Nationwide Life Insurance 10Q 2006 Q2 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2006

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 2-64559

NATIONWIDE LIFE INSURANCE COMPANY

(Exact name of registrant as specified in its charter)


Ohio		31-4156830
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

One Nationwide Plaza, Columbus, Ohio		43215
(Address of principal executive offices)		(Zip Code)

(614) 249-7111

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer¨ Accelerated filer¨ Non-accelerated filerx

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨ No x

No established published trading market exists for the registrant’s common stock, par value $1.00 per share. As of July 28, 2006, 3,814,779 shares of the registrant’s common stock were outstanding, all of which are held by Nationwide Financial Services, Inc.

The Registrant meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this Form in the reduced disclosure format.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2006

TABLE OF CONTENTS


PART I – FINANCIAL INFORMATION		1

ITEM 1	CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	1

ITEM 2	MANAGEMENT’S NARRATIVE ANALYSISOFTHE RESULTSOF OPERATIONS	19

ITEM 3	QUANTITATIVEAND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	45

ITEM 4	CONTROLSAND PROCEDURES	45

PART II – OTHER INFORMATION		46

ITEM 1	LEGAL PROCEEDINGS	46

ITEM 1A	RISK FACTORS	46

ITEM 2	UNREGISTERED SALESOF EQUITY SECURITIESAND USEOF PROCEEDS	46

ITEM 3	DEFAULTS UPON SENIOR SECURITIES	46

ITEM 4	SUBMISSIONOF MATTERSTOA VOTEOF SECURITY HOLDERS	46

ITEM 5	OTHER INFORMATION	46

ITEM 6	EXHIBITS	46

SIGNATURE		47

PART I – FINANCIAL INFORMATION

ITEM 1 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Condensed Consolidated Statements of Income

(Unaudited)

(in millions)


	Three months ended June 30,						Six months ended June 30,
	2006			2005			2006			2005
Revenues:
Policy charges	$	292.9		$	260.2		$	568.2		$	522.0
Traditional life insurance and immediate annuity premiums		76.8			66.8			153.8			131.4
Net investment income		512.8			527.3			1,029.8			1,044.4
Net realized (losses) gains on investments, hedging instruments and hedged items		(10.1	)		(1.5	)		(16.7	)		21.2
Other income		—			0.6			0.8			3.1

Total revenues		872.4			853.4			1,735.9			1,722.1

Benefits and expenses:
Interest credited to policyholder account values		333.1			335.5			663.0			657.5
Life insurance and annuity benefits		112.3			101.4			216.4			191.0
Policyholder dividends on participating policies		6.0			8.3			13.6			18.0
Amortization of deferred policy acquisition costs		122.6			110.6			239.2			230.2
Interest expense on debt, primarily with Nationwide Financial Services, Inc. (NFS)		15.6			15.9			32.2			31.3
Other operating expenses		131.2			128.8			264.7			263.5

Total benefits and expenses		720.8			700.5			1,429.1			1,391.5

Income from continuing operations before federal income tax (benefit) expense		151.6			152.9			306.8			330.6
Federal income tax (benefit) expense		(79.0	)		37.1			(48.0	)		83.4

Net income	$	230.6		$	115.8		$	354.8		$	247.2

See accompanying notes to condensed consolidated financial statements.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Condensed Consolidated Balance Sheets

(in millions, except per share amounts)


	June 30, 2006			December 31, 2005
	(Unaudited)
Assets
Investments:
Securities available-for-sale, at fair value:
Fixed maturity securities (cost $25,399.6 in 2006; $26,958.9 in 2005)	$	25,022.2		$	27,198.1
Equity securities (cost $25.4 in 2006; $35.1 in 2005)		31.8			42.1
Mortgage loans on real estate, net		8,344.3			8,458.9
Real estate, net		85.4			84.9
Policy loans		622.4			604.7
Other long-term investments		649.3			641.5
Short-term investments, including amounts managed by a related party		1,834.7			1,596.6

Total investments		36,590.1			38,626.8
Cash		2.0			0.9
Accrued investment income		337.6			344.0
Deferred policy acquisition costs		3,784.2			3,597.9
Other assets		1,752.7			1,699.1
Assets held in separate accounts		61,565.0			62,689.8

Total assets	$	104,031.6		$	106,958.5

Liabilities and Shareholder’s Equity
Liabilities:
Future policy benefits and claims	$	34,749.8		$	35,941.1
Short-term debt		179.8			242.3
Long-term debt, payable to NFS		700.0			700.0
Other liabilities		2,600.4			3,130.1
Liabilities related to separate accounts		61,565.0			62,689.8

Total liabilities		99,795.0			102,703.3

Shareholder’s equity:
Common stock, $1 par value; authorized - 5.0 shares; issued and outstanding - 3.8 shares		3.8			3.8
Additional paid-in capital		274.4			274.4
Retained earnings		4,128.2			3,883.4
Accumulated other comprehensive (loss) income		(169.8	)		93.6

Total shareholder’s equity		4,236.6			4,255.2

Total liabilities and shareholder’s equity	$	104,031.6		$	106,958.5

See accompanying notes to condensed consolidated financial statements.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Condensed Consolidated Statements of Changes in Shareholder’s Equity

Six Months Ended June 30, 2006 and 2005

(Unaudited)

(in millions)


	Common stock		Additional paid-in capital		Retained earnings			Accumulated other comprehensive income (loss)			Total shareholder’s equity
Balance as of December 31, 2004	$	3.8	$	274.4	$	3,543.9		$	393.8		$	4,215.9


Comprehensive income:
Net income		—		—		247.2			—			247.2
Other comprehensive loss, net of taxes		—		—		—			(34.0	)		(34.0	)

Total comprehensive income												213.2

Dividends to NFS		—		—		(75.0	)		—			(75.0	)

Balance as of June 30, 2005	$	3.8	$	274.4	$	3,716.1		$	359.8		$	4,354.1


Balance as of December 31, 2005	$	3.8	$	274.4	$	3,883.4		$	93.6		$	4,255.2


Comprehensive income:
Net income		—		—		354.8			—			354.8
Other comprehensive loss, net of taxes		—		—		—			(263.4	)		(263.4	)

Total comprehensive income												91.4

Dividends to NFS		—		—		(110.0	)		—			(110.0	)

Balance as of June 30, 2006	$	3.8	$	274.4	$	4,128.2		$	(169.8	)	$	4,236.6

See accompanying notes to condensed consolidated financial statements.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(in millions)


	Six months ended June 30,
	2006			2005
Cash flows from operating activities:
Net income	$	354.8		$	247.2
Adjustments to reconcile net income to net cash provided by operating activities:
Net realized losses (gains) on investments, hedging instruments and hedged items		16.7			(21.2	)
Interest credited to policyholder account values		663.0			657.5
Capitalization of deferred policy acquisition costs		(272.0	)		(239.5	)
Amortization of deferred policy acquisition costs		239.2			230.2
Amortization and depreciation		28.5			30.7
(Increase) decrease in other assets		(99.0	)		287.2
Increase (decrease) in policy and other liabilities		88.0			(298.1	)
Other, net		—			(24.7	)

Net cash provided by operating activities		1,019.2			869.3

Cash flows from investing activities:
Proceeds from maturity of securities available-for-sale		2,527.2			2,863.2
Proceeds from sale of securities available-for-sale		1,720.5			1,023.5
Proceeds from repayments of mortgage loans on real estate		1,083.0			1,115.3
Cost of securities available-for-sale acquired		(2,744.1	)		(4,196.8	)
Cost of mortgage loans on real estate originated or acquired		(985.2	)		(913.6	)
Net increase in short-term investments		(241.7	)		(58.9	)
Collateral (paid) received – securities lending, net		(323.1	)		202.8
Other, net		0.5			100.0

Net cash provided by investing activities		1,037.1			135.5

Cash flows from financing activities:
Net (decrease) increase in short-term debt		(62.5	)		121.2
Cash dividends paid to NFS		(110.0	)		(25.0	)
Investment and universal life insurance product deposits		1,260.7			1,106.6
Investment and universal life insurance product withdrawals		(3,143.4	)		(2,222.7	)

Net cash used in financing activities		(2,055.2	)		(1,019.9	)

Net increase (decrease) in cash		1.1			(15.1	)
Cash, beginning of period		0.9			15.5

Cash, end of period	$	2.0		$	0.4

See accompanying notes to condensed consolidated financial statements.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Condensed Consolidated Financial Statements (Unaudited)

June 30, 2006 and 2005

(1)

Basis of Presentation

The accompanying condensed consolidated financial statements of Nationwide Life Insurance Company and subsidiaries (NLIC, or collectively, the Company) have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all information and footnotes required by GAAP for complete financial statements. The financial information included herein reflects all adjustments (all of which are normal and recurring in nature) which are, in the opinion of management, necessary for a fair presentation of financial position and results of operations. Operating results for all periods presented are not necessarily indicative of the results that may be expected for the full year. All significant intercompany balances and transactions have been eliminated. The accompanying condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes for the year ended December 31, 2005 included in the Company’s 2005 Annual Report on Form 10-K.

The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements. Actual results could differ significantly from those estimates.

Certain items in the condensed consolidated financial statements and related notes have been reclassified to conform to the current presentation.

(2)

Summary of Significant Accounting Policies

A complete summary of the Company’s significant accounting policies is included in Note 2 to the audited consolidated financial statements included in the Company’s 2005 Annual Report on Form 10-K. During the quarter ended June 30, 2006, there have been no material changes to these policies.

(3)

Recently Issued Accounting Standards

In June 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation (FIN) No. 48,Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109, Accounting for Income Taxes (FIN 48). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB Statement No. 109,Accounting for Income Taxes.FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. The Company plans to adopt FIN 48 effective January 1, 2007. The Company is currently unable to quantify the impact of adopting FIN 48.

In March 2006, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 156,Accounting for Servicing of Financial Assets (SFAS 156). SFAS 156 amends SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities (SFAS 140). SFAS 156 requires that all separately recognized servicing assets and servicing liabilities be initially measured at fair value, if practicable. SFAS 156 permits, but does not require, the subsequent measurement of separately recognized servicing assets and servicing liabilities at fair value. An entity that uses derivative instruments to mitigate the risks inherent in servicing assets and servicing liabilities is required to account for those derivative instruments at fair value. Under SFAS 156, an entity can elect subsequent fair value measurement to account for its separately recognized servicing assets and servicing liabilities. By electing that option, an entity may simplify its accounting because SFAS 156 permits income statement recognition of the potential offsetting changes in fair value of those servicing assets and servicing liabilities and derivative instruments in the same accounting period. SFAS 156 is effective for fiscal years beginning after September 15, 2006, with early adoption permitted. The Company plans to adopt SFAS 156 effective January 1, 2007. SFAS 156 is not expected to have a material impact on the Company’s financial position or results of operations upon adoption.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

June 30, 2006 and 2005

In February 2006, the FASB issued SFAS No. 155,Accounting for Certain Hybrid Financial Instruments (SFAS 155). SFAS 155 amends SFAS No. 133,Accounting for Derivative Instruments and Hedging Activities (SFAS 133), and SFAS 140. SFAS 155 also resolves issues addressed in SFAS 133 Implementation Issue No. D1,Application of Statement 133 to Beneficial Interests in Securitized Financial Assets. In summary, SFAS 155: (1) permits an entity to make an irrevocable election to measure any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation at fair value in its entirety, with changes in fair value recognized in earnings; (2) clarifies which interest-only strips and principal-only strips are not subject to the requirements of SFAS 133; (3) establishes a requirement to evaluate interests in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation; (4) clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives; and (5) amends SFAS 140 to eliminate the prohibition on a qualifying special purpose entity from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. SFAS 155 is effective for all financial instruments acquired or issued after the beginning of an entity’s first fiscal year that begins after September 15, 2006. Earlier adoption is permitted as of the beginning of an entity’s fiscal year, provided the entity has not yet issued financial statements, including financial statements for any interim period for that fiscal year. Provisions of SFAS 155 may be applied to instruments that an entity holds at the date of adoption on an instrument-by-instrument basis. The Company elected to early adopt SFAS 155 as of January 1, 2006. On the date of adoption, there was no impact to the Company’s financial position or results of operations.

