<PAGE> 1
REGISTRATION NO. 33-00145
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
POST-EFFECTIVE AMENDMENT NO. 15
TO FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933 OF
SECURITIES OF UNIT INVESTMENT TRUSTS REGISTERED ON FORM N-8B-2
-------------------
NATIONWIDE VLI SEPARATE ACCOUNT
(EXACT NAME OF TRUST)
NATIONWIDE LIFE INSURANCE COMPANY
ONE NATIONWIDE PLAZA
COLUMBUS, OHIO 43216
(EXACT NAME AND ADDRESS OF DEPOSITOR AND REGISTRANT)
GORDON E. MCCUTCHAN
SECRETARY
ONE NATIONWIDE PLAZA
COLUMBUS, OHIO 43216
(NAME AND ADDRESS OF AGENT FOR SERVICE)
-------------------
This Post-Effective Amendment amends the Registration Statement in respect to
the prospectus and the Financial Statements
It is proposed that this filing will become effective (check appropriate
space):
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[X] on May 1, 1996 pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a)(i) of Rule 485
[ ] on (date) pursuant to paragraph (a)(i) of rule (485)
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
The Registrant has registered an indefinite number of securities by a prior
registration statement in accordance with Rule 24f-2 under the Investment
Company Act of 1940. Pursuant to Paragraph (a) (3) thereof, a non-refundable fee
in the amount of $500.00 has been paid to the Commission. Registrant filed its
Rule 24f-2 Notice for the fiscal year ended December 31, 1995, on February 15,
1996.
===============================================================================
<PAGE> 2
CROSS REFERENCE TO ITEMS REQUIRED
BY FORM N-8B-2
<TABLE>
<CAPTION>
N-8B-2 Item Caption in Prospectus
- ----------- ---------------------
<S> <C>
1 .............................................................. Nationwide Life Insurance Company
The Variable Account
2 .............................................................. Nationwide Life Insurance Company
3 .............................................................. Custodian of Assets
4 .............................................................. Distribution of The Policies
5 .............................................................. The Variable Account
6 .............................................................. Not Applicable
7 .............................................................. Not Applicable
8 .............................................................. Not Applicable
9 .............................................................. Legal Proceedings
10 .............................................................. Information About The Policies; How
The Cash Value Varies; Right to
Exchange for a Fixed Benefit Policy;
Reinstatement; Other Policy
Provisions
11 .............................................................. Investments of The Variable Account
12 .............................................................. The Variable Account
13 .............................................................. Policy Charges
Reinstatement
14 .............................................................. Underwriting and Issuance -
Premium Payments
Minimum Requirements for Issuance
of a Policy
15 .............................................................. Investments of the Variable Account;
Premium Payments
16 .............................................................. Underwriting and Issuance -
Allocation of Cash Value
17 .............................................................. Surrendering The Policy for Cash
18 .............................................................. Reinvestment
19 .............................................................. Not Applicable
20 .............................................................. Not Applicable
21 .............................................................. Policy Loans
22 .............................................................. Not Applicable
23 .............................................................. Not Applicable
24 .............................................................. Not Applicable
25 .............................................................. Nationwide Life Insurance Company
26 .............................................................. Not Applicable
27 .............................................................. Nationwide Life Insurance Company
28 .............................................................. Company Management
29 .............................................................. Company Management
30 .............................................................. Not Applicable
31 .............................................................. Not Applicable
32 .............................................................. Not Applicable
33 .............................................................. Not Applicable
34 .............................................................. Not Applicable
35 .............................................................. Nationwide Life Insurance Company
36 .............................................................. Not Applicable
37 .............................................................. Not Applicable
38 .............................................................. Distribution of The Policies
39 .............................................................. Distribution of The Policies
40 .............................................................. Not Applicable
41(a) .............................................................. Distribution of The Policies
42 .............................................................. Not Applicable
43 .............................................................. Not Applicable
44 .............................................................. How The Cash Value Varies
45 .............................................................. Not Applicable
46 .............................................................. How The Cash Value Varies
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
N-8B-2 Item Caption in Prospectus
- ----------- ---------------------
<S> <C>
47 .............................................................. Not Applicable
48 .............................................................. Custodian of Assets
49 .............................................................. Not Applicable
50 .............................................................. Not Applicable
51 .............................................................. Summary of The Policies;
Information About The Policies
52 .............................................................. Substitution of Securities
53 .............................................................. Taxation of The Company
54 .............................................................. Not Applicable
55 .............................................................. Not Applicable
56 .............................................................. Not Applicable
57 .............................................................. Not Applicable
58 .............................................................. Not Applicable
59 .............................................................. Financial Statements
</TABLE>
<PAGE> 4
NATIONWIDE LIFE INSURANCE COMPANY
P.O. Box 182150
One Nationwide Plaza
Columbus, Ohio 43218-2150
(800) 547-7548, TDD (800) 238-3035
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE POLICIES*
ISSUED BY NATIONWIDE LIFE INSURANCE COMPANY
THROUGH ITS NATIONWIDE VLI SEPARATE ACCOUNT
The Life Insurance Policies offered by this prospectus are variable life
insurance policies (collectively referred to as the "Policies"). The Policies
are designed to provide life insurance coverage on the Insured named in the
Policy. The Policies may also provide a Cash Surrender Value if the Policy is
terminated during the lifetime of the Insured. The Death Benefit and Cash Value
of the Policies may vary to reflect the experience of the Nationwide VLI
Separate Account (the "Variable Account") or the Fixed Account to which Cash
Values are allocated.
The Policies described in this prospectus may meet the definition of "modified
endowment contracts" under Section 7702A of the Internal Revenue Code (the
"Code"). The Code provides for taxation of surrenders, partial surrenders,
loans, collateral assignments and other pre-death distributions from modified
endowment contracts in the same way annuities are taxed. Any distribution is
taxable to the extent the Cash Value of the Policy exceeds, at the time of the
distribution, the premiums paid into the Policy. The Code also provides for a
10% tax penalty on the taxable portion of such distributions. That penalty is
applicable unless the distribution is 1) paid after the Policy Owner is 59-1/2
or disabled; or 2) the distribution is part of an annuity to the Policy Owner as
defined in the Code (see "Tax Matters").
It may not be advantageous to replace existing insurance with Policies described
in this prospectus. It may also be disadvantageous to purchase a policy to
obtain additional insurance protection if the purchaser already owns another
variable life insurance policy. The policies may not be advantageous for persons
who may wish to make policy loans or withdrawals prior to attaining age 59-1/2
(see "Tax Matters"). The Policy Owner may allocate premiums and Cash Value to
one or more of the sub-accounts of the Variable Account and the Fixed Account.
The assets of each sub-account will be used to purchase, at net asset value,
shares of a designated underlying Mutual Fund of the following series of the
underlying Variable Account Mutual Fund options:
VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST:
- Asset Allocation Fund (Formerly "Multiple Strategy Fund")
- Domestic Income Fund (Formerly "Domestic Strategic Income Fund")
- Emerging Growth Fund
- Enterprise Fund (Formerly "Common Stock Fund")
- Global Equity Fund
- Government Fund
- Money Market Fund
- Real Estate Securities Fund
Nationwide Life Insurance Company (the "Company") guarantees that the Death
Benefit for a Policy will never be less than the Specified Amount stated on the
Policy data pages as long as the Policy is in force. There is no guaranteed Cash
Surrender Value. If the Cash Surrender Value is insufficient to cover the
charges under the Policy, the Policy will lapse.
This prospectus generally describes only that portion of the Cash Value
allocated to the Variable Account. For a brief summary of the Fixed Account
Option, see "The Fixed Account Option."
*The contract is titled a "Flexible Premium Life Insurance Policy" in Texas.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THIS PROSPECTUS SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE. A PROSPECTUS
FOR THE UNDERLYING MUTUAL FUND OPTION(S) BEING CONSIDERED MUST ACCOMPANY THIS
PROSPECTUS AND SHOULD BE READ IN CONJUNCTION HEREWITH.
The date of this Prospectus is May 1, 1996.
1
<PAGE> 5
GLOSSARY OF TERMS
ATTAINED AGE- The Insured's age on the Policy Date, plus the number of full
years since the Policy Date.
ACCUMULATION UNIT- An accounting unit of measure used to calculate the Variable
Account Cash Value.
BENEFICIARY- The person to whom the proceeds due on the Insured's death are
paid.
CASH VALUE- The sum of the value of Policy assets in the Variable Account, Fixed
Account and any associated value in the Policy Loan Account.
CASH SURRENDER VALUE- The Policy's Cash Value, less any indebtedness under the
Policy, less any Surrender Charge.
CODE- The Internal Revenue Code of 1986, as amended.
COMPANY- Nationwide Life Insurance Company.
DEATH PROCEEDS- Amount of money payable to the Beneficiary if the Insured dies
while the Policy is in force.
FIXED ACCOUNT- An investment option which is funded by the General Account of
the Company.
GENERAL ACCOUNT- All assets of the Company other than those of the Variable
Account or in other separate accounts that have been or may be established by
the Company.
GUIDELINE SINGLE PREMIUM- The amount of single premium calculated in accordance
with the provisions of the Code as amended. It represents the single premium
required to mature the Policy under guaranteed mortality and expense charges,
and an interest rate of 6%.
HOME OFFICE- The main office of the Company located in Columbus, Ohio.
INSURED- The person whose life is covered by the Policy, and who is named on the
Policy Data Page.
MATURITY DATE- The Policy Anniversary on or following the Insured's 95th
birthday.
MONTHLY ANNIVERSARY DAY- The same day as the Policy Date for each succeeding
month.
MUTUAL FUNDS- The underlying mutual funds which correspond to the sub-accounts
of the Variable Account.
NET ASSET VALUE- The worth of one share at the end of a market day or at the
close of the New York Stock Exchange. Net Asset Value is computed by adding the
value of all portfolio holdings, plus other assets, deducting liabilities and
then dividing the results by the number of shares outstanding.
POLICY ANNIVERSARY- An anniversary of the Policy Date.
POLICY CHARGES- All deductions made from the value of the Variable Account, or
the Policy Cash Value.
POLICY DATE- The date the provisions of the Policy take effect, as shown on the
Policy Owner's Policy Data Page.
POLICY LOAN ACCOUNT- The Portion of the Cash Value which results from Policy
Loans.
POLICY OWNER- The person designated in the Policy application as the Owner. In
the State of New York, the variable life insurance Policies offered by the
Company are offered as "Certificates" for "Certificate Owners" under a group
contract rather than individual Policies. The provisions of both these
Certificates and the Policies are essentially the same and references to the
provisions of Policies and rights of Policy Owners in this prospectus include
Certificates and Certificate Owners.
POLICY YEAR- Each year commencing with the Policy Date and each Policy Date
anniversary thereafter.
SPECIFIED AMOUNT- A dollar amount used to determine the Death Benefit under a
Policy. It is shown on the Policy Data Page.
SURRENDER CHARGE- An amount deducted from the Cash Value if the Policy is
surrendered.
VALUATION DATE- Each day the New York Stock Exchange and the Company's Home
Office is open for business, or any other day during which there is a sufficient
degree of trading that the current net asset value of the Accumulation Units
might be materially affected.
VALUATION PERIOD- A period commencing with the close of business on the New York
Stock Exchange and ending at the close of business for the next succeeding
Valuation Date.
VARIABLE ACCOUNT- A separate investment account of the Nationwide Life Insurance
Company.
2
<PAGE> 6
TABLE OF CONTENTS
<TABLE>
<S> <C>
GLOSSARY OF TERMS..................................................................................................... 2
SUMMARY OF THE POLICIES............................................................................................... 5
Variable Life Insurance...................................................................................... 5
The Variable Account and its Sub-Accounts.................................................................... 5
The Fixed Account............................................................................................ 5
Deductions and Charges....................................................................................... 6
Premiums..................................................................................................... 6
NATIONWIDE LIFE INSURANCE COMPANY..................................................................................... 6
THE VARIABLE ACCOUNT.................................................................................................. 7
Investments of the Variable Account.......................................................................... 7
Van Kampen American Capital Life Investment Trust............................................................ 7
Reinvestment................................................................................................. 9
Transfers.................................................................................................... 9
Dollar Cost Averaging........................................................................................ 9
Substitution of Securities................................................................................... 9
Voting Rights................................................................................................ 10
INFORMATION ABOUT THE POLICIES........................................................................................ 10
Underwriting and Issuance.................................................................................... 10
-Minimum Requirements for Issuance of a Policy............................................................... 10
-Premium Payments............................................................................................ 10
-Allocation of Cash Value.................................................................................... 10
-Short-Term Right to Cancel Policy........................................................................... 11
POLICY CHARGES........................................................................................................ 11
Deductions from Premiums..................................................................................... 11
Deductions from Cash Value................................................................................... 11
-Charges on Surrender........................................................................................ 11
-Annual Administrative Charge................................................................................ 12
-Cost of Insurance Charge.................................................................................... 12
Deductions from the Sub-Accounts............................................................................. 12
-Mortality and Expense Risk Charge........................................................................... 13
-Administrative Expense Charge............................................................................... 13
-Premium Tax Recovery Charge................................................................................. 13
-Income Tax Charge........................................................................................... 13
HOW THE CASH VALUE VARIES............................................................................................. 13
How the Investment Experience is Determined.................................................................. 13
Net Investment Factor........................................................................................ 14
Valuation of Assets.......................................................................................... 14
Determining The Cash Value................................................................................... 14
Valuation Periods and Valuation Dates........................................................................ 14
SURRENDERING THE POLICY FOR CASH...................................................................................... 15
Right to Surrender........................................................................................... 15
Cash Surrender Value......................................................................................... 15
Partial Surrenders........................................................................................... 15
Maturity Proceeds............................................................................................ 15
Income Tax Withholding....................................................................................... 15
POLICY LOANS.......................................................................................................... 16
Taking a Policy Loan......................................................................................... 16
Effect on Investment Performance............................................................................. 16
Interest..................................................................................................... 16
Effect on Death Benefit and Cash Value....................................................................... 16
Repayment.................................................................................................... 16
HOW THE DEATH BENEFIT VARIES.......................................................................................... 17
-Calculation of the Death Benefit............................................................................ 17
-Proceeds Payable on Death................................................................................... 18
RIGHT TO EXCHANGE FOR A FIXED BENEFIT POLICY.......................................................................... 18
CHANGES OF INVESTMENT POLICY.......................................................................................... 18
GRACE PERIOD.......................................................................................................... 18
REINSTATEMENT......................................................................................................... 19
THE FIXED ACCOUNT OPTION.............................................................................................. 19
CHANGES IN EXISTING INSURANCE COVERAGE................................................................................ 19
Changes in the Specified Amount.............................................................................. 19
Changes in the Death Benefit Option.......................................................................... 20
OTHER POLICY PROVISIONS............................................................................................... 20
</TABLE>
3
<PAGE> 7
<TABLE>
<S> <C>
Policy Owner................................................................................................. 20
Beneficiary.................................................................................................. 20
Assignment................................................................................................... 20
Incontestability............................................................................................. 20
Error in Age or Sex.......................................................................................... 20
Suicide...................................................................................................... 20
Nonparticipating Policies.................................................................................... 21
LEGAL CONSIDERATIONS.................................................................................................. 21
DISTRIBUTION OF THE POLICIES.......................................................................................... 21
CUSTODIAN OF ASSETS................................................................................................... 21
TAX MATTERS........................................................................................................... 21
Policy Proceeds.............................................................................................. 21
Taxation of the Company...................................................................................... 22
Other Considerations......................................................................................... 22
THE COMPANY........................................................................................................... 22
COMPANY MANAGEMENT.................................................................................................... 23
Directors of the Company..................................................................................... 23
Executive Officers of the Company............................................................................ 24
OTHER CONTRACTS ISSUED BY THE COMPANY................................................................................. 24
STATE REGULATION...................................................................................................... 24
REPORTS TO POLICY OWNERS.............................................................................................. 25
ADVERTISING........................................................................................................... 25
LEGAL PROCEEDINGS..................................................................................................... 25
EXPERTS............................................................................................................... 25
REGISTRATION STATEMENT................................................................................................ 25
LEGAL OPINIONS........................................................................................................ 25
APPENDIX 1............................................................................................................ 26
APPENDIX 2............................................................................................................ 27
FINANCIAL STATEMENTS.................................................................................................. 38
</TABLE>
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO PERSON IS AUTHORIZED TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS.
4
<PAGE> 8
THE PRIMARY PURPOSE OF THE POLICIES IS TO PROVIDE LIFE INSURANCE PROTECTION FOR
THE BENEFICIARY NAMED IN THE POLICY. NO CLAIM IS MADE THAT THE POLICIES ARE IN
ANY WAY SIMILAR OR COMPARABLE TO A SYSTEMATIC INVESTMENT PLAN OF A MUTUAL FUND.
SUMMARY OF THE POLICIES
VARIABLE LIFE INSURANCE
The variable life insurance Policies offered by Nationwide Life Insurance
Company (the "Company") are similar in many ways to fixed-benefit whole life
insurance. As with fixed-benefit whole life insurance, the Owner of the Policy
pays a premium for life insurance coverage on the person insured. Also like
fixed-benefit whole life insurance, the Policies may provide for a Cash
Surrender Value which is payable if the Policy is terminated during the
Insured's lifetime. (As with fixed-benefit whole life insurance, the Cash
Surrender Value during the early Policy years may be substantially lower than
the premiums paid).
However, the Policies differ from fixed-benefit whole life insurance in several
respects. Unlike fixed-benefit whole life insurance, the Death Benefit and Cash
Value of the Policies may increase or decrease to reflect the investment
performance of the Variable Account sub-accounts or the Fixed Account to which
Cash Values are allocated (see "How the Death Benefit Varies"). There is no
guaranteed Cash Surrender Value (see "How the Cash Value Varies"). If the Cash
Surrender Value is insufficient to pay Policy Charges, the Policy will lapse.
THE VARIABLE ACCOUNT AND ITS SUB-ACCOUNTS
The Company places the Policy's Cash Value in the Nationwide VLI Separate
Account (the "Variable Account") at the time the Policy is issued. The Policy
Owner chooses the sub-accounts of the Variable Account or the Fixed Account into
which the Cash Value will be allocated (see "Allocation of Cash Value"). During
the free look period, however, the Cash Value is allocated to the money market
fund or the Fixed Account. For more information on the short term right to
cancel this policy, please see "Short Term Right to Cancel Policy". At present,
there are five sub-accounts. Assets of each sub-account are invested at Net
Asset Value in shares of a corresponding underlying Mutual Fund option. For a
description of the underlying Mutual Fund options and their investment
objectives, see "Investments of the Variable Account."
THE FIXED ACCOUNT
The Fixed Account is funded by the assets of the Company's General Account. Cash
Values allocated to the Fixed Account are credited with interest daily at a rate
declared by the Company. The interest rate declared is at the Company's sole
discretion, but may never be less than an effective annual rate of 4%.
DEDUCTIONS AND CHARGES
The Company deducts certain charges from the assets of the Variable Account and
the Cash Value of the Policy. These charges are made for administrative and
sales expenses, state premium taxes, providing life insurance protection and
assuming the mortality and expense risks.
The Company deducts a charge for the cost of insurance from the Policy's Cash
Value on the Policy Date and each Monthly Anniversary Day. The Company deducts
an annual policy administrative charge from the Policy's Cash Value at the
beginning of each Policy Year after the first. The current annual charge is $90
($65 in New York) for total premium payments less than $25,000 and $50 for total
premium payments greater than or equal to $25,000. This charge is guaranteed
never to exceed $135 ($120 in New York) for total premium payments less than
$25,000 and $75 for total premium payments greater than or equal to $25,000. The
Company also deducts on a daily basis from the assets of the Variable Account a
charge to provide for mortality and expense risks, administrative charges and
premium tax recovery. These current charges are equal on an annual basis to
1.30% of the Variable Account assets for the first 10 Policy Years and 1.00%
thereafter and are guaranteed never to exceed 1.60% and 1.30% respectively. For
Policies which are surrendered, the Company may deduct a Surrender Charge. The
Surrender Charge associated with each premium payment will not exceed 8.5% of
the premium payment, and will be applied for nine years after the effective date
of the premium payment. The Surrender Charge is designed to recover certain
expenses incurred by the Company related to the sale of Policies.
Underlying Mutual Fund shares are purchased at Net Asset Value, which reflects
the deduction of investment management fees and certain other expenses. The
management fees are charged by each underlying Mutual Fund's investment adviser
for managing the underlying Mutual Fund and selecting its portfolio of
securities. Other underlying Mutual Fund expenses can include such items as
interest expense on loans and contracts with transfer agents, custodians, and
other companies that provide services to the underlying Mutual Fund. The
management fees and other expenses for each underlying Mutual Fund for its most
recently completed fiscal year, expressed as a percentage of the underlying
Mutual Fund's average assets, are as follows:
5
<PAGE> 9
UNDERLYING MUTUAL FUND ANNUAL EXPENSES
<TABLE>
<S> <C>
Asset Allocation Fund (formerly "Multiple Strategy Fund")
Management Fees ............................................................................ 0.36 %
------------
Other Expenses.............................................................................. 0.24 %
------------
Total underlying Mutual Fund Expenses.................................................... 0.60 %
------------
Domestic Income Fund (formerly "Domestic Strategic Income Fund")
Management Fees............................................................................. 0.17 %
------------
Other Expenses.............................................................................. 0.43 %
------------
Total underlying Mutual Fund Expenses..................................................... 0.60 %
------------
Emerging Growth Fund
Management Fees............................................................................. 0.00 %
------------
Other Expenses.............................................................................. 2.50 %
------------
Total underlying Mutual Fund Expenses..................................................... 2.50 %
------------
Enterprise Fund (formerly "Common Stock Fund")
Management Fees ............................................................................ 0.42 %
------------
Other Expenses.............................................................................. 0.18 %
------------
Total underlying Mutual Fund Expenses..................................................... 0.60 %
------------
Global Equity Fund
Management Fees............................................................................. 0.00 %
------------
Other Expenses.............................................................................. 4.35 %
------------
Total underlying Mutual Fund Expenses..................................................... 4.35 %
------------
Government Fund
Management Fees............................................................................. 0.38 %
------------
Other Expenses.............................................................................. 0.22 %
------------
Total underlying Mutual Fund Expenses..................................................... 0.60 %
------------
Money Market Fund
Management Fees............................................................................. 0.17 %
------------
Other Expenses.............................................................................. 0.43 %
------------
Total underlying Mutual Fund Expenses..................................................... 0.60 %
------------
Real Estate Securities Fund
Management Fees............................................................................. 0.60 %
------------
Other Expenses.............................................................................. 1.90 %
------------
Total underlying Mutual Fund Expenses..................................................... 2.50 %
------------
</TABLE>
The Mutual Fund expenses shown above are assessed at the underlying Mutual Fund
level and are not direct charges against the Variable Account or reductions in
Cash Value. These underlying Mutual Fund expenses are taken into consideration
in computing each underlying Mutual Fund's Net Asset Value, which is the share
price used to calculate the Variable Account's unit value. The management fees
and other expenses, some of which may be subject to fee waivers or expense
reimbursements, are more fully described in the prospectuses for each individual
underlying Mutual Fund option. The information relating to the underlying Mutual
Fund expenses was provided by the underlying Mutual Fund and was not
independently verified by the Company.
PREMIUMS
The minimum premium for which a Policy may be issued is $10,000. A Policy may
be issued to an insured up to age 80.
For a limited time, the Policy Owner has a right to cancel the Policy and
receive a full refund of premiums paid (see "Short Term Right to Cancel
Policy").
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 of companies which includes Nationwide Mutual Insurance
Company, Nationwide Mutual Fire Insurance Company, Nationwide Life and Annuity
Insurance Company, Nationwide Property and Casualty Insurance Company, National
Casualty Company, West Coast Life Insurance Company, Scottsdale Indemnity
Company, Nationwide Indemnity Company and Nationwide General Insurance Company.
The Company's Home Office is at One Nationwide Plaza, Columbus, Ohio 43216.
The Company offers a complete line of life insurance, including annuities and
accident and health insurance. It is admitted to do business in all states, the
District of Columbia and Puerto Rico (for additional information, see "The
Company").
6
<PAGE> 10
THE VARIABLE ACCOUNT
The Nationwide VLI Separate Account (the "Variable Account"), was established by
a resolution of the Company's Board of Directors, on August 8, 1984, pursuant to
the provisions of Ohio law. The Company has caused the Variable Account to be
registered with the Securities and Exchange Commission as a unit investment
trust pursuant to the provisions of the Investment Company Act of 1940.
Nationwide Life Insurance Company, One Nationwide Plaza, Columbus, Ohio 43216
serves as trustee for the trust. Nationwide Financial Services, Inc., One
Nationwide Plaza, Columbus, Ohio 43216 serves as principal underwriter for the
trust. Such registration does not involve supervision of the management of the
Variable Account or the Company by the Securities and Exchange Commission.
The Variable Account is a separate investment account of the Company and as
such, is not chargeable with the liabilities arising out of any other business
the Company may conduct. The Company does not guarantee the investment
performance of the Variable Account. The Death Benefit and Cash Value under the
Policy may vary with the investment performance of the investments in the
Variable Account (see "How the Death Benefit Varies" and "How the Cash Value
Varies").
Premium payments and Cash Value are allocated within the Variable Account among
one or more sub-accounts. The assets of each sub-account are used to purchase
shares of the underlying Mutual Funds designated by the Policy Owner. Thus, the
investment performance of a Policy depends upon the investment performance of
the underlying Mutual Funds designated by the Policy Owner.
INVESTMENTS OF THE VARIABLE ACCOUNT
At the time of application, the Policy Owner elects to have the Cash Value
allocated among one or more of the Variable Account sub-accounts and the Fixed
Account (see "Allocation of Cash Value"). When the policy is issued, the
Policy's Cash Value not allocated to the Fixed Account is placed in the Money
Market Fund Sub-Account (for any Cash Value Allocated to a Sub-Account on the
application) or the Fixed Account, as designated by the Policy Owner, until
expiration of the period in which the Policy Owner may exercise his or her
short-term right to cancel the Policy. At the expiration of the period in which
the Policy Owner may exercise his or her short-term right to cancel the Policy,
shares of the underlying Mutual Funds specified by the Policy Owner are
purchased at Net Asset Value for the respective sub-account(s). Such election is
subject to any minimum premium limitations which may be imposed by the
underlying Mutual Fund option(s). In addition, no less than 5% of premium may be
allocated to any one sub-account or the Fixed Account. The Policy Owner may
change the allocation of Cash Value or may transfer Cash Value from one
sub-account to another, subject to such terms and conditions as may be imposed
by each underlying Mutual Fund and as set forth in this prospectus (see
"Transfers", "Allocation of Cash Value" and "Short-Term Right to Cancel
Policy"). Additional Premium Payments, upon acceptance, will be allocated to the
Nationwide Separate Account Trust Money Market Fund unless the Policy Owner
specifies otherwise (see "Premium Payments").
Each of the underlying Mutual Fund options receives investment advice from Van
Kampen American Capital Asset Management, Inc., which is paid fees for its
services by the underlying Mutual Funds. A summary of investment objectives is
contained in the description of each underlying Mutual Fund below. These
underlying Mutual Fund options are available only to serve as the underlying
investment for variable annuity and variable life contracts issued through
separate accounts of life insurance companies which may or may not be
affiliated, also known as "mixed and shared funding." There are certain risks
associated with mixed and shared funding, which is disclosed in the underlying
Mutual Funds' prospectuses. A full description of the underlying Mutual Fund
options, their investment policies and restrictions, risks and charges are
contained in the prospectuses of the respective underlying Mutual Funds. A
prospectus for the underlying Mutual Fund option(s) being considered must
accompany this prospectus and should be read in conjunction herewith.
VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST
The Van Kampen American Capital Life Investment Trust is an open-end
diversified management investment company organized as a Massachusetts business
trust on June 3, 1985. The Trust offers shares in separate funds which are sold
only to insurance companies to provide funding for variable life insurance
policies and variable annuity contracts. Van Kampen American Capital Asset
Management, Inc. serves as the Fund's investment adviser.
