.6 23.7
Other active plan participants 113.0 84.0
-------- --------
Accumulated postretirement benefit obligation 237.9 200.7
Plan assets at fair value 69.2 63.0
-------- --------
Plan assets less than accumulated postretirement benefit obligation (168.7) (137.7)
Unrecognized transition obligation of affiliates 1.5 1.7
Unrecognized net losses (gains) 1.6 (23.2)
-------- --------
$(165.6) $(159.2)
======== ========
</TABLE>
<PAGE> 20
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
The amount of NPPBC for the plan as a whole for the years ended
December 31, 1997, 1996 and 1995 was as follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996 1995
----------- ------------ ------------
<S> <C> <C> <C>
Service cost (benefits attributed to employee
service during the year) $ 7.0 $ 6.5 $ 6.2
Interest cost on accumulated postretirement
benefit obligation 14.0 13.7 14.2
Actual return on plan assets (3.6) (4.3) (2.7)
Amortization of unrecognized transition
obligation of affiliates 0.2 0.2 3.0
Net amortization and deferral (0.5) 1.8 (1.6)
------- ------ ------
$17.1 $17.9 $19.1
======= ====== ======
</TABLE>
Actuarial assumptions used for the measurement of the APBO and the
NPPBC for 1997, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
APBO:
Discount rate 6.70% 7.25% 6.75%
Assumed health care cost trend rate:
Initial rate 12.13% 11.00% 11.00%
Ultimate rate 6.12% 6.00% 6.00%
Uniform declining period 12 Years 12 Years 12 Years
NPPBC:
Discount rate 7.25% 6.65% 8.00%
Long term rate of return on plan
assets, net of tax 5.89% 4.80% 8.00%
Assumed health care cost trend rate:
Initial rate 11.00% 11.00% 10.00%
Ultimate rate 6.00% 6.00% 6.00%
Uniform declining period 12 Years 12 Years 12 Years
</TABLE>
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,
1997 by $0.4 million and have no impact on the NPPBC for the year ended
December 31, 1997.
(10) SHAREHOLDER'S EQUITY, REGULATORY RISK-BASED CAPITAL, RETAINED EARNINGS
AND DIVIDEND RESTRICTIONS
Ohio, NLIC's and NLAIC'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 NLAIC each exceed
the minimum risk-based capital requirements.
<PAGE> 21
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
The statutory capital and surplus of NLIC as of December 31, 1997, 1996
and 1995 was $1.13 billion, $1.00 billion and $1.36 billion,
respectively. The statutory net income of NLIC for the years ended
December 31, 1997, 1996 and 1995 was $111.7 million, $73.2 million and
$86.5 million, respectively.
As a result of the $850.0 million dividend paid on February 24, 1997,
any dividend paid by NLIC during the twelve-month period immediately
following the $850.0 million dividend would be an extraordinary
dividend under Ohio insurance laws. Accordingly, no such dividend could
be paid without prior regulatory approval. The Company has no reason to
believe that any reasonably foreseeable dividend to be paid by NLIC
would not receive the required 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 shareholder.
The Company currently does not expect such regulatory requirements to
impair its ability to pay operating expenses and shareholder dividends
in the future.
(11) TRANSACTIONS WITH AFFILIATES
As part of the restructuring described in note 1, NLIC paid a dividend
valued at $485.7 million to Nationwide Corp. on January 1, 1997
consisting of the outstanding shares of common stock of ELICW, National
Casualty Company (NCC) and West Coast Life Insurance Company (WCLIC).
Also, on February 24, 1997, NLIC paid a dividend to NFS, and NFS paid
an equivalent dividend to Nationwide Corp., consisting of securities
having an aggregate fair value of $850.0 million. The Company
recognized a gain of $14.4 million on the transfer of securities.
The Company leases office space from NMIC and certain of its
subsidiaries. For the years ended December 31, 1997, 1996 and 1995, the
Company made lease payments to NMIC and its subsidiaries of $8.4
million, $9.1 million and $9.0 million, 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 $85.8 million, $101.6 million and $107.1
million in 1997, 1996 and 1995, 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 inter-company 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 $20.5 million and $15.1 million as of
December 31, 1997 and 1996, 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 1997 and
1996 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> 22
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Intercompany reinsurance agreements 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 the Company'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 the Company's agreements, the investment
risk associated with changes in interest rates is borne by ELICW or
NMIC, as the case may be. Risk of asset default is retained by the
Company, although a fee is paid by ELICW or NMIC, as the case may be,
to the Company for the Company'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. The Company believes that the terms of
the modified coinsurance agreements are consistent in all material
respects with what the Company could have obtained with unaffiliated
parties. Amounts ceded to NMIC and ELICW for the years ended December
31, 1997 and 1996 were:
<TABLE>
<CAPTION>
1997 1996
---------------------------- ----------------------------
(in millions of dollars) NMIC ELICW NMIC ELICW
-------------- ------------- ----------------------------
<S> <C> <C> <C> <C>
Premiums $ 91.4 $199.8 $ 97.3 $224.2
Net investment income and other revenue $ 10.7 $ 13.4 $ 10.9 $ 14.8
Benefits, claims and other expenses $100.7 $225.9 $100.5 $246.6
</TABLE>
The Company and various affiliates entered into agreements with
Nationwide Cash Management Company (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.
Amounts on deposit with NCMC were $211.0 million and $4.8 million as of
December 31, 1997 and 1996, respectively, and are included in
short-term investments on the accompanying consolidated balance sheets.
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 $46.9 million. As discussed in note 15, WCLIC
is accounted for as discontinued operations.
Certain annuity products are sold through three affiliated companies,
which are also subsidiaries of NFS. Total commissions and fees paid to
these affiliates for the three years ended December 31, 1997 were $66.1
million, $76.9 million and $57.3 million, respectively.
(12) BANK LINES OF CREDIT
In August 1996, NLIC, along with NMIC, entered into a $600.0 million
revolving credit facility which provides for a $600.0 million 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. In September 1997,
the credit agreement was amended to include NFS as a party to and
borrower under the agreement.
<PAGE> 23
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(13) 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.
