1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997 COMMISSION FILE NO. 2-28596
NATIONWIDE LIFE INSURANCE COMPANY
(Exact name of registrant as specified in its charter)
OHIO 31-4156830
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
ONE NATIONWIDE PLAZA
COLUMBUS, OHIO 43215
(614) 249-7111
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
NONE
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to the filing
requirements for at least the past 90 days.
YES X NO
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ALL VOTING STOCK WAS HELD BY AFFILIATES OF THE REGISTRANT ON MARCH 20, 1998.
COMMON STOCK - 3,814,779 SHARES ISSUED AND OUTSTANDING AS OF MARCH 20, 1998
(Title of Class)
THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION I(1)(a)
AND (b) OF FORM 10-K AND IS THEREFORE FILING THIS FORM WITH THE REDUCED
DISCLOSURE FORMAT.
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PART I
ITEM 1 BUSINESS
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ORGANIZATION
Nationwide Life Insurance Company (NLIC) was incorporated in 1929
and is an Ohio stock legal reserve life insurance company. NLIC
offers a variety of forms of variable annuities, fixed annuities
and life insurance on a participating and a non-participating
basis.
Prior to January 27, 1997, NLIC was wholly owned by Nationwide
Corporation (Nationwide Corp.). On that date, Nationwide Corp.
contributed the outstanding shares of NLIC's common stock to
Nationwide Financial Services, Inc. (NFS), a holding company
formed by Nationwide Corp. in November 1996 for NLIC and other
companies within the Nationwide Insurance Enterprise that offer or
distribute long-term savings and retirement products. On March 11,
1997, NFS completed an initial public offering of its Class A
common stock.
During 1996 and 1997, Nationwide Corp. and NFS completed certain
transactions in anticipation of the initial public offering that
focused the business of NFS on long-term savings and retirement
products. On September 24, 1996, NLIC declared a dividend payable
to Nationwide Corp. on January 1, 1997 consisting of the
outstanding shares of common stock of certain subsidiaries that do
not offer or distribute long-term savings and retirement products.
In addition, during 1996, NLIC entered into two reinsurance
agreements whereby all of NLIC's accident and health and group
life insurance business was ceded to two affiliates effective
January 1, 1996. These subsidiaries, Employers Life Insurance
Company of Wausau (ELICW), National Casualty Company (NCC) and
West Coast Life Insurance Company (WCLIC), through December 31,
1996, and all accident and health and group life insurance
business have been accounted for as discontinued operations.
Additionally, NLIC paid $900.0 million of dividends, $50.0 million
to Nationwide Corp. on December 31, 1996 and $850.0 million to
NFS, which then made an equivalent dividend to Nationwide Corp.,
on February 24, 1997.
NFS contributed $836.8 million to the capital of NLIC during March
1997.
Wholly owned subsidiaries of NLIC as of December 31, 1997 include
Nationwide Life and Annuity Insurance Company (NLAIC), Nationwide
Advisory Services, Inc. (NAS), Nationwide Investment Services
Corporation (NISC) and NWE, Inc. (NWE). NLIC and its subsidiaries
are collectively referred to as "the Company."
The Company is a member of the Nationwide Insurance Enterprise,
which consists of Nationwide Mutual Insurance Company (NMIC) and
all of its subsidiaries and affiliates.
NLAIC offers universal life insurance, variable universal life
insurance and individual annuity contracts on a non-participating
basis. NAS is a registered broker-dealer providing investment
management and administration services. NISC, contributed by
Nationwide Corp. on April 5, 1996, is a registered broker-dealer
doing business solely in the deferred compensation market. NWE was
formed by NLIC to hold special investments.
The Company is a leading provider of long-term savings and
retirement products. The Company offers variable annuities, fixed
annuities and life insurance as well as mutual funds and pension
products and administrative services. By developing and offering a
wide variety of products, the Company believes that it has
positioned itself to compete effectively in various stock market
and interest rate environments. The Company markets its products
through a broad spectrum of wholesale and retail distribution
channels, including financial planners, pension plan
administrators, securities firms, banks and Nationwide Insurance
Enterprise insurance agents.
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The Company is one of the leaders in the development and sale of
variable annuities. For the year ended December 31, 1997, the
Company was the third largest writer of individual variable
annuity contracts in the United States (U.S.) based on sales,
according to The Variable Annuity Research & Data Service. Its
principal annuity series, The BEST of AMERICA, allows the customer
to choose from up to 39 investment options, including mutual funds
managed by premier mutual fund managers.
The Company has grown substantially in recent years as a result of
its long-term investment in developing the distribution channels
necessary to reach its target customers and the products required
to meet the demands of these customers. The Company believes its
growth has been further enhanced by favorable demographic trends,
the growing tendency of Americans to supplement traditional
sources of retirement income with self-directed investments, such
as products offered by the Company, and the performance of the
financial markets, particularly the U.S. stock markets, in recent
years.
BUSINESS SEGMENTS
The Company has three product segments: Variable Annuities, Fixed
Annuities and Life Insurance. In addition, the Company reports
corporate revenues and expenses, investments and related
investment income supporting capital not specifically allocated to
its product segments, revenues and expenses of its investment
advisor subsidiary (other than the portion allocated to the
Variable Annuities and Life Insurance segments) and revenues and
expenses related to group annuity contracts sold to Nationwide
Insurance Enterprise employee benefits plans in a Corporate and
Other segment.
The Variable Annuities segment, which accounted for $150.9 million
(or 36%) of the Company's operating income before federal income
tax expense for 1997, consists of annuity contracts that provide
the customer with the opportunity to invest in mutual funds
managed by independent investment managers and the Company, with
investment returns accumulating on a tax-deferred basis.
The Fixed Annuities segment, which accounted for $169.5 million
(or 40%) of the Company's operating income before federal income
tax expense for 1997, consists of annuity contracts that generate
a return for the customer at a specified interest rate, fixed for
a prescribed period, with returns accumulating on a tax-deferred
basis. Such contracts consist of single premium deferred
annuities, flexible premium deferred annuities and single premium
immediate annuities. The Fixed Annuities segment also includes the
fixed option under the Company's variable annuity contracts, which
accounted for 78% of the Company's fixed annuity sales in 1997 and
73% of the Company's fixed annuity policy reserves as of December
31, 1997. During 1997, the average crediting rates on contracts
(including the fixed option under the Company's variable annuity
contracts) in the Fixed Annuities segment was 6.12%. Substantially
all of the Company's crediting rates on its fixed annuity
contracts are guaranteed for a period not exceeding 15 months.
The Life Insurance segment, which accounted for $70.9 million (or
17%) of the Company's operating income before federal income tax
expense for 1997, is composed of a wide range of variable
universal life insurance, whole life insurance, universal life
insurance, term life insurance and corporate-owned life insurance
products that provide a death benefit and may also allow the
customer to build cash value on a tax-deferred basis.
The Corporate and Other segment accounted for $27.5 million (or
7%) of the Company's operating income (which excludes realized
gains and losses on investments) before federal income tax
expense for 1997.