In September 2005, the Accounting Standards Executive Committee of the American Institute of Certified Public Accountants issued Statement of Position (SOP) 05-1, Accounting by Insurance Enterprises for Deferred Acquisition Costs in Connection with Modifications or Exchanges of Insurance Contracts (SOP 05-1). SOP 05-1 provides guidance on accounting by insurance enterprises for deferred acquisition costs on internal replacements of insurance and investment contracts other than those specifically described in SFAS No. 97, Accounting and Reporting by Insurance Enterprises for Certain Long-Duration Contracts and for Realized Gains and Losses from the Sale of Investments, issued by the FASB. SOP 05-1 defines an internal replacement as a modification in product benefits, features, rights or coverages that occurs as a result of the exchange of a contract for a new contract, or by amendment, endorsement or rider to a contract, or by the election of a new feature or coverage within a contract. SOP 05-1 is effective for internal replacements occurring in fiscal years beginning after December 15, 2006, with earlier adoption encouraged. Retrospective application of SOP 05-1 to previously issued financial statements is not permitted. Initial application of SOP 05-1 is required as of the beginning of an entity’s fiscal year. The Company will adopt SOP 05-1 effective January 1, 2007. Although the Company is currently unable to quantify the impact of adoption, SOP 05-1 could have a material impact on the Company’s financial position and/or results of operations.

In May 2005, the FASB issued SFAS No. 154,Accounting Changes and Error Corrections(SFAS 154), which replaces Accounting Principles Board Opinion No. 20,Accounting Changes, and SFAS No. 3,Reporting Accounting Changes in Interim Financial Statements. SFAS 154 applies to all voluntary changes in accounting principle as well as to changes required by an accounting pronouncement in the unusual instance that the pronouncement does not include specific transition provisions. SFAS 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005, with earlier adoption permitted. The Company adopted SFAS 154 effective January 1, 2006. SFAS 154 has not had any impact on the Company’s financial position or results of operations since adoption.

(4)

Federal Income Taxes

The Company’s federal income tax returns for tax years 2000-2002 were under Internal Revenue Service (IRS) examination pursuant to a routine audit. Management establishes tax reserves representing its best estimate of additional amounts the Company may be required to pay if certain positions it has taken are challenged and ultimately denied by the IRS. These reserves are reviewed regularly and are adjusted as events occur that management believes impacts the Company’s liability for additional taxes, such as lapsing of applicable statutes of limitations; conclusion of tax audits or substantial agreement on the deductibility/non-deductibility of uncertain items; additional exposure based on current calculations; identification of new issues; release of administrative guidance; or rendering of a court decision affecting a particular tax issue. A significant component of the tax reserve the Company has maintained was related to the separate account dividends received deduction (DRD).

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

June 30, 2006 and 2005

In July 2006, the Company reached substantial agreement with the IRS on all open issues for tax years 2000-2002, including issues related to the DRD. Accordingly, the Company revised its estimate of amounts that may be due in connection with certain tax positions, including the DRD, for all open tax years. As a result of the revised estimate, $110.9 million of tax reserves were released into earnings during the quarter ended June 30, 2006.

Total federal income tax (benefit) expense differs from the amount computed by applying the U.S. federal income tax rate to income from continuing operations before federal income tax (benefit) expense as follows for the periods indicated:


	Three months ended June 30,
	2006					2005
(in millions)	Amount			%		Amount			%
Computed (expected) tax expense	$	53.1		35.0		$	53.5		35.0
Reserve release		(110.9	)	(73.2	)		—		—
Tax exempt interest and DRD		(16.9	)	(11.0	)		(11.9	)	(7.8	)
Income tax credits		(6.6	)	(4.4	)		(3.8	)	(2.5	)
Other, net		2.3		1.5			(0.7	)	(0.4	)

Total	$	(79.0	)	(52.1	)	$	37.1		24.3


	Six months ended June 30,
	2006					2005
(in millions)	Amount			%		Amount			%
Computed (expected) tax expense	$	107.4		35.0		$	115.7		35.0
Reserve release		(110.9	)	(36.1	)		—		—
Tax exempt interest and DRD		(33.8	)	(11.0	)		(24.1	)	(7.3	)
Income tax credits		(13.3	)	(4.3	)		(7.7	)	(2.3	)
Other, net		2.6		0.8			(0.5	)	(0.2	)

Total	$	(48.0	)	(15.6	)	$	83.4		25.2

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

June 30, 2006 and 2005

(5)

Shareholder’s Equity

Comprehensive Income

The Company’s comprehensive income for the periods presented includes net income and certain items that are reported directly within separate components of shareholder’s equity that are not recorded in net income (other comprehensive income or loss).

The following table summarizes the Company’s other comprehensive (loss) income, before and after federal income tax benefit (expense), for the periods indicated:


	Three months ended June 30,						Six months ended June 30,
(in millions)	2006			2005			2006			2005
Net unrealized (losses) gains on securities available-for-sale arising during the period:
Net unrealized (losses) gains before adjustments	$	(226.3	)	$	389.4		$	(636.0	)	$	(20.3	)
Net adjustment to deferred policy acquisition costs		59.0			(128.9	)		153.5			(1.4	)
Net adjustment to future policy benefits and claims		14.3			(40.5	)		56.4			(35.8	)
Related federal income tax benefit (expense)		53.4			(77.0	)		149.0			20.1

Net unrealized (losses) gains		(99.4	)		143.0			(276.9	)		(37.4	)

Reclassification adjustment for net realized losses on securities available-for-sale realized during the period:
Net unrealized gains (losses)		13.7			(1.4	)		18.8			(23.6	)
Related federal income tax (expense) benefit		(4.8	)		0.5			(6.6	)		8.3

Net reclassification adjustment		8.9			(0.9	)		12.2			(15.3	)

Other comprehensive (loss) income on securities available-for-sale		(90.5	)		142.1			(264.7	)		(52.7	)

Accumulated net holding (losses) gains on cash flow hedges:
Unrealized holding (losses) gains		(11.1	)		23.0			2.0			28.8
Related federal income tax benefit (expense)		3.9			(8.1	)		(0.7	)		(10.1	)

Other comprehensive (loss) income on cash flow hedges		(7.2	)		14.9			1.3			18.7

Total other comprehensive (loss) income	$	(97.7	)	$	157.0		$	(263.4	)	$	(34.0	)

Adjustments for net realized gains and losses on the ineffective portion of cash flow hedges were immaterial during the three and six month periods ended June 30, 2006 and 2005.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

June 30, 2006 and 2005

(6)

Pension Plans

The Company and certain affiliated companies participate in a defined benefit pension plan sponsored by Nationwide Mutual Insurance Company (NMIC). The Company funds pension costs accrued for direct employees plus an allocation of pension costs accrued for employees of affiliates whose work benefits the Company.

The following table summarizes the components of net periodic benefit cost for the NMIC pension plan as a whole, including amounts not related to the Company, for the periods indicated:


	Three months ended June 30,						Six months ended June 30,
(in millions)	2006			2005			2006			2005
Service cost	$	36.0		$	33.1		$	76.0		$	67.1
Interest cost		35.4			33.2			72.2			67.4
Expected return on plan assets		(51.9	)		(43.6	)		(103.9	)		(86.1	)
Recognized net actuarial loss		6.7			0.2			8.4			1.9
Amortization of prior service cost		(2.4	)		1.2			2.3			2.3
Amortization of unrecognized transition asset		—			(0.3	)		—			(0.6	)

Net periodic benefit cost	$	23.8		$	23.8		$	55.0		$	52.0

NMIC and all participating employers, including the Company, expect to contribute $120.0 million to the pension plan during 2006. Through June 30, 2006, $60.0 million had been contributed, all by NMIC. Additional contributions to the plan totaling $60.0 million are anticipated for the remainder of the year, including $16.2 million by the Company. Tax planning strategies influence the timing of plan contributions.

(7)

Contingencies

Legal Matters

The Company is a party to litigation and arbitration proceedings in the ordinary course of its business. It is not possible to determine the ultimate outcome of the pending investigations and legal proceedings or to provide reasonable ranges of potential losses. Some matters, including certain of those referred to below, are in very preliminary stages, and the Company does not have sufficient information to make an assessment of the plaintiffs’ claims for liability or damages. In some of the cases seeking to be certified as class actions, the court has not yet decided whether a class will be certified or (in the event of certification) the size of the class and class period. In many of the cases, the plaintiffs are seeking undefined amounts of damages or other relief, including punitive damages and equitable remedies, which are difficult to quantify and cannot be defined based on the information currently available. The Company does not believe, based on information currently known by the Company’s management, that the outcomes of such pending investigations and legal proceedings are likely to have a material adverse effect on the Company’s consolidated financial position. However, given the large and/or indeterminate amounts sought in certain of these matters and inherent unpredictability of litigation, it is possible that an adverse outcome in certain matters could have a material adverse effect on the Company’s consolidated financial results in a particular quarterly or annual period.

In recent years, life insurance companies have been named as defendants in lawsuits, including class action lawsuits relating to life insurance and annuity pricing and sales practices. A number of these lawsuits have resulted in substantial jury awards or settlements against life insurers other than the Company.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

June 30, 2006 and 2005

The financial services industry, including mutual fund, variable annuity, life insurance and distribution companies, has also been the subject of increasing scrutiny by regulators, legislators and the media over the past few years. Numerous regulatory agencies, including the United States Securities and Exchange Commission (SEC), the National Association of Securities Dealers and the New York State Attorney General, have commenced industry-wide investigations regarding late trading and market timing in connection with mutual funds and variable insurance contracts, and have commenced enforcement actions against some mutual fund and life insurance companies on those issues. The Company has been contacted by or received subpoenas from the SEC and the New York State Attorney General, who are investigating market timing in certain mutual funds offered in insurance products sponsored by the Company. The Company has cooperated with these investigations. Information requests from the New York State Attorney General and the SEC with respect to investigations into late trading and market timing were last responded to by the Company and its affiliates in December 2003 and June 2005, respectively, and no further information requests have been received with respect to these matters.

In addition, state and federal regulators have commenced investigations or other proceedings relating to compensation and bidding arrangements and possible anti-competitive activities between insurance producers and brokers and issuers of insurance products, and unsuitable sales and replacements by producers on behalf of the issuer. Also under investigation are compensation and revenue sharing arrangements between the issuers of variable insurance contracts and mutual funds or their affiliates, the use of side agreements and finite reinsurance agreements, and funding agreements issued to back medium-term note (MTN) programs. Related investigations and proceedings may be commenced in the future. The Company and/or its affiliates have been contacted by or received subpoenas from state and federal regulatory agencies, state securities law regulators and state attorneys general for information relating to these investigations into compensation, revenue sharing and bidding arrangements, anti-competitive activities, unsuitable sales or replacement practices, the use of side agreements and finite reinsurance agreements, and funding agreements backing the MTN program of NLIC. The Company is cooperating with regulators in connection with these inquiries and will cooperate with NMIC in responding to these inquiries to the extent that any inquiries encompass NMIC’s operations.

