OHIO | 6311 | 31-4156830 |
(State or other jurisdiction of incorporation or organization) | (Primary Standard Industrial Classification Code Number) | (I.R.S. Employer Identification Number) |
of registrant's principal executive offices)
One Nationwide Plaza
415 under the Securities Act of 1933, check the following box. | ☑ |
statement for the same offering. | □ |
offering. | □ |
offering. | □ |
filer", "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act. | □ |
Large accelerated filer | □ |
Accelerated filer | □ |
Non-accelerated filer (Do not check if a smaller reporting company) | ☑ |
Smaller reporting company | □ |
Emerging growth company | □ |
Title of Each Class of Securities to be Registered | Amount to be Registered | Proposed Maximum Offering Price Per Unit | Proposed Maximum Aggregate Offering Price, including previously registered securities1 | Amount of Registration Fee, including fee paid for previously registered securities |
Single Purchase Payment Deferred Index-Linked Annuity Contract | N/A | N/A | $1,345,496,540.85 2 | $150,974.18 3 |
1 | The amount to be registered and the proposed maximum offering price per unit are not applicable in that these contracts are not issued in predetermined amounts or units. The proposed maximum aggregate offering price is estimated solely for the purpose of determining the registration fee. |
2 | This registration statement is registering $1,000,000,000 of additional securities. This registration statement also includes unsold securities previously registered under the Securities Act of 1933 ("Securities Act") on Form S-1 (File No. 333-229802) filed by the Registrant on February 22, 2019 ("Prior Registration Statement"). Pursuant to Rule 415(a)(6) under the Securities Act, all unsold securities from the Prior Registration Statement will be added to this Registration Statement and the offering of securities under the Prior Registration Statement will be deemed terminated as of the date of effectiveness of this Registration Statement. As of April 22, 2021, there were $345,496,540.85 of unsold securities registered pursuant to the Prior Registration Statement. |
3 | The registrant is paying $109,100 to register the $1,000,000,000 of additional securities. Additionally, pursuant to Rule 415(a)(6) under the Securities Act, $41,874.18 (calculated at the rate in effect at the time the Prior Registration Statement was filed) of filing fees paid in connection with the unsold securities from the Prior Registration Statement shall continue to apply to the unsold securities. |
BlackRock Select Factor Index | J.P. Morgan Mozaic IISM Index | MSCI EAFE Index | NYSE ® Zebra Edge® Index |
SG Macro Compass Index | S&P 500SM Average Daily Risk Control 10% USD Price Return Index | S&P 500® Index |
• | The Participation Rate acts as a multiplier because it has the effect of multiplying the performance of the Index, positive or negative. If the Participation Rate is greater than 100%, it increases upside potential while also increasing risk of loss. Conversely, if the Participation Rate is lower than 100%, it decreases upside potential while also decreasing risk of loss. A Participation Rate may be set as low as 5%. A low Participation Rate would cause a Strategy to participate in the performance of the linked index to only a small extent. |
• | The Strategy Spread is an annualized percentage used as a deduction in the calculation of gains and losses. If the Strategy Spread is greater than 0%, its application will operate to negatively impact the performance of the Strategy. This means it will reduce gains and potentially increase losses. The Strategy Spread can result in losses under a Strategy even if the linked Index has increased in value. |
• | Non-Preferred Withdrawals may be subject to contingent deferred sales charges and negative market value adjustments, both of which will negatively impact the performance of your Contract. |
• | If you take a Non-Preferred Withdrawal prior to the end of a Strategy Term, which is also an event upon which we apply gains and losses to your Contract, we will calculate your rate of return in a different manner than if the withdrawal were a Preferred Withdrawal. The difference will reduce gains and may increase losses. In addition, losses related to the Non-Preferred Withdrawal could exceed the Strategy’s defined downside protection, exposing you to a greater risk of loss. |
For information on how to contact Nationwide, see Contacting the Service Center. |
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Adjusted Index Performance (AIP) – A percent that represents the Index Performance adjusted for a Strategy’s Participation Rate and Strategy Spread. The AIP is the Index Performance multiplied by the Participation Rate and then reduced by the product of the Strategy Spread multiplied by the Elapsed Term. The AIP is used in the Strategy Earnings Percentage and Non-Preferred Strategy Earnings Percentage calculations. |
Annuitant - The person upon whose life any life-contingent annuity payments depend and the person whose death triggers the Death Benefit. The Annuitant is also the person to whom annuity payments are made once you reach Annuitization. |
Annuitization Date - The date on which annuity payments begin. |
Annuity Commencement Date - The date on which annuity payments are scheduled to begin. |
Beneficiary - A person designated by the Contract Owner who may receive certain benefits under the Contract, including the Death Benefit. |
Business Day - Each day that the New York Stock Exchange is open for regular trading. A Business Day ends at the same time that regular trading on the New York Stock Exchange closes (typically 4:00 p.m. Eastern Time). |
Cash Withdrawal - The dollar amount paid to the Contract Owner upon a partial withdrawal or full surrender. A Cash Withdrawal is equal to the Gross Withdrawal minus any applicable CDSC and deducted taxes, and reflects the application of any MVA. |
Charitable Remainder Trust - A trust meeting the requirements of Section 664 of the Code. |
Code - The Internal Revenue Code of 1986, as amended. |
Contingent Annuitant - The person who becomes the Annuitant if the Annuitant dies before the Annuitization Date. |
Contingent Beneficiary - The person or entity designated by the Contract Owner to receive any benefits accorded to a Beneficiary if there are no surviving Beneficiaries when the Annuitant dies. |
Contingent Deferred Sales Charge (CDSC) - A charge that may be assessed if you take a Non-Preferred Withdrawal during the first six Contract Years. |
Contract - The Nationwide Defined Protection® Annuity Contract, the individual single purchase payment deferred annuity contract with index-linked strategies described in this prospectus. |
Contract Accumulation Value - The sum of your Strategy Accumulation Values as of a given date. |
Contract Anniversary - Each recurring twelve-month anniversary of the Date of Issue while the Contract remains in force. |
Contract Owner (you) - The person possessing all rights under the Contract prior to the Annuitization Date, along with any Joint Owner. As the context requires, "you" refers to a potential or existing Contract Owner. |
Contract Value - The sum of your Strategy Values as of a given date. |
Contract Year - The twelve-month period starting on the Date of Issue and each Contract Anniversary. A Contract Year ends on the day prior to a Contract Anniversary. |
Crediting Factors - For any Strategy, the Index, Strategy Term, Protection Level, Participation Rate, and Strategy Spread. See "Crediting Factors" for a description of each Crediting Factor. |
Date of Issue - The date we issue the Contract. Your Purchase Payment is applied to the Contract on the Date of Issue. |
Death Benefit - The benefit triggered upon the death of the Annuitant, provided such death occurs before the Annuitization Date while the Contract is in force and there is no Contingent Annuitant. |
Default Option – the Strategy where your Strategy Value will be transferred to if you have Strategy Value invested in a Strategy that will not be available for reinvestment for the next Strategy Term and we do not receive instructions from you prior to the close of business on the Strategy Term End Date. |
Elapsed Term - The number of calendar days that have elapsed during a Strategy Term divided by 365. |
Gross Withdrawal - A value that we calculate each time you take a partial withdrawal or full surrender representing the impact of the withdrawal. When you take a partial withdrawal or full surrender, the Gross Withdrawal equals the reduction in your Modified Contract Value and related Modified Strategy Value. A Gross Withdrawal equals the related Cash Withdrawal plus any applicable CDSC and deducted taxes, and minus any applicable MVA (which can be positive or negative). |
Index - The market index associated with a Strategy. |
Index Performance - The change in the value of an Index, expressed as a percentage, between the first day of a Strategy Term (or another date for a substitute Index) and a specific future day during that Strategy Term. The Index Performance may be positive, negative, or equal to zero. |
Index Value - On a Business Day, the closing value of an Index published for that day. On a day other than a Business Day, the Index Value will be the closing value of the Index for the previous Business Day. |
Individual Retirement Account - An account that qualifies for favorable tax treatment under Section 408(a) of the Code but does not include Roth IRAs. |
Individual Retirement Annuity (IRA) - An annuity contract that qualifies for favorable tax treatment under Section 408(b) of the Code, but does not include Roth IRAs or Simple IRAs. |
Interim Strategy Earnings - The amount applied to your Strategy when you take a partial withdrawal or full surrender on a day other than the Strategy Term End Date. |
Investment-Only Contract - A Contract purchased by a qualified pension, profit-sharing, or stock bonus plan as defined by Section 401(a) of the Code. |
Joint Owner - The person, if any, designated as a second person (in addition to the Contract Owner) to possess an undivided interest in the Contract. If there is a Joint Owner, references to Contract Owner and Joint Owner will apply to both of them, or either of them, unless the context requires otherwise. |
Lock-In - The feature under the Contract that allows an Index Value as of a certain date to be locked-in for purposes of calculating the Index Performance for a Strategy for the remainder of the Strategy Term. |
Lock-In Date - The date as of which the Index Value for a Strategy is locked in under the Lock-In feature. |
Market Value Adjustment (MVA) - The adjustment that may be applied if you take a Non-Preferred Withdrawal during the MVA Period. |
Modified Contract Value - The sum of your Modified Strategy Values as of a given date, which equals the maximum Gross Withdrawal that can be taken from the Contract on any given date. |
Modified Strategy Value - The maximum Gross Withdrawal that may be taken from a Strategy as of a given date during a Strategy Term. On a Strategy Term End Date, the Modified Strategy Value is equal to your Strategy Value plus any Term Strategy Earnings. On any day other than the Strategy Term End Date, the Modified Strategy Value is equal to your Strategy Value plus any Interim Strategy Earnings that would be applied if you withdrew your entire Strategy Value. |
MVA Period - The period of time during which Nationwide may apply the MVA to partial withdrawals and a full surrender. The MVA Period begins on the Date of Issue and ends after the sixth Contract Year. |
Nationwide (we, us, our) - Nationwide Life Insurance Company. |
Non-Preferred Strategy Earnings Percentage (NSEP) - A rate of interest (which may be positive, negative, or equal to zero) used to calculate Interim Strategy Earnings applied to a Strategy when a Non-Preferred Withdrawal is taken prior to the Strategy Term End Date. |
Non-Preferred Withdrawal - Any portion of a Gross Withdrawal from the Contract that is in excess of the Remaining Preferred Withdrawal Amount. Interim Strategy Earnings for a Non-Preferred Withdrawal are calculated using the Non-Preferred Strategy Earnings Percentage (or NSEP). Non-Preferred Withdrawals may also be subject to CDSCs and MVAs. All or a portion of any withdrawal may be subject to federal income taxes, and Contract Owners taking withdrawals before age 59½ may be subject to a 10% penalty tax. |
Non-Preferred Withdrawal Adjustment Percentage – A percent that can reduce your Interim Strategy Earnings if you take a Non-Preferred Withdrawal. It is part of the NSEP calculation. |
Non-Qualified Contract - A Contract which does not qualify for favorable tax treatment as a Qualified Plan, IRA, Roth IRAs, SEP IRA, or Simple IRA. |
Participation Rate - The proportion of the Index Performance that is reflected in the Strategy’s performance. |
Preferred Withdrawal - Any portion of a Gross Withdrawal from the Contract that is less than or equal to the Remaining Preferred Withdrawal Amount. Preferred Withdrawals are not subject to any CDSC or MVA. In addition, Interim Strategy Earnings for a Preferred Withdrawal are calculated using the Strategy Earnings Percentage (SEP). All or a portion of any withdrawal may be subject to federal income taxes, and Contract Owners taking withdrawals before age 59½ may be subject to a 10% penalty tax. |
Preferred Withdrawal Amount - The dollar amount of Gross Withdrawals that you can take during a given Contract Year without taking a Non-Preferred Withdrawal. |
Preferred Withdrawal Percentage – the percentage of your Contract Value that you can withdraw each Contract Year as a Preferred Withdrawal. |
Protection Level - An amount of downside protection under a Strategy for a Strategy Term. |
Purchase Payment - Money paid into the Contract by the Contract Owner. |
Qualified Plan - A retirement plan that receives favorable tax treatment under Section 401 of the Code, including Investment-Only Contracts. In this prospectus, all provisions applicable to Qualified Plans also apply to Investment-Only Contracts unless specifically stated otherwise. |
Remaining Preferred Withdrawal Amount - The Preferred Withdrawal Amount for a Contract Year minus the total dollar amount of all Preferred Withdrawals from the Contract already taken that Contract Year. The Remaining Preferred Withdrawal Amount will never be less than zero. |
Roth IRA - An annuity contract which qualifies for favorable tax treatment under Section 408A of the Code. |
Simplified Employee Pension IRA (SEP IRA) - An annuity contract which qualifies for favorable tax treatment under Section 408(k) of the Code. A SEP IRA is unrelated to the Strategy Earnings Percentage (SEP) described throughout this prospectus, which is a rate of return used to calculate Strategy Earnings. |
Service Center - The department of Nationwide responsible for receiving all service and transaction requests relating to the Contract. For service and transaction requests submitted other than by telephone (including fax requests), the Service Center is Nationwide’s mail and document processing facility. For service and transaction requests communicated by telephone, the Service Center is Nationwide’s operations processing facility. Information on how to contact the Service Center may be found under "Contacting the Service Center." |
Simple IRA - An annuity contract which qualifies for favorable tax treatment under Section 408(p) of the Code. |
Strategy - Each investment option to which you may allocate your Purchase Payment or Contract Value. |
Strategy Accumulation Value - The value of a Strategy if unrealized Strategy Earnings were to be applied to the Strategy Value using only the SEP as of a given date during a Strategy Term. It is the daily value expressed in dollars that is provided to show how the Strategy is performing throughout a Strategy Term. |
Strategy Earnings - The amount applied to a Strategy, including Term Strategy Earnings and/or Interim Strategy Earnings, on a given date or over a period of time. Strategy Earnings may be positive, negative, or equal to zero. Strategy Earnings may be negative when the Index Performance decreases or when the Index Performance increases but does not increase enough to offset the impact of any applicable Strategy Spread. |
Strategy Earnings Percentage (SEP) - A rate of interest (which may be positive, negative, or equal to zero) used to calculate Term Strategy Earnings applied to a Strategy on the Strategy Term End Date, as well as any Interim Strategy Earnings applied to a Strategy when a Preferred Withdrawal is taken prior to the Strategy Term End Date. The SEP is also used in the calculation of the Death Benefit. |
Strategy Spread - An annualized percentage used as a deduction in the calculation of a Strategy’s performance. The Strategy Spread, when greater than zero, reduces Strategy Earnings. To calculate the Strategy Spread’s impact at any point in time, it is multiplied by the Elapsed Term (e.g., a 2% Strategy Spread on a 3-year Strategy Term will reduce earnings calculated at the end of the Strategy Term by 6% (subject to the downside protection of the Protection Level)). |
Strategy Term - The duration of a Strategy, expressed in years. |
Strategy Term End Date - The last day of a Strategy Term. |
Strategy Value - The value of a Strategy without taking into account any potential gains or losses caused by future Strategy Earnings. |
Surrender Value - The amount available upon full surrender of the Contract. The Surrender Value is equal to the Modified Contract Value minus any applicable CDSC and after any applicable MVA. We may deduct taxes from the Surrender Value. |
Term Strategy Earnings - Strategy Earnings applied to a Strategy upon the maturity of a Strategy on the Strategy Term End Date. |
• | Charitable Remainder Trust |
• | Individual Retirement Annuity (IRA) |
• | Investment-Only Contract (Qualified Plans) |
• | Non-Qualified Contract |
• | Roth IRA |
• | Simplified Employee Pension IRA ("SEP IRA") |
• | Simple IRA |
• | BlackRock Select Factor Index, 1 Year, 100% Protection Level Strategy |
• | BlackRock Select Factor Index, 1 Year, 95% Protection Level Strategy |
• | BlackRock Select Factor Index, 1 Year, 90% Protection Level Strategy |
• | BlackRock Select Factor Index, 3 Year, 100% Protection Level Strategy |
• | BlackRock Select Factor Index, 3 Year, 95% Protection Level Strategy |
• | BlackRock Select Factor Index, 3 Year, 90% Protection Level Strategy |
• | J.P. Morgan Mozaic IISM Index, 1 Year, 100% Protection Level Strategy |
• | J.P. Morgan Mozaic IISM Index, 1 Year, 95% Protection Level Strategy |
• | J.P. Morgan Mozaic IISM Index, 1 Year, 90% Protection Level Strategy |
• | J.P. Morgan Mozaic IISM Index, 3 Year, 100% Protection Level Strategy |
• | J.P. Morgan Mozaic IISM Index, 3 Year, 95% Protection Level Strategy |
• | J.P. Morgan Mozaic IISM Index, 3 Year, 90% Protection Level Strategy |
• | MSCI EAFE Index, 1 Year, 100% Protection Level Strategy |
• | MSCI EAFE Index, 1 Year, 95% Protection Level Strategy |
• | MSCI EAFE Index, 1 Year, 90% Protection Level Strategy |
• | MSCI EAFE Index, 3 Year, 95% Protection Level Strategy |
• | MSCI EAFE Index, 3 Year, 90% Protection Level Strategy |
• | NYSE® Zebra Edge® Index, 1 Year, 100% Protection Level Strategy |
• | NYSE® Zebra Edge® Index, 1 Year, 95% Protection Level Strategy |
• | NYSE® Zebra Edge® Index, 1 Year, 90% Protection Level Strategy |
• | NYSE® Zebra Edge® Index, 3 Year, 100% Protection Level Strategy |
• | NYSE® Zebra Edge® Index, 3 Year, 95% Protection Level Strategy |
• | NYSE® Zebra Edge® Index, 3 Year, 90% Protection Level Strategy |
• | SG Macro Compass Index, 1 Year, 100% Protection Level Strategy |
• | SG Macro Compass Index, 1 Year, 95% Protection Level Strategy |
• | SG Macro Compass Index, 1 Year, 90% Protection Level Strategy |
• | SG Macro Compass Index, 3 Year, 100% Protection Level Strategy |
• | SG Macro Compass Index, 3 Year, 95% Protection Level Strategy |
• | SG Macro Compass Index, 3 Year, 90% Protection Level Strategy |
• | S&P 500® Average Daily Risk Control 10% USD Price Return Index, 1 Year, 100% Protection Level Strategy |
• | S&P 500® Average Daily Risk Control 10% USD Price Return Index, 1 Year, 95% Protection Level Strategy |
• | S&P 500® Average Daily Risk Control 10% USD Price Return Index, 1 Year, 90% Protection Level Strategy |
• | S&P 500® Average Daily Risk Control 10% USD Price Return Index, 3 Year, 100% Protection Level Strategy |
• | S&P 500® Average Daily Risk Control 10% USD Price Return Index, 3 Year, 95% Protection Level Strategy |
• | S&P 500® Average Daily Risk Control 10% USD Price Return Index, 3 Year, 90% Protection Level Strategy |
• | S&P 500® Index, 1 Year, 100% Protection Level Strategy |
• | S&P 500® Index, 1 Year, 95% Protection Level Strategy |
• | S&P 500® Index, 1 Year, 90% Protection Level Strategy |
• | S&P 500® Index, 3 Year, 95% Protection Level Strategy |
• | S&P 500® Index, 3 Year, 90% Protection Level Strategy |
1. | Index |
The Index is the market index to which a Strategy is linked. The different Indexes under the Contract provide exposure to different markets and asset classes, all of which may perform differently compared to each other and during different time periods. When we calculate Strategy Earnings, if the Index Performance is negative, you will lose money under your Contract unless the Strategy’s downside protection protects you from the loss. When the Index Performance is positive, you may or may not gain money under your Contract, depending on the impact of the Strategy Spread. | |
We calculate the Index Performance on a point-to-point basis, which is done by comparing: |
(a) | The value of the Index on the first day of the Strategy Term (the "Strategy Term Start Date") to |
(b) | The value of the Index on a specific future date during the Strategy Term, which could be the last day of the Strategy Term (the "Strategy Term End Date") or any date prior to the Strategy Term End Date on which you take a withdrawal. |
• | Lock-In. We calculate Index Performance differently when you have exercised the Lock-In feature for a Strategy. You may exercise the Lock-In feature on any business day prior to the Strategy Term End Date. Exercising the Lock-In feature operates to fix the Index Performance for the remainder of the Strategy Term as the change in the value of the Index between the Strategy Term Start Date and the "Lock-In Date." |
For example, if the Index Value on the Strategy Term Start Date equals 1,000, and then on a given day during the Strategy Term, you lock-in an Index Value of 1,100, your Index Performance will be +10% for the remainder of the Strategy Term. This would be true even if the Index later increases in value above 1,100 or decreases in value below 1,100. | |
Index Performance may not equate to Strategy Earnings depending on the other Crediting Factors applicable to the Strategy. You should fully understand the operation and impact of the Lock-In feature prior to purchasing the Contract or exercising the Lock-In feature. See "Lock-In Risk" and "Lock-In" for additional information. |
2. | Strategy Term |
The Strategy Term represents the duration of the Strategy, expressed in years. Currently, the Strategies offered under the contract have Strategy Terms of either 1 or 3 years. If you select a one-year Strategy Term, the performance of your investment will depend on the performance of the Index for up to a one-year period. If you select a three-year Strategy Term, the performance of your investment will depend on the performance of the Index for up to a three-year period. | |
3. | Protection Level |
The Protection Level represents an amount of downside protection under a Strategy for a Strategy Term. The Protection Level is presented as a percentage (e.g., 100%, 95%, 90%). A higher Protection Level provides more protection against loss than a lower Protection Level. For example, if you select a Strategy with a 90% Protection Level, your rate of return that is calculated at the end of the Strategy Term cannot be lower than -10%. If you select a Strategy with a 100% Protection level, your rate of return that is calculated at the end of the Strategy Term cannot be lower than 0%. | |
The Protection Level only applies when we apply Strategy Earnings to your Contract at the end of a Strategy Term or when you take a Preferred Withdrawal prior to the end of a Strategy Term. Even when the Protection Level applies, unless the Protection Level is 100%, the Protection Level provides only limited protection against loss. | |
The Protection Level’s defined downside protection does not apply to a Non-Preferred Withdrawal. There is some downside protection provided for Non-Preferred Withdrawals, but the Protection Level’s defined downside protection may be reduced by certain negative adjustments associated with the Non-Preferred Withdrawal. This means that your risk of loss increases when you take a Non-Preferred Withdrawal prior to the end of a Strategy Term. | |
It is possible to lose a substantial amount of your principal investment under this Contract. The CDSC and MVA may also result in a loss of principal and related earnings if you take a Non-Preferred Withdrawal from your Contract during the first six Contract Years. This risk exists even if you are invested in a Strategy with an Index that is performing positively as of the date of your withdrawal. | |
4. | Participation Rate |
The Participation Rate represents the proportion of the Index Performance that is reflected in the Strategy’s performance. The Participation Rate is presented as a percentage greater or less than, or equal to, 100% (e.g., 50% or 150%). The Participation Rate may have the effect of increasing or decreasing gains or losses as follows: |
• | If the Participation Rate is greater than 100%, it will increase your upside potential when the Index Performance is positive. For example, if your Participation Rate is 150%, we will multiply any positive Index Performance by 150%. |
A Participation Rate greater than 100% also increases your downside risk. For example, if your Participation Rate is 150%, we will multiply any negative Index Performance by 150% (subject to any applicable defined downside protection). | |
• | If the Participation Rate is less than 100%, it will decrease your upside potential when the Index Performance is positive. For example, if your Participation Rate is 90%, we will apply only 90% of the positive Index Performance. |
A Participation Rate lower than 100% also decreases your downside risk when Index Performance is negative. For example, if your Participation Rate is 90%, we will only apply 90% of the negative Index Performance (subject to any applicable defined downside protection). | |
• | If the Participation Rate is equal to 100%, it will neither increase nor decrease your upside potential or downside risk. |
5. | Strategy Spread |
The Strategy Spread is an annualized percentage used as a deduction in the calculation of a Strategy’s performance. A Strategy Spread greater than 0% always has the effect of reducing a Strategy’s performance. A Strategy will never have a Strategy Spread lower than 0%. | |
The impact of a Strategy Spread increases over the course of the Strategy Term, reaching its full potential impact on the Strategy Term End Date. For instance, if a Strategy with a 1-year Strategy Term has a Strategy Spread of 2%, the potential impact of the Strategy Spread will not reach 2% until the Strategy Term End Date. If a Strategy with a 3-year Strategy Term has a Strategy Spread of 2%, the potential impact of the Strategy Spread will not reach 6% (2% per year) until the Strategy Term End Date. | |
A Strategy Spread can result in negative Strategy Earnings even if you have positive Index performance. | |
We declare a new Strategy Spread at the start of each new Strategy Term, which may be different than the prior Strategy Spread for the same Strategy. Each Strategy has its own Maximum Strategy Spread that will never be greater than the initial Strategy Spread plus 2%. A Strategy’s Strategy Spread for a particular Strategy Term may be different for newly issued Contracts than for existing Contracts. |
• | The Participation Rate is guaranteed to never be lower than the "Minimum Participation Rate" applicable to that Strategy. Each Strategy has its own Minimum Participation Rate. Regardless, a Participation Rate will never be less than 5%. |
When the Participation Rate increases from one Strategy Term to the next, your upside potential will increase, but your risk of loss also increases. | |
When the Participation Rate decreases from one Strategy Term to the next, your upside potential decreases, but your risk of loss also decreases. | |
• | The Strategy Spread is guaranteed never to be greater than the "Maximum Strategy Spread" applicable to that Strategy. The Maximum Strategy Spread for each Strategy will equal the initial Strategy Spread for that Strategy plus 2%. |
When the Strategy Spread increases from one Strategy Term to the next, the Strategy Spread will have a greater impact on your gains and losses, decreasing gains and potentially increasing losses. |
• | First, we calculate the Index Performance. If you have not exercised the Lock-in feature, the Index Performance will be the change in the value of the Index between the first day of the Strategy Term and the Strategy Term End Date. If you have exercised the Lock-in feature, the Index Performance will be the change in the value of the Index between the first day of the Strategy Term and the date the value of the Index was locked-in. |
• | Second, we calculate the Adjusted Index Performance. The Adjusted Index Performance reflects the application of the Participation Rate and the Strategy Spread to the Index Performance. |
The formula for calculating the Adjusted Index Performance is as follows: (Index Performance x Participation Rate) – (Strategy Spread x Elapsed Term). At the end of the Strategy Term, "Elapsed Term" will equal the length of the Strategy Term expressed in years, currently, 1 or 3. | |
• | Third, we calculate your rate of return, which will be applied as a percentage of the value of your investment in the Strategy. We refer to this rate of return as the "Strategy Earnings Percentage." The Strategy Earnings Percentage will equal the greater of (a) the Adjusted Index Performance or (b) the Protection Level minus 100%. |
• | Fourth, using the Strategy Earnings Percentage, we calculate the dollar amount of gains or losses that will be applied to your Contract. We calculate that dollar amount by multiplying the Strategy Earnings Percentage by the value of your investment in the Strategy. |
(i) | a one-year Strategy Term; |
(ii) | a Protection Level of 90%; |
(iii) | a Participation Rate of 100%; |
(iv) | a Strategy Spread of 2%; |
(v) | the value of your investment in the Strategy at the beginning of the Strategy Term equals $10,000; and |
(vi) | no withdrawals were taken during the Strategy Term. |
Example – Table 1 | |
Index Performance | Strategy Earnings applied at end of a Strategy Term |
Index Performance = 10% | Your Strategy Earnings would be +$800• The Adjusted Index Performance equals 8%. This is calculated as follows: (10% x 100%) – (2% x 1) = 8%.• The Strategy Earnings Percentage equals 8%. The Adjusted Index Performance (8%) is greater than the Protection Level minus 100% (-10%).• The Strategy Earnings equal +$800. This is calculated by multiplying the Strategy Earnings Percentage (8%) by the value of the investment ($10,000).• The value of your investment would now equal $10,800. |
Index Performance = -5% | Your Strategy Earnings will be -$700• The Adjusted Index Performance equals -7%. This is calculated as follows: (-5% x 100%) – (2% x 1) = -7%.• The Strategy Earnings Percentage equals -7%. The Adjusted Index Performance (-7%) is greater than the Protection Level minus 100% (-10%).• The Strategy Earnings equal -$700. This is calculated by multiplying the Strategy Earnings Percentage (-7%) by the value of the investment ($10,000).• The value of your investment would now equal $9,300.In this scenario, the 90% Protection Level did not limit the amount of negative Strategy Earnings that were applied to the Contract. |
Index Performance = -15% | Your Strategy Earnings will be -$1,000• The Adjusted Index Performance equals -17%. This is calculated as follows: (-15% x 100%) – (2% x 1) = -17%.• The Strategy Earnings Percentage equals -10%. The Protection Level minus 100% (-10%) is greater than the Adjusted Index Performance (-17%).• The Strategy Earnings equal -$1,000. This is calculated by multiplying the Strategy Earnings Percentage (-10%) by the value of the investment ($10,000).• The value of your investment would now equal $9,000.In this scenario, the 90% Protection Level limited the amount of negative Strategy Earnings that were applied to the Contract. If there was no downside protection, the Strategy Earnings would have been -$1,700. |
Example – Table 2 | |||
Index Performance | Strategy Earnings applied at end of a Strategy Term using different Participation Rates based on stated assumptions | ||
100% Participation Rate (Example – Table 1) | 110% Participation Rate | 90% Participation Rate | |
Index Performance = 10% | +$800 | +$900 | +$700 |
Index Performance = -5% | -$700 | -$750 | -$650 |
Index Performance = -15% | -$1,000 | -$1,000 | -$1,000 |
• | A 110% Participation Rate increased gains when the Index performed positively, but also increased losses when the Index performed negatively. |
• | Conversely, a 90% Participation Rate decreased gains when the Index performed positively, but also decreased losses when the Index performed negatively. |
• | In all cases, when the Index Performance was so negative that the Adjusted Index Performance was below the Strategy’s defined downside protection, the Protection Level limited the realized losses. |
(a) | Your Contract Value at the beginning of the Contract Year (immediately prior to any partial withdrawal or full surrender on such day) multiplied by the applicable Preferred Withdrawal Percentage, or |
(b) | The amount required to meet minimum distribution requirements for the Contract under the Code. |
Subject to Contingent Deferred Surrender Charges? | Subject to Market Value Adjustment? | Does the Downside Protection Provided by the Protection Level Apply? | Strategy Earnings Calculation? | |
Non-Preferred Withdrawals | Yes | Yes | Reduced | Less Favorable than Preferred Withdrawals |
Subject to Contingent Deferred Surrender Charges? | Subject to Market Value Adjustment? | Does the Downside Protection Provided by the Protection Level Apply? | Strategy Earnings Calculation? | |
Preferred Withdrawals | No | No | Yes | More favorable than Non-Preferred Withdrawals |
• | First, we calculate the Index Performance. The Index Performance will be the percentage change in the value of the Index between the first day of the Strategy Term and the date of the withdrawal. (If you previously exercised the Lock-in feature, the Index Performance will be the percentage change that was locked-in.) |
• | Second, we calculate the Adjusted Index Performance. When calculating the Adjusted Index Performance, the Participation Rate will be applied in the same manner as at the end of the Strategy Term, but the impact of the Strategy Spread will depend on the amount of time that has elapsed during the Strategy Term. The Strategy Spread is determined by multiplying the Strategy Spread by the Elapsed Term. |
• | Third, we calculate your rate of return. For Preferred Withdrawals this is the Strategy Earnings Percentage. The Strategy Earnings Percentage will equal the greater of (a) the Adjusted Index Performance or (b) the Protection Level minus 100%. |
• | Fourth, we calculate your gains or losses based on your rate of return. Your Strategy Earnings will impact the amount of Strategy Value that we deduct from your Contract in order to satisfy the Preferred Withdrawal. When you have a gain, we will deduct less Strategy Value than the amount of the Preferred Withdrawal. When you have a loss, we will deduct more Strategy Value than the amount of the Preferred Withdrawal. In either case, you will receive the amount of the Preferred Withdrawal that you requested. We calculate gains and losses on withdrawals, and in turn the amount of Strategy Value to deduct when you take a Preferred Withdrawal, using the formula described in "Calculation of Strategy Earnings – Interim Strategy Earnings." |
(i) | a one-year Strategy Term; |
(ii) | a Protection Level of 90%; |
(iii) | a Participation Rate of 100%; |
(iv) | a Strategy Spread of 2%; and |
(v) | that you take a $1,000 Preferred Withdrawal at the midpoint of the Strategy Term. |
Example – Table 3 | |
Index Performance | Strategy Earnings on a Preferred Withdrawal |
Index Performance to Date = 10% | You will receive the $1,000 Preferred Withdrawal as requested, but we will reduce your Strategy Value by only $917.43. This is because the Preferred Withdrawal resulted in a gain of +$82.57 to your Strategy Value. Explanation:• The Adjusted Index Performance equals 9%. This is calculated as follows: (10% x 100%) – (2% x .5) = 9%.• The Strategy Earnings Percentage equals 9%. The Adjusted Index Performance (9%) is greater than the Protection Level minus 100% (-10%).• The Strategy Earnings equal $82.57. This is calculated by multiplying the Strategy Earnings Percentage (9%) by the amount of the Preferred Withdrawal ($1,000), and then dividing by 1 plus the Strategy Earnings Percentage.• The Strategy Value is reduced by $917.43 ($1,000 minus $82.57). |
Index Performance to Date = -5% | You will receive the $1,000 Preferred Withdrawal as requested, but we will reduce your Strategy Value by $1,063.83. This is because the Preferred Withdrawal resulted in a loss of -$63.83. Explanation:• The Adjusted Index Performance equals -6%. This is calculated as follows: (-5% x 100%) – (2% x .5) = -6%.• The Strategy Earnings Percentage equals -6%. The Adjusted Index Performance (-6%) is greater than the Protection Level minus 100% (-10%).• The Strategy Earnings equal -$63.83. This is calculated by multiplying the Strategy Earnings Percentage (-6%) by the amount of the Preferred Withdrawal ($1,000), and then dividing by 1 plus the Strategy Earnings Percentage.• The Strategy Value is reduced by $1,063.83 ($1,000 minus -$63.83).In this scenario, the 90% Protection Level did not limit the amount of negative Strategy Earnings applied to the Contract. |
Example – Table 3 | |
Index Performance | Strategy Earnings on a Preferred Withdrawal |
Index Performance to Date = -15% | You will receive the $1,000 Preferred Withdrawal as requested, but we will reduce your Strategy Value will be reduced by $1,111.11. This is because the Preferred Withdrawal resulted in a loss of -$111.11. Explanation:• The Adjusted Index Performance equals -16%. This is calculated as follows: (-15% x 100%) – (2% x .5) = -16%.• The Strategy Earnings Percentage equals -10%. The Protection Level minus 100% (-10%) is greater than the Adjusted Index Performance (-16%).• The Strategy Earnings equal -$111.11. This is calculated by multiplying the Strategy Earnings Percentage (-10%) by the amount of the Preferred Withdrawal ($1,000), and then dividing by 1 plus the Strategy Earnings Percentage.• The Strategy Value is reduced by $1,111.11 ($1,000 minus -$111.11).In this scenario, the 90% Protection Level limited the amount of negative Strategy Earnings applied to the Contract. If there was no downside protection, the Strategy Earnings would have been -$190.48. |
• | First, we calculate the Index Performance. This is not calculated differently than if you were taking a Preferred Withdrawal. |
• | Second, we calculate the Adjusted Index Performance. This too is not calculated differently than if you were taking a Preferred Withdrawal. |
• | Third, we calculate your rate of return. For Non-Preferred Withdrawals, we refer to this rate of return as the "Non-Preferred Strategy Earnings Percentage." Compared to the rate of return called the "Strategy Earnings Percentage" which would apply if you were taking a Preferred Withdrawal, the Non-Preferred Strategy Earnings Percentage operates to reduce gains and potentially increase losses. |
When we calculate the Non-Preferred Strategy Earnings Percentage, the calculation proportionately reduces your gains based on the amount of time remaining in the Strategy Term (i.e., any gains are pro-rated). The calculation also may increase losses. Losses may be increased due to the application of the "Non-Preferred Withdrawal Adjustment Percentage," which reduces your downside protection and exposes you to a greater risk of loss. | |
The negative impacts of taking a Non-Preferred Withdrawal prior to the end of a Strategy Term can be magnified or reduced depending on the length of the Strategy Term and the amount of time that has elapsed during a Strategy Term. See "Risk Factors – Non-Preferred Withdrawal Risk." | |
See "Appendix C: Non-Preferred Strategy Earnings Percentage" for a detailed explanation of how we calculate the Non-Preferred Strategy Earnings Percentage. | |
• | Fourth, we calculate your gains or losses based on your rate of return. Same as when you take a Preferred Withdrawal, your Strategy Earnings will impact the amount of Strategy Value that we deduct in order to satisfy the Non-Preferred Withdrawal. |
Example – Table 4 | ||
Index Performance | Gains and Losses on a Preferred Withdrawal (Example – Table 3) | Gains and Losses on a Non-Preferred Withdrawal* |
Index Performance = 10% | +$82.57 | +$43.06 |
Index Performance = -5% | -$63.83 | -$63.83 |
Index Performance = -15% | -$111.11 | -$123.60 |
In this scenario, the Protection Level limited the amount of negative Strategy Earnings applied to the Contract. If there was no downside protection, the Strategy Earnings would have been $190.48. | In this scenario, the Protection Level did not apply, but the amount of negative Strategy Earnings was limited by the reduced downside protection. If there was no downside protection, the Strategy Earnings would have been $190.48. |