ASSET ALLOCATION FUND (FORMERLY "MULTIPLE STRATEGY FUND")
The investment objective of this Fund is to seek a high total investment
return consistent with prudent risk through a fully managed investment
policy utilizing equity, intermediate and long-term debt and money market
securities. Total investment return consists of current income, including
dividends, interest, and discount accruals, and capital appreciation. The
Advisor may vary the composition of the
7
<PAGE> 11
portfolio from time to time based upon an evaluation of economic and
market trends and the anticipated relative total return available from a
particular type of security.
DOMESTIC INCOME FUND (FORMERLY "DOMESTIC STRATEGIC INCOME FUND")
The investment objective of this Fund is to seek current income as its
primary objective. Capital appreciation is a secondary objective. The
Fund attempts to achieve these objectives through investment primarily in
a diversified portfolio of fixed-income securities. The Fund may invest
in investment grade securities and lower rated and nonrated securities.
Lower rated securities are regarded by the rating agencies as
predominantly speculative with respect to the issuer's continuing ability
to meet principal and interest payments.
EMERGING GROWTH FUND
The investment objective of this Fund is to seek capital appreciation by
investing in a portfolio of securities consisting principally of common
stocks of small and medium sized companies considered by Van Kampen
American Capital Asset Management, Inc. ("the Adviser"), to be emerging
growth companies. Under normal market conditions, at least 65% of the
Fund's total assets will be invested in common stocks of small and medium
sized companies (less than $2 billion of market capitalization), both
domestic and foreign. The Fund may invest up to 20% of its total assets
in securities of foreign issuers. Additionally, the Fund may invest up to
15% of the value of its assets in restricted securities (i.e., securities
which may not be sold without registration under the Securities Act of
1933) and in other securities not having readily available market
quotations.
ENTERPRISE FUND (FORMERLY "COMMON STOCK FUND")
The investment objective of this Fund is to seek capital appreciation by
investing securities believed by the Advisor to have above average
potential for capital appreciation. Any income received on such
securities is incidental to the objective of capital appreciation.
GLOBAL EQUITY FUND
The investment objective of this Fund is to seek long term capital growth
through investments in an internationally diversified portfolio of equity
securities of companies of any nation including the United States. The
Fund intends to be invested in equity securities of companies of at least
three countries including the United States. Under normal market
conditions, at least 65% of the Fund's total assets are so invested.
Equity securities include common stocks, preferred stocks and warrants or
options to acquire such securities.
GOVERNMENT FUND
The investment objective of this Fund is to provide investors with a high
current return consistent with preservation of capital. The Government
Fund invests primarily in debt securities issued or guaranteed by the
U.S. Government, its agencies or instrumentalities. In order to hedge
against changes in interest rates, the Government Fund may also purchase
or sell options and engage in transactions involving interest rate
futures contracts and options on such contracts.
MONEY MARKET FUND
The investment objective of this Fund is to seek as high a level of
current income as is considered consistent with the preservation of
capital and liquidity by investing primarily in money market instruments.
REAL ESTATE SECURITIES FUND
The investment objective of this Fund is to seek long-term capital growth
by investing in a portfolio of securities of companies operating in the
real estate industry ("Real Estate Securities"). Current income is a
secondary consideration. Real Estate Securities include equity
securities, including common stocks and convertible securities, as well
as non-convertible preferred stocks and debt securities of real estate
industry companies. A "real estate industry company" is a company that
derives at least 50% of its assets (marked to market), gross income or
net profits from the ownership, construction, management or sale of
residential, commercial or industrial real estate. Under normal market
conditions, at least 65% of the Fund's total assets will be invested in
Real Estate Securities, primarily equity securities of real estate
investment trusts. The Fund may invest up to 25% of its total assets in
securities issued by foreign issuers, some or all of which may also be
Real Estate Securities. There can be no assurance that the Fund will
achieve its investment objective.
8
<PAGE> 12
REINVESTMENT
The Funds described above have as a policy the distribution of dividends in the
form of additional shares (or fractions thereof) of the underlying Mutual Funds.
The distribution of additional shares will not affect the number of Accumulation
Units attributable to a particular Policy (see "Allocation of Cash Value").
TRANSFERS
The Policy Owner may request a transfer of up to 100% of the Cash Value from the
Variable Account to the Fixed Account. The Owner's Cash Value in each
Sub-Account will be determined as of the date the transfer request is received
in the Home Office in good order. The Company reserves the right to restrict
transfers to the Fixed Account to 25% of the Cash Value.
The Policy Owner may annually transfer a portion of the value of the Fixed
Account to the Variable Account and a portion of the Variable Account to the
Fixed Account, without penalty or adjustment. The Company reserves the right to
limit the amount of Cash Value transferred out of the Fixed Account each Policy
Year. Transfers from the Fixed Account must be made within 30 days after the
termination date of the interest rate guarantee period.
Transfers may be made once per Valuation Date and may be made either in writing
or, in states allowing such transfers, by telephone. The Company will employ
reasonable procedures to confirm that instructions communicated by telephone are
genuine. Such procedures may include any or all of the following, or such other
procedures as the Company may, from time to time, deem reasonable: requesting
identifying information, such as name, contract number, Social Security number,
and/or personal identification number; tape recording all telephone
transactions, and providing written confirmation thereof to both the Policy
owner and any agent of record at the last address of record. Although failure to
follow reasonable procedures may result in the Company's liability for any
losses due to unauthorized or fraudulent telephone transfers, the Company will
not be liable for following instructions communicated by telephone which it
reasonably believes to be genuine. The Company may withdraw the telephone
exchange privilege upon 30 days written notice to Policy Owners.
Policy Owners who have entered into a Dollar Cost Averaging Agreement with the
Company (see "Dollar Cost Averaging" below) may transfer from the Fixed Account
to the Variable Account under the terms of that agreement.
DOLLAR COST AVERAGING
The Policy Owner may direct the Company to automatically transfer from the Money
Market sub-account or the Fixed Account to any other sub-account within the
Variable Account on a monthly basis. This service is intended to allow the
Policy Owner to utilize Dollar Cost Averaging, a long-term investment program
which provides for regular, level investments over time. The Company makes no
guarantees that Dollar Cost Averaging will result in a profit or protect against
loss in a declining market. To qualify for Dollar Cost Averaging there must be a
minimum total Cash Value, less policy indebtedness, of $15,000. Transfers for
purposes of Dollar Cost Averaging can only be made from the Money Market
sub-account or the Fixed Account. The minimum monthly Dollar Cost Averaging
transfer is $100. In addition, Dollar Cost Averaging monthly transfers from the
Fixed Account must be equal to or less than 1/30th of the Fixed Account value
when the Dollar Cost Averaging program is requested. Transfers out of the Fixed
Account, other than for Dollar Cost Averaging, may be subject to certain
additional restrictions (see "Transfers"). A written election of this service,
on a form provided by the Company, must be completed by the Policy Owner in
order to begin transfers. Once elected, transfers from the Money Market
sub-account or the Fixed Account will be processed monthly until either the
value in the Money Market sub-account or the Fixed Account is completely
depleted or the Policy Owner instructs the Company in writing to cancel the
monthly transfers.
The Company reserves the right to discontinue offering Dollar Cost Averaging
upon 30 days' written notice to Policy Owners, however, any discontinuation will
not affect Dollar Cost Averaging programs already commenced. The Company also
reserves the right to assess a processing fee for this service.
SUBSTITUTION OF SECURITIES
If shares of the underlying Mutual Fund options described in this prospectus
should no longer be available for investment by the Variable Account or, if in
the judgment of the Company's management further investment in such underlying
Mutual Funds should become inappropriate the Company may eliminate Sub-Accounts,
combine two or more Sub-Accounts, or substitute shares of one or more underlying
Mutual Fund for other underlying Mutual Fund shares already purchased or to be
purchased in the future by premium payments under the Policy. No substitution of
securities in the Variable Account may take place without prior approval of the
Securities and Exchange Commission, and under such requirements as it and any
state insurance department may impose.
9
<PAGE> 13
VOTING RIGHTS
Voting rights under the Policies apply with respect to Cash Value allocated to
the sub-accounts of the Variable Account.
In accordance with its view of present applicable law, the Company will vote the
shares of the underlying Mutual Funds held in the Variable Account at regular
and special meetings of the shareholders of the underlying Mutual Funds. These
shares will be voted in accordance with instructions from Policy Owners who have
an interest in the Variable Account. If the Investment Company Act of 1940 or
any regulation thereunder should be amended or if the present interpretation
thereof should change, and as a result the Company determines that it is
permitted to vote the shares of the underlying Mutual Funds in its own right, it
may elect to do so.
The Policy Owner shall have the voting interest under a Policy. The number of
shares in each sub-account for which the Policy Owner may give voting
instructions is determined by dividing any portion of the Policy's Cash Value
derived from participation in that underlying Mutual Fund by the Net Asset Value
of one share of that underlying Mutual Fund. The number of shares which a person
has a right to vote will be determined as of a date chosen by the Company, but
not more than 90 days prior to the meeting of the underlying Mutual Fund. Voting
instructions will be solicited by written communication at least 21 days prior
to such meeting.
Underlying Mutual Fund shares held in the Variable Account as to which no timely
instructions are received will be voted by the Company in the same proportion as
the voting instructions which are received.
Each person having a voting interest in the Variable Account will receive
periodic reports relating to investments of the Variable Account, the underlying
Mutual Funds' proxy material and a form with which to give such voting
instructions.
INFORMATION ABOUT THE POLICIES
UNDERWRITING AND ISSUANCE
- -Minimum Requirements for Issuance of a Policy
The minimum amount of initial premium that will be accepted by the Company is
$10,000. Policies may be issued to Insureds issue ages 80 or younger. Before
issuing any Policy, the Company requires evidence of insurability satisfactory
to it, which may include a medical examination.
- -Premium Payments
The initial premium for a Policy is payable in full at the Company's Home
Office. The minimum amount of initial premium required is $10,000 for issue ages
75 or younger and $50,000 for issue ages 76 through 80. The Specified Amount is
determined by treating the initial premium as equal to 100% of the Guideline
Single Premium. Upon payment of an initial premium, temporary insurance may be
provided, subject to a maximum amount. The effective date of permanent insurance
coverage is dependent upon completion of all underwriting requirements, payment
of the initial premium, and delivery of the Policy while the Insured is still
living.
The Policy Owner may make additional premium payments. The Policy is primarily
intended to be a single premium with a limited ability to make additional
payments. Subsequent premium payments under the Policy are permitted under the
following circumstances:
1. an additional premium payment is required to keep the Policy in force
(see "Grace Period"); or
2. except in Virginia, additional premium payments of at least $1,000 may be
made at any time provided the premium limits prescribed by the Internal
Revenue Service to qualify the Policy as a life insurance contract are
not violated.
Payment of additional premiums if accepted, may increase the Specified Amount of
insurance. However, the Company reserves the right to require satisfactory
evidence of insurability before accepting any additional premium payment which
results in an increase in the net amount at risk. The Company may also require
that any existing Policy indebtedness is repaid prior to accepting any
additional premium payments.
The Company will not accept a subsequent premium payment which would result in
total premiums paid exceeding the premium limitations prescribed by the Internal
Revenue Service to qualify the Policy as a life insurance contract.
- -Allocation of Cash Value
At the time a Policy is issued, its Cash Value will be based on the Money Market
Fund Sub-Account value or the Fixed Account as if the Policy had been issued and
the premium invested on the date the premium was
10
<PAGE> 14
received in good order by the Company. When the Policy is issued, the Cash Value
will be allocated to the Money Market Fund Sub-Account (for any Cash Value
Allocated to a Sub-Account on the application) or the Fixed Account until the
expiration of the period in which the Policy Owner may exercise his or her
short-term right to cancel the Policy. Cash Value not designated for the Fixed
Account will be placed in the Money Market Fund Sub-Account. At the expiration
of the period in which the Policy Owner may exercise his or her short term right
to cancel the Policy, shares of the Mutual Funds specified by the Policy Owner
are purchased at Net Asset Value for the respective sub-account(s). The Policy
Owner may change the allocation of Cash Value or may transfer Cash Value from
one sub-account to another, subject to such terms and conditions as may be
imposed by each underlying Mutual Fund option and as set forth in the
prospectus. Cash Value allocated to the Fixed Account at the time of application
may not be transferred prior to the first Policy Anniversary (see "Transfers"
and "Investments of the Variable Account").
The designation of investment allocations will be made by the prospective Policy
Owner at the time of application for a Policy. The Policy Owner may change the
way in which future premiums are allocated by giving written notice to the
Company. All percentage allocations must be in whole numbers, and must be at
least 5%. The sum of allocations must equal 100%.
- -Short-Term Right to Cancel Policy
A Policy may be returned for cancellation and a full refund of premium within 10
days after the Policy is received, within 45 days after the application for
insurance is signed, or within 10 days after the Company mails or delivers a
Notice of Right of Withdrawal, whichever is latest. The Policy can be mailed or
delivered to the registered representative who sold it, or the Company.
Immediately after such mailing or delivery, the Policy will be deemed void from
the beginning. The Company will refund the total premiums paid within seven days
after it receives the Policy.
POLICY CHARGES
DEDUCTIONS FROM PREMIUMS
No deduction is made from any premium at the time of payment. 100% of each
premium payment is applied to the Cash Value.
DEDUCTIONS FROM CASH VALUE
The Company may deduct certain charges from the Policy's Cash Value. While the
Company reserves the right to change current charges, it has no present intent
to do so. These are comprised of the following items:
- -Charges on Surrender
No charges are deducted from any premium payment. The Company incurs certain
expenses related to the sale of the Policies. These expenses include commissions
paid to sales personnel, the cost of sales literature and other promotional
activity. To recover these expenses, the Company imposes a Surrender Charge. The
Surrender Charge may be insufficient to recover all these expenses. Unrecovered
expenses are born by the Company's general assets which may include profits, if
any, from Mortality and Expense Risk Charges.
The initial premium payment and any subsequent premium payment which results in
an increased net amount at risk will have a Surrender Charge associated with it
that will be less than or equal to 8.5% of such premium payment, as set forth in
the chart in this provision. The Surrender Charge applies for nine years after
the effective date of each premium payment. Certain surrenders may result in
adverse tax consequences (see "Tax Matters").
<TABLE>
<CAPTION>
COMPLETED YEAR(S) SINCE CHARGES ON SURRENDER AS A
PREMIUM PAYMENT % PREMIUM PAYMENT
--------------- -----------------
<S> <C>
0 8.5%
1 8.5%
2 8.0%
3 8.0%
4 7.5%
5 7.0%
6 6.0%
7 5.0%
8 4.0%
9 0.0%
</TABLE>
11
<PAGE> 15
In no event will the Surrender Charge deducted on surrender exceed 8.5% of the
total premiums paid.
The amount of the Surrender Charge may be eliminated when the Policies are
issued to an officer, director, former director, partner, employee, or retired
employee of the Company; an employee of the General Distributor of the Policies,
Van Kampen American Capital Marketing, Inc.; or an employee of an affiliate of
the Company or the General Distributor; or, a duly appointed representative of
the Company who receives no commission as a result of the purchase.
Elimination of the Surrender Charge will be permitted by the Company only in
those situations where the Company does not incur sales or administrative
expenses normally associated with sales of a Policy. In no event will reduction
of the Surrender Charge be permitted where such reduction will be unfairly
discriminatory to any person.
- -Annual Administrative Charge
The Company deducts an annual administrative charge at the beginning of each
Policy Year after the first. It will be charged proportionately to the Cash
Values in each Variable sub-account and the Fixed Account. The amount of this
annual charge is determined by the total net premium payments (premium payments
less any previous partial surrenders) as follows:
<TABLE>
<CAPTION>
Total Net Premium Payments
Greater than But Less Current Annual Administrative Guaranteed Maximum Annual
or Equal to than Charge Administrative Charge
----------- ---- ------ ---------------------
<S> <C> <C> <C>
$10,000 $25,000 $90 Non-New York $135 Non-New York
$65 In New York $120 In New York
$25,000 $50 All States $ 75 All States
</TABLE>
- -Cost of Insurance Charge
A monthly deduction for the Cost of insurance is charged proportionately against
the Cash Value in each Sub-account and the Fixed Account on the Policy Date and
each Monthly Anniversary Day. The Company will determine the Monthly Cost of
Insurance charge by multiplying the Applicable Cost of Insurance rate by the net
amount at risk. The net amount at risk is equal to the Death Benefit minus the
Cash Value.
Guaranteed cost of insurance charges will not exceed the cost based on the
guaranteed cost of insurance rate and the Policy's net amount at risk.
Guaranteed cost of insurance rates for Standard-Simplified issues are based on
the 1980 Commissioner's Extended Term Mortality Table, Age Last Birthday (1980
CET). Guaranteed cost of insurance rates for Standard Preferred issues are based
on the 1980 Commissioner's Standard Ordinary Mortality Table, Age Last Birthday
(1980 CSO). Guaranteed cost of insurance rates for substandard issues are based
on appropriate percentage multiples of the 1980 CSO. These mortality tables are
sex distinct. In addition, separate mortality tables will be used for standard
and non-tobacco.
For Policies issued in Texas, guaranteed cost of insurance rates for
Standard-Simplified issues ("Special Class-Simplified" in Texas) are based on
130% of the 1980 Commissioner's Standard Ordinary Mortality Table, Age Last
Birthday (1980 CSO).
The rate class of an Insured may affect the cost of insurance rate. The Company
currently places Insureds into both standard rate classes and substandard
classes that involve a higher mortality risk. In an otherwise identical Policy,
an Insured in the standard rate class will have a lower cost of insurance than
an Insured in a rate class with higher mortality risks. The Company may also
issue certain Policies on a "Simplified Issue" basis to certain categories of
individuals. Due to the underwriting criteria established for Policies issued on
a Simplified Issue basis, actual rates for healthy individuals will be higher
than the current cost of insurance rates being charged under otherwise identical
Policies that are issued on a Preferred basis.
DEDUCTIONS FROM THE SUB-ACCOUNTS
The Company will deduct, on a daily basis, certain charges from the assets of
the Variable Account. On an annual basis, these charges are equivalent to:
<TABLE>
<CAPTION>
Policy Years Policy Years
1-10 11+
---- ---
<S> <C> <C>
Current 1.30% 1.00%
Guaranteed Maximum 1.60% 1.30%
</TABLE>
While the Company reserves the right to change current charges, it has no
present intent to do so.
12
<PAGE> 16
These charges consist of the following items:
- -Mortality and Expense Risk Charge
The Company assumes certain risks for guaranteeing mortality and expense
charges. The mortality risk assumed under the Policies is that the Insured may
not live as long as expected. The expense risk assumed is that the actual
expenses incurred in issuing and administering the Policies may be greater than
expected. In addition, the Company assumes risks associated with the nonrecovery
of policy issue, underwriting, and other administrative expenses due to Policies
which lapse or are surrendered during the first ten years following each premium
payment.
To compensate the Company for assuming these risks associated with the Policies,
the Company deducts a daily charge from the assets of the sub-accounts of the
Variable Account. This charge currently is equivalent to an effective annual
rate of 0.75%. To the extent that future levels of mortality and expenses are
less than or equal to those expected, the Company may realize a profit from
these charges. This charge is guaranteed not to exceed 0.90%.
- -Administrative Expense Charge
The Company deducts a daily Administrative Expense Charge to reimburse it for
expenses related to issuance and maintenance of the Policies including
underwriting, establishing policy records, accounting and record keeping, and
periodic reporting to Policy Owners. This charge is designed only to reimburse
the Company for its actual administrative expenses. In the aggregate, the
Company expects that the charges for administrative costs will be approximately
equal to the related expenses.
This charge is deducted daily from the assets of the sub-accounts of the
Variable Account. This charge currently is equivalent to an annual effective
rate of 0.25%. This charge is guaranteed not to exceed 0.40%.
- -Premium Tax Recovery Charge
Premium taxes are not deducted at the time a premium is paid. The Company pays
any state premium taxes attributable to a particular Policy when incurred by the
Company. The Company expects to pay an average state premium tax rate of
approximately 2.5% of premiums for all states, although such tax rates gradually
can range from 0% to 4%. To reimburse the Company for the payment of state
premium taxes associated with the Policies, during the first ten Policy Years
the Company deducts a daily charge from the assets of the sub-accounts. This
charge is computed on a daily basis, and is equivalent to an annual effective
rate of 0.30% of the assets of the Variable Account during the first ten Policy
Years, and 0% thereafter. This charge may be more or less than the amount
actually assessed by the state in which a particular Policy owner lives. The
Company does not expect to make a profit from this charge.
- -Income Tax Charge
The Company does not currently assess any charge for income taxes incurred by
the Company as a result of the operations of the sub-accounts of the Variable
Account (see "Taxation of the Company"). The Company reserves the right to
assess a charge for such taxes against the Variable Account if the Company
determines that such taxes will be incurred.
HOW THE CASH VALUE VARIES
On any date during the Policy Year, the Cash Value equals the Cash Value on the
preceding Valuation Date, plus any premium applied since the previous Valuation
Date, plus or minus any investment results, and less any Policy Charges.
There is no guaranteed Cash Value. The Cash Value will vary with the investment
experience of the Variable Account and/or the daily crediting of interest in the
Fixed Account and Policy Loan Account depending on the allocation of Cash Value
by the Policy Owner.
HOW THE INVESTMENT EXPERIENCE IS DETERMINED
The Cash Value in each sub-account is converted to Accumulation Units of that
sub-account. The conversion is accomplished by dividing the amount of Cash Value
allocated to a sub-account by the value of an Accumulation Unit for the
sub-account of the Valuation Period during which the allocation occurs.
The value of an Accumulation Unit for each sub-account was arbitrarily set
initially at $10 when the underlying Mutual Fund shares in that sub-account were
available for purchase. The value for any subsequent Valuation Period is
determined by multiplying the Accumulation Unit value for each sub-account for
the immediately preceding Valuation Period by the Net Investment Factor for the
sub-account during the subsequent Valuation
13
<PAGE> 17
Period. The value of an Accumulation Unit may increase or decrease from
Valuation Period to Valuation Period. The number of Accumulation Units will not
change as a result of investment experience.
NET INVESTMENT FACTOR
The Net Investment Factor for any Valuation Period is determined by dividing (a)
by (b) and subtracting (c) from the result where:
(a) is the net of:
(1) the net asset value per share of the underlying Mutual Fund held in
the sub-account determined at the end of the current Valuation
Period, plus
(2) the per share amount of any dividend or capital gain distributions
made by the underlying Mutual Fund held in the sub-account if the
"ex-dividend" date occurs during the current Valuation Period.
(b) is the net of:
(1) the net asset value per share of the underlying Mutual Fund held in
the Sub-Account determined at the end of the immediately preceding
Valuation Period, plus or minus
(2) the per share charge or credit, if any, for any taxes reserved for
in the immediately preceding Valuation Period.
(c) is a factor representing the daily Mortality and Expense Risk Charge,
Administration Expense Charge and Premium Tax Recovery Charge deducted
from the Variable Account. Such factor is equal to an annual rate of
1.30% for the first ten years and then 1.00% thereafter of the daily net
asset value of the Variable Account.
For underlying Mutual Funds that credit dividends on a daily basis and pay such
dividends once a month, the Net Investment Factor allows for the monthly
reinvestment of these daily dividends.
The Net Investment Factor may be greater or less than one; therefore, the value
of an Accumulation Unit may increase or decrease. It should be noted that
changes in the Net Investment Factor may not be directly proportional to changes
in the net asset value of underlying Mutual Fund shares, because of the
deduction for Mortality and Expense Risk Charge, Administration Expense Charge,
and Premium Tax Recovery Charge and any charge or credit for tax reserves.
VALUATION OF ASSETS
Underlying Mutual Fund shares in the Variable Account will be valued at their
Net Asset Value.
DETERMINING THE CASH VALUE
The sum of the value of all Variable Account Accumulation Units attributable to
the Policy and amounts credited to the Fixed Account is the Cash Value. The
number of Accumulation Units credited per each sub-account are determined by
dividing the net amount allocated to the sub-account by the Accumulation Unit
Value for the sub-account for the Valuation Period during which the premium is
received by the Company. In the event part or all of the Cash Value is
surrendered or charges or deductions are made against the Cash Value, an
appropriate number of Accumulation Units from the Variable Account and an
appropriate amount from the Fixed Account will be deducted in the same
proportion that the Policy Owner's interest in the Variable Account and the
Fixed Account bears to the total Cash Value.
The Cash Value in the Fixed Account and the Policy Loan Account is credited with
interest daily at an effective annual rate which the Company periodically
declares. The annual effective rate will never be less than 4%. Upon request,
the Company will inform the Policy Owner of the then applicable rates for each
account.
VALUATION PERIODS AND VALUATION DATES
A Valuation Period is the period commencing at the close of business on the New
York Stock Exchange and ending at the close of business for the next succeeding
Valuation Date. A Valuation Date is each day that the New York Stock Exchange
and the Company's Home Office is open for business or any other day during which
there is sufficient degree of trading that the current Net Asset Value of the
Accumulation Units might be materially affected.
14
<PAGE> 18
SURRENDERING THE POLICY FOR CASH
RIGHT TO SURRENDER
The Policy Owner may surrender the Policy in full at any time while the Insured
is living and receive its Cash Surrender Value. The cancellation will be
effective as of the date the Company receives a proper written request for
cancellation and the Policy. Such written request must be signed and, where
permitted, the signature guaranteed by a member firm of the New York, American,
Boston, Midwest, Philadelphia or Pacific Stock Exchange, or by a commercial bank
or a savings and loan, which is a member of the Federal Deposit Insurance
Corporation or other guarantor institution as defined by the federal security
laws and regulations. In some cases, the Company may require additional
documentation of a customary nature.
CASH SURRENDER VALUE
The Cash Surrender Value increases or decreases daily to reflect the investment
experience of the Variable Account and the daily crediting of interest in the
Fixed Account and the Policy Loan Account. The Cash Surrender Value equals the
Policy's Cash Value, next computed after the date the Company receives a proper
written request for surrender and the Policy, minus any charges, indebtedness or
other deductions due on that date, which may also include a Surrender Charge.
PARTIAL SURRENDERS
After the Policy has been in force for 5 Policy Years, the Policy Owner may
request a partial surrender. Partial surrenders will be permitted only if they
satisfy the following requirements:
1 The maximum partial surrender in any Policy Year is limited to 10%
of the total premium payment;
2 Partial surrenders must not result in a reduction of the Cash
Surrender Value below $10,000; and
3 After the partial surrender, the Policy continues to qualify as
life insurance.
When a partial surrender is made, the Cash Value is reduced by the amount of the
partial surrender. Under Death Benefit Option 1, the Specified Amount is reduced
by the amount of the partial surrender, unless the death benefit is based on the
applicable percentage of cash value. In such a case, a partial surrender will
decrease the Specified Amount by the amount by which the partial surrender
exceeds the difference between the death benefit and Specified Amount. Partial
surrender amounts must be first deducted from the values in the Variable
sub-accounts. Partial surrenders will be deducted from the Fixed Account only to
the extent that insufficient values are available in the Variable sub-accounts.
Surrender Charges will be waived for any partial surrenders which satisfy the
above conditions. Certain partial surrenders may result in currently taxable
income and tax penalties (see "Tax Matters").
MATURITY PROCEEDS
The Maturity Date is the Policy Anniversary on or next following the Insured's
95th birthday. The Maturity Proceeds will be payable to the Policy Owner on the
Maturity Date provided the Policy is still in force. The Maturity Proceeds will
be equal to the amount of the Policy's Cash Value, less any indebtedness.
INCOME TAX WITHHOLDING
Federal law requires the Company to withhold income tax from any portion of
surrender proceeds that is subject to tax, unless the Policy Owner advises the
Company, in writing, of his or her request not to withhold.