Additional information related to the Company's business segments
is included in Note 14 to the consolidated financial statements
and Financial Statement Schedule III.
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RATINGS
Ratings with respect to claims-paying ability and financial
strength have become an increasingly important factor in
establishing the competitive position of insurance companies.
Ratings are important to maintaining public confidence in the
Company and its ability to market its annuity and life insurance
products. Rating organizations continually review the financial
performance and condition of insurers, including the Company. Any
lowering of the Company's ratings could have a material adverse
effect on the Company's ability to market its products and could
increase the surrender of the Company's annuity products. Both of
these consequences could, depending upon the extent thereof, have
a material adverse effect on the Company's liquidity and, under
certain circumstances, net income. NLIC is rated "A+" (Superior)
by A.M. Best Company, Inc. and its claims-paying ability is
rated "Aa2" (Excellent) by Moody's Investor Services, Inc. and
"AA+" (Excellent) by Standard & Poor's Corporation.
The foregoing ratings reflect each rating agency's opinion of
NLIC's financial strength, operating performance and ability to
meet its obligations to policyholders and are not evaluations
directed toward the protection of investors. Such factors are of
concern to policyholders, agents and intermediaries.
COMPETITION
The Company competes with a large number of other insurers as well
as non-insurance financial services companies, such as banks,
broker/dealers and mutual funds, some of whom have greater
financial resources, offer alternative products and, with respect
to other insurers, have higher ratings than the Company. The
Company believes that competition in the Company's lines of
business is based on price, product features, commission
structure, perceived financial strength, claims-paying ratings,
service and name recognition. National banks, with their
preexisting customer bases for financial services products, may
pose increasing competition in the future to insurers who sell
annuities, including the Company, as a result of the U.S. Supreme
Court's 1994 decision in NationsBank of North Carolina v. Variable
Annuity Life Insurance Company, which permits national banks to
sell annuity products of life insurance companies in certain
circumstances.
Several proposals to repeal or modify the Glass-Steagall Act of
1933, as amended, and the Bank Holding Company Act of 1956, as
amended, have been made by members of Congress and the Clinton
Administration. Currently, the Bank Holding Company Act restricts
banks from being affiliated with insurance companies. None of
these proposals has yet been enacted, and it is not possible to
predict whether any of these proposals will be enacted, or, if
enacted, their potential effect on the Company.
REGULATION
NLIC and NLAIC, as with other insurance companies, are subject to
extensive regulation and supervision in the jurisdictions in which
they do business. Such regulations limit the amount of dividends
and other payments that can be paid by insurance companies without
prior approval and impose restrictions on the amount and type of
investments insurance companies may hold. These regulations also
affect many other aspects of insurance companies businesses,
including licensing of insurers and their products and agents,
risk-based capital requirements and the type and amount of
required asset valuation reserve accounts. These regulations are
primarily intended to protect policyholders rather than
shareholders. The Company can not predict the effect that any
proposed or future legislation may have on the financial condition
or results of operations of the Company.
Insurance companies are required to file detailed annual and
quarterly financial statements with state insurance regulators in
each of the states in which they do business, and their business
and accounts are subject to examination by such agencies at any
time. In addition, insurance regulators periodically examine an
insurer's financial condition, adherence to statutory accounting
practices and compliance with insurance department rules and
regulations. Applicable state insurance laws, rather than federal
bankruptcy laws, apply to the liquidation or the restructuring of
insurance companies.
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5
As part of their routine regulatory oversight process, state
insurance departments conduct detailed examinations periodically
(generally once every three to four years) of the books, records
and accounts of insurance companies domiciled in their states.
Such examinations are generally conducted in cooperation with the
departments of two or three other states under guidelines
promulgated by the National Association of Insurance Commissioners
(NAIC). The insurance subsidiaries are currently under examination
by the Ohio and Delaware insurance departments for the four-year
period ended December 31, 1996. While final reports of these
examinations have not yet been issued, management does not expect
such reports to raise any significant issues or adjustments.
The payment of dividends by NLIC is subject to restrictions set
forth in the insurance laws and regulations of Ohio, its
domiciliary state. The Ohio insurance laws require Ohio-domiciled
life insurance companies 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 12 months, exceeds the greater
of (i) 10% of statutory-basis policyholders' surplus as of the
prior December 31 or (ii) the statutory-basis net income of the
insurer for the 12-month period ending as of the prior December
31. The Ohio insurance laws also require insurers to seek prior
regulatory approval for any dividend paid from other than earned
surplus. Earned surplus is defined under the 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
surplus must be reasonable in relation to the insurer's
outstanding liabilities and adequate for its financial needs. As a
result of the $850.0 million dividend paid on February 24, 1997,
any dividend paid by NLIC during the 12-month period immediately
following the dividend would be an extraordinary dividend under
Ohio insurance laws. Accordingly, no such dividend could be paid
without prior regulatory approval. The payment of dividends by
NLIC may also be subject to restrictions set forth in the
insurance laws of New York that limit the amount of statutory
profits on NLIC's participating policies (measured before
dividends to policyholders) that can inure to the benefit of the
Company and its stockholders. The Company currently does not
expect such regulatory requirements to impair its ability to pay
operating expenses and dividends in the future.
EMPLOYEES
As of December 31, 1997, the Company had approximately 3,250
employees. None of the employees of the Company are covered by a
collective bargaining agreement and the Company believes that its
employee relations are satisfactory.
ITEM 2 PROPERTIES
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The Company's principal executive offices are located in Columbus,
Ohio. The Company leases its home office complex, consisting of
approximately 430,000 square feet, from NMIC and its subsidiaries
at One Nationwide Plaza, Two Nationwide Plaza and Three Nationwide
Plaza, Columbus, Ohio. The Company believes that its present
facilities are adequate for the anticipated needs of the Company.
ITEM 3 LEGAL PROCEEDINGS
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The Company is a party to litigation and arbitration proceedings
in the ordinary course of its business, none of which is expected
to have a material adverse effect on the Company.
In recent years, life insurance companies have been named as
defendants in lawsuits, including class action lawsuits, relating
to life insurance pricing and sales practices. A number of these
lawsuits have resulted in substantial jury awards or settlements.
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6
In October 1996, a policyholder of NLIC filed a complaint in
Alabama state court against NLIC and an agent of NLIC (Wayne M.
King v. Nationwide Life Insurance Company and Danny Nix) related
to the sale of a whole life policy on a "vanishing premium" basis
and seeking unspecified compensatory and punitive damages. The
King case was dismissed with prejudice on June 25, 1997 pursuant
to an agreement between the parties.
In February 1997, NLIC was named as a defendant in a lawsuit filed
in New York Supreme Court also related to the sale of whole life
policies on a "vanishing premium" basis (John H. Snyder v.