• | If you took a Non-Preferred Withdrawal on the first day of the Strategy Term, the lowest possible rate of return related to the withdrawal would be -12%, meaning that you could realize a 2% greater loss than otherwise permitted by the Protection Level. |
• | If you took a Non-Preferred Withdrawal at the midpoint of the Strategy Term, the lowest possible rate of return related to the withdrawal would be -11%, meaning that you could realize a 1% greater loss than otherwise permitted by the Protection Level. |
• | If you took a Non-Preferred Withdrawal on the day prior to the Strategy Term End Date, the lowest possible rate of return related to the withdrawal would be -10.005%, meaning that you could realize a 0.005% greater loss than otherwise permitted by the Protection Level. |
• | If you took a Non-Preferred Withdrawal on the first day of the Strategy Term, the lowest possible rate of return related to the withdrawal would be -16%, meaning that you could realize a 6% greater loss than otherwise permitted by the Protection Level. |
• | If you took a Non-Preferred Withdrawal at the midpoint of the Strategy Term, the lowest possible rate of return related to the withdrawal would be -13%, meaning that you could realize a 3% greater loss than otherwise permitted by the Protection Level. |
• | If you took a Non-Preferred Withdrawal on the day prior to the Strategy Term End Date, the lowest possible rate related to the withdrawal would be -10.005%, meaning that you could realize a 0.005% greater loss than otherwise permitted by the Protection Level. |
Number of Completed Contract Years | CDSC Percentage |
0 | 8.00% |
1 | 8.00% |
2 | 7.00% |
3 | 6.00% |
4 | 5.00% |
5 | 4.00% |
6+ | 0.00% |
• | Reinvest – You may reinvest some or all of your Strategy Value in the same Strategy for another Strategy Term (with the Participation Rate and Strategy Spread that we declare for the upcoming Strategy Term), assuming that the Strategy is available for investment. |
• | Transfer – You may transfer free of charge some or all of your Strategy Value to another Strategy that is available for investment. |
• | Partial Withdrawal or Full Surrender – You may take a partial withdrawal or fully surrender the Contract, which will be treated as a Preferred Withdrawal and/or a Non-Preferred Withdrawal, depending on your Remaining Preferred Withdrawal Amount. |
• | Single life annuity; |
• | Joint and Survivor Annuity; or |
• | Single life annuity with 10 or 20-year term certain. |
By Mail | P.O. Box 182021, Columbus, Ohio 43218-2021 |
By Phone | 1-800-848-6331 (TDD 1-800-238-3035) |
By Fax | 1-888-634-4472 |
On the Internet | www.nationwide.com |
• | When you invest in a Strategy, you are not directly participating in the performance of any stocks or other assets. Instead, the performance of the Strategy depends (in part) on the performance of its Index. The performance of an Index is based on changes in the values of the securities or other assets that comprise or define the Index. The securities comprising or defining the Indexes are subject to a variety of investment risks, many of which are complicated and interrelated. These risks may affect capital markets generally, specific market segments, or specific issuers. The performance of the Indexes may fluctuate, sometimes rapidly and unpredictably. Negative Index performance may cause you to realize investment losses. Your investment losses may be significant. |
For a description of particular investment risks to which the Indexes are subject, see "Indexes – Market Exposures and Investment Risks." | |
• | The historical performance of an Index or a Strategy does not guarantee future results. It is impossible to predict whether an Index or a Strategy will perform positively or negatively over the course of a Strategy Term. |
• | While it is not possible to invest directly in an Index under the Contract or otherwise, when you invest in a Strategy, you are indirectly exposed to the investment risks associated with its Index. If you invest in a Strategy that has an Index with higher investment risks, your investment in that Strategy indirectly exposes you to those higher investment risks. |
• | Because the Indexes under the Contract are all comprised or defined (at least in part) by a collection of equity securities, each Index is exposed to market risk and issuer risk. Market risk is the risk that market fluctuations may cause the value of a security or asset to fluctuate, sometimes rapidly and unpredictably. Issuer risk is the risk that the value of an issuer’s securities may decline for reasons directly related to the issuer, as opposed to the market generally. |
• | We calculate Index Performance by comparing the value of the Index between two specific points in time which means Index Performance may be negative or flat even if the Index performed positively for certain time periods between those two specific points in time. This is true even for Strategies with three-year Strategy Terms. |
• | If you are invested in multiple Strategies at the time that you request a partial withdrawal, you cannot select the specific Strategy(s) from which the partial withdrawal is to be taken. Your partial withdrawal will be allocated among all of your Strategies so that after the withdrawal is processed, the Strategy Values are allocated in the same proportion as before the withdrawal. This means that when you take a withdrawal you may be required to withdrawal money from a Strategy(s) that is performing negatively even if you have other Strategy(s) performing positively at the time of the withdrawal. |
• | Certain Indexes available under this Contract do not include income from any dividends paid by component companies. The exclusion of dividends from an Index will lower the Index Performance, particularly over the course of time. Additionally, certain Indexes are comprised of foreign issuers and include exchange rate methodologies that may lower a Strategy’s returns. See, "Indexes – Market Exposures and Investment Risks" for a summary of other important investment risks to which each Index under the Contract is exposed. |
• | In March 2020, the World Health Organization declared the COVID-19 outbreak a pandemic, which has resulted in market volatility and general economic uncertainty. Significant market volatility and negative investment returns in the market resulting from the COVID-19 pandemic could have a negative impact on the performance of the Indexes to which the Strategies are linked. |
• | When comparing Strategies with Strategy Terms that are the same length and all other Crediting Factors are the same, you should understand that a higher Strategy Spread is always more unfavorable to you than a lower Strategy Spread. |
• | When determining the maximum impact a Strategy Spread will have on your Index Performance you multiply the Strategy Spread by the number of years in the Strategy Term (e.g., if the Strategy Spread is 2% and the Strategy Term is 3 years, this will reduce the Index Performance (after it’s been multiplied by the Participation Rate) by 6% at the end of the Strategy Term). Note: in leap years, there may be an additional day of Strategy Spread. See "Crediting Factors – Strategy Spread." |
• | When comparing Strategies with Strategy Terms that differ in length, a higher Strategy Spread will always be more unfavorable to you on an annual basis, but the overall impact of a lower Strategy Spread over a multi-year Strategy Term may be more unfavorable to you than the overall impact of a higher Strategy Spread over a shorter Strategy Term. |
• | If the Participation Rate is greater than 100%, there will be more upside potential when the Index Performance is positive but more downside potential when the Index Performance is negative (subject to the level of loss protection provided by the Strategy’s Protection Level). |
• | If the Participation Rate is less than 100%, there will be less upside potential when the Index Performance is positive but less downside potential when the Index Performance is negative (subject to the amount of downside protection provided by the Strategy’s Protection Level). |
• | If the Participation Rate is equal to 100%, the Participation Rate will have no impact. |
• | If the same Strategy is available for investment for another Strategy Term, your Strategy Value will remain in the same Strategy, but with the Participation Rate and Strategy Spread that we declare for the upcoming Strategy Term. This will occur even if the new Participation Rate and Strategy Spread are different from the Strategy’s Participation Rate and Strategy Spread for the previous Strategy Term or since you last selected that Strategy for investment. The Strategy may no longer be appropriate for your investment goals. |
• | If the same Strategy is no longer available for investment, the Strategy Value will be transferred to the Default Option for the upcoming Strategy Term. |
• | If the AIP is positive at the time of your Non-Preferred Withdrawal, the AIP will be reduced under the NSEP, while the SEP formula would not reduce the AIP. This means we will apply less Strategy Earnings under the NSEP formula. |
• | If the AIP is less than the downside protection provided by the Strategy’s Protection Level at the time of your Non-Preferred Withdrawal, the NSEP’s Non-Preferred Withdrawal Adjustment Percentage will result in losses, including loss of principal, that are greater than the amount of downside protection provided by your Protection Level. |
• | You may exercise the Lock-In feature only once during a Strategy Term. Once you exercise the Lock-In feature for a Strategy, it may not be revoked. |
• | Once you exercise the Lock-In feature for a Strategy, you will no longer participate in the Index’s performance for the remainder of the Strategy Term, even if the Index performs positively. |
• | As a result of locking in an Index Value, the Index Performance will not change for the remainder of the Strategy Term. However, the Index Performance is not the only factor when calculating your Strategy Earnings. Neither the AIP, SEP, nor NSEP will be locked in and will continue to change (perhaps negatively) over the course of the Strategy Term. |
• | Even if you lock in an Index Value that, in turn, locks in a positive Index Performance, it may be possible to receive negative Strategy Earnings. This happens when the Strategy Spread component that is deducted from the Index Performance at the end of the Strategy Term (after the Index Performance has been multiplied by the Participation Rate) is greater than the positive Index Performance that was locked-in. |
• | You should carefully consider the merits of locking in a negative Index Performance. If you lock in an Index Value that, in turn, locks in a negative Index Performance, it will not be possible to receive positive Strategy Earnings throughout the remainder of the Strategy Term. Under such circumstances, it is possible that you would have realized less losses or no losses if you exercised the Lock-In feature at a different time or not at all. |
• | If you exercise the Lock-In feature for a Strategy, there is no additional earning potential for the Strategy Value allocated to the locked-in Strategy until the end of the Strategy Term (it does not accrue interest and there is no potential for additional earnings). |
• | Although you may contact our Service Center to obtain the last calculated Index Value, you will not know the locked-in Index Value in advance. This is because we lock in the Index Value next calculated after we receive your request. The Index Value that is locked in may be lower than the Index Value that you last obtained or that was last calculated prior to receiving your request. |
• | We will not provide advice or notify you regarding whether you should exercise the Lock-In feature or the optimal time for doing so, if one exists. You bear the risk that you will fail to exercise the Lock-In feature at the optimal time during a Strategy Term. You also bear the risk that you will exercise the Lock-In feature at a sub-optimal time during a Strategy Term. We will not warn you if you exercise the Lock-In feature at a sub-optimal time. We are not responsible for any losses related to your decision whether or not to exercise the Lock-In feature. |
• | Withdrawals under beneficially owned contracts are subject to applicable CDSC and Market Value Adjustments except when the withdrawals are made from a continued beneficially owned contract that is inherited as death benefit proceeds (as opposed to inherited contract value). |
• | A beneficial owner must be both the Contract Owner and the Annuitant of a beneficially owned contract, and no additional parties may be named. |
• | No changes to the parties will be permitted on any beneficially owned contract, except that a beneficial owner may request changes to their successor beneficiary(ies). |
• | Beneficially owned contracts cannot be assigned, except that a beneficial owner may assign rights to the distribution payments. |
• | There is no death benefit payable on a on a continued beneficially owned contract. After the death of the beneficial owner, any remaining death benefit or contract value to be distributed will be payable to a successor beneficiary in accordance with applicable federal tax laws. |
• | After the death of the Contract Owner (and Joint Owner, if any), a Beneficiary may name a successor beneficiary. A successor beneficiary will have the right to receive any payment or rights under the Contract after the Beneficiary’s death to which the Beneficiary would have been entitled, if he or she were alive. |
• | If there is more than one Beneficiary under the Contract, they share equally in any payment or rights under the Contract to which they are entitled. |
• | If there is more than one Contingent Beneficiary under the Contract, they share equally in any payment under the Contract to which they are entitled. |
• | Contract Owner (Non-Qualified Contracts only); |
• | Joint Owner (must be the Contract Owner’s spouse); |
• | Annuitant (subject to Nationwide’s underwriting and approval); |
• | Contingent Annuitant (subject to Nationwide’s underwriting and approval); |
• | Beneficiary; or |
• | Contingent Beneficiary. |
• | The Strategy’s Crediting Factors (including the Index); |
• | The performance of the Strategy’s Index; and |
• | The extent to which you take withdrawals, if any. |
• | BlackRock Select Factor Index, 1 Year, 100% Protection Level Strategy |
• | BlackRock Select Factor Index, 1 Year, 95% Protection Level Strategy |
• | BlackRock Select Factor Index, 1 Year, 90% Protection Level Strategy |
• | BlackRock Select Factor Index, 3 Year, 100% Protection Level Strategy |
• | BlackRock Select Factor Index, 3 Year, 95% Protection Level Strategy |
• | BlackRock Select Factor Index, 3 Year, 90% Protection Level Strategy |
• | J.P. Morgan Mozaic IISM Index, 1 Year, 100% Protection Level Strategy |
• | J.P. Morgan Mozaic IISM Index, 1 Year, 95% Protection Level Strategy |
• | J.P. Morgan Mozaic IISM Index, 1 Year, 90% Protection Level Strategy |
• | J.P. Morgan Mozaic IISM Index, 3 Year, 100% Protection Level Strategy |
• | J.P. Morgan Mozaic IISM Index, 3 Year, 95% Protection Level Strategy |
• | J.P. Morgan Mozaic IISM Index, 3 Year, 90% Protection Level Strategy |
• | MSCI EAFE Index, 1 Year, 100% Protection Level Strategy |
• | MSCI EAFE Index, 1 Year, 95% Protection Level Strategy |
• | MSCI EAFE Index, 1 Year, 90% Protection Level Strategy |
• | MSCI EAFE Index, 3 Year, 95% Protection Level Strategy |
• | MSCI EAFE Index, 3 Year, 90% Protection Level Strategy |
• | NYSE® Zebra Edge® Index, 1 Year, 100% Protection Level Strategy |
• | NYSE® Zebra Edge® Index, 1 Year, 95% Protection Level Strategy |
• | NYSE® Zebra Edge® Index, 1 Year, 90% Protection Level Strategy |
• | NYSE® Zebra Edge® Index, 3 Year, 100% Protection Level Strategy |
• | NYSE® Zebra Edge® Index, 3 Year, 95% Protection Level Strategy |
• | NYSE® Zebra Edge® Index, 3 Year, 90% Protection Level Strategy |
• | SG Macro Compass Index, 1 Year, 100% Protection Level Strategy |
• | SG Macro Compass Index, 1 Year, 95% Protection Level Strategy |
• | SG Macro Compass Index, 1 Year, 90% Protection Level Strategy |
• | SG Macro Compass Index, 3 Year, 100% Protection Level Strategy |
• | SG Macro Compass Index, 3 Year, 95% Protection Level Strategy |
• | SG Macro Compass Index, 3 Year, 90% Protection Level Strategy |
• | S&P 500® Average Daily Risk Control 10% USD Price Return Index, 1 Year, 100% Protection Level Strategy |
• | S&P 500® Average Daily Risk Control 10% USD Price Return Index, 1 Year, 95% Protection Level Strategy |
• | S&P 500® Average Daily Risk Control 10% USD Price Return Index, 1 Year, 90% Protection Level Strategy |
• | S&P 500® Average Daily Risk Control 10% USD Price Return Index, 3 Year, 100% Protection Level Strategy |
• | S&P 500® Average Daily Risk Control 10% USD Price Return Index, 3 Year, 95% Protection Level Strategy |
• | S&P 500® Average Daily Risk Control 10% USD Price Return Index, 3 Year, 90% Protection Level Strategy |
• | S&P 500® Index, 1 Year, 100% Protection Level Strategy |
• | S&P 500® Index, 1 Year, 95% Protection Level Strategy |
• | S&P 500® Index, 1 Year, 90% Protection Level Strategy |
• | S&P 500® Index, 3 Year, 95% Protection Level Strategy |
• | S&P 500® Index, 3 Year, 90% Protection Level Strategy |
• | Reinvest – You may reinvest some or all of your Strategy Value in the same Strategy for another Strategy Term (with the Participation Rate and Strategy Spread that we declare for the upcoming Strategy Term), assuming that the Strategy is available for investment. |
• | Transfer – You may transfer some or all of your Strategy Value to another Strategy that is available for investment for a Strategy Term (with the Participation Rate and Strategy Spread that we declare for the upcoming Strategy Term). |
• | Partial Withdrawal or Full Surrender – You may take a partial withdrawal or fully surrender the Contract, which will be treated as a Preferred Withdrawal and/or a Non-Preferred Withdrawal, depending on your Remaining Preferred Withdrawal Amount. |
• | If the maturing Strategy is available for reinvestment, your entire Strategy Value in the maturing Strategy will be reinvested in the same Strategy for another Strategy Term, but with the Participation Rate and Strategy Spread that we declare for the upcoming Strategy Term. |
• | If the maturing Strategy is not available for reinvestment, your entire Strategy Value in the maturing Strategy will be transferred to the Default Option. |
• | Your Contract Number; |
• | The date of the first day of the upcoming Strategy Term; |
• | The Strategy (or Strategies) from which you are transferring Strategy Value and the amount(s) to be transferred; and |
• | The Strategy (or Strategies) to which you are transferring Strategy Value and the amount(s) (by percentage) to be transferred. |
(1) | Index; |
(2) | Strategy Term; |
(3) | Protection Level; |
(4) | Participation Rate; and |
(5) | Strategy Spread. |
Index | The market index to which the Strategy is linked |
Strategy Term | The duration of the Strategy in years |
Protection Level | A factor in the Strategy’s defined downside protection. A higher Protection Level means a higher amount of downside protection. A lower Protection Level means a lower amount of downside protection. |
Participation Rate | A factor that amplifies or dampens the Strategy’s performance compared to the Index Performance. A higher Participation Rate means greater upside potential but also greater downside potential (subject to the downside protection). A lower Participation Rate means less upside potential but also less downside potential (also subject to the downside protection). |
Strategy Spread | A factor used as a deduction in calculating a Strategy’s performance. In general, a higher Strategy Spread will reduce a Strategy’s performance more than a lower Strategy Spread. |
• | For those Strategies that are available for initial investment under your Contract on the Date of Issue, their Crediting Factors (as well as any associated guaranteed minimums and maximums) will be described in your Contract. |
• | For any new Strategies that we make available for investment under your Contract after the Date of Issue, their Crediting Factors (as well as any associated guaranteed minimums and maximums) will be declared by us at least 30 days prior to the beginning of their first Strategy Terms. |
• | For all Strategies, after their first Strategy Terms, we will declare their Participation Rates and Strategy Spreads at least 30 days prior to the beginning of an upcoming Strategy Term, subject to their associated guaranteed minimums and maximums. |
(a) | The value of the Index on the first day of the Strategy Term (the "Strategy Term Start Date") to |
(b) | The value of the Index on a specific future date during the Strategy Term, which could be the last day of the Strategy Term (the "Strategy Term End Date") or any date prior to the Strategy Term End Date on which you take a withdrawal. |
• | BlackRock Select Factor Index (Ticker: BSELFCTX) |
• | J.P. Morgan Mozaic IISM Index (Ticker: JMOZAIC2) |
• | MSCI EAFE Index (Ticker: MXEA) |
• | NYSE® Zebra Edge® Index (Ticker: ZEDGENY) |
• | SG Macro Compass Index (Ticker: SGMACRO) |
• | S&P 500SM Average Daily Risk Control 10% USD Price Return Index (Ticker: SPXAV10P) |
• | S&P 500® Index (Ticker: SPX) |
BlackRock Select Factor Index | J.P. Morgan Mozaic IISM Index | MSCI EAFE Index | NYSE® Zebra Edge® Index | SG Macro Compass Index | S&P 500SM Average Daily Risk Control 10% USD Price Return Index | S&P 500® Index | |
Primary Market Exposures | |||||||
U.S. Equity | √ | √ | √ | √ | √ | √ | |
Non-U.S. Equity | √ | √ | √ | ||||
Fixed Income | √ | √ | √ | √ | |||
Commodities | √ | √ | |||||
Investment Risks | |||||||
Brexit Risk | √ | ||||||
Commodities Risk | √ | √ |
BlackRock Select Factor Index | J.P. Morgan Mozaic IISM Index | MSCI EAFE Index | NYSE® Zebra Edge® Index | SG Macro Compass Index | S&P 500SM Average Daily Risk Control 10% USD Price Return Index | S&P 500® Index | |
Currency Conversion Risk | √ | √ | √ | ||||
Equity Risk | √ | √ | √ | √ | √ | √ | √ |
Fixed Income Risk | √ | √ | √ | √ | √ | ||
Futures Risk | √ | √ | √ | ||||
Government Bond Risk | √ | √ | √ | √ | |||
Large-Capitalization Company Risk | √ | √ | √ | √ | √ | √ | √ |
Leverage Risk | √ | √ | √ | ||||
Market Non-Participation Risk | √ | √ | √ | √ | √ | ||
Mid- or Small-Capitalization Company Risk | √ | √ | √ | ||||
Momentum Risk | √ | ||||||
Non-U.S. Securities Risk | √ | √ | √ | ||||
Performance Drag Risk | √ | √ | |||||
U.S. Treasury Risk | √ | √ | √ | √ | |||
Underlying ETF Risks | √ | ||||||
Volatility Control Risk | √ | √ | √ | √ | √ |
• | Risks Common to the Underlying ETFs |
• | Performance Risk. Each ETF may perform negatively over short periods due to short-term market movements and over longer periods during more prolonged market downturns. |
• | Issuer Risk. The performance of each ETF depends on the performance of individual securities in which the ETF has exposure. Changes in the financial condition or credit rating of an issuer of those securities may cause the value of the securities to decline. |
• | Tracking Error Risk. Each ETF seeks to track the investment results of a specific market index. There is no guarantee that an ETF’s investment results will have a high degree of correlation to the performance of the index that it seeks to track, or that the ETF will achieve its investment objective. Each ETF may be subject to tracking error, which is the divergence of an ETF’s performance from that of the index it seeks to track. This risk may be heightened during times of increased market volatility or other unusual market conditions. Among other reasons, tracking error may result because an ETF incurs fees and expenses while the index does not. Certain ETFs may experience higher tracking error than is typical for ETFs that track a market index. |
• | Market Trading Risks. Each ETF faces numerous market trading risks, including the potential lack of an active market for fund shares, losses from trading in secondary markets, periods of high volatility, and disruptions in the creation/redemption process. Any of these factors, among others, may lead to an ETF’s shares trading at a premium or discount to net asset value. |
• | Risks Common to the Underlying Equity ETFs. The underlying equity ETFs are subject to "Equity Risk," "Large-Capitalization Company Risk," and "Mid- or Small-Capitalization Company Risk" as described above. |
• | Risks Common to the Underlying Fixed Income ETFs. The underlying fixed income ETFs are subject to "Fixed Income Risk," "Government Bond Risk," and "U.S. Treasury Risk" as described above. They are also subject to the following risks: |
• | Declining Interest Rate Risk. Each Fixed Income ETF is exposed to the risk that the ETF’s income may decline if interest rates fall. This decline in income can occur because the ETF may subsequently invest in lower-yielding bonds as bonds in its portfolio mature, are near maturity or are called, bonds in the underlying index are substituted, or the ETF otherwise needs to purchase additional bonds. |
• | Low and Negative Interest Rate Risk. Each Fixed Income ETF is exposed to the risks that during periods of very low or negative interest rates, the ETF may be unable to maintain positive returns or pay dividends. Very low or negative interest rates may magnify interest rate risk. Changing interest rates, including rates that fall below zero, may have unpredictable effects on markets, result in heightened market volatility, and detract from the ETF’s performance to the extent the ETF is exposed to such interest rates. Additionally, under certain market conditions in which interest rates are low and the market prices for portfolio securities have increased, the ETF may have a very low, or even negative yield. A low or negative yield would cause the ETF to lose money in certain conditions and over certain time periods. An increase in interest rates will generally cause the value of securities held by the ETF to decline, may lead to heightened volatility in the fixed-income markets, and may adversely affect the liquidity of certain fixed-income investments, including those held by the ETF. The historically low interest rate environment heightens the risks associated with rising interest rates. |
• | Risks Specific to Particular Underlying ETFs |
• | iShares MSCI USA Value Factor ETF – Value Stock Risk. This ETF primarily invests in stocks deemed to be undervalued. Stocks that are perceived as undervalued may fail to appreciate for long periods of time and may never realize their full potential value. |
• | iShares MSCI USA Momentum Factor ETF – Momentum Factor Risk. This ETF primarily invests in stocks that are deemed to exhibit relatively higher price momentum characteristics (i.e., stocks exhibiting strong recent price trends). Stocks that previously exhibited high momentum characteristics may not experience positive momentum in the future or may experience more volatility than the market as a whole. |
• | iShares MSCI USA Quality Factor ETF – Quality Stock Risk. This ETF primarily invests in stocks that are deemed to have quality characteristics identified through certain fundamental metrics. Even if a stock is deemed to be a quality stock, there is no guarantee that the past performance of that stock will continue. Companies that issue these stocks may experience lower than expected returns or may experience negative growth, as well as increased leverage, resulting in lower than expected or negative returns. |
• | iShares MSCI USA Size Factor ETF – Low Size Risk. From a defined universe of large- and mid-capitalization companies, this ETF emphasizes investments in stocks with smaller capitalizations within the investable universe. Relative to the larger companies within the investable universe, stocks of such smaller companies may be less stable and more susceptible to adverse developments, and their securities may be more volatile and less liquid. |
• | iShares MSCI Min Vol USA ETF – Minimum Volatility Risk. This ETF emphasizes investments in stocks that are deemed to have lower volatility. There is no guarantee that such stocks will be any less volatile than the market as a whole or any other stocks, and could be more volatile. The ETF may experience high volatility. |
• | Value – Stocks with lower valuations based on fundamentals |
• | Momentum – Stocks exhibiting strong recent price trends |
• | Quality – Stocks with strong and stable balance sheets |
• | Size – Stocks of relatively smaller, more nimble companies |
• | Minimum Volatility – Stocks with lower levels of historical volatility |
• | iShares MSCI USA Value Factor ETF: This ETF seeks to track the investment results of the MSCI USA Enhanced Value Index, a weighted index composed of stocks with value characteristics and relatively lower valuations. The MSCI USA Enhanced Value Index includes stocks that exhibit certain higher value characteristics based on price-to-book value, price-to-forward earnings, and enterprise value-to-cash flow from operations relative to their peers within the corresponding Global Industry Classification Standard (GICS®) sector. |
• | iShares MSCI USA Momentum Factor ETF: This ETF seeks to track the investment results of the MSCI USA Momentum SR Variant Index, a weighted index composed of stocks exhibiting relatively higher price momentum characteristics. In general, momentum stocks are stocks that exhibit strong recent price trends. The MSCI USA Momentum SR Variant Index selects stocks based on the stocks’ momentum scores. MSCI Inc. calculates momentum scores by analyzing the stocks’ excess returns and deviations in weekly returns over historical periods. |
• | iShares MSCI USA Quality Factor ETF: This ETF seeks to track the investment results of the MSCI USA Sector Neutral Quality Index, a weighted index composed of stocks with quality characteristics as identified through certain fundamental metrics. The MSCI USA Sector Neutral Quality Index selects stocks that exhibit certain higher quality characteristics (i.e., high return on equity, low earnings variability, and low leverage) relative to their peers within the corresponding Global Industry Classification Standard (GICS®) sector. |
• | iShares MSCI USA Size Factor ETF: This ETF seeks to track the investment results of the MSCI USA Low Size Index, a weighted index that emphasizes relatively smaller average market capitalizations within the capitalization range of the MSCI USA Index. The MSCI USA Low Size Index includes all stocks in the MSCI USA Index, and is therefore comprised of only large- and mid-capitalization stocks. However, the MSCI USA Low Size Index reweights the stocks such that the weightings of the companies on the lower end of the capitalization range are greater than the companies on the higher end of the capitalization range. |
• | iShares MSCI USA Min Vol Factor ETF: This ETF seeks to track the investment results of the MSCI USA Minimum Volatility (USD) Index, a weighted index composed of stocks that, in the aggregate, have lower volatility characteristics relative to the U.S. large- and mid-cap equity market. The MSCI USA Minimum Volatility (USD) Index selects stocks using a rules-based methodology that is designed to construct a portfolio with the lowest absolute volatility. "Lowest absolute volatility" is measured by MSCI Inc. using a multi-factor risk model and an optimization tool that aims to determine the least volatile index composition based on the projected market risk of the securities in the MSCI USA Index and certain weighting constraints. |
• | iShares 1-3 Year Treasury Bond ETF: This ETF seeks to track the investment results of the ICE U.S. Treasury 1-3 Year Bond Index, which is composed of U.S. Treasury bonds with remaining maturities between one and three years. |
• | iShares 20+ Year Treasury Bond ETF: This ETF seeks to track the investment results of the ICE U.S. Treasury 20+ Year Bond Index, which is composed of U.S. Treasury bonds with remaining maturities greater than 20 years. |
• | The value of the Index’s equity position will be lower when the Hedged ETF performs positively, and |
• | The value of the Index’s equity position will be higher when the Hedged ETF performs negatively. |
• | Equity Components. The possible equity components are futures contracts that provide exposure to the performance of equity indexes. There are six possible equity components, each represented by futures contracts referencing the: |
(1) | S&P 500® Index (comprised of large-capitalization U.S. companies); |
(2) | Nasdaq-100 Index® (comprised of large-capitalization non-financial U.S. and foreign companies traded on The Nasdaq Stock Market); |
(3) | Russell 2000® Index (comprised of small-capitalization U.S. companies); |
(4) | DAX® Index (comprised of large-capitalization companies traded on the Frankfurt Stock Exchange); |
(5) | FTSE® 100 Index (comprised of large-capitalization companies traded on the London Stock Exchange); or |
(6) | Tokyo Stock Price Index (TOPIX®) (comprised of large-capitalization companies traded on the Tokyo Stock Exchange). |
• | Fixed Income Components. The possible fixed income components are futures contracts that provide exposure to the performance of U.S and foreign government bonds. There are six possible fixed income components, each represented by futures contracts referencing a particular group of bonds. The six referenced groups of bonds are: |
(1) | Short-term U.S. Treasury notes (i.e., notes issued by the U.S. government); |
(2) | Medium-term U.S. Treasury notes; |
(3) | Long-term U.S. Treasury notes; |
(4) | Euro Bunds (bonds issued by the German federal government); |
(5) | Gilts (bonds issued by the U.K. government); and |
(6) | JBGs bonds issued by the Japanese government). |
• | Commodities Components. The possible commodities components are indexes that track the performance of futures contracts referencing commodities in the energy, industrial metal, and precious metal sectors. There are three possible commodities components. The three underlying indexes are: |
(1) | Bloomberg Energy SubindexSM (comprised of futures referencing the commodities included in the relevant sector within the Bloomberg Commodity IndexSM); |
(2) | Bloomberg Industrial Metals SubindexSM (comprised of futures referencing the commodities included in the relevant sector within the Bloomberg Commodity IndexSM); and |
(3) | Bloomberg Precious Metals SubindexSM (comprised of futures referencing the commodities included in the relevant sector within the Bloomberg Commodity IndexSM). |
• | Equity Futures Indexes – IND1CUE1, IND1CEE1, IND1CJE1: The three equity futures underlying indexes provide the SG Macro Compass Index with exposure to stock markets. Each underlying index gains exposure to stock market performance by including specific futures contracts that track certain U.S. and foreign stock market indexes. The underlying indexes’ futures contracts reference, respectively, the S&P 500® Index (comprised of large-capitalization U.S. companies), the DAX® Index (comprised of large-capitalization companies traded on the Frankfurt Stock Exchange), and the Nikkei 225® Index (comprised of large-capitalization companies traded on the Tokyo Stock Exchange). |
• | Fixed Income Futures Indexes – IND1BJB, IND1BFV, IND1BTY, IND1BUS, IND1BOE, IND1CER1, IND1BUB: The seven fixed income futures underlying indexes provide the SG Macro Compass Index with exposure to the performance of groups of U.S. and foreign government bonds. Each underlying index gains exposure to these government bonds by including futures contracts that reference U.S. Treasury notes (5, 10, and 20 year notes issued by the U.S. government), Euro Bunds (5, 10, and 30 year bonds issued by the German federal government), and JGBs (10 year bonds issued by the Japanese government). |
• | Commodities Futures Index – IND1CARC: The commodities futures underlying index exposes the SG Macro Compass Index to the performance of commodities (excluding gold and silver). The underlying index gains exposure to these commodities by including futures contracts that reference natural gas, WTI crude, Brent crude oil, gasoline blendstock, heating oil, corn, wheat, Kansas wheat, soybean, soybean oil, soybean meal, cotton, coffee, sugar, live cattle, lean hogs, copper, aluminum, nickel, gas oil, and zinc. |
• | SGI Low Vol 200 Index: The SGI Low Vol 200 Index selects on a monthly basis the 200 stocks that, subject to a liquidity threshold, have exhibited lowest relative volatility over the previous year. It then weights those stocks inversely proportional to their volatility, with stocks exhibiting lower volatility receiving greater weighting. |
• | SGI Equity Value US Index: The SGI Equity Value US Index selects on a quarterly basis an equally weighted basket of the 100 stocks that score the highest according to a value methodology. The index’s value |
methodology seeks to identify undervalued stocks by comparing stocks according to five fundamental ratios: book to price; earnings to price; one year forward earnings to price; earnings before interest, taxes, depreciation, and amortization (EBITDA) to enterprise value; and free cash flow to price. |
• | A is equal to the percentage change in the value of the old Index between the Strategy Term Start Date (or the first day during the Strategy Term on which the old Index was used, whichever is later) and the value of the Index on the date of substitution; and |
• | B is equal to the percentage change in the value of the new Index between the date of substitution and the relevant later date in the Strategy Term. |
Protection Level | Your Maximum Amount of Loss using the SEP for 1 and 3 Year Strategy Terms | Your Maximum Amount of Loss using the NSEP* for 1-Year Strategy Term | Your Maximum Amount of Loss using the NSEP* for 3-Year Strategy Term |
100% | 0% | -2% | -6% |
95% | -5% | -7% | -11% |
90% | -10% | -12% | -16% |
• | If the Participation Rate is greater than 100%, it will increase your upside potential when the Index Performance is positive. For example, if your Participation Rate is 150%, we will multiply any positive Index Performance by 150%. |
A Participation Rate greater than 100% also increases your downside risk. For example, if your Participation Rate is 150%, we will multiply any negative Index Performance by 150% (subject to any applicable defined downside protection). | |
• | If the Participation Rate is less than 100%, it will decrease your upside potential when the Index Performance is positive. For example, if your Participation Rate is 90%, we will apply only 90% of the positive Index Performance. |
A Participation Rate lower than 100% also decreases your downside risk when Index Performance is negative. For example, if your Participation Rate is 90%, we will only apply 90% of the negative Index Performance (subject to any applicable defined downside protection). |
• | If the Participation Rate is equal to 100%, it will neither increase nor decrease your upside potential or downside risk. |
Index Performance | Participation Rate | Adjusted Index Performance (Assuming 0% Strategy Spread) |
+10% | 125% | +12.5% |
+10% | 100% | +10% |
+10% | 50% | +5% |
+10% | 15% | 1.5% |
-10% | 125% | -12.5% |
-10% | 100% | -10% |
-10% | 50% | -5% |
-10% | 15% | -1.5% |
Index Performance | Strategy Spread* | Adjusted Index Performance* (Assuming 100% Participation Rate) |
+10% | 2% | +8.0% |
+5% | 2% | +3.0% |
+1% | 2% | -1.0% |
-5% | 2% | -7.0% |
-10% | 2% | -12.0% |
Value Associated with a Strategy | Related Value Associated with the Entire Contract |
Strategy Value | Contract Value |
Strategy Accumulation Value | Contract Accumulation Value |
Modified Strategy Value | Modified Contract Value |
(1) | The Strategy Value on the first day of the Strategy Term, as described above, minus |
(2) | The total dollar amount of all Gross Withdrawals deducted from the Strategy during the Strategy Term, plus |
(3) | The total dollar amount of all Strategy Earnings applied to the Strategy during the Strategy Term, plus |
(4) | The amount of any adjustment to the Strategy Value in connection with the Death Benefit during the Strategy Term (see "Death Benefit and Succession Rights – Calculation of the Death Benefit"), minus |
(5) | The amount of any premium taxes deducted from the Strategy during the Strategy Term. |
• | If on a day during the Strategy Term, the SEP equals 10%, your Strategy Accumulation Value on that day equals $55,000. |
• | If on a day during the Strategy Term, the SEP equals 0%, your Strategy Accumulation Value on that day equals $50,000. |
• | If on a day during the Strategy Term, the SEP equals -8%, your Strategy Accumulation Value on that day equals $46,000. |
• | In order to take the maximum Gross Withdrawal from a Strategy, you must fully surrender your Contract. A full surrender will terminate the Contract. |
• | If you take a partial withdrawal or full surrender that is greater than the Remaining Preferred Withdrawal Amount (a Non-Preferred Withdrawal), it may be subject to a CDSC and an MVA, and any Interim Strategy Earnings on the Non-Preferred Withdrawal would be calculated using the Non-Preferred Strategy Earnings Percentage (NSEP). |
• | The calculation of the Modified Strategy Value depends on the amount of the Preferred Withdrawal allocated to that Strategy. Preferred Withdrawals are always allocated among all of your Strategies using a specific formula described in the "Withdrawals – Preferred Withdrawals and Non-Preferred Withdrawals" section. |
• | If the SEP equals 10%: Term Strategy Earnings = $50,000 x 10% = $5,000 |
• | If the SEP equals 0%: Term Strategy Earnings = $50,000 x 0% = $0 |
• | If the SEP equals -8%: Term Strategy Earnings = $50,000 x -8% = -$4,000 |
• | any Strategy Earnings paid on any portion of the partial withdrawal or full surrender that is a Preferred Withdrawal; and |