(14) SEGMENT INFORMATION
The Company has three product 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 Fixed Annuities segment also includes the
fixed option under the Company's variable annuity contracts. 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 and
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.
The following table summarizes revenues and income from continuing
operations before federal income tax expense for the years ended
December 31, 1997, 1996 and 1995 and assets as of December 31, 1997,
1996 and 1995, by segment.
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996 1995
------------- ------------ ------------
<S> <C> <C> <C>
Revenues:
Variable Annuities $ 404.0 $ 284.6 $ 189.1
Fixed Annuities 1,141.4 1,092.6 1,052.0
Life Insurance 473.1 435.6 409.1
Corporate and Other 198.9 180.1 148.5
----------- ---------- ----------
$ 2,217.4 $ 1,992.9 $ 1,798.7
=========== ========== ==========
Income from continuing operations before federal income tax
expense:
Variable Annuities $ 150.9 $ 90.3 $ 50.8
Fixed Annuities 169.5 135.4 137.0
Life Insurance 70.9 67.2 67.6
Corporate and Other 38.6 22.6 32.2
----------- ---------- ----------
$ 429.9 $ 315.5 $ 287.6
=========== ========== ==========
Assets:
Variable Annuities $ 35,278.7 $ 25,069.7 $ 17,333.0
Fixed Annuities 14,436.3 13,994.7 13,250.4
Life Insurance 3,901.4 3,353.3 3,027.4
Corporate and Other 6,174.3 5,348.6 4,896.8
----------- ---------- ----------
$ 59,790.7 $ 47,766.3 $ 38,507.6
=========== ========== ==========
</TABLE>
<PAGE> 24
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(15) DISCONTINUED OPERATIONS
As discussed in note 1, NFS is a holding company for NLIC and certain
other companies within the Nationwide Insurance Enterprise that offer
or distribute long-term savings and retirement products. Prior to the
contribution by Nationwide Corp. of the outstanding common stock of
NLIC to NFS, 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
payable to Nationwide Corp. on January 1, 1997 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 with offices in Scottsdale, Arizona
that serves as a fronting company for a property and casualty
subsidiary of NMIC. 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 in the
accompanying consolidated financial statements through December 31,
1996. The Company did not recognize any gain or loss on the disposal of
these subsidiaries.
Also, 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 11 for a
complete discussion of the reinsurance agreements. The Company 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. NLIC's accident and health and group life insurance business
is accounted for as discontinued operations for all periods presented.
The Company 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 the Company.
A summary of the results of operations of discontinued operations for
the years ended December 31, 1997, 1996 and 1995 is as follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996 1995
-------------- ------------- ------------
<S> <C> <C> <C>
Revenues $ - $ 668.9 $ 776.9
Net income $ - $ 11.3 $ 24.7
</TABLE>
A summary of the assets and liabilities of discontinued operations as
of December 31, 1997, 1996 and 1995 is as follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996 1995
-------------- ------------- -------------
<S> <C> <C> <C>
Assets, consisting primarily of investments $247.3 $3,288.5 $3,206.7
Liabilities, consisting primarily of policy benefits and claims $247.3 $2,802.8 $2,700.0
</TABLE>
<PAGE> 36
<TABLE>
<CAPTION>
PART C. OTHER INFORMATION
Item 28. FINANCIAL STATEMENTS AND EXHIBITS PAGE
<S> <C>
(a)Financial Statements:
(1)Financial statements included
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, 1997. 27
Statements of Operations and Changes in
Contract Owners' Equity for the years ended
December 31, 1997 and 1996. 28
Notes to Financial Statements. 29
Schedule of Portfolio Investments. 32
Nationwide Life Insurance Company:
Independent Auditors' Report. 35
Consolidated Balance Sheets as of December
31, 1997 and 1996. 36
Consolidated Statements of Income for the
years ended December 31, 1997, 1996 and
1995. 37
Consolidated Statements of Shareholders
Equity for the years ended December 31,
1997, 1996 and 1995. 38
Consolidated Statements of Cash Flows for
the years ended December 31, 1997, 1996
and 1995. 39
Notes to Consolidated Financial Statements. 40
Schedule I - Consolidated Summary of Investments -
Other Than Investments in Related Parties 74
Schedule III - Supplementary Insurance Information 75
Schedule IV - Reinsurance 76
Schedule V - Valuation and Qualifying Accounts 77
</TABLE>
60 of 79
<PAGE> 37
<TABLE>
<CAPTION>
Item 29. DIRECTORS AND OFFICERS OF THE DEPOSITOR
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C>
Lewis J. Alphin Director
519 Bethel Church Road
Mount Olive, NC 28365
A.I. Bell Director
4121 North River Road West
Zanesville, OH 43701
Keith W. Eckel Director
1647 Falls Road
Clarks Summit, PA 18411
Willard J. Engel Director
301 East Marshall 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
Dimon R. McFerson Chairman and Chief Executive Officer-
One Nationwide Plaza Nationwide Insurance Enterprise
Columbus, OH 43215 and Director
David O. Miller Chairman of the Board and Director
115 Sprague Drive
Hebron, OH 43025
Yvonne L. Montgomery Director
2859 Paces Ferry Road
Atlanta, GA 30339
C. Ray Noecker Director
2770 Winchester Southern S.
Ashville, OH 43103
James F. Patterson Director
8765 Mulberry Road
Chesterland, OH 44026
</TABLE>
61 of 79
<PAGE> 38
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C>
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
Dennis W. Click Vice President and Secretary
One Nationwide Plaza
Columbus, OH 43215
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
</TABLE>
62 of 79
<PAGE> 39
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C>
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
One Nationwide Plaza
Columbus, OH 43215
</TABLE>
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> 40
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (SEE ATTACHED
OF ORGANIZATION CHART) UNLESS
COMPANY OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C> <C>
Affiliate Agency, Inc. Delaware Life Insurance Agency
Affiliate Agency of Ohio, Inc. Ohio 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
The Beak and Wire Corporation Ohio Radio Tower Joint Venture
California Cash Management Company California Inactive
Colonial County Mutual Insurance Texas Insurance Company
Company
Colonial Insurance Company of Wisconsin Insurance Company
Wisconsin
Columbus Insurance Brokerage and Germany Insurance Broker
Service GMBH
Companies Agency, Inc. Wisconsin Insurance Broker
Companies Agency Insurance Services California Insurance Broker
of California
Companies Agency of Alabama, Inc. Alabama Insurance Broker
Companies Agency of Georgia, Inc. Georgia Insurance Broker
Companies Agency of Idaho, Inc. Idaho Insurance Broker
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 Local Recording Agent (P&C)
Companies Annuity Agency of Texas, Texas Group and Variable Contract Agent
Inc.