If the Policy Owner requests that the Company not withhold taxes, or if the
taxes withheld are insufficient, the Policy Owner may be liable for payment of
an estimated tax. The Policy Owner should consult his or her tax advisor.
In certain employer-sponsored life insurance arrangements, including equity
split dollar arrangements, participants may be required to report for income tax
purposes, one or more of the following: (1) the value each year of the life
insurance protection provided; (2) an amount equal to any employer-paid
premiums; or (3) some or all of the amount by which the current value of the
contract exceeds the employer's interest in the contract. Participants should
consult with the sponsor or the administrator of the plan, and/or with their
personal tax or legal advisers, to determine the tax consequences, if any, of
their employer-sponsored life insurance arrangements.
15
<PAGE> 19
POLICY LOANS
TAKING A POLICY LOAN
The Policy Owner may take a loan using the Policy as security. During the first
year, maximum Policy indebtedness is limited to 50% of the Cash Surrender Value
less interest due on the next Policy Anniversary. After the first Policy Year,
the maximum Policy indebtedness is limited to 90% of the Cash Surrender Value
less interest due on the next Policy Anniversary. The Company will not grant a
loan for an amount less than $1,000 ($200 in Connecticut, $500 in New York).
Should the Death Benefit become payable, the Policy be surrendered, or the
Policy mature while a loan is outstanding, the amount of Policy indebtedness
will be deducted from the Death Benefit, Cash Surrender Value or the Maturity
Value, respectively.
Maximum Policy indebtedness, in Texas, is limited to 90% of the Cash Surrender
Value in the sub-accounts and 100% of the Cash Surrender Value in the Fixed
Account less interest due on the next Policy Anniversary.
Any request for a Policy loan must be in written form satisfactory to the
Company. The request must be signed and, where permitted, the signature
guaranteed by a member firm of the New York, American, Boston, Midwest,
Philadelphia or Pacific Stock Exchange; or by a Commercial Bank or a Savings and
Loan which is a member of the Federal Deposit Insurance Corporation. Certain
Policy loans may result in currently taxable income and tax penalties (see "Tax
Matters").
EFFECT ON INVESTMENT PERFORMANCE
When a loan is made, an amount equal to the amount of the loan is transferred
from the Variable Account to the Policy Loan Account. If the assets relating to
a Policy are held in more than one sub-account, withdrawals from sub-accounts
will be made in proportion to the assets in each Variable sub-account at the
time of the loan. Policy Loans will be transferred from the Fixed Account only
when insufficient amounts are available in the Variable sub-accounts. The amount
taken out of the Variable Account will not be affected by the Variable Account's
investment experience while the loan is outstanding.
INTEREST
Amounts transferred to the Policy Loan Account will earn interest daily from the
date of transfer.
Policy Loans will be currently credited interest daily at an annual effective
rate of 5.0%. This rate is guaranteed never to be lower than 4%. The Company may
change the current interest crediting rate on Policy Loans at any time at its
sole discretion. This earned interest is transferred from the Policy Loan
Account to a Variable Account or the Fixed Account on each Policy Anniversary.
It will be allocated according to the underlying Mutual Fund Allocation Factors
in effect at the time of the transfer.
The loan interest rate is 6% per year for all Policy Loans. Interest is charged
daily and is payable at the end of each Policy year. Unpaid interest will be
added to the existing policy indebtedness as of the due date and will be charged
interest at the same rate as the rest of the indebtedness.
Whenever the total loan indebtedness plus accrued interest exceeds the Cash
Value less any Surrender Charges, the Company will send a notice to the Policy
Owner and the assignee, if any. The Policy will terminate without value 61 days
after the mailing of the notice unless a sufficient repayment is made during
that period. A repayment is sufficient if it is large enough to reduce the total
loan indebtedness plus accrued interest to an amount equal to the total Cash
Value less any Surrender Charges plus an amount sufficient to continue the
Policy in force for 3 months.
EFFECT ON DEATH BENEFIT AND CASH VALUE
A Policy loan, whether or not repaid, will have a permanent effect on the Death
Benefit and Cash Value because the investment results of the Variable Account or
the Fixed Account will apply only to the non-loaned portion of the Cash Value.
The longer the loan is outstanding, the greater the effect is likely to be.
Depending on the investment results of the Variable Account or the Fixed Account
while the loan is outstanding, the effect could be favorable or unfavorable.
REPAYMENT
All or part of a loan may be repaid at any time while the Policy is in force
during the insured's lifetime. Any payment intended as a loan repayment, rather
than a premium payment, must be identified as such. Loan repayments will be
credited to the Variable sub-accounts and the Fixed Account in proportion to the
Policy Owner's Premium allocation in effect at the time of the repayment. Each
repayment may not be less than $1,000 ($50 in Connecticut and New York). The
Company reserves the right to require that any loan repayments resulting from
Policy Loans transferred from the Fixed Account must be first allocated to the
Fixed Account.
16
<PAGE> 20
HOW THE DEATH BENEFIT VARIES
- -Calculation of the Death Benefit
At issue, the Specified Amount is determined by treating the initial premium as
equal to 100% of the Guideline Single Premium. Additional premium payments, if
accepted, may increase the Specified Amount. Guideline Single Premiums vary by
attained age, sex, smoking classification, underwriting classification and total
premium payments. The following table illustrates representative initial
Specified Amounts, under Death Benefit Option 1, for non-tobacco.
<TABLE>
<CAPTION>
Issue $25,000 Single Premium $50,000 Single Premium
Age Male Female Male Female
--- ---- ------ ---- ------
<S> <C> <C> <C> <C>
35 $179,733 $208,354 $364,774 $423,008
40 143,373 166,704 290,792 338,264
45 114,856 134,300 232,769 272,332
50 92,583 108,739 187,452 220,323
55 75,306 88,601 152,298 179,349
60 62,112 72,636 125,453 146,866
65 52,094 59,930 105,070 121,014
Generally, for a given premium payment, the initial Specified Amount is greater
for non-tobacco than standard, females than males, preferred issue than
simplified issue. The Specified Amount is shown in the Policy.
While the Policy is in force, the Death Benefit will never be less than the
Specified Amount. The Death Benefit may vary with the Cash Value of the Policy,
which depends on investment performance.
The Policy Owner may choose one of two Death Benefit Options. Under Option (1),
the Death Benefit will be the greater of the Specified Amount or the Applicable
Percentage of Cash Value. Under Option (1), the amount of the Death Benefit will
ordinarily not change for several years to reflect the investment performance
and may not change at all. If investment performance is favorable the amount of
Death Benefit may increase. To see how and when investment performance will
begin to affect Death Benefits, please see the illustrations. Under Option (2),
the Death Benefit will be the greater of the Specified Amount plus the Cash
Value, or the Applicable Percentage of Cash Value and will vary directly with
the investment performance.
Policy Owners who are satisfied with the amount of their current insurance
coverage and prefer to have favorable investment performance and any future
premium payments reflected in increased Policy Cash Values should choose Death
Benefit Option (1). Policy Owners who prefer to have favorable investment
performance and any future premium payments increase Death Benefits should
choose Death Benefit Option (2).
The monthly Cost of Insurance for Option (1) will always be less than or equal
to the monthly Cost of Insurance for the same amount of Death Benefit under
Option (2) (see "Cost of Insurance Charge").
The term "applicable percentage" means:
1. 250% when the Insured is Attained Age 40 or less at the beginning
of a Policy Year, and
2. when the Insured is above Attained Age 40, the percentage shown in
the "Applicable Percentage of Cash Value Table" shown in this
provision.
APPLICABLE PERCENTAGE OF CASH VALUE TABLE
Attained Percentage Attained Percentage Attained Percentage
Age of Cash Value Age of Cash Value Age of Cash Value
--- ------------- --- ------------- --- -------------
<S> <C> <C> <C> <C> <C>
0-40 250% 60 130% 80 105%
41 243% 61 128% 81 105%
42 236% 62 126% 82 105%
43 229% 63 124% 83 105%
44 222% 64 122% 84 105%
45 215% 65 120% 85 105%
46 209% 66 119% 86 105%
47 203% 67 118% 87 105%
48 197% 68 117% 88 105%
49 191% 69 116% 89 105%
</TABLE>
17
<PAGE> 21
<TABLE>
<CAPTION>
Attained Percentage Attained Percentage Attained Percentage
Age of Cash Value Age of Cash Value Age of Cash Value
--- ------------- --- ------------- --- -------------
<S> <C> <C> <C> <C> <C>
50 185% 70 115% 90 105%
51 178% 71 113% 91 104%
52 171% 72 111% 92 103%
53 164% 73 109% 93 102%
54 157% 74 107% 94 101%
55 150% 75 105% 95 100%
56 146% 76 105%
57 142% 77 105%
58 138% 78 105%
59 134% 79 105%
</TABLE>
- -Proceeds Payable on Death
The actual Proceeds payable on the Insured's death will be the Death Benefit as
described above less any outstanding Policy loans, and less any unpaid Policy
Charges. Under certain circumstances, the proceeds may be adjusted (see
"Incontestability," "Error in Age or Sex" and "Suicide").
RIGHT TO EXCHANGE FOR A FIXED BENEFIT POLICY
The Policy Owner may exchange the Policy for a modified single premium life
insurance policy offered by the Company on the Policy Date. If not available,
the new policy may be a flexible premium adjustable life insurance policy
offered by the Company on the Policy Date. The benefits for the new policy will
not vary with the investment experience of a separate account. The exchange must
be elected within 24 months from the Policy Date. No evidence of insurability
will be required.
The Policy Owner and Beneficiary under the new Policy will be the same as those
under the exchanged Policy on the effective date of the exchange. The new Policy
will have a death benefit on the exchange date not more than the death benefit
of the original Policy immediately prior to the exchange date. The new Policy
will have the same policy date and issue age as the original Policy. The initial
Specified Amount and any increases in Specified Amount will have the same rate
class as those of the original Policy. Any indebtedness may be transferred to
the new policy.
The exchange may be subject to an equitable adjustment in rates and values to
reflect variances, if any, in the rates and values between the two Policies.
After adjustment, if any excess is owed the Policy Owner, the Company will pay
the excess to the Policy Owner in cash. The exchange may be subject to federal
income tax withholding (see "Income Tax Withholding").
CHANGES OF INVESTMENT POLICY
The Company may materially change the Investment Policy of a Variable Account.
The Company must inform the Policy Owner and obtain all necessary regulatory
approvals. Any change must be submitted to the various state insurance
departments which may disapprove it if deemed detrimental to the interests of
the policy holders or if it renders the Company's operations hazardous to the
public. If a Policy Owner objects, the Policy may be converted to a
substantially comparable Nationwide General Account Life Insurance Policy on the
life of the insured. The Policy Owner has the later of 60 days (6 months in
Pennsylvania) from the date of the Investment Policy change or 60 days (6 months
in Pennsylvania) from being informed of such change to make this conversion. The
Company will not require evidence of insurability for this conversion.
The new policy will not be affected by the investment experience of any Variable
Account. The New Policy will be for an amount of insurance not exceeding the
Death Benefit of the Policy converted on the date of such conversion.
GRACE PERIOD
If the Cash Surrender Value in the Policy is insufficient to pay the Cost of
Insurance Charges, Policy loan interest, or other charges which become due but
are unpaid, a grace period of 61 days will be allowed for payment of sufficient
premium to continue the Policy in force. The Company will notify the Policy
Owner of the amount required to continue the Policy in force. If the required
amount is not received within 61 days of the notice, the Policy will terminate
without value. If the Insured dies during the Grace Period, the Company will pay
the Death Proceeds.
18
<PAGE> 22
REINSTATEMENT
If the Grace Period ends and the Policy Owner has neither paid the required
premium nor surrendered the Policy for its Cash Surrender Value, the Policy
Owner may reinstate the Policy by:
1. submitting a written request at any time within 3 years after the end of
the Grace Period and prior to the Maturity Date:
2. providing evidence of insurability satisfactory to the Company;
3. paying sufficient premium to cover all Policy Charges that were due and
unpaid during the Grace Period;
4. paying sufficient premium to keep the Policy in force for 3 months from
the date of reinstatement, and
5. paying or reinstating any indebtedness against the Policy which existed
at the end of the Grace Period.
The effective date of a reinstated Policy will be the Monthly Anniversary Day on
or next following the date the application for reinstatement is approved by the
Company. If the Policy is reinstated, the Cash Value on the date of
reinstatement, but prior to applying any premiums or loan repayments received,
will be set equal to the appropriate Surrender Charge. Such Surrender Charge
will be based on the length of time from the date of premium payments to the
effective date of the reinstatement. Unless the Policy Owner has provided
otherwise, the allocation of the amount of the Surrender Charge, additional
premium payments, and any loan repayments will be based on the underlying Mutual
Fund Allocation factors in effect at the start of the Grace Period.
THE FIXED ACCOUNT OPTION
Because of exemptive and exclusionary provisions, interests in Nationwide's
General Account have not been registered under the Securities Act of 1933 and
the General Account has not been registered as an investment company under the
Investment Company Act of 1940. Accordingly, neither the General Account nor any
interests therein are subject to the provisions of these Acts, and Nationwide
has been advised that the staff of the Securities and Exchange Commission has
not reviewed the disclosures in this prospectus relating to the Fixed Account
option. Disclosures regarding the General Account may, however, be subject to
certain generally applicable provisions of the federal securities laws relating
to the accuracy and completeness of statements made in prospectuses.
As explained earlier, a Policy Owner may elect to allocate or transfer all or
part of the Cash Value to the Fixed Account and the amount allocated or
transferred becomes part of Nationwide's general assets (General Account).
Nationwide's General Account consists of all assets of the Company other than
those in the Variable Account and in other separate accounts that have been or
may be established by the Company. Subject to applicable law, the Company has
sole discretion over the investment of the assets of the General Account, and
Policy Owners do not share in the investment experience of those assets. The
Company guarantees that the part of the Cash Value invested under the Fixed
Account option will accrue interest daily at an effective annual rate that the
Company declares periodically. The Fixed Account crediting rate will not be less
than an effective annual rate of 4%. Upon request and in the annual statement
the Company will inform a Policy Owner of the then applicable rate. The Company
is not obligated to credit interest at a higher rate.
CHANGES IN EXISTING INSURANCE COVERAGE
After the first Policy Year, the Policy Owner may request certain changes in the
insurance coverage under the Policy. Any request must be in writing and received
at the Company's Home Office. No change will take effect unless the Cash
Surrender Value, after the change, is sufficient to keep the Policy in force for
at least 3 months.
CHANGES IN THE SPECIFIED AMOUNT
Payment of additional premiums or changes in the Death Benefit Option may
require an increase to the Specified Amount. The minimum increase in the
Specified Amount permitted by the Company is $10,000. An approved increase will
have an effective date of the Monthly Anniversary Day on or next following the
date the Company approves the supplemental application. The Company reserves the
right to limit such increases to one per Policy Year, and to require
satisfactory evidence of insurability for any increase in the Specified Amount.
In addition, the rate class, rate class multiple and rate type for the increase
in Specified Amount must be identical to those on the Policy Date. The Specified
Amount can not be decreased if, after the decrease the policy would fail to
satisfy the definition of Life Insurance under Section 7702 of the Code.
19
<PAGE> 23
CHANGES IN THE DEATH BENEFIT OPTION
The Policy Owner may change the Death Benefit Option under the Policy. If the
change is from Option 1 to Option 2, the Specified Amount will be decreased by
the amount of the Cash Value. If the change is from Option 2 to Option 1, the
Specified Amount will be increased by the amount of the Cash Value. Evidence of
insurability is not required for a change from Option 2 to Option 1. The Company
reserves the right to require evidence of insurability for a change from Option
1 to Option 2. The effective date of the change will be the Monthly Anniversary
Day on or next following the date the Company approves the request for change.
Only one change of option is permitted per Policy Year. A change in Death
Benefit Option will not be permitted if it results in the total premiums paid
exceeding the then current maximum premium limitations prescribed by the
Internal Revenue Service to qualify the Policy as a life insurance contract.
OTHER POLICY PROVISIONS
POLICY OWNER
While the Insured is living, all rights in this Policy are vested in the Policy
Owner named in the application or as subsequently changed, subject to
assignment, if any.
The Policy Owner may name a contingent policy owner or a new policy owner while
the Insured is living. Any change must be in a written form satisfactory to the
Company and recorded at the Company's Home Office. Once recorded, the change
will be effective when signed. The change will not affect any payment made or
action taken by the Company before it was recorded. The Company may require that
the Policy be submitted for endorsement before making a change.
If the Policy Owner is other than the Insured and names no contingent owner, and
dies before the Insured, the Policy Owner's rights in this Policy belong to the
Owner's estate.
BENEFICIARY
The Beneficiary(ies) shall be as named in the application or as subsequently
changed, subject to assignment, if any.
The Policy Owner may name a new Beneficiary while the Insured is living. Any
change must be in a written form satisfactory to the Company and recorded at the
Company's Home Office. Once recorded, the change will be effective when signed.
The change will not affect any payment made or action taken by the Company
before it was recorded.
If any Beneficiary predeceases the Insured, that Beneficiary's interest passes
to any surviving beneficiary, unless otherwise provided. Multiple beneficiaries
will be paid in equal shares, unless otherwise provided. If no named Beneficiary
survives the Insureds, the proceeds shall be paid to the Policy Owner or the
Policy Owner's estate.
ASSIGNMENT
While the Insured is living, the Policy Owner may assign his or her rights in
the Policy. The assignment must be in writing, signed by the Policy Owner and
recorded by the Company at its Home Office. The Company is not responsible for
any assignment not submitted for recording, nor is the Company responsible for
the sufficiency or validity of any assignment.
The assignment will be subject to any indebtedness owed to the Company before it
was recorded.
INCONTESTABILITY
The Company will not contest a Death Benefit based on representations in any
written application when such benefit has been in force, during the lifetime of
the Insured, for two years.
ERROR IN AGE OR SEX
If the Insured's age, sex or both, as stated in the application, are incorrect,
the affected benefits will be adjusted to reflect the correct age or sex.
SUICIDE
If the Insured dies by suicide within two years from the Policy Date, the
Company will pay no more than the sum of the premiums, less any unpaid loan. If
the Insured dies by suicide within two years from the date an application is
accepted for an increase in the Specified Amount, the Company will pay no more
than the amount paid for such additional benefit.
20
<PAGE> 24
NONPARTICIPATING POLICIES
The Policies are nonparticipating. This means that they do not participate in
any dividend distribution of the Company's surplus.
LEGAL CONSIDERATIONS
On July 6, 1983, the U.S. Supreme Court held in Arizona Governing Committee v.
Norris that certain annuity benefits provided by employers' retirement and
fringe benefit programs may not vary between men and women on the basis of sex.
This decision applies only to benefits derived from contributions made on or
after August 1, 1983. The Policies offered by this prospectus are based upon
actuarial tables which distinguish between men and women and thus the Policies
provided different benefits to men and women of the same age. Accordingly,
employers and employee organizations should consider, in consultation with legal
counsel, the impact of Norris on any employment related insurance or benefit
program before purchasing this Policy.
DISTRIBUTION OF THE POLICIES
The Policies will be sold by licensed insurance agents in those states where the
Policies may lawfully be 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). The
Policies will be distributed by the General Distributor, American Capital
Marketing, Inc.
Nationwide Financial Services, Inc., One Nationwide Plaza, Columbus, Ohio 43216,
("NFS") acts as general distributor for the Nationwide Multi-Flex Variable
Account, Nationwide DC Variable Account, Nationwide Variable Account-II,
Nationwide Variable Account-5, Nationwide Variable Account-6, Nationwide
Variable Account-8, Nationwide VA Separate Account-A, Nationwide VA Separate
Account-B, Nationwide VA Separate Account-C, Nationwide VL Separate Account-A,
Nationwide VLI Separate Account -2, Nationwide VLI Separate Account-3, NACo
Variable Account and the Nationwide Variable Account, all of which are separate
investment accounts of the Company or its affiliates. NFS is a wholly owned
subsidiary of the Company.
NFS also acts as principal underwriter for the Nationwide Investing Foundation,
Nationwide Separate Account Trust, Financial Horizons Investment Trust, and
Nationwide Investing Foundation II, which are open-end management investment
companies.
Gross commissions paid by the Company on the sale of these Policies plus fees
for marketing services provided by the General Distributor are not more than
7.50% of the premiums paid.
CUSTODIAN OF ASSETS
The Company serves as the Custodian of the assets of the Variable Account.
TAX MATTERS
POLICY PROCEEDS
Section 7702 of the Code provides that if certain tests are met, a Policy will
be treated as a life insurance policy for federal tax purposes. The Company will
monitor compliance with these tests. The Policy should thus receive the same
Federal income tax treatment as fixed benefit life insurance. As a result, the
life insurance proceeds payable under a Policy are excludable from gross income
of the beneficiary under Section 101 of the Code.
The Policies described in this prospectus, meet the definition of "modified
endowment contracts" under Section 7702A of the Code. The Code defines modified
endowment contracts as those policies issued or materially changed after June
21, 1988 on which the total premiums paid during the first seven years exceed
the amount that would have been paid if the policy provided for paid up benefits
after seven level annual premiums. The policies offered in this prospectus
typically fall within this definition. The Code provides for taxation of
surrenders, partial surrenders, loans, collateral assignments and other
pre-death distributions from modified endowment contracts in the same way
annuities are taxed. Any distribution is taxable to the extent the Cash Value of
the Policy exceeds, at the time of the distribution, the premiums paid into the
Policy. The Code generally provides for a 10% tax penalty on the taxable portion
of such distributions. That penalty is applicable unless the distribution is:
(1) paid after the Policy Owner is 59-1/2 or disabled; or (2) the distribution
is part of an annuity to the Policy Owner as defined in the Code.
Even though exchanges under Section 1035 of the Code qualify as material
changes, certain exchanges of pre-June 22, 1988 policies may retain their
non-modified endowment status. Therefore, the policies offered by this
prospectus may or may not be issued as modified endowment contracts. The Company
will monitor premiums
21
<PAGE> 25
paid and will notify the Policy Owner when the policy's non-modified endowment
status is in jeopardy. If a policy is not a modified endowment contract, a cash
distribution during the first fifteen years after a policy is issued which
causes a reduction in death benefits may still become fully or partially taxable
to the Owner pursuant to Section 7702(f)(7) of the Code. The Policy Owner should
carefully consider this potential effect and seek further information before
initiating any changes in the terms of the policy. Under certain conditions, a
policy may become a modified endowment as a result of certain material changes
or a reduction in benefits as defined by Section 7702A(c) of the Code.
In addition to meeting the tests required under Sections 7702, Section 817(h) of
the Code requires that the investments of separate accounts such as the Variable
Account be adequately diversified. Regulations under 817(h) provide that a
variable life policy which does not satisfy the diversification standards will
not be treated as life insurance unless the failure to satisfy the regulations
was inadvertent, the failure is corrected, and the Policy Owner or the Company
pays an amount to the Internal Revenue Service. The amount will be based on the
tax that would have been paid by the Policy Owner if the income, for the period
the policy was not diversified, had been received by the Policy Owner. If the
failure to diversify is not corrected in this manner, the Policy Owner will be
deemed the owner of the underlying securities and taxed on the earnings of his
or her account.
A total surrender or cancellation of the Policy by lapse may have adverse tax
consequences depending on the circumstances.
Federal estate and state and local estate, inheritance and other tax
consequences of ownership or receipt of Policy proceeds depend on the
circumstances of each Policy Owner or Beneficiary.
TAXATION OF THE COMPANY
The Company is taxed as a life insurance company under the Code. Since the
Variable Account is not a separate entity from the Company and its operations
form a part of the Company, it will not be taxed separately as a "regulated
investment company" under Sub-chapter M of the Code. Investment income and
realized capital gains on the assets of the Variable Account are reinvested and
taken into account in determining the value of Accumulation Units. As a result,
such investment income and realized capital gains are automatically applied to
increase reserves under the Policies.
The Company does not initially expect to incur any federal income tax liability
that would be chargeable to the Variable Account. Based upon these expectations,
no charge is currently being made against the Variable Account for federal
income taxes. If, however, the Company determines that on a separate company
basis such taxes may be incurred, it reserves the right to assess a charge for
such taxes against the Variable Account.
The Company may also incur state and local taxes (in addition to premium taxes)
in several states. At present, these taxes are not significant. If they
increase, however, charges for such taxes may be made.
OTHER CONSIDERATIONS
The foregoing discussion is general and is not intended as tax advice. Counsel
and other competent advisors should be consulted for more complete information.
This discussion is based on the Company's understanding of federal income tax
laws as they are currently interpreted by the Internal Revenue Service. No
representation is made as to the likelihood of continuation of these current
laws and interpretations.
THE COMPANY
The life insurance business, which includes product lines in health insurance
and annuities, is the only business in which the Company is engaged.
The Company markets its Policies through independent insurance brokers, general
agents, and registered representatives of registered NASD broker/dealer firms.
The Company serves as depositor for the Nationwide Variable Account, Nationwide
Variable Account-II, Nationwide Variable Account-3, Nationwide Variable
Account-4, Nationwide Variable Account-5, Nationwide Variable Account-6,
Nationwide Fidelity Advisor Variable Account, Nationwide Variable Account-8, MFS
Variable Account, Nationwide Multi-Flex Variable Account, Nationwide VLI
Separate Account, Nationwide VLI Separate Account-2, Nationwide VLI Separate
Account-3, the NACo Variable Account and the DC Variable Account, each of which
is a registered investment company, and each of which is a separate investment
account of the Company.
The Company, in common with other insurance companies, is subject to regulation
and supervision by the regulatory authorities of the states in which it is
licensed to do business. A license from the state insurance
22
<PAGE> 26
department is a prerequisite to the transaction of insurance business in that
state. In general, all states have statutory administrative powers. Such
regulation relates, among other things, to licensing of insurers and their
agents, the approval of policy forms, the methods of computing reserves, the
form and content of statutory financial statements, the amount of policyholders'
and stockholders' dividends, and the type of distribution of investments
permitted.
The Company operates in the highly competitive field of life insurance. There
are approximately 2,300 stock, mutual and other types of insurers in the life
insurance business in the United States, and a large number of them compete with
the registrant in the sale of insurance policies.
As is customary in insurance company groups, employees are shared with the other
insurance companies in the group. In addition to its direct salaried employees,
the Company shares employees with Nationwide Mutual Insurance Company and
Nationwide Mutual Fire Insurance Company.
The Company does not presently own or lease any materially important physical
properties when its property holdings are viewed in relation to its total
assets. The Company shares Home Office, other facilities and equipment with
Nationwide Mutual Insurance Company.
COMPANY MANAGEMENT
Nationwide Life Insurance Company, together with Nationwide Mutual Insurance
Company, Nationwide Mutual Fire Insurance Company, Nationwide Life and Annuity
Insurance Company, Nationwide Property and Casualty Insurance Company, National
Casualty Company, West Coast Life Insurance Company, Scottsdale Indemnity
Company, Nationwide Indemnity Company and Nationwide General Insurance Company
and all of their affiliated companies comprise the Nationwide Insurance
Enterprise.
The companies comprising the Nationwide Insurance Enterprise have substantially
common boards of directors and officers. Nationwide Corporation is the sole
shareholder of Nationwide Life.