• | any Strategy Earnings paid on any portion of the partial withdrawal or full surrender that is a Non-Preferred Withdrawal. |
• | If the partial withdrawal or full surrender results in only a Preferred Withdrawal, your Interim Strategy Earnings will be calculated based solely on the SEP. |
• | If there is no Remaining Preferred Withdrawal Amount when the partial withdrawal or full surrender is taken, the entire withdrawal will be treated as a Non-Preferred Withdrawal, and your Interim Strategy Earnings will be calculated based solely on the NSEP. |
• | If the partial withdrawal or full surrender is made up of both a Preferred Withdrawal and a Non-Preferred Withdrawal, your Interim Strategy Earnings will be calculated based on both the SEP and NSEP. |
• | Step One – We calculate the Interim Strategy Earnings for each Strategy for any portion of the partial withdrawal or full surrender that is a Preferred Withdrawal as follows: |
• | Step Two – We calculate the Interim Strategy Earnings for each Strategy for any portion of the partial withdrawal or full surrender that is a Non-Preferred Withdrawal as follows: |
• | Step Three – We add the Interim Strategy Earnings calculated in Steps One and Two to determine your total Interim Strategy Earnings applied to your Strategy in connection with the partial withdrawal or full surrender. |
Preferred Withdrawal | Interim Strategy Earnings on the Preferred Withdrawal (Step One)* | Non- Preferred Withdrawal | Interim Strategy Earnings on the Non-Preferred Withdrawal (Step Two)** | Total Interim Strategy Earnings (Step Three) |
$7,000 | $913 | $4,000 | $364 | $1,277 |
Preferred Withdrawal | Interim Strategy Earnings on the Preferred Withdrawal (Step One)* | Non- Preferred Withdrawal | Interim Strategy Earnings on the Non-Preferred Withdrawal (Step Two)** | Total Interim Strategy Earnings (Step Three) |
$7,000 | -$778 | $4,000 | -$545 | -$1,323 |
• | If the AIP equals 20%, the SEP equals 20% (20% is greater than -10%) |
• | If the AIP equals -5%, the SEP equals -5% (-5% is greater than -10%) |
• | If the AIP equals -15%, the SEP equals -10% (-15% is less than -10%) |
• | If the AIP is greater than 0%, the NSEP proportionately reduces your gains based on the amount of time remaining in the Strategy Term (i.e., any gains are pro-rated) (resulting in less gains compared to the SEP which does not reduce the AIP); |
• | If the AIP is less than 0% but greater than or equal to the amount of downside protection provided by the Protection Level, the NSEP will equal the AIP (NSEP will be equal to SEP); and |
• | If the AIP is less than the amount of downside protection provided by the Protection Level, the Non-Preferred Withdrawal Adjustment Percentage applies, and it will reduce the NSEP to an amount less than the downside protection provided by the Protection Level (resulting in more losses compared to SEP). |
• | If the Index Performance is 10% after half a year, then the AIP on that date would be 7% (10% Index Performance X 80% Participation Rate minus 2% Strategy Spread X Elapsed Term of .5) |
• | If the Index Performance is 10% after one year, then the AIP on that date would be 6% (10% Index Performance X 80% Participation Rate minus 2% Strategy Spread X Elapsed Term of 1). |
• | The Participation Rate may have the effect of amplifying or dampening the AIP, depending on whether the Participation Rate is greater or less than 100%, respectively. See "Crediting Factors – Participation Rate." |
• | A Strategy Spread greater than 0% always has the effect of reducing the AIP. The effect of the Strategy Spread gradually increases over the course of the Strategy Term, reaching its full potential impact on the Strategy Term End Date. See "Crediting Factors – Strategy Spread." |
• | When you take a partial withdrawal, you are withdrawing a portion of your money under the Contract. For a partial withdrawal, the Cash Withdrawal must be at least $100. |
• | When you take a full surrender, you are withdrawing all of your money under the Contract. Unlike a partial withdrawal, a full surrender results in the termination of your Contract. |
• | Suspend or delay the date of any partial withdrawal or full surrender payment while a partial withdrawal or full surrender request is not in good order; |
• | Delay payment of any partial withdrawal or full surrender for up to six months from the date that we receive the request, subject to regulatory approval; and |
• | Require that the signature(s) associated with any partial withdrawal or full surrender request be guaranteed by a qualifying institution or other firm qualified to give such a guaranty. |
• | Gross Withdrawal. With respect to the Contract as a whole, a Gross Withdrawal refers to the reduction in your Modified Contract Value as a result of the partial withdrawal or full surrender. With respect to a particular Strategy, a Gross Withdrawal refers to the reduction in your Modified Strategy Value as a result of the partial withdrawal or full surrender. A Gross Withdrawal does not represent the amount that you actually receive. A Gross Withdrawal equals the related Cash Withdrawal plus any applicable CDSC and taxes withheld, and minus any applicable MVA (which can be positive or negative). |
• | Net Withdrawal. With respect to the Contract as whole, a Net Withdrawal refers to the reduction in your Contract Value as a result of the partial withdrawal or full surrender. With respect to a particular Strategy, a Net Withdrawal refers to the reduction in your Strategy Value as a result of the partial withdrawal or full surrender. A Net Withdrawal does not represent the amount that you actually receive and serves only as a tracking value used by us in the administration of your Contract. A Net Withdrawal equals the related Gross Withdrawal minus any Interim Strategy Earnings. |
• | Cash Withdrawal. With respect to the Contract as a whole, a Cash Withdrawal refers to the total dollar amount that you receive as a result of the partial withdrawal or full surrender. A Cash Withdrawal equals the related Gross Withdrawal minus any applicable CDSC and deducted taxes, and after the application of any MVA. |
• | If you indicate that the dollar amount should be taken in the form of a Gross Withdrawal under the Contract, you will not necessarily know the dollar amount that you will actually receive, but you will know the overall reduction to your Modified Contract Value. Your Cash Withdrawal may be more or less than the Gross Withdrawal that you requested. |
• | If you indicate that the dollar amount should be taken in the form of a Cash Withdrawal under the Contract, you will know the dollar amount that you will actually receive, but you will not necessarily know the overall reduction to your Modified Contract Value. In order to pay you a certain Cash Withdrawal, we may need to reduce your Modified Contract Value by an amount greater than the Cash Withdrawal that you requested. |
Number of Completed Contract Years | Preferred Withdrawal Percentage |
0 | 7.00% |
1 | 7.00% |
2 | 7.00% |
3 | 7.00% |
4 | 7.00% |
5 | 7.00% |
6+ | 10.00% |
Number of Completed Contract Years | CDSC Percentage (as a percentage of the CDSC Base) |
0 | 8.00% |
1 | 8.00% |
2 | 7.00% |
3 | 6.00% |
4 | 5.00% |
5 | 4.00% |
6+ | 0.00% |
(1) | No CDSC or MVA is charged on payment of the Death Benefit or on any partial withdrawals or full surrender after the Death Benefit is paid. |
(2) | Nationwide may decide not to charge a CDSC and/or apply an MVA if the Contract is surrendered in exchange for another contract issued by Nationwide or one of its affiliated insurance companies. If another contract issued by Nationwide or one of its affiliates is exchanged for the Contract, Nationwide may reduce the CDSC and/or waive part of the MVA on the Contract. A CDSC and/or MVA may apply to the contract received in exchange for the Contract. |
(1) | Contract Owner / Joint Owner. If there is a surviving Contract Owner or Joint Owner, the survivor becomes the sole Contract Owner. The Contract otherwise continues uninterrupted. |
(2) | Beneficiary(ies). If there is no surviving Contract Owner or Joint Owner, the Beneficiary(ies) becomes (become) the new contract owner for purposes of the Code. |
(3) | Contingent Beneficiary(ies). If there is no surviving Beneficiary, the Contingent Beneficiary(ies) becomes (become) the new contract owner for purposes of the Code. |
(4) | Last Surviving Contract Owner's or Joint Owner’s Estate. If there is no surviving Contingent Beneficiary, the estate of the last surviving Contract Owner or Joint Owner becomes the new Contract Owner. |
(1) | Contract Owner / Joint Owner. If there is a surviving Contract Owner or Joint Owner, the survivor is entitled to the Death Benefit. |
(2) | Beneficiary(ies). If there is no surviving Contract Owner or Joint Owner, the Beneficiary(ies) is (are) entitled to the Death Benefit. |
(3) | Contingent Beneficiary(ies). If there is no surviving Beneficiary, the Contingent Beneficiary(ies) is (are) entitled to the Death Benefit. |
(4) | Last Surviving Contract Owner's or Joint Owner’s Estate. If there is no surviving Contingent Beneficiary, the estate of the last surviving Contract Owner or Joint Owner is entitled to the Death Benefit. |
(1) | Beneficiary(ies). The Beneficiary(ies) is (are) entitled to the Death Benefit. |
(2) | Contingent Beneficiary(ies). If there is no surviving Beneficiary, the Contingent Beneficiary(ies) is (are) entitled to the Death Benefit. |
(3) | Last Surviving Contract Owner's or Joint Owner’s Estate. If there is no surviving Contingent Beneficiary, the estate of the last surviving Contract Owner or Joint Owner is entitled to the Death Benefit. |
• | Proper proof of death; |
• | Instructions regarding the method of distribution; and |
• | Any forms required by a state or other jurisdiction. |
• | A certified copy of the death certificate of the deceased Annuitant; |
• | A copy of a certified decree of a court of competent jurisdiction as to the finding of death; |
• | A written statement by a medical doctor who attended the deceased; or |
• | Any other proof of death that we deem acceptable. |
(1) | If the person entitled to receive the Death Benefit is the surviving spouse of the deceased Contract Owner, the surviving spouse can do one of the following: |
a. | Elect to receive their portion of the Death Benefit as a lump sum; |
b. | Elect to receive their portion of the Death Benefit as an annuity; |
c. | Elect to receive their portion of the Death Benefit as any distribution that is permitted by state and federal regulations and is acceptable to Nationwide; or |
d. | Elect to continue the Contract with his or her portion of the Death Benefit and become the new Contract Owner. |
(2) | For any other person(s) entitled to receive the Death Benefit, he or she can do one of the following: |
a. | Elect to receive their portion of the Death Benefit as a lump sum; |
b. | Elect to receive their portion of the Death Benefit as an annuity; or |
c. | Elect to receive their portion of the Death Benefit as any distribution that is permitted by state and federal regulations and is acceptable to Nationwide. |
(a) | The new Contract Owner or assignee assumes full ownership of the Contract. We reserve the right to determine when such circumstances occur in our sole discretion. Examples of such circumstances may include (a) when ownership is transferred from an individual to a revocable trust for the benefit of the same individual; (b) when ownership changes due to a change in a Contract Owner’s spouse; or (c) when ownership changes because there is a change to a court appointed guardian representing the Contract Owner during the Contract Owner’s lifetime. |
(b) | Ownership of a Contract as an IRA or Roth IRA is being changed from one custodian to another, from the Contract Owner to a custodian, or from a custodian to the Contract Owner. |
(c) | The assignment is for the purpose of effectuating an exchange pursuant to Section 1035 of the Code. |
(d) | The change is the removal of a Contract Owner or Joint Owner when the Contract is jointly owned. |
• | the request is made prior to the Annuitization Date; |
• | the requested date is at least two years after the Date of Issue; |
• | the requested date is not later than the first day of the first calendar month after the Annuitant’s 90th birthday unless approved by Nationwide; and |
• | the request for change is made in writing, submitted to the Service Center and approved by Nationwide. |
• | Single life; |
• | Joint and survivor; and |
• | Single life with a 10 or 20 year term certain. |
1. | a fixed single life annuity with a 20 year term certain; or |
2. | a fixed single life annuity with a term certain to age 95. |
1. | reduce the amount to be annuitized to $5,000,000 or less by taking a partial withdrawal from the Contract; |
2. | reduce the amount to be annuitized to $5,000,000 or less by exchanging the portion of the Surrender Value in excess of $5,000,000 to another annuity contract; or |
3. | annuitize the portion of the Surrender Value in excess of $5,000,000 under an annuity payment option with a term certain, if available. |
1. | Waiver of sales charges. In addition to any sales load waivers included in the contract, Charitable Remainder Trusts may also withdraw the difference between: |
a. | the contract value on the day before the withdrawal; and |
b. | the total amount of purchase payments made to the contract (less an adjustment for amounts surrendered). |
2. | Contract ownership at annuitization. On the annuitization date, if the contract owner is a Charitable Remainder Trust, the Charitable Remainder Trust will continue to be the contract owner and the annuitant will NOT become the contract owner. |
3. | Recipient of death benefit proceeds. With respect to the death benefit proceeds, if the contract owner is a Charitable Remainder Trust, the death benefit is payable to the Charitable Remainder Trust. Any designation in conflict with the Charitable Remainder Trust’s right to the death benefit will be void. |
• | the contract is not transferable by the owner; |
• | the premiums are not fixed; |
• | if the contract owner is younger than age 50, the annual premium cannot exceed $5,500; if the contract owner is age 50 or older, the annual premium cannot exceed $6,500 (although rollovers of greater amounts from Qualified Plans, tax sheltered annuities, certain 457 governmental plans, and other IRAs can be received); |
• | certain minimum distribution requirements must be satisfied after the owner attains the age of 70½ prior to January 1, 2020. See "Tax Changes" for the change the SECURE Act made to this requirement; |
• | the entire interest of the owner in the contract is nonforfeitable; and |
• | after the death of the owner, additional distribution requirements may be imposed to ensure distribution of the entire balance in the contract within the statutory period of time. |
• | the contract is not transferable by the owner; |
• | the premiums are not fixed; |
• | if the contract owner is younger than age 50, the annual premium cannot exceed $5,500; if the contract owner is age 50 or older, the annual premium cannot exceed $6,500 (although rollovers of greater amounts from other Roth IRAs and other individual retirement plans can be received); |
• | the entire interest of the owner in the contract is nonforfeitable; and |
• | after the death of the owner, certain distribution requirements may be imposed to ensure distribution of the entire balance in the contract within the statutory period of time. |
• | minimum participation rules; |
• | top-heavy contribution rules; |
• | nondiscriminatory allocation rules; and |
• | requirements regarding a written allocation formula. |
• | vesting requirements; |
• | participation requirements; and |
• | administrative requirements. |
• | the type of contract purchased; |
• | the purposes for which the contract is purchased; and |
• | the personal circumstances of individual investors having interests in the contracts. |
• | IRAs; |
• | SEP IRAs; |
• | Simple IRAs; |
• | Roth IRAs; and |
• | Non-Qualified Contracts. |
• | made to a beneficiary on or after the death of the owner; |
• | attributable to the owner becoming disabled (as defined in the Internal Revenue Code); |
• | part of a series of substantially equal periodic payments made not less frequently than annually for the life (or life expectancy) of the owner, or the joint lives (or joint life expectancies); or of the owner and his or her designated beneficiary; |
• | used for qualified higher education expenses; |
• | used for expenses attributable to the purchase of a home for a qualified first-time buyer |
• | it is made on or after the date on which the contract owner attains age 59½; |
• | it is made to a beneficiary (or the contract owner's estate) on or after the death of the contract owner; |
• | it is attributable to the contract owner's disability; or |
• | it is used for expenses attributable to the purchase of a home for a qualified first-time buyer. |
• | made to a beneficiary on or after the death of the owner; |
• | attributable to the owner becoming disabled (as defined in the Internal Revenue Code); |
• | part of a series of substantially equal periodic payments made not less frequently than annually for the life (or life expectancy) of the owner, or the joint lives (or joint life expectancies) of the owner and his or her designated beneficiary; |
• | for qualified higher education expenses; or |
• | used for expenses attributable to the purchase of a home for a qualified first-time buyer. |
• | the result of a contract owner's death; |
• | the result of a contract owner's disability (as defined in the Internal Revenue Code); |
• | one of a series of substantially equal periodic payments made over the life (or life expectancy) of the contract owner or the joint lives (or joint life expectancies) of the contract owner and the beneficiary selected by the contract owner to receive payment under the annuity payment option selected by the contract owner; or |
• | is allocable to an investment in the contract before August 14, 1982. |
• | acquired by the estate of a decedent by reason of the death of the decedent; |
• | issued in connection with certain qualified retirement plans and individual retirement plans; |
• | purchased by an employer upon the termination of certain qualified retirement plans; or |
• | immediate annuities within the meaning of Section 72(u) of the Internal Revenue Code. |
• | if the payee does not provide Nationwide with a taxpayer identification number; or |
• | if Nationwide receives notice from the Internal Revenue Service that the taxpayer identification number furnished by the payee is incorrect. |
1. | provide Nationwide with a properly completed withholding certificate claiming the treaty benefit of a lower tax rate or exemption from tax; and |
2. | provide Nationwide with an individual taxpayer identification number. |
1. | the distribution is connected to the non-resident alien's conduct of business in the United States; |
2. | the distribution is includable in the non-resident alien's gross income for United States federal income tax purposes; and |
3. | provide Nationwide with a properly completed withholding certificate claiming the exemption. |
• | a transfer of the contract from one contract owner to another; or |
• | a distribution to someone other than a contract owner. |
a) | an individual who is two or more generations younger than the contract owner; or |
b) | certain trusts, as described in Section 2613 of the Internal Revenue Code (generally, trusts that have no beneficiaries who are not two or more generations younger than the contract owner). |
• | who would be required to include the contract, death benefit, distribution, or other payment in his or her federal gross estate at his or her death; or |
• | who is required to report the transfer of the contract, death benefit, distribution, or other payment for federal gift tax purposes. |
• | Waiving the 2020 lifetime and post death minimum distribution requirement (RMD) from defined contribution plans and IRAs, including the 2019 RMD taken in 2020 for those individuals turning 70½ in 2019. Additionally, 2020 will not be counted in measuring the five-year distribution period requirement for post death RMDs, with the result that the five-year period is extended by one year. |
• | Relief for coronavirus-related distributions and loans from qualified plans and IRAs, which includes an exception from the 10% penalty for early distribution and an exemption from the 20% mandatory withholding requirement. |
• | Increasing the age a contract owner must begin RMDs under IRAs and certain qualified plans from age 70½ to age 72. |
• | Requiring an individual beneficiary of an inherited IRA and certain qualified plans to withdraw their entire inherited interest within 10 years of the original contract owner’s death. |
• | Repealing the 70½ age limitation that prohibited an individual from making an IRA contribution. |
• | Lowered the federal individual and corporate income tax rates; |
• | Doubled the federal estate and gift tax exclusion amount to $10 million; |
• | Eliminated the ability to recharacterize the rollover or conversion of amounts from IRAs or eligible retirement plans to a Roth IRA. |
1. | If any contract owner dies on or after the Annuitization Date and before the entire interest in the contract has been distributed, then the remaining interest must be distributed at least as rapidly as the distribution method in effect on the contract owner's death. |
2. | If any contract owner dies before the Annuitization Date, then the entire interest in the contract (consisting of either the death benefit or the Contract Value reduced by charges set forth elsewhere in the contract) will be distributed within 5 years of the contract owner's death, provided however: |
a. | any interest payable to or for the benefit of a designated beneficiary may be distributed over the life of the designated beneficiary or over a period not longer than the life expectancy of the designated beneficiary. Payments must begin within one year of the contract owner's death unless otherwise permitted by federal income tax regulations; and |
b. | if the designated beneficiary is the surviving spouse of the deceased contract owner, the spouse can choose to become the contract owner instead of receiving a death benefit. Any distributions required under these distribution rules will be made upon that spouse's death. |
a) | the death of the annuitant will be treated as the death of a contract owner; |
b) | any change of annuitant will be treated as the death of a contract owner; and |
c) | in either case, the appropriate distribution will be made upon the death or change, as the case may be. |
a) | the life of the contract owner or the joint lives of the contract owner and the contract owner's designated beneficiary; or |
b) | a period not longer than the period determined under the table in Treasury Regulation 1.401(a)(9)-9, which is the deemed joint life expectancy of the contract owner and a person 10 years younger than the contract owner. If the designated beneficiary is the spouse of the contract owner, the period may not exceed the longer of the period determined under such table or the joint life expectancy of the contract owner and the contract owner's spouse, determined in accordance with Treasury Regulation. |
(a) | The life or life expectancy of the designated beneficiary, with such life expectancy determined under the tables prescribed by Treasury Regulation 1.401(a)(9)-9. Distributions must begin by the end of the calendar following the year of death. |
a. | In the case of a non-spouse designated beneficiary, the life expectancy is determined in the calendar year following the contract owner’s death, with such life expectancy reduced by one for each subsequent calendar year that elapsed from the year the life expectancy was determined. |
b. | If a designated beneficiary dies after January 1, 2020, any remaining interest must be distributed by December 31st of the tenth year following the death of the designated beneficiary. |
c. | If the sole designated beneficiary is the surviving spouse of the contract owner, then distributions must begin by the later of the calendar year following the year of the contract owner’s death or the end of the calendar year in which the contract owner would have turned 70 ½ (age 72 for those who turn age 70 ½ on or after January 1, 2020). |
• | By telephone at 1-800-848-6331 (TDD 1-800-238-3035) |
• | By mail to P.O. Box 182021, Columbus, Ohio 43218-2021 |
• | By Internet at www.nationwide.com |
• | statements showing the Contract’s quarterly activity; and |
• | confirmation statements showing transactions that affect the Contract’s value. |
• | The Strategy Value (F) is $70,000 |
• | The Remaining Preferred Withdrawal Amount (C) is $5,000 |
• | The SEP is 5% |
• | The NSEP is 3% |
• | A = $73,500 (i.e., $70,000 x (1 + 5%)). The Strategy Accumulation Value (A) is calculated using the formula Strategy Accumulation Value = Strategy Value x (1 + SEP). |
• | B = $72,195.24 (i.e., $5,000 + $67,195.24) |
❍ | C = $5,000, as assumed |
❍ | D = $67,195.24 (i.e., 1.03 x ($70,000 - $4,761.90)) |
■ | E = 1.03 (i.e., 1 + 3%) |
■ | F = $70,000, as assumed |
■ | G = $4,761.90 (i.e. $5,000 / (1 + 5%)) |
• | Modified Strategy Value = $72,195.24 (i.e., lesser of $73,500 or $72,195.24) |
• | The Strategy Value (F) is $30,000 |
• | The Remaining Preferred Withdrawal Amount (C) is $2,000 |
• | The SEP is -2% |
• | The NSEP is -2% |
• | A = $29,400 (i.e., $30,000 x (1 - 2%). The Strategy Accumulation Value (A) is calculated using the formula Strategy Accumulation Value = Strategy Value x (1 + SEP). |
• | B = $29,400 (i.e., $2,000 + $27,400) |
❍ | C = $2,000, as assumed |
❍ | D = $27,400 (i.e., 0.98 x ($30,000 - 2,040.82)) |
■ | E = 0.98 (i.e., 1 - 2%) |
■ | F = $30,000, as assumed |
■ | G = $2,040.82 (i.e., $2.000 / (1 - 2%)) |
• | Modified Strategy Value = $29,400 (i.e., lesser of $29,400 or $29,400) |
(a) | If the AIP is 12%, then D is 0.4167 (i.e., 1.25 / 3). A would be 5% (i.e., 12% x 0.4167) |
(b) | If the AIP is -6%, then D is 1. A would be -6% (i.e., -6% x 1) |
(c) | If the AIP is -15%, then D is 1. A would be -15% (i.e., -15% x 1) |
(a) | If Protection Level is 90% and Non-Preferred Withdrawal Adjustment Percentage is 2%, then B is -13.5% (i.e., (90%-100%) – 2% x 1.75) |
(b) | If Protection Level is 100% and Non-Preferred Withdrawal Adjustment Percentage is 2%, then B is -3.5% (i.e., (100%-100%) – 2% x 1.75) |
(c) | If Protection Level is 90% and Non-Preferred Withdrawal Adjustment Percentage is 3%, then B is -15.25% (i.e., (90%-100%) – 3% x 1.75) |
(a) | If A equals 5% and B equals -13.5%, the NSEP equals 5%. |
(b) | If A equals -6% and B equals -3.5%, the NSEP equals -3.5%. |
(c) | If A equals -15% and B equals -15.25%, the NSEP equals -15%. |
• | Index XYZ |
• | Protection Level of 90% (represents a downside protection of -10%) |
• | 3-Year Strategy Term |
• | Participation Rate of 80% |
• | Strategy Spread of 1.00% |
• | Index XYZ’s Index Performance is 32.00% |
• | CDSC Percentage = 8.00% |
• | MVA Factor = 3.25% |
1. | Calculate the Strategy Earnings Percentage (SEP) and Non-Preferred Strategy Earnings Percentage (NSEP) |
Step One | Step Two | Step Three | Step Four | Step Five | Step Six | Step Seven | Step Eight |
Elapsed Term | Adjusted Index Performance (AIP) | Downside Protection for SEP | Downside Protection for NSEP | Elapsed Term / Strategy Term | Factor to use in NSEP | Strategy Earnings Percentage (SEP) | Non-Preferred Strategy Earnings Percentage (NSEP) |
0.60 | 25.00% | -10.00% | -14.80% | 0.20 | 0.20 | 25.00% | 5.00% |
• | Step One: 0.60 = (219 days/365 days) |
• | Step Two: 25.00% = [ (80% x 32.00%) - 1.00% x 0.60)] (i.e. AIP = Participation Rate x Index Performance – Strategy Spread x Elapsed Term) |
• | Step Three: -10.00% = (90% - 100%) (i.e. downside protection for SEP = Protection Level – 100%) |
• | Step Four: -14.80% = [90% - 100% - 2.00% x (3 - 0.60)] (i.e. downside protection for NSEP = Protection Level – 100% - Non-Preferred Withdrawal Adjustment Percentage x (Strategy Term – Elapsed Term) |
• | Step Five: 0.20 = (0.60 / 3) (i.e. Elapsed Term / Strategy Term, which is representative of the amount of time that has passed in the Strategy Term) |
• | Step Six: 0.20 (Use result of Step Five if result of Step Four is 0% or greater; otherwise use 1) |
• | Step Seven: 25.00% = (Greater of 25.00% or -10.00%) (i.e. SEP = Greater of AIP or downside protection for SEP) |
• | Step Eight: 5.00% = (Greater of 25.00% x 0.20 or -14.80%) (i.e. NSEP = Greater of (AIP x result of Step Six) or downside protection for NSEP) |
2. | Calculate the Strategy Earnings |
Step One | Step Two | Step Three | Step Four | Step Five |
Dollar Amount of Preferred Withdrawal | Interim Strategy Earnings on the Preferred Withdrawal | Dollar Amount of Non-Preferred Withdrawal | Interim Strategy Earnings on the Non-Preferred Withdrawal | Total Interim Strategy Earnings |
$7,000 | $1,400 | $7,000 | $333 | $1,733 |
• | Step One: $7,000 = Lesser of 7% of $100,000 or $14,000 (i.e. dollar amount of Preferred Withdrawal is the lesser of the maximum Preferred Withdrawal Amount (7% of Contract Value at start of contract year) and the requested withdrawal) |
• | Step Two: $1,400 = [25.00% x $7,000 / (1 + 25.00%)] (i.e. SEP x Preferred Withdrawal / (1+ SEP)) |
• | Step Three: $7,000 = ($14,000 - $7,000) (i.e. dollar amount of Non-Preferred Withdrawal equals requested withdrawal minus dollar amount of Preferred Withdrawal) |
• | Step Four: $333 = [5.00% x $7,000 / (1 + 5.00%)] (i.e. NSEP x Non-Preferred Withdrawal / (1+ NSEP)) |
• | Step Five: $1,733 = ($1,400 + $333) (i.e. sum of Steps Two and Four) |
3. | Calculate the Contract Value |
Contract Value before Withdrawal | Gross Withdrawal | Total Strategy Earnings | Contract Value after Withdrawal |
$100,000 | $14,000 | $1,733 | $87,733 |
4. | Calculate the Cash Withdrawal |
Step One | Step Two | Step Three | Step Four | Step Five |
Gross Withdrawal | CDSC Base/MVA Base | CDSC | MVA | Cash Withdrawal |
$14,000 | $7,000 | $560 | $228 | $13,668 |
• | Step One: $14,000 (Gross Withdrawal) |
• | Step Two: $7,000 (i.e. CDSC Base and MVA Base = Non-Preferred Withdrawal) |
• | Step Three: $560 = ($7,000 x 8.00%) (i.e. CDSC Base x CDSC Percentage) |
• | Step Four: $228 = ($7,000 x 3.25%) (i.e. MVA Base x MVA Factor) |
• | Step Five: $13,668 = $14,000 - $560 +$228 (i.e. Result of Step One minus Step Three plus Step Four) |
• | Index XYZ’s Index Performance is -20.00% |
• | CDSC Percentage = 8.00% |
• | MVA Factor = 3.25% |
1. | Calculate the Strategy Earnings Percentage (SEP) and Non-Preferred Strategy Earnings Percentage (NSEP) |
Step One | Step Two | Step Three | Step Four | Step Five | Step Six | Step Seven | Step Eight |
Elapsed Term | Adjusted Index Performance (AIP) | Downside Protection for SEP | Downside Protection for NSEP | Elapsed Term / Strategy Term | Factor to use in NSEP | Strategy Earnings Percentage (SEP) | Non-Preferred Strategy Earnings Percentage (NSEP) |
1.096 | -17.096% | -10.00% | -13.81% | 0.365 | 1.00 | -10.00% | -13.81% |
• | Step One: 1.096 = (400 days/365 days) |
• | Step Two: -17.096% = [ (80% x -20.00%) - 1.00% x 1.096)] (i.e. AIP = Participation Rate x Index Performance – Strategy Spread x Elapsed Term) |
• | Step Three: -10.00% = (90% - 100%) (i.e. downside protection for SEP = Protection Level – 100%) |
• | Step Four: -13.81% = [90% - 100% - 2.00% x (3 - 1.096)] (i.e. downside protection for NSEP = Protection Level – 100% - Non-Preferred Withdrawal Adjustment Percentage x (Strategy Term – Elapsed Term) |
• | Step Five: 0.365 = (1.096 / 3) (i.e. Elapsed Term / Strategy Term) |
• | Step Six: 1.00 (Use result of Step Five if result of Step Four is 0% or greater; otherwise use 1) |
• | Step Seven: -10.00% = (Greater of -17.096% or -10.00%) (i.e. SEP = Greater of AIP or downside protection for SEP) |
• | Step Eight: -13.81% = (Greater of -17.096% x 1.00 or -13.81%) (i.e. NSEP = Greater of (AIP x result of Step Six) or downside protection for NSEP) |
2. | Calculate the Strategy Earnings |
Step One | Step Two | Step Three | Step Four | Step Five |
Dollar Amount of Preferred Withdrawal | Interim Strategy Earnings on the Preferred Withdrawal | Dollar Amount of Non-Preferred Withdrawal | Interim Strategy Earnings on the Non-Preferred Withdrawal | Total Interim Strategy Earnings |
$6,141 | -$682 | $7,859 | -$1,259 | -$1,941 |
• | Step One: $6,141 = Lesser of 7% of $87,733 or $14,000 (i.e. dollar amount of Preferred Withdrawal is the lesser of the maximum Preferred Withdrawal Amount (7% of Contract Value at start of contract year) and the requested withdrawal) |
• | Step Two: -$682 = [-10.00% x $6,141 / (1 + (-10.00%)] (i.e. SEP x Preferred Withdrawal / (1+ SEP)) |
• | Step Three: $7,859 = ($14,000 - $6,141) (i.e. dollar amount of Non-Preferred Withdrawal equals requested withdrawal minus dollar amount of Preferred Withdrawal) |
• | Step Four: -$1,259 = [-13.81% x $7,859 / (1 + (-13.81%)] (i.e. NSEP x Non-Preferred Withdrawal / (1+ NSEP)) |
• | Step Five: -$1,941 = (-$682 + (-$1,259)) (i.e. sum of Steps Two and Four) |
3. | Calculate the Contract Value |
Contract Value before Event | Gross Withdrawal | Total Strategy Earnings | Contract Value after Event |
$87,733 | $14,000 | -$1,941 | $71,792 |
4. | Calculate the Cash Withdrawal |
Step One | Step Two | Step Three | Step Four | Step Five |
Gross Withdrawal | CDSC Base/MVA Base | CDSC | MVA | Cash Withdrawal |
$14,000 | $7,859 | $629 | $255 | $13,626 |
• | Step One: $14,000 (Gross Withdrawal) |
• | Step Two: $7,859 (i.e. CDSC Base and MVA Base = Non-Preferred Withdrawal) |
• | Step Three: $629 = ($7,859 x 8.00%) (i.e. CDSC Base x CDSC Percentage) |
• | Step Four: $255 = ($7,859 x 3.25%) (i.e. MVA Base x MVA Factor) |
• | Step Five: $13,626 = $14,000 - $629 +$255 (i.e. Result of Step One minus Step Three plus Step Four) |
• | Index XYZ’s Index Performance is 15.7425% |
• | CDSC Percentage = 8.00% |
• | MVA Factor = -1.50% |
1. | Calculate the Strategy Earnings Percentage (SEP) and Non-Preferred Strategy Earnings Percentage (NSEP) |
Step One | Step Two | Step Three | Step Four | Step Five | Step Six | Step Seven | Step Eight |
Elapsed Term | Adjusted Index Performance (AIP) | Downside Protection for SEP | Downside Protection for NSEP | Elapsed Term / Strategy Term | Factor to use in NSEP | Strategy Earnings Percentage (SEP) | Non-Preferred Strategy Earnings Percentage (NSEP) |
1.644 | 10.950% | -10.00% | -12.712% | 0.548 | 0.548 | 10.950% | 6.00% |
• | Step One: 1.644 = (600 days / 365 days) |
• | Step Two: 10.95% = [ (80% x 15.7425%) - 1.00% x 1.644)] (i.e. AIP = Participation Rate x Index Performance – Strategy Spread x Elapsed Term) |
• | Step Three: -10.00% = (90% - 100%) (i.e. downside protection for SEP = Protection Level – 100%) |
• | Step Four: -12.712% = [90% - 100% - 2.00% x (3 - 1.644)] (i.e. downside protection for NSEP = Protection Level – 100% - Non-Preferred Withdrawal Adjustment Percentage x (Strategy Term – Elapsed Term) |
• | Step Five: 0.548 = (1.644 / 3) (i.e. Elapsed Term / Strategy Term) |
• | Step Six: 0.548 (Use result of Step Five if result of Step Four is 0% or greater; otherwise use 1) |
• | Step Seven: 10.950% = (Greater of 10.950% or -10.00%) (i.e. SEP = Greater of AIP or downside protection for SEP) |
• | Step Eight: 6.00% = (Greater of 10.95% x 0.548 or -12.712%) (i.e. NSEP = Greater of (AIP x result of Step Six) or downside protection for NSEP) |
2. | Calculate the Strategy Earnings |
Step One | Step Two | Step Three | Step Four | Step Five |
Dollar Amount of Preferred Withdrawal | Interim Strategy Earnings on the Preferred Withdrawal | Dollar Amount of Non-Preferred Withdrawal | Interim Strategy Earnings on the Non-Preferred Withdrawal | Total Interim Strategy Earnings |
$0 | $0 | $10,000 | $566 | $566 |
• | Step One: Remaining Preferred Withdrawal is zero |
• | Step Two: $0 = [10.95% x $0 / (1 + 10.95%)] (i.e. SEP x Preferred Withdrawal / (1+ SEP)) |
• | Step Three: $10,000 = ($10,000 - $0) (i.e. dollar amount of Non-Preferred Withdrawal equals requested withdrawal minus dollar amount of Preferred Withdrawal) |
• | Step Four: $566 = [6.00% x $10,000 / (1 + 6.00%)] (i.e. NSEP x Non-Preferred Withdrawal / (1+ NSEP)) |
• | Step Five: $566 = ($0 + $566) (i.e. sum of Steps Two and Four) |
3. | Calculate the Contract Value |
Contract Value before Event | Gross Withdrawal | Total Strategy Earnings | Contract Value after Event |
$71,792 | $10,000 | $566 | $62,358 |
4. | Calculate the Cash Withdrawal |
Step One | Step Two | Step Three | Step Four | Step Five |
Gross Withdrawal | CDSC Base/MVA Base | CDSC | MVA | Cash Withdrawal |
$10,000 | $10,000 | $800 | -$150 | $9,050 |
• | Step One: $10,000 (Gross Withdrawal) |
• | Step Two: $10,000 (i.e. CDSC Base and MVA Base = Non-Preferred Withdrawal) |
• | Step Three: $800 = ($10,000 x 8.00%) (i.e. CDSC Base x CDSC Percentage) |
• | Step Four: -$150 = ($10,000 x (-1.50%)) (i.e. MVA Base x MVA Factor) |
• | Step Five: $9,050 = $10,000 - $800 + (-$150) (i.e. Result of Step One minus Step Three plus Step Four) |
• | Index XYZ’s Index Performance is 2.2525% |
• | CDSC Percentage = 7.00% |
• | MVA Factor = 2.00% |
1. | Calculate the Strategy Earnings Percentage (SEP) and Non-Preferred Strategy Earnings Percentage (NSEP) |
Step One | Step Two | Step Three | Step Four | Step Five | Step Six | Step Seven | Step Eight |
Elapsed Term | Adjusted Index Performance (AIP) | Downside Protection for SEP | Downside Protection for NSEP | Elapsed Term / Strategy Term | Factor to use in NSEP | Strategy Earnings Percentage (SEP) | Non-Preferred Strategy Earnings Percentage (NSEP) |
2.192 | -0.39% | -10.00% | -11.62% | 0.731 | 1.00 | -0.39% | -0.39% |
• | Step One: 2.192 = (800 days / 365 days) |
• | Step Two: -0.39% = [ (80% x 2.2525%) - 1.00% x 2.192)] (i.e. AIP = Participation Rate x Index Performance – Strategy Spread x Elapsed Term) |
• | Step Three: -10.00% = (90% - 100%) (i.e. downside protection for SEP = Protection Level – 100%) |
• | Step Four: -11.62% = [90% - 100% - 2.00% x (3 - 2.192)] (i.e. downside protection for NSEP = Protection Level – 100% - Non-Preferred Withdrawal Adjustment Percentage x (Strategy Term – Elapsed Term) |
• | Step Five: 0.731 = (2.192 / 3) (i.e. Elapsed Term / Strategy Term) |
• | Step Six: 1.00 (Use result of Step Five if result of Step Four is 0% or greater; otherwise use 1) |
• | Step Seven: -0.39% = (Greater of -0.39% or -10.00%) (i.e. SEP = Greater of AIP or downside protection for SEP) |
• | Step Eight: -0.39% = (Greater of -0.39% x 1.00 or -11.62%) (i.e. NSEP = Greater of (AIP x result of Step Six) or downside protection for NSEP) |
2. | Calculate the Strategy Earnings |
Step One | Step Two | Step Three | Step Four | Step Five |
Dollar Amount of Preferred Withdrawal | Interim Strategy Earnings on the Preferred Withdrawal | Dollar Amount of Non-Preferred Withdrawal | Interim Strategy Earnings on the Non-Preferred Withdrawal | Total Interim Strategy Earnings |
$4,365 | -$17 | $4,365 | -$17 | -$34 |
• | Step One: $4,365 = Lesser of 7% of $62,358 or $8,730 (i.e. dollar amount of Preferred Withdrawal is the lesser of the maximum Preferred Withdrawal Amount (7% of Contract Value at start of contract year) and the requested withdrawal) |
• | Step Two: -$17 = [-0.39% x 4,365 / (1 + (-0.39%)] (i.e. SEP x Preferred Withdrawal / (1+ SEP)) |
• | Step Three: $4,365 = ($8,730 - $4,365) (i.e. dollar amount of Non-Preferred Withdrawal equals requested withdrawal minus dollar amount of Preferred Withdrawal) |
• | Step Four: -$17 = [-0.39% x $4,365 / (1 + (-0.39%)] (i.e. NSEP x Non-Preferred Withdrawal / (1+ NSEP)) |
• | Step Five: -$34 = ((-$17) + (-$17)) (i.e. sum of Steps Two and Four) |
3. | Calculate the Contract Value |
Contract Value before Event | Gross Withdrawal | Total Strategy Earnings | Contract Value after Event |
$62,358 | $8,730 | -$34 | $53,594 |
4. | Calculate the Cash Withdrawal |
Step One | Step Two | Step Three | Step Four | Step Five |
Gross Withdrawal | CDSC Base/MVA Base | CDSC | MVA | Cash Withdrawal |
$8,730 | $4,365 | $306 | $87 | $8,511 |
• | Step One: $8,730 (Gross Withdrawal) |
• | Step Two: $4,365 (CDSC Base and MVA Base = Non-Preferred Withdrawal) |
• | Step Three: $306 = ($4,365 x 7.00%) (i.e. CDSC Base x CDSC Percentage) |
• | Step Four: $87 = ($4,365 x 2.00%) (i.e. MVA Base x MVA Factor) |
• | Step Five: $8,511 = $8,730 - $306 + $87 (i.e. Result of Step One minus Step Three plus Step Four) |
• | Index XYZ’s Index Performance is 18.60% |
• | CDSC Percentage = 6.00% |
• | MVA Factor = 1.00% |
1. | Calculate the Strategy Earnings Percentage (SEP) |
Step One | Step Two | Step Three | Step Four |
Elapsed Term | Adjusted Index Performance (AIP) | Downside Protection for SEP | Strategy Earnings Percentage (SEP) |
3.00 | 11.88% | -10.00% | 11.88% |
• | Step One: 3.00 = (1095 days / 365 days) |
• | Step Two: 11.88% = [ (80% x 18.60%) - 1.00% x 3.00)] (i.e. AIP = Participation Rate x Index Performance – Strategy Spread x Elapsed Term) |
• | Step Three: -10.00% = (90% - 100%) (i.e. downside protection for SEP = Protection Level – 100%) |
• | Step Four: 11.88% = (Greater of 11.88% or -10.00%) (i.e. SEP = Greater of AIP or downside protection for SEP) |
2. | Calculate the Strategy Earnings |
Strategy Value | Term Strategy Earnings |
$53,594 | $6,367 |
3. | Calculate the Contract Value |
Contract Value before Event | Total Strategy Earnings | Contract Value after Event |
$53,594 | $6,367 | $59,961 |
4. | Calculate the Cash Withdrawal for a full surrender |
Step One | Step Two | Step Three | Step Four | Step Five |
Gross Withdrawal | CDSC Base/MVA Base | CDSC | MVA | Cash Withdrawal |
$59,961 | $55,764 | $3,346 | $558 | $57,173 |
• | Step One: $59,961 (Gross Withdrawal) |
• | Step Two: $55,764 (CDSC Base and MVA Base = Non-Preferred Withdrawal = $59,961 – 7% x $59,961) |
• | Step Three: $3,346 = ($55,764 x 6.00%) (i.e. CDSC Base x CDSC Percentage) |