Cooperative Service Company Nebraska Insurance Agency
Countrywide Services Corporation Delaware Products Liability, Investigative and Claims
Management Services
EMPLOYERS INSURANCE OF WAUSAU A Wisconsin Mutual Insurance Company
Mutual Company
</TABLE>
127 of 145
<PAGE> 41
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (SEE ATTACHED
OF ORGANIZATION CHART) UNLESS
COMPANY OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C> <C> <C>
** Employers Life Insurance Company of Wisconsin Life Insurance Company
Wausau
F & B, Inc. Iowa Insurance Agency
Farmland Mutual Insurance Company Iowa Mutual 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 Commercial Health and Medicare Supplement
Insurance
Insurance Intermediaries, Inc. Ohio Insurance Broker and Insurance Agency
Irvin L. Schwartz and Associates, Inc. Ohio 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 Wisconsin 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
</TABLE>
128 of 145
<PAGE> 42
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (SEE ATTACHED
OF ORGANIZATION CHART) UNLESS
COMPANY OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C> <C>
Nationwide Agency, Inc. Ohio Insurance Agency
Nationwide Agribusiness Insurance Iowa Insurance Company
Company
Nationwide Asset Allocation Trust Massachusetts Investment Company
Nationwide Cash Management Company Ohio Investment Securities Agent
Nationwide Community Urban Ohio Redevelopment of blighted areas within the
Redevelopment Corporation City of Columbus, Ohio
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/Dispatch LLC Ohio Engaged in related Arena development Activity
Nationwide Financial Institution Delaware Insurance Agency
Distributors Agency, Inc.
Nationwide Financial Services Capital Delaware Statutory Business Trust
Trust
Nationwide Financial Services, Inc. Delaware 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 General Insurance Company Ohio Insurance Company
Nationwide Global Holdings, Inc. Ohio Holding Company for Enterprise International
Operations
Nationwide Health Plans, Inc. Ohio Health Maintenance Organization
* Nationwide Indemnity Company Ohio Reinsurance Company
Nationwide Insurance Enterprise Ohio Membership Non-Profit Corporation
Foundation
Nationwide Insurance Enterprise Ohio Performs shares services functions for the
Services, Ltd. Enterprise
Nationwide Insurance Golf Charities, Ohio Membership Non-Profit Corporation
Inc.
Nationwide Investing Foundation Michigan Investment Company
* Nationwide Investing Massachusetts Investment Company
Foundation II
Nationwide Investing Foundation III Ohio Investment Company
</TABLE>
129 of 145
<PAGE> 43
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (SEE ATTACHED
OF ORGANIZATION CHART) UNLESS
COMPANY OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C> <C> <C>
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 Offers Preferred Provider Organization and
Other Related Products and Services
Nationwide Mutual Fire Insurance Ohio Mutual Insurance Company
Company
Nationwide Mutual Insurance Company Ohio Mutual 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, Delaware Life Insurance Agency
Inc.
NEA Valuebuilder Investor Services of Alabama Life Insurance Agency
Alabama, Inc.
NEA Valuebuilder Investor Services of Arizona Life Insurance Agency
Arizona, Inc.
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 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
</TABLE>
130 of 145
<PAGE> 44
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (SEE ATTACHED
OF ORGANIZATION CHART) UNLESS
COMPANY OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C> <C> <C>
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 Administers Deferred Compensation
Corporation 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
Scottsdale Insurance Company Ohio 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
TIG Countrywide Insurance Group California Independent Agency Personal Lines Underwriter
Wausau (Bermuda) Ltd. Bermuda Rent-a-captive Reinsurer
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
</TABLE>
131 of 145
<PAGE> 45
<TABLE>
<CAPTION>
NO. VOTING SECURITIES
STATE (SEE ATTACHED CHART) UNLESS
OF ORGANIZATION OTHERWISE INDICATED
COMPANY PRINCIPAL BUSINESS
<S> <C> <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
* 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 Variable Account-9 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide VL Separate Ohio Nationwide Life and Annuity Issuer of Life Insurance
Account-A Separate Account Policies
Nationwide VL Separate Ohio Nationwide Life and Annuity Issuer of Life Insurance
Account-B Separate Account Policies
Nationwide VL Separate Ohio Nationwide Life and Annuity Issuer of Life Insurance
Account-C Separate Account Policies
* Nationwide VLI Separate Account Ohio Nationwide Life Separate Issuer of Life Insurance
Account Policies
* Nationwide VLI Separate Account-2 Ohio Nationwide Life Separate Issuer of Life Insurance
Account Policies
* Nationwide VLI Separate Account-3 Ohio Nationwide Life Separate Issuer of Life Insurance
Account Policies
Nationwide VLI Separate Account-4 Ohio Nationwide Life Separate Issuer of Life Insurance
Account Policies
</TABLE>
132 of 145
<PAGE> 46
<TABLE>
<CAPTION>
(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 |
------------------------------------------
|
-----------------------------------------------------------------------
| | |
- --------------------------- --------------------------- ---------------------------- ---------------------------
| KEY HEALTH PLAN, INC. | | WAUSAU INSURANCE CO. | | WAUSAU SERVICE | | |
| | | (U.K.) LIMITED | | CORPORATION (WSC) | | NATIONWIDE LLOYDS |
|Common Stock: 1,000 | |Common Stock: 8,506,800 | |Common Stock: 1,000 Shares| | |