Nationwide Mutual Insurance Company, Nationwide Mutual Insurance
Co. and Nationwide Life Insurance Co.). The plaintiff in such
lawsuit seeks to represent a national class of NLIC policyholders
and claims unspecified compensatory and punitive damages. This
lawsuit has not been certified as a class action. On April 22,
1997, a motion to dismiss the Snyder complaint in its entirety was
filed by the defendants, and the plaintiff has opposed such
motion.
In November 1997, two plaintiffs, one who was the owner of a
variable life insurance contract and the other who was the owner
of a variable annuity contract, commenced action against NLIC and
the American Century group of defendants (Robert Young and David
Distad v. Nationwide Life Insurance Company et al.). In this
action, plaintiffs seek to represent a class of variable life
insurance contract owners and variable annuity contract owners
whom they claim were allegedly misled when purchasing these
variable contracts into believing that some portion of their
premiums were invested in a publicly traded mutual fund when,
in fact, the premium monies were invested in a mutual fund whose
shares may only be purchased by insurance companies. The complaint
seeks unspecified compensatory, treble and punitive damages. In
January 1998, both NLIC and American Century filed motions to
dismiss the entire complaint. Plaintiffs' counsel opposed these
motions and the federal court in Texas will hear arguments on the
motions to dismiss on April 1, 1998. This lawsuit is in an early
stage and has not been certified as a class action. NLIC intends
to defend this case vigorously.
There can be no assurance that any litigation relating to pricing
and sales practices will not have a material adverse effect on the
Company in the future.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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Omitted due to reduced disclosure format.
PART II
ITEM 5 MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER
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MATTERS
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There is no established public trading market for the NLIC's
shares of common stock. All of the 3,814,779 shares of NLIC's
common stock issued and outstanding are owned by NFS.
NLIC paid no cash dividends during 1997 and $50.0 million to
Nationwide Corp. during 1996.
On January 1, 1997, NLIC paid a dividend valued at $485.7 million
to Nationwide Corp. consisting of the outstanding shares of common
stock of ELICW, NCC and WCLIC. Also, on February 24, 1997, NLIC
paid a dividend to NFS, and NFS paid an equivalent dividend to
Nationwide Corp., consisting of securities having an aggregate
fair value of $850.0 million. The dividend payments were approved
by the Department of Insurance of the State of Ohio.
NLIC currently does not have a formal dividend policy. Management
of NLIC currently does not anticipate making dividend payments
during 1998.
Reference is made to note 10 of the consolidated financial
statements for information regarding dividend restrictions.
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ITEM 6 SELECTED CONSOLIDATED FINANCIAL DATA
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Omitted due to reduced disclosure format.
ITEM 7 MANAGEMENT'S NARRATIVE ANALYSIS OF THE RESULTS OF OPERATIONS
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INTRODUCTION
Management's narrative analysis of the results of operations of
NLIC and subsidiaries for the three years ended December 31, 1997
follows. This discussion should be read in conjunction with the
consolidated financial statements and related notes included
elsewhere in this report.
Management's narrative analysis contains forward-looking
statements that are intended to enhance the reader's ability to
assess the future financial performance of the Company. These
forward-looking statements are not based on historical information
and are being made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. Forward-looking
statements include, but are not limited to, statements which
represent the Company's beliefs concerning future levels of sales
and redemptions of the Company's products, investment yields and
interest spread, or the earnings or profitability of the Company's
activities. Because these statements are subject to numerous
assumptions, risks, and uncertainties, actual results could be
materially different. The following factors, among others, may
have such an impact: changes in economic conditions; movements in
interest rates and the stock markets; competitive pressures on
product pricing and services; success and timing of business
strategies; and the nature and extent of legislation and
regulatory actions and reforms. Readers are directed to consider
these and the other risks and uncertainties described in more
detail elsewhere in documents filed by the Company with the
Securities and Exchange Commission. The Company undertakes no
obligation to update or revise any forward-looking information,
whether as a result of new information, future events, or
otherwise.
RESULTS OF OPERATIONS
In addition to net income, the Company reports net operating
income, which excludes realized investment gains and losses and
results of discontinued operations. Net operating income is
commonly used in the insurance industry as a measure of on-going
earnings performance.
The following table reconciles the Company's reported net income
to net operating income for each of the last three years.
(in millions of dollars) 1997 1996 1995
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Net income $ 279.7 $ 215.9 $ 212.5
Realized gains on investments, net of tax (7.9) (1.0) (0.1)
Income from discontinued operations, net of tax - (11.3) (24.7)
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Net operating income $ 271.8 $ 203.6 $ 187.7
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Revenues
Total revenues for 1997, excluding realized gains and losses on
investments, increased to $2.21 billion compared to $1.99 billion
for 1996 and $1.80 billion for 1995. Increases in policy charges
and net investment income accounted for most of the growth.
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Policy charges include asset fees, which are primarily earned from
separate account assets generated from sales of variable
annuities; administration fees, which include fees charged per
contract on a variety of the Company's products and premium loads
on universal life insurance products; surrender fees, which are
charged as a percentage of premiums withdrawn during a specified
period of annuity and certain life insurance contracts; and cost
of insurance charges earned on universal life insurance products.
Policy charges for each of the last three years were as follows:
(in millions of dollars) 1997 1996 1995
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Asset fees $ 384.8 $ 275.5 $ 184.8
Administrative fees 59.5 50.1 40.7
Surrender fees 32.4 22.1 17.3
Cost of insurance charges 68.5 53.2 43.8
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Total policy charges $ 545.2 $ 400.9 $ 286.6
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The growth in asset fees reflects increases in total separate
account assets of 40% in 1997 and 45% in 1996. As of year end,
total separate account assets were $37.72 billion.
Net investment income includes the gross investment income earned
on investments supporting fixed annuities and certain life
insurance products as well as the yield on the Company's general
account invested assets which are not allocated to product
segments. Net investment income grew from $1.29 billion and $1.36
billion in 1995 and 1996, respectively, to $1.41 billion in 1997
primarily due to increased invested assets to support growth in
fixed annuity policy reserves. Fixed annuity policy reserves,
which include the fixed option of the Company's variable annuity
products, increased $727.8 million in 1996 and $682.4 million in
1997 and were $14.19 billion as of year end 1997. The increase in
net investment income due to growth in invested assets was
partially offset by declining investment yields in 1997 and 1996
due to lower market interest rates.
Realized gains and losses on investments are not considered by the
Company to be recurring components of earnings and are reported in
the Corporate and Other segment. The Company makes decisions
concerning the sale of invested assets based on a variety of
market, business, tax and other factors. Net realized gains on
investments were $11.1 million in 1997 compared to realized losses
of $0.3 million and $1.7 million in 1996 and 1995, respectively.
Realized gains in 1997 include $14.4 million recognized when
securities of $850.0 million were paid to NFS, which subsequently
paid to Nationwide Corp., as a dividend on February 24, 1997 as a
part of certain transactions that were completed in anticipation
of NFS' initial public offering. Also, during 1997, the Company
recorded a realized loss of $16.2 million related to the sale of a
single corporate bond investment that had deteriorated due to the
credit quality of the issuer.