• | Step Four: $558 = ($55,764 x 1.00%) (i.e. MVA Base x MVA Factor) |
• | Step Five: $57,173 = $59,961 - $3,346 + $558 (i.e. Result of Step One minus Step Three plus Step Four) |
• | The MVA Scaling Factor is 1.0 |
• | The Initial Market Value Reference Rate is 3.50% |
• | The MVA is calculated 13-1/2 months after the Date of Issue |
• | The Market Value Reference Rate on that date is 4.00% |
• | A is 3.50% |
• | B is 4.00% |
• | N is 59 (i.e. there are 58-1/2 months remaining in the MVA Period (72 months – 13-1/2 months), which is rounded up to 59 months) |
• | The MVA is calculated 39 months after the Date of Issue |
• | The Market Value Reference Rate on that date is 3.10% |
• | A is 3.50% |
• | B is 3.10% |
• | N is 33 (i.e. there are 33 months remaining in the MVA Period 72 months – 39 months) |
State | State Law Variations |
California | • Under the Right to Examine and Cancel section, for Contract Owners aged 65 or older on the Date of Issue, if the Contract is returned the Contract Owner is entitled to a refund of the greater of the Purchase Payment or the Contract Accumulation Value on the day the Contract is received by Nationwide or the agent who sold the Contract Owner the Contract. • Contingent Deferred Sales Charge is referred to as Surrender Charge. • Under the Calculation of the Death Benefit section, changes to the Contract Owner or assignment of the Contract do not change the Death Benefit to the Surrender Value. The Death Benefit will continue to be the Contract Accumulation Value. • The Increase in Remaining Preferred Withdrawal Amount After a Long-Term Care or Terminal Illness or Injury Event (CDSC and MVA Waiver) section is not available. |
Connecticut | • Under The Increase in Remaining Preferred Withdrawal Amount After a Long-Term Care or Terminal Illness or Injury Event (CDSC and MVA Waiver) section, "Long-Term Care Event" is referred to as "Confinement." • Under the Long-Term Care Event subsection of The Increase in Remaining Preferred Withdrawal Amount After a Long-Term Care or Terminal Illness or Injury Event (CDSC and MVA Waiver) section, Confinement occurs if at any time after the second Contract Anniversary, the Contract Owner (or Annuitant if the Contract Owner is not a natural person) is confined to a Long-Term Care Facility or Hospital for a continuous period of 90 days or more. • Under the Terminal Illness or Injury Event subsection of the Long-Term Care Event section of The Increase in Remaining Preferred Withdrawal Amount After a Long-Term Care or Terminal Illness or Injury Event (CDSC and MVA Waiver) section, a TI Event occurs if at any time after the second Contract Anniversary, the Contract Owner (or Annuitant if the Contract Owner is not a natural person) is diagnosed by a physician (who is not a party to the Contract nor an immediate family member of a party to the Contract) as having a Terminal Illness or Injury beginning after the Date of Issue. • Under the Calculation of the Death Benefit section, changes to the Contract Owner or assignment of the Contract do not change the Death Benefit to the Surrender Value. The Death Benefit will continue to be the Contract Accumulation Value. |
Florida | • Purchase Payments for any other annuity contract issued by Nationwide to the Contract Owner, Annuitant, or Contingent Annuitant will not be considered for purposes of determining whether the Purchase Payment under this Contract exceeds $1,000,000. • The Annuity Commencement Date must be at least one year after the Date of Issue. • Under the Annuity Payment Options for Contracts with Total Purchase Payments and/or Surrender Value Annuitized Less Than or Equal to $2,000,000, Annuity Payment Options for Contracts with Total Purchase Payments and/or Surrender Value Annuitized Greater Than $2,000,000, and Annuitization of Amounts Greater than $5,000,000 sections, references to "Surrender Value" are replaced with "Contract Accumulation Value." |
Hawaii | • Joint Owners are not limited to spouses. |
Illinois | • Joint Owners are not limited to spouses. • Incontestability - This Contract, attached application, including any attached supplemental applications, together with any amendments, optional riders and endorsements, if any, will not be contested. • Misstatements made as to the sex of the Contract Owner, Joint Owner, Annuitant, Contingent Annuitant, Beneficiary or Contingent Beneficiary are excluded from the Misstatements of Age or Sex section. |
Massachusetts | • The Increase in Remaining Preferred Withdrawal Amount After a Long-Term Care or Terminal Illness or Injury Event (CDSC and MVA Waiver) section is not available. |
State | State Law Variations |
New Jersey | • The Increase in Remaining Preferred Withdrawal Amount After a Long-Term Care or Terminal Illness or Injury Event (CDSC and MVA Waiver) section is not available. • Joint Owners are not limited to spouses. • Purchase Payments for any other annuity contract issued by Nationwide to the Contract Owner, Annuitant, or Contingent Annuitant will not be considered for purposes of determining whether the Purchase Payment under this Contract exceeds $1,000,000. • CDSC and/or MVA will not be waived under the Waiver or Reduction of the CDSC or MVA section if the Contract is surrendered in exchange for another contract issued by Nationwide or one of its affiliated insurance companies. Additionally the CDSC and/or MVA will not be waived if another contract issued by Nationwide or one of its affiliates is exchanged for the Contract. • The Contract cannot be categorized as a Charitable Remainder Trust. • Extends spousal rights to any party to a civil union. |
Pennsylvania | • Strategies with 3-year Strategy Terms are not available. |
Texas | • Purchase Payments for any other annuity contract issued by Nationwide to the Contract Owner, Annuitant, or Contingent Annuitant will not be considered for purposes of determining whether the Purchase Payment under this Contract exceeds $1,000,000. • Purchase CDSC and/or MVA will not be waived under the Waiver or Reduction of the CDSC or MVA section if the Contract is surrendered in exchange for another contract issued by Nationwide or one of its affiliated insurance companies. Additionally, the CDSC and/or MVA will not be waived if another contract issued by Nationwide or one of its affiliates is exchanged for the Contract. |
Washington | • The Terminal Illness or Injury Event subsection under The Increase in Remaining Preferred Withdrawal Amount After a Long-Term Care or Terminal Illness or Injury Event (CDSC and MVA Waiver) section is not available. |
December 31, | ||||||
(in millions) | 2020 | 2019 | 2018 | |||
Total revenues | $834 | $883 | $895 | |||
Pre-tax operating earnings | $ (12) | $ 10 | $ 28 |
December 31, | ||||||
(in millions) | 2020 | 2019 | 2018 | |||
Total revenues | $5,247 | $6,010 | $5,656 |
December 31, | ||||||
(in millions) | 2020 | 2019 | 2018 | |||
Pre-tax operating earnings | $355 | $434 | $375 |
December 31, | ||||||
(in millions) | 2020 | 2019 | 2018 | |||
Total revenues | $7,132 | $5,470 | $5,181 | |||
Pre-tax operating earnings | $ 115 | $ 128 | $ 118 |
December 31, | ||||||
(in millions) | 2020 | 2019 | 2018 | |||
Total revenues | $1,903 | $2,089 | $2,263 | |||
Pre-tax operating earnings | $ 608 | $ 461 | $ 489 |
• | Bonds are generally stated at amortized cost, except those with an NAIC designation of "6", which are stated at the lower of amortized cost or fair value. Changes in fair value of bonds stated at fair value are charged to capital and surplus. |
• | Loan-backed and structured securities, which are included in bonds in the statutory financial statements, are stated in a manner consistent with the bond guidelines, but with additional consideration given to the special valuation rules implemented by the NAIC applicable to residential mortgage-backed securities that are not backed by U.S. government agencies, commercial mortgage-backed securities and certain other structured securities. Under these guidelines, an initial and adjusted NAIC designation is determined for each security. The initial NAIC designation, which takes into consideration the security’s amortized cost relative to an NAIC-prescribed valuation matrix, is used to determine the reporting basis (i.e., amortized cost or lower of amortized cost or fair value). |
• | Preferred stocks are generally stated at amortized cost, except those with an NAIC designation of "4" through "6", which are stated at the lower of amortized cost or fair value. Common stocks are stated at fair value. Changes in fair value of stocks stated at fair value are charged to capital and surplus. |
• | The investment in the Company’s wholly-owned insurance subsidiaries, NLAIC and Eagle, and wholly-owned noninsurance subsidiaries, NISC and NIA, are carried using the equity method of accounting. The Company’s investment in JNF, an unaudited downstream noninsurance holding company, is based on the individual audited subsidiary, controlled and affiliated entities owned by the holding company in accordance with the "look through" provisions of Statements of Statutory Accounting Principles ("SSAP") No. 97, Investments in Subsidiary, Controlled and Affiliated Entities. Investments in NLAIC, JNF and NISC are included in stocks, and the investment in Eagle is included in other invested assets on the statutory statements of admitted assets, liabilities, capital and surplus. |
• | Commercial mortgage loans are recorded at unpaid principal balance, adjusted for premiums and discounts, less a valuation allowance. |
• | Policy loans, which are collateralized by the related insurance policy, are carried at the outstanding principal balance and do not exceed the cash surrender value of the policy. As such, no valuation allowance for policy loans is required. |
• | Cash equivalents include highly liquid investments with original maturities of less than three months and, effective December 31, 2020, amounts on deposit in internal qualified cash pools. |
• | Short-term investments consist primarily of government agency discount notes with maturities of twelve months or less at acquisition and are carried at amortized cost, which approximates fair value. Prior to December 31, 2020, included amounts on deposit in internal qualified cash pools. |
• | Alternative investments are generally reported based on the equity method of accounting. |
• | The Company’s investment portfolio (and, specifically, the valuations of investment assets held) has been, and may continue to be, adversely affected as a result of market developments from the COVID-19 pandemic and uncertainty regarding its outcome. Moreover, changes in interest rates, reduced liquidity or a continued slowdown in the U.S. or in global economic conditions may also adversely affect the values and cash flows of these assets. The Company’s investments in mortgages and mortgage-backed securities could be negatively affected by delays or failures of borrowers to make payments of principal and interest when due or delays or moratoriums on foreclosures or enforcement actions with respect to delinquent or defaulted mortgages imposed by governmental authorities. Further, extreme market volatility may leave the Company unable to react to market events in a prudent manner consistent with the Company’s historical investment practices in dealing with more orderly markets; |
• | The Company provided COVID-19 hardship assistance to its customers including suspending cancellation of certain policies, deferring premium payment deadlines and waiving certain late fees and may elect to do so again in the future as a result of the COVID-19 pandemic. |
• | Potential state or federal legislation and regulation intended to ease the impact of the COVID-19 pandemic on consumers that could mandate waiver of late fees and/or limit or eliminate the ability to cancel policies for non-payment of premiums; |
• | Potential impacts to financial product revenues due to the overall economic slowdown, including the decline in economic activity, reductions in the sale of financial products due to the current market conditions, a reduction in fees collected from assets under management, a reduction in new sales, and an increased number of customers experiencing difficulty in paying premiums; |
• | While the Company has implemented risk management and contingency plans and taken preventive measures and other precautions, no predictions of specific scenarios can be made with respect to the COVID-19 pandemic and such measures may not adequately predict the impact on the Company’s business from such events. An extended period of remote work arrangements could introduce operational risk and impair the Company’s ability to manage its business. |
• | The Company also outsources certain critical business activities to third parties. As a result, the Company relies upon the successful implementation and execution of the business continuity planning of such entities in the current environment. While the Company closely monitors the business continuity activities of these third parties, successful implementation and execution of their business continuity strategies are largely outside the Company’s control. If one or more of the third parties to whom the Company outsources certain critical business activities experience operational failures as a result of the impacts from the spread of COVID-19, or claim that they cannot perform due to a force majeure, it may have a material adverse effect on the Company’s business, financial condition, results of operations, liquidity and cash flows; and |
• | Potential impacts to the cost and availability of reinsurance. |
Year ended or as of December 31, | ||||||||||
(in millions) | 2020 | 2019 | 2018 | 2017 | 2016 | |||||
Statutory Statements of Operations Data | ||||||||||
Total revenues | $ 15,116 | $ 14,452 | $ 13,995 | $ 14,802 | $ 14,213 | |||||
Total benefits and expenses | $ 14,050 | $ 13,419 | $ 12,985 | $ 13,817 | $ 13,245 | |||||
Net income | $ 487 | $ 629 | $ 711 | $ 1,039 | $ 751 | |||||
Statutory Statements of Admitted Assets, Liabilities, Capital and Surplus Data | ||||||||||
Total invested assets | $ 50,281 | $ 48,044 | $ 45,020 | $ 42,507 | $ 41,115 | |||||
Total admitted assets | $166,217 | $155,133 | $139,341 | $145,670 | $133,345 | |||||
Total liabilities | $157,112 | $146,311 | $132,496 | $139,721 | $128,137 | |||||
Total capital and surplus | $ 9,105 | $ 8,822 | $ 6,845 | $ 5,949 | $ 5,208 |
(a) | fluctuations in the results of operations or financial condition; |
(b) | actual claims losses exceeding reserves for claims; |
(c) | difficult economic and business conditions, including financial, capital and credit market conditions as a result of changes in interest rates or prolonged periods of low interest rates, equity prices, volatility, yields and liquidity in the equity and credit markets, as well as geopolitical conditions and the impact of political, regulatory, judicial, economic or financial events, including terrorism, epidemics or pandemics (such as the COVID-19 pandemic), impacting financial markets generally and companies in the Company’s investment portfolio specifically; |
(d) | the degree to which the Company chooses not to hedge risks, or the potential ineffectiveness or insufficiency of hedging or risk management strategies the Company does implement; |
(e) | changes in certain accounting and/or financial reporting standards issued by the Financial Accounting Standards Board ("FASB"), SEC, NAIC or other standard-setting bodies; |
(f) | the inability to maintain the availability of systems and facilities in the event of a disaster, natural or man-made catastrophe (such as the COVID-19 pandemic), blackout, terrorist attack or war; |
(g) | heightened competition that affects the cost of, and demand for, the Company’s products, specifically including the intensification of price competition, the entry of new competitors, consolidation, technological innovation and the development of new products by new and existing competitors; |
(h) | adverse state and federal legislation and regulation, including in response to the COVID-19 pandemic, with respect to, among other things, tax law changes impacting the federal estate tax and tax treatment of life insurance and investment products; limitations on premium levels; restrictions on product approval and policy issuance; increases in minimum capital and reserves and other financial viability requirements; restrictions on mutual fund service fee payments; changes affecting sales practices, including investigations and/or claims handling and escheat investigations; and regulatory actions of the DOL under ERISA, in particular proposed rule-making with respect to |
fiduciary obligations, rule-making adopted by regulatory authorities under the Dodd-Frank Act and the Federal Deposit Insurance Act, including SEC comprehensive rulemaking and guidance regarding standards of conduct for broker dealers and investment advisers; | |
(i) | the inability to mitigate the capital impact associated with statutory reserving and capital requirements; |
(j) | failure to maintain or expand distribution channels; |
(k) | possible difficulties in executing, integrating and realizing projected results of acquisitions, divestitures and restructurings; |
(l) | loss of key vendor relationships or failure of a vendor to protect confidential and proprietary information or otherwise perform (including as a result of the COVID-19 pandemic); |
(m) | changes in interest rates and the equity markets causing a reduction in the market value of the Company’s investment portfolio, investment income and/or asset fees; an acceleration of other expenses; a reduction in separate account assets or a reduction in the demand for the Company’s products; increased liabilities related to living benefits and death benefit guarantees; or an impact on ultimate realizability of deferred tax assets; |
(n) | outlook changes and downgrades in the financial strength and claims-paying ability ratings of the Company assigned by NRSROs; |
(o) | competitive, regulatory or tax changes that affect the cost of, or demand for, products; |
(p) | fluctuations in RBC levels; |
(q) | settlement of tax liabilities for amounts that differ significantly from those recorded on the balance sheets; |
(r) | deviations from assumptions regarding future persistency, mortality and morbidity rates (including as a result of natural and man-made catastrophes, pandemics, including the COVID-19 pandemic, epidemics, malicious acts, terrorist acts and climate change), and interest rates used in calculating reserve amounts and in pricing products; |
(s) | adverse results and/or resolution of litigation, arbitration, regulatory investigation and/or inquiry; |
(t) | the availability, pricing and effectiveness of reinsurance; |
(u) | the effectiveness of policies and procedures for managing risk; |
(v) | interruption in telecommunication, information technology or other operational systems or failure to maintain the security, confidentiality or privacy of sensitive data on such systems; |
(w) | adverse consequences, including financial and reputational costs, regulatory problems and potential loss of customers resulting from a breach of information security, a failure to meet privacy regulations, or inability to secure and maintain the confidentiality of proprietary or customers’ personal information; |
(x) | the inability to protect intellectual property and defend against claims of infringement; |
(y) | realized losses with respect to impairments of assets in the investment portfolio of the Company; |
(z) | exposure to losses related to variable annuity guarantee benefits, including from downturns and volatility in equity markets; |
(aa) | statutory reserve requirements associated with term and universal life insurance policies under Regulation XXX, Guideline AXXX and principles-based reserving requirements; |
(ab) | lack of liquidity in certain investments, access to credit facilities, or other inability to access capital; and |
(ac) | defaults on commercial mortgages and volatility in their performance. |
December 31, | ||||||
(in millions) | 2020 | 2019 | Change | |||
Revenues | ||||||
Premiums and annuity considerations | $10,637 | $10,168 | 5% | |||
Net investment income | 2,107 | 1,974 | 7% | |||
Amortization of interest maintenance reserve | - | (2) | 100% | |||
Other revenues | 2,372 | 2,312 | 3% | |||
Total revenues | $15,116 | $14,452 | 5% | |||
Benefits and expenses | ||||||
Benefits to policyholders and beneficiaries | $15,013 | $14,782 | 2% | |||
Increase in reserves for future policy benefits and claims | 1,627 | 1,501 | 8% | |||
Net transfers from separate accounts | (3,544) | (3,747) | 5% | |||
Commissions | 646 | 674 | (4%) | |||
Dividends to policyholders | 36 | 38 | (5%) | |||
Reserve adjustment on reinsurance assumed | (172) | (246) | 30% | |||
Other expenses | 444 | 417 | 6% | |||
Total benefits and expenses | $14,050 | $13,419 | 5% | |||
Income before federal income tax expense and net realized capital losses on investments | $ 1,066 | $ 1,033 | 3% | |||
Federal income tax expense (benefit) | 4 | (73) | 105% | |||
Income before net realized capital losses on investments | $ 1,062 | $ 1,106 | (4%) | |||
Net realized capital losses on investments, net of tax and transfers to the interest maintenance reserve | (575) | (477) | (21%) | |||
Net income | $ 487 | $ 629 | (23%) |
December 31, | ||||||
(in millions) | 2019 | 2018 | Change | |||
Revenues | ||||||
Premiums and annuity considerations | $10,168 | $ 9,829 | 3% | |||
Net investment income | 1,974 | 1,927 | 2% | |||
Amortization of interest maintenance reserve | (2) | (1) | (100%) | |||
Other revenues | 2,312 | 2,240 | 3% | |||
Total revenues | $14,452 | $13,995 | 3% | |||
Benefits and expenses | ||||||
Benefits to policyholders and beneficiaries | $14,782 | $13,961 | 6% | |||
Increase in reserves for future policy benefits and claims | 1,501 | 736 | 104% | |||
Net transfers from separate accounts | (3,747) | (2,468) | (52%) | |||
Commissions | 674 | 670 | 1% | |||
Dividends to policyholders | 38 | 40 | (5%) | |||
Reserve adjustment on reinsurance assumed | (246) | (352) | 30% | |||
Other expenses | 417 | 398 | 5% | |||
Total benefits and expenses | $13,419 | $12,985 | 3% | |||
Income before federal income tax expense and net realized capital losses on investments | $ 1,033 | $ 1,010 | 2% | |||
Federal income tax (benefit) expense | (73) | 64 | (214%) | |||
Income before net realized capital losses on investments | $ 1,106 | $ 946 | 17% | |||
Net realized capital losses on investments, net of tax and transfers to the interest maintenance reserve | (477) | (235) | (103%) | |||
Net income | $ 629 | $ 711 | (12%) |
December 31, | ||||||
(in millions) | 2020 | 2019 | Change | |||
Results of Operations | ||||||
Revenues | ||||||
Premiums and annuity considerations | $394 | $ 413 | (5%) | |||
Net investment income | 247 | 262 | (6%) | |||
Other revenues | 193 | 208 | (7%) | |||
Total revenues | $834 | $ 883 | (6%) | |||
Benefits and expenses | ||||||
Benefits to policyholders and beneficiaries | $689 | $ 756 | (9%) | |||
Increase in reserves for future policy benefits and claims | 62 | 21 | 195% | |||
Net transfers from separate accounts | (85) | (105) | 19% | |||
Commissions | 21 | 30 | (30%) | |||
Dividends to policyholders | 36 | 38 | (5%) | |||
Other expenses | 123 | 133 | (8%) | |||
Total benefits and expenses | $846 | $ 873 | (3%) | |||
Pre-tax operating earnings | $ (12) | $ 10 | (220%) |
December 31, | ||||||
(in millions) | 2019 | 2018 | Change | |||
Results of Operations | ||||||
Revenues | ||||||
Premiums and annuity considerations | $ 413 | $410 | 1% | |||
Net investment income | 262 | 270 | (3%) | |||
Amortization of interest maintenance reserve | - | 1 | (100%) | |||
Other revenues | 208 | 214 | (3%) | |||
Total revenues | $ 883 | $895 | (1%) | |||
Benefits and expenses | ||||||
Benefits to policyholders and beneficiaries | $ 756 | $713 | 6% | |||
Increase in reserves for future policy benefits and claims | 21 | 4 | 425% | |||
Net transfers from separate accounts | (105) | (71) | (48%) | |||
Commissions | 30 | 27 | 11% |
December 31, | ||||||
(in millions) | 2019 | 2018 | Change | |||
Dividends to policyholders | 38 | 40 | (5%) | |||
Other expenses | 133 | 154 | (14%) | |||
Total benefits and expenses | $873 | $867 | 1% | |||
Pre-tax operating earnings | $ 10 | $ 28 | (64%) |
December 31, | ||||||
(in millions) | 2020 | 2019 | Change | |||
Results of Operations | ||||||
Revenues | ||||||
Premiums and annuity considerations | $ 3,407 | $ 4,202 | (19%) | |||
Net investment income | 338 | 319 | 6% | |||
Amortization of interest maintenance reserve | 4 | 1 | 300% | |||
Other revenues | 1,498 | 1,488 | 1% | |||
Total revenues | $ 5,247 | $ 6,010 | (13%) | |||
Benefits and expenses | ||||||
Benefits to policyholders and beneficiaries | $ 7,140 | $ 7,993 | (11%) | |||
(Decrease) increase in reserves for future policy benefits and claims | (78) | 25 | (412%) | |||
Net transfers from separate accounts | (2,490) | (2,695) | 8% | |||
Commissions | 437 | 442 | (1%) | |||
Reserve adjustment on reinsurance assumed | (172) | (246) | 30% | |||
Other expenses | 55 | 57 | (4%) | |||
Total benefits and expenses | $ 4,892 | $ 5,576 | (12%) | |||
Pre-tax operating earnings | $ 355 | $ 434 | (18%) |
December 31, | ||||||
(in millions) | 2019 | 2018 | Change | |||
Results of Operations | ||||||
Revenues | ||||||
Premiums and annuity considerations | $ 4,202 | $ 3,868 | 9% | |||
Net investment income | 319 | 319 | 0% | |||
Amortization of interest maintenance reserve | 1 | 1 | 0% | |||
Other revenues | 1,488 | 1,468 | 1% | |||
Total revenues | $ 6,010 | $ 5,656 | 6% | |||
Benefits and expenses | ||||||
Benefits to policyholders and beneficiaries | $ 7,993 | $ 7,980 | 0% | |||
Increase (decrease) in reserves for future policy benefits and claims | 25 | (211) | 112% | |||
Net transfers from separate accounts | (2,695) | (2,618) | (3%) | |||
Commissions | 442 | 434 | 2% | |||
Reserve adjustment on reinsurance assumed | (246) | (352) | 30% | |||
Other expenses | 57 | 48 | 19% | |||
Total benefits and expenses | $ 5,576 | $ 5,281 | 6% | |||
Pre-tax operating earnings | $ 434 | $ 375 | 16% |
December 31, | ||||||
(in millions) | 2020 | 2019 | Change | |||
Results of Operations | ||||||
Revenues | ||||||
Premiums and annuity considerations | $ 5,939 | $ 4,324 | 37% | |||
Net investment income | 843 | 824 | 2% | |||
Amortization of interest maintenance reserve | (4) | (4) | 0% | |||
Other revenues | 354 | 326 | 9% | |||
Total revenues | $ 7,132 | $ 5,470 | ||||
Benefits and expenses | ||||||
Benefits to policyholders and beneficiaries | $ 6,582 | $ 5,308 | 24% | |||
Increase in reserves for future policy benefits and claims | 1,582 | 1,135 | 39% | |||
Net transfers from separate accounts | (1,372) | (1,319) | (4%) | |||
Commissions | 94 | 96 | (2%) | |||
Other expenses | 131 | 122 | 7% |
December 31, | ||||||
(in millions) | 2020 | 2019 | Change | |||
Total benefits and expenses | $7,017 | $5,342 | 31% | |||
Pre-tax operating earnings | $ 115 | $ 128 | (10%) |
December 31, | ||||||
(in millions) | 2019 | 2018 | Change | |||
Results of Operations | ||||||
Revenues | ||||||
Premiums and annuity considerations | $ 4,324 | $4,095 | 6% | |||
Net investment income | 824 | 798 | 3% | |||
Amortization of interest maintenance reserve | (4) | (3) | (33%) | |||
Other revenues | 326 | 291 | 12% | |||
Total revenues | $ 5,470 | $5,181 | 6% | |||
Benefits and expenses | ||||||
Benefits to policyholders and beneficiaries | $ 5,308 | $4,685 | 13% | |||
Increase in reserves for future policy benefits and claims | 1,135 | 876 | 30% | |||
Net transfers from separate accounts | (1,319) | (725) | (82%) | |||
Commissions | 96 | 95 | 1% | |||
Other expenses | 122 | 132 | (8%) | |||
Total benefits and expenses | $ 5,342 | $5,063 | 6% | |||
Pre-tax operating earnings | $ 128 | $ 118 | 8% |
December 31, | ||||||
(in millions) | 2020 | 2019 | Change | |||
Results of Operations | ||||||
Revenues | ||||||
Premiums and annuity considerations | $ 897 | $1,229 | (27%) | |||
Net investment income | 679 | 569 | 19% | |||
Amortization of interest maintenance reserve | - | 1 | 0% | |||
Other revenues | 327 | 290 | 13% | |||
Total revenues | $1,903 | $2,089 | (9%) | |||
Benefits and expenses | ||||||
Benefits to policyholders and beneficiaries | $ 602 | $ 725 | (17%) | |||
Increase in reserves for future policy benefits and claims | 61 | 320 | (81%) | |||
Net transfers to separate accounts | 403 | 372 | 8% | |||
Commissions | 94 | 106 | (11%) | |||
Other expenses | 135 | 105 | 29% | |||
Total benefits and expenses | $1,295 | $1,628 | (20%) | |||
Pre-tax operating earnings | $ 608 | $ 461 | 32% |
December 31, | ||||||
(in millions) | 2019 | 2018 | Change | |||
Results of Operations | ||||||
Revenues | ||||||
Premiums and annuity considerations | $1,229 | $1,456 | (16%) | |||
Net investment income | 569 | 540 | 5% | |||
Amortization of interest maintenance reserve | 1 | - | 0% | |||
Other revenues | 290 | 267 | 9% | |||
Total revenues | $2,089 | $2,263 | (8%) | |||
Benefits and expenses | ||||||
Benefits to policyholders and beneficiaries | $ 725 | $ 583 | 24% | |||
Increase in reserves for future policy benefits and claims | 320 | 67 | 378% | |||
Net transfers to separate accounts | 372 | 946 | (61%) | |||
Commissions | 106 | 114 | (7%) | |||
Other expenses | 105 | 64 | 64% |
December 31, | ||||||
(in millions) | 2019 | 2018 | Change | |||
Total benefits and expenses | $1,628 | $1,774 | (8%) | |||
Pre-tax operating earnings | $ 461 | $ 489 | (6%) |
Payments due by period | ||||||||||
(in millions) | Less than 1 year | 1-3 years | More 3-5 years | than 5 years | Total | |||||
Future policy benefits and claims1,2,3,4 | $5,710 | 8,878 | 7,987 | 82,011 | 104,586 | |||||
Policyholders dividends accumulation5 | 430 | - | - | - | 430 | |||||
Short-term debt6 | 3 | - | - | - | 3 | |||||
Securities lending payable7 | 102 | 102 | ||||||||
Surplus notes8 | 71 | 141 | 141 | 2,029 | 2,382 | |||||
Total | $6,316 | $9,019 | $8,128 | $84,040 | $107,503 |
1 | A significant portion of policy contract benefits and claims to be paid do not have stated contractual maturity dates and may not result in any ultimate payment obligation. Amounts reported represent estimated undiscounted cash flows out of the Company’s general account related to death, surrender, annuity and other benefit payments under policy contracts in force as of December 31, 2020. Separate account payments are not reflected due to the matched nature of these obligations and because the contract owners bear the investment risk of such deposits. Estimated payment amounts were developed based on the Company’s historical experience and related contractual provisions. Significant assumptions incorporated in the reported amounts include future policy lapse rates (including the impact of customer decisions to make future premium payments to keep the related policies in force); coverage levels remaining unchanged from those provided under contracts in force as of December 31, 2020; future interest crediting rates; and estimated timing of payments. Actual amounts will vary, potentially by a significant amount, from the amounts indicated due to deviations between assumptions and actual results and the addition of new business in future periods. |
2 | Contractual provisions exist which could adjust the amount and/or timing of those obligations reported. Key assumptions related to payments due by period include customer lapse and withdrawal rates (including timing of death), exchanges to and from the fixed and separate accounts of the variable annuities, claim experience with respect to guarantees, and future interest crediting levels. Assumptions for future interest crediting levels were made based on processes consistent with the Company’s past practices, which are at the discretion of the Company, subject to guaranteed minimum crediting rates in many cases and/or subject to contractually obligated increases for specified time periods. Many of the contracts with potentially accelerated payments are subject to surrender charges, which are generally calculated as a percentage of deposits made and are assessed at declining rates during the first seven years after a deposit is made. Amounts disclosed include an estimate of those accelerated payments, net of applicable surrender charges. See Note 2 to the audited statutory financial statements included in the F pages of this report for a description of the Company’s method for establishing life and annuity reserves. |
3 | Certain assumptions have been made about mortality experience and retirement patterns in the amounts reported. Actual deaths and retirements may differ significantly from those projected, which could cause the timing of the obligations reported to vary significantly. In addition, contractual surrender provisions exist on an immaterial portion of these contracts that could accelerate those obligations presented. Amounts disclosed do not include an estimate of those accelerated payments. Most of the contracts with potentially accelerated payments are subject to surrender charges, which are generally calculated as a percentage of the commuted value of the remaining term certain benefit payments and are assessed at declining rates during the first seven policy years. |
4 | Contractual provisions exist that could increase those obligations presented. The process for determining future interest crediting rates, as described in Note 2 above, was used to develop the estimates of payments due by period. |
5 | The provision for policyholders' dividends payable represents the liabilities related to dividends payable in the following year on participating policies. As such, the obligations related to these liabilities are presented in the table above in the less than one year category in the amounts of the liabilities presented in the Company's Statement of Admitted Assets, Liabilities, Capital and Surplus. |
6 | No contractual provisions exist that could create, increase or accelerate those obligations presented. The amount presented includes interest accrued based on rates in effect during 2020. See Note 9 to the audited statutory financial statements, included in the F pages of this report for more details. |
7 | Since the timing of the return is uncertain, these obligations have been reflected in payments due in less than one year. |
8 | See Note 10 to the audited statutory financial statements included in the F pages of this report for a discussion of the Company’s surplus notes. |
December 31, 2020 | December 31, 2019 | |||||||
(in millions) | Carrying value | % of total | Carrying value | % of total | ||||
Invested assets: | ||||||||
Bonds | $37,207 | 74% | $35,124 | 73% | ||||
Stocks | 2,835 | 6% | 2,622 | 6% | ||||
Mortgage loans, net of allowance | 7,783 | 15% | 7,655 | 16% | ||||
Policy loans | 888 | 2% | 903 | 2% | ||||
Derivative assets | 51 | 0% | 94 | 0% | ||||
Cash, cash equivalents and short-term investments | 461 | 1% | 556 | 1% | ||||
Securities lending collateral assets | 101 | 0% | 132 | 0% | ||||
Other invested assets | 955 | 2% | 958 | 2% | ||||
Total invested assets | $50,281 | 100% | $48,044 | 100% |
(in millions) | December 31, 2020 | December 31, 2019 | ||||||||||
NAIC designation | Carrying value | Fair value | % of total statement value | Carrying value | Fair value | % of total statement value | ||||||
1 | $20,212 | $22,806 | 54% | $19,561 | $21,185 | 55% | ||||||
2 | 14,886 | 16,833 | 40% | 13,933 | 14,919 | 40% | ||||||
3 | 1,635 | 1,695 | 5% | 1,115 | 1,119 | 3% | ||||||
4 | 353 | 347 | 1% | 296 | 299 | 1% | ||||||
5 | 113 | 109 | 0% | 199 | 170 | 1% | ||||||
6 | 8 | 20 | 0% | 20 | 43 | 0% | ||||||
7 | $ 37,20 | $41,810 | 100% | $35,124 | $37,735 | 100% |
(in millions) | December 31, 2020 | December 31, 2019 | ||||||||||
NAIC designation | Statement Value | Fair Value | % of total statement value | Statement Value | Fair Value | % of total statement value | ||||||
1 | $6,759 | 7,024 | 95% | $5,035 | 5,200 | 94% | ||||||
2 | 191 | 223 | 3% | 231 | 260 | 4% | ||||||
3 | 111 | 105 | 2% | 67 | 62 | 1% | ||||||
4 | 55 | 51 | 0% | 63 | 60 | 1% | ||||||
5 | 20 | 19 | 0% | 19 | 18 | 0% | ||||||
6 | 5 | 18 | 0% | 18 | 40 | 0% | ||||||
$7,141 | $7,440 | 100% | $5,433 | $5,640 | 100% |
December 31, | ||||
(in millions) | 2020 | 2019 | ||
Alternative investments: | ||||
Private equity funds | $321 | $267 | ||
Real estate partnerships | 366 | 299 | ||
Tax credit funds | 177 | 192 | ||
Investment in Eagle | 52 | 65 | ||
Total alternative investments | $916 | $823 | ||
Derivatives collateral and receivables | 39 | 135 | ||
Total other invested assets | $955 | $958 |
Life Insurance1 | Annuities 2 | Retirement Solutions3 | Corporate Solutions and Other | |||||||||||||
(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 | ||||||||
December 31, 2020 | ||||||||||||||||
Minimum guaranteed crediting rate of 3.51% or greater | $594 | 4.00% | $ - | -% | $ 38 | 3.95% | $ - | -% | ||||||||
Minimum guaranteed crediting rate of 3.01% to 3.50% | $ - | -% | $ 210 | 3.64% | $ 6,346 | 3.42% | $ - | -% | ||||||||
Minimum guaranteed crediting rate of 2.01% to 3.00% | $575 | 3.05% | $1,451 | 3.04% | $ 4,172 | 2.83% | $2,306 | 3.04% | ||||||||
Minimum guaranteed crediting rate of 0.01% to 2.00% | $ 55 | 2.56% | $ 553 | 1.12% | $10,548 | 2.92% | $ 979 | 3.07% | ||||||||
No minimum guaranteed crediting rate4 | $ - | -% | $ 56 | 0.55% | $ 1,246 | 2.39% | $ - | -% | ||||||||
December 31, 2019 | ||||||||||||||||
Minimum guaranteed crediting rate of 3.51% or greater | $607 | 4.00% | $ - | -% | $ 280 | 3.66% | $ - | -% | ||||||||
Minimum guaranteed crediting rate of 3.01% to 3.50% | $ - | -% | $ 203 | 3.54% | $13,800 | 3.31% | $ - | -% | ||||||||
Minimum guaranteed crediting rate of 2.01% to 3.00% | $562 | 3.13% | $1,459 | 3.01% | $ 2,195 | 2.80% | $2,336 | 3.12% | ||||||||
Minimum guaranteed crediting rate of 0.01% to 2.00% | $ 37 | 2.79% | $ 539 | 1.22% | $ 1,610 | 2.47% | $ 919 | 3.25% | ||||||||
No minimum guaranteed crediting rate4 | $ - | -% | $ 10 | 2.27% | $ 2,882 | 2.29% | $ - | -% |
1 | Includes universal life products and the fixed investment options selected within variable life products. |
2 | Includes individual fixed annuity products and the fixed investment options selected within variable annuity and indexed products. |
3 | Includes group fixed annuity products. |
4 | Includes certain products with a stated minimum guaranteed crediting rate of 0%. |
Name | Age | Date Service Began | ||
John L. Carter | 58 | February 2013 | ||
Timothy G. Frommeyer | 56 | January 2009 | ||
Steven A. Ginnan | 53 | June 2018 | ||
Eric S. Henderson | 58 | March 2012 | ||
Mark R. Thresher | 64 | January 2009 | ||
Kirt A. Walker | 57 | November 2009 |
Name | Age | Position with NLIC | ||
Gale V. King | 64 | Executive Vice President-Chief Administrative Officer | ||
Mark R. Thresher | 64 | Executive Vice President | ||
James R. Fowler | 49 | Executive Vice President-Chief Information Officer | ||
Tina Ambrozy | 50 | Senior Vice President-NF Strategic Customer Solutions | ||
Ann S. Bair | 58 | Senior Vice President-Marketing Management-Financial Services | ||
Pamela A. Biesecker | 59 | Senior Vice President-Head of Taxation | ||
John L. Carter | 58 | President and Chief Operating Officer | ||
Joel L. Coleman | 55 | Senior Vice President-Chief Investment Officer | ||
Rae Ann Dankovic | 53 | Senior Vice President-Nationwide Financial Services Legal | ||
Steven M. English | 46 | Senior Vice President-External Affairs | ||
Timothy G. Frommeyer | 56 | Senior Vice President-Chief Financial Officer | ||
Steven A. Ginnan | 53 | Senior Vice President-Chief Financial Officer-Nationwide Financial | ||
Mia S. Hairston | 52 | Senior Vice President-Human Resources – NF | ||
Craig A. Hawley | 53 | Senior Vice President-Annuity Distribution | ||
Eric S. Henderson | 58 | Senior Vice President-Nationwide Annuity | ||
David LaPaul | 55 | Senior Vice President and Treasurer | ||
Kevin G. O’Brien | 52 | Senior Vice President-IT Chief Financial Officer, Procurement & BTO | ||
Juan J. Perez | 40 | Senior Vice President-Corporate Solutions | ||
Scott Ramey | 49 | Senior Vice President-Retirement Plan Sales | ||
Sandra L. Rich | 60 | Senior Vice President | ||
Michael A. Richardson | 52 | Senior Vice President-Chief Technology Officer - Nationwide Financial | ||
Kristi L. Rodriquez | 47 | Senior Vice President-Nationwide Retirement Institute | ||
Denise L. Skingle | 50 | Senior Vice President-Finance & Strategy Legal and Corporate Secretary | ||
Holly R. Snyder | 53 | Senior Vice President-Nationwide Life | ||
Michael S. Spangler | 55 | Senior Vice President-Investment Management Group |
Name and address of beneficial owner | Amount and nature of beneficial ownership | Percent of class | ||
Nationwide Financial Services, Inc. 1 Nationwide Plaza Columbus, Ohio 43215 | 3,814,779 shares | 100% |
• | using position at Nationwide or affiliation with any Nationwide company for personal gain or advantage; and |
• | any interest or association that interferes with independent exercise of judgment in the best interest of Nationwide. |
NATIONWIDE LIFE INSURANCE COMPANY
FOR THE YEAR ENDED DECEMBER 31, 2020
Page | ||||
F-1 | ||||
Statutory Statements of Admitted Assets, Liabilities, Capital and Surplus | F-3 | |||
F-4 | ||||
F-5 | ||||
F-6 | ||||
F-7 | ||||
Schedule I – Consolidated Summary of Investments – Other Than Investments in Related Parties | F-47 | |||
F-48 | ||||
F-49 | ||||
F-50 |
Audit Committee of the Board of Directors Nationwide Life Insurance Company:
We have audited the accompanying financial statements of Nationwide Life Insurance Company (the Company), which comprise the statutory statements of admitted assets, liabilities, capital and surplus as of December 31, 2020 and 2019, and the related statutory statements of operations, changes in capital and surplus, and cash flow for each of the years in the three-year period ended December 31, 2020, and the related notes to the statutory financial statements (“statutory financial statements”).