|------------ Shares | |------------ Shares | |------------ | | |
| | | | | |=========| |
| Cost | | Cost | | Cost | || | A TEXAS LLOYDS |
| ---- | | ---- | | ---- | || | |
|Employers- | |Employers- | |Employers- | || | |
| 80% $1,828,478 | |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% $1,461,761 | | |WSC-100% $1,000 | | |WSC-100% $10,000 | | |WSC-100% $248,222 |
- --------------------------- | --------------------------- | ---------------------------- | ---------------------------
| | |
- --------------------------- | --------------------------- | ---------------------------- | ---------------------------
| COMPANIES AGENCY | | | COMPANIES AGENCY | | | COMPANIES AGENCY | | | COMPANIES |
| OF ALABAMA, INC. | | | OF PENNSYLVANIA, INC. | | | INSURANCE SERVICES | | | AGENCY, INC. |
| | | | | | | OF CALIFORNIA | | | |
|Common Stock: 1,000 | | |Common Stock: 1,000 | | |Common Stock: 1,000 | | |Common Stock: 100 |
|------------ Shares | | |------------ Shares | |---|------------ Shares | |------|------------ Shares |
| |---|---| | | | | | |
| Cost | | | Cost | | | Cost | | Cost |
| ---- | | | ---- | | | ---- | | ---- |
|WSC-100% $100 | | |WSC-100% $100 | | |WSC-100% $1,000 | |WSC-100% $10,000 |
- --------------------------- | --------------------------- | ---------------------------- ---------------------------
| | |
- --------------------------- | --------------------------- | ---------------------------- ---------------------------
| COMPANIES AGENCY | | | COMPANIES AGENCY | | | PHYSICIANS PLUS | | PENSION ASSOCIATES |
| OF IDAHO, INC. | | | OF PHOENIX, INC. | | | INSURANCE | | OF WAUSAU, INC. |
| | | | | | | CORPORATION | |Common Stock: 1,000 |
|Common Stock: 1,000 | | |Common Stock: 1,000 | | |Common Stock: 7,150 | |------------ Shares |
|------------ Shares | | |------------ Shares | | |------------ Shares | | |
| |-------| | |---|Preferred Stock: 11,540 | | |
| | | | | | |--------------- Shares | |Companies Cost |
| | | | | | | | |Agency, Inc. ---- |
| Cost | | | Cost | | | Cost | |(Wisconsin)-100% $10,000 |
| ---- | | | ---- | | | ---- | | |
|WSC-100% $1,000 | | |WSC-100% $1,000 | | |WSC-33-1/3% $6,215,459| | |
- --------------------------- | --------------------------- | ---------------------------- ---------------------------
| |
| --------------------------- | ----------------------------
| | WAUSAU | | | PREVEA HEALTH |
| | (BERMUDA) LTD. | | | INSURANCE PLAN, INC. |
| | Common Stock: 120,000 | | |Common Stock: 3,000 Shares|
| | ------------- Shares | | |------------ |
----| | ----| |
| | | |
| Cost | | Cost |
| ---- | | ---- |
| WSC-100% $5,000,000| |WSC-33-1/3% $500,000 |
--------------------------- ----------------------------
</TABLE>
<PAGE> 47
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE(R) (middle)
<S> <C> <C>
-----------------------------------------------------------------------------
| |
| |
| NATIONWIDE MUTUAL |
=======| INSURANCE COMPANY |================================================
| (CASUALTY) |
| |
| |
-----------------------------------------------------------------------------
| || |
| || -------------------------------------------------------------
| || ---------------------------------------------------------------------------------------
| || | |
- -------------------------------- || | -------------------------------- --------------------------------
| ALLNATIONS, INC. | || | | NATIONWIDE GENERAL | | NECKURA HOLDING |
|Common Stock: 10,330 Shares | || | | INSURANCE COMPANY | | COMPANY (NECKURA) |
|------------ | || | | | | |
| Cost | || | |Common Stock: 20,000 | |Common Stock: 10,000 |
| ---- | || | |------------ Shares | |------------ Shares |
|Casualty-18.6% $88,320 | || | | Cost | | Cost |
|Fire-18.6% $88,463 | || | | ---- | | ---- |
|Preferred Stock: 1,466 Shares | || |----|Casualty-100% $5,944,422 | ---------|Casualty-100% $87,943,140 |
|--------------- | || | | | | | |
| Cost | || | | | | | |
| ---- | || | | | | | |
|Casualty-6.8% $100,000 | || | | | | | |
|Fire-6.8% $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 WINCONSIN | | | 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% $41,750,000 | | |Neckura-100% DM 15,825,681 |
- -------------------------------- | | -------------------------------- | --------------------------------
| | |
- -------------------------------- | | -------------------------------- | --------------------------------
| COOPERATIVE SERVICE | | | | SCOTTSDALE | | | NECKURA GENERAL |
| COMPANY | | | | INSURANCE COMPANY | | | INSURANCE COMPANY |
|Common Stock: 600 Shares | | | | (SIC) | | | |
|------------ | | | |Common Stock: 30,136 | | |Common Stock: 1,500 |
| Cost |-------- |----|------------ Shares | ---- |--------|------------ Shares |
| ---- | | | Cost | | | | Cost |
|Farmland $3,506,173 | | | ---- | | | | ---- |
|Mutual-100% | | |Casualty-100% $150,000,000 | | | |Neckura-100% DM 1,656,925 |
| | | | | | | | |
| | | | | | | | |
- -------------------------------- | -------------------------------- | | --------------------------------
| | |
- -------------------------------- | -------------------------------- | | --------------------------------
| NATIONWIDE AGRIBUSINESS | | | SCOTTSDALE | | | | COLUMBUS INSURANCE |
| INSURANCE COMPANY | | | SURPLUS LINES | | | | BROKERAGE AND SERVICE |
|Common Stock: 1,000,000 | | | INSURANCE COMPANY | | | | GmbH |
|------------ Shares |------------ | | Common Stock: 100,000 | | | |Common Stock: 1 Share |
| | | | ------------ Shares | ---| |--------|------------ |
| Cost | | | | | | | Cost |
|Casualty-99.9% ---- | | | Cost | | | | ---- |
|Other Capital: $26,714,335 | | | ---- | | | |Neckura-100% DM 51,639 |
|------------- | | | SIC-100% $6,000,000 | | | | |
|Casualty-Ptd. $ 713,576 | | | | | | | |
- -------------------------------- | -------------------------------- | | --------------------------------