Benefits and Expenses
Interest credited to policyholder account balances totaled $1.02
billion in 1997 compared to $982.3 million in 1996 and $950.3
million in 1995 and principally relates to fixed annuity products.
The growth in interest credited reflects the increase in fixed
annuity policy reserves previously discussed partially offset by
reduced average crediting rates. The average crediting rate on
fixed annuity policy reserves was 6.12% in 1997 compared to 6.30%
and 6.58% in 1996 and 1995, respectively.
Amortization of deferred policy acquisition costs (DAC) increased
to $167.2 million in 1997 compared to $133.4 million in 1996 and
$82.7 million in 1995. The increase is principally related to
increased business in the Variable Annuities segment.
Operating expenses were $384.9 million in 1997, a 12% increase
from 1996 operating expenses of $342.4 million. Operating expenses
were $273.0 million in 1995. The increase reflects the growth in
the number of annuity and life insurance contracts in-force and
the related increase in administrative processing costs. Increased
operating expenses in 1997 also reflect the cost of certain
technology initiatives.
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The Company has developed a plan to address issues related to the
Year 2000. The problem relates to many existing computer programs
using only two digits to identify a year in the date field. These
programs were designed and developed without considering the
impact of the upcoming change in the century. If not corrected,
many computer applications could fail or create erroneous results
by or at the Year 2000. The Company has been evaluating its
exposure to the Year 2000 issue through a review of all of its
operating systems as well as dependencies on the systems of others
since 1996. The Company expects all system changes and
replacements needed to achieve Year 2000 compliance to be
completed by the end of 1998. Compliance testing will be completed
in the first quarter of 1999. The Company charges to expense all
costs associated with these system changes as the costs are
incurred.
Operating expenses in 1997 include approximately $45 million on
technology projects, which includes costs related to Year 2000 and
the development of a new policy administration system for
traditional life insurance products and other system enhancements.
The Company anticipates spending a comparable amount in 1998 on
technology projects, including Year 2000 initiatives.
Federal income tax expense was $150.2 million representing an
effective tax rate of 34.9% for 1997. Federal income tax expense
in 1996 and 1995 was $110.9 million and $99.8 million,
respectively, representing effective rates of 35.2% and 34.7%.
Discontinued Operations
Discontinued operations include the results of (i) the three NLIC
subsidiaries whose outstanding common stock, on September 24,
1996, was declared as a dividend payable to Nationwide Corp. on
January 1, 1997 and (ii) NLIC's accident and health and group life
insurance business which was ceded to affiliates effective January
1, 1996. The Company entered into these transactions in 1996 in
order to focus its business on long-term savings and retirement
products. The transactions are described in note 15 of the
consolidated financial statements. The Company did not recognize
any gain or loss on the disposal of these subsidiaries or
discontinuance of the accident and health and group life insurance
business. Income from discontinued operations was $11.3 million in
1996 and $24.7 million in 1995. There was no income from
discontinued operations in 1997.
Statutory Premiums and Deposits
The Company sells its products through a broad distribution
network comprised of wholesale and retail distribution channels.
Wholesale distributors are unaffiliated entities that sell the
Company's products to their own customer base and include
investment broker/dealers, pension plan administrators and
financial institutions. The Company has access to over 1,000
broker/dealers and over 30,000 registered representatives who sell
individual and group variable annuities, fixed annuities and
variable life insurance in all 50 states and the District of
Columbia. Over 250 regional pension plan administrators market the
Company's group variable and fixed annuities to employers
sponsoring employee retirement programs. The Company currently has
relationships with over 180 banks selling individual variable and
fixed annuities (under the Company's brand name and on a
private-label basis), variable universal life insurance and group
pension products.
Retail distributors are representatives of the Company who market
products directly to a customer base identified by the Company and
include representatives of affiliated sales companies and
Nationwide Insurance Enterprise insurance agents. The Company
markets products on a retail basis to state and local governments
and to teachers through affiliated sales companies. Approximately
4,300 licensed Nationwide Insurance Enterprise insurance agents
sell life insurance and individual annuities primarily targeting
holders of personal automobile and homeowners' insurance policies
issued by the Nationwide Insurance Enterprise.
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Statutory premiums and deposits by distribution channel for each
of the last three years are summarized as follows:
1997 1996 1995
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(in millions of dollars) Amount % Amount % Amount %
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Wholesale channels:
Investment dealers $ 3,894.1 37.7% $ 3,627.8 42.5% $ 2,835.4 42.8%
Pension market 2,325.0 22.5 1,911.6 22.4 1,573.7 23.8
Financial institutions 1,653.2 16.0 947.2 11.1 515.4 7.8
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Total wholesale channels 7,872.3 76.2 6,486.6 76.0 4,924.5 74.4
Retail channels:
Public sector and teachers market 1,862.1 18.0 1,528.0 17.9 1,244.9 18.8
Nationwide agents 602.7 5.8 525.5 6.1 446.5 6.8
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Total retail channels 2,464.8 23.8 2,053.5 24.0 1,691.4 25.6
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Total external premiums and
deposits 10,337.1 100.0% 8,540.1 100.0% 6,615.9 100.0%
========= ======== ========= ========= ========= =========
Nationwide Insurance Enterprise
employee and agent benefit plans 174.9 502.5 182.1
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Total statutory premiums
and deposits $10,512.0 $ 9,042.6 $ 6,798.0
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Excluding Nationwide Insurance Enterprise benefit plan sales, the
Company achieved annual sales growth of 21%, 29%, and 21% in 1997,
1996 and 1995, respectively. The Company's goal is 20% annual
growth in external sales and management believes the Company is
well positioned to achieve that goal in 1998.
The Company's flagship products are marketed under The BEST of
AMERICA brand, and include individual and group variable annuities
and variable life insurance. The BEST of AMERICA products allow
customers to choose from among investment options managed by
premier mutual fund managers. The Company has also developed
private label variable and fixed annuity products in conjunction
with other financial services providers which allow those
providers to sell individual variable and fixed annuities with
substantially the same features as the Company's brand name
products to their own customer bases under their own brand name.
The Company also markets group deferred compensation retirement
plans to employees of state and local governments for use under
Internal Revenue Code (IRC) Section 457. The Company utilizes its
sponsorship by the National Association of Counties and The United
States Conference of Mayors when marketing IRC Section 457
products. In addition, the Company utilizes an exclusive
arrangement with the National Education Association (NEA) to
market tax-qualified annuities under IRC 403(b) to NEA members.
Variable annuities developed for the NEA members are sold under
the NEA Valuebuilder brand.