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with statutory accounting practices prescribed or permitted by the Ohio Department of Insurance (the Department). Management is also responsible for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.
Basis for Adverse Opinion on U.S. Generally Accepted Accounting Principles
As described in Note 2 to the financial statements, the financial statements are prepared by the Company using statutory accounting practices prescribed or permitted by the Department, which is a basis of accounting other than U.S. generally accepted accounting principles. Accordingly, the financial statements are not intended to be presented in accordance with U.S. generally accepted accounting principles.
The effects on the financial statements of the variances between the statutory accounting practices described in Note 2 and U.S. generally accepted accounting principles, although not reasonably determinable, are presumed to be material.
Adverse Opinion on U.S. Generally Accepted Accounting Principles
In our opinion, because of the significance of the variances between statutory accounting practices and U.S. generally accepted accounting principles discussed in the Basis for Adverse Opinion on U.S. Generally Accepted Accounting Principles paragraph, the financial statements referred to above do not present fairly, in accordance with U.S. generally accepted accounting principles, the financial position of the Company as of December 31, 2020 and 2019, or the results of its operations or its cash flows for each of the years in the three-year period ended December 31, 2020.
Opinion on Statutory Basis of Accounting
In our opinion, the financial statements referred to above present fairly, in all material respects, the admitted assets, liabilities, capital and surplus of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flow for each of the years in the three-year period ended December 31, 2020, in accordance with statutory accounting practices prescribed or permitted by the Department described in Note 2.
Other Matter
Our audits were conducted for the purpose of forming an opinion on the financial statements as a whole. The supplementary information included in Schedule I Consolidated Summary of Investments – Other Than Investments in Related Parties, Schedule III Supplementary Insurance Information, Schedule IV Reinsurance and Schedule V Valuation and Qualifying Accounts is presented for purposes of additional analysis and is not a required part of the financial statements but is supplementary information required by the Securities and Exchange Commission’s Regulation S-X. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audits of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole.
Columbus, Ohio
March 19, 2021
F-2
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Statutory Statements of Admitted Assets, Liabilities, Capital and Surplus
December 31, | ||||||||
(in millions, except share amounts) | 2020 | 2019 | ||||||
Admitted assets | ||||||||
Invested assets | ||||||||
Bonds | $ | 37,207 | $ | 35,124 | ||||
Stocks | 2,835 | 2,622 | ||||||
Mortgage loans, net of allowance | 7,783 | 7,655 | ||||||
Policy loans | 888 | 903 | ||||||
Derivative assets | 51 | 94 | ||||||
Cash, cash equivalents and short-term investments | 461 | 556 | ||||||
Securities lending collateral assets | 101 | 132 | ||||||
Other invested assets | 955 | 958 | ||||||
Total invested assets | $ | 50,281 | $ | 48,044 | ||||
Accrued investment income | 692 | 573 | ||||||
Deferred federal income tax assets, net | 642 | 601 | ||||||
Federal income tax receivable | 11 | 108 | ||||||
Other assets | 184 | 152 | ||||||
Separate account assets | 114,407 | 105,655 | ||||||
Total admitted assets | $ | 166,217 | $ | 155,133 | ||||
Liabilities, capital and surplus | ||||||||
Liabilities | ||||||||
Future policy benefits and claims | $ | 41,002 | $ | 39,139 | ||||
Policyholders dividend accumulation | 430 | 452 | ||||||
Short-term debt | 3 | 203 | ||||||
Asset valuation reserve | 466 | 479 | ||||||
Payable for securities | 177 | 113 | ||||||
Derivative liabilities | 87 | 23 | ||||||
Securities lending payable | 101 | 132 | ||||||
Other liabilities | 1,929 | 1,682 | ||||||
Accrued transfers from separate accounts | (1,490 | ) | (1,567 | ) | ||||
Separate account liabilities | 114,407 | 105,655 | ||||||
Total liabilities | $ | 157,112 | $ | 146,311 | ||||
Capital and surplus | ||||||||
Capital shares ($1 par value; authorized - 5,000,000 shares, issued and outstanding - 3,814,779 shares) | $ | 4 | $ | 4 | ||||
Surplus notes | 1,100 | 1,100 | ||||||
Additional paid-in capital | 1,998 | 1,998 | ||||||
Unassigned surplus | 6,003 | 5,720 | ||||||
Total capital and surplus | $ | 9,105 | $ | 8,822 | ||||
Total liabilities, capital and surplus | $ | 166,217 | $ | 155,133 |
See accompanying notes to statutory financial statements.
F-3
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Statutory Statements of Operations
Year ended December 31, | ||||||||||||
(in millions) | 2020 | 2019 | 2018 | |||||||||
Revenues | ||||||||||||
Premiums and annuity considerations | $ | 10,637 | $ | 10,168 | $ | 9,829 | ||||||
Net investment income | 2,107 | 1,974 | 1,927 | |||||||||
Amortization of interest maintenance reserve | - | (2 | ) | (1 | ) | |||||||
Other revenues | 2,372 | 2,312 | 2,240 | |||||||||
Total revenues | $ | 15,116 | $ | 14,452 | $ | 13,995 | ||||||
Benefits and expenses | ||||||||||||
Benefits to policyholders and beneficiaries | $ | 15,013 | $ | 14,782 | $ | 13,961 | ||||||
Increase in reserves for future policy benefits and claims | 1,627 | 1,501 | 736 | |||||||||
Net transfers from separate accounts | (3,544 | ) | (3,747 | ) | (2,468 | ) | ||||||
Commissions | 646 | 674 | 670 | |||||||||
Dividends to policyholders | 36 | 38 | 40 | |||||||||
Reserve adjustment on reinsurance assumed | (172 | ) | (246 | ) | (352 | ) | ||||||
Other expenses | 444 | 417 | 398 | |||||||||
Total benefits and expenses | $ | 14,050 | $ | 13,419 | $ | 12,985 | ||||||
Income before federal income tax expense and net realized capital losses on investments | $ | 1,066 | $ | 1,033 | $ | 1,010 | ||||||
Federal income tax expense (benefit) | 4 | (73 | ) | 64 | ||||||||
Income before net realized capital losses on investments | $ | 1,062 | $ | 1,106 | $ | 946 | ||||||
Net realized capital (losses) on investments, net of federal income tax (benefit) expense of $(26), $7 and $8 in 2020, 2019 and 2018, respectively, and excluding $(4), $0 and $(1) of net realized capital (losses) transferred to the interest maintenance reserve in 2020, 2019 and 2018, respectively | (575 | ) | (477 | ) | (235 | ) | ||||||
Net income | $ | 487 | $ | 629 | $ | 711 |
See accompanying notes to statutory financial statements.
F-4
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Statutory Statements of Changes in Capital and Surplus
(in millions) | Capital shares | Surplus notes | Additional paid-in capital | Unassigned surplus | Capital and surplus | |||||||||||||||
Balance as of December 31, 2017 | $ | 4 | $ | 700 | $ | 963 | $ | 4,282 | $ | 5,949 | ||||||||||
Net income | - | - | - | 711 | 711 | |||||||||||||||
Change in asset valuation reserve | - | - | - | (12 | ) | (12 | ) | |||||||||||||
Change in deferred income taxes | - | - | - | 72 | 72 | |||||||||||||||
Change in net unrealized capital gains and losses, net of tax expense of $88 | - | - | - | (304 | ) | (304 | ) | |||||||||||||
Change in nonadmitted assets | - | - | - | (6 | ) | (6 | ) | |||||||||||||
Capital contribution from Nationwide | ||||||||||||||||||||
Financial Services, Inc. | - | - | 435 | - | 435 | |||||||||||||||
Balance as of December 31, 2018 | $ | 4 | $ | 700 | $ | 1,398 | $ | 4,743 | $ | 6,845 | ||||||||||
Net income | - | - | - | 629 | 629 | |||||||||||||||
Change in asset valuation reserve | - | - | - | (107 | ) | (107 | ) | |||||||||||||
Change in deferred income taxes | - | - | - | (29 | ) | (29 | ) | |||||||||||||
Change in net unrealized capital gains and losses, net of tax (benefit) of ($29) | - | - | - | 426 | 426 | |||||||||||||||
Change in nonadmitted assets | - | - | - | 59 | 59 | |||||||||||||||
Change in surplus notes | - | 400 | - | - | 400 | |||||||||||||||
Capital contribution from Nationwide Financial Services, Inc. | - | - | 600 | - | 600 | |||||||||||||||
Other, net | - | - | - | (1 | ) | (1 | ) | |||||||||||||
Balance as of December 31, 2019 | $ | 4 | $ | 1,100 | $ | 1,998 | $ | 5,720 | $ | 8,822 | ||||||||||
Change in reserve on account of change in valuation basis | - | - | - | 78 | 78 | |||||||||||||||
Cumulative effect of change in accounting principle | - | - | - | 5 | 5 | |||||||||||||||
Balance as of January 1, 2020 | $ | 4 | $ | 1,100 | $ | 1,998 | $ | 5,803 | $ | 8,905 | ||||||||||
Net income | - | - | - | 487 | 487 | |||||||||||||||
Change in asset valuation reserve | - | - | - | 13 | 13 | |||||||||||||||
Change in deferred income taxes | - | - | - | 41 | 41 | |||||||||||||||
Change in net unrealized capital gains and losses, net of tax (benefit) of ($3) | - | - | - | (313 | ) | (313 | ) | |||||||||||||
Change in nonadmitted assets | - | - | - | (21 | ) | (21 | ) | |||||||||||||
Other, net | - | - | - | (7 | ) | (7 | ) | |||||||||||||
Balance as of December 31, 2020 | $ | 4 | $ | 1,100 | $ | 1,998 | $ | 6,003 | $ | 9,105 |
See accompanying notes to statutory financial statements.
F-5
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Statutory Statements of Cash Flow
Years ended December 31, | ||||||||||||
(in millions) | 2020 | 2019 | 2018 | |||||||||
Cash flows from operating activities: | ||||||||||||
Premiums collected, net of reinsurance | $ | 10,648 | $ | 10,184 | $ | 9,812 | ||||||
Net investment income | 2,034 | 1,825 | 2,041 | |||||||||
Other revenue | 2,664 | 2,708 | 2,329 | |||||||||
Policy benefits and claims paid | (14,886 | ) | (14,778 | ) | (13,947 | ) | ||||||
Commissions, operating expenses and taxes, other than federal income tax paid | (885 | ) | (847 | ) | (710 | ) | ||||||
Net transfers from separate accounts | 3,620 | 3,805 | 2,606 | |||||||||
Policyholders’ dividends paid | (38 | ) | (40 | ) | (45 | ) | ||||||
Federal income taxes recovered | 121 | 87 | 74 | |||||||||
Net cash provided by operating activities | $ | 3,278 | $ | 2,944 | $ | 2,160 | ||||||
Cash flows from investing activities: | ||||||||||||
Proceeds from investments sold, matured or repaid: | ||||||||||||
Bonds | $ | 3,404 | $ | 3,547 | $ | 3,366 | ||||||
Stocks | 37 | 58 | 1 | |||||||||
Mortgage loans | 640 | 910 | 580 | |||||||||
Derivative assets | - | 4 | 560 | |||||||||
Other assets | 905 | 381 | 190 | |||||||||
Total investment proceeds | $ | 4,986 | $ | 4,900 | $ | 4,697 | ||||||
Cost of investments acquired: | ||||||||||||
Bonds | $ | (5,527 | ) | $ | (6,327 | ) | $ | (4,499 | ) | |||
Stocks | (517 | ) | (454 | ) | (608 | ) | ||||||
Mortgage loans | (769 | ) | (800 | ) | (762 | ) | ||||||
Derivative assets | (580 | ) | (687 | ) | - | |||||||
Other assets | (837 | ) | (340 | ) | (610 | ) | ||||||
Total investments acquired | $ | (8,230 | ) | $ | (8,608 | ) | $ | (6,479 | ) | |||
Net decrease in policy loans | 15 | 2 | 36 | |||||||||
Net cash used in investing activities | $ | (3,229 | ) | $ | (3,706 | ) | $ | (1,746 | ) | |||
Cash flows from financing activities and miscellaneous sources: | ||||||||||||
Surplus notes | $ | - | $ | 400 | $ | - | ||||||
Capital contribution from Nationwide Financial Services, Inc. | - | 600 | 435 | |||||||||
Net change in deposits on deposit-type contract funds and other insurance liabilities | 160 | (714 | ) | 228 | ||||||||
Net change in short-term debt | (200 | ) | (162 | ) | 365 | |||||||
Derivative liabilities | 65 | 2 | (135 | ) | ||||||||
Other cash (used) provided | (169 | ) | 93 | (172 | ) | |||||||
Net cash (used in) provided by financing activities and miscellaneous | $ | (144 | ) | $ | 219 | $ | 721 | |||||
Net (decrease) increase in cash, cash equivalents and short-term investments | $ | (95 | ) | $ | (543 | ) | $ | 1,135 | ||||
Cash, cash equivalents and short-term investments at beginning of year | 556 | 1,099 | (36 | ) | ||||||||
Cash, cash equivalents and short-term investments at end of year | $ | 461 | $ | 556 | $ | 1,099 | ||||||
Supplemental disclosure of non-cash activities: | ||||||||||||
Exchange of bond investments | $ | 799 | $ | 592 | $ | 573 | ||||||
Intercompany transfer of securities | $ | - | $ | 6 | $ | 108 | ||||||
Intercompany transfer of mortgages | $ | - | $ | - | $ | 155 |
See accompanying notes to statutory financial statements.
F-6
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2020, 2019 and 2018 Statutory Financial Statements
(1) | Nature of Operations |
Nationwide Life Insurance Company (“NLIC” or “the Company”) was incorporated in 1929 and is an Ohio domiciled stock life insurance company. The Company is a member of the Nationwide group of companies (“Nationwide”), 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.
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 wide range of products and services, which include fixed and variable individual annuities, private and public sector group retirement plans, life insurance, investment advisory services and other investment products. The Company is licensed to conduct business in all fifty states, the District of Columbia, Guam, Puerto Rico and the U.S. Virgin Islands.
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, wirehouses and regional firms, pension plan administrators, life insurance agencies, life insurance specialists and registered investment advisors. Representatives of affiliates who market products directly to a customer base include Nationwide Retirement Solutions, Inc. and Nationwide Financial Network producers, which includes the agency distribution force of the Company’s ultimate parent company, NMIC. NMIC completed the transition away from utilizing the exclusive agent model in 2020. The Company believes its broad range of competitive products, strong distributor relationships and diverse distribution network position it to compete effectively under various economic conditions.
Wholly-owned subsidiaries of NLIC as of December 31, 2020 include Nationwide Life and Annuity Insurance Company (“NLAIC”) and its wholly-owned subsidiaries, Olentangy Reinsurance, LLC (“Olentangy”) and Nationwide SBL, LLC (“NWSBL”), Jefferson National Financial Corporation (“JNF”) and its wholly-owned subsidiaries, Jefferson National Securities Corporation (“JNSC”) and Jefferson National Life Insurance Company (“JNLIC”), and its wholly-owned subsidiary, Jefferson National Life Insurance Company of New York (“JNLNY”), Eagle Captive Reinsurance, LLC (“Eagle”), Nationwide Investment Services Corporation (“NISC”) and Nationwide Investment Advisor, LLC (“NIA”). NLAIC primarily offers fixed indexed annuity contracts and individual annuity contracts, universal life insurance, variable universal life insurance, term life insurance and corporate-owned life insurance on a non-participating basis. Olentangy is a Vermont domiciled special purpose financial captive insurance company. NWSBL offers a securities-based lending product and is an Ohio limited liability company and nonadmitted subsidiary. JNF is a distributor of tax-advantaged investing solutions for registered investment advisors, fee-based advisors and the clients they serve. JNSC is a registered broker-dealer. JNLIC and JNLNY are licensed to underwrite both fixed and variable annuity products. Eagle is an Ohio domiciled special purpose financial captive insurance company. NISC is a registered broker-dealer. NIA is a registered investment advisor.
The Company is subject to regulation by the insurance departments of states in which it is domiciled and/or transacts business and undergoes periodic examinations by those departments.
As of December 31, 2020 and 2019, the Company did not have a significant concentration of financial instruments in a single investee, industry or geographic region. Also, the Company did not have a concentration of business transactions with a particular customer, lender, distribution source, market or geographic region in which a single event could cause a severe impact on the Company’s financial position after considering insurance risk that has been transferred to external reinsurers.
(2) | Summary of Significant Accounting Policies |
Use of Estimates
The preparation of the statutory financial statements requires the Company to make estimates and assumptions that affect the amounts reported in the statutory financial statements and accompanying notes. Significant estimates include legal and regulatory reserves, certain investment and derivative valuations, future policy benefits and claims, provision for income taxes and valuation of deferred tax assets. Actual results could differ significantly from those estimates.
Basis of Presentation
The statutory financial statements of the Company are presented on the basis of accounting practices prescribed or permitted by the Ohio Department of Insurance (“the Department”). Prescribed statutory accounting practices are those practices incorporated directly or by reference in state laws, regulations and general administrative rules applicable to all insurance enterprises domiciled in a particular state. Permitted statutory accounting practices include practices not prescribed by the domiciliary state, but allowed by the domiciliary state regulatory authority.
F-7
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2020, 2019 and 2018 Statutory Financial Statements
The Company’s subsidiary, Eagle, applies a prescribed practice which values assumed guaranteed minimum death benefits (“GMDB”) and guaranteed lifetime withdrawal benefits (“GLWB”) risks on variable annuity contracts from NLIC and GLWB risks on fixed indexed annuity contracts from NLAIC using separate alternative reserving bases from the Statutory Accounting Principles detailed within the National Association of Insurance Commissioners (“NAIC”) Accounting Practices and Procedures manual (“NAIC SAP”) pursuant to Ohio Revised Code Chapter 3964 and approved by the Department. The prescribed practice related to NLIC guaranteed risks decreased the Company’s subsidiary valuation of Eagle, included in other invested assets on the statutory statements of admitted assets, liabilities, capital and surplus, by $711 million and $411 million as of December 31, 2020 and 2019, respectively. The prescribed practice related to NLAIC guaranteed risks, increased the Company’s subsidiary valuation of Eagle, included in other invested assets on the statutory statements of admitted assets, liabilities, capital and surplus, by $523 million and $226 million as of December 31, 2020 and 2019, respectively.
Olentangy was granted a permitted practice from the State of Vermont allowing Olentangy to carry the assets placed into a trust account by Union Hamilton Reinsurance Ltd. (“UHRL”) on its statutory statements of admitted assets, liabilities, capital and surplus at net admitted asset value. This permitted practice increased NLAIC’s valuation of this subsidiary, included in stocks on the statutory statements of admitted assets, liabilities, capital and surplus, by $67 million as of December 31, 2020 and 2019.
There was no difference in the Company’s net income as a result of prescribed or permitted practices. If the prescribed or permitted practices were not applied, the Company’s risk-based capital would continue to be above regulatory action levels. A reconciliation of the Company’s capital and surplus between NAIC SAP and prescribed and permitted practices is shown below:
(in millions) | | SSAP # | | F/S Page | | State of domicile | | | As of December 31, 2020 |
| | As of December 31, 2019 |
| |||||||
Capital and Surplus | ||||||||||||||||||||
Statutory Capital and Surplus | OH | $ | 9,105 | $ | 8,822 | |||||||||||||||
State Prescribed Practice: | ||||||||||||||||||||
Subsidiary valuation - Eagle: NLIC risks ceded | 52 | 3 | OH | 711 | 411 | |||||||||||||||
Subsidiary valuation - Eagle: NLAIC risks ceded | 52 | 3 | OH | (523 | ) | (226 | ) | |||||||||||||
State Permitted Practice: | ||||||||||||||||||||
Subsidiary valuation - Olentangy | 20 | 3 | VT | (67 | ) | (67 | ) | |||||||||||||
Statutory Capital and Surplus, NAIC SAP | $ | 9,226 | $ | 8,940 | ||||||||||||||||
Statutory accounting practices vary in some respects from U.S. generally accepted accounting principles (“GAAP”), including the following practices:
Financial Statements
● | Statutory financial statements are prepared using language and groupings substantially the same as the annual statements of the Company filed with the NAIC and state regulatory authorities; |
● | assets must be included in the statutory statements of admitted assets, liabilities, capital and surplus at net admitted asset value and nonadmitted assets are excluded through a charge to capital and surplus; |
● | an asset valuation reserve (“AVR”) is established in accordance with the NAIC Annual Statement Instructions for Life and Accident and Health Insurance Companies and is reported as a liability, and changes in the AVR are reported directly in capital and surplus; |
● | an interest maintenance reserve (“IMR”) is established in accordance with the NAIC Annual Statement Instructions for Life and Accident and Health Insurance Companies and is reported as a liability, and the amortization of the IMR is reported as revenue; |
● | the expense allowance associated with statutory reserving practices for investment contracts held in the separate accounts is reported in the general account as a negative liability; |
● | accounting for contingencies requires recording a liability at the midpoint of a range of estimated possible outcomes when no better estimate in the range exists; |
● | surplus notes are accounted for as a component of capital and surplus; |
● | costs related to successful policy acquisitions are charged to operations in the year incurred; |
● | negative cash balances are reported as negative assets; |
F-8
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2020, 2019 and 2018 Statutory Financial Statements
● | certain income and expense items are charged or credited directly to capital and surplus; |
● | amounts on deposit in internal qualified cash pools are reported as cash equivalents; |
● | the statutory statements of cash flows are presented on the basis prescribed by the NAIC; and |
● | the statutory financial statements do not include accumulated other comprehensive income. |
Future Policy Benefits and Claims
● | Deposits to universal life contracts, investment contracts and limited payment contracts are included in revenue; and |
● | future policy benefit reserves are based on statutory requirements. |
Reinsurance Ceded
● | Certain assets and liabilities are reported net of ceded reinsurance balances; and |
● | provision is made for amounts receivable and outstanding for more than 90 days through a charge to capital and surplus. |
Investments
● | Investments in bonds are generally stated at amortized cost, except those with an NAIC designation of “6”, which are stated at the lower of amortized cost or fair value; |
● | investments in preferred stocks are generally stated at amortized cost, except those with an NAIC designation of “4” through “6”, which are stated at the lower of amortized cost or fair value; |
● | other-than-temporary impairments on bonds, excluding loan-backed and structured securities, are measured based on fair value and are not reversible; |
● | the proportional amortized cost method is utilized to determine the liquidation value of Low-Income Housing Tax Credit Funds (“Tax Credit Funds”); |
● | admitted subsidiary, controlled and affiliated entities are not consolidated; rather, those investments are generally carried at audited statutory capital and surplus or GAAP equity, as appropriate, and are recorded as an equity investment in stocks or other invested assets; |
● | equity in earnings of subsidiary companies is recognized directly in capital and surplus as net unrealized capital gains or losses, while dividends from unconsolidated companies are recorded in operations as net investment income; |
● | undistributed earnings and valuation adjustments from investments in joint ventures, partnerships and limited liability companies are recognized directly in capital and surplus as net unrealized capital gains or losses; |
● | changes in non-specific mortgage loan reserves are measured under an incurred loss model and are recorded directly in capital and surplus as net unrealized capital gains or losses; and |
● | gains on sales of investments between affiliated companies representing economic transactions are deferred at the parent level until the related assets are paid down or an external sale occurs. |
Separate Accounts
● | Assets and liabilities of guaranteed separate accounts are reported as separate account assets and separate account liabilities, respectively. |
Derivative Instruments
● | Derivatives used in effective hedging transactions are valued in a manner consistent with the hedged asset or liability; |
● | unrealized gains and losses on derivatives that are not considered to be effective hedges are charged to capital and surplus; |
● | interest earned on derivatives is charged to net investment income; and |
● | embedded derivatives are not separated from the host contract and accounted for separately as a derivative instrument. |
F-9
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2020, 2019 and 2018 Statutory Financial Statements
Goodwill
● | Goodwill is limited to 10% of the prior reporting period’s adjusted statutory surplus, with any goodwill in excess of this limitation nonadmitted through a charge to surplus; and |
● | goodwill is amortized and charged to surplus. |
Federal Income Taxes
● | Changes in deferred federal income taxes are recognized directly in capital and surplus with limitations on the amount of deferred tax assets that can be reflected as an admitted asset (15% of surplus); and |
● | uncertain tax positions are subject to a “more likely than not” standard for federal and foreign income tax loss contingencies only. |
Nonadmitted Assets
● | In addition to the nonadmitted assets described above, certain other assets are nonadmitted and charged directly to capital and surplus. These include prepaid assets, certain software, disallowed IMR and other receivables outstanding for more than 90 days. |
The financial information included herein is prepared and presented in accordance with SAP prescribed or permitted by the Department. Certain differences exist between SAP and GAAP, which are presumed to be material.
Revenues and Benefits
Life insurance premiums are recognized as revenue over the premium paying period of the related policies when due. Annuity considerations are recognized as revenue when received. Health insurance premiums are earned ratably over the terms of the related insurance and reinsurance contracts or policies. Policy benefits and claims that are expensed include interest credited to policy account balances, benefits and claims incurred in the period in excess of related policy reserves and other changes in future policy benefits.
Future Policy Benefits and Claims
Future policy benefits for traditional products are based on statutory mortality and interest requirements without consideration of withdrawals. The principal statutory mortality tables and interest assumptions used on policies in force are the 1958 Commissioner’s Standard Ordinary (“CSO”) table at interest rates of 2.5%, 3.0%, 3.5%, 4.0% and 4.5%, the 1941 CSO table at an interest rate of 2.5%, the 1980 CSO table at interest rates of 4.0%, 4.5%, 5.0% and 5.5%, the 2001 CSO table at an interest rate of 4.0% and 3.5% and the 2017 CSO table at an interest rate of 3.5% and 4.5%. Beginning January 1, 2020, the Company has applied principles-based reserving to all new individual life business. For business subject to principles-based reserving, additional reserves may be held where the deterministic and/or stochastic reserves are in excess of net premium reserves, as defined by Valuation Manual 20, Requirements for Principle-Based Reserves for Life Products (“VM-20”).
Future policy benefits for universal life and variable universal life contracts have been calculated based on participants’ contributions plus interest credited on any funds in the fixed account less applicable contract charges. These policies have been adjusted for possible future surrender charges in accordance with the Commissioner’s Reserve Valuation Method (“CRVM”). For business subject to principles-based reserving, the Company has calculated reserves under VM-20.
Future policy benefits for annuity products have been established based on contract term, interest rates and various contract provisions. Individual deferred annuity contracts issued in 1990 and after have been adjusted for possible future surrender charges in accordance with the Commissioner’s Annuity Reserve Valuation Method (“CARVM”).
As of 2019, the Company calculated its reserves for variable annuity products with guaranteed minimum death, accumulation and withdrawal benefits and other contracts involving guaranteed benefits similar to those offered with variable annuities under the standard scenario of Actuarial Guideline XLIII “CARVM for Variable Annuities”, which exceeded the stochastic 70th percentile Conditional Tail Expectations scenario. Effective January 1, 2020, the Company changed its reserve valuation basis for variable annuities due to changes to Valuation Manual 21, Requirements for Principle-Based Reserves for Variable Annuities (“VM-21”) and as a result, the Company calculated its reserves using a stochastic reserve, which is floored at the cash surrender value.
The aggregate reserves for individual accident and health policies consist of active life reserves, disabled life reserves and unearned premium reserves. The active life reserves for disability income are reserved for on the net level basis, at a 3.0% interest rate, using either the 1964 Commissioner’s Disability Table (for policies issued prior to 1982) or the 1985 Commissioner’s Individual Disability Table A (for policies issued after 1981). The active life reserves for major medical insurance (both scheduled and unscheduled benefits) are based on the benefit ratio method for policies issued after 1981.
F-10
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2020, 2019 and 2018 Statutory Financial Statements
The active life reserves for accident and health policies are reserved for on the net level basis, at a 3.0% interest rate, using either the 1956 Inter-Company Hospital-Surgical tables, the 1974 Medical Expense tables or the 1959 Accidental Death Benefits table.
The disabled life reserves for accident and health policies are calculated using the 1985 Commissioner’s Individual Disability Table A at a 3.0% interest rate. Unearned premium reserves are based on the actual gross premiums and actual days.
The aggregate reserves for group accident and health and franchise accident and health policies consist of disabled life reserves and unearned premium reserves. Reserves for benefits payable on disabled life claims are based on the 2012 Group Long-Term Disability (GLTD) Valuation Table, at varying interest rates of 2.75% - 6.0%, for group policies and the 1987 Commissioner’s Group Disability Table, at varying interest rates of 2.75% - 10.25%, for franchise policies.
Future policy benefits and claims for group long-term disability policies are the present value (discounted between 2.75% and 6.00%) of amounts not yet due on reported claims and an estimate of amounts to be paid on incurred but unreported claims. Future policy benefits and claims on other group health policies are not discounted.
The Company issues fixed and floating rate funding agreements to the Federal Home Loan Bank of Cincinnati (“FHLB”). The liabilities for such funding agreements are treated as annuities under Ohio law for life insurance companies and recorded in future policy benefits and claims. Refer to Note 9 for additional details.
Separate Accounts
Separate account assets represent contractholders’ funds that have been legally segregated into accounts with specific investment objectives. Separate account assets are primarily recorded at fair value, with the value of separate account liabilities set to equal the fair value of separate account assets. Separate account assets are primarily comprised of public, privately-registered and non-registered mutual funds, whose fair value is primarily based on the funds’ net asset value. Other separate account assets are recorded at fair value based on the methodology that is applicable to the underlying assets. In limited circumstances, other separate account assets are recorded at book value when the policyholder does not participate in the underlying portfolio experience.
Separate account liabilities, in conjunction with accrued transfers from separate accounts, represent contractholders’ funds adjusted for possible future surrender charges in accordance with the CARVM and the CRVM, respectively. The difference between full account value and CARVM/CRVM is reflected in accrued transfers to separate accounts, as prescribed by the NAIC, in the statutory statements of admitted assets, liabilities, capital and surplus. The annual change in the difference between full account value and CARVM/CRVM and its applicable federal income tax is reflected in the statutory statements of operations as part of the net transfers to separate accounts and federal income tax, respectively.
Retained Assets
The Company does not retain beneficiary assets. During a death benefit claim, the death benefit settlement method is payment to the beneficiary in the form of a check or electronic funds transfer.
Investments
Bonds and stocks of unaffiliated companies. Bonds are generally stated at amortized cost, except those with an NAIC designation of “6”, which are stated at the lower of amortized cost or fair value. Preferred stocks are generally stated at amortized cost, except those with an NAIC designation of “4” through “6”, which are stated at the lower of amortized cost or fair value. Common stocks are stated at fair value. Changes in the fair value of bonds and stocks stated at fair value are charged to capital and surplus.
Loan-backed and structured securities, which are included in bonds in the statutory financial statements, are stated in a manner consistent with the bond guidelines, but with additional consideration given to the special valuation rules implemented by the NAIC applicable to residential mortgage-backed securities that are not backed by U.S. government agencies, commercial mortgage-backed securities and certain other structured securities. Under these guidelines, an initial and adjusted NAIC designation is determined for each security. The initial NAIC designation, which takes into consideration the security’s amortized cost relative to an NAIC-prescribed valuation matrix, is used to determine the reporting basis (i.e., amortized cost or lower of amortized cost or fair value).
Interest income is recognized when earned, while dividends are recognized when declared. The Company nonadmits investment income due and accrued when amounts are over 90 days past due.
F-11
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2020, 2019 and 2018 Statutory Financial Statements
For investments in loan-backed and structured securities, the Company recognizes income and amortizes discounts and premiums using the effective-yield method based on prepayment assumptions, generally obtained using a model provided by a third-party vendor, and the estimated economic life of the securities. When actual prepayments differ significantly from estimated prepayments, the effective-yield is recalculated to reflect actual payments to date and anticipated future payments. Any resulting adjustment is included in net investment income in the period the estimates are revised. All other investment income is recorded using the effective-yield method without anticipating the impact of prepayments.
Purchases and sales of bonds and stocks are recorded on the trade date, with the exception of private placement bonds, which are recorded on the funding date. Realized gains and losses are determined on a specific identification method on the trade date.
Independent pricing services are most often utilized, and compared to pricing from additional sources, to determine the fair value of bonds and stocks for which market quotations or quotations on comparable securities are available. For these bonds and stocks, the Company obtains the pricing services’ methodologies and classifies the investments accordingly in the fair value hierarchy.
A corporate pricing matrix is used in valuing certain corporate bonds. The corporate pricing matrix was developed using publicly available spreads for privately-placed corporate bonds with varying weighted average lives and credit quality ratings. The weighted average life and credit quality rating of a particular bond to be priced using the corporate pricing matrix are important inputs into the model and are used to determine a corresponding spread that is added to the appropriate U.S. Treasury yield to create an estimated market yield for that bond. The estimated market yield and other relevant factors are then used to estimate the fair value of the particular bond.
Non-binding broker quotes are also utilized to determine the fair value of certain bonds when deemed appropriate or when valuations are not available from independent pricing services or a corporate pricing matrix. These bonds are classified with the lowest priority in the fair value hierarchy as only one broker quote is ordinarily obtained, the investment is not traded on an exchange, the pricing is not available to other entities and/or the transaction volume in the same or similar investments has decreased. Inputs used in the development of prices are not provided to the Company by the brokers as the brokers often do not provide the necessary transparency into their quotes and methodologies. At least annually, the Company performs reviews and tests to ensure that quotes are a reasonable estimate of the investments’ fair value. Price movements of broker quotes are subject to validation and require approval from the Company’s management. Management uses its knowledge of the investment and current market conditions to determine if the price is indicative of the investment’s fair value.
For all bonds, the Company considers its ability and intent to hold the security for a period of time sufficient to allow for the anticipated recovery in value, the expected recovery of principal and interest and the extent to which the fair value has been less than amortized cost. If the decline in fair value to below amortized cost is determined to be other-than-temporary, a realized loss is recorded equal to the difference between the amortized cost of the investment and its fair value.
The Company periodically reviews loan-backed and structured securities in an unrealized loss position by comparing the present value of cash flows, including estimated prepayments, expected to be collected from the security to the amortized cost basis of the security. If the present value of cash flows expected to be collected, discounted at the security’s effective interest rate, is less than the amortized cost basis of the security, the impairment is considered other-than-temporary and a realized loss is recorded.
All other bonds in an unrealized loss position are periodically reviewed to determine if a decline in fair value to below amortized cost is other-than-temporary. Factors considered during this review include timing and amount of expected cash flows, ability of the issuer to meet its obligations, financial condition and future prospects of the issuer, amount and quality of any underlying collateral and current economic and industry conditions that may impact an issuer.
Stocks may experience other-than-temporary impairment based on the prospects for full recovery in value in a reasonable period of time and the Company’s ability and intent to hold the stock to recovery. If a stock is determined to be other-than-temporarily impaired, a realized loss is recorded equal to the difference between the cost basis of the investment and its fair value.
F-12
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2020, 2019 and 2018 Statutory Financial Statements
Investments in subsidiaries. The investment in the Company’s wholly-owned insurance subsidiaries, NLAIC and Eagle, are carried using the equity method of accounting applicable to U.S. insurance subsidiary, controlled and affiliated (“SCA”) entities. This requires the investment to be recorded based on the value of its underlying audited statutory surplus. Furthermore, the equity method of accounting would be discontinued if the investment is reduced to zero, unless the Company has guaranteed obligations of the subsidiary or otherwise committed to provide further financial support. In accordance with the “look through” provisions of Statements of Statutory Accounting Principles (“SSAP”) No. 97, Investments in Subsidiary, Controlled and Affiliated Entities, the valuation of JNF, an unaudited downstream noninsurance holding company, is based on the individual audited SCA entities owned by the holding company. Additionally, all non-affiliated liabilities, commitments, contingencies, guarantees or obligations of the holding company are reflected in the determination of the carrying value of the investments. The Company’s investment in NISC and NIA, wholly-owned non-insurance subsidiaries, are carried using the equity method of accounting applicable to U.S. non-insurance subsidiary, controlled and affiliated entities. This requires the investment to be recorded based on its underlying audited GAAP equity. Investments in NLAIC, JNF and NISC are included in stocks, and the investment in Eagle is included in other invested assets on the statutory statements of admitted assets, liabilities, capital and surplus.
Mortgage loans, net of allowance. The Company holds commercial mortgage loans that are collateralized by properties throughout the U.S. Mortgage loans are held at unpaid principal balance adjusted for premiums and discounts, less a valuation allowance. The Company also holds commercial mortgage loans of these property types that are under development. Mortgage loans under development are collateralized by the borrower’s common stock.
As part of the underwriting process, specific guidelines are followed to ensure the initial quality of a new mortgage loan. Third-party appraisals are obtained to support loaned amounts as the loans are collateral dependent or guaranteed.
The collectability and value of a mortgage loan is based on the ability of the borrower to repay and/or the value of the underlying collateral. Many of the Company’s mortgage loans are structured with balloon payment maturities, exposing the Company to risks associated with the borrowers’ ability to make the balloon payment or refinance the property. Loans are considered delinquent when contractual payments are 90 days past due.
Mortgage loans require a loan-specific reserve when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. When management determines that a loan requires a loan-specific reserve, a provision for loss is established equal to the difference between the carrying value and the fair value of the collateral less costs to sell. Loan-specific reserve charges are recorded in net realized capital gains and losses. In the event a loan-specific reserve charge is reversed, the recovery is also recorded in net realized capital gains and losses.
In addition to the loan-specific reserves, the Company maintains a non-specific reserve based primarily on loan surveillance categories and property type classes, which reflects management’s best estimates of probable credit losses inherent in the portfolio of loans without specific reserves as of the date of the statutory statements of admitted assets, liabilities, capital and surplus. Management’s periodic evaluation of the adequacy of the non-specific reserve is based on past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect a group of borrowers’ ability to repay, the estimated value of the underlying collateral, composition of the loan portfolio, current economic conditions and other relevant factors. Non-specific reserve changes are recorded directly in capital and surplus as net unrealized capital gains and losses.
Management evaluates the credit quality of individual mortgage loans and the portfolio as a whole through a number of loan quality measurements, including, but not limited to, loan-to-value (“LTV”) and debt service coverage (“DSC”) ratios. The LTV ratio is calculated as a ratio of the amortized cost of a loan to the estimated value of the underlying collateral. DSC is the amount of cash flow generated by the underlying collateral of the mortgage loan available to meet periodic interest and principal payments of the loan. These loan quality measurements contribute to management’s assessment of relative credit risk in the mortgage loan portfolio. Based on underwriting criteria and ongoing assessment of the properties’ performance, management believes the amounts, net of valuation allowance, are collectible. This process identifies the risk profile and potential for loss individually and in the aggregate for the commercial mortgage loan portfolios. These factors are updated and evaluated at least annually. Due to the nature of the collateral underlying mortgage loans under development, these loans are not evaluated using the LTV and DSC ratios described above.