DIRECTORS OF THE COMPANY
<TABLE>
<CAPTION>
Director
Name Since Principal Occupation
---- ----- --------------------
<S> <C> <C>
Lewis J. Alphin 1993 Farm Owner and Operator (1)
Keith W. Eckel 1996 Partner and Manager, Fred W. Eckel Sons and Eckel Farms, Inc. (1)
Willard J. Engel 1994 General Manager Lyon County Cooperative Oil Company (1)
Fred C. Finney 1992 Owner and Operator, Moreland Fruit Farm; Operator, Melrose Orchard
Charles L. Fuellgraf, Jr.*+ 1969 Chief Executive Officer, Fuellgraf Electric Company, Electrical
Construction and Engineering Services (1)
Joseph J. Gasper*+ 1996 President and Chief Operating Officer, Nationwide Life Insurance
Company and Nationwide Life and Annuity Company
Henry S. Holloway*+ 1986 Farm Owner and Operator (1)
D. Richard McFerson*+ 1988 Chairman and Chief Executive Officer, Nationwide Insurance
Enterprise Company (2)
David O. Miller*+ 1985 Farm Owner and Land Developer; President, Owen Potato Farm, Inc.;
Partner, M&M Enterprises (1)
C. Ray Noecker 1994 Farm Owner and Operator (1)
James F. Patterson + 1989 Vice President, Pattersons, Inc.; President Patterson Farms, Inc.
Arden L. Shisler*+ 1984 Partner and Manager, Sweetwater Beef Farms; President and Chief
Executive Officer, K&B Transport, Inc. (1)
Robert L. Stewart 1989 Farm Owner and Operator; Owner, Sunnydale Mining (1)
Nancy C. Thomas * 1986 Farm Owner and Operator, Da-Ma-Lor Farm (1)
</TABLE>
23
<PAGE> 27
<TABLE>
<S> <C> <C>
Harold W. Weihl 1990 Farm Owner and Operator, Weihl Farm (1)
</TABLE>
- --------------------
*Member, Executive Committee +Member, Investment Committee
1) Principal occupation for last five years.
2) Prior to assuming this current position, Messrs. McFerson and Gasper
held other executive management positions with the companies.
Each of the directors is a director of the other major affiliates of the
Nationwide Insurance Enterprise, except Mr. Gasper who is a director only of the
Company and Nationwide Life Insurance Company. Messrs. McFerson and Gasper are
directors of Nationwide Financial Services, Inc., a registered broker-dealer.
Messrs. Gasper, Holloway, McFerson, Miller, Patterson and Shisler are directors
of Nationwide Corporation. Messrs. Fuellgraf, Gasper, McFerson, Ms. Thomas and
Mr. Weihl are trustees of Nationwide Investing Foundation, a registered
investment company. Mr. McFerson is a trustee of Nationwide Separate Account
Trust, Financial Horizons Investment Trust, and Nationwide Investing Foundation
II, registered investment companies. Mr. Engel is a director of Western
Cooperative Transport.
EXECUTIVE OFFICERS OF THE COMPANY
<TABLE>
<CAPTION>
NAME OFFICE HELD
- ---- -----------
<S> <C>
D. Richard McFerson Chairman and Chief Executive Officer-Nationwide Insurance Enterprise
Joseph J. Gasper President and Chief Operating Officer
Gordon E. McCutchan Executive Vice President, Law and Corporate Services and Secretary
Robert A. Oakley Executive Vice President-Chief Financial Officer
Robert J. Woodward, Jr. Executive Vice President-Chief Investment Officer
James E. Brock Senior Vice President - Life Company Operations
W. Sidney Druen Senior Vice President and General Counsel and Assistant Secretary
Harvey S. Galloway, Jr. Senior Vice President and Chief Actuary
Richard A. Karas Senior Vice President - Sales and Financial Services
Mark A. Folk Vice President and Treasurer
</TABLE>
Mr. Gasper is also President and Chief Operating Officer of Nationwide Life and
Annuity Insurance Company. Each of the other officers listed above is also an
officer of each of the companies comprising the Nationwide Insurance Enterprise.
Each of the executive officers listed above has been associated with the
registrant in an executive capacity for more than the past five years, except
Mr. Folk, who joined the Registrant in 1993. From 1983-1993, Mr. Folk served as
a partner at the accounting firm KPMG Peat Marwick LLP.
OTHER CONTRACTS ISSUED BY THE COMPANY
The Company does presently and will, from time to time, offer variable contracts
and policies with benefits which vary in accordance with the investment
experience of a separate account of the Company.
STATE REGULATION
The Company is subject to the laws of Ohio governing insurance companies and to
regulation by the Ohio Insurance Department. An annual statement in a prescribed
form is filed with the Insurance Department each year covering the operation of
the Company for the preceding year and its financial condition as of the end of
such year. Regulation by the Insurance Department includes periodic examination
to determine the Company's contract liabilities and reserves so that the
Insurance Department may certify the items are correct. The Company's books and
accounts are subject to review by the Insurance Department at all times and a
full examination of its operations is conducted periodically by the National
Association of Insurance
24
<PAGE> 28
Commissioners. Such regulation does not, however, involve any supervision of
management or investment practices or policies. In addition, the Company is
subject to regulation under the insurance laws of other jurisdictions in which
it may operate.
REPORTS TO POLICY OWNERS
The Company will mail to the Policy Owner, at the last known address of record,
an annual statement showing the amount of the current Death Benefit, the Cash
Value, and Cash Surrender Value, premiums paid and monthly charges deducted
since the last report, the amounts invested in the Fixed Account and in the
Variable Account and in each sub-account of the Variable Account, and any Policy
debt, as well as interest on the debt for the preceding year.
Policy Owners will also be sent annual and semi-annual reports containing
financial statements for the Variable Account as required by the 1940 Act.
In addition, Policy Owners will receive statements of significant transactions,
such as change in Specified Amount, change in Death Benefit Option, changes in
future premium allocation, transfers among sub-accounts, premium payments,
loans, increase in loan principal, loan repayments, unpaid loan interest added
to principal, reinstatement and termination.
ADVERTISING
The Company is ranked and rated by independent financial rating services, among
which are Moody's, Standard & Poor's and A.M. Best Company. The purpose of these
ratings is to reflect the financial strength or claims-paying ability of the
Company. The ratings are not intended to reflect the investment experience or
financial strength of the Variable Account. The Company may advertise these
ratings from time to time. In addition, the Company may include in certain
advertisements endorsements in the form of a list of organizations, individuals
or other parties which recommend the Company or the Contracts . Furthermore, the
Company may occasionally include in advertisements comparisons of currently
taxable and tax deferred investment programs based on selected tax brackets or
discussions of alternative investment vehicles and general economic conditions.
LEGAL PROCEEDINGS
There are no material legal proceedings, other than ordinary routine litigation
incidental to the business to which the Company and the Variable Account are
parties or to which any of their property is the subject.
The American Capital Marketing, Inc., is not engaged in any material litigation
of any nature.
EXPERTS
The financial statements and schedules included herein have been included herein
in reliance upon the reports of KPMG Peat Marwick LLP, independent certified
public accountants, and upon the authority of said firm as experts in accounting
and auditing.
REGISTRATION STATEMENT
A Registration Statement has been filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, with respect to the
Policies offered hereby. This prospectus does not contain all the information
set forth in the Registration Statement and amendments thereto and exhibits
filed as a part thereof, to all of which reference is hereby made for further
information concerning the Variable Account, the Company, and the Policies
offered hereby. Statements contained in this prospectus as to the content of
Policies and other legal instruments are summaries. For a complete statement of
the terms thereof, reference is made to such instruments as filed.
LEGAL OPINIONS
Legal matters in connection with the Policies described herein are being passed
upon by Druen, Rath & Dietrich, One Nationwide Plaza, Columbus, Ohio 43216. All
the members of such firm are employed by the Nationwide Mutual Insurance
Company.
25
<PAGE> 29
APPENDIX 1
ILLUSTRATIONS OF WHEN ADDITIONAL PREMIUM PAYMENTS ARE PERMITTED
Example 1: A male non-tobacco, age 35, purchases a Policy with an initial
premium of $25,000 and selects Death Benefit Option 1. The initial premium is
treated as 100% of the Guideline Single Premium which results in a Specified
Amount of $179,733. In the 12th and subsequent policy years, annual premiums of
$2,177 may be paid without violating the premium limitations prescribed by the
Internal Revenue Service to qualify the Policy as a life insurance contract.
Additional premiums which increase the Specified Amount may be made at any time,
subject to the $1,000 minimum. The Company reserves the right to require
satisfactory evidence of insurability with any premium payment which increases
the net amount at risk. In addition, premium payments may be made at any time if
they are required to continue the Policy in force.
Example 2: A male non-tobacco, age 55, purchases a Policy with an initial
premium of $100,000 and selects Death Benefit Option 1. The initial premium is
treated as 100% of the Guideline Single Premium which results in a Specified
Amount of $306,283. In the 11th and subsequent policy years, annual premiums of
$9,591 may be paid without violating the premium limitations prescribed by the
Internal Revenue Service to qualify the Policy as a life insurance contract.
Additional premiums which increase the Specified Amount may be made at any time,
subject to the $1,000 minimum. The Company reserves the right to require
satisfactory evidence of insurability with any premium payment which increases
the net amount at risk. In addition, premium payments may be made at any time if
they are required to continue the Policy in force.
26
<PAGE> 30
APPENDIX 2
ILLUSTRATIONS OF CASH VALUES
CASH SURRENDER VALUES
AND DEATH BENEFITS
The illustrations in this prospectus have been prepared to help show how values
under the Policies change with investment performance. The illustrations
illustrate how Cash Values, Cash Surrender Values and Death Benefits under a
Policy would vary over time if the hypothetical gross investment rates of return
were a uniform annual effective rate of either 0%, 6% or 12%. If the
hypothetical gross investment rate of return averages 0%, 6% or 12% over a
period of years, but fluctuates above or below those averages for individual
years, the Cash Values, Cash Surrender Values and Death Benefits may be
different. For hypothetical returns of 0% and 6%, the illustrations also
illustrate when the Policies would go into default, at which time additional
premium payments would be required to continue the Policy in force. The
illustrations also assume there is no Policy Indebtedness, no additional premium
payments are made, no Cash Values are allocated to the Fixed Account, and there
are no changes in the Specified Amount or Death Benefit option.
The amounts shown for the Cash Value, Cash Surrender Value and Death Benefit as
of each Policy Anniversary reflect the fact that the net investment return on
the assets held in the sub-accounts is lower than the gross return. This is due
to the daily charges made against the assets of the sub-accounts for assuming
mortality and expense risks, recovering premium taxes and providing for
administrative expenses. On a current basis, these charges are equivalent to an
annual effective rate of 1.30% in the first 10 policy years and 1.00%
thereafter. On a guaranteed basis, these charges are equivalent to an annual
maximum effective rate of 1.60% in the first 10 policy years and 1.30%
thereafter. In addition, the net investment returns also reflect the deduction
of underlying Mutual Fund investment advisory fees and other expenses which are
equivalent to an annual effective rate of 0.60%.
Taking account of the current charges for mortality and expense risks,
recovering premium taxes and providing for administrative and underlying Mutual
Fund expenses, gross annual rates of return of 0%, 6% and 12% correspond to net
investment experience at constant annual rates of -1.9%, 4.1%, and 10.1%,
respectively, in policy years 1 through ten, and -1.6%, 4.4% and 10.4%
thereafter. Taking account of guaranteed charges, gross annual rates of return
of 0%, 6% and 12% correspond to net investment experience at constant annual
rates of -2.2%, 3.8% and 9.8%, respectively, in policy years 1 through 10, and
- -1.9%, 4.1% and 10.1% thereafter.
The illustrations also reflect the fact that the Company makes monthly charges
for providing insurance protection. Current values reflect current cost of
insurance charges and guaranteed values reflect the maximum cost of insurance
charges guaranteed in the Policy. The values shown are for policies which are
issued as standard (including non-tobacco). Policies issued on a substandard
basis would result in lower Cash Values and Death Benefits than those
illustrated. Death Benefit Option 1 has been assumed in all the illustrations.
In addition, the illustrations reflect the fact that the Company deducts an
annual administrative charge at the beginning of each Policy Year after the
first. The illustrations also reflect the fact that no charges for federal or
state income taxes are currently made against the Variable Account. If such a
charge is made in the future, it will require a higher gross investment return
than illustrated in order to produce the net after-tax returns shown in the
illustrations.
Upon request, the Company will furnish a comparable illustration based on the
proposed Insured's age, sex, smoking classification, rating classification and
premium payment requested.
27
<PAGE> 31
$10,000 INITIAL PREMIUM: $43,190 SPECIFIED AMOUNT
MALE: NON-TOBACCO: SIMPLIFIED ISSUE: AGE 45
NEW YORK
CURRENT VALUES
<TABLE>
<CAPTION>
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PREMIUMS
PAID PLUS CASH CASH CASH
POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
---- ----- ----- ----- ------- ----- ----- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 10,500 9,590 8,740 43,190 10,170 9,320 43,190 10,751 9,901 43,190
2 11,025 9,116 8,266 43,190 10,269 9,419 43,190 11,491 10,641 43,190
3 11,576 8,641 7,841 43,190 10,360 9,560 43,190 12,289 11,489 43,190
4 12,155 8,165 7,365 43,190 10,442 9,642 43,190 13,151 12,351 43,190
5 12,763 7,685 6,935 43,190 10,513 9,763 43,190 14,082 13,332 43,190
6 13,401 7,199 6,499 43,190 10,572 9,872 43,190 15,088 14,388 43,190
7 14,071 6,705 6,105 43,190 10,615 10,015 43,190 16,175 15,575 43,190
8 14,775 6,200 5,700 43,190 10,640 10,140 43,190 17,351 16,851 43,190
9 15,513 5,680 5,280 43,190 10,643 10,243 43,190 18,622 18,222 43,190
10 16,289 5,141 5,141 43,190 10,621 10,621 43,190 19,998 19,998 43,190
11 17,103 4,595 4,595 43,190 10,602 10,602 43,190 21,554 21,554 43,190
12 17,959 4,028 4,028 43,190 10,557 10,557 43,190 23,254 23,254 43,190
13 18,856 3,440 3,440 43,190 10,484 10,484 43,190 25,115 25,115 43,190
14 19,799 2,827 2,827 43,190 10,380 10,380 43,190 27,155 27,155 43,190
15 20,789 2,184 2,184 43,190 10,240 10,240 43,190 29,396 29,396 43,190
16 21,829 1,509 1,509 43,190 10,061 10,061 43,190 31,862 31,862 43,190
17 22,920 796 796 43,190 9,835 9,835 43,190 34,580 34,580 44,263
18 24,066 39 39 43,190 9,557 9,557 43,190 37,552 37,552 47,316
19 25,270 (*) (*) (*) 9,218 9,218 43,190 40,786 40,786 50,575
20 26,533 (*) (*) (*) 8,810 8,810 43,190 44,306 44,306 54,053
21 27,860 (*) (*) (*) 8,325 8,325 43,190 48,138 48,138 57,766
22 29,253 (*) (*) (*) 7,729 7,729 43,190 52,295 52,295 62,231
23 30,715 (*) (*) (*) 7,004 7,004 43,190 56,805 56,805 67,030
24 32,251 (*) (*) (*) 6,131 6,131 43,190 61,695 61,695 72,183
25 33,864 (*) (*) (*) 5,081 5,081 43,190 66,998 66,998 77,718
26 35,557 (*) (*) (*) 3,820 3,820 43,190 72,747 72,747 83,659
27 37,335 (*) (*) (*) 2,300 2,300 43,190 79,008 79,008 89,279
28 39,201 (*) (*) (*) 462 462 43,190 85,836 85,836 95,278
29 41,161 (*) (*) (*) (*) (*) (*) 93,296 93,296 101,693
30 43,219 (*) (*) (*) (*) (*) (*) 101,468 101,468 108,571
</TABLE>
ASSUMPTIONS:
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND AN ANNUAL $65
ADMINISTRATIVE EXPENSE CHARGE.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS INVESTMENT
RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE PROSPECTUS APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN FORCE.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM
THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD
OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. NO REPRESENTATIONS CAN BE MADE BY NATIONWIDE LIFE OR THE TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
28
<PAGE> 32
$10,000 INITIAL PREMIUM: $43,190 SPECIFIED AMOUNT
MALE: NON-TOBACCO: SIMPLIFIED ISSUE: AGE 45
NEW YORK
GUARANTEED VALUES
<TABLE>
<CAPTION>
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
----------------------- ----------------------- -----------------------
PREMIUMS
PAID PLUS CASH CASH CASH
POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
---- ----- ----- ----- ------- ----- ----- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 10,500 9,549 8,699 43,190 10,128 9,278 43,190 10,706 9,856 43,190
2 11,025 8,981 8,131 43,190 10,123 9,273 43,190 11,333 10,483 43,190
3 11,576 8,414 7,614 43,190 10,106 9,306 43,190 12,005 11,205 43,190
4 12,155 7,847 7,047 43,190 10,073 9,273 43,190 12,724 11,924 43,190
5 12,763 7,277 6,527 43,190 10,023 9,273 43,190 13,494 12,744 43,190
6 13,401 6,701 6,001 43,190 9,953 9,253 43,190 14,320 13,620 43,190
7 14,071 6,117 5,517 43,190 9,860 9,260 43,190 15,204 14,604 43,190
8 14,775 5,521 5,021 43,190 9,740 9,240 43,190 16,151 15,651 43,190
9 15,513 4,907 4,507 43,190 9,587 9,187 43,190 17,165 16,765 43,190
10 16,289 4,272 4,272 43,190 9,398 9,398 43,190 18,251 18,251 43,190
11 17,103 3,623 3,623 43,190 9,194 9,194 43,190 19,475 19,475 43,190
12 17,959 2,941 2,941 43,190 8,943 8,943 43,190 20,795 20,795 43,190
13 18,856 2,222 2,222 43,190 8,640 8,640 43,190 22,224 22,224 43,190
14 19,799 1,461 1,461 43,190 8,278 8,278 43,190 23,772 23,772 43,190
15 20,789 648 648 43,190 7,846 7,846 43,190 25,454 25,454 43,190
16 21,829 (*) (*) (*) 7,333 7,333 43,190 27,287 27,287 43,190
17 22,920 (*) (*) (*) 6,729 6,729 43,190 29,288 29,288 43,190
18 24,066 (*) (*) (*) 6,013 6,013 43,190 31,482 31,482 43,190
19 25,270 (*) (*) (*) 5,168 5,168 43,190 33,896 33,896 43,190
20 26,533 (*) (*) (*) 4,169 4,169 43,190 36,560 36,560 44,603
21 27,860 (*) (*) (*) 2,994 2,994 43,190 39,462 39,462 47,354
22 29,253 (*) (*) (*) 1,612 1,612 43,190 42,591 42,591 50,684
23 30,715 (*) (*) (*) (*) (*) (*) 45,966 45,966 54,239
24 32,251 (*) (*) (*) (*) (*) (*) 49,604 49,604 58,037
25 33,864 (*) (*) (*) (*) (*) (*) 53,527 53,527 62,091
26 35,557 (*) (*) (*) (*) (*) (*) 57,755 57,755 66,418
27 37,335 (*) (*) (*) (*) (*) (*) 62,343 62,343 70,448
28 39,201 (*) (*) (*) (*) (*) (*) 67,333 67,333 74,740
29 41,161 (*) (*) (*) (*) (*) (*) 72,773 72,773 79,323
30 43,219 (*) (*) (*) (*) (*) (*) 78,726 78,726 84,237
</TABLE>
ASSUMPTIONS:
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) GUARANTEED VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES AND AN
ANNUAL $120 ADMINISTRATIVE EXPENSE CHARGE.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS INVESTMENT
RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE PROSPECTUS APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN FORCE.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM
THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD
OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. NO REPRESENTATIONS CAN BE MADE BY NATIONWIDE LIFE OR THE TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
29
<PAGE> 33
$10,000 INITIAL PREMIUM: $41,661 SPECIFIED AMOUNT
MALE: NON-TOBACCO: SIMPLIFIED ISSUE: AGE 45
NON-NEW YORK
CURRENT VALUES
<TABLE>
<CAPTION>
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
----------------------- ----------------------- -----------------------
PREMIUMS
PAID PLUS CASH CASH CASH
POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
---- ----- ----- ----- ------- ----- ----- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 10,500 9,604 8,754 41,661 10,185 9,335 41,661 10,766 9,916 41,661
2 11,025 9,122 8,272 41,661 10,275 9,425 41,661 11,496 10,646 41,661
3 11,576 8,640 7,840 41,661 10,358 9,558 41,661 12,286 11,486 41,661
4 12,155 8,159 7,359 41,661 10,434 9,634 41,661 13,140 12,340 41,661
5 12,763 7,677 6,927 41,661 10,501 9,751 41,661 14,063 13,313 41,661
6 13,401 7,192 6,492 41,661 10,557 9,857 41,661 15,064 14,364 41,661
7 14,071 6,703 6,103 41,661 10,602 10,002 41,661 16,146 15,546 41,661
8 14,775 6,205 5,705 41,661 10,631 10,131 41,661 17,319 16,819 41,661
9 15,513 5,697 5,297 41,661 10,642 10,242 41,661 18,590 18,190 41,661
10 16,289 5,175 5,175 41,661 10,632 10,632 41,661 19,968 19,968 41,661
11 17,103 4,651 4,651 41,661 10,631 10,631 41,661 21,529 21,529 41,661
12 17,959 4,109 4,109 41,661 10,607 10,607 41,661 23,235 23,235 41,661
13 18,856 3,550 3,550 41,661 10,560 10,560 41,661 25,103 25,103 41,661
14 19,799 2,970 2,970 41,661 10,487 10,487 41,661 27,151 27,151 41,661
15 20,789 2,364 2,364 41,661 10,382 10,382 41,661 29,400 29,400 41,661
16 21,829 1,730 1,730 41,661 10,243 10,243 41,661 31,876 31,876 41,661
17 22,920 1,064 1,064 41,661 10,065 10,065 41,661 34,593 34,593 44,279
18 24,066 358 358 41,661 9,841 9,841 41,661 37,552 37,552 47,316
19 25,270 (*) (*) (*) 9,563 9,563 41,661 40,773 40,773 50,558
20 26,533 (*) (*) (*) 9,226 9,226 41,661 44,278 44,278 54,019
21 27,860 (*) (*) (*) 8,822 8,822 41,661 48,096 48,096 57,715
22 29,253 (*) (*) (*) 8,321 8,321 41,661 52,239 52,239 62,164
23 30,715 (*) (*) (*) 7,711 7,711 41,661 56,735 56,735 66,948
24 32,251 (*) (*) (*) 6,972 6,972 41,661 61,614 61,614 72,089
25 33,864 (*) (*) (*) 6,084 6,084 41,661 66,907 66,907 77,613
26 35,557 (*) (*) (*) 5,015 5,015 41,661 72,649 72,649 83,546
27 37,335 (*) (*) (*) 3,727 3,727 41,661 78,903 78,903 89,160
28 39,201 (*) (*) (*) 2,170 2,170 41,661 85,723 85,723 95,153
29 41,161 (*) (*) (*) 284 284 41,661 93,175 93,175 101,561
30 43,219 (*) (*) (*) (*) (*) (*) 101,336 101,336 108,430
</TABLE>
ASSUMPTIONS:
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND AN ANNUAL $90
ADMINISTRATIVE EXPENSE CHARGE.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS INVESTMENT
RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE PROSPECTUS APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN FORCE.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM
THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD
OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. NO REPRESENTATIONS CAN BE MADE BY NATIONWIDE LIFE OR THE TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
30
<PAGE> 34
$10,000 INITIAL PREMIUM: $41,661 SPECIFIED AMOUNT
MALE: NON-TOBACCO: SIMPLIFIED ISSUE: AGE 45
NON-NEW YORK
GUARANTEED VALUES
<TABLE>
<CAPTION>
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
----------------------- ----------------------- -----------------------
PREMIUMS
PAID PLUS CASH CASH CASH
POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
---- ----- ----- ----- ------- ----- ----- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 10,500 9,556 8,706 41,661 10,135 9,285 41,661 10,713 9,863 41,661
2 11,025 8,981 8,131 41,661 10,123 9,273 41,661 11,333 10,483 41,661
3 11,576 8,407 7,607 41,661 10,098 9,298 41,661 11,996 11,196 41,661
4 12,155 7,834 7,034 41,661 10,058 9,258 41,661 12,707 11,907 41,661
5 12,763 7,258 6,508 41,661 10,001 9,251 41,661 13,469 12,719 41,661
6 13,401 6,679 5,979 41,661 9,926 9,226 41,661 14,287 13,587 41,661
7 14,071 6,092 5,492 41,661 9,828 9,228 41,661 15,163 14,563 41,661
8 14,775 5,494 4,994 41,661 9,703 9,203 41,661 16,103 15,603 41,661
9 15,513 4,879 4,479 41,661 9,547 9,147 41,661 17,110 16,710 41,661
10 16,289 4,245 4,245 41,661 9,356 9,356 41,661 18,190 18,190 41,661
11 17,103 3,597 3,597 41,661 9,152 9,152 41,661 19,408 19,408 41,661
12 17,959 2,919 2,919 41,661 8,902 8,902 41,661 20,725 20,725 41,661
13 18,856 2,205 2,205 41,661 8,602 8,602 41,661 22,150 22,150 41,661
14 19,799 1,451 1,451 41,661 8,244 8,244 41,661 23,697 23,697 41,661
15 20,789 648 648 41,661 7,820 7,820 41,661 25,381 25,381 41,661
16 21,829 (*) (*) (*) 7,318 7,318 41,661 27,216 27,216 41,661
17 22,920 (*) (*) (*) 6,726 6,726 41,661 29,225 29,225 41,661
18 24,066 (*) (*) (*) 6,029 6,029 41,661 31,429 31,429 41,661
19 25,270 (*) (*) (*) 5,205 5,205 41,661 33,859 33,859 41,985
20 26,533 (*) (*) (*) 4,235 4,235 41,661 36,521 36,521 44,555
21 27,860 (*) (*) (*) 3,094 3,094 41,661 39,403 39,403 47,283
22 29,253 (*) (*) (*) 1,754 1,754 41,661 42,511 42,511 50,588
23 30,715 (*) (*) (*) 184 184 41,661 45,863 45,863 54,118
24 32,251 (*) (*) (*) (*) (*) (*) 49,477 49,477 57,888
25 33,864 (*) (*) (*) (*) (*) (*) 53,373 53,373 61,912
26 35,557 (*) (*) (*) (*) (*) (*) 57,572 57,572 66,207
27 37,335 (*) (*) (*) (*) (*) (*) 62,129 62,129 70,206
28 39,201 (*) (*) (*) (*) (*) (*) 67,085 67,085 74,464
29 41,161 (*) (*) (*) (*) (*) (*) 72,489 72,489 79,013
30 43,219 (*) (*) (*) (*) (*) (*) 78,401 78,401 83,890
</TABLE>
ASSUMPTIONS:
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) GUARANTEED VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES AND AN
ANNUAL $135 ADMINISTRATIVE EXPENSE CHARGE.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS INVESTMENT
RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE PROSPECTUS APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN FORCE.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM
THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD
OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. NO REPRESENTATIONS CAN BE MADE BY NATIONWIDE LIFE OR THE TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
31
<PAGE> 35
$25,000 INITIAL PREMIUM: $114,856 SPECIFIED AMOUNT
MALE: NON-TOBACCO: SIMPLIFIED ISSUE: AGE 45
CURRENT VALUES
<TABLE>
<CAPTION>
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
----------------------- ----------------------- -----------------------
PREMIUMS
PAID PLUS CASH CASH CASH
POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
---- ----- ----- ----- ------- ----- ----- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 26,250 24,006 21,881 114,856 25,457 23,332 114,856 26,909 24,784 114,856
