10-Q 1 l84675ae10-q.txt NATIONWIDE LIFE INSURANCE COMPANY FORM 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------------------ FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000 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 (I.R.S. Employer Identification No.) incorporation or organization) 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) 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 --- --- All voting stock was held by affiliates of the Registrant on November 1, 2000. COMMON STOCK (par value $1 per share) - 3,814,779 shares issued and outstanding as of November 1, 2000 (Title of Class) THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1)(a) AND (b) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM WITH THE REDUCED DISCLOSURE FORMAT. 2 NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES FORM 10-Q INDEX PART I FINANCIAL INFORMATION Item 1 Unaudited Consolidated Financial Statements 3 Item 2 Management's Narrative Analysis of the Results of Operations 10 Item 3 Quantitative and Qualitative Disclosures About Market Risk 19 PART II OTHER INFORMATION Item 1 Legal Proceedings 20 Item 2 Changes in Securities 20 Item 3 Defaults Upon Senior Securities 20 Item 4 Submission of Matters to a Vote of Security Holders 20 Item 5 Other Information 21 Item 6 Exhibits and Reports on Form 8-K 21 SIGNATURE 22 2 3 PART I - FINANCIAL INFORMATION ITEM 1 UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Consolidated Statements of Income (Unaudited) (in millions)

THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ---------------- ---------------------- 2000 1999 2000 1999 ------ ------ -------- -------- REVENUES Policy charges $ 284.8 $ 231.7 $ 823.5 $ 656.0 Life insurance premiums 51.7 51.5 180.7 153.9 Net investment income 412.6 379.2 1,229.6 1,114.6 Net realized (losses) gains on investments (2.1) 6.2 (15.9) (7.5) Other 3.6 26.6 12.8 66.5 ------ ------ -------- -------- 750.6 695.2 2,230.7 1,983.5 ------ ------ -------- -------- BENEFITS AND EXPENSES Interest credited to policyholder account balances 292.4 272.4 876.9 803.6 Other benefits and claims 56.2 51.7 185.2 146.5 Policyholder dividends on participating policies 8.3 8.7 31.8 30.5 Amortization of deferred policy acquisition costs 91.6 68.6 263.7 196.1 Other operating expenses 125.2 120.2 365.7 333.5 ------ ------ -------- -------- 573.7 521.6 1,723.3 1,510.2 ------ ------ -------- -------- Income before federal income tax expense 176.9 173.6 507.4 473.3 Federal income tax expense 50.9 58.4 157.2 158.8 ------ ------ -------- -------- Net income $ 126.0 $ 115.2 $ 350.2 $ 314.5 ====== ====== ======== ========

See accompanying notes to unaudited consolidated financial statements. 3 4 NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Consolidated Balance Sheets (in millions, except per share amounts)

(UNAUDITED) SEPTEMBER 30, DECEMBER 31, ASSETS 2000 1999 --------- --------- Investments: Securities available-for-sale, at fair value: Fixed maturity securities (cost $14,805.1 in 2000; $15,377.3 in 1999) $ 14,809.8 $ 15,294.0 Equity securities (cost $113.3 in 2000; $84.9 in 1999) 129.1 92.9 Mortgage loans on real estate, net 6,113.0 5,786.3 Real estate, net 285.6 254.8 Policy loans 578.7 519.6 Other long-term investments 84.5 73.8 Short-term investments 613.3 416.0 --------- --------- 22,614.0 22,437.4 --------- --------- Cash 2.0 4.8 Accrued investment income 247.8 238.6 Deferred policy acquisition costs 2,811.6 2,554.1 Other assets 358.1 305.9 Assets held in separate accounts 71,653.7 67,135.1 --------- --------- $ 97,687.2 $ 92,675.9 ========= ========= LIABILITIES AND SHAREHOLDER'S EQUITY Future policy benefits and claims $ 21,804.4 $ 21,861.6 Other liabilities 1,158.4 914.2 Liabilities related to separate accounts 71,653.7 67,135.1 --------- --------- 94,616.5 89,910.9 --------- --------- Shareholder's equity: Capital shares, $1 par value. Authorized 5.0 million shares, issued and Outstanding 3.8 million shares 3.8 3.8 Additional paid-in capital 766.1 766.1 Retained earnings 2,271.2 2,011.0 Accumulated other comprehensive income (loss) 29.6 (15.9) --------- --------- 3,070.7 2,765.0 --------- --------- $ 97,687.2 $ 92,675.9 ========= =========