Interest income on performing mortgage loans is recognized in net investment income over the life of the loan using the effective-yield method. Loans in default or in the process of foreclosure are placed on non-accrual status. Interest received on non-accrual status mortgage loans is included in net investment income in the period received. Loans are restored to accrual status when the principal and interest is current and it is determined the future principal and interest payments are probable or the loan is modified.
Policy loans. Policy loans, which are collateralized by the related insurance policy, are held at the outstanding principal balance and do not exceed the net cash surrender value of the policy. As such, no valuation allowance for policy loans is required.
F-13
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2020, 2019 and 2018 Statutory Financial Statements
Cash and cash equivalents. Cash and cash equivalents include highly liquid investments with original maturities of less than three months and, effective December 31, 2020, amounts on deposit in internal qualified cash pools. The Company and various affiliates maintain agreements with Nationwide Cash Management Company (“NCMC”), an affiliate, under which NCMC acts as a common agent in handling the purchase and sale of short-term securities for the respective accounts of the participants in the internal qualified cash pool.
Short-term investments. Short-term investments consist primarily of government agency discount notes with maturities of twelve months or less at acquisition. Short-term investments also include outstanding promissory notes with initial maturity dates of one-year or less with certain affiliates. The Company carries short-term investments at amortized cost, which approximates fair value. As of December 31, 2019, short-term investments also included amounts on deposit with NCMC.
Other invested assets. Other invested assets consist primarily of alternative investments in private equity funds, private debt funds, tax credit funds, real estate partnerships and the investment in Eagle. Except for investments in certain tax credit funds, these investments are recorded using the equity method of accounting. Changes in carrying value as a result of the equity method are reflected as net unrealized capital gains and losses as a direct adjustment to capital and surplus. Gains and losses are generally recognized through income at the time of disposal or when operating distributions are received. Partnership interests in tax credit funds are held at amortized cost with amortization charged to net investment income over the period in which the tax benefits, primarily credits, are earned. Tax credits are recorded as an offset to tax expense in the period utilized.
The Company has sold $2.3 billion, $2.2 billion and $2.0 billion in Tax Credit Funds to unrelated third parties with outstanding guarantees as of December 31, 2020, 2019 and 2018, respectively. The Company has guaranteed after-tax benefits to the third-party investors through periods ending in 2037. 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, the Company must fund any shortfall. The maximum amount of undiscounted future payments that the Company could be required to pay the investors under the terms of the guarantees is $1.4 billion, but the Company does not anticipate making any material payments related to the guarantees. The Company’s risks are mitigated in the following ways: (1) the Company has the right to buyout the equity related to the guarantee under certain circumstances, (2) the Company may replace underperforming properties to mitigate exposure to guarantee payments, (3) the Company oversees the asset management of the deals and (4) changes in tax laws are explicitly excluded from the Company’s guarantees of after-tax benefits.
Securities Lending. The Company has entered into securities lending agreements with a custodial bank whereby eligible securities are loaned to third parties, primarily major brokerage firms. These transactions are used to generate additional income in the securities portfolio. The Company is entitled to receive from the borrower any payments of interest and dividends received on loaned securities during the loan term. The agreements require a minimum of 102% of the fair value of the loaned securities to be held as collateral. Cash collateral is invested by the custodial bank in investment-grade securities, which are included in the total invested assets of the Company. Periodically, the Company may receive non-cash collateral, which would be recorded off-balance sheet. The Company recognizes loaned securities in bonds. A securities lending payable is recorded in other liabilities for the amount of cash collateral received. If the fair value of the collateral received (cash and/or securities) is less than the fair value of the securities loaned, the shortfall is nonadmitted. Net income received from securities lending activities is included in net investment income. Because the borrower or the Company may terminate a securities lending transaction at any time, if loans are terminated in advance of the reinvested collateral asset maturities, the Company would repay its securities lending obligations from operating cash flows or the proceeds of sales from its investment portfolio, which includes significant liquid securities.
Derivative Instruments
The Company uses derivative instruments to manage exposures and mitigate risks primarily associated with interest rates, equity markets and foreign currency. These derivative instruments primarily include interest rate swaps, cross-currency swaps, futures and options.
Derivative instruments used in hedging transactions considered to be effective hedges are reported in a manner consistent with the hedged items. Derivative instruments used in hedging transactions that do not meet or no longer meet the criteria of an effective hedge are accounted for at fair value with changes in fair value recorded in capital and surplus as unrealized gains or losses.
The fair value of derivative instruments is determined using various valuation techniques relying predominantly on observable market inputs. These inputs include interest rate swap curves, credit spreads, interest rates, counterparty credit risk, equity volatility and equity index levels.
F-14
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2020, 2019 and 2018 Statutory Financial Statements
The Company’s derivative transaction counterparties are generally financial institutions. To reduce the credit risk associated with open contracts, the Company enters into master netting agreements which permit the closeout and netting of transactions with the same counterparty upon the occurrence of certain events. In addition, the Company attempts to reduce credit risk by obtaining collateral from counterparties. The determination of the need for and the levels of collateral vary based on an assessment of the credit risk of the counterparty. The Company accepts collateral in the forms of cash and marketable securities. Non-cash collateral received is recorded off-balance sheet.
Cash flows and payment accruals on derivatives are recorded in net investment income.
Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources while unobservable inputs reflect the Company’s view of market assumptions in the absence of observable market information. The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. In determining fair value, the Company uses various methods, including market, income and cost approaches.
The Company categorizes its financial instruments into a three-level hierarchy based on the priority of the inputs to the valuation technique. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure fair value fall within different levels of the hierarchy, the category level is based on the lowest priority level input that is significant to the fair value measurement of the instrument in its entirety.
The Company categorizes assets and liabilities held at fair value in the statutory statements of admitted assets, liabilities, capital and surplus as follows:
Level 1. Unadjusted quoted prices accessible in active markets for identical assets or liabilities at the measurement date and mutual funds where the value per share (unit) is determined and published daily and is the basis for current transactions.
Level 2. Unadjusted quoted prices for similar assets or liabilities in active markets or inputs (other than quoted prices) that are observable or that are derived principally from or corroborated by observable market data through correlation or other means. Primary inputs to this valuation technique may include comparative trades, bid/asks, interest rate movements, U.S. Treasury rates, London Interbank Offered Rate (“LIBOR”), prime rates, cash flows, maturity dates, call ability, estimated prepayments and/or underlying collateral values.
Level 3. Prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. Inputs reflect management’s best estimates of the assumptions market participants would use at the measurement date in pricing the asset or liability. Consideration is given to the risk inherent in both the method of valuation and the valuation inputs. Primary inputs to this valuation technique include broker quotes and comparative trades.
The Company reviews its fair value hierarchy classifications for assets and liabilities quarterly. Changes in observability of significant valuation inputs identified during these reviews may trigger reclassifications. Reclassifications are reported as transfers at the beginning of the period in which the change occurs.
Asset Valuation Reserve
The Company maintains an AVR as prescribed by the NAIC for the purpose of offsetting potential credit related investment losses on each invested asset category, excluding cash, policy loans and income receivable. The AVR contains a separate component for each category of invested assets. The change in AVR is charged or credited directly to capital and surplus.
F-15
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2020, 2019 and 2018 Statutory Financial Statements
Interest Maintenance Reserve
The Company records an IMR as prescribed by the NAIC, which represents the net deferral for interest-related gains or losses arising from the sale of certain investments, such as bonds, mortgage loans and loan-backed and structured securities sold. The IMR is applied as follows:
• | for bonds, the designation from the NAIC Capital Markets and Investments Analysis Office must not have changed more than one designation between the beginning of the holding period and the date of sale; |
• | the bond must never have been classified as a default security; |
• | for mortgage loans, during the prior two years, they must not have had interest more than 90 days past due, been in the process of foreclosure or in the course of voluntary conveyance, nor had restructured terms; and |
• | for loan-backed and structured securities, all interest-related other-than-temporary impairments and interest-related realized gains or losses on sales of the securities. |
The realized gains or losses, net of related federal income tax, from the applicable bonds and mortgage loans sold, have been removed from the net realized gain or loss amounts and established as a net liability. This liability is amortized into income such that the amount of each capital gain or loss amortized in a given year is based on the excess of the amount of income which would have been reported that year, if the asset had not been disposed of over the amount of income which would have been reported had the asset been repurchased at its sale price. In the event the unamortized IMR liability balance is negative, the balance is reclassified as an asset and fully nonadmitted. The Company utilizes the grouped method for amortization. Under the grouped method, the liability is amortized into income over the remaining period to expected maturity based on the groupings of the individual securities into five-year bands.
Goodwill
For companies whose operations are primarily insurance related, goodwill is the excess of the cost to acquire a company over the Company’s share of the statutory book value of the acquired entity. Goodwill is recorded in stocks in the statutory statements of admitted assets, liabilities and surplus. Goodwill is amortized on a straight-line basis over the period of economic benefit, not to exceed ten years, with a corresponding charge to surplus.
Unamortized goodwill totaled $100 million and $116 million as of December 31, 2020 and 2019, respectively. All unamortized goodwill as of December 31, 2020 and 2019, is related to the acquisition of JNF, which represents 55% and 69%, respectively, of JNF’s gross SCA value. All goodwill was admitted as of December 31, 2020 and 2019. Amortization of goodwill totaled $16 million for the years ended December 31, 2020, 2019 and 2018. No goodwill was impaired during these periods.
Federal Income Taxes
The Company utilizes the asset and liability method of accounting for income taxes. Under this method, deferred tax assets, net of any nonadmitted portion and statutory valuation allowance, and deferred tax liabilities, are recognized for the expected future tax consequences attributable to differences between the statutory financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income or loss in the years in which those temporary differences are expected to be recovered or settled. The change in deferred taxes, excluding the impact of taxes on unrealized capital gains or losses and nonadmitted deferred taxes, is charged directly to surplus.
The Company provides for federal income taxes based on amounts the Company believes it ultimately will owe. Inherent in the provision for federal income taxes are estimates regarding the deductibility of certain items and the realization of certain tax credits. In the event the ultimate deductibility of certain items or the realization of certain tax credits differs from estimates, the Company may be required to change the provision for federal income taxes recorded in the statutory financial statements, which could be significant.
Tax reserves are reviewed regularly and are adjusted as events occur that the Company believes impact its liability for additional taxes, such as lapsing of applicable statutes of limitations, conclusion of tax audits or substantial agreement with taxing authorities on the deductibility/nondeductibility 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. The Company believes its tax reserves reasonably provide for potential assessments that may result from Internal Revenue Service (“IRS”) examinations and other tax-related matters for all open tax years.
The Company is included in the NMIC consolidated federal income tax return.
F-16
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2020, 2019 and 2018 Statutory Financial Statements
Reinsurance Ceded
The Company cedes insurance to other companies in order to limit potential losses and to diversify its exposures. Such agreements do not relieve the Company of its primary obligation to the policyholder in the event the reinsurer is unable to meet the obligations it has assumed. Reinsurance premiums ceded and reinsurance recoveries on benefits and claims incurred are deducted from the respective income and expense accounts. Assets and liabilities related to reinsurance ceded are reported in the statutory statements of admitted assets, liabilities, capital and surplus on a net basis within the related future policy benefits and claims of the Company.
Participating Business
Participating business, which refers to policies that participate in profits through policyholder dividends, represented approximately 4% of the Company’s life insurance in force in 2020 and 2019, and 50% of the number of life insurance policies in force in 2020 and 2019. The provision for policyholder dividends was based on the respective year’s dividend scales, as approved by the Board of Directors. Policyholder dividends are recognized when declared. No additional income was allocated to participating policyholders during 2020 and 2019.
Accounting Changes and Corrections of Errors
During 2020, the Company identified and corrected an error in the variable annuity ceded premium calculation under the intercompany 100% coinsurance agreement with Eagle. The error resulted in an understatement of ceded premiums for the years ended December 31, 2019 and 2018. In accordance with SSAP No. 3, Accounting Changes and Corrections of Errors, the total prior period correction of $9 million was reported in 2020 as a negative adjustment to unassigned funds (surplus) and consisted of $11 million of ceded premiums, offset by $2 million of taxes.
Effective January 1, 2020, the Company changed its reserve valuation basis for variable annuities due to changes to VM-21. As a result of this change, the Company records stochastic reserves, floored at the cash surrender value, instead of reserves using the standard scenario previously required under Actuarial Guideline XLIII “CARVM for Variable Annuities”. The impacts of the valuation basis change were recognized as of January 1, 2020, resulting in an increase to statutory capital and surplus of $78 million. In addition, the Company changed its reserve valuation basis for stable value wraps covering certain group life insurance policies from Separate Accounts Funding Guaranteed Minimum Benefits Under Group Contracts, to VM-21. There was no impact to statutory capital and surplus as a result of this change.
During 2020, the Company modified its approach used to schedule the reversals of its deferred tax assets for policyholder reserves under SSAP No. 101, Income Taxes (“SSAP No. 101”). Prior to 2020 the Company scheduled the reversals of its deferred tax assets for policyholder reserves by estimating the reserve reversal using the aggregate policyholder reserve. As of January 1, 2020, the Company is now taking a disaggregate approach and calculates reversal of the deferred tax assets for policyholder reserves on a product-by-product basis. The new method is more precise and better reflects how the deferred tax assets for policyholder reserves moves with the underlying reserve liability. SSAP No. 101 permits a company to modify its scheduling method so long as the modification is treated as change in accounting principle. The impact of the change increases the Company’s net admitted deferred tax asset $6 million and $5 million as of December 31, 2020 and January 1, 2020, respectively, with a commensurate increase in capital and surplus. There was no impact on net income.
Recently Adopted Accounting Standard
In December 2020, the Company adopted revisions to SSAP No. 2R, Cash, Cash Equivalents, Drafts and Short-Term Investments (“SSAP No. 2R”). The adopted revisions require internal cash pooling arrangements to meet certain criteria to be considered qualified cash pools, with investments in qualifying pools reported as cash equivalents on the statutory statements of admitted assets, liabilities, capital and surplus. The Company’s cash pool meets the criteria to be considered a qualified cash pool under SSAP No. 2R. The internal cash pooling arrangement with NCMC was historically classified as short-term investments, resulting in a change in classification to cash equivalents.
COVID-19
On March 11, 2020, the World Health Organization declared the novel coronavirus (“COVID-19”) a pandemic. The COVID-19 pandemic conditions create financial market volatility and uncertainty regarding whether and when certain customer behaviors will return to historical patterns, including sales of new and retention of existing policies, life insurance mortality and credit allowance exposure. Although impacting certain sales and revenues, none of the aforementioned items have had a material impact on the overall financial condition of the Company. The extent to which the COVID-19 pandemic may impact the Company’s ongoing operations and financial condition will depend on future developments that are evolving and uncertain.
F-17
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2020, 2019 and 2018 Statutory Financial Statements
Subsequent Events
The Company evaluated subsequent events through March 19, 2021, the date the statutory financial statements were issued.
The Department is in the process of implementing Ohio Administrative Code 3901-1-67, Alternative Derivative and Reserve Accounting Practices (“the Rule”). Once adopted and implemented, the Rule will constitute a prescribed practice as contemplated by the NAIC SAP. The prescribed practice is to allow Ohio-domiciled insurance companies to utilize certain alternative derivative and reserve accounting practices for eligible derivative instruments and indexed products, respectively, in order to better align the measurement of indexed product reserves and the derivatives that hedge them. Effective March 15, 2021, the Department allows Ohio-domiciled insurance companies the option to immediately utilize the alternative derivative and reserve accounting practices contemplated by the Rule. The Company plans to adopt the prescribed practice allowed under the Rule effective January 1, 2021. The Company continues to evaluate the impact of the adoption.
On March 9, 2021, the Company’s Board of Directors declared an ordinary dividend of up to $550 million payable to NFS on or around March 24, 2021.
F-18
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2020, 2019 and 2018 Statutory Financial Statements
(3) | Analysis of Actuarial Reserves and Deposit Liabilities by Withdrawal Characteristics |
The following table summarizes the analysis of individual annuities actuarial reserves by withdrawal characteristics, as of the dates indicated:
(in millions) | General account | Separate account with guarantees | Separate account non- guaranteed | Total | % of Total | |||||||||||||||
December 31, 2020 | ||||||||||||||||||||
Subject to discretionary withdrawal: | ||||||||||||||||||||
With market value adjustment | $ | 190 | $ | 162 | $ | - | $ | 352 | 0 | % | ||||||||||
At book value less current surrender charge of 5% or more | 219 | - | - | 219 | 0 | % | ||||||||||||||
At fair value | - | - | 65,990 | 65,990 | 92 | % | ||||||||||||||
Total with market value adjustment or at fair value | $ | 409 | $ | 162 | $ | 65,990 | $ | 66,561 | 92 | % | ||||||||||
At book value without adjustment (minimal or no charge or adjustment) | 3,480 | - | 8 | 3,488 | 5 | % | ||||||||||||||
Not subject to discretionary withdrawal | 1,755 | - | 62 | 1,817 | 3 | % | ||||||||||||||
Total, gross | $ | 5,644 | $ | 162 | $ | 66,060 | $ | 71,866 | 100 | % | ||||||||||
Less: Reinsurance ceded | (112 | ) | - | - | (112 | ) | ||||||||||||||
Total, net | $ | 5,532 | $ | 162 | $ | 66,060 | $ | 71,754 | ||||||||||||
Amount included in ‘Subject to discretionary withdrawal at book value less current surrender charge of 5% or more’ that will move to ‘Subject to discretionary withdrawal at book value without adjustment (minimal or no charge or adjustment)’ | $ | 67 | $ | - | $ | - | $ | 67 | ||||||||||||
December 31, 2019 | ||||||||||||||||||||
Subject to discretionary withdrawal: | ||||||||||||||||||||
With market value adjustment | $ | 19 | $ | 181 | $ | 29 | $ | 229 | 0 | % | ||||||||||
At book value less current surrender charge of 5% or more | 270 | - | - | 270 | 1 | % | ||||||||||||||
At fair value | - | - | 61,535 | 61,535 | 91 | % | ||||||||||||||
Total with market value adjustment or at fair value | $ | 289 | $ | 181 | $ | 61,564 | $ | 62,034 | 92 | % | ||||||||||
At book value without adjustment (minimal or no charge or adjustment) | 3,587 | - | 11 | 3,598 | 5 | % | ||||||||||||||
Not subject to discretionary withdrawal | 1,761 | - | 56 | 1,817 | 3 | % | ||||||||||||||
Total, gross | $ | 5,637 | $ | 181 | $ | 61,631 | $ | 67,449 | 100 | % | ||||||||||
Less: Reinsurance ceded | (104 | ) | - | - | (104 | ) | ||||||||||||||
Total, net | $ | 5,533 | $ | 181 | $ | 61,631 | $ | 67,345 | ||||||||||||
Amount included in ‘Subject to discretionary withdrawal at book value less current surrender charge of 5% or more’ that will move to ‘Subject to discretionary withdrawal at book value without adjustment (minimal or no charge or adjustment)’ | $ | 128 | $ | - | $ | - | $ | 128 |
F-19
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2020, 2019 and 2018 Statutory Financial Statements
The following table summarizes the analysis of group annuities actuarial reserves by withdrawal characteristics, as of the dates indicated:
�� | ||||||||||||||||||||
(in millions) | General account | Separate account with guarantees | Separate account non- guaranteed | Total | % of Total | |||||||||||||||
December 31, 2020 | ||||||||||||||||||||
Subject to discretionary withdrawal: | ||||||||||||||||||||
With market value adjustment | $ | 17,393 | $ | 2,483 | $ | - | $ | 19,876 | 43 | % | ||||||||||
At book value less current surrender charge of 5% or more | 3 | - | - | 3 | 0 | % | ||||||||||||||
At fair value | - | - | 19,670 | 19,670 | 43 | % | ||||||||||||||
Total with market value adjustment or at fair value | $ | 17,396 | $ | 2,483 | $ | 19,670 | $ | 39,549 | 86 | % | ||||||||||
At book value without adjustment (minimal or no charge or adjustment) | 6,000 | - | - | 6,000 | 13 | % | ||||||||||||||
Not subject to discretionary withdrawal | 591 | - | 3 | 594 | 1 | % | ||||||||||||||
Total, gross | $ | 23,987 | $ | 2,483 | $ | 19,673 | $ | 46,143 | 100 | % | ||||||||||
Less: Reinsurance ceded | (58 | ) | - | - | (58 | ) | ||||||||||||||
Total, net | $ | 23,929 | $ | 2,483 | $ | 19,673 | $ | 46,085 | ||||||||||||
Amount included in ‘Subject to discretionary withdrawal at book value less current surrender charge of 5% or more’ that will move to ‘Subject to discretionary withdrawal at book value without adjustment (minimal or no charge or adjustment)’ | $ | 3 | $ | - | $ | - | $ | 3 | ||||||||||||
December 31, 2019 | ||||||||||||||||||||
Subject to discretionary withdrawal: | ||||||||||||||||||||
With market value adjustment | $ | 16,485 | $ | 2,166 | $ | - | $ | 18,651 | 44 | % | ||||||||||
At book value less current surrender charge of 5% or more | 1 | - | - | 1 | 0 | % | ||||||||||||||
At fair value | - | - | 18,284 | 18,284 | 43 | % | ||||||||||||||
Total with market value adjustment or at fair value | $ | 16,486 | $ | 2,166 | $ | 18,284 | $ | 36,936 | 87 | % | ||||||||||
At book value without adjustment (minimal or no charge or adjustment) | 5,354 | - | - | 5,354 | 12 | % | ||||||||||||||
Not subject to discretionary withdrawal | 584 | 2 | - | 586 | 1 | % | ||||||||||||||
Total, gross | $ | 22,424 | $ | 2,168 | $ | 18,284 | $ | 42,876 | 100 | % | ||||||||||
Less: Reinsurance ceded | (60 | ) | - | - | (60 | ) | ||||||||||||||
Total, net | $ | 22,364 | $ | 2,168 | $ | 18,284 | $ | 42,816 | ||||||||||||
Amount included in ‘Subject to discretionary withdrawal at book value less current surrender charge of 5% or more’ that will move to ‘Subject to discretionary withdrawal at book value without adjustment (minimal or no charge or adjustment)’ | $ | 1 | $ | - | $ | - | $ | 1 |
F-20
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2020, 2019 and 2018 Statutory Financial Statements
The following table summarizes the analysis of deposit-type contracts and other liabilities without life or disability contingencies by withdrawal characteristics, as of the dates indicated:
(in millions) | General account | Separate account non- guaranteed | Total | % of Total | ||||||||||||
December 31, 2020 | ||||||||||||||||
Subject to discretionary withdrawal: | ||||||||||||||||
With market value adjustment | $ | 2 | $ | - | $ | 2 | 0 | % | ||||||||
At fair value | 12 | - | 12 | 0 | % | |||||||||||
Total with market value adjustment or at fair value | $ | 14 | $ | - | $ | 14 | 0 | % | ||||||||
At book value without adjustment (minimal or no charge or adjustment) | 728 | 3 | 731 | 22 | % | |||||||||||
Not subject to discretionary withdrawal | 2,540 | 13 | 2,553 | 78 | % | |||||||||||
Total, gross | $ | 3,282 | $ | 16 | $ | 3,298 | 100 | % | ||||||||
Less: Reinsurance ceded | - | - | - | |||||||||||||
Total, net | $ | 3,282 | $ | 16 | $ | 3,298 | ||||||||||
December 31, 2019 | ||||||||||||||||
Subject to discretionary withdrawal: | ||||||||||||||||
With market value adjustment | $ | 3 | $ | - | $ | 3 | 0 | % | ||||||||
At fair value | 13 | - | 13 | 0 | % | |||||||||||
Total with market value adjustment or at fair value | $ | 16 | $ | - | $ | 16 | 0 | % | ||||||||
At book value without adjustment (minimal or no charge or adjustment) | 775 | 4 | 779 | 25 | % | |||||||||||
Not subject to discretionary withdrawal | 2,331 | 12 | 2,343 | 75 | % | |||||||||||
Total, gross | $ | 3,122 | $ | 16 | $ | 3,138 | 100 | % | ||||||||
Less: Reinsurance ceded | - | - | - | |||||||||||||
Total, net | $ | 3,122 | $ | 16 | $ | 3,138 |
The following table is a reconciliation of total annuity actuarial reserves and deposit fund liabilities, as of the dates indicated:
December 31, | ||||||||
(in millions) | 2020 | 2019 | ||||||
Life, accident and health annual statement: | ||||||||
Annuities, net (excluding supplemental contracts with life contingencies) | $ | 29,445 | $ | 27,880 | ||||
Supplemental contracts with life contingencies, net | 16 | 17 | ||||||
Deposit-type contracts | 3,282 | 3,122 | ||||||
Subtotal | $ | 32,743 | $ | 31,019 | ||||
Separate accounts annual statement: | ||||||||
Annuities, net (excluding supplemental contracts with life contingencies) | $ | 88,378 | $ | 82,264 | ||||
Other contract deposit funds | 16 | 16 | ||||||
Subtotal | $ | 88,394 | $ | 82,280 | ||||
Total annuity actuarial reserves and deposit fund liabilities, net | $ | 121,137 | $ | 113,299 |
F-21
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2020, 2019 and 2018 Statutory Financial Statements
The following table summarizes the analysis of life actuarial reserves by withdrawal characteristics, as of the dates indicated:
General account | Separate account - nonguaranteed1 | |||||||||||||||||||||||
(in millions) | Account value | Cash value | Reserve | Account value | Cash value | Reserve | ||||||||||||||||||
December 31, 2020 | ||||||||||||||||||||||||
Subject to discretionary withdrawal, surrender values or policy loans: | ||||||||||||||||||||||||
Term policies with cash value | $ | - | $ | 11 | $ | 11 | $ | - | $ | - | $ | - | ||||||||||||
Universal life | 2,585 | 2,600 | 2,764 | - | - | - | ||||||||||||||||||
Universal life with secondary guarantees | 360 | 288 | 720 | - | - | - | ||||||||||||||||||
Indexed universal life with secondary guarantees | 179 | 130 | 191 | - | - | - | ||||||||||||||||||
Other permanent cash value life insurance | - | 1,300 | 2,607 | - | - | - | ||||||||||||||||||
Variable life | 1,887 | 1,965 | 2,060 | 24,591 | 24,581 | 24,582 | ||||||||||||||||||
Miscellaneous reserves | - | - | - | - | - | 9 | ||||||||||||||||||
Subtotal | $ | 5,011 | $ | 6,294 | $ | 8,353 | $ | 24,591 | $ | 24,581 | $ | 24,591 | ||||||||||||
Not subject to discretionary withdrawal or no cash value: | ||||||||||||||||||||||||
Term policies without cash value | - | - | 275 | - | - | - | ||||||||||||||||||
Accidental death benefits | - | - | 1 | - | - | - | ||||||||||||||||||
Disability - active lives | - | - | 13 | - | - | - | ||||||||||||||||||
Disability - disabled lives | - | - | 58 | - | - | - | ||||||||||||||||||
Miscellaneous reserves | - | - | 30 | - | - | - | ||||||||||||||||||
Total, gross | $ | 5,011 | $ | 6,294 | $ | 8,730 | $ | 24,591 | $ | 24,581 | $ | 24,591 | ||||||||||||
Less: reinsurance ceded | (10 | ) | (10 | ) | (240 | ) | - | - | - | |||||||||||||||
Total, net | $ | 5,001 | $ | 6,284 | $ | 8,490 | $ | 24,591 | $ | 24,581 | $ | 24,591 |
1 | In 2020, the classification of certain group life insurance policies was changed from separate accounts with guarantees to separate accounts nonguaranteed as a result of a change in the reserve valuation basis, as described in Note 2. |
F-22
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2020, 2019 and 2018 Statutory Financial Statements
General account | Separate account - nonguaranteed | |||||||||||||||||||||||
(in millions) | Account value | Cash value | Reserve | Account value | Cash value | Reserve | ||||||||||||||||||
December 31, 2019 | ||||||||||||||||||||||||
Subject to discretionary withdrawal, surrender values or policy loans: | ||||||||||||||||||||||||
Term policies with cash value | $ | - | $ | 11 | $ | 11 | $ | - | $ | - | $ | - | ||||||||||||
Universal life | 2,549 | 2,561 | 2,728 | - | - | - | ||||||||||||||||||
Universal life with secondary guarantees | 335 | 265 | 613 | - | - | - | ||||||||||||||||||
Indexed universal life with secondary guarantees | 140 | 99 | 146 | - | - | - | ||||||||||||||||||
Other permanent cash value life insurance | - | 1,328 | 2,676 | - | - | - | ||||||||||||||||||
Variable life | 1,903 | 1,992 | 2,080 | 21,853 | 21,840 | 19,596 | ||||||||||||||||||
Subtotal | $ | 4,927 | $ | 6,256 | $ | 8,254 | $ | 21,853 | $ | 21,840 | $ | 19,596 | ||||||||||||
Not subject to discretionary withdrawal or no cash value: | ||||||||||||||||||||||||
Term policies without cash value | - | - | 299 | - | - | - | ||||||||||||||||||
Accidental death benefits | - | - | 1 | - | - | - | ||||||||||||||||||
Disability - active lives | - | - | 12 | - | - | - | ||||||||||||||||||
Disability - disabled lives | - | - | 57 | - | - | - | ||||||||||||||||||
Miscellaneous reserves | - | - | 36 | - | - | - | ||||||||||||||||||
Total, gross | $ | 4,927 | $ | 6,256 | $ | 8,659 | $ | 21,853 | $ | 21,840 | $ | 19,596 | ||||||||||||
Less: reinsurance ceded | (10 | ) | (10 | ) | (272 | ) | - | - | - | |||||||||||||||
Total, net | $ | 4,917 | $ | 6,246 | $ | 8,387 | $ | 21,853 | $ | 21,840 | $ | 19,596 |
The following table is a reconciliation of life actuarial reserves, as of the dates indicated:
December 31, | ||||||||
(in millions) | 2020 | 2019 | ||||||
Life, accident and health annual statement: | ||||||||
Life Insurance, net | $ | 8,400 | $ | 8,292 | ||||
Accidental death benefits, net | 1 | 1 | ||||||
Disability - active lives, net | 12 | 10 | ||||||
Disability - disabled lives, net | 51 | 52 | ||||||
Miscellaneous reserves, net | 26 | 32 | ||||||
Subtotal | $ | 8,490 | $ | 8,387 | ||||
Separate accounts annual statement: | ||||||||
Life insurance1 | $ | 24,884 | $ | 22,138 | ||||
Miscellaneous reserves | 9 | 5 | ||||||
Subtotal | $ | 24,893 | $ | 22,143 | ||||
Total life actuarial reserves, net | $ | 33,383 | $ | 30,530 |
1 | In 2020, life insurance account value, cash value and reserve includes separate accounts with guarantees of $302 million for universal life. In 2019, life insurance account value, cash value and reserve includes separate accounts with guarantees of $297 million and $2.2 billion for universal life and variable life, respectively. |
F-23
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2020, 2019 and 2018 Statutory Financial Statements
Direct Premium Written by Managing General Agents and Third Party Administrators
The following table summarizes direct premium written by managing general agents and third party administrators as of December 31, 2020:
(in millions) | ||||||||||||||
Managing general agent/ third party reserve | FEIN number | Exclusive contract | Types of written | Types of authority granted1 | Total Direct Premium | |||||||||
Meridian Management Group, LLC | 22-3713596 | Not Exclusive | Accident & health | U / P / B | $ | 42 | ||||||||
RMTS - Manufacturers & Traders Trust Co. | 20-1049240 | Not Exclusive | Accident & health | C / CA / B / P / U | 26 | |||||||||
Fringe Insurance Benefits, Inc. | 74-2616364 | Not Exclusive | Accident & health | B / P / U | 41 | |||||||||
Star Line Group | 04-3499188 | Not Exclusive | Accident & health | C / CA / B / P / U | 7 | |||||||||
AccuRisk Solutions, LLC | 31-1777676 | Not Exclusive | Accident & health | C / CA / B / P /U | 90 | |||||||||
Merchants Benefit Administration, Inc. | 86-0875918 | Exclusive | Accident & health | B / C / CA / P | 14 | |||||||||
Roundstone Management, Ltd. | 27-0371422 | Not Exclusive | Accident & health | C / CA / B / P / U | 75 | |||||||||
Gilsbar, Inc. | 72-0519951 | Not Exclusive | Accident & health | B / P / U | 75 | |||||||||
Matrix | 01-0544915 | Not Exclusive | Accident & health | C / CA / B / P / U | 19 | |||||||||
IRC | 74-2824053 | Not Exclusive | Accident & health | C / CA / B / P / U | 28 | |||||||||
TMS RE Inc | 65-0644164 | Not Exclusive | Accident & health | C / CA / B / P / U | 70 | |||||||||
United Group Programs Inc. | 59-1896277 | Not Exclusive | Accident & health | C / CA / B / P / U | 9 | |||||||||
USMGU | 46-4619917 | Not Exclusive | Accident & health | C / CA / B / P / U | 1 | |||||||||
Total Direct Premiums Written and Produced | $ | 497 |
1 | Authority code key includes: C– claims payment, CA– claims adjustment, B- binding authority, P-premium collection, U- underwriting. |
F-24
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2020, 2019 and 2018 Statutory Financial Statements
(4) | Separate Accounts |
The Company’s separate account statement includes assets legally insulated from the general account as of the dates indicated, attributed to the following product lines:
December 31, 2020 | December 31, 2019 | |||||||||||||||
(in millions) | Separate assets | Separate assets (not legally | Separate assets | Separate assets (not legally | ||||||||||||
Product / Transaction: | ||||||||||||||||
Individual annuities | $ | 71,875 | $ | - | $ | 67,222 | $ | - | ||||||||
Group annuities | 17,550 | - | 16,187 | - | ||||||||||||
Life insurance | 24,982 | - | 22,246 | - | ||||||||||||
Total | $ | 114,407 | $ | - | $ | 105,655 | $ | - |
The following table summarizes amounts paid towards separate account guarantees by the general account and related risk charges paid by the separate account for the years ended:
(in millions) | Total paid toward separate account guarantees | Risk charges paid to general account | ||||||
2020 | $ | 26 | $ | 631 | ||||
2019 | $ | 58 | $ | 612 | ||||
2018 | $ | 18 | $ | 594 | ||||
2017 | $ | 13 | $ | 559 | ||||
2016 | $ | 36 | $ | 507 |
The Company does not engage in securities lending transactions within its separate accounts.
Most separate accounts held by the Company relate to individual and group variable annuity and variable universal life insurance contracts of a non-guaranteed return nature. The net investment experience of the separate accounts is credited directly to the contract holder and can be positive or negative. The individual variable annuity contracts generally provide an incidental death benefit of the greater of account value or premium paid (net of prior withdrawals). However, many individual variable annuity contracts also provide death benefits equal to (i) the most recent fifth-year anniversary account value, (ii) the highest account value on any previous anniversary, (iii) premiums paid increased 5% or certain combinations of these, all adjusted for prior withdrawals. The death benefit and cash value under the variable universal life policies may vary with the investment performance of the underlying investments in the separate accounts. The assets and liabilities of these separate accounts are carried at fair value and are non-guaranteed.
Certain other separate accounts offered by the Company contain groups of variable universal life policies wherein the assets supporting account values on the underlying policies reside in Private Placement Separate Accounts. They provide a quarterly interest rate based on a crediting formula that reflects the market value to book value ratio of the investments, investment portfolio yield and a specified duration.
Certain other separate accounts relate to a guaranteed term option, which provides a guaranteed interest rate that is paid over certain maturity durations ranging from three to ten years, so long as certain conditions are met. If amounts allocated to the guaranteed term option are distributed prior to the maturity period, a market value adjustment can be assessed. The assets and liabilities of these separate accounts are carried at fair value.
Another separate account offered by the Company contains a group of universal life policies wherein the assets supporting the account values on the underlying policies reside in a Private Placement Separate Account. It provides an annual interest rate guarantee, subject to a minimum guarantee of 3%. The interest rate declared each year reflects the anticipated investment experience of the account. The business has been included as a nonindexed guarantee less than or equal to 4%.