2 27,563 22,965 20,840 114,856 25,856 23,731 114,856 28,918 26,793 114,856
3 28,941 21,923 19,923 114,856 26,244 24,244 114,856 31,091 29,091 114,856
4 30,388 20,879 18,879 114,856 26,620 24,620 114,856 33,442 31,442 114,856
5 31,907 19,830 17,955 114,856 26,979 25,104 114,856 35,986 34,111 114,856
6 33,502 18,770 17,020 114,856 27,320 25,570 114,856 38,741 36,991 114,856
7 35,178 17,695 16,195 114,856 27,635 26,135 114,856 41,724 40,224 114,856
8 36,936 16,598 15,348 114,856 27,920 26,670 114,856 44,956 43,706 114,856
9 38,783 15,472 14,472 114,856 28,168 27,168 114,856 48,458 47,458 114,856
10 40,722 14,310 14,310 114,856 28,371 28,371 114,856 52,256 52,256 114,856
11 42,758 13,146 13,146 114,856 28,610 28,610 114,856 56,548 56,548 114,856
12 44,896 11,937 11,937 114,856 28,803 28,803 114,856 61,236 61,236 114,856
13 47,141 10,682 10,682 114,856 28,948 28,948 114,856 66,366 66,366 114,856
14 49,498 9,374 9,374 114,856 29,037 29,037 114,856 71,986 71,986 114,856
15 51,973 8,004 8,004 114,856 29,061 29,061 114,856 78,153 78,153 114,856
16 54,572 6,561 6,561 114,856 29,011 29,011 114,856 84,930 84,930 114,856
17 57,300 5,038 5,038 114,856 28,877 28,877 114,856 92,388 92,388 118,256
18 60,165 3,418 3,418 114,856 28,644 28,644 114,856 100,534 100,534 126,673
19 63,174 1,686 1,686 114,856 28,295 28,295 114,856 109,402 109,402 135,658
20 66,332 (*) (*) (*) 27,816 27,816 114,856 119,058 119,058 145,250
21 69,649 (*) (*) (*) 27,190 27,190 114,856 129,576 129,576 155,491
22 73,132 (*) (*) (*) 26,352 26,352 114,856 140,999 140,999 167,789
23 76,788 (*) (*) (*) 25,272 25,272 114,856 153,404 153,404 181,016
24 80,627 (*) (*) (*) 23,912 23,912 114,856 166,873 166,873 195,241
25 84,659 (*) (*) (*) 22,222 22,222 114,856 181,495 181,495 210,534
26 88,892 (*) (*) (*) 20,138 20,138 114,856 197,366 197,366 226,971
27 93,336 (*) (*) (*) 17,577 17,577 114,856 214,659 214,659 242,565
28 98,003 (*) (*) (*) 14,431 14,431 114,856 233,522 233,522 259,209
29 102,903 (*) (*) (*) 10,573 10,573 114,856 254,129 254,129 277,000
30 108,049 (*) (*) (*) 5,857 5,857 114,856 276,689 276,689 296,057
</TABLE>
ASSUMPTIONS:
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND AN ANNUAL $50
ADMINISTRATIVE EXPENSE CHARGE.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS INVESTMENT
RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE PROSPECTUS APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN FORCE.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM
THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD
OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. NO REPRESENTATIONS CAN BE MADE BY NATIONWIDE LIFE OR THE TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
32
<PAGE> 36
$25,000 INITIAL PREMIUM: $114,856 SPECIFIED AMOUNT
MALE: NON-TOBACCO: SIMPLIFIED ISSUE: AGE 45
GUARANTEED VALUES
<TABLE>
<CAPTION>
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
----------------------- ----------------------- -----------------------
PREMIUMS
PAID PLUS CASH CASH CASH
POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
---- ----- ----- ----- ------- ----- ----- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 26,250 23,843 21,718 114,856 25,288 23,163 114,856 26,733 24,608 114,856
2 27,563 22,610 20,485 114,856 25,474 23,349 114,856 28,508 26,383 114,856
3 28,941 21,372 19,372 114,856 25,631 23,631 114,856 30,411 28,411 114,856
4 30,388 20,126 18,126 114,856 25,754 23,754 114,856 32,450 30,450 114,856
5 31,907 18,866 16,991 114,856 25,838 23,963 114,856 34,637 32,762 114,856
6 33,502 17,586 15,836 114,856 25,877 24,127 114,856 36,982 35,232 114,856
7 35,178 16,277 14,777 114,856 25,862 24,362 114,856 39,498 37,998 114,856
8 36,936 14,929 13,679 114,856 25,782 24,532 114,856 42,194 40,944 114,856
9 38,783 13,531 12,531 114,856 25,625 24,625 114,856 45,086 44,086 114,856
10 40,722 12,071 12,071 114,856 25,380 25,380 114,856 48,188 48,188 114,856
11 42,758 10,572 10,572 114,856 25,108 25,108 114,856 51,676 51,676 114,856
12 44,896 8,983 8,983 114,856 24,724 24,724 114,856 55,445 55,445 114,856
13 47,141 7,296 7,296 114,856 24,215 24,215 114,856 59,528 59,528 114,856
14 49,498 5,494 5,494 114,856 23,563 23,563 114,856 63,961 63,961 114,856
15 51,973 3,555 3,555 114,856 22,743 22,743 114,856 68,784 68,784 114,856
16 54,572 1,458 1,458 114,856 21,729 21,729 114,856 74,045 74,045 114,856
17 57,300 (*) (*) (*) 20,491 20,491 114,856 79,803 79,803 114,856
18 60,165 (*) (*) (*) 18,984 18,984 114,856 86,125 86,125 114,856
19 63,174 (*) (*) (*) 17,159 17,159 114,856 93,095 93,095 115,438
20 66,332 (*) (*) (*) 14,963 14,963 114,856 100,735 100,735 122,896
21 69,649 (*) (*) (*) 12,334 12,334 114,856 109,007 109,007 130,808
22 73,132 (*) (*) (*) 9,204 9,204 114,856 117,929 117,929 140,335
23 76,788 (*) (*) (*) 5,494 5,494 114,856 127,550 127,550 150,509
24 80,627 (*) (*) (*) 1,101 1,101 114,856 137,926 137,926 161,373
25 84,659 (*) (*) (*) (*) (*) (*) 149,113 149,113 172,971
26 88,892 (*) (*) (*) (*) (*) (*) 161,171 161,171 185,347
27 93,336 (*) (*) (*) (*) (*) (*) 174,257 174,257 196,911
28 98,003 (*) (*) (*) (*) (*) (*) 188,486 188,486 209,220
29 102,903 (*) (*) (*) (*) (*) (*) 203,998 203,998 222,358
30 108,049 (*) (*) (*) (*) (*) (*) 220,968 220,968 236,436
</TABLE>
ASSUMPTIONS:
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) GUARANTEED VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES AND AN
ANNUAL $75 ADMINISTRATIVE EXPENSE CHARGE.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS INVESTMENT
RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE PROSPECTUS APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN FORCE.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM
THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD
OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. NO REPRESENTATIONS CAN BE MADE BY NATIONWIDE LIFE OR THE TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
33
<PAGE> 37
$100,000 INITIAL PREMIUM: $306,283 SPECIFIED AMOUNT
MALE: NON-TOBACCO: PREFERRED ISSUE: AGE 55
CURRENT VALUES
<TABLE>
<CAPTION>
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
----------------------- ----------------------- -----------------------
PREMIUMS
PAID PLUS CASH CASH CASH
POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
---- ----- ----- ----- ------- ----- ----- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 105,000 96,163 87,663 306,283 101,978 93,478 306,283 107,794 99,294 306,283
2 110,250 92,262 83,762 306,283 103,877 95,377 306,283 116,178 107,678 306,283
3 115,763 88,340 80,340 306,283 105,745 97,745 306,283 125,266 117,266 306,283
4 121,551 84,384 76,384 306,283 107,572 99,572 306,283 135,127 127,127 306,283
5 127,628 80,375 72,875 306,283 109,345 101,845 306,283 145,837 138,337 306,283
6 134,010 76,297 69,297 306,283 111,054 104,054 306,283 157,481 150,481 306,283
7 140,710 72,129 66,129 306,283 112,684 106,684 306,283 170,158 164,158 306,283
8 147,746 67,843 62,843 306,283 114,213 109,213 306,283 183,975 178,975 306,283
9 155,133 63,411 59,411 306,283 115,622 111,622 306,283 199,058 195,058 306,283
10 162,889 58,803 58,803 306,283 116,889 116,889 306,283 215,555 215,555 306,283
11 171,034 54,160 54,160 306,283 118,352 118,352 306,283 234,339 234,339 306,283
12 179,586 49,264 49,264 306,283 119,649 119,649 306,283 255,044 255,044 306,283
13 188,565 44,088 44,088 306,283 120,763 120,763 306,283 277,808 277,808 327,814
14 197,993 38,597 38,597 306,283 121,670 121,670 306,283 302,599 302,599 354,041
15 207,893 32,742 32,742 306,283 122,336 122,336 306,283 329,582 329,582 382,315
16 218,287 26,458 26,458 306,283 122,717 122,717 306,283 358,950 358,950 412,792
17 229,202 19,662 19,662 306,283 122,754 122,754 306,283 390,997 390,997 441,826
18 240,662 12,247 12,247 306,283 122,375 122,375 306,283 425,992 425,992 472,852
19 252,695 4,102 4,102 306,283 121,504 121,504 306,283 464,245 464,245 506,027
20 265,330 (*) (*) (*) 120,066 120,066 306,283 506,111 506,111 541,538
21 278,596 (*) (*) (*) 117,989 117,989 306,283 552,001 552,001 579,602
22 292,526 (*) (*) (*) 114,937 114,937 306,283 601,930 601,930 632,027
23 307,152 (*) (*) (*) 110,745 110,745 306,283 656,229 656,229 689,040
24 322,510 (*) (*) (*) 105,209 105,209 306,283 715,253 715,253 751,016
25 338,635 (*) (*) (*) 98,053 98,053 306,283 779,377 779,377 818,346
26 355,567 (*) (*) (*) 88,901 88,901 306,283 848,994 848,994 891,444
27 373,346 (*) (*) (*) 77,249 77,249 306,283 924,510 924,510 970,735
28 392,013 (*) (*) (*) 62,420 62,420 306,283 1,006,344 1,006,344 1,056,662
29 411,614 (*) (*) (*) 43,537 43,537 306,283 1,094,932 1,094,932 1,149,679
30 432,194 (*) (*) (*) 19,475 19,475 306,283 1,190,729 1,190,729 1,250,266
</TABLE>
ASSUMPTIONS:
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND AN ANNUAL $50
ADMINISTRATIVE EXPENSE CHARGE.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS INVESTMENT
RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE PROSPECTUS APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN FORCE.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM
THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD
OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. NO REPRESENTATIONS CAN BE MADE BY NATIONWIDE LIFE OR THE TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
34
<PAGE> 38
$100,000 INITIAL PREMIUM: $306,283 SPECIFIED AMOUNT
MALE: NON-TOBACCO: PREFERRED ISSUE: AGE 55
GUARANTEED VALUES
<TABLE>
<CAPTION>
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
----------------------- ----------------------- -----------------------
PREMIUMS
PAID PLUS CASH CASH CASH
POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
---- ----- ----- ----- ------- ----- ----- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 105,000 95,279 86,779 306,283 101,066 92,566 306,283 106,854 98,354 306,283
2 110,250 90,411 81,911 306,283 101,915 93,415 306,283 114,102 105,602 306,283
3 115,763 85,454 77,454 306,283 102,610 94,610 306,283 121,869 113,869 306,283
4 121,551 80,378 72,378 306,283 103,124 95,124 306,283 130,199 122,199 306,283
5 127,628 75,149 67,649 306,283 103,425 95,925 306,283 139,143 131,643 306,283
6 134,010 69,727 62,727 306,283 103,480 96,480 306,283 148,760 141,760 306,283
7 140,710 64,066 58,066 306,283 103,246 97,246 306,283 159,120 153,120 306,283
8 147,746 58,105 53,105 306,283 102,667 97,667 306,283 170,298 165,298 306,283
9 155,133 51,774 47,774 306,283 101,681 97,681 306,283 182,387 178,387 306,283
10 162,889 45,001 45,001 306,283 100,220 100,220 306,283 195,503 195,503 306,283
11 171,034 37,834 37,834 306,283 98,515 98,515 306,283 210,424 210,424 306,283
12 179,586 30,049 30,049 306,283 96,198 96,198 306,283 226,819 226,819 306,283
13 188,565 21,561 21,561 306,283 93,183 93,183 306,283 244,931 244,931 306,283
14 197,993 12,258 12,258 306,283 89,361 89,361 306,283 265,047 265,047 310,105
15 207,893 1,992 1,992 306,283 84,587 84,587 306,283 287,090 287,090 333,024
16 218,287 (*) (*) (*) 78,671 78,671 306,283 310,910 310,910 357,546
17 229,202 (*) (*) (*) 71,364 71,364 306,283 336,784 336,784 380,566
18 240,662 (*) (*) (*) 62,340 62,340 306,283 364,928 364,928 405,070
19 252,695 (*) (*) (*) 51,205 51,205 306,283 395,601 395,601 431,205
20 265,330 (*) (*) (*) 37,503 37,503 306,283 429,121 429,121 459,159
21 278,596 (*) (*) (*) 20,698 20,698 306,283 465,872 465,872 489,166
22 292,526 (*) (*) (*) 137 137 306,283 505,606 505,606 530,886
23 307,152 (*) (*) (*) (*) (*) (*) 548,538 548,538 575,965
24 322,510 (*) (*) (*) (*) (*) (*) 594,898 594,898 624,643
25 338,635 (*) (*) (*) (*) (*) (*) 644,918 644,918 677,164
26 355,567 (*) (*) (*) (*) (*) (*) 698,831 698,831 733,773
27 373,346 (*) (*) (*) (*) (*) (*) 756,865 756,865 794,709
28 392,013 (*) (*) (*) (*) (*) (*) 819,243 819,243 860,205
29 411,614 (*) (*) (*) (*) (*) (*) 886,181 886,181 930,490
30 432,194 (*) (*) (*) (*) (*) (*) 957,902 957,902 1,005,797
</TABLE>
ASSUMPTIONS:
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) GUARANTEED VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES AND AN
ANNUAL $75 ADMINISTRATIVE EXPENSE CHARGE.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS INVESTMENT
RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE PROSPECTUS APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN FORCE.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM
THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD
OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. NO REPRESENTATIONS CAN BE MADE BY NATIONWIDE LIFE OR THE TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
35
<PAGE> 39
$100,000 INITIAL PREMIUM: $211,021 SPECIFIED AMOUNT
MALE: NON-TOBACCO: PREFERRED ISSUE: AGE 65
CURRENT VALUES
<TABLE>
<CAPTION>
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
----------------------- ----------------------- -----------------------
PREMIUMS
PAID PLUS CASH CASH CASH
POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
---- ----- ----- ----- ------- ----- ----- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 105,000 95,834 87,334 211,021 101,659 93,159 211,021 107,486 98,986 211,021
2 110,250 91,539 83,039 211,021 103,204 94,704 211,021 115,561 107,061 211,021
3 115,763 87,147 79,147 211,021 104,677 96,677 211,021 124,356 116,356 211,021
4 121,551 82,637 74,637 211,021 106,069 98,069 211,021 133,964 125,964 211,021
5 127,628 77,980 70,480 211,021 107,366 99,866 211,021 144,490 136,990 211,021
6 134,010 73,139 66,139 211,021 108,547 101,547 211,021 156,056 149,056 211,021
7 140,710 68,067 62,067 211,021 109,588 103,588 211,021 168,808 162,808 211,021
8 147,746 62,705 57,705 211,021 110,455 105,455 211,021 182,919 177,919 211,021
9 155,133 56,991 52,991 211,021 111,115 107,115 211,021 198,593 194,593 216,467
10 162,889 50,865 50,865 211,021 111,538 111,538 211,021 215,830 215,830 230,938
11 171,034 44,410 44,410 211,021 112,039 112,039 211,021 235,369 235,369 247,137
12 179,586 37,185 37,185 211,021 112,138 112,138 211,021 256,627 256,627 269,458
13 188,565 29,059 29,059 211,021 111,774 111,774 211,021 279,745 279,745 293,733
14 197,993 19,872 19,872 211,021 110,867 110,867 211,021 304,876 304,876 320,119
15 207,893 9,408 9,408 211,021 109,310 109,310 211,021 332,177 332,177 348,786
16 218,287 (*) (*) (*) 106,956 106,956 211,021 361,817 361,817 379,908
17 229,202 (*) (*) (*) 103,605 103,605 211,021 393,969 393,969 413,667
18 240,662 (*) (*) (*) 98,990 98,990 211,021 428,810 428,810 450,251
19 252,695 (*) (*) (*) 92,767 92,767 211,021 466,527 466,527 489,853
20 265,330 (*) (*) (*) 84,502 84,502 211,021 507,313 507,313 532,678
21 278,596 (*) (*) (*) 73,639 73,639 211,021 551,372 551,372 578,941
22 292,526 (*) (*) (*) 59,231 59,231 211,021 598,878 598,878 628,821
23 307,152 (*) (*) (*) 40,174 40,174 211,021 650,036 650,036 682,538
24 322,510 (*) (*) (*) 14,935 14,935 211,021 705,059 705,059 740,312
25 338,635 (*) (*) (*) (*) (*) (*) 764,154 764,154 802,362
26 355,567 (*) (*) (*) (*) (*) (*) 827,521 827,521 868,897
27 373,346 (*) (*) (*) (*) (*) (*) 897,071 897,071 932,954
28 392,013 (*) (*) (*) (*) (*) (*) 973,765 973,765 1,002,978
29 411,614 (*) (*) (*) (*) (*) (*) 1,058,777 1,058,777 1,079,952
30 432,194 (*) (*) (*) (*) (*) (*) 1,153,591 1,153,591 1,165,127
</TABLE>
ASSUMPTIONS:
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND AN ANNUAL $50
ADMINISTRATIVE EXPENSE CHARGE.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS INVESTMENT
RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE PROSPECTUS APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN FORCE.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM
THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD
OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. NO REPRESENTATIONS CAN BE MADE BY NATIONWIDE LIFE OR THE TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
36
<PAGE> 40
$100,000 INITIAL PREMIUM: $211,021 SPECIFIED AMOUNT
MALE: NON-TOBACCO: PREFERRED ISSUE: AGE 65
GUARANTEED VALUES
<TABLE>
<CAPTION>
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
----------------------- ----------------------- -----------------------
PREMIUMS
PAID PLUS CASH CASH CASH
POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
---- ----- ----- ----- ------- ----- ----- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 105,000 94,459 85,959 211,021 100,259 91,759 211,021 106,060 97,560 211,021
2 110,250 88,603 80,103 211,021 100,176 91,676 211,021 112,447 103,947 211,021
3 115,763 82,457 74,457 211,021 99,792 91,792 211,021 119,295 111,295 211,021
4 121,551 75,959 67,959 211,021 99,062 91,062 211,021 126,673 118,673 211,021
5 127,628 69,030 61,530 211,021 97,923 90,423 211,021 134,663 127,163 211,021
6 134,010 61,563 54,563 211,021 96,293 89,293 211,021 143,361 136,361 211,021
7 140,710 53,423 47,423 211,021 94,066 88,066 211,021 152,886 146,886 211,021
8 147,746 44,428 39,428 211,021 91,099 86,099 211,021 163,394 158,394 211,021
9 155,133 34,369 30,369 211,021 87,225 83,225 211,021 175,096 171,096 211,021
10 162,889 23,011 23,011 211,021 82,254 82,254 211,021 188,279 188,279 211,021
11 171,034 10,144 10,144 211,021 76,208 76,208 211,021 203,939 203,939 214,136
12 179,586 (*) (*) (*) 68,582 68,582 211,021 221,287 221,287 232,352
13 188,565 (*) (*) (*) 59,044 59,044 211,021 240,032 240,032 252,033
14 197,993 (*) (*) (*) 47,166 47,166 211,021 260,272 260,272 273,286
15 207,893 (*) (*) (*) 32,355 32,355 211,021 282,111 282,111 296,216
16 218,287 (*) (*) (*) 13,782 13,782 211,021 305,648 305,648 320,931
17 229,202 (*) (*) (*) (*) (*) (*) 330,985 330,985 347,534
18 240,662 (*) (*) (*) (*) (*) (*) 358,218 358,218 376,129
19 252,695 (*) (*) (*) (*) (*) (*) 387,441 387,441 406,813
20 265,330 (*) (*) (*) (*) (*) (*) 418,752 418,752 439,690
21 278,596 (*) (*) (*) (*) (*) (*) 452,252 452,252 474,865
22 292,526 (*) (*) (*) (*) (*) (*) 488,044 488,044 512,446
23 307,152 (*) (*) (*) (*) (*) (*) 526,235 526,235 552,547
24 322,510 (*) (*) (*) (*) (*) (*) 566,933 566,933 595,279
25 338,635 (*) (*) (*) (*) (*) (*) 610,235 610,235 640,747
26 355,567 (*) (*) (*) (*) (*) (*) 656,227 656,227 689,038
27 373,346 (*) (*) (*) (*) (*) (*) 706,909 706,909 735,185
28 392,013 (*) (*) (*) (*) (*) (*) 763,085 763,085 785,978
29 411,614 (*) (*) (*) (*) (*) (*) 825,734 825,734 842,249
30 432,194 (*) (*) (*) (*) (*) (*) 896,108 896,108 905,069
</TABLE>
ASSUMPTIONS:
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) GUARANTEED VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES AND AN
ANNUAL $75 ADMINISTRATIVE EXPENSE CHARGE.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS INVESTMENT
RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE PROSPECTUS APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN FORCE.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM
THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD
OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. NO REPRESENTATIONS CAN BE MADE BY NATIONWIDE LIFE OR THE TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
37
<PAGE> 41
<PAGE> 1
Independent Auditors' Report
The Board of Directors and Contract Owners of
Nationwide VLI Separate Account
Nationwide Life Insurance Company:
We have audited the accompanying statement of assets, liabilities and
contract owners' equity of Nationwide VLI Separate Account as of December 31,
1995, and the related statements of operations and changes in contract owners'
equity and schedules of changes in unit value for each of the years in the three
year period then ended. These financial statements and schedules of changes in
unit value are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedules of changes in unit value 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 and schedules of
changes in unit value are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of December 31, 1995, by correspondence with the custodian and the
transfer agents of the underlying mutual funds. 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 financial statements and schedules of changes in unit
value referred to above present fairly, in all material respects, the financial
position of Nationwide VLI Separate Account as of December 31, 1995, and the
results of its operations and its changes in contract owners' equity and the
schedules of changes in unit value for each of the years in the three year
period then ended in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Columbus, Ohio
February 6, 1996
<PAGE> 2
NATIONWIDE VLI SEPARATE ACCOUNT
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY
DECEMBER 31, 1995
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in Van Kampen American Capital Life
Investment Trust, at market value:
Common Stock Fund
1,801,420 shares (cost $23,991,656) .............. $ 26,462,863
Domestic Strategic Income Fund
427,490 shares (cost $3,589,193) .................. 3,509,695
Emerging Growth Fund
42,444 shares (cost $475,666) ..................... 497,015
Global Equity Fund
20,666 shares (cost $209,185) ..................... 213,064
Government Fund
6,265,236 shares (cost $54,992,190) ............... 56,763,039
Money Market Fund
9,782,717 shares (cost $9,782,717) ................ 9,782,717
Multiple Strategy Fund
2,098,321 shares (cost $23,600,829) ............... 24,424,455
Real Estate Securities Fund
4,679 shares (cost $48,129) ....................... 50,248
------------
Total assets ................................... 121,703,096
ACCOUNTS PAYABLE .......................................... 585
------------
CONTRACT OWNERS' EQUITY ................................... $121,702,511
============
</TABLE>
Contract owners' equity represented by:
<TABLE>
<CAPTION>
UNITS UNIT VALUE
--------- ----------
<S> <C> <C> <C>
Single Premium contracts issued prior to
April 16, 1990:
Common Stock Sub-account ............... 1,165,519 $ 22.498859 $ 26,222,848
Domestic Strategic Income Sub-account .. 193,912 17.235188 3,342,110
Emerging Growth Sub-account ............ 42,641 11.655608 497,007
Global Equity Sub-account .............. 20,762 10.262083 213,061
Government Sub-account ................. 2,990,179 18.968390 56,718,881
Money Market Sub-account ............... 611,001 15.695093 9,589,718
Multiple Strategy Sub-account .......... 1,125,079 21.519909 24,211,598
Real Estate Securities Sub-account ..... 4,659 10.784280 50,244
Single Premium contracts issued on or after
April 16, 1990:
Common Stock Sub-account ............... 5,428 21.257132 115,384
Domestic Strategic Income Sub-account .. 9,801 17.099466 167,592
Government Sub-account ................. 2,836 14.433482 40,933
Money Market Sub-account ............... 16,792 11.648994 195,610
Multiple Strategy Sub-account .......... 5,169 18.558022 95,926
Multiple Payment Contracts and Flexible
Premium Contracts:
Common Stock Sub-account ............... 6,873 18.137100 124,656
Multiple Strategy Sub-account .......... 7,030 16.634918 116,943
========= ========= ------------
$121,702,511
============
</TABLE>
See accompanying notes to financial statements.
<PAGE> 3
NATIONWIDE VLI SEPARATE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
------------- ----------- -----------
<S> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested capital gains and dividends ................ $ 11,096,149 9,791,294 8,172,407
------------- ----------- -----------
Gain (loss) on investments:
Proceeds from redemptions of mutual
fund shares ......................................... 23,835,749 22,040,399 23,152,130
Cost of mutual fund shares sold ..................... (21,777,460) (20,667,556) (20,977,882)
------------- ----------- -----------
Realized gain (loss) on investments ................. 2,058,289 1,372,843 2,174,248
Change in unrealized gain (loss) on
investments ....................................... 11,069,519 (15,672,902) (360,705)
------------- ----------- -----------
Net gain (loss) on investments ................... 13,127,808 (14,300,059) 1,813,543
------------- ----------- -----------
Net investment activity .................... 24,223,957 (4,508,765) 9,985,950
------------- ----------- -----------
EQUITY TRANSACTIONS:
Purchase payments from contract owners ................ 39,639 25,229 19,352
Surrenders (note 2d) .................................. (11,745,567) (9,547,706) (9,817,586)
Death benefits (note 4) ............................... (1,552,445) (1,196,526) (1,033,549)
Policy loans (net of repayments) (note 5) ............. 833,405 1,817,775 (226,605)
------------- ----------- -----------
Net equity transactions .................... (12,424,968) (8,901,228) (11,058,388)
------------- ----------- -----------
EXPENSES:
Deductions for surrender charges (note 2d) ........... (193,286) (377,936) (421,375)
Redemptions to pay cost of insurance charges
and administrative charges (notes 2b
and 2c) ............................................. (1,770,626) (2,043,874) (2,027,161)
Deductions for asset charges (note 3) ................. (1,124,778) (1,135,456) (1,270,553)
------------- ----------- -----------
Total expenses ............................. (3,088,690) (3,557,266) (3,719,089)
------------- ----------- -----------
NET CHANGE IN CONTRACT OWNERS' EQUITY ................... 8,710,299 (16,967,259) (4,791,527)
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ............. 112,992,212 129,959,471 134,750,998
------------- ----------- -----------
CONTRACT OWNERS' EQUITY END OF PERIOD ................... $ 121,702,511 112,992,212 129,959,471
============= =========== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 4
NATIONWIDE VLI SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) ORGANIZATION AND NATURE OF OPERATIONS
The Nationwide VLI Separate Account ("Separate Account") was
established pursuant to a resolution of the Board of Directors of
Nationwide Life Insurance Company (the Company) on August 8, 1984. The
Separate Account has been registered as a unit investment trust under
the Investment Company Act of 1940 and consists of eight sub-accounts.
Assets of each sub-account are invested at net asset value in shares
of corresponding underlying mutual funds offered by Van Kampen
American Capital Life Investment Trust. The funds consist of Common
Stock, Domestic Strategic Income (formerly Corporate Bond), Emerging
Growth, Global Equity, Government, Money Market, Multiple Strategy and
Real Estate Securities Funds. At December 31, 1995, contract owners
have invested in all of the above funds.
The Company offers modified single premium, and multiple payment and
flexible premium variable life insurance contracts through the
Account. The primary distribution for the contracts is through the
brokerage community; however, other distributors may be utilized.