See accompanying notes to unaudited consolidated financial statements. 4 5 NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Consolidated Statements of Shareholder's Equity (Unaudited) Nine Months Ended September 30, 2000 and 1999 (in millions)

ACCUMULATED ADDITIONAL OTHER TOTAL COMMON PAID-IN RETAINED COMPREHENSIVE SHAREHOLDER'S STOCK CAPITAL EARNINGS INCOME (LOSS) EQUITY --------- ---------- -------- ------------- ------------- BALANCE, JANUARY 1, 1999 $ 3.8 $ 914.7 $ 1,579.0 $ 275.6 $ 2,773.1 Comprehensive income: Net income -- -- 314.5 -- 314.5 Net unrealized losses on securities available-for-sale arising during the period -- -- -- (238.2) (238.2) -------- Total comprehensive income 76.3 -------- Capital contribution -- 26.4 87.9 23.5 137.8 Dividends to shareholder -- (175.0) (11.0) -- (186.0) ---- ------- -------- -------- -------- BALANCE, SEPTEMBER 30, 1999 $ 3.8 $ 766.1 $ 1,970.4 $ 60.9 $ 2,801.2 ==== ======= ======== ======== ======== BALANCE, JANUARY 1, 2000 $ 3.8 $ 766.1 $ 2,011.0 $ (15.9) $ 2,765.0 Comprehensive income: Net income -- -- 350.2 -- 350.2 Net unrealized gains on securities available-for-sale arising during the period -- -- -- 45.5 45.5 -------- Total comprehensive income 395.7 -------- Dividends to shareholder -- -- (90.0) -- (90.0) ---- ------- -------- -------- -------- BALANCE, SEPTEMBER 30, 2000 $ 3.8 $ 766.1 $ 2,271.2 $ 29.6 $ 3,070.7 ==== ======= ======== ======== ========

See accompanying notes to unaudited consolidated financial statements. 5 6 NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Consolidated Statements of Cash Flows (Unaudited) Nine Months Ended September 30, 2000 and 1999 (in millions)

2000 1999 --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 350.2 $ 314.5 Adjustments to reconcile net income to net cash provided by operating activities: Interest credited to policyholder account balances 876.9 803.6 Capitalization of deferred policy acquisition costs (586.8) (481.6) Amortization of deferred policy acquisition costs 263.7 196.1 Amortization and depreciation (7.4) 3.3 Realized losses on investments, net 15.9 7.5 Increase in accrued investment income (9.2) (17.6) (Increase) decrease in other assets (53.3) 38.6 Increase (decrease) in policy liabilities 0.5 (17.1) Increase in other liabilities 269.7 39.1 Other, net 27.4 (0.6) --------- --------- Net cash provided by operating activities 1,147.6 885.8 --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from maturity of securities available-for-sale 2,479.2 1,681.9 Proceeds from sale of securities available-for-sale 432.3 336.1 Proceeds from repayments of mortgage loans on real estate 609.4 350.0 Proceeds from sale of real estate 2.2 5.7 Proceeds from repayments of policy loans and sale of other invested assets 17.2 23.7 Cost of securities available-for-sale acquired (2,345.8) (2,479.9) Cost of mortgage loans on real estate acquired (950.1) (452.2) Cost of real estate acquired (6.1) (11.1) Short-term investments, net (197.3) (20.5) Other, net (116.8) (84.3) --------- --------- Net cash used in investing activities (75.8) (650.6) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES Cash dividends paid (140.0) (188.5) Increase in investment product and universal life insurance product account balances 3,609.4 2,690.9 Decrease in investment product and universal life insurance product account balances (4,544.0) (2,719.7) --------- --------- Net cash used in financing activities (1,074.6) (217.3) --------- --------- Net (decrease) increase in cash (2.8) 17.9 Cash, beginning of period 4.8 3.4 --------- --------- Cash, end of period $ 2.0 $ 21.3 ========= =========