| | |
- -------------------------------- | -------------------------------- | | --------------------------------
| NATIONAL CASUALTY | | | NATIONAL PREMIUM & | | | | LEBEN DIREKT |
| COMPANY | | | BENEFIT ADMINISTRATION | | | | INSURANCE COMPANY |
| (NC) | | | COMPANY | | | | |
|Common Stock: 100 Shares | | |Common Stock: 10,000 | | | |Common Stock: 4,000 Shares |
|------------ |------------- |------------ Shares |----- ---------|------------ |
| Cost | | Cost | | | Cost |
| ---- | | ---- | | | ---- |
|Casualty-100% $67,442,439 | |Scottsdale-100% $10,000 | | |Neckura-100% DM 4,000,000 |
| | | | | | |
| | | | | | |
- -------------------------------- -------------------------------- | --------------------------------
| |
- -------------------------------- -------------------------------- | --------------------------------
| NCC OF AMERICA, LTD. | | SVM SALES | | | AUTO DIREKT |
| (INACTIVE) | | GmbH | | | INSURANCE COMPANY |
| | | | | | |
| | |Common Stock: 50 Shares | | |Common Stock: 1,500 Shares |
| | |------------ |----------------- |------------ |
| | | Cost | | Cost |
|NC-100% | | ---- | | ---- |
| | |Neckura-100% DM 50,000 | |Neckura-100% DM 1,643,149 |
| | | | | |
| | | | | |
- -------------------------------- -------------------------------- --------------------------------
</TABLE>
<PAGE> 48
<TABLE>
<CAPTION>
(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 |
| | | | | (Inactive) |
| |Surplus Debentures | | | |
| |------------------ | |----| |
| | Cost | | | |
| | ---- | | | |
| |Colonial $500,000 | | |Casualty-100% |
| |Lone Star 150,000 | | | |
| -------------------------------- | --------------------------------
| |
| -------------------------------- | --------------------------------
| | TIG COUNTRYWIDE | | | THE BEAK AND |
| | INSURANCE COMPANY | | | WIRE CORPORATION |
| |Common Stock 12,500 | | | |
-----|------------ Shares | | |Common Stock: 750 Shares |
| | | -----|------------ |
| | Cost | | | Cost |
| | ---- | | | ---- |
| |Casualty-100% $215,273,000 | | |Casualty-100% $1,419,000 |
| | | | | |
| -------------------------------- | | |
| | --------------------------------
| |
| -------------------------------- | --------------------------------
| | NATIONWIDE INSURANCE | | | NATIONWIDE/DISPATCH LLC |
| | ENTERPRISE SERVICES, LTD. | | | |
| | | | | |
| |Single Member Limited | | | |
- - - |Liability Company | - - -| |
| | | |
| | | |
|Casualty-100% | |Casualty-90% |
| | | |
-------------------------------- | |
--------------------------------
Subsidiary Companies -- Solid Line
Contractual Association -- Double Lines
Limited Liability Company -- Dotted Line
December 31, 1997
</TABLE>
<PAGE> 49
<TABLE>
<CAPTION>
(Left Side)
------------------------------------------------
| 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, INC. | | DISTRIBUTORS AGENCY | || | |
| | | | (NW ADV. SERV.) | | OF ALABAMA, INC. | || | |
| Common Stock: 66,000 | | | 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 | || | NFIDAI -100% $100 | || | |
--------------------------- | --------------------------- || --------------------------- || --------------------------
| || ||
--------------------------- | --------------------------- || --------------------------- || --------------------------
| NWE, INC. | | | NATIONWIDE | || | LANDMARK FINANCIAL | || | |
| | | | INVESTORS SERVICES, INC. | || | SERVICES OF | || | |
| | | | | || | NEW YORK, INC. | || | |
| Common Stock: 100 | | | Common Stock: 5 Shares | || | Common Stock: 10,000 | || | FINANCIAL HORIZONS |
| ------------ Shares |--| | ------------ |==|| | ------------ Shares |--||==| DISTRIBUTORS AGENCY |
| | | | | || | | || | OF OKLAHOMA, INC. |
| Cost | | | Cost | || | Cost | || | |
| ---- | | | ---- | || | ---- | || | |
| NW Life -100% $35,971,375 | | | NW Adv. Serv. -100% $5,000| || | NFIDAI -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 | || | NFIDAI -100% $153,000 | || | |
--------------------------- | --------------------------- || --------------------------- || --------------------------
| || ||
--------------------------- | --------------------------- || --------------------------- || --------------------------
| NATIONWIDE REALTY | | | NATIONWIDE | || | AFFILIATE AGENCY, INC. | || | |
| PROPERTIES, LTD. | | | INVESTING | || | | || | |
| | | | FOUNDATION | || | | || | |
| Units: | | | | || | Common Stock: 100 | || | AFFILIATE |
| ------ - -| | |==|| | ------------ Shares |--||==| AGENCY OF |
| | | | | || | | | OHIO, INC. |
| | | | | || | Cost | | |
| NW Life -90% | | | | || | ---- | | |
| NW Mutual-10% | | | COMMON LAW TRUST | || | NFIDAI -100% $100 | | |
--------------------------- | --------------------------- || --------------------------- --------------------------
| ||
--------------------------- | --------------------------- ||
| NATIONWIDE | | | NATIONWIDE | ||
| PROPERTIES, LTD. | | | INVESTING | ||
| | | | FOUNDATION II | ||
| Units: - -| | | ||
| ------ | | |==||
| | | | ||
| | | | ||
| NW Life -97.6% | | | ||
| NW Mutual -2.4% | | COMMON LAW TRUST | ||
--------------------------- --------------------------- ||
||
--------------------------- ||
| NATIONWIDE | ||
| SEPARATE ACCOUNT | ||
| TRUST | ||
| | ||
| |__||
| |
| |
| |
| COMMON LAW TRUST |
---------------------------
</TABLE>
<PAGE> 50
<TABLE>
<CAPTION>
(Center)
NATIONWIDE INSURANCE ENTERPRISE (R)
<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 | |
| SERVICES, INC. (NFS) | |
| | |
| Common Stock: Control | |
| ------------ ------- | |
| | |
| | |
| Class A Public--100% | |
| Class B NW Corp--100% | |
--------------------------- |
| |
---------------------------------------------------------------------- |
| | | |
--------------------------- --------------------------- --------------------------- | -------------------------