F-25
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2020, 2019 and 2018 Statutory Financial Statements
The following tables summarize the separate account reserves of the Company, as of the dates indicated:
(in millions) | Indexed | Nonindexed guarantee less than or equal to 4% | Nonindexed guarantee more than 4% | Nonguaranteed separate accounts | Total | |||||||||||||||
December 31, 2020 | ||||||||||||||||||||
Premiums, considerations or deposits | $ | - | $ | 417 | $ | - | $ | 5,392 | $ | 5,809 | ||||||||||
Reserves | ||||||||||||||||||||
For accounts with assets at: | ||||||||||||||||||||
Fair value | $ | - | $ | 2,480 | $ | 166 | $ | 110,340 | $ | 112,986 | ||||||||||
Amortized cost | - | 302 | - | - | 302 | |||||||||||||||
Total reserves | $ | - | $ | 2,782 | $ | 166 | $ | 110,340 | $ | 113,288 | ||||||||||
By withdrawal characteristics: | ||||||||||||||||||||
With market value adjustment | $ | - | $ | 2,480 | $ | 166 | $ | - | $ | 2,646 | ||||||||||
At book value without market value adjustment and with current surrender charge of 5% or more | - | - | - | - | - | |||||||||||||||
At fair value | - | - | - | 110,252 | 110,252 | |||||||||||||||
At book value without market value adjustment and with current surrender charge less than 5% | - | 302 | - | 11 | 313 | |||||||||||||||
Subtotal | $ | - | $ | 2,782 | $ | 166 | $ | 110,263 | $ | 113,211 | ||||||||||
Not subject to discretionary withdrawal | - | - | - | 77 | 77 | |||||||||||||||
Total reserves1 | $ | - | $ | 2,782 | $ | 166 | $ | 110,340 | $ | 113,288 |
1 | The total reserves balance does not equal the liabilities related to separate accounts of $114.4 billion in the statutory statements of admitted assets, liabilities, capital and surplus by $1.1 billion, due to an adjustment for CARVM/CRVM reserves and other liabilities that have not been allocated to the categories outlined above. |
F-26
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2020, 2019 and 2018 Statutory Financial Statements
Nonindexed | Nonindexed | |||||||||||||||||||
guarantee | guarantee | Nonguaranteed | ||||||||||||||||||
less than or | more than | separate | ||||||||||||||||||
(in millions) | Indexed | equal to 4% | 4% | accounts | Total | |||||||||||||||
December 31, 2019 | ||||||||||||||||||||
Premiums, considerations or deposits | $ | - | $ | 135 | $ | - | $ | 6,007 | $ | 6,142 | ||||||||||
Reserves | ||||||||||||||||||||
For accounts with assets at: | ||||||||||||||||||||
Fair value | $ | - | $ | 2,202 | $ | 146 | $ | 99,612 | $ | 101,960 | ||||||||||
Amortized cost | - | 2,463 | - | - | 2,463 | |||||||||||||||
Total reserves | $ | - | $ | 4,665 | $ | 146 | $ | 99,612 | $ | 104,423 | ||||||||||
By withdrawal characteristics: | ||||||||||||||||||||
With market value adjustment | $ | - | $ | 2,202 | $ | 146 | $ | 29 | $ | 2,377 | ||||||||||
At book value without market value adjustment and with current surrender charge of 5% or more | - | - | - | - | - | |||||||||||||||
At fair value | - | - | - | 99,499 | 99,499 | |||||||||||||||
At book value without market value adjustment and with current surrender charge less than 5% | - | 2,463 | - | 13 | 2,476 | |||||||||||||||
Subtotal | $ | - | $ | 4,665 | $ | 146 | $ | 99,541 | $ | 104,352 | ||||||||||
Not subject to discretionary withdrawal | - | - | - | 71 | 71 | |||||||||||||||
Total reserves1 | $ | - | $ | 4,665 | $ | 146 | $ | 99,612 | $ | 104,423 |
1 | The total reserves balance does not equal the liabilities related to separate accounts of $105.7 billion in the statutory statements of admitted assets, liabilities, capital and surplus by $1.2 billion, due to an adjustment for CARVM/CRVM reserves and other liabilities that have not been allocated to the categories outlined above. |
The following table is a reconciliation of net transfers to (from) separate accounts, as of the dates indicated:
December 31, | ||||||||||||
(in millions) | 2020 | 2019 | 2018 | |||||||||
Transfers as reported in the statutory statements of operations of the separate accounts: | ||||||||||||
Transfers to separate accounts | $ | 5,809 | $ | 6,142 | $ | 6,392 | ||||||
Transfers from separate accounts | (8,921) | (9,470) | (8,461) | |||||||||
Net transfers from separate accounts | $ | (3,112) | $ | (3,328) | $ | (2,069) | ||||||
Reconciling adjustments: | ||||||||||||
Exchange accounts offsetting in the general account | (337) | (321) | (303) | |||||||||
Fees not included in general account transfers | (67) | (68) | (58) | |||||||||
Other miscellaneous adjustments not included in the general account balance | (28) | (30) | (38) | |||||||||
Transfers as reported in the statutory statements of operations | $ | (3,544) | $ | (3,747) | $ | (2,468) |
F-27
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2020, 2019 and 2018 Statutory Financial Statements
(5) | Investments |
Bonds and Stocks
The following table summarizes the carrying value, the excess of fair value over carrying value, the excess of carrying value over fair value and the fair value of bonds and stocks, as of the dates indicated:
(in millions) | Carrying value | Fair value in excess of carrying value | Carrying value in excess of fair value | Fair value | ||||||||||||
December 31, 2020 | ||||||||||||||||
Bonds: | ||||||||||||||||
U.S. Government | $ | 7 | $ | - | $ | - | $ | 7 | ||||||||
States, territories and possessions | 370 | 59 | - | 429 | ||||||||||||
Political subdivisions | 343 | 71 | - | 414 | ||||||||||||
Special revenues | 2,763 | 564 | - | 3,327 | ||||||||||||
Industrial and miscellaneous | 26,583 | 3,656 | 46 | 30,193 | ||||||||||||
Loan-backed and structured securities | 7,141 | 336 | 37 | 7,440 | ||||||||||||
Total bonds | $ | 37,207 | $ | 4,686 | $ | 83 | $ | 41,810 | ||||||||
Common stocks unaffiliated | $ | 142 | $ | - | $ | - | $ | 142 | ||||||||
Preferred stocks unaffiliated | 97 | 12 | - | 109 | ||||||||||||
Total unaffiliated stocks1 | $ | 239 | $ | 12 | $ | - | $ | 251 | ||||||||
Total bonds and unaffiliated stocks1 | $ | 37,446 | $ | 4,698 | $ | 83 | $ | 42,061 | ||||||||
December 31, 2019 | ||||||||||||||||
Bonds: | ||||||||||||||||
U.S. Government | $ | 7 | $ | - | $ | - | $ | 7 | ||||||||
States, territories and possessions | 398 | 42 | 1 | 439 | ||||||||||||
Political subdivisions | 344 | 52 | 1 | 395 | ||||||||||||
Special revenues | 2,702 | 370 | 5 | 3,067 | ||||||||||||
Industrial and miscellaneous | 26,240 | 2,012 | 65 | 28,187 | ||||||||||||
Loan-backed and structured securities | 5,433 | 238 | 31 | 5,640 | ||||||||||||
Total bonds | $ | 35,124 | $ | 2,714 | $ | 103 | $ | 37,735 | ||||||||
Common stocks unaffiliated | $ | 181 | $ | - | $ | - | $ | 181 | ||||||||
Preferred stocks unaffiliated | 55 | 4 | - | 59 | ||||||||||||
Total unaffiliated stocks1 | $ | 236 | $ | 4 | $ | - | $ | 240 | ||||||||
Total bonds and unaffiliated stocks1 | $ | 35,360 | $ | 2,718 | $ | 103 | $ | 37,975 |
1 | Excludes affiliated common stocks with a carrying value of $2.6 billion and $2.4 billion as of December 31, 2020 and 2019, respectively. Affiliated common stocks includes investment in NLAIC and JNF of $2.4 billion and $180 million as of December 31, 2020, respectively, and $2.2 billion and $169 million as of December 31, 2019, respectively. |
The carrying value of bonds on deposit with various states as required by law or special escrow agreement was $3 million as of December 31, 2020 and 2019.
F-28
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2020, 2019 and 2018 Statutory Financial Statements
The following table summarizes the carrying value and fair value of bonds, by contractual maturity, as of December 31, 2020. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without early redemption penalties:
(in millions) | Carrying value | Fair value | ||||||
Bonds: | ||||||||
Due in one year or less | $ | 1,314 | $ | 1,331 | ||||
Due after one year through five years | 7,925 | 8,441 | ||||||
Due after five years through ten years | 9,450 | 10,557 | ||||||
Due after ten years | 11,377 | 14,041 | ||||||
Total bonds excluding loan-backed and structured securities | $ | 30,066 | $ | 34,370 | ||||
Loan-backed and structured securities | 7,141 | 7,440 | ||||||
Total bonds | $ | 37,207 | $ | 41,810 |
The following table summarizes the fair value and unrealized losses on bonds and stocks (amount by which cost or amortized cost exceeds fair value), for which other-than-temporary declines in value have not been recognized, based on the amount of time each type of bond or stock has been in an unrealized loss position, as of the dates indicated:
Less than or equal to one year | More than one year | Total | ||||||||||||||||||||||
(in millions) | Fair value | Unrealized losses | Fair value | Unrealized losses | Fair value | Unrealized losses | ||||||||||||||||||
December 31, 2020 | ||||||||||||||||||||||||
Bonds: | ||||||||||||||||||||||||
States, territories and possessions | $ | 1 | $ | - | $ | - | $ | - | $ | 1 | $ | - | ||||||||||||
Special revenues | 14 | - | - | - | 14 | - | ||||||||||||||||||
Industrial and miscellaneous | 636 | 27 | 408 | 38 | 1,044 | 65 | ||||||||||||||||||
Loan-backed and structured securities | 1,454 | 15 | 870 | 23 | 2,324 | 38 | ||||||||||||||||||
Total bonds | $ | 2,105 | $ | 42 | $ | 1,278 | $ | 61 | $ | 3,383 | $ | 103 | ||||||||||||
Common stocks unaffiliated | 21 | 4 | - | - | 21 | 4 | ||||||||||||||||||
Preferred stocks unaffiliated | 9 | - | - | - | 9 | - | ||||||||||||||||||
Total bonds and stocks | $ | 2,135 | $ | 46 | $ | 1,278 | $ | 61 | $ | 3,413 | $ | 107 | ||||||||||||
December 31, 2019 | ||||||||||||||||||||||||
Bonds: | ||||||||||||||||||||||||
States, territories and possessions | $ | 23 | $ | 1 | $ | - | $ | - | $ | 23 | $ | 1 | ||||||||||||
Political subdivisions | 65 | 1 | - | - | 65 | 1 | ||||||||||||||||||
Special revenues | 397 | 5 | - | - | 397 | 5 | ||||||||||||||||||
Industrial and miscellaneous | 852 | 9 | 911 | 103 | 1,763 | 112 | ||||||||||||||||||
Loan-backed and structured securities | 704 | 6 | 1,124 | 28 | 1,828 | 34 | ||||||||||||||||||
Total bonds | $ | 2,041 | $ | 22 | $ | 2,035 | $ | 131 | $ | 4,076 | $ | 153 | ||||||||||||
Common stocks unaffiliated | 32 | - | 16 | 1 | 48 | 1 | ||||||||||||||||||
Preferred stocks unaffiliated | 1 | - | - | - | 1 | - | ||||||||||||||||||
Total bonds and stocks | $ | 2,074 | $ | 22 | $ | 2,051 | $ | 132 | $ | 4,125 | $ | 154 |
As of December 31, 2020, management evaluated securities in an unrealized loss position and all non-marketable securities for impairment. As of the reporting date, the Company has the intent and ability to hold these securities until the fair value recovers, which may be maturity, and therefore, does not consider the securities to be other-than-temporarily impaired.
There was no intent to sell other-than-temporary impairments on loan-backed and structured securities for the years ended December 31, 2020 and 2019.
F-29
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2020, 2019 and 2018 Statutory Financial Statements
Mortgage Loans, Net of Allowance
The following table summarizes the amortized cost of mortgage loans by method of evaluation for credit loss, and the related valuation allowances by type of credit loss, as of the dates indicated:
December 31, | ||||||||
(in millions) | 2020 | 2019 | ||||||
Amortized cost: | ||||||||
Loans with non-specific reserves | $ | 7,819 | $ | 7,675 | ||||
Loans with specific reserves | 12 | 14 | ||||||
Total amortized cost | $ | 7,831 | $ | 7,689 | ||||
Valuation allowance: | ||||||||
Non-specific reserves | $ | 45 | $ | 31 | ||||
Specific reserves | 3 | 3 | ||||||
Total valuation allowance1 | $ | 48 | $ | 34 | ||||
Mortgage loans, net of allowance | $ | 7,783 | $ | 7,655 |
1 | Changes in the valuation allowance are due to current period provisions. These changes in the valuation allowance for the years ended December 31, 2020, 2019, and 2018 were immaterial. |
As of December 31, 2020 and 2019, the Company’s mortgage loans classified as delinquent and/or in non-accrual status were immaterial in relation to the total mortgage loan portfolio.
The following table summarizes the LTV ratio and DSC ratio of the mortgage loan portfolio as of the dates indicated:
LTV ratio | DSC ratio | |||||||||||||||||||||||||||||||
(in millions) | Less than 90% | 90% or greater | Total | Greater than 1.00 | Less than or equal to 1.00 | Total | ||||||||||||||||||||||||||
December 31, 2020 | ||||||||||||||||||||||||||||||||
Apartment | $ | 2,988 | $ | 25 | $ | 3,013 | $ | 2,993 | $ | 20 | $ | 3,013 | ||||||||||||||||||||
Industrial | 1,026 | - | 1,026 | 1,005 | 21 | 1,026 | ||||||||||||||||||||||||||
Office | 1,307 | - | 1,307 | 1,304 | 3 | 1,307 | ||||||||||||||||||||||||||
Retail | 2,155 | 27 | 2,182 | 2,169 | 13 | 2,182 | ||||||||||||||||||||||||||
Other | 218 | - | 218 | 218 | - | 218 | ||||||||||||||||||||||||||
Total1 | $ | 7,694 | $ | 52 | $ | 7,746 | $ | 7,689 | $ | 57 | $ | 7,746 | ||||||||||||||||||||
Weighted average DSC ratio | 2.21 | 1.52 | 2.20 | 2.21 | 0.91 | 2.20 | ||||||||||||||||||||||||||
Weighted average LTV ratio | 57 | % | 98 | % | 57 | % | 57 | % | 65 | % | 57% | |||||||||||||||||||||
December 31, 2019 | ||||||||||||||||||||||||||||||||
Apartment | $ | 2,906 | $ | 124 | $ | 3,030 | $ | 3,018 | $ | 12 | $ | 3,030 | ||||||||||||||||||||
Industrial | 906 | - | 906 | 905 | 1 | 906 | ||||||||||||||||||||||||||
Office | 1,306 | - | 1,306 | 1,291 | 15 | 1,306 | ||||||||||||||||||||||||||
Retail | 2,162 | 9 | 2,171 | 2,151 | 20 | 2,171 | ||||||||||||||||||||||||||
Other | 205 | - | 205 | 205 | - | 205 | ||||||||||||||||||||||||||
Total1 | $ | 7,485 | $ | 133 | $ | 7,618 | $ | 7,570 | $ | 48 | $ | 7,618 | ||||||||||||||||||||
Weighted average DSC ratio | 2.13 | 1.19 | 2.11 | 2.12 | 0.90 | 2.11 | ||||||||||||||||||||||||||
Weighted average LTV ratio | 54 | % | 95 | % | 54 | % | 54 | % | 72 | % | 54% |
1 | Excludes $85 million and $71 million of commercial mortgage loans that were under development as of December 31, 2020 and 2019, respectively. |
As of December 31, 2020 and 2019, the Company has a diversified mortgage loan portfolio with no more than 24% and 23%, respectively, in a geographic region in the U.S. and no more than 1% with any one borrower. The maximum and minimum lending rates for mortgage loans originated or acquired during 2020 were 4.3% and 1.9%, respectively, and for those originated or acquired during 2019 were 12.0% and 3.1%, respectively. As of December 31, 2020 and 2019, the maximum LTV ratio of any one loan at the time of loan origination was 80% and 82%, respectively. As of December 31, 2020 and 2019, the Company did not hold mortgage loans with interest 90 days or more past due. Additionally, there were no taxes, assessments or any amounts advanced and not included in the mortgage loan portfolio.
F-30
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2020, 2019 and 2018 Statutory Financial Statements
Securities Lending
The fair value of loaned securities was $244 million and $306 million as of December 31, 2020 and 2019, respectively. The Company held $101 million and $132 million of cash collateral on securities lending as of December 31, 2020 and 2019, respectively. As of December 31, 2020, the carrying value and fair value of reinvested collateral assets was $101 million. As of December 31, 2019, the carrying value and fair value of reinvested collateral assets was $133 million. The fair value of bonds acquired with reinvested collateral assets was $103 million and $134 million as of December 31, 2020 and 2019, respectively. There are no securities lending transactions that extend beyond one year as of the reporting date. The Company received $148 million and $180 million of non-cash collateral on securities lending as of December 31, 2020 and 2019, respectively.
Net Investment Income
The following table summarizes net investment income by investment type, for the years ended:
December 31, | ||||||||||||
(in millions) | 2020 | 2019 | 2018 | |||||||||
Bonds | $ | 1,419 | $ | 1,408 | $ | 1,378 | ||||||
Mortgage loans | 339 | 353 | 335 | |||||||||
Other invested assets | 384 | 225 | 228 | |||||||||
Policy loans | 43 | 45 | 54 | |||||||||
Other | 41 | 51 | 41 | |||||||||
Gross investment income | $ | 2,226 | $ | 2,082 | $ | 2,036 | ||||||
Investment expenses | (119) | (108) | (109) | |||||||||
Net investment income | $ | 2,107 | $ | 1,974 | $ | 1,927 |
There was no investment income due and accrued that was nonadmitted as of December 31, 2020 and 2019.
Net Realized Capital Gains and Losses
The following table summarizes net realized capital gains and losses for the years ended:
December 31, | ||||||||||||
(in millions) | 2020 | 2019 | 2018 | |||||||||
Gross gains on sales | $ | 36 | $ | 71 | $ | 22 | ||||||
Gross losses on sales | (42) | (21) | (16) | |||||||||
Net realized (losses) gains on sales | $ | (6) | $ | 50 | $ | 6 | ||||||
Net realized derivative losses | (521) | (515) | (226) | |||||||||
Other-than-temporary impairments | (78) | (5) | (8) | |||||||||
Total net realized losses on sales | $ | (605) | $ | (470) | $ | (228) | ||||||
Tax (benefit) expense on net losses | (26) | 7 | 8 | |||||||||
Net realized capital losses, net of tax | $ | (579) | $ | (477) | $ | (236) | ||||||
Less: Realized losses transferred to the IMR | (4) | - | (1) | |||||||||
Net realized capital losses, net of tax and transfers to the IMR | $ | (575) | $ | (477) | $ | (235) |
For the year ended December 31, 2020, gross realized gains and gross realized losses on sales of bonds were $26 million and $38 million, respectively. For the year ended December 31, 2019, gross realized gains and gross realized losses on sales of bonds were $56 million and $19 million, respectively. For the year ended December 31, 2018, gross realized gains and gross realized losses on sales of bonds were $15 million and $13 million, respectively.
The Company did not enter into any material repurchase transactions that would be considered wash sales during the years ended December 31, 2020 and 2019.
Investment Commitments
The Company had unfunded commitments related to its investment in limited partnerships and limited liability companies totaling $483 million and $496 million as of December 31, 2020 and 2019, respectively. As of December 31, 2020 and 2019, there were $21 million and $45 million of commitments to purchase private placement bonds and $114 million and $147 million of outstanding commitments to fund mortgage loans, respectively.
F-31
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2020, 2019 and 2018 Statutory Financial Statements
(6) | Derivative Instruments |
The Company is exposed to certain risks related to its ongoing business operations which are managed using derivative instruments.
Interest rate risk management. In the normal course of business, the Company enters into transactions that expose it to interest rate risk arising from mismatches between assets and liabilities. The Company may use interest rate swaps and futures to reduce or alter interest rate exposure.
Interest rate contracts are used by the Company in association with fixed and variable rate investments to achieve cash flow streams that support certain financial obligations of the Company and to produce desired investment returns. As such, interest rate contracts are generally used to convert fixed rate cash flow streams to variable rate cash flow streams or vice versa.
Equity market risk management. The Company issues a variety of insurance products that expose it to equity risks. To mitigate these risks, the Company enters into a variety of derivatives including equity index futures and options.
Other risk management. As part of its regular investing activities, the Company may purchase foreign currency denominated investments. These investments and the associated income expose the Company to volatility associated with movements in foreign exchange rates. As foreign exchange rates change, the increase or decrease in the cash flows of the derivative instrument are intended to mitigate the changes in the functional-currency equivalent cash flows of the hedged item. To mitigate this risk, the Company uses cross-currency swaps.
Credit risk associated with derivatives transactions. The Company periodically evaluates the risks within the derivative portfolios due to credit exposure. When evaluating this risk, the Company considers several factors which include, but are not limited to, the counterparty credit risk associated with derivative receivables, the Company’s own credit as it relates to derivative payables, the collateral thresholds associated with each counterparty and changes in relevant market data in order to gain insight into the probability of default by the counterparty. The Company also considers the impact credit exposure could have on the effectiveness of the Company’s hedging relationships. As of December 31, 2020 and 2019, the impact of the exposure to credit risk on the fair value measurement of derivatives and the effectiveness of the Company’s hedging relationships was immaterial.
The following table summarizes the fair value, carrying value and related notional amounts of derivative instruments, as of the dates indicated:
(in millions) | Notional amount | Net Carrying Value | Fair value asset | Fair value liability | Average fair value | |||||||||||||||
December 31, 2020 | ||||||||||||||||||||
Interest rate swaps | $ | 7 | $ | (1) | $ | - | $ | (1) | $ | (1) | ||||||||||
Options | - | - | - | - | - | |||||||||||||||
Cross currency swaps | 1,524 | (36) | 75 | (49) | - | |||||||||||||||
Futures | 3,342 | - | - | - | - | |||||||||||||||
Total | $ | 4,873 | $ | (37) | $ | 75 | $ | (50) | $ | (1) | ||||||||||
December 31, 2019 | ||||||||||||||||||||
Interest rate swaps | $ | 7 | $ | (1) | $ | - | $ | (1) | $ | - | ||||||||||
Options | 202 | 6 | 6 | - | 1 | |||||||||||||||
Cross currency swaps | 1,537 | 66 | 99 | (19) | 1 | |||||||||||||||
Futures | 3,153 | - | - | - | - | |||||||||||||||
Total | $ | 4,899 | $ | 71 | $ | 105 | $ | (20) | $ | 2 |
Of the $75 million and $105 million of fair value of derivative assets as of December 31, 2020 and 2019, $24 million and $14 million were subject to master netting agreements as of December 31, 2020 and 2019, the Company received $35 million and $68 million of cash collateral and $22 million and $45 million in pledged securities, respectively, resulting in an immaterial uncollateralized position as of December 31, 2020 and 2019. Of the $50 million and $20 million of fair value of derivative liabilities as of December 31, 2020 and 2019, $24 million and $14 million were subject to master netting agreements as of December 31, 2020 and 2019, the Company posted $28 million and $3 million of cash collateral, respectively, resulting in an immaterial uncollateralized position as of December 31, 2020 and 2019. Securities received as collateral are recorded off-balance sheet and exclude initial margin posted on derivatives of $280 million and $128 million as of December 31, 2020 and 2019, respectively.
F-32
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2020, 2019 and 2018 Statutory Financial Statements
The following table summarizes net gains and losses on derivatives programs by type of derivative instrument, as of the dates indicated:
Net realized (losses) gains recorded in operations | Unrealized (losses) gains recorded in capital and surplus | |||||||||||||||||||||||
December 31, | December 31, | |||||||||||||||||||||||
(in millions) | 2020 | 2019 | 2018 | 2020 | 2019 | 2018 | ||||||||||||||||||
Interest rate swaps | $ | - | $ | - | $ | (5) | $ | - | $ | - | $ | 35 | ||||||||||||
Options | - | 3 | (313) | (1) | 4 | 244 | ||||||||||||||||||
Cross currency swaps | 4 | (1) | - | (102) | (13) | 65 | ||||||||||||||||||
Futures | (525) | (517) | 92 | 1 | (169) | 132 | ||||||||||||||||||
Total | $ | (521) | $ | (515) | $ | (226) | $ | (102) | $ | (178) | $ | 476 |
(7) | Fair Value Measurements |
The following table summarizes assets and liabilities held at fair value as of December 31, 2020:
(in millions) | Level 1 | Level 2 | Level 3 | Net Asset Value (NAV) | Total | |||||||||||||||
Assets | ||||||||||||||||||||
Bonds | $ | - | $ | 4 | $ | 1 | $ | - | $ | 5 | ||||||||||
Common stocks unaffiliated | 53 | 88 | 1 | - | 142 | |||||||||||||||
Separate account assets | 109,265 | 2,047 | 58 | 2,720 | 114,090 | |||||||||||||||
Assets at fair value | $ | 109,318 | $ | 2,139 | $ | 60 | $ | 2,720 | $ | 114,237 | ||||||||||
Liabilities | ||||||||||||||||||||
Derivative liabilities | $ | - | $ | 1 | $ | - | $ | - | $ | 1 | ||||||||||
Liabilities at fair value | $ | - | $ | 1 | $ | - | $ | - | $ | 1 |
The following table presents the rollforward of Level 3 assets and liabilities held at fair value during the year ended December 31, 2020:
(in millions) | Bonds | Common stocks | Derivative assets1 | Separate account assets | Assets at fair | |||||||||||||||
Balance as of December 31, 2019 | $ | 6 | $ | 1 | $ | 6 | $ | 87 | $ | 100 | ||||||||||
Net gains (losses): | ||||||||||||||||||||
In operations | (2) | - | - | - | (2) | |||||||||||||||
In surplus | 5 | - | (1) | (17) | (13) | |||||||||||||||
Purchases | 2 | - | - | - | 2 | |||||||||||||||
Sales | (9) | - | (5) | (12) | (26) | |||||||||||||||
Transfers into Level 3 | 1 | - | - | - | 1 | |||||||||||||||
Transfers out of Level 3 | (2) | - | - | - | (2) | |||||||||||||||
Balance as of December 31, 2020 | $ | 1 | $ | 1 | $ | - | $ | 58 | $ | 60 |
1 | Non-binding broker quotes are utilized to determine fair value of all Level 3 derivative assets. |
Bonds transfers into and/or out of Level 3 during the year ended December 31, 2020 are due to the changes in observability of pricing inputs and changes resulting from application of the lower of amortized cost or fair value rules based on the security’s NAIC designation.
F-33
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2020, 2019 and 2018 Statutory Financial Statements
The following table summarizes assets and liabilities held at fair value as of December 31, 2019:
(in millions) | Level 1 | Level 2 | Level 3 | Net Asset Value (NAV) | Total | |||||||||||||||
Assets | ||||||||||||||||||||
Bonds | $ | - | $ | 3 | $ | 6 | $ | - | $ | 9 | ||||||||||
Common stocks unaffiliated | 68 | 112 | 1 | - | 181 | |||||||||||||||
Derivative assets | - | - | 6 | - | 6 | |||||||||||||||
Separate account assets | 101,312 | 1,857 | 87 | 2,091 | 105,347 | |||||||||||||||
Assets at fair value | $ | 101,380 | $ | 1,972 | $ | 100 | $ | 2,091 | $ | 105,543 | ||||||||||
Liabilities | ||||||||||||||||||||
Derivative liabilities | $ | - | $ | 1 | $ | - | $ | - | $ | 1 | ||||||||||
Liabilities at fair value | $ | - | $ | 1 | $ | - | $ | - | $ | 1 |
The following table presents the rollforward of Level 3 assets and liabilities held at fair value during the year ended December 31, 2019:
(in millions) | Bonds | Common stocks | Derivative assets1 | Separate account assets | Assets at fair value | |||||||||||||||
Balance as of December 31, 2018 | $ | 8 | $ | 1 | $ | 2 | $ | 80 | $ | 91 | ||||||||||
Net gains (losses): | ||||||||||||||||||||
In operations | - | - | 3 | - | 3 | |||||||||||||||
In surplus | (4) | - | 4 | 7 | 7 | |||||||||||||||
Purchases | 3 | - | 6 | - | 9 | |||||||||||||||
Sales | (5) | - | (9) | - | (14) | |||||||||||||||
Transfers into Level 3 | 24 | - | - | - | 24 | |||||||||||||||
Transfers out of Level 3 | (20) | - | - | - | (20) | |||||||||||||||
Balance as of December 31, 2019 | $ | 6 | $ | 1 | $ | 6 | $ | 87 | 100 |
1 | Non-binding broker quotes are utilized to determine fair value of all Level 3 derivative assets. |
Bond transfers into and/or out of Level 3 during the year ended December 31, 2019 are due to the changes in observability of pricing inputs and changes resulting from application of the lower of amortized cost or fair value rules based on the security’s NAIC designation.
F-34
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2020, 2019 and 2018 Statutory Financial Statements
The following table summarizes the carrying value and fair value of the Company’s assets and liabilities not held at fair value as of the dates indicated. The valuation techniques used to estimate these fair values are described below or in Note 2.
Fair Value | ||||||||||||||||||||
(in millions) | Level 1 | Level 2 | Level 3 | Total fair value | Carrying value | |||||||||||||||
December 31, 2020 | ||||||||||||||||||||
Assets: | ||||||||||||||||||||
Bonds1 | $ | 1,366 | $ | 39,072 | $ | 1,367 | $ | 41,805 | $ | 37,202 | ||||||||||
Preferred stocks unaffiliated | - | 104 | 5 | 109 | 97 | |||||||||||||||
Mortgage loans, net of allowance | - | - | 7,952 | 7,952 | 7,783 | |||||||||||||||
Policy loans | - | - | 888 | 888 | 888 | |||||||||||||||
Derivative assets | - | 75 | - | 75 | 51 | |||||||||||||||
Cash, cash equivalents and short-term investments | (90 | ) | 551 | - | 461 | 461 | ||||||||||||||
Securities lending collateral assets | 101 | - | - | 101 | 101 | |||||||||||||||
Separate account assets | 7 | 368 | - | 375 | 317 | |||||||||||||||
Total assets | $ | 1,384 | $ | 40,170 | $ | 10,212 | $ | 51,766 | $ | 46,900 | ||||||||||
Liabilities: | ||||||||||||||||||||
Investment contracts | $ | - | $ | - | $ | 1,249 | $ | 1,249 | $ | 2,076 | ||||||||||
Derivative liabilities | - | 48 | - | 48 | 86 | |||||||||||||||
Total liabilities | $ | - | $ | 48 | $ | 1,249 | $ | 1,297 | $ | 2,162 | ||||||||||
December 31, 2019 | ||||||||||||||||||||
Assets: | ||||||||||||||||||||
Bonds1 | $ | 1,494 | $ | 35,302 | $ | 930 | $ | 37,726 | $ | 35,115 | ||||||||||
Preferred stocks unaffiliated | - | 59 | - | 59 | 55 | |||||||||||||||
Mortgage loans, net of allowance | - | - | 7,856 | 7,856 | 7,655 | |||||||||||||||
Policy loans | - | - | 903 | 903 | 903 | |||||||||||||||
Derivative assets | - | 99 | - | 99 | 88 | |||||||||||||||
Short-term investments | 7 | 615 | - | 622 | 622 | |||||||||||||||
Securities lending collateral assets | 132 | - | - | 132 | 132 | |||||||||||||||
Separate account assets | 3 | 334 | - | 337 | 308 | |||||||||||||||
Total assets | $ | 1,636 | $ | 36,409 | $ | 9,689 | $ | 47,734 | $ | 44,878 | ||||||||||
Liabilities: | ||||||||||||||||||||
Investment contracts² | $ | - | $ | - | $ | 953 | $ | 953 | $ | 1,801 | ||||||||||
Derivative liabilities | - | 19 | - | 19 | 22 | |||||||||||||||
Total liabilities | $ | - | $ | 19 | $ | 953 | $ | 972 | $ | 1,823 |
1 | Level 3 is primarily composed of industrial and miscellaneous bonds. |
2 | Prior period balances updated to conform to current period presentation. |
Mortgage loans, net of allowance. The fair values of mortgage loans are estimated using discounted cash flow analyses based on interest rates currently being offered for similar loans to borrowers with similar credit ratings.
Policy loans. The carrying amount reported in the statutory statements of admitted assets, liabilities, capital and surplus approximates fair value as policy loans are fully collateralized by the cash surrender value of underlying insurance policies.
Securities lending collateral assets. These assets are comprised of bonds and short-term investments and the respective fair values are estimated based on the fair value methods described in Note 2.
F-35
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2020, 2019 and 2018 Statutory Financial Statements
Investment contracts. For investment contracts without defined maturities, fair value is the amount payable on demand, net of surrender charges. For investment contracts with known or determined maturities, fair value is estimated using discounted cash flow analysis. Interest rates used in this analysis are similar to currently offered contracts with maturities consistent with those remaining for the contracts being valued. The fair value of adjustable rate contracts approximates their carrying value.
(8) | Federal Income Taxes |
The following tables summarize the net admitted deferred tax assets, as of the dates indicated:
December 31, 2020 | ||||||||||||
(in millions) | Ordinary | Capital | Total | |||||||||
Total gross deferred tax assets | $ | 770 | $ | 16 | $ | 786 | ||||||
Statutory valuation allowance adjustment | - | - | - | |||||||||
Adjusted gross deferred tax assets | $ | 770 | $ | 16 | $ | 786 | ||||||
Less: Deferred tax assets nonadmitted | (41 | ) | - | (41) | ||||||||
Net admitted deferred tax assets | $ | 729 | $ | 16 | $ | 745 | ||||||
Less: Deferred tax liabilities | (94 | ) | (9 | ) | (103) | |||||||
Net admitted deferred tax assets | $ | 635 | $ | 7 | $ | 642 | ||||||
December 31, 2019 | ||||||||||||
(in millions) | Ordinary | Capital | Total | |||||||||
Total gross deferred tax assets | $ | 730 | $ | 44 | $ | 774 | ||||||
Statutory valuation allowance adjustment | - | - | - | |||||||||
Adjusted gross deferred tax assets | $ | 730 | $ | 44 | $ | 774 | ||||||
Less: Deferred tax assets nonadmitted | (13 | ) | (24 | ) | (37) | |||||||
Net admitted deferred tax assets | $ | 717 | $ | 20 | $ | 737 | ||||||
Less: Deferred tax liabilities | (134 | ) | (2 | ) | (136) | |||||||
Net admitted deferred tax assets | $ | 583 | $ | 18 | $ | 601 |
The following table summarizes components of the change in deferred income taxes reported in capital and surplus before consideration of nonadmitted assets and changes from the prior year, as of the dates indicated:
December 31, | ||||||||||||
(in millions) | 2020 | 2019 | Change | |||||||||
Adjusted gross deferred tax assets | $ | 786 | $ | 774 | $ | 12 | ||||||
Total deferred tax liabilities | (103 | ) | (136 | ) | 33 | |||||||
Net deferred tax assets | $ | 683 | $ | 638 | $ | 45 | ||||||
Less: Tax effect of unrealized gains | 3 | |||||||||||
Change in deferred income tax | $ | 42 |
F-36
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2020, 2019 and 2018 Statutory Financial Statements
The following tables summarize components of the admitted deferred tax assets calculation, as of the dates indicated:
December 31, 2020 | ||||||||||||
(in millions) | Ordinary | Capital | Total | |||||||||
Federal income taxes recoverable through loss carryback | $ | - | $ | 7 | $ | 7 | ||||||
Adjusted gross deferred tax assets expected to be realized1 | 633 | 2 | 635 | |||||||||
Adjusted gross deferred tax assets offset against existing gross deferred tax liabilities | 96 | 7 | 103 | |||||||||
Admitted deferred tax assets | $ | 729 | $ | 16 | $ | 745 |
December 31, 2019 | ||||||||||||
(in millions) | Ordinary | Capital | Total | |||||||||
Federal income taxes recoverable through loss carryback | $ | - | $ | 6 | $ | 6 | ||||||
Adjusted gross deferred tax assets expected to be realized1 | 583 | 12 | 595 | |||||||||
Adjusted gross deferred tax assets offset against existing gross deferred tax liabilities | 134 | 2 | 136 | |||||||||
Admitted deferred tax assets | $ | 717 | $ | 20 | $ | 737 |
1 | Note that this amount is calculated as the lesser of the adjusted gross deferred tax assets expected to be realized following the balance sheet due date or the adjusted gross deferred tax assets allowed per the limitation threshold. For the years ended December 31, 2020 and 2019, the threshold limitation for adjusted capital and surplus was $1.3 billion and $1.2 billion, respectively. |
The adjusted capital and surplus used to determine the recovery period and adjusted gross deferred tax assets allowed per the limitation threshold was $8.4 billion and $8.1 billion as of December 31, 2020 and 2019, respectively. The ratio percentage used to determine the recovery period and adjusted gross deferred tax assets allowed per the limitation threshold was 1,176% and 1,296% as of December 31, 2020 and 2019, respectively.
The following tables summarize the impact of tax planning strategies, as of the dates indicated:
December 31, 2020 | ||||||||||||
Ordinary | Capital | Total | ||||||||||
Adjusted gross deferred tax assets | 0.00 | % | 0.00 | % | 0.00 | % | ||||||
Net admitted adjusted gross deferred tax assets | 32.64 | % | 0.00 | % | 32.64 | % |
December 31, 2019 | ||||||||||||
Ordinary | Capital | Total | ||||||||||
Adjusted gross deferred tax assets | 0.00 | % | 0.00 | % | 0.00 | % | ||||||
Net admitted adjusted gross deferred tax assets | 35.23 | % | 0.00 | % | 35.23 | % |
The Company’s tax planning strategies included the use of affiliated reinsurance for the years ended December 31, 2020 and 2019.
There are no temporary differences for which deferred tax liabilities are not recognized for the years ended December 31, 2020 and 2019.
F-37
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2020, 2019 and 2018 Statutory Financial Statements
The following table summarizes the tax effects of temporary differences and the change from the prior year, for the years ended:
December 31, | ||||||||||||
(in millions) | 2020 | 2019 | Change | |||||||||
Deferred tax assets | ||||||||||||
Ordinary: | ||||||||||||
Future policy benefits and claims | $ | 108 | $ | 108 | $ | - | ||||||
Investments | 116 | 88 | 28 | |||||||||
Deferred acquisition costs | 202 | 201 | 1 | |||||||||
Policyholders’ dividends accumulation | 5 | 5 | - | |||||||||
Compensation and benefits accrual | 10 | 10 | - | |||||||||
Tax credit carry-forward | 316 | 303 | 13 | |||||||||
Other | 13 | 15 | (2 | ) | ||||||||
Subtotal | $ | 770 | $ | 730 | $ | 40 | ||||||
Nonadmitted | (41 | ) | (13 | ) | (28 | ) | ||||||
Admitted ordinary deferred tax assets | $ | 729 | $ | 717 | $ | 12 | ||||||
Capital: | ||||||||||||
Investments | 16 | 44 | (28 | ) | ||||||||
Subtotal | $ | 16 | $ | 44 | $ | (28 | ) | |||||
Nonadmitted | - | (24 | ) | 24 | ||||||||
Admitted capital deferred tax assets | $ | 16 | $ | 20 | $ | (4 | ) | |||||
Admitted deferred tax assets | $ | 745 | $ | 737 | $ | 8 | ||||||
Deferred tax liabilities | ||||||||||||
Ordinary: | ||||||||||||
Investments | $ | (2 | ) | $ | (26 | ) | $ | 24 | ||||
Deferred and uncollected premium | (6 | ) | (6 | ) | - | |||||||
Future policy benefits and claims | (57 | ) | (58 | ) | 1 | |||||||
Deferred acquisition costs | (28 | ) | (43 | ) | 15 | |||||||
Other | (1 | ) | (1 | ) | - | |||||||
Subtotal | $ | (94 | ) | $ | (134 | ) | $ | 40 | ||||
Capital: | ||||||||||||
Investments | (9 | ) | (2 | ) | (7 | ) | ||||||
Subtotal | $ | (9 | ) | $ | (2 | ) | $ | (7 | ) | |||
Deferred tax liabilities | $ | (103 | ) | $ | (136 | ) | $ | 33 | ||||
Net deferred tax assets | $ | 642 | $ | 601 | $ | 41 |
In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion of the total deferred tax assets will not be realized. Valuation allowances are established when necessary to reduce the deferred tax assets to amounts expected to be realized. Based on the Company’s analysis, it is more likely than not that the results of future operations and the implementation of tax planning strategies will generate sufficient taxable income to enable the Company to realize all deferred tax assets. Therefore, no valuation allowances have been established as of December 31, 2020 and 2019.
F-38
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2020, 2019 and 2018 Statutory Financial Statements
The following table summarizes the Company’s income tax incurred and change in deferred income tax. The total income tax and change in deferred income tax differs from the amount obtained by applying the federal statutory rate to income (loss) before tax as follows, for the years ended:
December 31, | ||||||||||||
(in millions) | 2020 | 2019 | 2018 | |||||||||
Current income tax (benefit) expense | $ | (22 | ) | $ | (66 | ) | $ | 73 | ||||
Change in deferred income tax (without tax on unrealized gains and losses) | (41 | ) | 29 | (72 | ) | |||||||
Total income tax (benefit) expense reported | $ | (63 | ) | $ | (37 | ) | $ | 1 | ||||
Income before income and capital gains taxes | $ | 465 | $ | 563 | $ | 783 | ||||||
Federal statutory tax rate | 21 | % | 21 | % | 21 | % | ||||||
Expected income tax expense at statutory tax rate | $ | 98 | $ | 118 | $ | 164 | ||||||
Decrease in actual tax reported resulting from: | ||||||||||||
Dividends received deduction | (117 | ) | (101 | ) | (99 | ) | ||||||
Change in tax reserves | 16 | - | 16 | |||||||||
Tax credits | (48 | ) | (53 | ) | (51 | ) | ||||||
Tax (benefit) expense related to the Tax Cuts and Jobs Act1 | - | - | (26 | ) | ||||||||
Loss carryback rate differential | (10 | ) | - | - | ||||||||
Other | (2 | ) | (1 | ) | (3 | ) | ||||||
Total income tax (benefit) expense reported | $ | (63 | ) | $ | (37 | ) | $ | 1 |
1 | Prior year amount represents the remeasurement of deferred tax assets revised after return filing as a result of the Tax Cuts and Jobs Act. |
The Company incurred $6 million in federal income tax expense in 2019 which is available for recoupment in the event of future net losses.