See accompanying notes to unaudited consolidated financial statements. 6 7 NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Unaudited Consolidated Financial Statements Nine Months Ended September 30, 2000 (1) Basis of Presentation --------------------- The accompanying unaudited consolidated financial statements of Nationwide Life Insurance Company and subsidiaries (NLIC or collectively the Company) have been prepared in accordance with generally accepted accounting principles, which differ from statutory accounting practices prescribed or permitted by regulatory authorities, for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all information and footnotes required by generally accepted accounting principles for complete financial statements. The financial information included herein reflects all adjustments (all of which are normal and recurring in nature) which are, in the opinion of management, necessary for a fair presentation of financial position and results of operations. Operating results for all periods presented are not necessarily indicative of the results that may be expected for the full year. All significant intercompany balances and transactions have been eliminated. The accompanying unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes for the year ended December 31, 1999 included in the Company's annual report on Form 10-K. (2) Comprehensive Income -------------------- Comprehensive Income (Loss) includes net income as well as certain items that are reported directly within a separate component of shareholder's equity that bypass net income. Currently, the Company's only component of Other Comprehensive Income (Loss) is unrealized gains (losses) on securities available-for-sale. The related before and after federal income tax amounts are as follows:

THREE MONTHS ENDED NINE MONTHS ENDED (in millions) SEPTEMBER 30, SEPTEMBER 30, -------------------------------------------------------- ---------------------------------------- 2000 1999 2000 1999 ------ ------ ------ ------ Unrealized gains (losses) on securities Available-for-sale arising during the period: Gross $ 116.0 $ (91.6) $ 86.6 $ (487.9) Adjustment to deferred policy acquisition costs (34.9) 15.3 (25.8) 108.7 Related federal income tax (expense) benefit (28.4) 29.9 (21.3) 132.5 ------ ------ ------ ------- Net 52.7 (46.4) 39.5 (246.7) ------ ------ ------ ------- Reclassification adjustment for net (gains) losses on securities available-for-sale realized during the period: Gross (2.9) (2.0) 9.2 13.0 Related federal income tax expense (benefit) 1.0 0.8 (3.2) (4.5) ------ ------ ------ ------- Net (1.9) (1.2) 6.0 8.5 ------ ------ ------ ------- Total Other Comprehensive Income (Loss) $ 50.8 $ (47.6) $ 45.5 $ (238.2) ====== ====== ====== =======

(3) Recently Issued Accounting Standards ------------------------------------ In June 1998, the Financial Accounting Standards Board (FASB) issued Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities" (FAS 133). FAS 133, as amended by Statement Nos. 137 and 138, is effective for fiscal years beginning after June 15, 2000 and establishes accounting and reporting standards for derivative instruments and for hedging activities. The Statement also addresses contracts that contain embedded derivatives, such as certain insurance contracts. FAS 133 requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. The Company plans to adopt this Statement in first quarter 2001 and is currently evaluating the impact on results of operations and financial condition. 7 8 NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Unaudited Consolidated Financial Statements, Continued (4) Segment Disclosures ------------------- The Company uses differences in products as the basis for defining its reportable segments. The Company reports three product segments: Variable Annuities, Fixed Annuities and Life Insurance. The Variable Annuities segment consists of annuity contracts that provide the customer with access to a wide range of investment options, tax-deferred accumulation of savings, asset protection in the event of an untimely death and flexible payout options including lump-sum, systematic withdrawal or a stream of payments for life. The Company's variable annuity products consist almost entirely of flexible premium deferred variable annuity contracts. 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, tax-deferred accumulation of savings and flexible payout options including lump-sum, systematic withdrawal or a stream of payments for life. 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 variable annuity contracts. The Life Insurance segment consists of insurance products, including variable universal life insurance and corporate-owned life insurance products, which provide a death benefit and may also allow the customer to build cash value on a tax-deferred basis. In addition to the product segments, the Company reports corporate revenues and expenses, investments and related investment income supporting capital not specifically allocated to its product segments, certain revenues and expenses of its investment advisor and broker/dealer subsidiary, revenues and expenses related to group annuity contracts sold to Nationwide employee and agent benefit plans and all realized gains and losses on investments in a Corporate and Other segment. The following table summarizes the financial results of the Company's business segments for the three months ended September 30, 2000 and 1999.