| IRVIN L. SCHWARTZ | | PUBLIC EMPLOYEES BENEFIT | | NEA VALUEBUILDER | | | NATIONWIDE GLOBAL |
| & ASSOCIATES | | SERVICES CORPORATION | | INVESTOR SERVICES, INC. | | | HOLDINGS, INC. |
| | | (PEBSCO) | | (NEA) | | | |
| Common Stock: Control | | Common Stock: 236,494 |==|| | Common Stock: 500 |= || | | Common Stock: 1 Share |
| ------------ ------- | | ------------ Shares | || | ------------ Shares | || |--| ------------ |
| | | | || | | || | | |
| | | | || | | || | | Cost |
| Class A Other -100% | | | || | | || | | ---- |
| Class B NFS -100% | | NFS -100% | || | NFS -100% | || | | NW Corp-100% $7,000,00 |
- ---------------------------- ---------------------------- || ---------------------------- || | --------------------------
--------------------------- || --------------------------- || |
| PEBSCO OF | || | NEA VALUEBUILDER | || | --------------------------
| ALABAMA | || | INVESTOR SERVICES | || | | MRM INVESTMENT, INC. |
| | || | OF ALABAMA, INC. | || | | |
| Common Stock: 100,000 | || | Common Stock: 500 | || | | |
| ------------ Shares |--|| | ------------ Shares |--|| __ | Common Stock: 1 Share |
| | || | | || | ----------- |
| Cost | || | Cost | || | |
| ---- | || | ---- | || | Cost |
| PEBSCO -100% $1,000 | || | NEA -100% $5,000 | || | ---- |
--------------------------- || --------------------------- || | NW Corp.-100% $7,000,000|
|| || --------------------------
--------------------------- || --------------------------- ||
| 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 | || | NEA VALUEBUILDER |
| MONTANA | || | INVESTOR SERVICES | || | INVESTOR SERVICES |
| | || | OF NEVADA, INC. | || | OF OHIO, INC. |
| Common Stock: 500 | || | Common Stock: 500 | || | |
| ------------ Shares |--|| | ------------ Shares |--||====| |
| | || | | || | |
| Cost | || | Cost | || | |
| ---- | || | ---- | || | |
| PEBSCO -100% $500 | || | NEA -100% $500 | || | |
--------------------------- || --------------------------- || --------------------------
|| ||
--------------------------- || --------------------------- || -------------------------
| PEBSCO OF | || | NEA VALUEBUILDER | || | NEA VALUEBUILDER |
| NEW MEXICO | || | INVESTOR SERVICES | || | INVESTOR SERVICES |
| | || | OF WYOMING, INC. | || | OF OKLAHOMA, INC. |
| Common Stock: 1,000 | || | Common Stock: 500 | || | |
| ------------ Shares |--|| | ------------ Shares |--||====| |
| | || | | || | |
| Cost | || | Cost | || | |
| ---- | || | ---- | || | |
| PEBSCO -100% $1,000 | || | NEA -100% $500 | || | |
--------------------------- || --------------------------- || --------------------------
|| ||
--------------------------- || --------------------------- || --------------------------
| | || | NEA VALUEBUILDER | || | NEA VALUEBUILDER |
| | || | SERVICES INSURANCE | || | INVESTOR SERVICES |
| PEBSCO OF | || | AGENCY, INC. | || | OF TEXAS, INC. |
| TEXAS, INC. | || | Common Stock: 100 | || | |
| |==|| | ------------ Shares |--||=== | |
| | | | | |
| | | Cost | | |
| | | ---- | | |
| | | NEA -100% $1,000 | | |
--------------------------- --------------------------- --------------------------
</TABLE>
<PAGE> 51
<TABLE>
<CAPTION>
(Right)
<S> <C> <C> <C> <C> <C> <C>
------------------------------------------------
| NATIONWIDE MUTUAL |
========================================| FIRE INSURANCE COMPANY |
| (FIRE) |
------------------------------------------------
|
- -----------------------------------------------------------------|
- ----------------------------------------------------------------------------------------------
| | |
--------------------------- ------------------------------ ------------------------------
| GATES, MCDONALD | | EMPLOYERS LIFE INSURANCE | | NATIONWIDE |
| & COMPANY (GATES) | | OF WAUSAU (ELIOW) | | HEALTH PLANS, INC. (NHP) |
| | | | | |
| 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: 200 | | | Common Stock: 100 |
|-- | ------------ Shares | |--| ------------ Shares | |--| ------------ Shares |
| | | | | | | |
| | Cost | | Cost | | | NHP Cost |
| | ---- | | ---- | | | ---- |
| | GATES -100% $106,947 | | ELIOW -100% $57,413,193 | | | Inc. -100% $25,149 |
| ----------------------------- ------------------------------ | ------------------------------
| |
| ----------------------------- | ------------------------------
| | GATES, MCDONALD & COMPANY | | | NATIONWIDE |
| | OF NEVADA | | | AGENCY, INC. |
| | | | | |
| | Common Stock: 40 | | | Common Stock: 100 |
|-- | ------------ Shares | |--| ------------ Shares |
| | | | |
| | Cost | | Cost |
| | ---- | | NHP ---- |
| | Gates -100% $93,750 | | Inc. -99% $116,077 |
| ----------------------------- ------------------------------
|
| -----------------------------
| | GATESMCDONALD |
| | HEALTH PLUS, INC. |
| | |
| | Common Stock: 200 |
|-- | ------------ Shares |
| |
| Cost |
| ---- |
| Gates -100% $2,000,000 |
-----------------------------
Subsidiary Companies -- Solid Line
Contractual Association -- Double Line
Limited Liability Company -- Dotted Line
December 31, 1997
Page 2
</TABLE>
<PAGE> 52
Item 31. NUMBER OF CONTRACT OWNERS
The number of contract Owners of Qualified and Non-Qualified
Contracts as of April 30, 1998, was 5 and 1, 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> 53
OFFERED BY
NATIONWIDE
LIFE INSURANCE COMPANY
Group Common Stock
Variable Annuity Contracts
Separate Account No. 1
PROSPECTUS
MAY 1, 1998
73 of 79
<PAGE> 54
INDEPENDENT AUDITORS' CONSENT AND
REPORT ON FINANCIAL STATEMENT SCHEDULES AND CONDENSED FINANCIAL INFORMATION
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 30, 1998, included the related financial statement
schedules as of December 31, 1997, and for each of the years in the three-year
period ended December 31, 1997, 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.