External statutory premiums and deposits by product are as
follows:
(in millions of dollars) 1997 1996 1995
---------- ---------- ----------
The BEST of AMERICA products:
Individual variable annuities $ 4,269.7 $ 3,801.5 $ 2,740.6
Group variable annuities 2,220.5 1,807.1 1,457.6
Variable universal life 220.3 165.4 101.3
Private label annuities 1,006.3 625.9 389.7
IRC Section 457 annuities 1,715.7 1,425.8 1,191.1
The NEA Valuebuilder annuities 145.5 102.2 53.8
Other 759.1 612.2 681.8
---------- ---------- ----------
$ 10,337.1 $ 8,540.1 $ 6,615.9
========== ========== ==========
10
11
BUSINESS SEGMENTS
The Company has three product segments: Variable Annuities, Fixed
Annuities and Life Insurance. In addition, the Company reports
corporate income and expenses, investments and related investment
income supporting capital not specifically allocated to its
product segments, revenues and expenses of its investment advisor
subsidiary (other than the portion allocated to the Variable
Annuities and Life Insurance segments) and revenues and expenses
related to group annuity contracts sold to Nationwide Insurance
Enterprise employee benefit plans in a Corporate and Other
segment. All information set forth below relating to the Company's
Variable Annuities segment excludes the fixed option under the
Company's variable annuity contracts. Such information is included
in the Company's Fixed Annuities segment.
The following table summarizes operating income before federal
income tax expense for the Company's business segments for each of
the last three years.
(in millions of dollars) 1997 1996 1995
---------- ---------- ----------
Operating income:
Variable annuity $ 150.9 $ 90.3 $ 50.8
Fixed annuity 169.5 135.4 137.0
Life insurance 70.9 67.2 67.6
Corporate and other 27.5 22.9 33.9
---------- ---------- ----------
$ 418.8 $ 315.8 $ 289.3
========== ========== ==========
Variable Annuities
The Variable Annuities segment consists of annuity contracts that
provide the customer with the opportunity to invest in mutual
funds managed by independent investment managers and the Company,
with investment returns accumulating on a tax-deferred basis. The
Company's variable annuity products consist almost entirely of
flexible premium deferred variable annuity contracts.
11
12
The following table summarizes certain selected financial data for
the Company's Variable Annuities segment for the years indicated.
(in millions of dollars) 1997 1996 1995
---------- ---------- ----------
INCOME STATEMENT DATA (1)
Revenues:
Asset fees $ 370.2 $ 261.8 $ 172.8
Administrative fees 21.8 18.1 14.0
Surrender fees 21.9 13.6 10.0
---------- ---------- ----------
Total policy charges 413.9 293.5 196.8
Net investment income and other (2) (9.9) (8.9) (7.8)
---------- ---------- ----------
404.0 284.6 189.0
---------- ---------- ----------
Benefits and expenses:
Benefits and claims 5.9 4.6 2.9
Amortization of DAC 87.8 57.4 26.3
Other operating expenses 159.4 132.3 109.0
---------- ---------- ----------
253.1 194.3 138.2
========== ========== ==========
Operating income before federal income tax expense $ 150.9 $ 90.3 $ 50.8
========== ========== ==========
OTHER DATA (1)
Statutory premiums and deposits (3) $ 7,535.8 $ 6,500.3 $ 4,399.3
Withdrawals 2,683.3 1,697.4 1,071.6
Policy reserves as of year end $ 34,486.7 $ 24,278.1 $ 16,761.8
Ratio of policy charges to average policy reserves 1.41% 1.43% 1.44%
Pre-tax operating income to average policy reserves 0.51% 0.44% 0.37%
----------
<FN>
(1) Excludes the fixed option under the Company's variable annuity contracts which is reported in
the Company's Fixed Annuities segment.
(2) The Company's method of allocating net investment income results in a charge (negative net
investment income) to this segment which is recognized in the Corporate and Other segment. The
charge relates to non-invested assets which support this segment on a statutory basis.
(3) Statutory data have been derived from the Annual Statements of NLIC and NLAIC, as filed with
insurance regulatory authorities and prepared in accordance with statutory accounting practices.
</FN>
Variable annuity segment results reflect a sharp increase in
policy charge revenues partially offset by increases in
amortization of DAC and other operating expenses. The increase in
policy charge revenues is attributable to growth in asset fees.
Asset fees were $370.2 million in 1997 up 41% from $261.8 million
in 1996 and totaled $172.8 million in 1995. The increase in assets
fees reflects substantial growth in policy reserve levels as a
result of steady premium growth and through market appreciation on
investments underlying reserves. Variable annuity policy reserves
grew $10.21 billion during 1997 reaching $34.49 billion as of year
end 1997 compared to growth in 1996 of $7.52 billion and year end
1996 reserves of $24.28 billion. Total policy charges as a
percentage of policy reserves remained relatively stable between
141 and 144 basis points during the last three years presented,
reflecting no or minimal changes in the levels of policy charges
for most variable annuity products.
The Company has sustained high sales growth over the recent three
year period through deeper penetration of existing distribution
channels and the addition of new sales outlets. In addition,
variable annuity sales reflect growing consumer demand for
equity-based retirement savings investments, coupled with a robust
stock market and lower interest rates. Significant increases in
production through financial institutions, pension plan
administrators and public sector markets have contributed strongly
to the growth in variable annuity sales in 1997, when sales
increased 16% to a record $7.54 billion compared to $6.50 billion
in 1996. Variable annuity sales in 1996 represented a 48% increase
over 1995 sales of $4.40 billion.
12
13
Favorable equity market conditions over the past three years have
also contributed significantly to the growth in variable annuity
policy reserves. Variable annuity policy reserves reflect market
appreciation of $5.21 billion, $2.72 billion and $2.93 billion in
1997, 1996 and 1995, respectively.
The increase in amortization of DAC in 1997 compared to 1996 and
1995 is due to overall growth in the variable annuity business.
The growth in operating expenses also reflects the overall growth
in the variable annuity business. Operating expenses were 54 basis
points of average variable annuity policy reserves for 1997
comparing favorably to 64 basis points and 80 basis points for
1996 and 1995, respectively. The Company has controlled operating
expense growth by increasing productivity through investments in
technology and economies of scale.
Fixed Annuities
The Fixed Annuities segment consists of annuity contracts that
generate a return for the customer at a specified interest rate,
fixed for a prescribed period, with returns accumulating on a
tax-deferred basis. Such contracts consist of single premium
deferred annuities, flexible premium deferred annuities and single
premium immediate annuities. The Fixed Annuities segment includes
the fixed option under the Company's variable annuity contracts.
The following table summarizes certain selected financial data for
the Company's Fixed Annuities segment for the years indicated.
(in millions of dollars) 1997 1996 1995
---------- ---------- ----------
INCOME STATEMENT DATA (1)
Revenues:
Policy charges $ 15.9 $ 18.0 $ 16.4
Life insurance premiums 27.3 24.0 32.8
Net investment income 1,098.2 1,050.6 1,002.8
---------- ---------- ----------
1,141.4 1,092.6 1,052.0
---------- ---------- ----------
Benefits and expenses:
Interest credited to policyholder account balances 823.4 805.0 775.7
Other benefits and claims 23.3 33.8 29.5
Amortization of DAC 39.8 38.6 29.5
Other operating expenses 85.4 79.8 80.3
---------- ---------- ----------
971.9 957.2 915.0
========== ========== ==========
Operating income before federal income tax expense $ 169.5 $ 135.4 $ 137.0
========== ========== ==========
OTHER DATA (1)
Statutory premiums and deposits (2) $ 2,137.9 $ 1,600.5 $ 1,864.2
Withdrawals and benefits 1,710.0 1,375.5 1,151.6
Policy reserves as of year end $ 14,194.2 $ 13,511.8 $ 12,784.0
Net interest margin on general account policy reserves 2.04% 1.92% 1.92%
Pre-tax operating income to average policy reserves 1.22% 1.03% 1.14%
----------
<FN>
(1) Includes the fixed option under the Company's variable annuity contracts.