VARIABLE FIXED LIFE CORPORATE (in millions) ANNUITIES ANNUITIES INSURANCE AND OTHER TOTAL ------------------------------------ ---------- --------- ---------- --------- -------- 2000 Operating revenue (1) $ 193.5 $ 325.7 $ 187.5 $ 46.0 $ 752.7 Benefits and expenses 105.5 276.4 148.4 43.4 573.7 ------ ------- ------ ------ ------- Operating income before federal income tax expense 88.0 49.3 39.1 2.6 179.0 Net realized losses on investments -- -- -- (2.1) (2.1) ------ ------- ------ ------ ------- Consolidated income before federal income tax expense $ 88.0 $ 49.3 $ 39.1 $ 0.5 $ 176.9 ====== ======= ======= ====== ======= 1999 Operating revenue (1) $ 159.4 $ 292.1 $ 162.5 $ 75.0 $ 689.0 Benefits and expenses 86.3 248.1 130.7 56.5 521.6 ------ ------- ------ ------ ------- Operating income before federal income tax expense 73.1 44.0 31.8 18.5 167.4 Net realized gains on investments -- -- -- 6.2 6.2 ------ ------- ------ ------ ------- Consolidated income before federal income tax expense $ 73.1 $ 44.0 $ 31.8 $ 24.7 $ 173.6 ====== ======= ======= ====== =======

---------- (1) Excludes net realized gains and losses on investments. 8 9 NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Unaudited Consolidated Financial Statements, Continued The following table summarizes the allocation of assets to and the financial results of the Company's business segments for the nine months ended September 30, 2000 and 1999.

VARIABLE FIXED LIFE CORPORATE (in millions) ANNUITIES ANNUITIES INSURANCE AND OTHER TOTAL ------------------------------------ --------- --------- --------- --------- --------- 2000 Operating revenue (1) $ 569.0 $ 975.5 $ 549.7 $ 152.4 $ 2,246.6 Benefits and expenses 311.5 833.8 440.8 137.2 1,723.3 --------- --------- -------- -------- --------- Operating income before federal income taxes 257.5 141.7 108.9 15.2 523.3 Net realized losses on investments -- -- -- (15.9) (15.9) --------- --------- -------- -------- --------- Income (loss) before federal income taxes $ 257.5 $ 141.7 $ 108.9 $ (0.7) $ 507.4 ========= ========= ======== ======== ========= Assets as of period end $66,214.3 $17,226.3 $7,936.0 $6,310.6 $97,687.2 ========= ========= ======== ======== ========= 1999 Operating revenue (1) $ 457.7 $ 866.0 $ 466.9 $ 200.4 $ 1,991.0 Benefits and expenses 247.4 733.2 376.8 152.8 1,510.2 --------- --------- -------- -------- --------- Operating income before federal income taxes 210.3 132.8 90.1 47.6 480.8 Net realized losses on investments -- -- -- (7.5) (7.5) --------- --------- -------- -------- --------- Income before federal income taxes $ 210.3 $ 132.8 $ 90.1 $ 40.1 $ 473.3 ========= ========= ======== ======== ========= Assets as of period end $53,475.8 $16,682.4 $6,018.2 $6,126.3 $82,302.7 ========= ========= ======== ======== =========

---------- (1) Excludes net realized gains and losses on investments. (5) Contingencies ------------- On October 29, 1998, the Company was named in a lawsuit filed in Ohio state court related to the sale of deferred annuity products for use as investments in tax-deferred contributory retirement plans (Mercedes Castillo v. Nationwide Financial Services, Inc., Nationwide Life Insurance Company and Nationwide Life and Annuity Insurance Company). On May 3, 1999, the complaint was amended to, among other things, add Marcus Shore as a second plaintiff. The amended complaint is brought as a class action on behalf of all persons who purchased individual deferred annuity contracts or participated in group annuity contracts sold by the Company and the other named Company affiliates which were used to fund certain tax-deferred retirement plans. The amended complaint seeks unspecified compensatory and punitive damages. No class has been certified. On June 11, 1999, the Company and the other named defendants filed a motion to dismiss the amended complaint. On March 8, 2000, the court denied the motion to dismiss the amended complaint filed by the Company and other named defendants. The Company intends to defend this lawsuit vigorously. 9 10 ITEM 2 MANAGEMENT'S NARRATIVE ANALYSIS OF THE RESULTS OF OPERATIONS INTRODUCTION The following analysis of unaudited consolidated results of operations of the Company should be read in conjunction with the unaudited consolidated financial statements and related notes included elsewhere herein. Management's discussion and analysis contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to the results of operations and businesses of the Company. These forward-looking statements involve certain risks and uncertainties. Factors that may cause actual results to differ materially from those contemplated or projected, forecast, estimated or budgeted in such forward looking statements include, among others, the following possibilities: (i) the potential impact on the Company's reported net income that could result from the adoption of certain accounting standards issued by the FASB; (ii) tax law changes impacting the tax treatment of life insurance and investment products; (iii) heightened competition, including specifically the intensification of price competition, the entry of new competitors and the development of new products by new and existing competitors; (iv) adverse state and federal legislation and regulation, including limitations on premium levels, increases in minimum capital and reserves, and other financial viability requirements; (v) failure to expand distribution channels in order to obtain new customers or failure to retain existing customers; (vi) inability to carry out marketing and sales plans, including, among others, changes to certain products and acceptance of the revised products in the market; (vii) changes in interest rates and the capital markets causing a reduction of investment income or asset fees, reduction in the value of the Company's investment portfolio or a reduction in the demand for the Company's products; (viii) general economic and business conditions which are less favorable than expected; (ix) unanticipated changes in industry trends and ratings assigned by nationally recognized statistical rating organizations or A.M. Best Company, Inc.; and (x) inaccuracies in assumptions regarding future persistency, mortality, morbidity and interest rates used in calculating reserve amounts. RESULTS OF OPERATIONS In addition to net income, the Company reports net operating income, which excludes net realized investment gains and losses. 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.

THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ----------------- ----------------- (in millions) 2000 1999 2000 1999 ------------------------------------------------------ ------ ------ ------ ------ Net income $126.0 $115.2 $350.2 $314.5 Net realized losses (gains) on investments, net of tax 1.3 (4.0) 10.3 4.9 ------ ------ ------ ------ Net operating income $127.3 $111.2 $360.5 $319.4 ====== ====== ====== ======

Revenues Total operating revenues, which exclude net realized gains and losses on investments, for third quarter 2000 increased to $752.7 million compared to $689.0 million for the same period in 1999. For the first nine months of 2000 and 1999, total operating revenues were $2.25 billion and $1.99 billion, respectively. Increases in policy charges and net investment income were the key drivers to revenue growth. 10 11 Policy charges include asset fees, which are primarily earned from separate account assets generated from sales of variable annuities and variable life insurance products; cost of insurance charges earned on universal life insurance products; administration fees, which include fees charged per contract on a variety of the Company's products and premium loads on universal life insurance products; and surrender fees, which are charged as a percentage of premiums withdrawn during a specified period of annuity and certain life insurance contracts. Policy charges for the comparable periods of 2000 and 1999 were as follows:

THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------ ------------------ (in millions) 2000 1999 2000 1999 ------------------------------------ ------ ------ ------ ------ Asset fees $185.6 $159.1 $541.5 $451.7 Cost of insurance charges 40.4 30.5 112.5 84.8 Administrative fees 35.7 28.0 99.6 75.8 Surrender fees 23.1 14.1 69.9 43.7 ------ ------ ------ ------ Total policy charges $284.8 $231.7 $823.5 $656.0 ====== ====== ====== ======