These proceedings are expected to continue in the future and could result in legal precedents and new industry-wide legislation, rules and regulations that could significantly affect the financial services industry, including life insurance and annuity companies. These proceedings also could affect the outcome of one or more of the Company’s litigation matters. There can be no assurance that any such litigation or regulatory actions will not have a material adverse effect on the Company in the future.

On February 11, 2005, NLIC was named in a class action lawsuit filed in Common Pleas Court, Franklin County, Ohio entitledMichael Carr v. Nationwide Life Insurance Company. The complaint seeks recovery for breach of contract, fraud by omission, violation of the Ohio Deceptive Trade Practices Act and unjust enrichment. The complaint also seeks unspecified compensatory damages, disgorgement of all amounts in excess of the guaranteed maximum annual premium and attorneys’ fees. On February 2, 2006, the Court granted the plaintiff’s motion for class certification on the breach of contract and unjust enrichment claims. The Court certified a class consisting of all residents of the United States and the Virgin Islands who, during the Class Period, paid premiums on a modal basis to NLIC for term life insurance policies issued by NLIC during the Class Period that provide for guaranteed maximum premiums, excluding certain specified products. Excluded from the class are NLIC; any parent, subsidiary or affiliate of NLIC; all employees, officers and directors of NLIC; and any justice, judge or magistrate judge of the State of Ohio who may hear the case. The Class Period is from February 10, 1990 through February 2, 2006, the date the class was certified. NLIC continues to defend this lawsuit vigorously.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

June 30, 2006 and 2005

On April 13, 2004, NLIC was named in a class action lawsuit filed in Circuit Court, Third Judicial Circuit, Madison County, Illinois, entitledWoodbury v. Nationwide Life Insurance Company. NLIC removed this case to the United States District Court for the Southern District of Illinois on June 1, 2004. On December 27, 2004, the case was transferred to the United States District Court for the District of Maryland and included in the multi-district proceeding entitledIn Re Mutual Funds Investment Litigation. In response, on May 13, 2005, the plaintiff filed a First Amended Complaint purporting to represent, with certain exceptions, a class of all persons who held (through their ownership of an NLIC annuity or insurance product) units of any NLIC sub-account invested in mutual funds that included foreign securities in their portfolios and that experienced market timing or stale price trading activity. The First Amended Complaint purports to disclaim, with respect to market timing or stale price trading in NLIC’s annuities sub-accounts, any allegation based on NLIC’s untrue statement, failure to disclose any material fact, or usage of any manipulative or deceptive device or contrivance in connection with any class member’s purchases or sales of NLIC annuities or units in annuities sub-accounts. The plaintiff claims, in the alternative, that if NLIC is found with respect to market timing or stale price trading in its annuities sub-accounts, to have made any untrue statement, to have failed to disclose any material fact or to have used or employed any manipulative or deceptive device or contrivance, then the plaintiff purports to represent a class, with certain exceptions, of all persons who, prior to NLIC’s untrue statement, omission of material fact, use or employment of any manipulative or deceptive device or contrivance, held (through their ownership of an NLIC annuity or insurance product) units of any NLIC sub-account invested in mutual funds that included foreign securities in their portfolios and that experienced market timing activity. The First Amended Complaint alleges common law negligence and seeks to recover damages not to exceed $75,000 per plaintiff or class member, including all compensatory damages and costs. On June 1, 2006, the District Court granted NLIC’s motion to dismiss the plaintiff’s complaint. On June 30, 2006, the plaintiff filed a notice of appeal. NLIC continues to defend this lawsuit vigorously.

On January 21, 2004, NLIC, Nationwide Life Insurance Company of America (NLICA), Nationwide Life and Annuity Insurance Company (NLAIC), NFS and Nationwide Financial Corporation (collectively referred to as the Companies) were named in a lawsuit filed in the United States District Court for the Northern District of Mississippi entitledUnited Investors Life Insurance Company v. Nationwide Life Insurance Company and/or Nationwide Life Insurance Company of America and/or Nationwide Life and Annuity Insurance Company and/or Nationwide Life and Annuity Company of America and/or Nationwide Financial Services, Inc. and/or Nationwide Financial Corporation, and John Does A-Z.In its complaint, the plaintiff alleges that the Companies and/or their affiliated life insurance companies caused the replacement of variable insurance policies and other financial products issued by United Investors with policies issued by the Companies. The plaintiff raises claims for (1) violations of the Federal Lanham Act, and common law unfair competition and defamation; (2) tortious interference with the plaintiff’s contractual relationship with Waddell & Reed, Inc. and/or its affiliates, Waddell & Reed Financial, Inc., Waddell & Reed Financial Services, Inc. and W&R Insurance Agency, Inc., or with the plaintiff’s contractual relationships with its variable policyholders; (3) civil conspiracy; and (4) breach of fiduciary duty. The complaint seeks compensatory damages, punitive damages, pre- and post-judgment interest, a full accounting, a constructive trust and costs and disbursements, including attorneys’ fees. On December 30, 2005, the Companies filed a motion for summary judgment. On June 15, 2006, the District Court granted the Companies’ motion for summary judgment on all grounds and dismissed the plaintiff’s entire case with prejudice. On June 26, 2006, the plaintiff filed a notice of its intent to appeal the District Court’s decision. The Companies continue to defend this lawsuit vigorously.

On October 31, 2003, NLIC and NLAIC were named in a lawsuit seeking class action status filed in the United States District Court for the District of Arizona. The suit, entitledRobert Helman et al v. Nationwide Life Insurance Company et al, challenges the sale of deferred annuity products for use as investments in tax-deferred contributory retirement plans. On April 8, 2004, the plaintiff filed an amended class action complaint on behalf of all persons who purchased an individual variable deferred annuity contract or a certificate to a group variable annuity contract issued by NLIC or NLAIC, which were allegedly used to fund certain tax-deferred retirement plans. The amended class action complaint seeks unspecified compensatory damages. On July 27, 2004, the District Court granted the motion to dismiss filed by NLIC and NLAIC. On June 7, 2006, the Ninth Circuit Court of Appeals affirmed the District Court’s granting of the motion to dismiss. To the extent this decision is appealed to the U.S. Supreme Court, NLIC and NLAIC intend to continue to defend this lawsuit vigorously.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

June 30, 2006 and 2005

On August 15, 2001, NFS and NLIC were named in a lawsuit filed in the United States District Court for the District of Connecticut entitledLou Haddock, as trustee of the Flyte Tool & Die, Incorporated Deferred Compensation Plan, et al v. Nationwide Financial Services, Inc. and Nationwide Life Insurance Company. Currently, the plaintiffs’ fifth amended complaint, filed March 21, 2006, purports to represent a class of qualified retirement plans under the Employee Retirement Income Security Act of 1974, as amended (ERISA), that purchased variable annuities from NLIC. The plaintiffs allege that they invested ERISA plan assets in their variable annuity contracts and that NLIC and NFS breached ERISA fiduciary duties by allegedly accepting service payments from certain mutual funds. The complaint seeks disgorgement of some or all of the payments allegedly received by NLIC and NFS, other unspecified relief for restitution, declaratory and injunctive relief, and attorneys’ fees. To date, the District Court has rejected the plaintiffs’ request for certification of the alleged class. On April 20, 2006, NLIC and NFS filed a motion to dismiss the plaintiffs’ fifth amended complaint. NLIC and NFS continue to defend this lawsuit vigorously.

Tax Matters

The Company’s federal income tax returns are routinely audited by the IRS. Management has established tax reserves representing its best estimate of additional amounts it may be required to pay if certain tax positions it has taken are challenged and ultimately denied by the IRS. These reserves are reviewed regularly and are adjusted as events occur that management believes impact its liability for additional taxes, such as lapsing of applicable statutes of limitations, conclusion of tax audits or substantial agreement on the deductibility/non-deductibility of uncertain items, additional exposure based on current calculations, identification of new issues, release of administrative guidance or rendering of a court decision affecting a particular tax issue. Management believes its tax reserves reasonably provide for potential assessments that may result from IRS examinations and other tax-related matters for all open tax years.

(8)

Guarantees

Since 2001, the Company has sold $626.1 million of credit enhanced equity interests in Low-Income-Housing Tax Credit Funds (Tax Credit Funds) to unrelated third parties. The Company has guaranteed cumulative after-tax yields to the third party investors ranging from 3.75% to 5.25% over periods ending between 2002 and 2022. As of June 30, 2006, the Company held guarantee reserves totaling $6.3 million on these transactions. These guarantees are in effect for periods of approximately 15 years each. The Tax Credit Funds provide a stream of tax benefits to the investors that will generate a yield and return of capital. If the tax benefits are not sufficient to provide these cumulative after-tax yields, then the Company must fund any shortfall, which is mitigated by stabilization collateral set aside by the Company at the inception of the transactions. The maximum amount of undiscounted future payments that the Company could be required to pay the investors under the terms of the guarantees is $1.44 billion. The Company does not anticipate making any payments related to these guarantees.

To the extent there are cash deficits in any specific property owned by the Tax Credit Funds, property reserves, property operating guarantees and reserves held by the Tax Credit Funds are exhausted before the Company is required to perform under its guarantees. To the extent the Company is ever required to perform under its guarantees, it may recover any such funding out of the cash flow distributed from the sale of the underlying properties of the Tax Credit Funds. This cash flow distribution would be paid to the Company prior to any cash flow distributions to unrelated third party investors.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

June 30, 2006 and 2005

(9)

Variable Interest Entities

As of June 30, 2006 and December 31, 2005, the Company had relationships with 19 variable interest entities (VIEs), each of which the Company was the primary beneficiary. Each of these VIEs is a conduit that assists the Company in structured product transactions. One of the VIEs is used in the securitization of mortgage loans, while the others are involved in the sale of Tax Credit Funds to third party investors for which the Company provides guaranteed returns (see Note 8). The results of operations and financial position of these VIEs are included along with corresponding minority interest liabilities in the accompanying condensed consolidated financial statements.

The net assets of these VIEs totaled $446.9 million and $440.6 million as of June 30, 2006 and December 31, 2005, respectively. The following table summarizes the components of net assets as of the dates indicated:


(in millions)	June 30, 2006			December 31, 2005
Mortgage loans on real estate	$	9.8		$	31.5
Other long-term investments		452.1			478.6
Short-term investments		33.4			42.3
Other assets		41.1			41.3
Short-term debt		(10.6	)		(32.6	)
Other liabilities		(78.9	)		(120.5	)

The Company’s total loss exposure from VIEs of which the Company is the primary beneficiary was immaterial as of June 30, 2006 and December 31, 2005 (except for the impact of guarantees disclosed in Note 8). For the mortgage loan VIE, to which the short-term debt relates, the creditors have no recourse against the Company in the event of default by the VIE.

In addition to the VIEs described above, the Company holds variable interests, in the form of limited partnerships or similar investments, in a number of Tax Credit Funds of which the Company is not the primary beneficiary. These investments have been held by the Company for periods of 1 to 10 years and allow the Company to experience certain tax credits and other tax benefits from affordable housing projects. The Company also has certain investments in other securitization transactions that qualify as VIEs, but of which the Company is not the primary beneficiary. The total exposure to loss on these VIEs was $65.3 million and $53.9 million as of June 30, 2006 and December 31, 2005, respectively.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

June 30, 2006 and 2005

(10)

Segment Information

Management views the Company’s business primarily based on its underlying products and uses this basis to define its four reportable segments: Individual Investments, Retirement Plans, Individual Protection, and Corporate and Other.

The primary segment profitability measure that management uses is pre-tax operating earnings, which is calculated by adjusting income from continuing operations before federal income taxes to exclude: (1) net realized gains and losses on investments, hedging instruments and hedged items, except for periodic net coupon settlements on non-qualifying derivatives; (2) net realized gains and losses related to securitizations; and (3) the adjustment to amortization of deferred policy acquisition costs (DAC) related to net realized gains and losses.