(2) Statutory data have been derived from the Annual Statements of NLIC and NLAIC, as filed with
insurance regulatory authorities and prepared in accordance with statutory accounting
practices.
</FN>
13
14
Fixed annuity segment results reflect an increase in interest
spread income attributable to growth in fixed annuity policy
reserves and wider interest margins. Interest spread is the
differential between net investment income and interest credited
to policyholder account balances. Interest spreads vary depending
on crediting rates offered by competitors, performance of the
investment portfolio, changes in market interest rates and other
factors. The following table depicts the interest margins on
general account policy reserves in the Fixed Annuities segment for
each of the last three years.
1997 1996 1995
---------- ---------- ----------
Net investment income 8.16% 8.22% 8.50%
Interest credited 6.12 6.30 6.58
---------- ---------- ----------
2.04% 1.92% 1.92%
========== ========== ==========
The Company expects interest margins to compress during 1998
reflecting the lower interest rate environment available for new
invested assets. The Company is able to mitigate the effects of
lower investment yields by periodically resetting the rates
credited on fixed annuity contracts. As of December 31, 1997,
$6.85 billion, or 48% of fixed annuity policy reserves, were in
contracts where the guaranteed interest rate is reestablished each
quarter. Fixed annuity policy reserves of $4.88 billion are in
contracts that adjust the crediting rate on an annual basis with
portions resetting in each calendar quarter. The Company also has
$1.40 billion of fixed annuity policy reserves that call for the
crediting rate to be reset annually on each January 1. The
remaining $1.06 billion of fixed annuity policy reserves are in
payout status where the Company has guaranteed periodic, typically
monthly, payments.
Fixed annuity policy reserves increased to $14.19 billion as of
year-end compared to $13.51 billion a year ago and $12.78 billion
as of the end of 1995. The growth reflects increased fixed annuity
sales in 1997 through the financial institutions and investment
dealer channels. Sales for 1997 were up 34% to $2.14 billion
compared to $1.60 billion in 1996. Sales in 1995 totaled $1.86
billion. Most of the Company's fixed annuity sales are premiums
allocated to the guaranteed fixed option of variable annuity
contracts. Fixed annuity sales for 1997 include $1.67 billion in
premiums allocated to the fixed option under a variable annuity
contract, compared to $1.24 billion in 1996. Sales growth in 1997
reflects the success of proprietary fixed product sales through
financial institutions, as well as the impact of a 1.00%
first-year bonus crediting rate offered on The BEST of AMERICA -
America's Vision product during the second half of 1997.
The decrease in other benefits and claims reflects a $13.0 million
charge in 1996 related to reserve strengthening in the immediate
annuity line due to changes in estimated profitability based on
revised assumptions for mortality and reinvestment rates.
Amortization of DAC reflects a reduction in 1996 of $6.0 million
due to changes in estimates of expected future profits as a result
of favorable investment spread and persistency experience.
Life Insurance
The Life Insurance segment consists of insurance products,
including variable universal life insurance and corporate-owned
insurance products, that provide a death benefit and may also
allow the customer to build cash value on a tax-deferred basis.
14
15
The following table summarizes certain selected financial data for
the Company's Life Insurance segment for the years indicated.
(in millions of dollars) 1997 1996 1995
---------- ---------- ----------
INCOME STATEMENT DATA
Revenues:
Cost of insurance charges $ 68.5 $ 53.2 $ 43.8
Other policy charges 36.8 33.4 27.5
---------- ---------- ----------
Total policy charges 105.3 86.6 71.3
Life insurance premiums 178.1 174.6 166.3
Net investment income 189.1 174.0 171.3
Other 0.6 0.4 0.2
---------- ---------- ----------
473.1 435.6 409.1
---------- ---------- ----------
Benefits and expenses:
Interest credited to policyholder account balances 78.5 70.2 69.0
Other benefits and claims 149.0 141.2 133.0
Policyholder dividends 40.6 40.7 39.7
Amortization of DAC 39.6 37.4 31.0
Other operating expenses 94.5 78.9 68.8
---------- ---------- ----------
402.2 368.4 341.5
========== ========== ==========
Operating income before federal income tax expense $ 70.9 $ 67.2 $ 67.6
========== ========== ==========
OTHER DATA:
Statutory premiums (1):
Traditional and universal life $ 248.4 $ 253.9 $ 248.3
Variable universal life 220.0 165.4 104.1
Corporate-owned life 195.0 20.0 -
Policy reserves as of year end:
Traditional and universal life 2,369.5 2,295.5 2,213.7
Variable universal life 892.1 622.6 446.8
Corporate-owned life 225.4 20.8 -
Life insurance in force:
Traditional and universal life 27,495.7 28,107.0 27,616.9
Variable universal life 11,337.4 8,094.6 4,926.5
Corporate-owned life $ 426.3 $ 73.0 $ -
----------
<FN>
(1) Statutory data have been derived from the Annual Statements of NLIC and NLAIC, as filed with
insurance regulatory authorities and prepared in accordance with statutory accounting
practices.
</FN>
Life Insurance segment results reflect revenue growth in the
variable universal life insurance line driven by a steady increase
in insurance in-force and policy reserves partially offset by
higher operating expenses associated with technology-related costs
in the traditional life insurance lines.
Variable universal life insurance policy charges were $57.1
million in 1997, an increase of $18.5 million, or 48%, compared to
$38.6 million in 1996. For 1995, variable universal life insurance
policy charges were $26.7 million. The growth in variable
universal life policy charges is attributable to the growth in
insurance in-force and policy reserves, which increased 40% and
43%, respectively, in 1997. During 1996, variable universal life
insurance in-force and policy reserves increased 64% and 39%,
respectively. Growth in insurance in-force and policy reserves is
due to strong sales from both investment dealers and Nationwide
Insurance Enterprise insurance agents, combined with high
persistency. In February, 1998, the Company introduced a new
variable universal life insurance product called Next Generation,
which offers an innovative, tiered-pricing structure that
maximizes cash value. The Company anticipates continued sales
growth in 1998 for variable universal life insurance as well as
its recent entry into corporate-owned insurance products.
15
16
The growth in operating expenses is due to technology-related
costs combined with the increase in variable life insurance
policies in-force. Technology-related expenses in 1997 were $16.5
million, compared to $3.2 million in 1996. The majority of the
expenses are for a new policy administration system to support
traditional life insurance products and for activities to make
systems Year 2000 compliant.