(b) THE CONTRACTS
Prior to December 31, 1990, only contracts without a front-end sales
charge, but with a contingent deferred sales charge and certain other
fees, were offered for purchase. Beginning December 31, 1990,
contracts with a front-end sales charge, a contingent deferred sales
charge and certain other fees, are offered for purchase. See note 2
for a discussion of policy charges and note 3 for asset charges.
The contract owners' equity is affected by the investment results of
each fund, equity transactions by contract owners and certain policy
charges (see notes 2 and 3). The accompanying financial statements
include only contract owners' purchase payments pertaining to the
variable portions of their contracts and exclude any purchase payments
for fixed dollar benefits, the latter being included in the accounts
of the Company.
(c) SECURITY VALUATION, TRANSACTIONS AND RELATED INVESTMENT INCOME
The market value of the underlying mutual funds is based on the
closing net asset value per share at December 31, 1995. Fund purchases
and sales are accounted for on the trade date (date the order to buy
or sell is executed). The cost of investments sold is determined on a
specific identification basis, and dividends (which include capital
gain distributions) are accrued as of the ex-dividend date.
(d) FEDERAL INCOME TAXES
Operations of the Account form a part of, and are taxed with,
operations of the Company, which is taxed as a life insurance company
under the provisions of the Internal Revenue Code.
The Company does not provide for income taxes within the Account.
Taxes are the responsibility of the contract owner upon termination or
withdrawal.
(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.
<PAGE> 5
2. POLICY CHARGES
(a) DEDUCTIONS FROM PREMIUMS
On multiple payment contracts and flexible premium contracts, the
Company deducts a charge for state premium taxes equal to 2.5% of all
premiums received to cover the payment of these premium taxes. The
Company also deducts a sales load from each premium payment received
not to exceed 3.5% of each premium payment. The Company may at its
sole discretion reduce this sales loading.
(b) COST OF INSURANCE
A cost of insurance charge is assessed monthly against each contract
by liquidating units. The amount of the charge is based upon age, sex,
rate class and net amount at risk (death benefit less total contract
value).
(c) ADMINISTRATIVE CHARGES
For single premium contracts, the Company deducts an annual
administrative charge which is determined as follows:
Contracts issued prior to April 16, 1990:
Purchase payments totalling less than $25,000 - $10/month
Purchase payments totalling $25,000 or more - none
Contracts issued on or after April 16, 1990:
Purchase payments totalling less than $25,000 - $90/year ($65/year
in New York)
Purchase payments totalling $25,000 or more - $50/year
For multiple payment contracts the Company currently deducts a monthly
administrative charge of $5 (may deduct up to $7.50, maximum) to
recover policy maintenance, accounting, record keeping and other
administrative expenses.
For flexible premium contracts, the Company currently deducts a
monthly administrative charge of $25 during the first policy year and
$5 per month thereafter (may deduct up to $7.50, maximum) to recover
policy maintenance, accounting, record keeping and other
administrative expenses. Additionally, the Company deducts an increase
charge of $2.04 per year per $1,000 applied to any increase in the
specified amount during the first 12 months after the increase becomes
effective.
The above charges are assessed against each contract by liquidating
units.
(d) SURRENDERS
Policy surrenders result in a redemption of the contract value from
the Separate Account and payment of the surrender proceeds to the
contract owner or designee. The surrender proceeds consist of the
contract value, less any outstanding policy loans, and less a
surrender charge, if applicable. The charge is determined according to
contract type.
For single premium contracts, the charge is determined based upon a
specified percentage of the original purchase payment. For single
premium contracts issued prior to April 16, 1990, the charge is 8% in
the first year and declines to 0% after the ninth year. For single
premium contracts issued on or after April 16, 1990, the charge is
8.5% in the first year and declines to 0% after the ninth year.
For multiple payment contracts and flexible premium contracts, the
amount charged is based upon a specified percentage of the initial
surrender charge, which varies by issue age, sex and rate class. The
charge is 100% of the initial surrender charge in the first year, with
certain exceptions, declining to 0% after the ninth year.
The Company may waive the surrender charge for certain contracts in
which the sales expenses normally associated with the distribution of
a contract are not incurred.
<PAGE> 6
3. ASSET CHARGES
For single premium contracts, the Company deducts a charge from the
contract to cover mortality and expense risk charges related to
operations, and to recover policy maintenance and premium tax charges.
For contracts issued prior to April 16, 1990, the charge is equal to
an annual rate of .95% during the first ten policy years, and .50%
thereafter. A reduction of charges on these contracts is possible in
policy years six through ten for those contracts achieving certain
investment performance criteria; for contracts issued on or after
April 16, 1990, the charge is equal to an annual rate of 1.30% during
the first ten policy years, and 1.00% thereafter.
For multiple payment contracts and flexible premium contracts, the
Company deducts a charge equal to an annual rate of .80%, with certain
exceptions, to cover mortality and expense risk charges related to
operations.
The above charges are assessed through the daily unit value
calculation.
4. DEATH BENEFITS
Death benefits result in a redemption of the contract value from the
Separate Account and payment of the death benefit proceeds, less any
outstanding policy loans and policy charges, to the legal beneficiary.
The excess of the death benefit proceeds over the contract value on
the date of death is paid by the Company's general account.
5. POLICY LOANS (NET OF REPAYMENTS)
Contract provisions allow contract owners to borrow up to 90% (50%
during first year of single premium contracts) of a policy's cash
surrender value. For single premium contracts issued prior to April
16, 1990, 6.5% interest is due and payable annually in advance. For
single premium contracts issued on or after April 16, 1990, multiple
payment contracts and flexible premium contracts, 6% interest is due
and payable in advance on the policy anniversary when there is a loan
outstanding on the policy.
At the time the loan is granted, the amount of the loan is transferred
from the Account to the Company's general account as collateral for
the outstanding loan. Collateral amounts in the general account are
credited with the stated rate of interest in effect at the time the
loan is made, subject to a guaranteed minimum rate. Loan repayments
result in a transfer of collateral, including interest, back to the
Account.
6. SCHEDULE I
Schedule I presents the components of the change in unit values, which
are the basis for determining contract owners' equity. This schedule
is presented for each sub-account in the following format:
- Beginning unit value - Jan. 1
- Reinvested dividends and capital gains
(This amount reflects the increase in the unit value due to
dividend and capital gain distributions from the underlying
mutual funds.)
- Unrealized gain (loss)
(This amount reflects the increase (decrease) in the unit value
resulting from the market appreciation (depreciation) of the
underlying mutual funds.)
- Asset charges
(This amount reflects the decrease in the unit value due to the
charges discussed in note 3.)
- Ending unit value - Dec. 31
- Percentage increase (decrease) in unit value.
<PAGE> 7
SCHEDULE I
NATIONWIDE VLI SEPARATE ACCOUNT
SINGLE PREMIUM CONTRACTS ISSUED PRIOR TO APRIL 16, 1990
SCHEDULES OF CHANGES IN UNIT VALUES
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(UNDERLYING MUTUAL FUNDS OF VAN KAMPEN AMERICAN CAPITAL)
<TABLE>
<CAPTION>
DOMESTIC
COMMON STRATEGIC EMERGING
STOCK INCOME GROWTH GLOBAL EQUITY
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
1995
Beginning unit value - Jan. 1 $16.580891 14.336077 10.000000 10.000000
--------------------------------------------------------------------------------------------
Reinvested dividends and capital gains 3.004553 1.359225 .000000 .000000
--------------------------------------------------------------------------------------------
Unrealized gain (loss) 3.100329 1.690878 1.707069 .309271
--------------------------------------------------------------------------------------------
Asset charges (.186914) (.150992) (.051461) (.047188)
--------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $22.498859 17.235188 11.655608 10.262083
--------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value*(a) 36% 20% 17%(b) 3%(b)
============================================================================================
1994
Beginning unit value - Jan. 1 $17.325425 15.127964 ** **
--------------------------------------------------------------------------------------------
Reinvested dividends and capital gains 1.976086 1.490981
--------------------------------------------------------------------------------------------
Unrealized gain (loss) (2.559308) (2.144766)
--------------------------------------------------------------------------------------------
Asset charges (.161312) (.138102)
--------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $16.580891 14.336077
--------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value*(a) (4)% (5)%
============================================================================================
1993
Beginning unit value - Jan. 1 $16.049449 13.129409 ** **
--------------------------------------------------------------------------------------------
Reinvested dividends and capital gains .988860 1.177277
--------------------------------------------------------------------------------------------
Unrealized gain (loss) .443906 .958277
--------------------------------------------------------------------------------------------
Asset charges (.156790) (.136999)
--------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $17.325425 15.127964
--------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value*(a) 8% 15%
============================================================================================
<CAPTION>
MONEY MULTIPLE REAL ESTATE
GOVERNMENT MARKET STRATEGY SECURITIES
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
1995
Beginning unit value - Jan. 1 16.344365 15.022875 16.538427 10.000000
-------------------------------------------------------------------------------------------
Reinvested dividends and capital gains 1.217414 .817690 2.418600 .092106
-------------------------------------------------------------------------------------------
Unrealized gain (loss) 1.576618 .000000 2.744315 .740132
-------------------------------------------------------------------------------------------
Asset charges (.170007) (.145472) (.181433) (.047958)
-------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 18.968390 15.695093 21.519909 10.784280
-------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value*(a) 16% 4% 30% 8%(b)
===========================================================================================
1994
Beginning unit value - Jan. 1 17.301801 14.623465 17.329774 **
-------------------------------------------------------------------------------------------
Reinvested dividends and capital gains 1.062855 .539516 1.995739
-------------------------------------------------------------------------------------------
Unrealized gain (loss) (1.862740) .000000 (2.627910)
-------------------------------------------------------------------------------------------
Asset charges (.157551) (.140106) (.159176)
-------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 16.344365 15.022875 16.538427
-------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value*(a) (6)% 3% (5)%
===========================================================================================
1993
Beginning unit value - Jan. 1 16.194306 14.379569 16.243698 **
-------------------------------------------------------------------------------------------
Reinvested dividends and capital gains 1.044833 .381680 1.376516
-------------------------------------------------------------------------------------------
Unrealized gain (loss) .225301 .000000 (.130378)
-------------------------------------------------------------------------------------------
Asset charges (.162639) (.137784) (.160062)
-------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 17.301801 14.623465 17.329774
-------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value*(a) 7% 2% 7%
===========================================================================================
</TABLE>
* An annualized rate of return cannot be determined as:
(a) Asset charges do not include the policy charges discussed in note 2; and
(b) This investment option was not utilized for the entire year indicated.
** This investment option was not available or was not utilized.
<PAGE> 8
SCHEDULE I, CONTINUED
NATIONWIDE VLI SEPARATE ACCOUNT
SINGLE PREMIUM CONTRACTS ISSUED ON OR AFTER APRIL 16, 1990
SCHEDULES OF CHANGES IN UNIT VALUES
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(UNDERLYING MUTUAL FUNDS OF VAN KAMPEN AMERICAN CAPITAL)
<TABLE>
<CAPTION>
DOMESTIC
COMMON STRATEGIC MONEY MULTIPLE
STOCK INCOME GOVERNMENT MARKET STRATEGY
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
1995**
Beginning unit value - Jan. 1 $15.720497 14.272889 12.480782 11.189053 14.311997
-----------------------------------------------------------------------------------------------------------
Reinvested dividends and capital gains 2.839638 1.348751 .928076 .607952 2.086061
-----------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 2.939071 1.683177 1.202259 .000000 2.374431
-----------------------------------------------------------------------------------------------------------
Asset charges (.242074) (.205351) (.177635) (.148011) (.214467)
-----------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $21.257132 17.099466 14.433482 11.648994 18.558022
-----------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* 35% 20% 16% 4% 30%
===========================================================================================================
1994
Beginning unit value - Jan. 1 $16.483852 15.113958 13.258615 10.929642 15.049256
-----------------------------------------------------------------------------------------------------------
Reinvested dividends and capital gains 1.874048 1.484668 .813111 .402452 1.727365
-----------------------------------------------------------------------------------------------------------
Unrealized gain (loss) (2.427739) (2.137258) (1.425714) .000000 (2.275800)
-----------------------------------------------------------------------------------------------------------
Asset charges (.209664) (.188479) (.165230) (.143041) (.188824)
-----------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $15.720497 14.272889 12.480782 11.189053 14.311997
-----------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (5)% (6)% (6)% 2% (5)%
===========================================================================================================
1993
Beginning unit value - Jan. 1 $15.324267 13.163967 12.453930 10.785653 14.156355
-----------------------------------------------------------------------------------------------------------
Reinvested dividends and capital gains .941020 1.176441 .802266 .285158 1.195810
-----------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .423067 .961164 .173553 .000000 (.112372)
-----------------------------------------------------------------------------------------------------------
Asset charges (.204502) (.187614) (.171134) (.141169) (.190537)
-----------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $16.483852 15.113958 13.258615 10.929642 15.049256
-----------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* 8% 15% 6% 1% 6%
===========================================================================================================
</TABLE>
* An annualized rate of return cannot be determined as asset charges do not
include the policy charges discussed in note 2.
** No other investment options were utilized.
<PAGE> 9
SCHEDULE I, CONTINUED
NATIONWIDE VLI SEPARATE ACCOUNT
MULTIPLE PAYMENT CONTRACTS AND FLEXIBLE PREMIUM CONTRACTS
SCHEDULES OF CHANGES IN UNIT VALUES
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(UNDERLYING MUTUAL FUNDS OF VAN KAMPEN AMERICAN CAPITAL)
<TABLE>
<CAPTION>
COMMON MULTIPLE
STOCK STRATEGY
SUB-ACCOUNT SUB-ACCOUNT
----------- -----------
<S> <C> <C>
1995**
Beginning unit value - Jan. 1 $13.346462 12.765144
---------------------------------------------------------------------------------------
Reinvested dividends and capital gains 2.421740 1.869449
---------------------------------------------------------------------------------------
Unrealized gain (loss) 2.495698 2.118344
---------------------------------------------------------------------------------------
Asset charges (.126800) (.118019)
---------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $18.137100 16.634918
---------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* 36% 30%
=======================================================================================
1994**
Beginning unit value - Jan. 1 $13.924920 13.355954
---------------------------------------------------------------------------------------
Reinvested dividends and capital gains 1.590429 1.540293
---------------------------------------------------------------------------------------
Unrealized gain (loss) (2.059623) (2.027726)
---------------------------------------------------------------------------------------
Asset charges (.109264) (.103377)
---------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $13.346462 12.765144
---------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (4)% (4)%
=======================================================================================
1993**
Beginning unit value - Jan. 1 $12.880252 12.500360
---------------------------------------------------------------------------------------
Reinvested dividends and capital gains .794704 1.060708
---------------------------------------------------------------------------------------
Unrealized gain (loss) .356007 (.101308)
---------------------------------------------------------------------------------------
Asset charges (.106043) (.103806)
---------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $13.924920 13.355954
---------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* 8% 7%
=======================================================================================
</TABLE>
** An annualized rate of return cannot be determined as asset charges do not
include the policy charges discussed in note 2.
** No other investment options were utilized.
See note 6.
<PAGE> 42
<PAGE> 1
INDEPENDENT AUDITORS' REPORT
----------------------------
The Board of Directors
Nationwide Life Insurance Company:
We have audited the consolidated financial statements of Nationwide Life
Insurance Company (a wholly owned subsidiary of Nationwide Corporation) and
subsidiaries as listed in the accompanying index. In connection with our audits
of the consolidated financial statements, we also have audited the financial
statement schedules as listed in the accompanying index. These consolidated
financial statements and financial statement schedules are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these consolidated financial statements and financial statement schedules based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
Participating insurance and the related surplus are discussed in note 12. The
Company and its counsel are of the opinion that the ultimate ownership of the
participating surplus in excess of the contemplated equitable policyholder
dividends belongs to the shareholder. The accompanying consolidated financial
statements are presented on such basis.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Nationwide Life
Insurance Company and subsidiaries as of December 31, 1995 and 1994, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1995, in conformity with generally
accepted accounting principles. Also in our opinion, the related financial
statement schedules, when considered in relation to the basic consolidated
financial statements taken as a whole, present fairly, in all material
respects, the information set forth therein.
In 1994, the Company adopted the provisions of the Financial Accounting
Standards Board's Statement of Financial Accounting Standards (SFAS) No. 115,
Accounting for Certain Investments in Debt and Equity Securities.
In 1993, the Company adopted the provisions of SFAS No. 109, Accounting for
Income Taxes and SFAS No. 106, Employers' Accounting for Postretirement
Benefits Other Than Pensions.
KPMG Peat Marwick LLP
Columbus, Ohio
February 26, 1996
<PAGE> 2
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Consolidated Balance Sheets
December 31, 1995 and 1994
(000's omitted)
<TABLE>
<CAPTION>
ASSETS 1995 1994
------ ----------------- ----------------
<S> <C> <C>
Investments (notes 5, 8 and 9):
Securities available-for-sale, at fair value:
Fixed maturities (cost $13,438,630 in 1995; $8,318,865 in 1994) $ 14,167,377 8,045,906
Equity securities (cost $27,362 in 1995; $18,372 in 1994) 33,718 24,713
Fixed maturities held-to-maturity, at amortized cost (fair value $3,602,310 in 1994) - 3,688,787
Mortgage loans on real estate 4,786,599 4,222,284
Real estate 239,089 252,681
Policy loans 370,908 340,491
Other long-term investments 67,280 63,914
Short-term investments (note 13) 45,732 131,643
----------- -----------
19,710,703 16,770,419
----------- -----------
Cash 10,485 7,436
Accrued investment income 239,881 220,540
Deferred policy acquisition costs 1,094,195 1,064,159
Deferred Federal income tax -- 36,515
Other assets 795,169 790,603
Assets held in Separate Accounts (note 8) 18,763,678 12,222,461
----------- -----------
$40,614,111 31,112,133
=========== ===========
LIABILITIES AND SHAREHOLDER'S EQUITY
------------------------------------
Future policy benefits and claims (notes 6 and 8) 18,200,128 16,321,461
Policyholders' dividend accumulations 353,554 338,058
Other policyholder funds 71,155 72,770
Accrued Federal income tax (note 7):
Current 34,064 13,126
Deferred 238,877 -
----------- -----------
272,941 13,126
----------- -----------
Other liabilities 284,143 235,778
Liabilities related to Separate Accounts (note 8) 18,763,678 12,222,461
----------- -----------
37,945,599 29,203,654
----------- -----------
Shareholder's equity (notes 3, 4, 5, 7, 12 and 13):
Capital shares, $1 par value. Authorized 5,000 shares, issued and
outstanding 3,815 shares 3,815 3,815
Additional paid-in capital 673,782 622,753
Retained earnings 1,606,607 1,401,579
Unrealized gains (losses) on securities available-for-sale, net 384,308 (119,668)
----------- -----------
2,668,512 1,908,479
----------- -----------
Commitments and contingencies (notes 9 and 15)
$40,614,111 31,112,133
=========== ===========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> 3
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Consolidated Statements of Income
Years ended December 31, 1995, 1994 and 1993
(000's omitted)
<TABLE>
<CAPTION>
1995 1994 1993
--------------- -------------- -------------
<S> <C> <C> <C>
Revenues (note 16):
Traditional life insurance premiums $ 274,957 209,538 215,715
Accident and health insurance premiums 509,658 324,524 312,655
Universal life and investment product policy charges 307,676 239,021 188,057
Net investment income (note 5) 1,482,980 1,289,501 1,204,426
Realized gains (losses) on investments (notes 5 and 13) 836 (16,384) 113,673
---------- ---------- ----------
2,576,107 2,046,200 2,034,526
---------- ---------- ----------
Benefits and expenses:
Benefits and claims 1,656,287 1,279,763 1,236,906
Provision for policyholders' dividends on participating policies (note 12) 48,074 46,061 53,189
Amortization of deferred policy acquisition costs 93,044 94,744 102,134
Other operating costs and expenses 458,970 352,402 329,396
---------- ---------- ----------
2,256,375 1,772,970 1,721,625
---------- ---------- ----------
Income before Federal income tax expense and cumulative effect of
changes in accounting principles 319,732 273,230 312,901
---------- ---------- ----------
Federal income tax expense (note 7):
Current 103,464 79,847 75,124
Deferred 3,790 9,657 31,634
---------- ---------- ----------
107,254 89,504 106,758
---------- ---------- ----------
Income before cumulative effect of changes in accounting principles 212,478 183,726 206,143
Cumulative effect of changes in accounting principles, net (note 3) -- -- 5,365
---------- ---------- ----------
Net income $ 212,478 183,726 211,508
========== ========== ==========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> 4
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Consolidated Statements of Shareholder's Equity
Years ended December 31, 1995, 1994 and 1993
(000's omitted)
<TABLE>
<CAPTION>
Unrealized
gains (losses)
Additional on securities Total
Capital paid-in Retained available-for- shareholder's
shares capital earnings sale, net equity
----------- ----------- ----------- ----------------- ---------------
<S> <C> <C> <C> <C> <C>
1993:
Balance, beginning of year $ 3,815 311,753 1,024,150 90,524 1,430,242
Capital contributions -- 111,000 -- -- 111,000
Dividends paid to shareholder -- -- (17,805) -- (17,805)
Net income -- -- 211,508 -- 211,508
Unrealized losses on equity securities, net -- -- -- (83,777) (83,777)
---------- ---------- ---------- ---------- ----------
Balance, end of year $ 3,815 422,753 1,217,853 6,747 1,651,168
========== ========== ========= ========== ==========
1994:
Balance, beginning of year 3,815 422,753 1,217,853 6,747 1,651,168
Capital contribution -- 200,000 -- -- 200,000
Net income -- -- 183,726 -- 183,726
Adjustment for change in accounting for
certain investments in debt and equity
securities, net (note 3) -- -- -- 216,915 216,915
Unrealized losses on securities available-
for-sale, net -- -- -- (343,330) (343,330)
---------- ---------- ---------- ---------- ----------
Balance, end of year $ 3,815 622,753 1,401,579 (119,668) 1,908,479
========== ========== ========== ========== ==========
1995:
Balance, beginning of year 3,815 622,753 1,401,579 (119,668) 1,908,479
Capital contribution (note 13) -- 51,029 -- (4,111) 46,918
Dividends paid to shareholder -- -- (7,450) -- (7,450)
Net income -- -- 212,478 -- 212,478
Unrealized gains on securities available-
for-sale, net -- -- -- 508,087 508,087
---------- ---------- ---------- ---------- ----------
Balance, end of year $ 3,815 673,782 1,606,607 384,308 2,668,512
========== ========== ========== ========== ==========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> 5
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Consolidated Statements of Cash Flows
Years ended December 31, 1995, 1994 and 1993
(000's omitted)
<TABLE>
<CAPTION>
1995 1994 1993
-------------- ------------ -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 212,478 183,726 211,508
Adjustments to reconcile net income to net cash provided by operating
activities:
Capitalization of deferred policy acquisition costs (349,456) (264,434) (191,994)
Amortization of deferred policy acquisition costs 93,044 94,744 102,134
Amortization and depreciation 10,319 6,207 11,156
Realized losses (gains) on invested assets, net 717 15,949 (113,648)
Deferred Federal income tax expense (benefit) 4,023 (2,166) (6,006)
Increase in accrued investment income (19,341) (29,654) (4,218)
Increase in other assets (3,227) (112,566) (549,277)
Increase in policy liabilities 198,200 1,038,641 509,370
Increase in policyholders' dividend accumulations 15,496 15,372 17,316
Increase in accrued Federal income tax payable 20,938 832 16,838
Increase in other liabilities 48,365 17,826 26,958
Other, net (20,556) (19,303) (11,745)
----------- ----------- ------------
Net cash provided by operating activities 211,000 945,174 18,392
----------- ----------- -----------
Cash flows from investing activities:
Proceeds from maturity of securities available-for-sale 706,442 579,067 --
Proceeds from sale of securities available-for-sale 131,420 247,876 247,502
Proceeds from maturity of fixed maturities held-to-maturity 633,173 516,003 1,192,093
Proceeds from sale of fixed maturities -- -- 33,959
Proceeds from repayments of mortgage loans on real estate 215,134 220,744 146,047
Proceeds from sale of real estate 48,477 46,713 23,587
Proceeds from repayments of policy loans and sale of other invested assets 79,620 134,998 59,643
Cost of securities available-for-sale acquired (2,232,047) (2,569,672) (12,550)
Cost of fixed maturities held-to-maturity acquired (669,449) (675,835) (2,016,831)
Cost of mortgage loans on real estate acquired (821,078) (627,025) (475,336)
Cost of real estate acquired (10,970) (15,962) (8,827)
Policy loans issued and other invested assets acquired (92,904) (118,012) (76,491)
----------- ----------- ------------
Net cash used in investing activities (2,012,182) (2,261,105) (887,204)
----------- ----------- -----------
Cash flows from financing activities:
Proceeds from capital contributions 46,918 200,000 111,000
Dividends paid to shareholder (7,450) -- (17,805)
Increase in universal life and investment product account balances 3,202,135 3,640,958 2,249,740
Decrease in universal life and investment product account balances (1,523,283) (2,449,580) (1,458,504)
----------- ----------- -----------
Net cash provided by financing activities 1,718,320 1,391,378 884,431
----------- ----------- -----------
Net (decrease) increase in cash and cash equivalents (82,862) 75,447 15,619
Cash and cash equivalents, beginning of year 139,079 63,632 48,013
----------- ----------- -----------
Cash and cash equivalents, end of year $ 56,217 139,079 63,632
=========== =========== ===========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> 6
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements
December 31, 1995, 1994 and 1993
(000's omitted)
(1) ORGANIZATION AND DESCRIPTION OF BUSINESS
Nationwide Life Insurance Company (NLIC) is a wholly owned subsidiary of
Nationwide Corporation (Corp.). Wholly-owned subsidiaries of NLIC include
Nationwide Life and Annuity Insurance Company (NLAIC) (formerly known as
Financial Horizons Life Insurance Company), West Coast Life Insurance
Company (WCLIC), Employers Life Insurance Company of Wausau and
subsidiaries (ELICW), National Casualty Company (NCC) and Nationwide
Financial Services, Inc. (NFS). NLIC and its subsidiaries are
collectively referred to as "the Company."
NLIC, NLAIC, WCLIC and ELICW are life and accident and health insurers
and NCC is a property and casualty insurer. The Company is licensed in
all 50 states, the District of Columbia, the Virgin Islands and Puerto
Rico. The Company offers a full range of life insurance, health insurance
and annuity products through exclusive agents, brokers and other
distribution channels and is subject to competition from other insurers
throughout the United States. The Company is subject to regulation by the
Insurance Departments of states in which it is licensed, and undergoes
periodic examinations by those departments.
The following is a description of the most significant risks facing
life and health insurers and how the Company mitigates those risks:
LEGAL/REGULATORY RISK is the risk that changes in the legal or
regulatory environment in which an insurer operates will create
additional expenses not anticipated by the insurer in pricing its
products. That is, regulatory initiatives designed to reduce insurer
profits, new legal theories or insurance company insolvencies through
guaranty fund assessments may create costs for the insurer beyond
those currently recorded in the consolidated financial statements. The
Company mitigates this risk by offering a wide range of products and
by operating throughout the United States, thus reducing its exposure
to any single product or jurisdiction, and also by employing
underwriting practices which identify and minimize the adverse impact
of this risk.
CREDIT RISK is the risk that issuers of securities owned by the
Company or mortgagors on mortgage loans on real estate owned by the
Company will default or that other parties, including reinsurers,
which owe the Company money, will not pay. The Company minimizes this
risk by adhering to a conservative investment strategy, by maintaining
sound reinsurance and credit and collection policies and by
providing for any amounts deemed uncollectible.