Individual Investments

The Individual Investments segment consists of individual The BEST of AMERICA® and private label deferred variable annuity products, deferred fixed annuity products, income products and advisory services. Individual deferred annuity contracts provide the customer with tax-deferred accumulation of savings and flexible payout options including lump sum, systematic withdrawal or a stream of payments for life. In addition, individual variable annuity contracts provide the customer with access to a wide range of investment options and asset protection in the event of an untimely death, while individual fixed annuity contracts generate a return for the customer at a specified interest rate fixed for prescribed periods.

Retirement Plans

The Retirement Plans segment is comprised of the Company’s private and public sector retirement plans business. The private sector includes Internal Revenue Code (IRC) Section 401 and Section 403 business, and the public sector includes IRC Section 457 and Section 401(a) business, both in the form of fixed and variable group annuities.

Individual Protection

The Individual Protection segment consists of investment life insurance products, including individual variable, corporate-owned and bank-owned life insurance products; traditional life insurance products; and universal life insurance products. Life insurance products provide a death benefit and generally allow the customer to build cash value on a tax-advantaged basis.

Corporate and Other

The Corporate and Other segment includes certain structured products business; the MTN program; net investment income not allocated to product segments; periodic net coupon settlements on non-qualifying derivatives; unallocated expenses; interest expense on debt; revenue and expenses of the Company’s non-insurance subsidiaries not reported in other segments; and net realized gains and losses related to securitizations.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

June 30, 2006 and 2005

The following tables summarize the Company’s business segment operating results for the periods indicated:

Three months ended June 30, 2006

(in millions)

Individual

Investments

Retirement

Plans

Individual

Protection

Corporate

and Other

Total

Revenues:

Policy charges

142.3

55.1

95.5

—

292.9

Traditional life insurance and immediate annuity premiums

34.9

—

41.9

—

76.8

Net investment income

184.4

156.0

81.7

90.7

512.8

Net realized losses on investments, hedging instruments and hedged items¹

—

(10.5

)

(10.5

)

Other income

0.8

—

(0.4

)

0.4

Total revenues

362.4

211.1

219.1

79.8

872.4

Benefits and expenses:

Interest credited to policyholder account values

126.8

110.3

45.5

50.5

333.1

Life insurance and annuity benefits

49.9

—

62.4

—

112.3

Policyholder dividends on participating policies

—

6.0

—

6.0

Amortization of DAC

84.8

10.7

28.5

(1.4

)

122.6

Interest expense on debt

—

15.6

Other operating expenses

50.6

45.9

31.1

3.6

131.2

Total benefits and expenses

312.1

166.9

173.5

68.3

720.8

Income from continuing operations before federal income tax expense

50.3

44.2

45.6

11.5

151.6

Net realized losses on investments, hedging instruments and hedged items¹

—

10.5

Adjustment to amortization of DAC related to net realized losses

(1.4

)

Pre-tax operating earnings

50.3

44.2

45.6

20.6

¹	Excluding periodic net coupon settlements on non-qualifying derivatives.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

June 30, 2006 and 2005


	Three months ended June 30, 2005
(in millions)	Individual Investments		Retirement Plans		Individual Protection		Corporate and Other			Total
Revenues:
Policy charges	$	130.6	$	36.3	$	93.3	$	—		$	260.2
Traditional life insurance and immediate annuity premiums		23.1		—		43.7		—			66.8
Net investment income		207.6		157.3		85.6		76.8			527.3
Net realized losses on investments, hedging instruments and hedged items¹		—		—		—		(1.3	)		(1.3	)
Other income		0.3		0.1		—		—			0.4

Total revenues		361.6		193.7		222.6		75.5			853.4

Benefits and expenses:
Interest credited to policyholder account values		142.0		109.5		47.6		36.4			335.5
Life insurance and annuity benefits		40.7		—		60.7		—			101.4
Policyholder dividends on participating policies		—		—		8.3		—			8.3
Amortization of DAC		70.8		11.0		25.0		3.8			110.6
Interest expense on debt		—		—		—		15.9			15.9
Other operating expenses		45.7		45.8		35.9		1.4			128.8

Total benefits and expenses		299.2		166.3		177.5		57.5			700.5

Income from continuing operations before federal income tax expense		62.4		27.4		45.1		18.0		$	152.9

Net realized losses on investments, hedging instruments and hedged items¹		—		—		—		1.3
Adjustment to the amortization of DAC related to net realized losses		—		—		—		3.8

Pre-tax operating earnings	$	62.4	$	27.4	$	45.1	$	23.1

¹	Excluding periodic net coupon settlements on non-qualifying derivatives.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

June 30, 2006 and 2005

Six months ended June 30, 2006

(in millions)

Individual
Investments

Retirement
Plans

Individual
Protection

Corporate
and Other

Total

Revenues:

Policy charges

284.2

90.8

193.2

—

568.2

Traditional life insurance and immediate annuity premiums

66.4

—

87.4

—

153.8

Net investment income

379.2

315.8

162.6

172.2

1,029.8

Net realized losses on investments, hedging instruments and hedged items¹

—

(17.7

)

(17.7

)

Other income

1.2

—

0.6

1.8

Total revenues

731.0

406.6

443.2

155.1

1,735.9

Benefits and expenses:

Interest credited to policyholder account values

257.1

220.9

88.9

96.1

663.0

Life insurance and annuity benefits

90.4

—

126.0

—

216.4

Policyholder dividends on participating policies

—

13.6

—

13.6

Amortization of DAC

182.4

20.7

42.6

(6.5

)

239.2

Interest expense on debt

—

32.2

Other operating expenses

97.2

89.7

72.1

5.7

264.7

Total benefits and expenses

627.1

331.3

343.2

127.5

1,429.1

Income from continuing operations before federal income tax expense

103.9

75.3

100.0

27.6

306.8

Net realized losses on investments, hedging instruments and hedged items¹

—

17.7

Adjustment to amortization of DAC related to net realized losses

—

(6.5

)

Pre-tax operating earnings

103.9

75.3

100.0

38.8

¹	Excluding periodic net coupon settlements on non-qualifying derivatives.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

June 30, 2006 and 2005


	Six months ended June 30, 2005
(in millions)	Individual Investments		Retirement Plans		Individual Protection		Corporate and Other			Total
Revenues:
Policy charges	$	261.1	$	73.6	$	187.3	$	—		$	522.0
Traditional life insurance and immediate annuity premiums		43.7		—		87.7		—			131.4
Net investment income		412.7		319.2		169.3		143.2			1,044.4
Net realized gains on investments, hedging instruments and hedged items¹		—		—		—		21.5			21.5
Other income		0.6		0.2		—		2.0			2.8

Total revenues		718.1		393.0		444.3		166.7			1,722.1

Benefits and expenses:
Interest credited to policyholder account values		280.7		218.8		91.1		66.9			657.5
Life insurance and annuity benefits		72.3		—		118.7		—			191.0
Policyholder dividends on participating policies		—		—		18.0		—			18.0
Amortization of DAC		153.4		23.3		48.1		5.4			230.2
Interest expense on debt		—		—		—		31.3			31.3
Other operating expenses		90.9		91.6		71.1		9.9			263.5

Total benefits and expenses		597.3		333.7		347.0		113.5			1,391.5

Income from continuing operations before federal income tax expense		120.8		59.3		97.3		53.2		$	330.6

Net realized gains on investments, hedging instruments and hedged items¹		—		—		—		(21.5	)
Adjustment to the amortization of DAC related to net realized gains		—		—		—		5.4

Pre-tax operating earnings	$	120.8	$	59.3	$	97.3	$	37.1

¹	Excluding periodic net coupon settlements on non-qualifying derivatives.

ITEM 2 MANAGEMENT’S NARRATIVE ANALYSIS OF THE RESULTS OF OPERATIONS

TABLE OF CONTENTS


FORWARD-LOOKING INFORMATION		20

OVERVIEW		21

CRITICAL ACCOUNTING POLICIESAND RECENTLY ISSUED ACCOUNTING STANDARDS		22

RESULTSOF OPERATIONS		23

SALES		27

BUSINESS SEGMENTS		32

CONTRACTUAL OBLIGATIONSAND COMMITMENTS		45

OFF-BALANCE SHEET TRANSACTIONS		45

Forward-Looking Information

The information included herein contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to the results of operations and businesses of Nationwide Life Insurance Company and subsidiaries (NLIC, or collectively, the Company). Whenever used in this report, words such as “anticipate,” “estimate,” “expect,” “intend,” “plan,” “believe,” “project,” “target,” and other words of similar meaning are intended to identify such forward-looking statements. These forward-looking statements involve certain risks and uncertainties. Factors that may cause actual results to differ materially from those contemplated or projected, forecast, estimated or budgeted in such forward-looking statements include, among others, the following possibilities:

(i)

the potential impact on the Company’s reported net income and related disclosures that could result from the adoption of certain accounting and/or financial reporting standards issued by the Financial Accounting Standards Board, the United States Securities and Exchange Commission (SEC) or other standard-setting bodies;

(ii)

tax law changes impacting the tax treatment of life insurance and investment products;

(iii)

repeal of the federal estate tax;

(iv)

heightened competition, including specifically the intensification of price competition, the entry of new competitors and the development of new products by new and existing competitors;

(v)

adverse state and federal legislation and regulation, including limitations on premium levels, increases in minimum capital and reserves, and other financial viability requirements; restrictions on mutual fund distribution payment arrangements such as revenue sharing and 12b-1 payments; and regulation changes resulting from industry practice investigations;

(vi)

failure to expand distribution channels in order to obtain new customers or failure to retain existing customers;

(vii)

inability to carry out marketing and sales plans, including, among others, development of new products and/or changes to certain existing products and acceptance of the new and/or revised products in the market;

(viii)

changes in interest rates and the equity markets causing a reduction of investment income and/or asset fees; an acceleration of the amortization of deferred policy acquisition costs (DAC), a reduction in separate account assets or a reduction in the demand for the Company’s products;

(ix)

reduction in the value of the Company’s investment portfolio as a result of changes in interest rates and yields in the market as well as geopolitical conditions and the impact of political, regulatory, judicial, economic or financial events, including terrorism, affecting the market generally and companies in the Company’s investment portfolio specifically;

(x)

general economic and business conditions which are less favorable than expected;

(xi)

competitive, regulatory or tax changes that affect the cost of, or demand for, the Company’s products;

(xii)

unanticipated changes in industry trends and ratings assigned by nationally recognized rating organizations;

(xiii)

settlement of tax liabilities for amounts that differ significantly from those recorded on the balance sheets;

(xiv)

deviations from assumptions regarding future persistency, mortality (including as a result of the outbreak of a pandemic illness, such as Avian Flu), morbidity and interest rates used in calculating reserve amounts and in pricing the Company’s products;

(xv)

adverse litigation results and/or resolution of litigation and/or arbitration or investigation results that could result in monetary damages or impact the manner in which the Company conducts its operations; and

(xvi)

adverse consequences, including financial and reputation costs, regulatory problems and potential loss of customers resulting from failure to meet privacy regulations and/or protect the Company’s customers’ confidential information.

Overview

The following analysis of condensed consolidated results of operations and financial condition of the Company should be read in conjunction with the condensed consolidated financial statements and related notes included elsewhere herein.

The Company is a member of the Nationwide group of companies, which is comprised of Nationwide Mutual Insurance Company (NMIC) and all of its subsidiaries and affiliates.

All of the outstanding shares of NLIC’s common stock are owned by Nationwide Financial Services, Inc. (NFS), a holding company formed by Nationwide Corporation, a majority-owned subsidiary of NMIC.