Corporate and Other
The following table summarizes certain selected financial data for
the Company's Corporate and Other segment for the years indicated.
(in millions of dollars) 1997 1996 1995
------------ ------------ ------------
INCOME STATEMENT DATA:
Revenues:
Net investment income $ 148.7 $ 154.7 $ 137.6
Other 39.1 25.7 12.7
------------ ------------ ------------
187.8 180.4 150.3
------------ ------------ ------------
Benefits and expenses:
Interest credited to policy reserves 114.7 106.1 105.6
Other operating expenses 45.6 51.4 10.8
------------ ------------ ------------
160.3 157.5 116.4
============ ============ ============
Operating income before federal income tax expense(1) $ 27.5 $ 22.9 $ 33.9
============ ============ ============
OTHER DATA:
Statutory premiums and deposits (2) $ 174.9 $ 502.6 $ 182.1
Withdrawals and benefits 205.4 140.3 144.4
Policy reserves as of year end 3,791.9 3,302.5 2,644.3
Nationwide retail mutual fund assets(3) $ 2,555.0 $ 2,136.2 $ 2,113.9
----------
<FN>
(1) Excludes realized gains (losses) on investments and discontinued operations.
(2) Statutory data have been derived from the Annual Statements of NLIC and NLAIC, as filed with
insurance regulatory authorities and prepared in accordance with statutory accounting practices.
(3) Excludes mutual funds selected as investment options under the Company's variable annuity and
variable universal life insurance contracts and mutual funds selected as investment options under
Nationwide Insurance Enterprise employee and agent benefit plans.
</FN>
Revenues in the Corporate and Other segment consist of net
investment income on invested assets not allocated to the three
product segments, investment management fees and other revenues
earned from Nationwide mutual funds other than the portion
allocated to the Variable Annuities and Life Insurance segments
and net investment income and policy charges from group annuity
contracts issued to Nationwide Insurance Enterprise employee and
agent benefit plans.
In addition to the operating revenues previously presented, the
Company also reports realized gains and losses on investments in
the Corporate and Other segment. Net realized gains on investments
were $11.1 million in 1997 compared to realized losses of $0.3
million and $1.7 million in 1996 and 1995, respectively. Realized
gains in 1997 include $14.4 million recognized when securities of
$850.0 million were paid to NFS, which subsequently paid to
Nationwide Corp., as a dividend on February 24, 1997 as a part of
certain transactions that were completed in anticipation of NFS'
initial public offering. Also, during 1997, the Company recorded a
realized loss of $16.2 million related to the sale of a single
corporate bond investment that had deteriorated due to the credit
quality of the issuer.
16
17
PROPOSED LEGISLATION
The Clinton Administration's 1999 budget proposal contains
provisions which, if enacted, would eliminate many tax benefits
currently afforded to annuity products and certain life insurance
products. These provisions appear to be inconsistent with what the
Company believes to be the Administration's desire to encourage
private sector long-term savings.
Currently, policyholders are permitted to exchange life insurance,
endowment or annuity contracts for similar contracts without being
required to pay tax on the accretion of value within the contracts
being transferred in the exchange. In addition, policyholders who
hold variable annuity or life insurance contracts are currently
permitted to transfer funds between various investment options
offered under such contracts on a tax-free basis. The 1999 budget
proposal, if enacted in its current form, would make all exchanges
involving insurance contracts immediately taxable. In addition,
under the budget proposal each investment option offered under a
single variable contract would be treated as a separate variable
contract, and thus transfers of funds between different investment
options would cause the amounts transferred to be subject to tax,
to the extent there has been accretion in value. The budget
proposal would also reduce policyholders' tax basis in annuity and
life insurance contracts by the mortality and expense charges
paid, increasing future taxable gains. Most of the tax benefits of
corporate-owned life insurance products would also be eliminated
by the budget proposal.
The Company supports social policy that encourages private sector
savings, and believes that the provisions contained in the budget
proposal clearly run counter to that goal. Annuity products are
specifically designed for long-term and retirement savings and
play an important role in millions of individuals' financial
protection plans. However, there can be no assurance as to whether
legislation will be enacted which would contain provisions with
possible adverse effects on the Company's ability to sell its
annuity and life insurance products.
ITEM 8 CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ------ --------------------------------------------------------
The consolidated financial statements of Nationwide Life Insurance
Company and Subsidiaries are included in a separate section of
this report which is indexed in Item 14 - Exhibits, Financial
Statement Schedules, and Reports on Form 8-K.
Semi-annual and annual reports are sent to contract owners of the
variable annuity and life insurance contracts issued through
registered Separate Accounts of the Company.
ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- ------ ---------------------------------------------------------------
FINANCIAL DISCLOSURES
---------------------
None.
17
18
PART III
ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- ------- --------------------------------------------------
Omitted due to reduced disclosure format.
ITEM 11 EXECUTIVE COMPENSATION
- ------- ----------------------
Omitted due to reduced disclosure format.
ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- ------- --------------------------------------------------------------
Omitted due to reduced disclosure format.
ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- ------- ----------------------------------------------
Omitted due to reduced disclosure format.
PART IV
ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
- ------- ----------------------------------------------------------------
Page
---------------
CONSOLIDATED FINANCIAL STATEMENTS:
Independent Auditors' Report F-1
Consolidated Balance Sheets as of December 31, 1997 and 1996 F-2
Consolidated Statements of Income for the years ended December 31, 1997, 1996 and 1995 F-3
Consolidated Statements of Shareholder's Equity for the years ended December 31, 1997,
1996 and 1995 F-4
Consolidated Statements of Cash Flows for the years ended December 31, 1997, 1996
and 1995 F-5
Notes to Consolidated Financial Statements F-6
FINANCIAL STATEMENT SCHEDULES:
Schedule I Consolidated Summary of Investments - Other Than Investments in
Related Parties as of December 31, 1997 F-25
Schedule III Supplementary Insurance Information as of December 31, 1997, 1996 and
1995 and for each of the years then ended F-26
Schedule IV Reinsurance as of December 31, 1997, 1996 and 1995 and for each of the
years then ended F-27
Schedule V Valuation and Qualifying Accounts for the years ended December 31,
1997, 1996 and 1995 F-28
All other schedules are omitted because they are not applicable or
not required, or because the required information has been
included in the audited consolidated financial statements or notes
thereto
EXHIBIT INDEX 21
18
19
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
NATIONWIDE LIFE INSURANCE COMPANY (Registrant)
By /s/ Dimon R. McFerson
-------------------------------------------------
Dimon R. McFerson, Chairman and Chief Executive
Officer - Nationwide Insurance Enterprise
Date: March 4, 1998
19
20
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities indicated on March 4, 1998.