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law and includes certain income tax provisions relevant to businesses. The Company is required to recognize the effect on the financial statements in the period the law was enacted. For year ended December 31, 2020, the CARES Act did not have a material impact on the Company’s financial statements.
The CARES Act amended the Tax Cuts and Jobs Act, to accelerate the ability of companies to fully recover AMT credits in 2020 versus 2021. The Company had $159 million of an income tax receivable that was previously AMT credit carryforwards as of December 31, 2019. In 2020, the Company received a refund of $158 million of its AMT credits.
The following table summarizes operating loss or tax credit carry-forwards available as of December 31, 2020:
(in millions) | Amount | Origination | Expiration | |||||||||
Business credits | $ | 5 | 2011 | 2031 | ||||||||
Business credits | $ | 9 | 2012 | 2032 | ||||||||
Business credits | $ | 6 | 2013 | 2033 | ||||||||
Business credits | $ | 39 | 2014 | 2034 | ||||||||
Business credits | $ | 47 | 2015 | 2035 | ||||||||
Business credits | $ | 62 | 2016 | 2036 | ||||||||
Business credits | $ | 62 | 2017 | 2037 | ||||||||
Business credits | $ | 30 | 2018 | 2038 | ||||||||
Business credits | $ | 27 | 2019 | 2039 | ||||||||
Business credits | $ | 29 | 2020 | 2040 |
F-39
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2020, 2019 and 2018 Statutory Financial Statements
The Company is included in the NMIC consolidated federal income tax return which includes the following entities:
Nationwide Mutual Insurance Company AGMC Reinsurance, Ltd Allied Group, Inc. Allied Holding (Delaware), Inc. Allied Insurance Company of America Allied Property & Casualty Insurance Company Allied Texas Agency, Inc. AMCO Insurance Company American Marine Underwriters Crestbrook Insurance Company Depositors Insurance Company DVM Insurance Agency, Inc. Eagle Captive Reinsurance, LLC Freedom Specialty Insurance Company Harleysville Group Inc. Harleysville Insurance Co. of New York Harleysville Insurance Company Harleysville Insurance Company of New Jersey Harleysville Lake States Insurance Company Harleysville Life Insurance Company Harleysville Preferred Insurance Company Harleysville Worcester Insurance Company Jefferson National Financial Corporation Jefferson National Securities Corporation Lone Star General Agency, Inc. National Casualty Company Nationwide Advantage Mortgage Company Nationwide Affinity Insurance Company of America Nationwide Agent Risk Purchasing Group. Inc. Nationwide Agribusiness Insurance Company Nationwide Assurance Company Nationwide Cash Management Company | Nationwide Corporation Nationwide Financial Assignment Company Nationwide Financial General Agency, Inc. Nationwide Financial Services, Inc. Nationwide General Insurance Company Nationwide Global Holdings, Inc. Nationwide Indemnity Company Nationwide Insurance Company of America Nationwide Insurance Company of Florida Nationwide Investment Services Corporation Nationwide Life and Annuity Ins. Company Nationwide Life Insurance Company Nationwide Lloyds Nationwide Property & Casualty Ins. Company Nationwide Retirement Solutions, Inc. Nationwide Sales Solutions, Inc. Nationwide Trust Company, FSB NBS Insurance Agency, Inc. NFS Distributors, Inc. NWD Investment Management, Inc. Registered Investment Advisors Services, Inc. Scottsdale Indemnity Company Scottsdale Insurance Company Scottsdale Surplus Lines Insurance Company THI Holdings (Delaware), Inc. Titan Insurance Company Titan Insurance Services, Inc. Veterinary Pet Insurance Company Victoria Fire & Casualty Company Victoria National Insurance Company Victoria Select Insurance Company VPI Services, Inc. |
The method of allocation among the companies is based upon separate return calculations with current benefit for tax losses and credits utilized in the consolidated return.
The Company did not have any protective tax deposits under Section 6603 of the Internal Revenue Code as of December 31, 2020 and 2019.
The Company does not have any tax loss contingencies for which it is reasonably possible that the total liability will significantly increase within twelve months of the reporting date.
F-40
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2020, 2019 and 2018 Statutory Financial Statements
(9) | Short-Term Debt and Federal Home Loan Bank Funding Agreement |
Short-Term Debt
The following table summarizes the carrying value of short-term debt and weighted average annual interest rates, as of the dates indicated:
December 31, | ||||||||
(in millions) | 2020 | 2019 | ||||||
$750 million commercial paper program (0.00%) | $ | - | $ | 200 | ||||
Accrued interest payable | 3 | 3 | ||||||
Total short-term debt | $ | 3 | $ | 203 |
The Company participates in a commercial paper program with a limit of $750 million. The rating agency guidelines recommend that the Company maintain minimum liquidity backup, which includes cash and liquid assets, as well as committed bank lines, equal to 50% of any amounts outstanding under the commercial paper program. The commercial paper will not be redeemed prior to maturity or be subject to voluntary prepayment. Proceeds from the sale of the commercial paper will be used to meet working capital requirements and for general corporate purposes, including the funding of acquisitions.
As of December 31, 2019, the Company had access to borrow up to $300 million from the FHLB to provide financing for operations that expired on March 22, 2020. In March 2020, the Company renewed the agreement with the FHLB until March 19, 2021. The Company had $4.3 billion and $4.0 billion in eligible collateral and no amounts outstanding under the agreement as of December 31, 2020 and 2019, respectively. In February 2021, the Company terminated this agreement and entered into a new agreement with the FHLB, which expires February 4, 2022, that allows the Company and NLAIC access to collectively borrow up to $1.1 billion in the aggregate, which would be collateralized by pledged securities.
The Company has entered into an agreement with its custodial bank to borrow against the cash collateral that is posted in connection with its securities lending program. The maximum amount available under the agreement is $350 million. The borrowing rate on this program is equal to one-month U.S. LIBOR. The Company had no amounts outstanding under this agreement as of December 31, 2020 and 2019.
The terms of certain debt instruments contain various restrictive covenants, including, but not limited to, minimum statutory surplus defined in the agreements. The Company was in compliance with all covenants as of December 31, 2020 and 2019.
The amount of interest paid on short-term debt was immaterial in 2020, 2019 and 2018.
Federal Home Loan Bank Funding Agreements
The Company is a member of the FHLB. Through its membership, the FHLB established the Company’s capacity for short-term borrowings and cash advances under the funding agreement program at up to 50% of total admitted assets.
The Company’s Board of Directors has authorized the issuance of funding agreements up to $4.0 billion to the FHLB, shared between the Company and NLAIC, in exchange for cash advances, which are collateralized by pledged securities. The Company uses these funds in an investment spread strategy, consistent with its other investment spread operations. As such, the Company applies SSAP No. 52, Deposit-Type Contracts, accounting treatment to these funds, consistent with its other deposit-type contracts. It is not part of the Company’s strategy to utilize these funds for operations, and any funds obtained from the FHLB for use in general operations would be accounted for consistent with SSAP No. 15, Debt and Holding Company Obligations, as borrowed money. Membership requires the Company to purchase and hold a minimum amount of FHLB capital stock plus additional stock based on outstanding advances. The Company has $30 million in membership stock as of December 31, 2020 and 2019. As part of the agreement, the Company purchased and held an additional $58 million and $53 million in activity stock as of December 31, 2020 and 2019, respectively, which is included in the general account in stocks on the statutory statements of admitted assets, liabilities, capital and surplus. The Company’s liability for advances from the FHLB was $2.1 billion and $1.8 billion as of December 31, 2020 and 2019, respectively, which is included in future policy benefits and claims on the statutory statements of admitted assets, liabilities, capital and surplus. The advances were collateralized by bonds and mortgage loans with carrying values of $2.4 billion (1.5% of total admitted assets) as of December 31, 2020 and $2.2 billion (1.4% of total admitted assets) as of December 31, 2019, which are included in the general account in bonds and mortgage loans on the statutory statements of admitted assets, liabilities, capital and surplus.
F-41
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2020, 2019 and 2018 Statutory Financial Statements
(10) | Surplus Notes |
The following table summarizes the carrying value of surplus notes issued by the Company to NFS, as of the dates indicated:
(in millions) | ||||||||||||||||||||||||||||
Date issued | Interest rate | Par value | Carrying value | Interest and/ or principal paid in current year | Total interest and/ or principal paid | Unapproved interest and/ or principal | Date of maturity | |||||||||||||||||||||
December 31, 2020 | ||||||||||||||||||||||||||||
12/19/2001 | 7.50 | % | $ | 300 | $ | 300 | $ | 22 | $ | 428 | $ | - | 12/31/2031 | |||||||||||||||
6/27/2002 | 8.15 | % | 300 | 300 | 25 | 448 | - | 6/27/2032 | ||||||||||||||||||||
12/23/2003 | 6.75 | % | 100 | 100 | 7 | 112 | - | 12/23/2033 | ||||||||||||||||||||
12/20/2019 | 4.21 | % | 400 | 400 | 17 | 17 | - | 12/19/2059 | ||||||||||||||||||||
Total | $ | 1,100 | $ | 1,100 | $ | 71 | $ | 1,005 | $ | - | ||||||||||||||||||
December 31, 2019 | ||||||||||||||||||||||||||||
12/19/2001 | 7.50 | % | $ | 300 | $ | 300 | $ | 23 | $ | 406 | $ | - | 12/31/2031 | |||||||||||||||
6/27/2002 | 8.15 | % | 300 | 300 | 24 | 423 | - | 6/27/2032 | ||||||||||||||||||||
12/23/2003 | 6.75 | % | 100 | 100 | 7 | 105 | - | 12/23/2033 | ||||||||||||||||||||
12/20/2019 | 4.21 | % | 400 | 400 | - | - | - | 12/19/2059 | ||||||||||||||||||||
Total | $ | 1,100 | $ | 1,100 | $ | 54 | $ | 934 | $ | - |
The surplus notes were issued in accordance with Section 3901.72 of the Ohio Revised Code. The principal and interest on these surplus notes shall not be a liability or claim against NLIC, or any of its assets, except as provided in Section 3901.72 of the Ohio Revised Code. The Department must approve interest and principal payments before they are paid.
(11) | Reinsurance |
The Company has a 100% coinsurance agreement with funds withheld with Eagle to cede specified GMDB and GLWB obligations provided under substantially all of the variable annuity contracts issued and to be issued by NLIC. While the GMDB and GLWB contract riders are ceded by NLIC to Eagle, the base annuity contracts and any non-reinsured risks will be retained by NLIC.
Amounts ceded to Eagle during 2020, 2019 and 2018 included premiums of $627 million, $529 million and $506 million, respectively, benefits and claims, net of third party reinsurance recoveries of $23 million, $17 million, and $14 million respectively, net investment earnings on funds withheld assets of $49 million, $33 million and $20 million, respectively, and an expense allowance for third party reinsurance premiums of $1 million, $1 million and $1 million, respectively. As of December 31, 2020 and 2019, the carrying value of the funds withheld assets was $965 million and $795 million, respectively, which consists of bonds and short-term investments that had a carrying value of $856 million and $722 million, respectively, and mortgage loans that had a carrying value of $108 million and $73 million, respectively. As of December 31, 2020 and 2019, the Company’s reserve credit for guaranteed benefits ceded under the reinsurance agreement was $65 million and $275 million, respectively. Amounts payable to Eagle related to the reinsurance agreement were $402 million and $248 million as of as of December 31, 2020 and December 31, 2019, respectively.
The Company has a reinsurance agreement with NMIC whereby nearly all of the Company’s accident and health business not ceded to unaffiliated reinsurers is ceded to NMIC on a modified coinsurance basis. Either party may terminate the agreement on January 1 of any year with prior notice. Under a modified coinsurance agreement, the ceding company retains invested assets, and investment earnings are paid to the reinsurer. Under the terms of the Company’s agreement, the investment risk associated with changes in interest rates is borne by the reinsurer. Risk of asset default is retained by the Company, although a fee is paid to the Company for the retention of such risk. The ceding of risk does not discharge the Company, as the original insurer, from its primary obligation to the policyholder. Amounts ceded to NMIC include revenues of $281 million, $279 million and $257 million for the years ended December 31, 2020, 2019 and 2018, respectively, while benefits, claims and expenses ceded were $260 million, $273 million and $237 million, respectively.
F-42
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2020, 2019 and 2018 Statutory Financial Statements
The Company has an intercompany reinsurance agreement with NLAIC whereby certain inforce and subsequently issued fixed individual deferred annuity contracts are assumed on a modified coinsurance basis. Under modified coinsurance agreements, the ceding company retains invested assets and investment earnings are paid to the reinsurer. Under terms of the agreement, the Company bears the investment risk associated with changes in interest rates. Risk of asset default remains with NLAIC, and the Company pays a fee to NLAIC for the retention of such risk. The agreement will remain inforce until all contract obligations are settled. The ceding of risk does not discharge the original insurer from its primary obligation to the contractholder. Amounts assumed from NLAIC are included in the Company’s statutory statement of operations for 2020, 2019 and 2018 and include premiums of $12 million, $14 million and $14 million, respectively, net investment income of $46 million, $49 million and $58 million, respectively, and benefits, change in reserves and other expenses of $171 million, $251 million and $358 million, respectively. The reserve adjustment for 2020, 2019 and 2018 of $(172) million, $(246) million and $(352) million, respectively, represents changes in reserves related to this fixed block of business, offset by investment earnings on the underlying assets. Policy reserves assumed under this agreement totaled $1.1 billion and $1.2 billion as of December 31, 2020 and 2019, respectively, and amounts payable related to this agreement were $8 million and $0.4 million, respectively.
The Company has an intercompany reinsurance agreement with NLAIC whereby certain variable universal life insurance, whole life insurance and universal life insurance policies are assumed on a modified coinsurance basis. Total policy reserves under this treaty were $37 million and $39 million as of December 31, 2020 and 2019, respectively. Total premiums assumed under this treaty were $8 million, $11 million and $8 million during 2020, 2019 and 2018, respectively.
The Company has an intercompany reinsurance agreement with NLAIC whereby a certain life insurance contract is assumed on a 100% coinsurance basis. Policy reserves assumed under this agreement totaled $158 million and $157 million as of December 31, 2020 and 2019, respectively.
The Company has entered into reinsurance contracts to cede a portion of its individual annuity and life insurance business to unrelated reinsurers. Total reserve credits taken as of December 31, 2020 and 2019 were $420 million and $438 million, respectively. The three largest contracts are with Security Benefit Life Insurance Company (“SBL”), SCOR Global Life Americas Reinsurance (“SGLAR”), and Security Life of Denver Insurance Company (“SLD”) as of December 31, 2020. Total reserve credits taken on these contracts as of December 31, 2020 and 2019 totaled $100 million and $90 million for each year, from SBL, $44 million and $0, respectively, from SGLAR and $36 million and $41 million, respectively, from SLD. The ceding of risk does not relieve the Company, as the original insurer, from its primary obligation to the policyholder. Under the terms of the contracts, SBL has established a trust as collateral for the recoveries, whereby the trust assets are invested in investment grade securities, the fair value of which must at all times be greater or equal to 100% of the reinsured reserves.
F-43
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2020, 2019 and 2018 Statutory Financial Statements
(12) | Transactions with Affiliates |
The Company has entered into significant, recurring transactions and agreements with NMIC, other affiliates and subsidiaries as a part of its ongoing operations. These include annuity and life insurance contracts, office space cost sharing arrangements, and agreements related to reinsurance, cost sharing, tax sharing, administrative services, marketing, intercompany loans, intercompany repurchases, cash management services and software licensing. In addition, several benefit plans sponsored by NMIC are available to Nationwide employees, for which the Company has no legal obligations. Measures used to determine the allocation among companies includes individual employee estimates of time spent, special cost studies, the number of full-time employees and other methods agreed to by the participating companies.
In addition, Nationwide Services Company, LLC (“NSC”), a subsidiary of NMIC, provides data processing, systems development, hardware and software support, telephone, mail and other services to the Company, based on specified rates for units of service consumed pursuant to the Enterprise Cost Sharing Agreement. For the years ended December 31, 2020, 2019 and 2018, the Company was allocated costs from NMIC and NSC totaling $281 million, $220 million and $235 million, respectively.
The Company has issued group annuity and life insurance contracts and performs administrative services for various employee benefit plans sponsored by NMIC or its affiliates. Total account values of these contracts were $3.7 billion, $3.5 billion and $3.4 billion as of December 31, 2020, 2019 and 2018, respectively. Total revenues from these contracts were $122 million, $120 million and $119 million for the years ended December 31, 2020, 2019 and 2018, respectively, and include policy charges, net investment income from investments backing the contracts and administrative fees. Total interest credited to the account balances were $115 million, $112 million and $107 million for the years ended December 31, 2020, 2019 and 2018, respectively.
The Company may underwrite insurance policies for its officers, directors, and/or other personnel providing services to the Company. The Company may offer discounts on certain products that are subject to applicable state insurance laws and approvals.
Under the Enterprise Cost Sharing Agreement, the Company has a cost sharing arrangement with NMIC to occupy office space. For the years ended December 31, 2020, 2019 and 2018, the Company was allocated costs from NMIC of $13 million, $11 million and $10 million, respectively.
The Company receives an annual fee payable from the Tax Credit Funds, for which it is a guarantor and Managing Member, for its services in connection with the oversight of the performance of the Investee Partnerships and the compliance by their managing members and managing agents thereof with the provisions of the various operating level agreements and applicable laws. The Company earned $2 million for the years ended December 31, 2020, 2019 and 2018.
Funds of Nationwide Funds Group (“NFG”), a group of Nationwide businesses that develops, sells and services mutual funds, are offered to the Company’s customers as investment options in certain of the Company’s products. As of December 31, 2020, 2019 and 2018, customer allocations to NFG funds totaled $69.2 billion, $66.8 billion and $60.7 billion, respectively. For the years ended December 31, 2020, 2019 and 2018, NFG paid the Company $229 million, $227 million and $227 million, respectively, for the distribution and servicing of these funds.
Amounts on deposit with NCMC for the benefit of the Company were $551 million and $616 million as of December 31, 2020 and 2019, respectively. As of December 31, 2020, amounts on deposit with NCMC were comprised of $547 million of cash equivalents, with remaining amounts in short-term investments.
Certain annuity products are sold through affiliated companies, which are also subsidiaries of NFS. Total commissions and fees paid to these affiliates for the years ended December 31, 2020, 2019 and 2018 was $69 million, $71 million and $72 million, respectively.
The Company provides financing to Nationwide Realty Investors, LTD, a subsidiary of NMIC with interest rates ranging from 3.3% to 5.0% and maturity dates ranging from January 2022 to June 2041. As of December 31, 2020 and 2019, the Company had mortgage loans outstanding of $414 million and $348 million, respectively.
The Company also participates in intercompany repurchase agreements with affiliates whereby the seller transfers securities to the buyer at a stated value. Upon demand or after a stated period, the seller repurchases the securities from the buyer at the original sales price plus interest. As of December 31, 2020 and 2019, the Company had no outstanding borrowings from affiliated entities under such agreements. During 2020 and 2019, there was no outstanding borrowings from affiliated entities at any given time. The amount the Company incurred for interest expense on intercompany repurchase agreements during 2020, 2019 and 2018 were immaterial.
During 2020, 2019 and 2018, the Company received capital contributions of $0, $600 million and $435 million, respectively, from NFS.
F-44
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2020, 2019 and 2018 Statutory Financial Statements
During 2020, the Company sold securities of $59 million to Nationwide Mutual Fire Insurance Company for cash, which resulted in a realized loss of $2 million.
During 2020, 2019 and 2018, the Company paid capital contributions of $500 million, $400 million and $565 million, respectively, to NLAIC.
On February 11, 2020, the Company entered into an unsecured promissory note and revolving line of credit with JNLNY whereby JNLNY can borrow up to $5 million. As of December 31, 2020, no amounts were drawn on the note.
On November 21, 2019, NFS and the Company entered into a promissory note, where the Company borrowed $386 million from NFS at 1-month LIBOR plus 0.785%. This note was fully repaid on December 20, 2019.
During 2018, NLAIC borrowed $340 million from the Company at interest rates ranging from 3-month LIBOR plus 0.785% to 3.57% with maturity dates ranging from January 16, 2019 to March 21, 2019. During 2019, NLAIC made payments of principal and interest and, as of March 21, 2019, the promissory notes were repaid in full.
Pursuant to financial support agreements, the Company has agreed to provide NLAIC and JNLIC with the minimum capital and surplus required by each state in which NLAIC and JNLIC does business. These agreements do not constitute the Company as guarantor of any obligation or indebtedness of NLAIC or JNLIC or provide any creditor of NLAIC or JNLIC with recourse to or against any of the assets of the Company.
Eagle’s surplus position is evaluated quarterly to determine if an additional surplus contribution is required from the Company or if a distribution to the Company can be declared as of each quarter end.
During 2020 and 2019, the Company made surplus contributions to Eagle. On March 31, 2020 and April 17, 2020, the Company made surplus contributions to Eagle of $555 million and $50 million, respectively. On October 17, 2019, the Company made a surplus contribution to Eagle of $9 million.
During 2020 and 2019 Eagle declared distributions to the Company based on their earned surplus position. On February 10, 2021, the Company received a dividend distribution of $292 million from Eagle that was declared on December 31, 2020. The dividend receivable was recorded in accrued investment income on the December 31, 2020 statutory statement of admitted assets, liabilities, capital and surplus. On November 10, 2020 the Company received a total distribution of $267 million from Eagle that was declared on September 30, 2020 and consisted of a return of contributed surplus of $184 million and a dividend of $83 million. On August 10, 2020 the Company received a return of contributed surplus distribution of $421 million from Eagle that was declared on June 30, 2020. On February 10, 2020, the Company received a total distribution of $180 million from Eagle that was declared on December 31, 2019 and consisted of a return of contributed surplus of $9 million and a dividend of $171 million. The return of contributed surplus was recorded in other assets and the dividend receivable was recorded in accrued investment income on the December 31, 2019 statutory statement of admitted assets, liabilities, capital and surplus. On August 9, 2019, the Company received a dividend distribution of $41 million from Eagle that was declared on June 28, 2019. On May 10, 2019, the Company received a total distribution of $212 million from Eagle that was declared on March 26, 2019 and consisted of a return of contributed surplus of $190 million and a dividend of $22 million.
The Company utilizes the look-through approach in valuing its investment in Nationwide Real Estate Investors (NLIC), LLC (“NW REI (NLIC)”), a subsidiary of NMIC, at $90 million and $69 million as of December 31, 2020 and 2019, respectively. NW REI (NLIC)’s financial statements are not audited and the Company has limited the value of its investment in NW REI (NLIC) to the value contained in the audited statutory financial statements of the underlying investments. All liabilities, commitments, contingencies, guarantees or obligations of the NW REI (NLIC), which are required under applicable accounting guidance, are reflected in the Company’s determination of the carrying value of the investment in NW REI (NLIC), if not already recorded in the financial statements of NW REI (NLIC).
(13) Contingencies
Legal and Regulatory Matters
The Company is subject to legal and regulatory proceedings in the ordinary course of its business. These include proceedings specific to the Company and proceedings generally applicable to business practices in the industries in which the Company operates. The outcomes of these proceedings cannot be predicted due to their complexity, scope, and many uncertainties. The Company believes, however, that based on currently known information, the ultimate outcome of all pending legal and regulatory proceedings is not likely to have a material adverse effect on the Company’s financial condition.
F-45
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2020, 2019 and 2018 Statutory Financial Statements
The various businesses conducted by the Company are subject to oversight by numerous federal and state regulatory entities, including but not limited to the Securities and Exchange Commission, the Financial Industry Regulatory Authority, the Department of Labor, the IRS, the Office of the Comptroller of the Currency and state insurance authorities. Such regulatory entities may, in the normal course of business, be engaged in general or targeted inquiries, examinations and investigations of the Company and/or its affiliates. With respect to all such scrutiny directed at the Company or its affiliates, the Company is cooperating with regulators.
Guarantees
In accordance with SSAP No. 5R, Liabilities, Contingencies and Impairments of Assets, for all guarantees made to or on behalf of wholly-owned subsidiaries, no initial liability recognition has been made and there is no net financial statement impact related to these guarantees.
The contractual obligations under NLAIC’s single premium deferred annuity (“SPDA”) contracts in force and issued before September 1, 1988 are guaranteed by the Company. Total SPDA contracts affected by this guarantee in force as of December 31, 2020 and 2019 were approximately $8 million and $9 million, respectively.
The Company has guaranteed the obligations and liabilities of NISC, including, without limitation, the full and prompt payment of all accounts payable to any party now or in the future. If for any reason NISC fails to satisfy any of its obligations, the Company will cause such obligation, loss or liability to be fully satisfied.
Indemnifications
In the normal course of business, the Company provides standard indemnifications to contractual counterparties. The types of indemnifications typically provided include breaches of representations and warranties, taxes and certain other liabilities, such as third-party lawsuits. The indemnification clauses are often standard contractual terms and are entered into in the normal course of business based on an assessment that the risk of loss would be remote. The terms of the indemnifications vary in duration and nature. In many cases, the maximum obligation is not explicitly stated, and the contingencies triggering the obligation to indemnify have not occurred and are not expected to occur. Consequently, the amount of the obligation under such indemnifications is not determinable. Historically, the Company has not made any material payments pursuant to these obligations.
(14) | Regulatory Risk-Based Capital, Dividend Restrictions and Unassigned Surplus |
The NAIC Risk-Based Capital (“RBC”) model law requires every insurer to calculate its total adjusted capital and RBC requirement to ensure insurer solvency. Regulatory guidelines provide for an insurance commissioner to intervene if the insurer experiences financial difficulty, as evidenced by a company’s total adjusted capital falling below established relationships to required RBC. The model includes components for asset risk, liability risk, interest rate exposure and other factors. The State of Ohio, where the Company is domiciled, imposes minimum RBC requirements that are developed by the NAIC. The formulas in the model for determining the amount of RBC specify various weighting factors that are applied to financial balances or various levels of activity based on the perceived degree of risk. Regulatory compliance is determined by a ratio of total adjusted capital to authorized control level RBC, as defined by the NAIC. Companies below specific trigger points or ratios are classified within certain levels, all of which require specified corrective action. The Company exceeded the minimum RBC requirements for all periods presented.
The State of Ohio insurance laws require insurers to seek prior regulatory approval to pay a dividend or distribution of cash or other property if the fair market value thereof, together with that of other dividends or distributions made in the preceding twelve months, exceeds the greater of (i) 10% of statutory-basis capital and surplus as of the prior December 31 or (ii) the statutory-basis net income of the insurer for the prior year. During the years ended December 31, 2020, 2019 and 2018, the Company did not pay any dividends to NFS. The Company’s statutory capital and surplus as of December 31, 2020, was $9.1 billion and statutory net income for 2020 was $487 million. As of January 1, 2021, the Company has the ability to pay dividends to NFS totaling $911 million without obtaining prior approval.
The State of Ohio insurance laws also require insurers to seek prior regulatory approval for any dividend paid from other than earned capital and surplus. Earned capital and surplus is defined under the State of Ohio insurance laws as the amount equal to the Company’s unassigned funds as set forth in its most recent statutory financial statements, including net unrealized capital gains and losses or revaluation of assets. Additionally, following any dividend, an insurer’s policyholder capital and surplus must be reasonable in relation to the insurer’s outstanding liabilities and adequate for its financial needs. The payment of dividends by the Company may also be subject to restrictions set forth in the insurance laws of the State of New York that limit the amount of statutory profits on the Company’s participating policies (measured before dividends to policyholders) available for the benefit of the Company and its stockholders.
The Company currently does not expect such regulatory requirements to impair the ability to pay operating expenses and dividends in the future.
F-46
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Schedule I Summary of Investments – Other Than Investments in Related Parties
As of December 31, 2020:
(in millions) | Column A | Column B | Column C | Column D | ||||||||||
Type of investment | Cost | Fair value | Amount at which is shown in the assets, liabilities, capital and surplus | |||||||||||
Bonds: | ||||||||||||||
U.S. Treasury securities and obligations of U.S. government corporations | $ | 2 | $ | 2 | $ | 2 | ||||||||
U.S. government and agencies | 120 | 150 | 120 | |||||||||||
Obligations of states and political subdivisions | 3,323 | 3,988 | 3,323 | |||||||||||
Foreign governments | 63 | 71 | 63 | |||||||||||
Public utilities | 3,784 | 4,280 | 3,790 | |||||||||||
All other corporate, mortgage-backed and asset-backed securities | 29,876 | 33,319 | 29,909 | |||||||||||
Total fixed maturity securities | $ | 37,168 | $ | 41,810 | $ | 37,207 | ||||||||
Equity securities: | ||||||||||||||
Common Stocks: | ||||||||||||||
Banks, trust and insurance companies | 30 | 33 | 33 | |||||||||||
Industrial, miscellaneous and all other | 113 | 109 | 109 | |||||||||||
Nonredeemable preferred stocks | 97 | 109 | 97 | |||||||||||
Total equity securities1 | $ | 240 | $ | 251 | $ | 239 | ||||||||
Mortgage loans2 | 7,831 | 7,783 | ||||||||||||
Short-term investments | 461 | 461 | ||||||||||||
Policy loans | 888 | 888 | ||||||||||||
Other long-term investments3 | 950 | 950 | ||||||||||||
Total invested assets | $ | 47,538 | $ | 47,528 |
1 | Amount does not agree to the statutory statements of admitted assets, liabilities, capital and surplus as investments in related parties of $2.6 billion are excluded. |
2 | Difference from Column B is attributable to valuation allowances on mortgage loans (see Note 5 to the audited statutory financial statements). |
3 | Includes derivatives, securities lending reinvested collateral assets and other invested assets. Amount does not agree to the statutory statements of admitted assets, liabilities, capital and surplus as investments in related parties of $157 million are excluded. |
See accompanying notes to statutory financial statements and report of independent registered public accounting firm.
F-47
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Schedule III Supplementary Insurance Information
As of December 31, 2020, 2019 and 2018 and for each of the years then ended (in millions):
Column A | Column B | Column C | Column D | Column E | Column F | |||||||||||||||
Year: Segment | Deferred policy acquisition costs1 | Future policy benefits, loss | Unearned premiums2 | Other policy and benefits | Premium revenue | |||||||||||||||
2020 | ||||||||||||||||||||
Life Insurance | $ | 5,204 | $ | 394 | ||||||||||||||||
Annuities | 7,837 | 3,443 | ||||||||||||||||||
Retirement Solutions | 22,362 | 5,939 | ||||||||||||||||||
Corporate Solutions and Other | 5,599 | 861 | ||||||||||||||||||
|
|
|
|
| ||||||||||||||||
Total | $41,002 | $10,637 | ||||||||||||||||||
2019 | ||||||||||||||||||||
Life Insurance | $ | 5,125 | $ | 413 | ||||||||||||||||
Annuities | 7,955 | 4,202 | ||||||||||||||||||
Retirement Solutions | 20,781 | 4,324 | ||||||||||||||||||
Corporate Solutions and Other | 5,278 | 1,229 | ||||||||||||||||||
|
|
|
|
| ||||||||||||||||
Total | $ | 39,139 | $ | 10,168 | ||||||||||||||||
|
|
|
|
| ||||||||||||||||
2018 | ||||||||||||||||||||
Life Insurance | $ | 5,087 | $ | 410 | ||||||||||||||||
Annuities | 7,934 | 3,868 | ||||||||||||||||||
Retirement Solutions | 19,646 | 4,095 | ||||||||||||||||||
Corporate Solutions and Other | 5,670 | 1,456 | ||||||||||||||||||
|
|
|
|
| ||||||||||||||||
Total | $ | 38,337 | $ | 9,829 | ||||||||||||||||
|
|
|
|
|
Column A | Column G | Column H | Column I | Column J | Column K | |||||||||||||||
Year: Segment | Net investment income3 | Benefits, claims, losses and settlement expenses4 | Amortization of deferred policy acquisition costs1 | Other operating expenses | Premiums written | |||||||||||||||
2020 | ||||||||||||||||||||
Life Insurance | $ | 247 | $ | 772 | $ | 123 | ||||||||||||||
Annuities | 338 | 7,539 | 55 | |||||||||||||||||
Retirement Solutions | 843 | 8,258 | 131 | |||||||||||||||||
Corporate Solutions and Other | 679 | 717 | 135 | |||||||||||||||||
|
|
| ||||||||||||||||||
Total | $ | 2,107 | $ | 17,286 | $ | 444 | ||||||||||||||
|
|
| ||||||||||||||||||
2019 | ||||||||||||||||||||
Life Insurance | $ | 262 | $ | 807 | $ | 133 | ||||||||||||||
Annuities | 319 | 8,460 | 57 | |||||||||||||||||
Retirement Solutions | 824 | 6,539 | 122 | |||||||||||||||||
Corporate Solutions and Other | 569 | 1,151 | 105 | |||||||||||||||||
|
|
| ||||||||||||||||||
Total | $ | 1,974 | $ | 16,957 | $ | 417 | ||||||||||||||
|
|
| ||||||||||||||||||
2018 | ||||||||||||||||||||
Life Insurance | $ | 270 | $ | 744 | $ | 154 | ||||||||||||||
Annuities | 319 | 8,203 | 48 | |||||||||||||||||
Retirement Solutions | 798 | 5,656 | 132 | |||||||||||||||||
Corporate Solutions and Other | 540 | 764 | 64 | |||||||||||||||||
|
|
| ||||||||||||||||||
Total | $ | 1,927 | $ | 15,367 | $ | 398 | ||||||||||||||
|
|
|
1 | Deferred policy acquisition costs and amortization of deferred policy acquisition costs are not applicable for statutory basis of accounting. |
2 | Unearned premiums and other policy claims and benefits payable are included in Column C amounts. |
3 | Allocations of net investment income and certain operating expenses are based on numerous assumptions and estimates and reported segment operating results would change if different methods were applied. |
4 | Benefits to policyholders and beneficiaries, reserves for future policy benefits and claims and commissions are included in Column H amounts. |
See accompanying notes to statutory financial statements and report of independent registered public accounting firm.
F-48
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
As of December 31, 2020, 2019 and 2018 and each of the years then ended:
(in millions) | ||||||||||||||||
Column A | Column B | Column C | Column D | Column E | ||||||||||||
Ceded to | Assumed | |||||||||||||||
Gross | other | from other | Net | |||||||||||||
amount | companies | companies | amount | |||||||||||||
2020 | ||||||||||||||||
Life insurance in force | $ | 146,855 | $ | (31,055 | ) | $ | 686 | $ | 116,486 | |||||||
Premiums: | ||||||||||||||||
Life Insurance1 | $ | 1,378 | $ | (133 | ) | $ | 8 | $ | 1,253 | |||||||
Accident and health insurance | 441 | (440 | ) | - | 1 | |||||||||||
Total | $ | 1,819 | $ | (573 | ) | $ | 8 | $ | 1,254 | |||||||
2019 | ||||||||||||||||
Life insurance in force | $ | 146,044 | $ | (31,691 | ) | $ | 728 | $ | 115,081 | |||||||
Premiums: | ||||||||||||||||
Life Insurance1 | $ | 1,761 | $ | (661 | ) | $ | 10 | $ | 1,110 | |||||||
Accident and health insurance | 444 | (445 | ) | 2 | 1 | |||||||||||
Total | $ | 2,205 | $ | (1,106 | ) | $ | 12 | $ | 1,111 | |||||||
2018 | ||||||||||||||||
Life insurance in force | $ | 141,650 | $ | (32,380 | ) | $ | 788 | $ | 110,058 | |||||||
Premiums: | ||||||||||||||||
Life Insurance1 | $ | 1,985 | $ | (130 | ) | $ | 8 | $ | 1,863 | |||||||
Accident and health insurance | 289 | (373 | ) | 85 | 1 | |||||||||||
Total | $ | 2,274 | $ | (503 | ) | $ | 93 | $ | 1,864 |
1 | Primarily represents premiums from traditional life insurance and life-contingent immediate annuities and excludes deposits on investment and universal life insurance products. |
See accompanying notes to statutory financial statements and report of independent registered public accounting firm.
F-49
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Schedule V Valuation and Qualifying Accounts
Years ended December 31, 2020, 2019 and 2018:
(in millions) | ||||||||||||||||
Column A | Column B | Column C | Column D | Column E | ||||||||||||
Balance at | Charged to | Balance at | ||||||||||||||
beginning | costs and | end of | ||||||||||||||
Description | of period | expenses | Deductions1 | period | ||||||||||||
2020 | ||||||||||||||||
Valuation allowances - mortgage loans | $ | 34 | $ | 14 | $ | - | $ | 48 | ||||||||
2019 | ||||||||||||||||
Valuation allowances - mortgage loans | $ | 25 | $ | 9 | $ | - | $ | 34 | ||||||||
2018 | ||||||||||||||||
Valuation allowances - mortgage loans | $ | 23 | $ | 2 | $ | - | $ | 25 |
1 | Amounts generally represent recoveries, payoffs and sales. |
See accompanying notes to statutory financial statements and report of independent registered public accounting firm.
F-50
Item 13. | Other Expenses of Issuance and Distribution |
Item 14. | Indemnification of Directors and Officers |
• | any threatened, pending or completed civil action, suit or proceeding; |
• | any threatened, pending or completed criminal action, suit or proceeding; |
• | any threatened, pending or completed administrative action or proceeding; |
• | any threatened, pending or completed investigative action or proceeding. |
Item 15. | Recent Sales of Unregistered Securities. |
Item 16. | Exhibits and Financial Statement Schedules |
(A) | Exhibits |
(101.CAL) | Not applicable | |
(101.DEF) | Not applicable | |
(101.LAB) | Not applicable | |
(101.PRE) | Not applicable |
(B) | Financial Statement Schedules |
Item 17. | Undertakings |
(1) | To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: |
(a) | To include any prospectus required by section 10(a)(3) of the Securities Act of 1933; |
(b) | To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; |
(c) | To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement. |
(2) | That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
(3) | To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. |
(4) | That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use. |
(5) | That, for the purpose of determining liability of the Registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities: The undersigned Registrant undertakes that in a primary offering of securities of the undersigned Registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned Registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser: |
(a) | Any preliminary prospectus or prospectus of the undersigned Registrant relating to the offering required to be filed pursuant to Rule 424; |
(b) | Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned Registrant or used or referred to by the undersigned Registrant; |
(c) | The portion of any other free writing prospectus relating to the offering containing material information about the undersigned Registrant or its securities provided by or on behalf of the undersigned Registrant; and |
(d) | Any other communication that is an offer in the offering made by the undersigned Registrant to the purchaser. |
(B) | Insofar as indemnification for liabilities arising under the Securities Act of 1933 ("Act") may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officers or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. |
NATIONWIDE LIFE INSURANCE COMPANY |
(Registrant) |
By: /s/ JAMIE RUFF CASTO |
Jamie Ruff Casto Attorney-in-Fact |
JOHN L. CARTER | |
John L. Carter, President and Chief Operating Officer, and Director | |
MARK R. THRESHER | |
Mark R. Thresher, Executive Vice President and Director | |
TIMOTHY G. FROMMEYER | |
Timothy G. Frommeyer, Senior Vice President-Chief Financial Officer and Director | |
ERIC S. HENDERSON | |
Eric S. Henderson, Senior Vice-Nationwide Annuity and Director | |
STEVEN A. GINNAN | |
Steven A. Ginnan, Senior Vice President-Chief Financial Officer-Nationwide Financial and Director | |
KIRT A. WALKER | |
Director | |
By /s/ Jamie Ruff Casto | |
Jamie Ruff Casto Attorney-in-Fact |