Wholly-owned subsidiaries of NLIC include Nationwide Life and Annuity Insurance Company (NLAIC) and Nationwide Investment Services Corporation (NISC). NLAIC offers universal life insurance, variable universal life insurance, corporate-owned life insurance (COLI) and individual annuity contracts on a non-participating basis. NISC is a registered broker/dealer.

The Company is a leading provider of long-term savings and retirement products in the United States of America (U.S.). The Company develops and sells a diverse range of products including individual annuities, private and public group retirement plans, other investment products sold to institutions, life insurance and advisory services. The Company sells its products through a diverse distribution network. Unaffiliated entities that sell the Company’s products to their own customer bases include independent broker/dealers, financial institutions, wirehouse and regional firms, pension plan administrators, and life insurance specialists. Representatives of affiliates who market products directly to a customer base include Nationwide Retirement Solutions, Inc. (NRS), Nationwide Financial Network (NFN) producers and TBG Insurance Services Corporation d/b/a TBG Financial (TBG Financial). The Company also distributes products through the NMIC agency distribution force.

Business Segments

SeePart 1 – Financial Information, Item 1 – Condensed Consolidated Financial Statements, Note 9 – Segment Informationfor a discussion of reportable segments, including the components of each segment.

The following table summarizes pre-tax operating earnings by segment for the periods indicated:


	Three months ended June 30,					Six months ended June 30,
(in millions)	2006		2005		Change	2006		2005		Change
Individual Investments	$	50.3	$	62.4	(19)%	$	103.9	$	120.8	(14)%
Retirement Plans		44.2		27.4	61 %		75.3		59.3	27 %
Individual Protection		45.6		45.1	1 %		100.0		97.3	3 %
Corporate and Other		20.6		23.1	(11)%		38.8		37.1	5 %

Revenues and Expenses

The Company earns revenues and generates cash primarily from policy charges, life insurance premiums and net investment income. Policy charges include asset fees, which are earned primarily from separate account values generated from the sale of individual and group variable annuities and investment life insurance products; cost of insurance charges earned on universal life insurance products, which are assessed on the amount of insurance in force in excess of the related policyholder account value; administrative fees, which include fees charged per contract on a variety of the Company’s products and premium loads on universal life insurance products; and surrender fees, which are charged as a percentage of premiums withdrawn during a specified period for annuity and certain life insurance contracts. Net investment income includes earnings on investments supporting fixed annuities, the medium-term note (MTN) program and certain life insurance products, and earnings on invested assets not allocated to product segments, all net of related investment expenses. Other income includes asset fees, administrative fees, commissions and other income earned by subsidiaries of the Company that provide administrative, marketing and distribution services.

Management makes decisions concerning the sale of invested assets based on a variety of market, business, tax and other factors. All realized gains and losses generated by these sales, charges related to other-than-temporary impairments of available-for-sale securities and other investments, and changes in the allowance for losses on mortgage loans on real estate are reported in realized gains and losses on investments, hedging instruments and hedged items. Also included are changes in the fair values of derivatives qualifying as fair value hedges and the related changes in the fair values of hedged items; the ineffective, or excluded, portion of cash flow hedges; changes in the fair values of derivatives that do not qualify for hedge accounting treatment; and periodic net coupon settlements on non-qualifying derivatives.

The Company’s primary expenses include interest credited to policyholder account values, other benefits and claims, amortization of DAC and general business operating expenses. Interest credited principally relates to individual and group fixed annuities, funding agreements backing the NLIC MTN program and certain life insurance products. Other benefits and claims include policyholder benefits in excess of policyholder account values for universal life and individual deferred annuities and net claims and provisions for future policy benefits for traditional life insurance products and immediate annuities.

Profitability

The Company’s profitability largely depends on its ability to effectively price and manage risk on its various products, administer customer funds and control operating expenses. Lapse rates on existing contracts also impact profitability.

In particular, the Company’s profitability is driven by fee income on separate account products, general and separate account asset levels and management’s ability to manage interest spread income. Interest spread income is comprised of net investment income, excluding any applicable allocated charges for invested capital, less interest credited to policyholder account values. Interest spread income can vary depending on crediting rates offered by the Company; performance of the investment portfolio, including the rate of prepayments; changes in market interest rates; the competitive environment; and other factors. In recent periods, management has taken actions to address low interest rate environments and the resulting impact on interest spread margins, including reducing commissions on fixed annuity sales, launching new products with new guaranteed rates, discontinuing the sale of its leading annual reset fixed annuities and invoking contractual provisions that limit the amount of variable annuity deposits allocated to the guaranteed fixed option. Also, the majority of new business now contains lower floor guarantees than were historically provided.

In addition, life insurance profits are significantly impacted by mortality, morbidity and persistency experience.

Critical Accounting Policies and Recently Issued Accounting Standards

The preparation of financial statements in accordance with United States generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the amounts reported in the financial statements. Actual results could differ significantly from those estimates.

The Company’s most critical estimates include those used to determine the following: the balance, recoverability and amortization of DAC for investment products and universal life insurance products; impairment losses on investments; valuation allowances for mortgage loans on real estate; federal income tax provision; the liability for future policy benefits and claims; and pension benefits.

Note 2 to the audited consolidated financial statements included in the Company’s 2005 Annual Report on Form 10-K provides a summary of significant accounting policies. SeePart 1 – Financial Information, Item 1 – Condensed Consolidated Financial Statements, Note 2 – Recently Issued Accounting Standardsof this report for a discussion of recently issued accounting standards. The Company’s critical accounting policies have not changed materially from those disclosed in the Company’s 2005 Annual Report on Form 10-K.

Results of Operations

Second Quarter – 2006 Compared to 2005

The following table summarizes the Company’s consolidated results of operations for the periods indicated:


	Three months ended June 30,
(in millions)	2006			2005			Change
Revenues:
Policy charges:
Asset fees	$	163.4		$	150.3		9 %
Cost of insurance charges		69.5			67.3		3 %
Administrative fees		42.3			20.8		103 %
Surrender fees		17.7			21.8		(19)%

Total policy charges		292.9			260.2		13 %
Traditional life insurance and immediate annuity premiums		76.8			66.8		15 %
Net investment income		512.8			527.3		(3)%
Net realized losses on investments, hedging instruments and hedged items		(10.1	)		(1.5	)	NM
Other income		—			0.6		(100)%

Total revenues		872.4			853.4		2 %

Benefits and expenses:
Interest credited to policyholder account values		333.1			335.5		(1)%
Life insurance and annuity benefits		112.3			101.4		11 %
Policyholder dividends on participating policies		6.0			8.3		(28)%
Amortization of DAC		122.6			110.6		11 %
Interest expense, primarily with NFS		15.6			15.9		(2)%
Other operating expenses		131.2			128.8		2 %

Total benefits and expenses		720.8			700.5		3 %

Income from continuing operations before federal income tax (benefit) expense		151.6			152.9		(1)%
Federal income tax (benefit) expense		(79.0	)		37.1		NM

Net income	$	230.6		$	115.8		99 %

The increase in net income primarily was driven by a tax benefit recorded in the three months ended June 30, 2006 compared to tax expense for the comparable period in 2005. This favorable comparison was partially offset by lower income from continuing operations before federal income tax (benefit) expense primarily due to lower interest spread income, higher amortization of DAC and increased life insurance and annuity benefits. Higher administrative fees, asset fees and traditional life insurance and immediate annuity premiums partially offset the overall decrease in income from continuing operations before federal income tax (benefit) expense.

Interest spread income declined primarily within the Individual Investments segment due to lower general account assets caused by fixed annuity net outflows.

Higher amortization of DAC primarily occurred in the Individual Investments segment due to increased variable annuity gross profits driven by higher asset levels.

Life insurance and annuity benefits increased primarily within the Individual Investments segment due to higher immediate annuity reserves driven by growth in sales relative to a year ago.

Higher administrative fees primarily were attributable to the Retirement Plans segment due to the withdrawal of funds from a fixed annuity contract. SeePart I – Financial Information , Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) – Business Segments – Retirement Plans for further explanation.

Asset fees rose due to increases in both average separate account values and the average asset fee rate charged within the Individual Investments segment. The average variable asset fee rate increased as new business sold with higher-risk features and corresponding higher fee rates influenced the overall average rate.

The increase in traditional life insurance and immediate annuity premiums was due to higher interest rates relative to a year ago, which created a favorable environment for immediate annuity products in the Individual Investments segment.

Year-to-Date – 2006 Compared to 2005

The following table summarizes the Company’s consolidated results of operations for the periods indicated:


	Six months ended June 30,
(in millions)	2006			2005		Change
Revenues:
Policy charges:
Asset fees	$	325.5		$	300.5	8 %
Cost of insurance charges		139.1			133.9	4 %
Administrative fees		66.5			45.1	47 %
Surrender fees		37.1			42.5	(13)%

Total policy charges		568.2			522.0	9 %
Traditional life insurance and immediate annuity premiums		153.8			131.4	17 %
Net investment income		1,029.8			1,044.4	(1)%
Net realized (losses) gains on investments, hedging instruments and hedged items		(16.7	)		21.2	NM
Other income		0.8			3.1	(74)%

Total revenues		1,735.9			1,722.1	1 %

Benefits and expenses:
Interest credited to policyholder account values		663.0			657.5	1 %
Life insurance and annuity benefits		216.4			191.0	13 %
Policyholder dividends on participating policies		13.6			18.0	(24)%
Amortization of DAC		239.2			230.2	4 %
Interest expense, primarily with NFS		32.2			31.3	3 %
Other operating expenses		264.7			263.5	—

Total benefits and expenses		1,429.1			1,391.5	3 %

Income from continuing operations before federal income tax (benefit) expense		306.8			330.6	(7)%
Federal income tax (benefit) expense		(48.0	)		83.4	NM

Net income		354.8			247.2	44 %

The increase in net income primarily was driven by a tax benefit recorded in the three months ended June 30, 2006 compared to tax expense for the comparable period in 2005. This favorable comparison was partially offset by lower income from continuing operations before federal income tax (benefit) expense primarily due to the recognition of net realized losses on investments, hedging instruments and hedged items in 2006 compared to net gains in the prior year; higher life insurance and annuity benefits; and lower interest spread income. Higher asset fees, traditional life insurance and immediate annuity premiums, and administrative fees partially offset the overall decrease in income from continuing operations before income tax (benefit) expense.

As described in the second quarter section of this discussion, $110.9 million of tax reserves were released into earnings during the quarter ended June 30, 2006. Therefore, the effective tax rates in 2006 and 2005 are not comparable.

The Company recorded net realized losses on investments, hedging instruments and hedged items during the second quarter of 2006 compared to net realized gains in the prior year primarily due to a decline in gross gains and an increase in gross losses on sales of fixed maturity securities. Due to the rising interest rate environment, the bond market was less favorable in the first six months of 2006 compared to the same period a year ago.

Higher life insurance and annuity benefits primarily were driven by the Individual Protection segment due to adverse mortality in both the fixed and investment life businesses, partially offset by a waiver of premium reserve release in fixed life. The Individual Investments segment also increased primarily due to higher immediate annuity reserves due to growth in sales relative to a year ago.

Interest spread income decreased primarily within the Individual Investments segment due to lower general account assets caused by fixed annuity net outflows. Additionally, the Individual Protection segment declined due to decreased asset levels and investment yields.

Higher administrative fees primarily were attributable to the Retirement Plans segment due to the withdrawal of funds from a fixed annuity contract. SeePart I – Financial Information , Item 2 – (MD&A) – Business Segments – Retirement Plans for further explanation.

Sales

The Company regularly monitors and reports a production volume metric titled “sales.” Sales or similar measures are commonly used in the insurance industry as a measure of the volume of new and renewal business generated in a period.