/s/ Dimon R. McFerson /s/ Joseph J. Gasper
- ------------------------------------------------------------ ----------------------------------------------------------
Dimon R. McFerson, Chairman and Chief Executive Joseph J. Gasper, President and Chief Operating
Officer - Nationwide Insurance Enterprise and Director Officer and Director
/s/ Lewis J. Alphin /s/ Keith W. Eckel
- ------------------------------------------------------------ ----------------------------------------------------------
Lewis J. Alphin, Director Keith W. Eckel, Director
/s/ Willard J. Engel /s/ Fred C. Finney
- ------------------------------------------------------------ ----------------------------------------------------------
Willard J. Engel, Director Fred C. Finney, Director
/s/ Charles L. Fuellgraf, Jr. /s/ Henry S. Holloway
- ------------------------------------------------------------ ----------------------------------------------------------
Charles L. Fuellgraf, Jr., Director Henry S. Holloway, Director
/s/ David O. Miller /s/ C. Ray Noecker
- ------------------------------------------------------------ ----------------------------------------------------------
David O. Miller, Director C. Ray Noecker, Director
/s/ James F. Patterson /s/ Arden L. Shisler
- ------------------------------------------------------------ ----------------------------------------------------------
James F. Patterson, Director Arden L. Shisler, Director
/s/ Robert L. Stewart /s/ Nancy C. Thomas
- ------------------------------------------------------------ ----------------------------------------------------------
Robert L. Stewart, Director Nancy C. Thomas, Director
/s/ Harold W. Weihl /s/ Robert A. Oakley
- ------------------------------------------------------------ ----------------------------------------------------------
Harold W. Weihl, Director Robert A. Oakley, Executive Vice President - Chief
Financial Officer
/s/ Mark R. Thresher
- ------------------------------------------------------------
Mark R. Thresher, Vice President - Controller
(Chief Accounting Officer)
20
21
EXHIBIT INDEX
Exhibit Page
- ---------- ----
3.1 Amended Articles of Incorporation of Nationwide Life Insurance
Company, dated March 14, 1986 23
3.2 Form of Amended and Restated Code of Regulations of Nationwide
Life Insurance Company (previously filed as Exhibit 3 to Form
10-K, Commission File Number 2-28596, filed March 28, 1997,
and incorporated herein by reference)
10.1 Form of Tax Sharing Agreement among Nationwide Mutual Insurance
Company, Nationwide Corporation and any corporation that may
hereafter be a subsidiary of Nationwide Corporation (previously
filed as Exhibit 10.1 to Form 10-K, Commission File Number 2-28596,
filed March 28, 1997, and incorporated herein by reference)
10.1.1 First Amendment to the Tax Sharing Agreement among Nationwide
Mutual Insurance Company, Nationwide Corporation and any
corporation that may hereafter be a subsidiary of Nationwide
Corporation (previously filed as Exhibit 10.2.1 to Form 10-K,
Commission File Number 1-12785, filed March 31, 1998, and
incorporated herein by reference)
10.2 Form of First Amendment to Cost Sharing Agreement among parties
named therein (previously filed as Exhibit 10.2 to Form 10-K,
Commission File Number 2-28596, filed March 28, 1997, and
incorporated herein by reference)
10.3 Modified Coinsurance Agreement between Nationwide Life Insurance
Company and Nationwide Mutual Insurance Company (previously filed
as Exhibit 10.3 to Form 10-K, Commission File Number 2-28596, filed
March 28, 1997, and incorporated herein by reference)
10.4 Modified Coinsurance Agreement between Employers Life Insurance
Company of Wausau and Nationwide Life Insurance Company (previously
filed as Exhibit 10.4 to Form 10-K, Commission File Number 2-28596,
filed March 28, 1997, and incorporated herein by reference)
10.5 Credit Facility, dated August 12, 1996, among Nationwide Life
Insurance Company, Nationwide Mutual Insurance Company, the banks
named therein and Morgan Guaranty Trust Company of New York, the
administrative agent (previously filed as Exhibit 10.5 to Form
10-K, Commission File Number 2-28596, filed March 28, 1997, and
incorporated herein by reference)
10.5.1 Amendment dated as of September 8, 1997 to the Credit Agreement
dated as of August 12, 1996 among Nationwide Mutual Insurance
Company, Nationwide Life Insurance Company, the banks party thereto
and Morgan Guaranty Trust Company of New York, as administrative
agent (previously filed as Exhibit 10(a) to Form 10-Q for the
quarterly period ended September 30, 1997, Commission File Number
1-12785, filed November 13, 1997, and incorporated herein by
reference)
10.6 Form of Lease Agreement between Nationwide Life Insurance Company
and Nationwide Mutual Insurance Company (previously filed as
Exhibit 10.6 to Form 10-K, Commission File Number 2-28596, filed
March 28, 1997, and incorporated herein by reference)
10.7 General Description of Nationwide Insurance Enterprise Executive
Incentive Plan (previously filed as Exhibit 10.7 to Form 10-K,
Commission File Number 2-28596, filed March 28, 1997, and
incorporated herein by reference)
10.8 General Description of Nationwide Insurance Enterprise Management
Incentive Plan (previously filed as Exhibit 10.8 to Form 10-K,
Commission File Number 2-28596, filed March 28, 1997, and
incorporated herein by reference)
10.9 Nationwide Insurance Enterprise Excess Benefit Plan effective as of
December 31, 1996 (previously filed as Exhibit 10.9 to Form 10-K,
Commission File Number 2-28596, filed March 28, 1997, and
incorporated herein by reference)
10.10 Nationwide Insurance Enterprise Supplemental Retirement Plan
effective as of December 31, 1996 (previously filed as Exhibit
10.10 to Form 10-K, Commission File Number 2-28596, filed March 28,
1997, and incorporated herein by reference)
21
22
10.11 Nationwide Salaried Employees Severance Pay Plan (previously filed
as Exhibit 10.11 to Form 10-K, Commission File Number 2-28596,
filed March 28, 1997, and incorporated herein by reference)
10.12 Nationwide Insurance Enterprise Supplemental Defined Contribution
Plan effective as of January 1, 1996 (previously filed as Exhibit
10.12 to Form 10-K, Commission File Number 2-28596, filed March 28,
1997, and incorporated herein by reference)
10.13 General Description of Nationwide Insurance Enterprise Individual
Deferred Compensation Program previously filed as Exhibit 10.13 to
Form 10-K, Commission File Number 2-28596, filed March 28, 1997,
and incorporated herein by reference)
10.14 General Description of Nationwide Mutual Insurance Company
Directors Deferred Compensation Program (previously filed as
Exhibit 10.14 to Form 10-K, Commission File Number 2-28596, filed
March 28, 1997, and incorporated herein by reference)
10.15 Deferred Compensation Agreement, dated as of September 3, 1979,
between Nationwide Mutual Insurance Company and D. Richard McFerson
(previously filed as Exhibit 10.15 to Form 10-K, Commission File
Number 2-28596, filed March 28, 1997, and incorporated herein by
reference)
27 Financial Data Schedule (electronic filing only)
- ------
All other exhibits referenced by Item 601 of Regulation S-K are not
required under the related instructions or are inapplicable and
therefore have been omitted.
22