The audits referred to in our report on Nationwide Life Insurance Company
Separate Account No. 1 dated February 20, 1998, included the related condensed
financial information as of December 31, 1997, and for each of the years in the
five-year period ended December 31, 1997, included in the registration
statement. The condensed financial information is the responsibility of the
Company's management. Our responsibility is to express an opinion on the
condensed financial information based on our audits. In our opinion, such
condensed financial information when considered in relation to the basic
financial statements takes as a whole, present fairly in all material respects
the information as 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 30, 1998
74 of 79
<PAGE> 55
<PAGE> 1
SCHEDULE I
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED SUMMARY OF INVESTMENTS -
OTHER THAN INVESTMENTS IN RELATED PARTIES
(in millions of dollars)
As of December 31, 1997
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------- ------------- -------------- ---------------
Column A Column B Column C Column D
- ----------------------------------------------------------------------------- ------------- -------------- ---------------
Amount at
which shown
in the
Market consolidated
Type of Investment Cost value balance sheet
- ----------------------------------------------------------------------------- ------------- -------------- ---------------
Fixed maturity securities available-for-sale:
Bonds:
<S> <C> <C> <C>
U.S. Government and government agencies and authorities $ 3,859.7 $ 3,981.7 $ 3,981.7
States, municipalities and political subdivisions 1.6 1.6 1.6
Foreign governments 93.3 95.8 95.8
Public utilities 1,555.3 1,609.8 1,609.8
All other corporate 7,223.0 7,515.2 7,515.2
---------- ---------- ----------
Total fixed maturity securities available-for-sale 12,732.9 13,204.1 13,204.1
---------- ---------- ----------
Equity securities available-for-sale:
Common stocks:
Industrial, miscellaneous and all other 67.8 78.0 78.0
Non-redeemable preferred stock - 2.4 2.4
---------- ---------- ----------
Total equity securities available-for-sale 67.8 80.4 80.4
---------- ---------- ----------
Mortgage loans on real estate, net 5,228.1 5,181.6 (1)
Real estate, net:
Investment properties 254.9 235.7 (1)
Acquired in satisfaction of debt 82.6 75.7 (1)
Policy loans 415.3 415.3
Other long-term investments 27.9 25.2 (2)
Short-term investments 358.4 358.4
---------- ----------
Total investments $19,167.9 $19,576.4
========== ==========
</TABLE>
- ----------
(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 3 to the consolidated financial statements.
(2) Difference from Column B is primarily due to operating gains (losses) of
investments in limited partnerships.
See accompanying independent auditors' report.
<PAGE> 2
SCHEDULE III
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
SUPPLEMENTARY INSURANCE INFORMATION
(in millions of dollars)
As of December 31, 1997, 1996 and 1995 and for each of the years then ended
<TABLE>
<CAPTION>
- -------------------------------- ----------------- -------------------- ------------------- ------------------ ---------------
Column A Column B Column C Column D Column E Column F
- -------------------------------- ----------------- -------------------- ------------------- ------------------ ---------------
Deferred Future policy Other policy
policy benefits, losses, Unearned claims and
acquisition claims and premiums benefits payable Premium
Segment costs loss expenses (1) (1) revenue
- ------------------------------- ------------------ -------------------- ------------------- ------------------ ---------------
1997: Variable Annuities $1,018.4 $ - $ -
Fixed Annuities 277.9 14,103.1 27.3
Life Insurance 472.9 2,683.4 178.1
Corporate and Other (103.8) 1,916.3 -
-------- ------------- ---------
Total $1,665.4 $18,702.8 $ 205.4
======== ============= =========
1996: Variable Annuities $ 792.1 $ - $ -
Fixed Annuities 242.0 13,388.9 24.0
Life Insurance 414.4 2,391.5 174.6
Corporate and Other (82.0) 1,820.2 -
-------- ------------- ---------
Total $1,366.5 $17,600.6 $ 198.6
======== ============= =========
1995: Variable Annuities $ 569.8 $ - $ -
Fixed Annuities 220.7 12,759.3 32.8
Life Insurance 366.9 2,282.6 166.3
Corporate and Other (136.9) 1,730.0 -
-------- ------------- ---------
Total $1,020.5 $ 16,771.9 $ 199.1
======== ============= =========
- ---------------------------------------------------- -------------------- ------------------- ------------------ ---------------
Column A Column G Column H Column I Column J Column K
- ---------------------------------------------------- -------------------- ------------------- ------------------ ----------------
Net investment Benefits, claims, Amortization Other
income losses and of deferred policy operating Premiums
Segment (2) settlement expenses acquisition costs expenses written
(2)
- ---------------------------------------------------- -------------------- ------------------- ------------------ ---------------
<C> <C> <C> <C> <C>
1997: Variable Annuities $ (26.8) $ 5.9 $ 87.8 $ 159.4
Fixed Annuities 1,098.2 846.7 39.8 85.4
Life Insurance 189.1 227.5 39.6 94.5
Corporate and Other 148.7 114.7 - 45.6
-------- ---------- ------- -------
Total $1,409.2 $ 1,194.8 $ 167.2 $ 384.9
======== ========== ======= =======
1996: Variable Annuities $ (21.4) $ 4.6 $ 57.4 $ 132.3
Fixed Annuities 1,050.6 838.5 38.6 79.7
Life Insurance 174.0 211.4 37.4 79.0
Corporate and Other 154.6 106.1 - 51.4
-------- ---------- ------- -------
Total $1,357.8 $ 1,160.6 $ 133.4 $ 342.4
======== ========== ======= =======
1995: Variable Annuities $ (17.6) $ 2.9 $ 26.3 $ 109.1
Fixed Annuities 1,002.7 805.0 29.5 80.3
Life Insurance 171.2 202.0 31.0 68.8
Corporate and Other 137.7 105.6 (4.1) 14.8
-------- ---------- ------- -------
Total $1,294.0 $ 1,115.5 $ 82.7 $ 273.0
======== ========== ======= =======
</TABLE>
- ----------
(1) Unearned premiums and other policy claims and benefits payable are included
in Column C amounts.