Sales are not derived from any specific GAAP income statement accounts or line items and should not be viewed as a substitute for any financial measure determined in accordance with GAAP, including sales as it relates to non-insurance companies. Additionally, the Company’s definition of sales may differ from that used by other companies. As used in the insurance industry, sales, or similarly titled measures, generate customer funds managed and administered, which ultimately drive revenues.

As calculated and analyzed by management, statutory premiums and deposits on individual and group annuities and life insurance products calculated in accordance with accounting practices prescribed or permitted by regulatory authorities and deposits on administration-only group retirement plans and the advisory services program are adjusted as described below to arrive at sales.

Life insurance premiums determined on a GAAP basis are significantly different than statutory premiums and deposits. Life insurance premiums determined on a GAAP basis are recognized as revenue when due, as calculated on an accrual basis in proportion to the service provided and performance rendered under the contract. In addition, many life insurance and annuity products involve an initial deposit or a series of deposits from customers. These deposits are accounted for as such on a GAAP basis and therefore are not reflected in the GAAP income statement. On a statutory basis, life insurance premiums collected (cash basis) and deposits received (cash basis) are aggregated and reported as statutory premiums and annuity consideration revenues.

Sales, as reported by the Company, are stated net of internal replacements, which management believes provides a more meaningful disclosure of production in a given period. In addition, the Company’s definition of sales excludes funding agreements issued under the Company’s MTN program; asset transfers associated with large case BOLI and large case retirement plan acquisitions; and deposits into Nationwide employee and agent benefit plans. Although these products contribute to asset and earnings growth, their production flows potentially can mask trends in the underlying business and thus do not provide meaningful comparisons and analyses.

Management believes that the presentation of sales as measured for management purposes enhances the understanding of the Company’s business and helps depict longer-term trends that may not be apparent in the results of operations due to differences between the timing of sales and revenue recognition.

The Company’s flagship products are marketed under The BEST of AMERICA brand and include individual variable and group annuities, group private sector retirement plans, and variable life insurance. The BEST of AMERICA products allow customers to choose from investment options managed by premier mutual fund managers. The Company has also developed private label variable and fixed annuity products in conjunction with other financial services providers that allow those providers to sell products to their own customer bases under their own brand names.

The Company also markets group deferred compensation retirement plans to employees of state and local governments for use under Internal Revenue Code (IRC) Section 457. The Company utilizes its sponsorship by the National Association of Counties, The United States Conference of Mayors and The International Association of Firefighters when marketing IRC Section 457 products.

Second Quarter – 2006 Compared to 2005

The following table summarizes sales by product and segment for the periods indicated:


	Three months ended June 30,
(in millions)	2006		2005		Change
Individual Investments
Individual variable annuities:
The BEST of AMERICA products	$	1,116.3	$	816.4	37 %
Private label annuities		96.7		95.3	1 %

Total individual variable annuities		1,213.0		911.7	33 %
Individual fixed annuities		45.0		63.4	(29)%
Income products		57.4		44.7	28 %
Advisory services program		70.1		63.8	10 %

Total Individual Investments		1,385.5		1,083.6	28 %

Retirement Plans
Private sector:
The BEST of AMERICA products		348.6		373.5	(7)%
Public sector:
IRC Section 457 annuities		389.0		394.4	(1)%

Total Retirement Plans		737.6		767.9	(4)%

Individual Protection
Corporate-owned life insurance		146.7		142.9	3 %
The BEST of AMERICA variable life series		110.1		109.1	1 %
Traditional/universal life insurance		84.7		89.1	(5)%

Total Individual Protection		341.5		341.1	—

Total sales	$	2,464.6	$	2,192.6	12 %

SeePart I – Financial Information, Item 2 – MD&A –Business Segments for an analysis of sales by product and segment.

The following table summarizes sales by distribution channel for the periods indicated:


	Three months ended June 30,
(in millions)	2006		2005		Change
Non-affiliated:
Independent broker/dealers	$	728.8	$	679.5	7 %
Financial institutions		471.9		338.7	39 %
Wirehouse and regional firms		365.6		325.2	12 %
Pension plan administrators		110.4		94.7	17 %
Life insurance specialists		84.0		104.3	(20)%

Total non-affiliated sales		1,760.7		1,542.4	14 %

Affiliated:
NRS		395.5		401.1	(1)%
Nationwide agents		187.7		174.6	8 %
TBG Financial		62.7		38.6	62 %
NFN producers		58.0		35.9	62 %

Total affiliated sales		703.9		650.2	8 %

Total sales	$	2,464.6	$	2,192.6	12 %

The increase in total sales primarily was driven by strong sales of the recently introduced Lifetime Income (L.Inc.) and Capital Preservation Plus Lifetime Income (CPPLI) product riders in the Individual Investments segment.

Increased sales in the independent broker/dealers and financial institutions channels were driven by increased variable annuity sales, specifically L.Inc. and CPPLI as mentioned above.

Higher sales through the wirehouse and regional firms channel were driven by increases in sales of variable annuity products with living benefit features.

Higher sales in the NFN producers channel primarily was driven by increased sales of variable annuity and income products.

Year-to-Date – 2006 Compared to 2005

The following table summarizes sales by product and segment for the periods indicated:


	Six months ended June 30,
(in millions)	2006		2005		Change
Individual Investments
Individual variable annuities:
The BEST of AMERICA products	$	2,028.8	$	1,575.9	29 %
Private label annuities		169.7		184.5	(8)%

Total individual variable annuities		2,198.5		1,760.4	25 %
Individual fixed annuities		84.0		117.7	(29)%
Income products		114.4		87.6	31 %
Advisory services program		132.7		117.0	13 %

Total Individual Investments		2,529.6		2,082.7	21 %

Retirement Plans
Private sector:
The BEST of AMERICA products		712.2		789.2	(10)%
Public sector:
IRC Section 457 annuities		796.3		768.2	4 %

Total Retirement Plans		1,508.5		1,557.4	(3)%

Individual Protection
Corporate-owned life insurance		428.9		377.7	14 %
The BEST of AMERICA variable life series		220.2		212.8	3 %
Traditional/universal life insurance		164.8		172.2	(4)%

Total Individual Protection		813.9		762.7	7 %

Total sales	$	4,852.0	$	4,402.8	10 %

SeePart I – Financial Information, Item 2 – MD&A – Business Segments of this report for an analysis of sales by product and segment.

The following table summarizes sales by distribution channel for the periods indicated:


	Six months ended June 30,
(in millions)	2006		2005		Change
Non-affiliated:
Independent broker/dealers	$	1,404.0	$	1,345.1	4 %
Financial institutions		847.5		660.7	28 %
Wirehouse and regional firms		688.4		634.3	9 %
Life insurance specialists		256.6		230.9	11 %
Pension plan administrators		191.5		196.2	(2)%

Total non-affiliated sales		3,388.0		3,067.2	10 %

Affiliated:
NRS		806.9		782.1	3 %
Nationwide agents		366.3		339.0	8 %
TBG Financial		173.1		147.1	18 %
NFN producers		117.7		67.4	75 %

Total affiliated sales		1,464.0		1,335.6	10 %

Total sales	$	4,852.0	$	4,402.8	10 %

The increase in total sales primarily was due to strong sales of variable annuity products in the Individual Investments segment driven by the strong performance of the L.Inc. and CPPLI product riders. Higher COLI sales in the Individual Protection segment also contributed to the increase.

Increased sales in the independent broker/dealers and financial institutions channels were generated from strong variable annuity sales, specifically L.Inc. and CPPLI as mentioned above.

Sales through life insurance specialists increased due to the addition of two large COLI cases during the first quarter of 2006.

Higher sales in the NFN producers channel primarily was driven by increased sales of variable annuity and income products.

Business Segments

Individual Investments

Second Quarter – 2006 Compared to 2005

The following table summarizes selected financial data for the Company’s Individual Investments segment for the periods indicated:


	Three months ended June 30,
(in millions)	2006		2005		Change
Statements of Income Data
Revenues:
Policy charges:
Asset fees	$	123.8	$	111.1	11 %
Administrative fees		4.7		3.4	38 %
Surrender fees		13.8		16.1	(14)%

Total policy charges		142.3		130.6	9 %
Premiums on income products		34.9		23.1	51 %
Net investment income		184.4		207.6	(11)%
Other income		0.8		0.3	167 %

Total revenues		362.4		361.6	—

Benefits and expenses:
Interest credited to policyholder account values		126.8		142.0	(11)%
Annuity benefits and claims		49.9		40.7	23 %
Amortization of DAC		84.8		70.8	20 %
Other operating expenses		50.6		45.7	11 %

Total benefits and expenses		312.1		299.2	4 %

Pre-tax operating earnings	$	50.3	$	62.4	(19)%

Other Data
Sales:
Individual variable annuities	$	1,213.0	$	911.7	33 %
Individual fixed annuities		45.0		63.4	(29)%
Income products		57.4		44.7	28 %
Advisory services program		70.1		63.8	10 %

Total sales	$	1,385.5	$	1,083.6	28 %

Average account values:
General account	$	13,596.9	$	14,592.5	(7)%
Separate account		36,424.3		33,847.6	8 %
Advisory services program		491.6		281.5	75 %

Total average account values	$	50,512.8	$	48,721.6	4 %

Pre-tax operating earnings to average account values		0.40%		0.51%

The decrease in pre-tax operating earnings primarily was driven by higher amortization of DAC and annuity benefits and claims and lower interest spread income. Increased asset fees and premiums on income products partially offset the overall decrease.

Higher amortization of DAC primarily was due to higher variable annuity gross profits driven by higher asset levels.

Higher annuity benefits and claims were driven by increased immediate annuity reserves due to growth in sales relative to a year ago. This increase is consistent with the increase in premiums on income products noted below.

The following table summarizes the interest spread on Individual Investments segment average general account values for the period indicated:


	Three months ended June 30,
	2006	2005
Net investment income	5.60%	5.86%
Interest credited	3.73%	3.89%

Interest spread on average general account values	1.87%	1.97%

Interest spread margins declined during the second quarter of 2006 to 187 basis points compared to 197 basis points in the same period a year ago. Included in the current quarter were 9 basis points, or $3.1 million, of income from mortgage loan prepayment penalties and bond call premiums compared to 16 basis points, or $6.0 million, in the same period a year ago. Interest spread income declined primarily due to lower general account assets caused by fixed annuity net outflows.

Asset fees rose due to increases in both average separate account values and the average asset fee rate charged, with approximately equal contributions from each component. Asset fees are calculated daily and charged as a percentage of separate account values. The average variable asset fee rate increased to 1.36% from 1.31% in the prior year quarter as new business sold with higher-risk features and corresponding higher fee rates influenced the overall average rate.

The increase in premiums on income products was due to higher interest rates relative to a year ago, which created a favorable environment for immediate annuity products. The Federal Funds rate was 3.25% at June 30, 2005 compared to 5.25% at June 30, 2006.

Higher sales were driven by the variable annuity business as production rose due to continued strong momentum from the recently introduced L.Inc. and CPPLI product riders and the implementation of more targeted sales processes. L.Inc. and CPPLI accounted for $191.7 and $126.2 of the increase in sales over the second quarter of 2005.