INTEREST RATE RISK is the risk that interest rates will change and
cause a decrease in the value of an insurer's investments. This change
in rates may cause certain interest-sensitive products to become
uncompetitive or may cause disintermediation. The Company mitigates
this risk by charging fees for non-conformance with certain policy
provisions, by offering products that transfer this risk to the
purchaser, and/or by attempting to match the maturity schedule of its
assets with the expected payouts of its liabilities. To the extent
that liabilities come due more quickly than assets mature, an insurer
would have to borrow funds or sell assets prior to maturity and
potentially recognize a gain or loss.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies followed by the Company that
materially affect financial reporting are summarized below. The
accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles (GAAP) which
differ from statutory accounting practices prescribed or permitted by
regulatory authorities. See note 4.
<PAGE> 7
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
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 December 31, 1995 consolidated financial statements include the
accounts of NLIC and its wholly owned subsidiaries NLAIC, WCLIC, ELICW, NCC
and NFS. The December 31, 1994 and 1993 consolidated financial statements
include the accounts of NLIC, NLAIC, WCLIC, NCC and NFS. The December 31,
1994 consolidated balance sheet also includes the accounts of ELICW, which
was acquired by NLIC effective December 31, 1994. See Note 13. 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, 1995.
Mortgage loans on real estate are carried at the unpaid principal balance
less valuation allowances. The Company provides valuation allowances for
impairments of mortgage loans on real estate based on a review by portfolio
managers. The measurement of impaired loans is based on the present value
of expected future cash flows discounted at the loan's effective interest
rate or, as a practical expedient, at the fair value of the collateral, if
the loan is collateral dependent. Loans in foreclosure and loans considered
to be impaired are placed on non-accrual status. Interest received on
non-accrual status mortgage loans on real estate are included in interest
income in the period received.
Real estate is carried at cost less accumulated depreciation and valuation
allowances. Other long-term investments are carried on the equity basis,
adjusted for valuation allowances.
Realized gains and losses on the sale of investments are determined on the
basis of specific security identification. Estimates for valuation
allowances and other than temporary declines are included in realized gains
and losses on investments.
In March, 1995, the Financial Accounting Standards Board (FASB) issued
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 121 - ACCOUNTING FOR THE
IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF
(SFAS 121). SFAS 121 requires impairment losses to be 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. SFAS 121 also addresses
the accounting for long-lived assets that are expected to be disposed of.
The statement is effective for fiscal years beginning after December 15,
1995 and earlier application is permitted. Previously issued consolidated
financial statements shall not be restated. The Company will adopt SFAS 121
in 1996 and the impact on the consolidated financial statements is not
expected to be material.
<PAGE> 8
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
(c) REVENUES AND BENEFITS
TRADITIONAL LIFE INSURANCE PRODUCTS: Traditional life insurance
products include those products with fixed and guaranteed premiums and
benefits and consist primarily of whole life, limited-payment life, term
life and certain annuities with life contingencies. Premiums for
traditional life insurance products are recognized as revenue when due.
Benefits and expenses are associated with earned premiums so as to result
in recognition of profits over the life of the contract. This association
is accomplished by the provision for future policy benefits and the
deferral and amortization of policy acquisition costs.
UNIVERSAL LIFE AND INVESTMENT PRODUCTS: Universal life products include
universal life, variable universal life and other interest-sensitive life
insurance policies. Investment products consist primarily of individual and
group deferred annuities, annuities without life contingencies and
guaranteed investment contracts. Revenues for universal life and investment
products consist of 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 benefits and claims incurred in the period in
excess of related policy account balances and interest credited to policy
account balances.
ACCIDENT AND HEALTH INSURANCE: Accident and health insurance premiums
are recognized as revenue over the terms of the policies. Policy claims are
charged to expense in the period that the claims are incurred.
(d) DEFERRED POLICY ACQUISITION COSTS
The costs of acquiring new business, principally commissions, certain
expenses of the policy issue and underwriting department and certain
variable agency expenses have been deferred. For traditional life and
individual health insurance products, these deferred 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. For
universal life and investment products, deferred policy acquisition costs
are being amortized with interest over the lives of the policies in
relation to the present value of estimated future gross profits from
projected interest margins, 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).
(e) SEPARATE ACCOUNTS
Separate Account assets and liabilities represent contractholders'
funds which have been segregated into accounts with specific investment
objectives. The investment income and gains or losses of these accounts
accrue directly to the contractholders. The activity of the Separate
Accounts is not reflected in the consolidated statements of income and cash
flows except for the fees the Company receives for administrative services
and risks assumed.
(f) FUTURE POLICY BENEFITS
Future policy benefits for traditional life and individual health
insurance policies have been calculated using a net level premium method
based on estimates of mortality, morbidity, investment yields and
withdrawals which were used or which were being experienced at the time the
policies were issued, rather than the assumptions prescribed by state
regulatory authorities. See note 6.
Future policy benefits for annuity policies in the accumulation phase,
universal life and variable universal life policies have been calculated
based on participants' contributions plus interest credited less applicable
contract charges.
<PAGE> 9
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
Future policy benefits and claims for collectively renewable long-term
disability policies (primarily discounted at 5.2%) and group long-term
disability policies (primarily discounted at 5.5%) are the present value of
amounts not yet due on reported claims and an estimate of amounts to be
paid on incurred but unreported claims. The impact of reserve discounting
is not material. Future policy benefits and claims on other
group health insurance policies are not discounted.
(g) PARTICIPATING BUSINESS
Participating business represents approximately 45% (45% in 1994 and
48% in 1993) of the Company's ordinary life insurance in force, 72% (72% in
1994 and 1993) of the number of policies in force, and 39% (41% in 1994 and
45% in 1993) of life insurance premiums. The provision for policyholder
dividends is based on current dividend scales. Future dividends are
provided for ratably in future policy benefits based on dividend scales in
effect at the time the policies were issued. Dividend scales are approved
by the Board of Directors.
Income attributable to participating policies in excess of policyholder
dividends is accounted for as belonging to the shareholder. See note 12.
(h) FEDERAL INCOME TAX
NLIC, NLAIC, WCLIC and NCC file a consolidated Federal income tax
return with Nationwide Mutual Insurance Company (NMIC), the majority
shareholder of Corp. Through 1994, ELICW filed a consolidated Federal
income tax return with Employers Insurance of Wausau A Mutual Company.
Beginning in 1995, ELICW files a separate Federal income tax return.
In 1993, the Company adopted STATEMENT OF FINANCIAL ACCOUNTING
STANDARDS NO. 109 - ACCOUNTING FOR INCOME TAXES, which required a change
from the deferred method of accounting for income tax of APB Opinion 11 to
the asset and liability method of accounting for income tax. Under the
asset and liability method, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and operating loss and tax
credit carryforwards. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled.
Under this method, the effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date. Valuation allowances are established when necessary to
reduce the deferred tax assets to the amounts expected to be realized.
The Company has reported the cumulative effect of the change in method
of accounting for income tax in the 1993 consolidated statement of income.
See note 3.
(i) REINSURANCE CEDED
Reinsurance premiums ceded and reinsurance recoveries on benefits and
claims incurred are deducted from the respective income and expense
accounts. Assets and liabilities related to reinsurance ceded are reported
on a gross basis.
(j) CASH EQUIVALENTS
For purposes of the consolidated statements of cash flows, the Company
considers all short-term investments with original maturities of three
months or less to be cash equivalents.
<PAGE> 10
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
(k) RECLASSIFICATION
Certain items in the 1994 and 1993 consolidated financial
statements have been reclassified to conform to the 1995
presentation.
(3) CHANGES IN ACCOUNTING PRINCIPLES
Effective January 1, 1994, the Company changed its method of
accounting for certain investments in debt and equity securities in
connection with the issuance of STATEMENT OF FINANCIAL ACCOUNTING
STANDARDS NO. 115 - ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND
EQUITY SECURITIES. As of January 1, 1994, the Company classified fixed
maturity securities with amortized cost and fair value of $6,593,844
and $7,024,736, respectively, as available-for-sale and recorded the
securities at fair value. Previously, these securities were recorded
at amortized cost. The effect as of January 1, 1994 has been recorded
as a direct credit to shareholder's equity as follows:
<TABLE>
<CAPTION>
<S> <C>
Excess of fair value over amortized cost of fixed maturity
securities available-for-sale $ 430,892
Adjustment to deferred policy acquisition costs (97,177)
Deferred Federal income tax (116,800)
---------
$ 216,915
=========
During 1993, the Company adopted accounting principles in connection
with the issuance of two accounting standards by the FASB. The effect
as of January 1, 1993, the date of adoption, has been recognized in
the 1993 consolidated statement of income as the cumulative effect of
changes in accounting principles, as follows:
Asset/liability method of recognizing income tax (note 2(h)) $ 26,344
Accrual method of recognizing postretirement benefits other
than pensions (net of tax benefit of $11,296) (note 11) (20,979)
--------
$ 5,365
========
</TABLE>
(4) BASIS OF PRESENTATION
The consolidated financial statements have been prepared in accordance
with GAAP. Annual Statements for NLIC and NLAIC, WCLIC, ELICW and NCC,
filed with the Department of Insurance of the State of Ohio (the
Department), California Department of Insurance, Wisconsin Insurance
Department and Michigan Bureau of Insurance, respectively, are prepared
on the basis of accounting practices prescribed or permitted by such
regulatory authorities. Prescribed statutory accounting practices
include a variety of publications of the National Association of
Insurance Commissioners (NAIC), as well as state laws, regulations and
general administrative rules. Permitted statutory accounting practices
encompass all accounting practices not so prescribed. The Company has
no material permitted statutory accounting practices.
The statutory capital shares and surplus of NLIC as reported to
regulatory authorities as of December 31, 1995, 1994 and 1993 was
$1,363,031, $1,262,861 and $992,631, respectively. The statutory net
income of NLIC as reported to regulatory authorities for the years
ended December 31, 1995, 1994 and 1993 was $86,529, $76,532 and
$185,943, respectively.
<PAGE> 11
LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
(5) INVESTMENTS
An analysis of investment income by investment type follows for the
years ended December 31:
<TABLE>
<CAPTION>
1995 1994 1993
------------- ------------ ------------
<S> <C> <C> <C>
Gross investment income:
Securities available-for-sale:
Fixed maturities $ 772,589 674,346 --
Equity securities 1,436 550 7,230
Fixed maturities held-to-maturity 232,692 193,009 800,255
Mortgage loans on real estate 410,965 376,783 364,810
Real estate 39,222 40,280 39,684
Short-term investments 12,249 6,990 5,080
Other 61,701 42,831 33,832
---------- ---------- ----------
Total investment income 1,530,854 1,334,789 1,250,891
Less investment expenses 47,874 45,288 46,465
---------- ---------- ----------
Net investment income $1,482,980 1,289,501 1,204,426
========== ========== ==========
</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>
1995 1994 1993
--------------- ------------- --------------
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturities $ 6,792 (7,120) --
Equity securities 3,435 1,427 129,728
Fixed maturities -- -- 20,225
Mortgage loans on real estate (7,312) (20,462) (28,241)
Real estate and other (2,079) 9,771 (8,039)
-------- -------- --------
$ 836 (16,384) 113,673
======== ======== ========
</TABLE>
The components of unrealized gains (losses) on securities
available-for-sale, net, were as follows as of December 31:
<TABLE>
<CAPTION>
1995 1994
--------------- -------------
<S> <C> <C>
Gross unrealized gains (losses) $ 735,103 (266,618)
Adjustment to deferred policy acquisition costs (143,851) 82,525
Deferred Federal income tax (206,944) 64,425
--------- ---------
$ 384,308 (119,668)
========= =========
</TABLE>
An analysis of the change in gross unrealized gains (losses) on
securities available-for-sale and fixed maturities held-to-maturity
follows for the years ended December 31:
<TABLE>
<CAPTION>
1995 1994 1993
--------------- ------------- -------------
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturities $ 1,001,706 (703,851) --
Equity securities 15 (1,990) (128,837)
Fixed maturities held-to-maturity 86,477 (421,427) 223,392
----------- ----------- -----------
$ 1,088,198 (1,127,268) 94,555
=========== =========== ===========
</TABLE>
<PAGE> 12
LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
The amortized cost and estimated fair value of securities available-for-sale
were as follows as of December 31, 1995:
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Estimated
cost gains losses fair value
-------------- ------------ ------------- ---------------
<S> <C> <C> <C> <C>
Fixed maturities:
U.S. Treasury securities and obligations of U.S.
government corporations and agencies $ 438,109 36,714 (53) 474,770
Obligations of states and political subdivisions 9,742 1,252 (1) 10,993
Debt securities issued by foreign governments 162,442 9,641 (66) 172,017
Corporate securities 8,902,494 524,796 (30,561) 9,396,729
Mortgage-backed securities 3,925,843 196,645 (9,620) 4,112,868
--------- ----------- ----------- -----------
Total fixed maturities 13,438,630 769,048 (40,301) 14,167,377
Equity securities 27,362 6,441 (85) 33,718
---------- ----------- ----------- -----------
$13,465,992 775,489 (40,386) 14,201,095
=========== =========== ============ ===========
</TABLE>
The amortized cost and estimated fair value of securities available-for-sale
and fixed maturities held-to-maturity were as follows as of December 31, 1994:
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Estimated
cost gains losses fair value
------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C>
SECURITIES AVAILABLE-FOR-SALE
Fixed maturities:
U.S. Treasury securities and obligations of U.S.
government corporations and agencies $ 393,156 1,794 (18,941) 376,009
Obligations of states and political subdivisions 2,202 55 (21) 2,236
Debt securities issued by foreign governments 177,910 872 (9,205) 169,577
Corporate securities 4,201,738 50,405 (128,698) 4,123,445
Mortgage-backed securities 3,543,859 18,125 (187,345) 3,374,639
---------- ---------- ---------- ---------
Total fixed maturities 8,318,865 71,251 (344,210) 8,045,906
Equity securities 18,372 6,637 (296) 24,713
---------- ---------- ---------- ---------
$8,337,237 77,888 (344,506) 8,070,619
========== ========= ========== =========
FIXED MATURITY SECURITIES HELD-TO-MATURITY
Obligations of states and political subdivisions $ 11,613 92 (255) 11,450
Debt securities issued by foreign governments 16,131 111 (39) 16,203
Corporate securities 3,661,043 34,180 (120,566) 3,574,657
---------- ---------- ---------- ---------
$3,688,787 34,383 (120,860) 3,602,310
========== ========== ========== =========
</TABLE>
<PAGE> 13
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
The amortized cost and estimated fair value of fixed maturity securities
available-for-sale as of December 31, 1995, by contractual maturity, are shown
below. Expected maturities will differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or without call
or prepayment penalties.
<TABLE>
<CAPTION>
Amortized Estimated
cost fair value
----------- ------------
<S> <C> <C>
FIXED MATURITY SECURITIES AVAILABLE-FOR-SALE
- --------------------------------------------
Due in one year or less $ 641,490 647,639
Due after one year through five years 5,365,703 5,623,126
Due after five years through ten years 2,477,457 2,609,262
Due after ten years 1,028,137 1,174,482
----------- -----------
9,512,787 10,054,509
Mortgage-backed securities 3,925,843 4,112,868
----------- -----------
$13,438,630 14,167,377
=========== ===========
</TABLE>
Proceeds from the sale of securities available-for-sale during 1995 and 1994
were $131,420 and $247,876, respectively, while proceeds from sales of
investments in fixed maturity securities during 1993 were $33,959. Gross gains
of $7,197 ($3,406 in 1994 and $2,413 in 1993) and gross losses of $2,309
($21,866 in 1994 and $39 in 1993) were realized on those sales.
During 1995, the Company transferred fixed maturity securities classified as
held-to-maturity with amortized cost of $27,929 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 $4,285.
As permitted by the FASB's Special Report, A GUIDE TO IMPLEMENTATION OF
STATEMENT 115 ON ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND EQUITY
SECURITIES, issued in November, 1995, the Company transferred all of its fixed
maturity securities previously classified as held-to-maturity to
available-for-sale. As of December 14, 1995, the date of transfer, the fixed
maturity securities had amortized cost of $3,705,644, resulting in a gross
unrealized gain of $171,531.
Investments that were non-income producing for the twelve month period
preceding December 31, 1995 amounted to $28,958 ($11,513 for 1994) and
consisted of $8,228 (none in 1994) in fixed maturity securities, $14,740
($11,111 in 1994) in real estate and $5,990 ($402 in 1994) in other long-term
investments.
Real estate is presented at cost less accumulated depreciation of $30,931 in
1995 ($29,275 in 1994) and valuation allowances of $26,250 in 1995 ($27,330 in
1994).
Other long-term investments are presented net of valuation allowances of $457
as of December 31, 1995. There were no such valuation allowances as of December
31, 1994.
As of December 31, 1995, the recorded investment of mortgage loans on real
estate considered to be impaired (under STATEMENT OF FINANCIAL ACCOUNTING
STANDARDS NO. 114, ACCOUNTING BY CREDITORS FOR IMPAIRMENT OF A LOAN as amended
by STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 118, ACCOUNTING BY CREDITORS
FOR IMPAIRMENT OF A LOAN - INCOME RECOGNITION AND DISCLOSURE) was $44,995,
which includes $23,975 of impaired mortgage loans on real estate for which the
related valuation allowance was $5,276 and $21,020 of impaired mortgage loans
on real estate for which there was no valuation allowance. During 1995, the
average recorded investment in impaired mortgage loans on real estate was
approximately $22,621 and interest income recognized on those loans was $416,
which is equal to interest income recognized using a cash-basis method of
income recognition.
<PAGE> 14
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
Activity in the valuation allowance account for mortgage loans on real
estate is summarized for the year ended December 31, 1995:
<TABLE>
<CAPTION>
1995
--------
<S> <C>
Allowance, beginning year $ 47,892
Additions charged to operations 7,653
Direct write-downs charged against the allowance (4,850)
--------
Allowance, end of year $ 50,695
========
</TABLE>
Foresclosures of mortgage loans on real estate were $37,187 in 1994 and
mortgage loans on real estate in process of foreclosure or in-substance
foreclosed as of December 31, 1994 totaled $19,878, which approximated fair
value.
Fixed maturity securities with an amortized cost of $13,982 and $11,137 as
of December 31, 1995 and 1994, respectively, were on deposit with various
regulatory agencies as required by law.
(6) FUTURE POLICY BENEFITS AND CLAIMS
The liability for future policy benefits for investment contracts represents
approximately 82% and 81% of the total liability for future policy benefits
as of December 31, 1995 and 1994, respectively. The average interest rate
credited on investment product policies was approximately 6.5%, 6.5% and
7.0% for the years ended December 31, 1995, 1994 and 1993, respectively.
The liability for future policy benefits for traditional life insurance and
individual health insurance policies has been established based upon the
following assumptions:
INTEREST RATES: Interest rates vary as follows:
<TABLE>
<CAPTION>
Health
Year of issue Life Insurance insurance
-------------- ------------------------------------------------------------ ---------------
<S> <C> <C>
1995 7.6%, not graded - permanent contracts with loan provisions 4.5%
7.7%, not graded - all other contracts
1984-1994 6.0% to 10.5%, not graded 5.0% to 6.0%
1966-1983 6.0% to 8.1%, graded over 20 years to 4.0% to 6.6% 3.5% to 6.0%
1965 and prior generally lower than post 1965 issues 3.5% to 4.0%
</TABLE>
WITHDRAWALS: Rates, which vary by issue age, type of coverage and
policy duration, are based on Company experience.
MORTALITY: Mortality and morbidity rates are based on published tables,
modified for the Company's actual experience.
<PAGE> 15
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
Activity in the liability for unpaid claims and claim adjustment expenses is
summarized for the years ended December 31:
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ---------
<S> <C> <C> <C>
Balance, beginning of year $ 637,998 592,180 760,209
Less reinsurance recoverables 438,761 430,720 547,683
--------- --------- ---------
Net balance, beginning of year 199,237 161,460 212,526
--------- --------- ---------
Incurred related to:
Current year 425,907 273,299 309,721
Prior years (17,203) (26,156) (26,248)
--------- --------- ---------
Total incurred 408,704 247,143 283,473
--------- --------- ---------
Paid related to:
Current year 290,605 175,700 208,978
Prior years 111,353 73,889 125,561
--------- --------- ---------
Total paid 401,958 249,589 334,539
--------- --------- ---------
Unpaid claims of acquired companies 2,542 40,223 --
--------- --------- ---------
Net balance, end of year 208,525 199,237 161,460
Plus reinsurance recoverables 491,321 438,761 430,720
--------- --------- ---------
Balance, end of year $ 699,846 637,998 592,180
========= ========= =========
</TABLE>
Reinsurance recoverables include amounts from affiliates, as discussed in
note 13, of $477,912, $430,936, $430,278 and $534,983 as of December 31,
1995, 1994, 1993 and 1992, respectively.
The provision for claims and claim adjustment expenses for prior years
decreased in each of the three years ended December 31, 1995 due to
lower-than-anticipated costs to settle accident and health insurance claims.
(7) FEDERAL INCOME TAX
The tax effects of temporary differences that give rise to significant
components of the net deferred tax asset (liability) as of December 31,
1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Deferred tax assets:
Future policy benefits $ 179,916 124,044
Fixed maturity securities available-for-sale -- 95,536
Liabilities in Separate Accounts 129,120 94,783
Mortgage loans on real estate and real estate 26,062 25,632
Other policyholder funds 7,752 7,137
Other assets and other liabilities 47,215 57,528
--------- ---------
Total gross deferred tax assets 390,065 404,660
--------- ---------
Deferred tax liabilities:
Deferred policy acquisition costs 312,616 317,224
Fixed maturity securities available-for-sale 266,184 --
Equity securities available-for-sale and other
long-term investments 3,431 3,620
Other 46,711 47,301
--------- ---------
Total gross deferred tax liabilities 628,942 368,145
--------- ---------
$(238,877) 36,515
========= =========
</TABLE>
<PAGE> 16
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
The Company has determined that valuation allowances are not necessary as
of December 31, 1995, 1994 and 1993 based on its analysis of future
deductible amounts. 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. All future
deductible amounts can be offset by future taxable amounts or recovery of
Federal income tax paid within the statutory carryback period. In
addition, for future deductible amounts for securities available-for-sale,
affiliates of the Company which are included in the same consolidated
Federal income tax return hold investments that could be sold for capital
gains that could offset capital losses realized by the Company should
securities available-for-sale be sold at a loss.
<TABLE>
Total Federal income tax expense for the years ended December 31, 1995,
1994 and 1993 differs from the amount computed by applying the U.S.
Federal income tax rate to income before tax as follows:
<CAPTION>
1995 1994 1993
---------------------- ---------------------- ----------------------
Amount % Amount % Amount %
--------------- ----- -------------- ------ ------------- -------
<S> <C> <C> <C> <C> <C> <C>
Computed (expected) tax expense $ 111,906 35.0 $ 95,631 35.0 $ 109,515 35.0
Tax exempt interest and dividends
received deduction (137) (0.1) (194) (0.1) (2,322) (0.7)
Current year increase in U.S. Federal
income tax rate -- -- -- -- 1,704 0.5
Other, net (4,515) (1.4) (5,933) (2.1) (2,139) (0.7)
--------- ---- --------- ---- --------- ----
Total (effective rate of each year) $ 107,254 33.5 $ 89,504 32.8 $ 106,758 34.1
========= ==== ========= ==== ========= ====
</TABLE>
Total Federal income tax paid was $75,309, $87,576 and $58,286 during the
years ended December 31, 1995, 1994 and 1993, respectively.
Prior to 1984, the Life Insurance Company Income Tax Act of 1959 as
amended by the Deficit Reduction Act of 1984 (DRA), permitted the deferral
from taxation of a portion of statutory income under certain
circumstances. In these situations, the deferred income was accumulated in
the Policyholders' Surplus Account (PSA). Management considers the
likelihood of distributions from the PSA to be remote; therefore, no
Federal income tax has been provided for such distributions in the
consolidated financial statements. The DRA eliminated any additional
deferrals to the PSA. Any distributions from the PSA, however, will
continue to be taxable at the then current tax rate. The balance of the
PSA was approximately $35,344 as of December 31, 1995.
(8) DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 107 - DISCLOSURES ABOUT
FAIR VALUE OF FINANCIAL INSTRUMENTS (SFAS 107) requires disclosure of fair
value information about existing on and off-balance sheet financial
instruments. SFAS 107 defines the fair value of a financial instrument as
the amount at which the financial instrument could be exchanged in a
current transaction between willing parties. In cases where quoted market
prices are not available, fair value is based on estimates using present
value or other valuation techniques.
These techniques are significantly affected by the assumptions used,
including the discount rate and estimates of future cash flows. Although
fair value estimates are calculated using assumptions that management
believes are appropriate, changes in assumptions could cause these
estimates to vary materially. In that regard, the derived fair value
estimates cannot be substantiated by comparison to independent markets
and,in many cases, could not be realized in the immediate settlement of
the instruments. SFAS 107 excludes certain assets and liabilities from its
disclosure requirements. Accordingly, the aggregate fair value amounts
presented do not represent the underlying value of the Company.
<PAGE> 17
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
Although insurance contracts, other than policies such as annuities
that are classified as investment contracts, are specifically exempted
from SFAS 107 disclosures, estimated fair value of policy reserves on
life insurance contracts are provided to make the fair value disclosures
more meaningful.
The tax ramifications of the related unrealized gains and losses can
have a significant effect on fair value estimates and have not been
considered in the estimates.
The following methods and assumptions were used by the Company in
estimating its fair value disclosures:
CASH, SHORT-TERM INVESTMENTS AND POLICY LOANS: The carrying
amount reported in the consolidated balance sheets for these
instruments approximates their fair value.
FIXED MATURITY AND EQUITY SECURITIES: Fair value for fixed
maturity securities is based on quoted market prices, where available.
For fixed maturity securities not actively traded, fair value is
estimated using values obtained from independent pricing services or,
in the case of private placements, is estimated by discounting
expected future cash flows using a current market rate applicable to
the yield, credit quality and maturity of the investments. The fair
value for equity securities is based on quoted market prices.
SEPARATE ACCOUNT ASSETS AND LIABILITIES: The fair value of
assets held in Separate Accounts is based on quoted market prices. The
fair value of liabilities related to Separate Accounts is the
amount payable on demand.
MORTGAGE LOANS ON REAL ESTATE: The fair value for mortgage
loans on real estate is estimated using discounted cash flow analyses,
using interest rates currently being offered for similar loans to
borrowers with similar credit ratings. Loans with similar
characteristics are aggregated for purposes of the calculations. Fair
value for mortgages in default is the estimated fair value of the
underlying collateral.
INVESTMENT CONTRACTS: Fair value for the Company's liabilities under
investment type contracts is disclosed using two methods. For
investment contracts without defined maturities, fair value is the
amount payable on demand. For investment contracts with known or
determined maturities, fair value is estimated using discounted cash
flow analysis. Interest rates used are similar to currently offered
contracts with maturities consistent with those remaining for the
contracts being valued.
POLICY RESERVES ON LIFE INSURANCE CONTRACTS: Included are disclosures
for individual life, universal life and supplementary contracts with
life contingencies for which the estimated fair value is the amount
payable on demand. Also included are disclosures for the Company's
limited payment policies, which the Company has used discounted cash
flow analyses similar to those used for investment contracts with
known maturities to estimate fair value.
POLICYHOLDERS' DIVIDEND ACCUMULATIONS AND OTHER POLICYHOLDER FUNDS:
The carrying amount reported in the consolidated balance sheets for
these instruments approximates their fair value.