(2) Allocations of net investment income and certain operating expenses are
based on a number of assumptions and estimates, and reported operating
results would change by segment if different methods were applied.
See accompanying independent auditors' report.
<PAGE> 3
SCHEDULE IV
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
REINSURANCE
(in millions of dollars)
As of December 31, 1997, 1996 and 1995 and for each of the years then ended
<TABLE>
<CAPTION>
- ----------------------------------------------- --------------- -------------- ------------- ------------- ------------
Column A Column B Column C Column D Column E Column F
- ----------------------------------------------- --------------- -------------- ------------- ------------- ------------
Percentage
Ceded to Assumed of amount
Gross other from other Net assumed
amount companies companies amount to net
--------------- -------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
1997:
Life insurance in force $ 52,648.4 $13,678.7 $ 289.7 $ 39,259.4 0.7%
=========== ========= ======== =========== =======
Premiums:
Life insurance $ 235.9 $ 32.7 $ 2.2 $ 205.4 1.1%
Accident and health insurance 261.2 272.6 11.4 - N/A
----------- ---------- --------- ----------- -------
Total $ 497.1 $ 305.3 $ 13.6 $ 205.4 6.6%
=========== ========= ========= =========== =======
1996:
Life insurance in force $47,150.6 $11,164.6 $ 288.6 $ 36,274.6 0.8%
=========== ========= ======== =========== =======
Premiums:
Life insurance $ 225.6 $ 29.3 $ 2.3 $ 198.6 1.2%
Accident and health insurance 291.9 305.8 13.9 - N/A
----------- --------- -------- ----------- -------
Total $ 517.5 $ 335.1 $ 16.2 $ 198.6 8.2%
=========== ========= ======== =========== =======
1995:
Life Insurance in force $41,087.9 $ 8,935.7 $ 391.2 $ 32,543.4 1.2%
=========== ========= ======== =========== =======
Premiums:
Life insurance $ 221.3 $ 24.4 $ 2.2 $ 199.1 1.1%
Accident and health insurance 298.0 313.0 15.0 - N/A
----------- --------- -------- ----------- -------
Total $ 519.3 $ 337.4 $ 17.2 $ 199.1 8.6%
=========== ========= ======== =========== =======
</TABLE>
- ----------
Note: The life insurance caption represents principally premiums from
traditional life insurance and life-contingent immediate annuities and
excludes deposits on investment products and universal life insurance
products.
See accompanying independent auditors' report.
<PAGE> 4
SCHEDULE V
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(in millions of dollars)
Years ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------- ------------- -------------
Column A Column B Column C Column D Column E
- --------------------------------------------------- ----------------------------------------------- ------------- -------------
Balance at Charged to Charged to Balance at
beginning costs and other Deductions end of
Description of period expenses accounts (1) period
- --------------------------------------------------- -------------------------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
1997:
Valuation allowances - fixed maturity securities $ - $ 16.2 $ - $ 16.2 $ -
Valuation allowances - mortgage loans on real estate 51.0 (1.2) - 7.3 42.5
Valuation allowances - real estate 15.2 (4.1) - - 11.1
-------- ------ ------- ------- -------
Total $ 66.2 $ 10.9 $ - $ 23.5 $ 53.6
======== ====== ======= ======= =======
1996:
Valuation allowances - mortgage loans on real estate $ 49.1 $ 4.5 $ - $ 2.6 $ 51.0
Valuation allowances - real estate 25.8 (10.6) - - 15.2
-------- ------ ------- ------- -------
Total $ 74.9 $ (6.1) $ - $ 2.6 $ 66.2
======== ====== ======= ======= =======
1995:
Valuation allowances - fixed maturity securities $ - $ 8.9 $ - $ 8.9 $ -
Valuation allowances - mortgage loans on real estate 46.4 7.4 - 4.7 49.1
Valuation allowances - real estate 27.3 (1.5) - - 25.8
-------- ------ ------- ------- -------
Total $ 73.7 $ 14.8 $ - $ 13.6 $ 74.9
======== ====== ======= ======= =======
</TABLE>
- ----------
(1) Amounts represent direct write-downs charged against the valuation
allowance.
See accompanying independent auditors' report.
<PAGE> 56
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 30th day of April, 1998.
SEPARATE ACCOUNT NO. 1
---------------------------------------------------------------
(Registrant)
NATIONWIDE LIFE INSURANCE COMPANY
---------------------------------------------------------------
(Insurance Company)
By/s/JOSEPH P. RATH
---------------------------------------------------------------
Joseph P. Rath
Vice President- Product and Market Compliance
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 30th day
of April, 1998.
SIGNATURE TITLE
--------- -----
LEWIS J. ALPHIN Director
- ------------------------------------------
Lewis J. Alphin
A.I. BELL Director
- ------------------------------------------
A.I. Bell
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
Chairman and Chief Executive Officer
DIMON R. MCFERSON Nationwide Insurance Enterprise
- ------------------------------------------ and Director
Dimon R. McFerson
DAVID O. MILLER Chairman of the Board and Director
- ------------------------------------------
David O. Miller
C. RAY NOECKER Director
- ------------------------------------------
C. Ray Noecker
YVONNE L. MONTGOMERY Director
- ------------------------------------------
Yvonne L. Montgomery
ROBERT A. OAKLEY Executive Vice President-Chief
- ------------------------------------------ Financial Officer
Robert A. Oakley
JAMES F. PATTERSON Director
- ------------------------------------------
James F. Patterson
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
By/s/JOSEPH P. RATH
- ------------------------------------------
Joseph P. Rath
79 of 79