Year-to-Date – 2006 Compared to 2005

The following table summarizes selected financial data for the Company’s Individual Investments segment for the periods indicated:


	Six months ended June 30,
(in millions)	2006		2005		Change
Statements of Income Data
Revenues:
Policy charges:
Asset fees	$	246.3	$	221.9	11 %
Administrative fees		9.2		7.5	23 %
Surrender fees		28.7		31.7	(10)%

Total policy charges		284.2		261.1	9 %
Premiums on income products		66.4		43.7	52 %
Net investment income		379.2		412.7	(8)%
Other income		1.2		0.6	100 %

Total revenues		731.0		718.1	2 %

Benefits and expenses:
Interest credited to policyholder account values		257.1		280.7	(8)%
Annuity benefits and claims		90.4		72.3	25 %
Amortization of DAC		182.4		153.4	19 %
Other operating expenses		97.2		90.9	7 %

Total benefits and expenses		627.1		597.3	5 %

Pre-tax operating earnings	$	103.9	$	120.8	(14)%

Other Data
Sales:
Individual variable annuities	$	2,198.5	$	1,760.4	25 %
Individual fixed annuities		84.0		117.7	(29)%
Income products		114.4		87.6	31 %
Advisory services program		132.7		117.0	13 %

Total sales	$	2,529.6	$	2,082.7	21 %

Average account values:
General account	$	13,789.6	$	14,628.1	(6)%
Separate account		36,076.3		34,126.5	6 %
Advisory services program		464.9		253.0	84 %

Total average account values	$	50,330.8	$	49,007.6	3 %

Account values as of period end:
Individual variable annuities	$	40,746.9	$	39,049.8	4 %
Individual fixed annuities		6,757.7		7,710.7	(12)%
Income products		1,928.6		1,811.4	7 %
Advisory services program		508.1		314.6	62 %

Total account values	$	49,941.3	$	48,886.5	2 %

GMDB - Net amount at risk, net of reinsurance	$	204.8	$	275.4	(26)%
GMDB - Reserves, net of reinsurance	$	29.9	$	24.8	21 %
Pre-tax operating earnings to average account values		0.41%		0.49%

Higher amortization of DAC primarily was due to higher variable annuity gross profits driven by higher asset levels.

The following table summarizes the interest spread on Individual Investments segment average general account values for the periods indicated:


	Six months ended June 30,
	2006	2005
Net investment income	5.68%	5.81%
Interest credited	3.73%	3.84%

Interest spread on average general account values	1.95%	1.97%

Interest spread margins declined during the first six months of 2006 to 195 basis points compared to 197 basis points in the same period a year ago. Included in the current period were 11 basis points, or $7.1 million, of income from mortgage loan prepayment penalties and bond call premiums compared to 18 basis points, or $12.8 million, in the same period a year ago. Interest spread income declined primarily due to lower general account assets caused by fixed annuity net outflows. For the full year 2006, the Company expects interest spread margins to remain relatively stable and projects full year spreads of 190 to 195 basis points, including a nominal level of prepayment activity during the remainder of the year.

Asset fees rose due to increases in both average separate account values and the average asset fee rate charged, with approximately equal contributions from each component. The average variable asset fee rate increased to 1.37% from 1.30% in the comparable prior year period as new business sold with higher-risk features and corresponding higher fee rates influenced the overall average rate.

The increase in premiums on income products was due to higher interest rates relative to a year ago, which created a favorable environment for immediate annuity products.

Higher sales were driven by the variable annuity business as production rose due to continued strong momentum from the recently introduced L.Inc. and CPPLI product riders and the implementation of more targeted sales processes. CPPLI and L.Inc. accounted for $319.1 and $207.3 of the increase in sales over the first six months of 2005.

The following table summarizes selected information about the Company’s deferred individual fixed annuities, including the fixed option of variable annuities, as of June 30, 2006:

Ratchet

Reset

Market value
adjustment (MVA)
and other

Total

(dollars in millions)

Account

value

Weighted

average

crediting

rate

Account

value

Weighted

average

crediting

rate

Account

value

Weighted

average

crediting

rate

Account

value

Weighted

average

crediting

rate

Minimum interest rate of 3.50% or greater

—

N/A

507.3

3.27%

—

N/A

507.3

3.27%

Minimum interest rate of 3.00% to 3.49%

2,629.0

4.78%

5,176.1

3.07%

—

N/A

7,805.1

3.65%

Minimum interest rate lower than 3.00%

871.2

3.28%

633.0

3.48%

22.2

3.58%

1,526.4

3.32%

MVA with no minimum interest rate guarantee

—

N/A

—

N/A

1,638.7

3.12%

1,638.7

3.07%

Total deferred individual fixed annuities

3,500.2

4.41%

6,316.4

3.13%

1,660.9

3.13%

11,477.5

3.50%

Retirement Plans

Second Quarter – 2006 Compared to 2005

The following table summarizes selected financial data for the Company’s Retirement Plans segment for the periods indicated:


	Three months ended June 30,
(in millions)	2006		2005		Change
Statements of Income Data
Revenues:
Policy charges:
Asset fees	$	31.5	$	32.1	(2) %
Administrative fees		22.4		1.8	NM
Surrender fees		1.2		2.4	(50) %

Total policy charges		55.1		36.3	52 %
Net investment income		156.0		157.3	(1)%
Other income		—		0.1	(100)%

Total revenues		211.1		193.7	9 %

Benefits and expenses:
Interest credited to policyholder account values		110.3		109.5	1 %
Amortization of DAC		10.7		11.0	(3)%
Other operating expenses		45.9		45.8	—

Total benefits and expenses		166.9		166.3	—

Pre-tax operating earnings	$	44.2	$	27.4	61 %

Other Data
Sales:
Private sector	$	348.6	$	373.5	(7)%
Public sector		389.0		394.4	(1)%

Total sales	$	737.6	$	767.9	(4)%

Average account values:
General account	$	10,713.2	$	10,432.8	3 %
Separate account		17,181.7		18,524.5	(7)%

Total average account values	$	27,894.9	$	28,957.3	(4)%

Pre-tax operating earnings to average account values		0.63%		0.38%

The increase in pre-tax operating earnings primarily was driven by higher administrative fees attributable to the withdrawal of funds from a fixed annuity contract, which resulted in an $18.6 million policy adjustment that led to an increase in policy fees.

The following table summarizes the interest spread on Retirement Plans segment average general account values for the periods indicated:


	Three months ended June 30,
	2006	2005
Net investment income	5.83%	6.03%
Interest credited	4.12%	4.20%

Interest spread on average general account values	1.71%	1.83%

Interest spread margins declined during the second quarter of 2006 to 171 basis points compared to 183 basis points in the same period a year ago. Included in the current quarter were 6 basis points, or $1.6 million, of income from mortgage loan prepayment penalties and bond call premiums compared to 16 basis points, or $4.3 million, in the same period a year ago.

Private sector sales decreased due to the declining issuance of group annuity contracts.

Public sector sales declined mainly due to the fixed annuity contract withdrawal mentioned above.

Year-to-Date – 2006 Compared to 2005

The following table summarizes selected financial data for the Company’s Retirement Plans segment for the periods indicated:


	Six months ended June 30,
(in millions)	2006		2005		Change
Statements of Income Data
Revenues:
Policy charges:
Asset fees	$	63.3	$	65.0	(3)%
Administrative fees		24.9		4.1	NM
Surrender fees		2.6		4.5	(42)%

Total policy charges		90.8		73.6	23 %
Net investment income		315.8		319.2	(1)%
Other income		—		0.2	(100)%

Total revenues		406.6		393.0	3 %

Benefits and expenses:
Interest credited to policyholder account values		220.9		218.8	1 %
Amortization of DAC		20.7		23.3	(11)%
Other operating expenses		89.7		91.6	(2)%

Total benefits and expenses		331.3		333.7	(1)%

Pre-tax operating earnings	$	75.3	$	59.3	27 %

Other Data
Sales:
Private sector	$	712.2	$	789.2	(10)%
Public sector		796.3		768.2	4 %

Total sales	$	1,508.5	$	1,557.4	(3)%

Average account values:
General account	$	10,757.9	$	10,334.7	4 %
Separate account		17,735.8		18,753.5	(5)%

Total average account values	$	28,493.7	$	29,088.2	(2)%

Account values as of period end:
Private sector	$	12,187.7	$	13,787.9	(12)%
Public sector		14,908.2		14,797.6	1 %

Total account values	$	27,095.9	$	28,585.5	(5)%

Pre-tax operating earnings to average account values		0.53%		0.41%

The following table summarizes the interest spread on Retirement Plans segment average general account values for the periods indicated:


	Six months ended June 30,
	2006	2005
Net investment income	5.87%	6.18%
Interest credited	4.11%	4.23%

Interest spread on average general account values	1.76%	1.95%

Interest spread margins decreased to 176 basis points in the first six months of 2006 compared to 195 basis points in the same period a year ago. Included in the current period were 7 basis points, or $3.9 million, of income from mortgage loan prepayment penalties and bond call premiums compared to 21 basis points, or $11.0 million, in the same period a year ago. For the full year 2006, the Company expects interest spread margins to increase slightly and projects full year spreads of 180 to 185 basis points, including a nominal level of prepayment activity during the remainder of the year.

Private sector sales decreased due to the declining issuance of group annuity contracts.

Public sector sales growth was due to increased flows from existing cases and higher rates of plan transfers.

Individual Protection

Second Quarter – 2006 Compared to 2005

The following table summarizes selected financial data for the Company’s Individual Protection segment for the periods indicated:


	Three months ended June 30,
(in millions)	2006		2005		Change
Statements of Income Data
Revenues:
Policy charges:
Asset fees	$	8.1	$	7.1	14 %
Cost of insurance charges		69.5		67.3	3 %
Administrative fees		15.2		15.6	(3)%
Surrender fees		2.7		3.3	(18)%

Total policy charges		95.5		93.3	2 %
Traditional life insurance premiums		41.9		43.7	(4)%
Net investment income		81.7		85.6	(5)%

Total revenues		219.1		222.6	(2)%

Benefits and expenses:
Interest credited to policyholder account values		45.5		47.6	(4)%
Life insurance benefits		62.4		60.7	3 %
Policyholder dividends on participating policies		6.0		8.3	(28)%
Amortization of DAC		28.5		25.0	14 %
Other operating expenses		31.1		35.9	(13)%

Total benefits and expenses		173.5		177.5	(2)%

Pre-tax operating earnings	$	45.6	$	45.1	1 %

Other Data
Sales:
Corporate-owned life insurance	$	146.7	$	142.9	3 %
The BEST of AMERICA variable life series		110.1		109.1	1 %
Traditional/universal life insurance		84.7		89.1	(5)%

Total sales	$	341.5	$	341.1	—

Pre-tax operating earnings decreased slightly primarily due to lower net investment income and higher amortization of DAC, partially offset by lower other operating expenses and higher cost of insurance charges.

Net investment income declined primarily due to lower yields and a declining level of assets.

Higher amortization of DAC primarily was attributable to increased insurance in force.

The decrease in other operating expenses primarily resulted from higher software capitalization due to a higher spending rate on capitalizable systems development projects compared to the prior year quarter and lower premium taxes.

The improvement in cost of insurance charges was driven by increased universal life business in force and the aging block of individual and corporate investment life business.