<PAGE> 18
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
Carrying amount and estimated fair value of financial instruments
subject to SFAS 107 and policy reserves on life insurance contracts were
as follow as of December 31, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
-------------------------- -------------------------
Carrying Estimated Carrying Estimated
amount fair value amount fair value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
ASSETS
- ------
Investments:
Securities available-for-sale:
Fixed maturities $14,167,377 14,167,377 8,045,906 8,045,906
Equity securities 33,718 33,718 24,713 24,713
Fixed maturities held-to-maturity -- -- 3,688,787 3,602,310
Mortgage loans on real estate 4,786,599 5,169,805 4,222,284 4,173,284
Policy loans 370,908 370,908 340,491 340,491
Short-term investments 45,732 45,732 131,643 131,643
Cash 10,485 10,485 7,436 7,436
Assets held in Separate Accounts 18,763,678 18,763,678 12,222,461 12,222,461
LIABILITIES
- -----------
Investment contracts 13,561,943 13,221,724 12,189,894 11,657,556
Policy reserves on life insurance contacts 3,695,814 3,659,074 3,170,085 2,934,384
Policyholders' dividend accumulations 353,554 353,554 338,058 338,058
Other policyholder funds 71,155 71,155 72,770 72,770
Liabilities related to Separate Accounts 18,763,678 18,224,933 12,222,461 11,807,331
</TABLE>
(9) ADDITIONAL FINANCIAL INSTRUMENTS DISCLOSURES
--------------------------------------------
FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK: The Company is a party to
financial instruments with off-balance-sheet risk in the normal course of
business through management of its investment portfolio. These financial
instruments include commitments to extend credit in the form of loans. These
instruments involve, to varying degrees, elements of credit risk in excess
of amounts recognized on the consolidated balance sheets.
Commitments to fund fixed rate mortgage loans on real estate are agreements
to lend to a borrower, and are subject to conditions established in the
contract. Commitments generally have fixed expiration dates or other
termination clauses and may require payment of a deposit. Commitments
extended by the Company are based on management's case-by-case credit
evaluation of the borrower and the borrower's loan collateral. The
underlying mortgage property represents the collateral if the commitment is
funded. The Company's policy for new mortgage loans on real estate is to
lend no more than 80% of collateral value. Should the commitment be funded,
the Company's exposure to credit loss in the event of nonperformance by the
borrower is represented by the contractual amounts of these commitments less
the net realizable value of the collateral. The contractual amounts also
represent the cash requirements for all unfunded commitments. Commitments on
mortgage loans on real estate of $361,974 extending into 1996 were
outstanding as of December 31, 1995.
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% (22%
in 1994) in any geographic area and no more than 2% (2% in 1994) with any
one borrower.
<PAGE> 19
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
The summary below depicts loans by remaining principal balance as of
December 31, 1995 and 1994:
<TABLE>
<CAPTION>
Apartment
Office Warehouse Retail & other Total
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
1995:
East North Central $ 140,732 110,361 534,814 184,201 970,108
East South Central 23,978 15,653 183,790 84,588 308,009
Mountain -- 18,940 144,156 48,727 211,823
Middle Atlantic 124,079 72,201 183,562 18,383 398,225
New England 9,594 39,526 153,644 1 202,765
Pacific 190,628 239,687 395,914 107,650 933,879
South Atlantic 101,904 74,731 458,355 279,692 914,682
West North Central 134,866 14,205 81,521 37,586 268,178
West South Central 69,143 99,618 194,717 272,323 635,801
--------- --------- --------- --------- ---------
$ 794,924 684,922 2,330,473 1,033,151 4,843,470
========= ========= ========= =========
Less valuation allowances and unamortized discount 56,871
---------
Total mortgage loans on real estate, net $4,786,599
=========
</TABLE>
<TABLE>
<CAPTION>
Apartment
Office Warehouse Retail & other Total
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
1994:
East North Central $ 109,233 103,499 540,686 191,489 944,907
East South Central 24,298 10,803 127,845 76,897 239,843
Mountain 3,150 13,770 140,358 39,682 196,960
Middle Atlantic 61,299 53,285 140,847 30,111 285,542
New England 10,536 43,282 139,131 4 192,953
Pacific 195,393 210,930 397,911 68,768 873,002
South Atlantic 87,150 81,576 424,150 210,354 803,230
West North Central 127,760 11,766 80,854 4,738 225,118
West South Central 51,013 84,796 184,923 194,788 515,520
--------- --------- --------- --------- ---------
$ 669,832 613,707 2,176,705 816,831 4,277,075
========= ========= ========= =========
Less valuation allowances and unamortized discount 54,791
---------
Total mortgage loans on real estate, net $4,222,284
=========
</TABLE>
(10) PENSION PLAN
------------
The Company is a participant, together with other affiliated companies,
in a pension plan covering all employees who have completed at least one
thousand hours of service within a twelve-month period and who have met
certain age requirements. Benefits are based upon the highest average
annual salary of a specified number of consecutive years of the last ten
years of service. The Company funds pension costs accrued for direct
employees plus an allocation of pension costs accrued for employees of
affiliates whose work efforts benefit the Company.
Effective January 1, 1995, the plan was amended to provide enhanced
benefits for participants who met certain eligibility requirements and
elected early retirement no later than March 15, 1995. The entire cost of
the enhanced benefit was borne by NMIC and certain of its property and
casualty insurance company affiliates.
<PAGE> 20
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
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. 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, 1995, 1994 and 1993 were $14,105, $10,451 and $6,702,
respectively.
The Company's net accrued pension expense as of December 31, 1995 and
1994 was $1,376 and $1,836, respectively.
The net periodic pension cost for the Nationwide Insurance Companies and
Affiliates Retirement Plan as a whole for the years ended December 31,
1995, 1994 and 1993 follows:
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Service cost (benefits earned during the period) $ 64,524 64,740 47,694
Interest cost on projected benefit obligation 95,283 73,951 70,543
Actual return on plan assets (249,294) (21,495) (105,002)
Net amortization and deferral 143,353 (62,150) 20,832
--------- --------- ---------
$ 53,866 55,046 34,067
========= ========= =========
</TABLE>
Basis for measurements, net periodic pension cost:
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Weighted average discount rate 7.50% 5.75% 6.75%
Rate of increase in future compensation levels 6.25% 4.50% 4.75%
Expected long-term rate of return on plan assets 8.75% 7.00% 7.50%
</TABLE>
Information regarding the funded status of the Nationwide Insurance
Enterprise Retirement Plan as a whole as of December 31, 1995
(post-merger) and the Nationwide Insurance Companies and Affiliates
Retirement Plan as of December 31, 1995 (pre-merger) and 1994 follows:
<TABLE>
<CAPTION>
Post-merger Pre-merger
1995 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Accumulated benefit obligation:
Vested $ 1,236,730 1,002,079 914,850
Nonvested 26,503 8,998 7,570
----------- ----------- -----------
$ 1,263,233 1,011,077 922,420
=========== =========== ===========
Net accrued pension expense:
Projected benefit obligation for services rendered
to date $ 1,780,616 1,447,522 1,305,547
Plan assets at fair value 1,738,004 1,508,781 1,241,771
----------- ----------- -----------
Plan assets (less than) in excess of projected
benefit obligation (42,612) 61,259 (63,776)
Unrecognized prior service cost 42,845 42,850 46,201
Unrecognized net (gains) losses (63,130) (86,195) 39,408
Unrecognized net obligation (asset) at transition 41,305 (19,841) (21,994)
----------- ----------- -----------
$ (21,592) (1,927) (161)
=========== =========== ===========
</TABLE>
<PAGE> 21
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
Basis for measurements, funded status of plan:
<TABLE>
<CAPTION>
Post-merger Pre-merger
1995 1995 1994
--------------- --------------- ---------------
<S> <C> <C> <C>
Weighed average discount rate 6.00% 6.00% 7.50%
Rate of increase in future compensation levels 4.25% 4.25% 6.25%
</TABLE>
Assets of the Nationwide Insurance Enterprise Retirement Plan are invested
in group annuity contracts of NLIC and ELICW. Prior to the merger, the
assets of the Nationwide Insurance Companies and Affiliates Retirement
Plan were invested in a group annuity contract of NLIC.
(11) POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
-------------------------------------------
In addition to the defined benefit pension plan, the Company, together
with other affiliated companies, participates in life and health care
defined benefit plans for qualifying retirees. Postretirement life and
health care benefits are contributory and generally available to full
time employees who have attained age 55 and have accumulated 15 years of
service with the Company after reaching age 40. Postretirement health
care benefit contributions are adjusted annually and contain cost-sharing
features such as deductibles and coinsurance. In addition, there are caps
on the Company's portion of the per-participant cost of the postretirement
health care benefits. These caps can increase annually, but not more than
three percent. The Company's policy is to fund the cost of health care
benefits in amounts determined at the discretion of management. Plan
assets are invested primarily in group annuity contracts of NLIC.
Effective January 1, 1993, the Company adopted the provisions of STATEMENT
OF FINANCIAL ACCOUNTING STANDARDS NO. 106 - EMPLOYERS' ACCOUNTING FOR
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS (SFAS 106), which requires the
accrual method of accounting for postretirement life and health care
insurance benefits based on actuarially determined costs to be recognized
over the period from the date of hire to the full eligibility date of
employees who are expected to qualify for such benefits.
The Company elected to immediately recognize its estimated accumulated
postretirement benefit obligation as of January 1, 1993. Accordingly, a
noncash charge of $32,275 ($20,979 net of related income tax benefit) was
recorded in the 1993 consolidated statement of income as a cumulative
effect of a change in accounting principle. See note 3. The adoption of
SFAS 106, including the cumulative effect of the change in accounting
principle, increased the expense for postretirement benefits by $35,277
to $36,544 in 1993. 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, 1995 and 1994 was $51,490 and $36,001, respectively, and the
net periodic postretirement benefit cost (NPPBC) for 1995 and 1994 was
$8,269 and $4,627, respectively.
The amount of NPPBC for the plan as a whole for the years ended
December 31, 1995, 1994 and 1993 was as follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Service cost - benefits attributed to employee service during the year $ 6,235 8,586 7,090
Interest cost on accumulated postretirement benefit obligation 14,151 14,011 13,928
Actual return on plan assets (2,657) (1,622) --
Amortization of unrecognized transition obligation of affiliates 2,966 568 568
Net amortization and deferral (1,619) 1,622 --
-------- -------- --------
$ 19,076 23,165 21,586
======== ======== ========
</TABLE>
<PAGE> 22
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
Information regarding the funded status of the plan as a whole as of
December 31, 1995 and 1994 follows:
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Accrued postretirement benefit expense:
Retirees $ 88,680 76,677
Fully eligible, active plan participants 28,793 22,013
Other active plan participants 90,375 59,089
--------- ---------
Accumulated postretirement benefit obligation (APBO) 207,848 157,779
Plan assets at fair value 54,325 49,012
--------- ---------
Plan assets less than accumulated postretirement benefit obligation (153,523) (108,767)
Unrecognized transition obligation of affiliates 1,827 6,577
Unrecognized net gains (1,038) (41,497)
--------- ---------
$(152,734) (143,687)
========= =========
</TABLE>
Actuarial assumptions used for the measurement of the APBO as of
December 31, 1995 and 1994 and the NPPBC for 1995, 1994 and 1993 were
as follows:
<TABLE>
<CAPTION>
1995 1995 1994 1994 1993
APBO NPPBC APBO NPPBC NPPBC
----------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Discount rate 6.75% 8% 8% 7% 8%
Assumed health care cost trend rate:
Initial rate 11% 10% 11% 12% 14%
Ultimate rate 6% 6% 6% 6% 6%
Uniform declining period 12 Years 12 Years 12 Years 12 Years 12 Years
</TABLE>
The health care cost trend rate assumption has an effect on the amounts
reported. For the plan as a whole, a one percentage point increase in
the assumed health care cost trend rate would increase the APBO as of
December 31, 1995 by $641 and the NPPBC for the year ended December 31,
1995 by $107.
(12) REGULATORY RISK-BASED CAPITAL, RETAINED EARNINGS AND DIVIDEND
RESTRICTIONS
-------------------------------------------------------------
Each insurance company's state of domicile imposes minimum risk-based
capital requirements that were developed by the NAIC. The formulas for
determining the amount of risk-based capital specify various weighting
factors that are applied to financial balances or various levels of
activity based on the perceived degree of risk. Regulatory compliance
is determined by a ratio of the company's regulatory total adjusted
capital, as defined by the NAIC, to its authorized control level
risk-based capital, as defined by the NAIC. Companies below specific
trigger points or ratios are classified within certain levels, each of
which requires specified corrective action. NLIC and each of its
insurance subsidiaries exceed the minimum risk-based capital
requirements.
In accordance with the requirements of the New York statutes, the
Company has agreed with the Superintendent of Insurance of that state
that so long as participating policies and contracts are held by
residents of New York, no profits on participating policies and
contracts in excess of the larger of (a) ten percent of such profits or
(b) fifty cents per year per thousand dollars of participating life
insurance in force, exclusive of group term, as of the year-end shall
inure to the benefit of the shareholder. Such New York statutes
further provide that so long as such agreement is in effect, such
excess of profits shall be exhibited as "participating policyholders'
surplus" in annual statements filed with the Superintendent and shall
be used only for the payment or apportionment of dividends to
participating policyholders at least to the extent required by statute
or for the purpose of making up any loss on participating policies.
<PAGE> 23
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
In the opinion of counsel for the Company, the ultimate ownership of the
entire surplus, however classified, of the Company resides with the
shareholder, subject to the usual requirements under state laws and
regulations that certain deposits, reserves and minimum surplus be
maintained for the protection of the policyholders until all policy
contracts are discharged.
Based on the opinion of counsel with respect to the ownership of its
surplus, the Company is of the opinion that the earnings attributable to
participating policies in excess of the amounts paid as dividends to
policyholders belong to the shareholder rather than the policyholders,
and such earnings are so treated by the Company.
The amount of shareholder's equity other than capital shares was
$2,664,697, $1,904,664 and $1,647,353 as of December 31, 1995, 1994 and
1993, respectively. The amount thereof not presently available for
dividends to the shareholder due to the New York restrictions was
$1,503,241, $929,934 and $954,037 as of December 31, 1995, 1994 and 1993,
respectively.
Ohio law limits the payment of dividends to shareholders. The maximum
dividend that may be paid by the Company without prior approval of the
Director of the Department is limited to the greater of statutory gain
from operations of the preceding calendar year or 10% of statutory
shareholder's surplus as of the prior December 31. Therefore, $2,468,687
of shareholder's equity, as presented in the accompanying consolidated
financial statements, is so restricted as to dividend payments in 1996.
Each of NLIC's insurance company subsidiaries are limited in their
payment of dividends by the state insurance department of their
respective state of domicile. As of December 31, 1995, the maximum amount
of shareholder's equity available for dividend payment to NLIC in 1996 by
its insurance company subsidiaries without prior approval are:
<TABLE>
<S> <C>
Nationwide Life and Annuity Insurance Company $10,143
West Coast Life Insurance Company 13,153
Employers Life Insurance Company of Wausau 10,132
National Casualty Company --
-------
$33,428
=======
</TABLE>
(13) TRANSACTIONS WITH AFFILIATES
----------------------------
On March 1, 1995, Corp. contributed all of the outstanding shares of
Farmland Life Insurance Company (Farmland) to NLIC, which then merged
Farmland into WCLIC effective June 30, 1995. The contribution resulted in
a direct increase to consolidated shareholder's equity of $46,918. The
contribution of Farmland has been accounted for in a manner similar to a
pooling of interests and accordingly, Farmland's results are included in
the consolidated statements of income beginning January 1, 1995. However,
prior period consolidated financial statements have not been restated due
to the impact of Farmland being immaterial.
Effective December 31, 1994, NLIC purchased all of the outstanding shares
of ELICW from Wausau Service Corporation (WSC) for $155,000. NLIC
transferred fixed maturity securities and cash with a fair value of
$155,000 to WSC on December 28, 1994, which resulted in a realized loss
of $19,239 on the disposition of the securities. The purchase price
approximated both the historical cost basis and fair value of net assets
of ELICW. ELICW has and will continue to share home office, other
facilities, equipment and common management and administrative services
with WSC.
Certain annuity products are sold through three affiliated companies
which are also subsidiaries of Corp. Total commissions and fees paid to
these affiliates for the three years ended December 31, 1995 were
$57,969, $50,470 and $44,577, respectively.
<PAGE> 24
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
The Company shares home office, other facilities, equipment and common
management and administrative services with affiliates.
The Company participates in intercompany repurchase agreements with
affiliates whereby the seller will transfer securities to the buyer at a
stated value. Upon demand or a stated period, the securities will be
repurchased by the seller at the original sales price plus a price
differential. Transactions under the agreements during 1995 and
1994 were not material.
During 1993, the Company sold equity securities with a market value
$194,515 to NMIC, resulting in a realized gain of $122,823. With the
proceeds, the Company purchased securities with a market value of
$194,139 and cash of $376 from NMIC.
Intercompany reinsurance contracts exist between NLIC and NMIC, NLIC and
WCLIC, NLIC and NCC, WCLIC and NMIC and WCLIC and ELICW as of December
31, 1995. These contracts are immaterial to the consolidated financial
statements.
NCC participates in several 100% quota share reinsurance agreements with
NMIC and Nationwide Mutual Fire Insurance Company, the minority
shareholder of Corp. As a result of these agreements, the following
assets and (liabilities) are included in the consolidated financial
statements as of December 31, 1995 and 1994 for reinsurance ceded:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Reinsurance recoverable $ 590,379 541,289
Unearned premium reserves (112,467) (110,353)
Liability for unpaid claims and claim adjustment expense (477,912) (430,936)
</TABLE>
The ceding of reinsurance does not discharge the original insurer from
primary liability to its policyholder. The insurer which assumes the
coverage assumes the related liability and it is the practice of insurers
to treat insured risks, to the extent of reinsurance ceded, as though
they were risks for which the original insurer is not liable. Management
believes the financial strength of NMIC reduces to an acceptable level
any risk to NCC under these intercompany reinsurance agreements.
ELICW assumes certain accident and health insurance business from
Employers Insurance of Wausau A Mutual Company, an affiliate. During
1995, total premiums assumed by ELICW under the reinsurance
agreement were $150,622.
The Company and various affiliates entered into agreements with
Nationwide Cash Management Company (NCMC) and California Cash Management
Company (CCMC), both affiliates, under which NCMC and CCMC act as common
agents in handling the purchase and sale of short-term securities for the
respective accounts of the participants. Amounts on deposit with NCMC and
CCMC were $21,644 and $92,531 as of December 31, 1995 and 1994,
respectively, and are included in short-term investments on the
accompanying consolidated balance sheets.
(14) BANK LINES OF CREDIT
--------------------
As of December 31, 1995 and 1994, NLIC had $120,000 of confirmed but
unused bank lines of credit which support a $100,000 commercial paper
borrowing authorization.
(15) CONTINGENCIES
-------------
The Company is a defendant in various lawsuits. In the opinion of
management, the effects, if any, of such lawsuits are not expected to be
material to the Company's financial position or results of operations.
<PAGE> 25
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
(16) SEGMENT INFORMATION
-------------------
The Company operates in the long-term savings, life insurance and
accident and health insurance lines of business in the life insurance and
property and casualty insurance industries. Long-term savings operations
include both qualified and non-qualified annuity contracts issued to both
individuals and groups. Life insurance operations include whole life,
universal life, variable universal life and endowment and term life
insurance issued to individuals and groups. Accident and health insurance
operations also provide coverage to individuals and groups. Corporate
primarily includes investments, and the related investment income, which
are not specifically allocated to one of the three operating segments. In
addition, realized gains and losses on all general account investments
are reported as a component of the corporate segment.
During 1995, the Company changed its reporting segments to better reflect
the way the businesses are managed. Prior periods have been restated to
reflect these changes.
The following table summarizes the revenues and income (loss) before
Federal income tax expense and cumulative effect of changes in accounting
principles for the years ended December 31, 1995, 1994 and 1993 and
assets as of December 31, 1995, 1994 and 1993, by business segment.
<TABLE>
<CAPTION>
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Revenues:
Long-term savings $ 1,406,241 1,125,013 1,048,045
Life insurance 502,885 452,795 432,343
Accident and health insurance 532,383 345,545 339,764
Corporate 134,598 122,847 214,374
------------ ------------ ------------
$ 2,576,107 2,046,200 2,034,526
============ ============ ============
Income (loss) before Federal income tax expense and
cumulative effect of changes in accounting principles:
Long-term savings 129,475 95,530 47,966
Life insurance 63,169 46,119 36,383
Accident and health insurance (12,521) 13,221 15,041
Corporate 139,609 118,360 213,511
------------ ------------ ------------
$ 319,732 273,230 312,901
============ ============ ============
Assets:
Long-term savings 34,634,892 25,815,273 20,695,598
Life insurance 3,675,581 3,231,651 2,897,574
Accident and health insurance 307,643 291,296 297,200
Corporate 1,995,995 1,773,913 1,515,989
------------ ------------ ------------
$ 40,614,111 31,112,133 25,406,361
============ ============ ============
</TABLE>
<PAGE> 43
PART II - OTHER INFORMATION
CONTENTS OF REGISTRATION STATEMENT
This Post-Effective Amendment No. 15 to Form S-6 Registration Statement
comprises the following papers and documents:
The facing sheet.
Cross-reference to items required by Form N-8B-2.
The prospectus consisting of 71 pages.
Representations and Undertakings.
Accountants' Consent.
The Signatures.
The following exhibits required by Forms N-8B-2 and S-6:
<TABLE>
<S> <C>
1. Power of Attorney April 4, 1996. An original power of attorney dated April 4,
1996 is included with the Post-Effective
Amendment No. 6 to the Registration Statement
on Form N-4 of NACo Variable Account (File No.
33-33425, 811-5999) on file with the Company.
2. Resolution of the Depositor's Board of Included with the Registration Statement
Directors authorizing the establishment on Form N-8B-2 for the Nationwide VLI
of the Registrant, adopted. Separate Account, and hereby
incorporated herein by reference.
3. Distribution Contracts Included with the Registration Statement
on Form N-8B-2 for the Nationwide VLI
Separate Account, and hereby
incorporated herein by reference.
4. Form of Security Included with Post-Effective Amendment
No. 8 and hereby incorporated herein by
reference.
5. Articles of Incorporation of Depositor Included with the Registration Statement
on Form N-8B-2 for the Nationwide VLI
Separate Account, and hereby
incorporated herein by reference.
6. Application form of Security Included with Post-Effective Amendment
No. 8 and hereby incorporated herein by
reference.
7. Opinion of Counsel Included with Post-Effective Amendment
No. 8 and hereby incorporated herein by
reference.
</TABLE>
<PAGE> 44
Representations and Undertakings
The Registrant and the Company hereby make the following representations and
undertakings:
(a) This filing is made pursuant to Rules 6c-3 and 6e-3(T) under the Investment
Company Act of 1940 (the "Act"). The Registrant and the Company elect to be
governed by Rule 6e-3(T)(b)(13)(i)(B) under the Act with respect to the Policies
described in the prospectus. The Policies have been designed in such a way as to
qualify for the exemptive relief from various provisions of the Act afforded by
Rule 6e-3(T).
(b) Paragraph (b) (13) (iii) (F) of Rule 6e-3(T) is being relied on for the
deduction of the mortality and expense risk charges ("risk charges") assumed by
the Company under the Policies. The Company represents that the risk charges are
within the range of industry practice for comparable policies and reasonable in
relation to all of the risks assumed by the issuer under the Policies. Actuarial
memoranda demonstrating the reasonableness of these charges are maintained by
the Company, and will be made available to the Securities and Exchange
Commission (the "Commission") on request.
(c) The Company has concluded that there is a reasonable likelihood that the
distribution financing arrangement of the separate account will benefit the
separate account and the contractholders and will keep and make available to the
Commission on request a memorandum setting forth the basis for this
representation.
(d) The Company represents that the separate account will invest only in
management investment companies which have undertaken to have a board of
directors, a majority of whom are not interested persons of the Company,
formulate and approve any plan under Rule 12b-1 to finance distribution
expenses.
(e) Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the Registrant hereby undertakes to file with the
Commission such supplementary and periodic information, documents, and reports
as may be prescribed by any rule or regulation of the Commission heretofore or
hereafter duly adopted pursuant to authority conferred in that section.
<PAGE> 45
ACCOUNTANTS' CONSENT
The Board of Directors of Nationwide Life Insurance Company and
Contract Owners of the Nationwide VLI Separate Account:
We consent to the use of our reports included herein and to the reference to our
firm under the heading "Experts" in the prospectus.
KPMG Peat Marwick LLP
Columbus, Ohio
April 26, 1996
<PAGE> 46
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, NATIONWIDE VLI SEPARATE ACCOUNT, certifies that it meets the
requirements of Securities Act Rule 485(b) for effectiveness of this
Post-Effective Amendment No. 15 and has duly caused this Post-Effective
Amendment No. 15 to be signed on its behalf by the undersigned thereunto duly
authorized, and its seal to be hereunto affixed and attested, all in the City of
Columbus, and State of Ohio, on this 26th day of April, 1996.
NATIONWIDE VLI SEPARATE ACCOUNT
(Registrant)
(Seal) NATIONWIDE LIFE INSURANCE COMPANY
Attest: (Sponsor)
W. SIDNEY DRUEN By: JOSEPH P. RATH
- ------------------- --------------------
W. Sidney Druen Joseph P. Rath
Assistant Secretary Vice President and Associate
General Counsel
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment No. 15 has been signed below by the following persons in the
capacities indicated on the 26th day of April, 1996.
<TABLE>
<CAPTION>
SIGNATURE TITLE
<S> <C> <C>
LEWIS J. ALPHIN Director
- ---------------------------------
Lewis J. Alphin
KEITH W. ECKEL Director
- ---------------------------------
Keith W. Eckel
WILLARD J. ENGEL Director
- ---------------------------------
Willard J. Engel
FRED C. FINNEY Director
- ---------------------------------
Fred C. Finney
CHARLES L. FUELLGRAF, JR. Director
- ---------------------------------
Charles L. Fuellgraf, Jr.
JOSEPH J. GASPER President/Chief
- --------------------------------- Operating Office and Director
Joseph J. Gasper
HENRY S. HOLLOWAY Chairman of the Board
- --------------------------------- and Director
Henry S. Holloway
D. RICHARD McFERSON Chairman and Chief Executive Officer -
- --------------------------------- Nationwide Insurance Enterprise and Director
D. Richard McFerson
DAVID O. MILLER Director
- ---------------------------------
David O. Miller
C. RAY NOECKER Director
- ---------------------------------
C. Ray Noecker
ROBERT A. OAKLEY Executive Vice President-
- --------------------------------- Chief Financial Officer
Robert A. Oakley
JAMES F. PATTERSON Director By/s/JOSEPH P. RATH
- --------------------------------- ----------------------
James F. Patterson Joseph P. Rath
Attorney-in-Fact
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
</TABLE>
<PAGE> 1
INDEPENDENT AUDITORS' REPORT
----------------------------
The Board of Directors
Nationwide Life Insurance Company:
We have audited the consolidated financial statements of Nationwide Life
Insurance Company (a wholly owned subsidiary of Nationwide Corporation) and
subsidiaries as listed in the accompanying index. In connection with our audits
of the consolidated financial statements, we also have audited the financial
statement schedules as listed in the accompanying index. These consolidated
financial statements and financial statement schedules are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these consolidated financial statements and financial statement schedules based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
Participating insurance and the related surplus are discussed in note 12. The
Company and its counsel are of the opinion that the ultimate ownership of the
participating surplus in excess of the contemplated equitable policyholder
dividends belongs to the shareholder. The accompanying consolidated financial
statements are presented on such basis.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Nationwide Life
Insurance Company and subsidiaries as of December 31, 1995 and 1994, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1995, in conformity with generally
accepted accounting principles. Also in our opinion, the related financial
statement schedules, when considered in relation to the basic consolidated
financial statements taken as a whole, present fairly, in all material
respects, the information set forth therein.
In 1994, the Company adopted the provisions of the Financial Accounting
Standards Board's Statement of Financial Accounting Standards (SFAS) No. 115,
Accounting for Certain Investments in Debt and Equity Securities.
In 1993, the Company adopted the provisions of SFAS No. 109, Accounting for
Income Taxes and SFAS No. 106, Employers' Accounting for Postretirement
Benefits Other Than Pensions.
KPMG Peat Marwick LLP
Columbus, Ohio
February 26, 1996
47