Year-to-Date – 2006 Compared to 2005

The following table summarizes selected financial data for the Company’s Individual Protection segment for the periods indicated:


	Six months ended June 30,
(in millions)	2006		2005		Change
Statements of Income Data
Revenues:
Policy charges:
Asset fees	$	15.9	$	13.5	18 %
Cost of insurance charges		139.1		133.9	4 %
Administrative fees		32.4		33.5	(3)%
Surrender fees		5.8		6.4	(9)%

Total policy charges		193.2		187.3	3 %
Traditional life insurance premiums		87.4		87.7	—
Net investment income		162.6		169.3	(4)%

Total revenues		443.2		444.3	—

Benefits and expenses:
Interest credited to policyholder account values		88.9		91.1	(2)%
Life insurance benefits		126.0		118.7	6 %
Policyholder dividends on participating policies		13.6		18.0	(24)%
Amortization of DAC		42.6		48.1	(11)%
Other operating expenses		72.1		71.1	1 %

Total benefits and expenses		343.2		347.0	(1)%

Pre-tax operating earnings	$	100.0	$	97.3	3 %

Other Data
Sales:
Corporate-owned life insurance	$	428.9	$	377.7	14 %
The BEST of AMERICA variable life series		220.2		212.8	3 %
Traditional/universal life insurance		164.8		172.2	(4)%

Total sales	$	813.9	$	762.7	7 %

Policy reserves as of period end:
Individual investment life insurance	$	3,405.2	$	3,112.6	9 %
Corporate investment life insurance		7,164.8		6,338.1	13 %
Traditional life insurance		2,128.6		2,143.6	(1)%
Universal life insurance		1,102.8		1,024.3	8 %

Total policy reserves	$	13,801.4	$	12,618.6	9 %

Insurance in force as of period end:
Individual investment life insurance	$	38,149.3	$	36,928.6	3 %
Corporate investment life insurance		24,061.2		23,184.9	4 %
Traditional life insurance		19,800.5		20,663.3	(4)%
Universal life insurance		9,180.0		8,569.1	7 %

Total insurance in force	$	91,191.0	$	89,345.9	2 %

The increase in pre-tax operating earnings primarily was driven by lower amortization of DAC and higher cost of insurance charges, partially offset by lower net investment income and higher life insurance benefits.

The decrease in amortization of DAC primarily was attributable to lower overall margins as a result of adverse mortality experience and additional amortization on one large COLI case that lapsed in the prior year quarter.

Higher cost of insurance charges were due to increased business in force throughout the segment combined with the aging of the individual life insurance business.

Lower net investment income was due to decreased asset levels and investment yields.

Higher life insurance benefits were due to adverse mortality in both the fixed and investment life businesses, partially offset by a $3.3 million waiver of premium reserve release in fixed life during the first quarter of 2006.

The overall sales improvement primarily was due to higher COLI sales driven by the addition of two large cases that closed during the first quarter of 2006.

Corporate and Other

Second Quarter – 2006 Compared to 2005

The following table summarizes selected financial data for the Company’s Corporate and Other segment for the periods indicated:


	Three months ended June 30,
(in millions)	2006			2005			Change
Statements of Income Data
Operating revenues:
Net investment income	$	90.7		$	76.8		18 %
Other income		(0.4	)		—		NM

Total operating revenues		90.3			76.8		18 %

Benefits and operating expenses:
Interest credited to policyholder account values		50.5			36.4		39 %
Interest expense on debt		15.6			15.9		(2)%
Other operating expenses		3.6			1.4		157 %

Total benefits and operating expenses		69.7			53.7		30 %

Pre-tax operating earnings		20.6			23.1		(11)%
Net realized losses on investments, hedging instruments and hedged items¹		(10.5	)		(1.3	)	NM
Adjustment to amortization of DAC related to net realized losses		1.4			(3.8	)	NM

Income from continuing operations before federal income taxes	$	11.5		$	18.0		(36)%

¹	Excluding periodic net coupon settlements on non-qualifying derivatives.

Pre-tax operating earnings decreased primarily due to higher other operating expenses, which were driven by an increase in legal expenses.

The Company recorded higher net realized losses on investments, hedging instruments and hedged items during the second quarter of 2006 compared to the prior year primarily due to an increase in gross losses on sales of fixed maturity securities. Due to the rising interest rate environment, the bond market was less favorable in the second quarter of 2006 compared to the same period a year ago.

The following table summarizes net realized losses on investments, hedging instruments and hedged items from continuing operations by source for the periods indicated:


	Three months ended June 30,
(in millions)	2006			2005
Total realized gains on sales, net of hedging losses	$	13.9		$	8.8
Total realized losses on sales, net of hedging gains		(26.3	)		(5.0	)
Other-than-temporary and other investment impairments		(3.2	)		(5.7	)
Credit default swaps		(0.1	)		(0.7	)
Periodic net coupon settlements on non-qualifying derivatives		0.4			(0.2	)
Other derivatives		5.2			1.3

Net realized losses on investments, hedging instruments and hedged items	$	(10.1	)	$	(1.5	)

Year-to-Date – 2006 Compared to 2005

The following table summarizes selected financial data for the Company’s Corporate and Other segment for the periods indicated:


	Six months ended June 30,
(in millions)	2006			2005			Change
Statements of Income Data
Operating revenues:
Net investment income	$	172.2		$	143.2		20 %
Other income		0.6			2.0		(70)%

Total operating revenues		172.8			145.2		19 %

Benefits and operating expenses:
Interest credited to policyholder account values		96.1			66.9		44 %
Interest expense on debt		32.2			31.3		3 %
Other operating expenses		5.7			9.9		(42)%

Total benefits and operating expenses		134.0			108.1		24 %

Pre-tax operating earnings		38.8			37.1		5 %
Net realized (losses) gains on investments, hedging instruments and hedged items¹		(17.7	)		21.5		NM
Adjustment to amortization of DAC related to net realized losses (gains)		6.5			(5.4	)	NM

Income from continuing operations before federal income taxes	$	27.6		$	53.2		(48)%

Other Data
Account values as of period end —
Funding agreements backing medium-term notes	$	4,047.4		$	4,009.1		1 %

¹	Excluding periodic net coupon settlements on non-qualifying derivatives.

Pre-tax operating earnings were flat. The Company recorded higher net realized losses on investments, hedging instruments and hedged items during the second quarter of 2006 compared to the prior year primarily due to a decline in gross gains and an increase in gross losses on sales of fixed maturity securities. Due to the rising interest rate environment, the bond market was less favorable in the first six months of 2006 compared to the same period a year ago.

The following table summarizes net realized (losses) gains on investments, hedging instruments and hedged items from continuing operations by source for the periods indicated:


	Six months ended June 30,
(in millions)	2006			2005
Total realized gains on sales, net of hedging losses	$	24.7		$	39.9
Total realized losses on sales, net of hedging gains		(44.1	)		(8.0	)
Other-than-temporary and other investment impairments		(4.0	)		(9.9	)
Credit default swaps		(0.3	)		(2.4	)
Periodic net coupon settlements on non-qualifying derivatives		1.0			(0.3	)
Other derivatives		6.0			1.9

Net realized (losses) gains on investments, hedging instruments and hedged items	$	(16.7	)	$	21.2

The Company has a comprehensive portfolio monitoring process for fixed maturity and equity securities to identify and evaluate the necessity of recording impairment losses for other-than-temporary declines in the fair value of investments.

The following table summarizes for the six months ended June 30, 2006 the Company’s largest aggregate losses on sales and write-downs by issuer, the related circumstances giving rise to the losses and the circumstances that may have affected other material investments held:


								June 30, 2006
(in millions)	Fair value at sale (proceeds)		YTD loss on sale			YTD write-downs		Holdings¹		Net unrealized gain (loss)
U.S. government agency securities that were sold at a loss in 2006. No impairment is necessary on the remaining holdings.		170.2		(3.5	)		—		709.6		24.3

U.S. government securities that were sold at a loss in 2006. No impairment is necessary on the remaining holdings.		50.2		(1.5	)		—		194.9		2.9

A bank and thrift holding company which offers various financial services to consumers and small businesses in the United States. A portion of the securities was sold in the second quarter of 2006. The Company has the ability and intent to hold the remaining securities to recovery.		47.6		(2.7	)		—		131.5		(8.6	)

A service company that provides electronic commerce and payment services for businesses and consumers worldwide. A portion of the securities was sold in the first quarter of 2006. The Company has the ability and intent to hold the remaining securities to recovery.		27.1		(1.3	)		—		6.8		(0.4	)

Total	$	295.1	$	(9.0	)	$	—	$	1,042.8	$	18.2

¹	Holdings represent amortized cost of fixed maturity securities and cost of equity securities as of the date indicated.

No other issuer had aggregate losses on sales and write-downs greater than 2.0% of the Company’s total gross losses on sales and write-downs on fixed maturity and equity securities.

Contractual Obligations and Commitments

The Company’s contractual obligations and commitments have not changed materially from those disclosed in the Company’s 2005 Annual Report on Form 10-K.

Off-Balance Sheet Transactions

Under the MTN program, NLIC issues funding agreements to an unconsolidated third party trust to secure notes issued to investors by the trust. The funding agreements rankpari passuwith all other insurance claims of the issuing company in the event of liquidation and should be treated as “annuities” under applicable Ohio insurance law. Therefore, the funding agreement obligations are classified as a component of future policy benefits and claims on the condensed consolidated balance sheets. Because the Company is not the primary beneficiary of, and has no ownership interest in, or control over, the third party trust that issues the notes, the Company does not include the trust in its condensed consolidated financial statements. Since the notes issued by the trust have a secured interest in the funding agreements issued by the Company, Moody’s Investors Service, Inc. and Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc., assign the same ratings to the notes and the insurance financial strength of the Company.

ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company’s market risks have not changed materially from those disclosed in the Company’s 2005 Annual Report on Form 10-K.

ITEM 4 CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Company’s Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934). Based on such evaluation, such officers have concluded that the Company’s disclosure controls and procedures are effective as of the end of the period covered by this Quarterly Report.

Changes in Internal Control Over Financial Reporting

Effective April 1, 2006, the Company implemented a series of new enterprise resource planning (ERP) modules, including a new general ledger and chart of accounts and new consolidation, reporting and purchasing tools. The introduction of these new ERP modules and the related workflow changes resulted in changes to many of the Company’s financial reporting controls and procedures. Such changes were identified and planned prior to their introduction into the Company’s internal controls over financial reporting. Following implementation, these new controls were validated according to the Company’s established processes. The integration of the ERP modules and related workflow changes will continue throughout 2006 and may result in further changes to the Company’s financial reporting controls and procedures.

The system changes were undertaken to standardize accounting systems, improve management reporting and consolidate accounting functions for the Company, its subsidiaries and affiliates, and were not undertaken in response to any actual or perceived significant deficiencies in the Company’s internal control over financial reporting. There have been no other changes during the Company’s second fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1 LEGAL PROCEEDINGS

SeePart 1 – Financial Information, Item 1 – Unaudited Condensed Consolidated Financial Statements, Note 7 – Contingencies – Legal Mattersfor a discussion of legal proceedings.

ITEM 1A RISK FACTORS

The Company’s risk factors have not changed materially from those disclosed in the Company’s 2005 Annual Report on Form 10-K.

ITEM 2 UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Omitted due to reduced disclosure format.

ITEM 3 DEFAULTS UPON SENIOR SECURITIES

Omitted due to reduced disclosure format.

ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Omitted due to reduced disclosure format.

ITEM 5 OTHER INFORMATION

None.

ITEM 6 EXHIBITS


		31.1		Certification of W.G. Jurgensen pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002

		31.2		Certification of Timothy G. Frommeyer pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002

		32.1		Certification of W.G. Jurgensen pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (this exhibit is intended to be furnished in accordance with Regulation S-K, Item 601(b)(32)(ii) and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or incorporated by reference into any document filed under the Securities Act of 1933, except as shall be expressly set forth by specific reference to such filing)

		32.2		Certification of Timothy G. Frommeyer pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (this exhibit is intended to be furnished in accordance with Regulation S-K, Item 601(b)(32)(ii) and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or incorporated by reference into any document filed under the Securities Act of 1933, except as shall be expressly set forth by specific reference to such filing)

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		NATIONWIDE LIFE INSURANCE COMPANY
		(Registrant)

Date: August 3, 2006		/s/ Timothy G. Frommeyer
		Timothy G. Frommeyer, Senior Vice President – Chief Financial Officer (Principal Financial Officer and Duly Authorized Officer)

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Nationwide Life Insurance (NWLIC) 10-Q2006 Q2 Quarterly report

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