The growth in asset fees reflects a 25% increase in total separate account assets which reached $71.65 billion as of September 30, 2000 compared to $57.25 billion a year ago. Continued strong sales of variable annuity and variable life insurance products as well as market appreciation have contributed significantly to the increase in separate account assets. Cost of insurance charges are assessed as a percentage of the net amount at risk on universal life insurance policies. The net amount at risk is equal to a policy's death benefit minus the related policyholder account value. The increase in cost of insurance charges is due primarily to growth in the net amount at risk related to individual investment life insurance reflecting expanded distribution and increased customer demand for variable life insurance products. The net amount at risk related to individual variable universal life insurance grew to $23.05 billion as of September 30, 2000 compared to $18.38 billion a year ago. The growth in administrative fees is attributable to a significant increase in premiums on individual variable life policies and certain corporate-owned life policies where the Company collects a premium load. The increase in surrender charges is primarily attributable to policyholder withdrawals in the Variable Annuities segment, and reflects the overall increase in variable annuity policy reserves and an increase in surrender rates in the first nine months of 2000. 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 $379.2 million in the third quarter of 1999 to $412.6 million in the third quarter of 2000 and from $1.11 billion in the first nine months of 1999 to $1.23 billion in the first nine months of 2000. The increases were primarily due to increased invested assets to support growth in fixed annuity policy reserves coupled with an increase in average yield on the investment portfolio. Fixed annuity policy reserves, which include the fixed option of variable annuity contracts, increased $460.5 million to $16.61 billion as of the end of third quarter 2000 compared to $16.15 billion a year ago. Other income totaled $3.6 million in third quarter 2000, a decrease of $23.0 million from third quarter 1999. For the first nine months of 2000, other income totaled $12.8 million compared to $66.5 million in the first nine months of 1999. The decrease is due to the assignment of the Company's investment advisory and related agreements associated with Nationwide mutual funds to an affiliate. 11 12 The Company does not consider net realized gains and losses on investments to be recurring components of earnings. The Company makes decisions concerning the sale of invested assets based on a variety of market, business, tax and other factors. Net realized (losses) gains on investments were $(2.1) million and $6.2 million for third quarter 2000 and 1999, respectively. The Company reported net realized losses on investments of $15.9 million and $7.5 million for the first nine months of 2000 and 1999, respectively. During the first nine months of 2000 the Company recognized a total of $10.5 million of realized losses on two fixed maturity security holdings. Benefits and Expenses Total benefits and expenses were $573.7 million in third quarter 2000, a 10% increase over third quarter 1999, while year-to-date 2000 benefits and expenses were $1.72 billion compared to $1.51 billion a year ago. The increase is due mainly to growth in amortization of deferred acquisition costs (DAC) and interest credited. Additionally, other policyholder benefits and other operating expenses were up approximately 6% compared to the year ago third quarter and up 15% compared to the nine-month period a year ago. The significant growth in the Variable Annuities segment business coupled with an increase in lapse rates, which resulted in additional surrender fee income, are the primary reasons for the increase in amortization of DAC, which totaled $91.6 million and $68.6 million in third quarter 2000 and 1999, respectively. On a year-to-date basis, amortization of DAC totaled $263.7 million in 2000 compared to $196.1 million in 1999. Consistent with the growth in fixed annuity business and higher crediting rates, interest credited increased to $292.4 million for the third quarter of 2000 compared to $272.4 million a year ago. For the first nine months of 2000, interest credited increased $73.3 million to $876.9 million as compared to 1999. Federal income tax expense was $50.9 million in third quarter 2000 compared to $58.4 million in third quarter 1999, representing effective tax rates of 28.8% and 33.6% for third quarter 2000 and 1999 respectively. For the first nine months of 2000 and 1999 federal income tax expense was $157.2 million and $158.8 million, representing effective tax rates of 31.0% and 33.6%, respectively. An increase in tax exempt income and investment tax credits resulted in the decrease in effective rates. Recently Issued Accounting Standards See note 3 to the unaudited consolidated financial statements for a discussion of recently issued accounting standards. Sales Information The following table summarizes total Company sales, excluding internal replacements, by business segment.

THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------------ ------------------------ (in millions) 2000 1999 2000 1999 ----------------------------------------------- --------- --------- --------- --------- Variable annuity deposits $ 2,801.0 $ 2,470.2 $ 9,357.5 $ 7,552.5 Fixed annuity deposits 785.8 756.2 2,372.1 2,122.5 Life insurance premiums 367.9 311.0 1,075.2 763.4 --------- --------- --------- --------- Total core premiums and deposits 3,954.7 3,537.4 12,804.8 10,438.4 Internal replacements (451.3) (169.7) (1,344.8) (425.3) --------- --------- --------- --------- Total core sales 3,503.4 3,367.7 11,460.0 10,013.1 --------- --------- --------- --------- Bank-owned life insurance (BOLI) -- -- 328.7 86.7 Institutional products 484.2 316.9 808.7 316.9 Nationwide employee and agent benefit plans 103.8 92.1 239.7 282.2 --------- --------- --------- --------- Total sales $ 4,091.4 $ 3,776.7 $12,837.1 $10,698.9 ========= ========= ========= =========

12 13 Total core sales represent amounts that are recurring and are the sales figures management uses to set and evaluate the Company's sales goals. The Company reports statutory premiums and deposits related to life insurance and annuity products as core sales. Sales of institutional products represent sales of funding agreements that secure notes issued to foreign investors through a third party trust under the Company's $2 billion medium-term note program. The program was launched in July 1999 as a means to expand spread based product offerings. The Company excludes institutional products and BOLI sales as well as deposits into Nationwide employee and agent benefit plans from its targeted core sales. Although funding agreements and BOLI contribute to asset and earnings growth, they do not produce steady production flow that lends itself to meaningful comparisons. BOLI sales in 2000 include $300.0 million from an affiliate. Also, included in the third quarter and nine-month sales in 2000 is $70.0 million of corporate-owned life insurance from an affiliate, which is reported in the Nationwide employee and agent benefit plans. The Company also excludes internal replacements from core sales. Total core sales reached $3.50 billion in the third quarter of 2000, an increase of 4% over 1999, while year-to-date core sales increased 14% over 1999. Total annuity sales, net of internal replacements, contributed $3.14 billion and $3.06 billion in the third quarter of 2000 and 1999, respectively. Core life insurance sales for third quarter 2000 were up 18% to $367.9 million with individual variable universal life and corporate-owned life products leading the growth. The Company sells its products through a broad distribution network. Unaffiliated entities that sell the Company's products to their own customer base include independent broker/dealers, brokerage firms, pension plan administrators, life insurance specialists and financial institutions. Representatives of the Company or its affiliates who market products directly to a customer base identified by the Company include Nationwide Retirement Solutions sales representatives and Nationwide agents. Core sales by distribution channel are summarized as follows:

THREE MONTHS ENDED, NINE MONTHS ENDED, SEPTEMBER 30, SEPTEMBER 30, --------------------- ----------------------- (in millions) 2000 1999 2000 1999 ---------------------------------------- -------- -------- --------- --------- Independent broker/dealers $1,449.2 $1,331.6 $ 4,593.2 $ 3,952.6 Brokerage firms 294.5 207.3 902.8 655.7 Financial institutions 743.6 609.4 2,148.0 1,780.3 Pension plan administrators 228.7 261.2 819.6 934.4 Nationwide Retirement Solution sales representatives 447.9 623.0 1,894.4 1,830.9 Nationwide agents 184.6 189.5 619.5 573.0 Life specialists 154.9 145.7 482.5 286.2 -------- -------- --------- --------- Total core sales $3,503.4 $3,367.7 $11,460.0 $10,013.1 ======== ======== ========= =========

Sales through independent broker/dealers increased 9% and 16% for the three months and nine months ended September 30, 2000, respectively. The hiring of additional wholesalers and certain product enhancements have contributed to the growth. Sales through financial institutions increased as we continue to add banks which sell our products. The Company's flagship products are marketed under The BEST of AMERICA(R) brand, and include individual and group variable annuities and variable life insurance. The BEST of AMERICA(R) products allow customers to choose from investment options managed by premier mutual fund managers. The Company has also developed private label variable and fixed annuity products in conjunction with other financial services providers which allow those providers to sell 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. 13 14 Core sales by product are summarized as follows:

THREE MONTHS ENDED, NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, -------------------- ----------------------- (in millions) 2000 1999 2000 1999 ------------------------------------------- -------- -------- --------- --------- BEST of AMERICA(R) products $1,430.2 $1,176.4 $ 4,371.8 $ 3,609.1 Private label annuities 235.6 321.8 784.3 987.0 Other 133.6 106.5 411.9 301.1 -------- -------- --------- --------- Total individual annuities 1,799.4 1,604.7 5,568.0 4,897.2 -------- -------- --------- --------- BEST of AMERICA(R) group pension series 897.3 891.7 3,046.4 2,681.0 IRC Section 457 annuities 427.7 550.9 1,733.0 1,603.4 Other 11.1 9.4 37.4 68.1 -------- -------- --------- --------- Total group annuities 1,336.1 1,452.0 4,816.8 4,352.5 -------- -------- --------- --------- BEST of AMERICA(R) variable life series 155.8 107.8 419.2 297.9 Corporate-owned life insurance 152.9 145.7 476.2 286.2 Traditional/Universal life insurance 59.2 57.5 179.8 179.3 -------- -------- --------- --------- Total life insurance 367.9 311.0 1,075.2 763.4 -------- -------- --------- --------- Total core sales $3,503.4 $3,367.7 $11,460.0 $10,013.1 ======== ======== ========= =========

BUSINESS SEGMENTS The Company has three product segments: Variable Annuities, Fixed Annuities and Life Insurance. In addition, the Company reports certain other revenues and expenses 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.

THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------- ------------------- (in millions) 2000 1999 2000 1999 ---------------------------------- ------ ------ ------ ------ Variable Annuities $ 88.0 $ 73.1 $257.5 $210.3 Fixed Annuities 49.3 44.0 141.7 132.8 Life Insurance 39.1 31.8 108.9 90.1 Corporate and Other 2.6 18.5 15.2 47.6 ------ ------ ------ ------ $179.0 $167.4 $523.3 $480.8 ====== ====== ====== ======

Variable Annuities The Variable Annuities segment consists of annuity contracts that provide the customer with access to a wide range of investment options, tax-deferred accumulation of savings, asset protection in the event of an untimely death and flexible payout options including lump-sum, systematic withdrawal or a stream of payments for life. The Company's variable annuity products consist almost entirely of flexible premium deferred variable annuity contracts. 14 15 The following table summarizes certain selected financial data for the Company's Variable Annuities segment for the periods indicated.

THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------------ --------------------- (in millions) 2000 1999 2000 1999 ------------------------------------------------------- --------- --------- -------- -------- INCOME STATEMENT DATA Revenues $ 193.5 $ 159.4 $ 569.0 $ 457.7 Benefits and expenses 105.5 86.3 311.5 247.4 --------- --------- -------- -------- Operating income before federal income tax expense $ 88.0 $ 73.1 $ 257.5 $ 210.3 ========= ========= ======== ======== OTHER DATA Statutory premiums and deposits (1) $ 2,801.0 $ 2,470.2 $9,357.5 $7,552.5 Policy reserves as of period end: Individual $38,781.2 $32,106.0 Group 25,145.2 19,993.0 --------- --------- Total $63,926.4 $52,099.0 ========= ========= Pre-tax operating income to average policy reserves 0.55% 0.56% 0.55% 0.56%

---------- (1) Statutory amounts have been derived from the Quarterly Statements of the Company's life insurance subsidiaries, as filed with insurance regulatory authorities and prepared in accordance with statutory accounting practices which differ from Generally Accepted Accounting Principles. Variable annuity segment results reflect substantially increased asset fee revenue partially offset by increases in DAC amortization and other operating expenses. Asset fees increased to $179.6 million in the third quarter of 2000, up 16% from $154.6 million in the same period a year ago. For the first nine months of 2000, asset fees totaled $524.9 million up 20% from the first nine months of 1999. The increase in asset fees is due to continued growth in variable annuity policy reserve levels resulting from increased variable annuity sales and market appreciation on investments underlying reserves. Variable annuity policy reserves declined $99.9 million during third quarter 2000 and totaled $63.93 billion as of September 30, 2000 due to $803.8 million of policy reserves reinsured during the quarter. However, during the first nine months of 2000 reserves have increased $2.73 billion and are up 23% compared to a year ago. Variable annuity deposits increased 13% for the third quarter 2000, reaching $2.80 billion compared to $2.47 billion in the year ago quarter. Variable annuity deposits grew 24% in 2000 compared to the first nine months of 1999, reaching $9.36 billion. Nearly all channels contributed to the growth in 2000. Less favorable equity market conditions during the first nine months of 2000 have slowed the growth in variable annuity policy reserves. Variable annuity policy reserves reflect market appreciation of $739.5 million during the first nine months of 2000. Over the past twelve months, variable annuity policy reserves have increased $9.44 billion as a result of market appreciation, due mainly to $8.70 billion of market appreciation in the fourth quarter of 1999. 15 16 Offsetting the growth in policy reserves attributable to an increase in deposits and market appreciation was an increase in policyholder surrender activity. Excluding the impact of internal replacements and transfers to the assets managed and administered segment, surrenders as a percentage of average reserves were 13%, annualized, in third quarter 2000, compared to 10% in third quarter 1999. The surrender rate in the first nine months of 2000 was 14%, annualized, as compared to 10% for the first nine months of 1999. The increase in surrender activity is attributable to an increase in competition in the individual variable annuity market which has increased transfers to competitor products and the overall aging of the Company's book of business. The Company introduced new products, new product features and new retention strategies during first quarter 2000 in an effort to decrease the rate of surrenders. The rate of surrenders in third quarter 2000 remains unchanged from second quarter 2000. However, the rate of surrenders has declined 200 basis points to an annualized rate of 13% from the first quarter 2000 rate of 15%. Amortization of DAC increased 47% to $60.2 million in third quarter 2000 compared to $40.9 million in third quarter 1999. DAC amortization for the first nine months of 2000 increased to $172.2 million compared to $115.1 million for the first nine months of 1999. Operating expenses of $44.0 million in third quarter 2000 were flat compared to third quarter 1999, while year-to-date 2000 operating expenses were $136.3 million compared to $130.7 million in 1999. The growth in DAC amortization and operating expenses reflect the overall growth in the variable annuity business. The increase in DAC amortization also reflects the increase in policyholder surrenders. 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, tax-deferred accumulation of savings and flexible payout options including lump-sum, systematic withdrawal or a stream of payments for life. 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 Fixed Annuities segment for the periods indicated.

THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------------ --------------------- (in millions) 2000 1999 2000 1999 -------------------------------------------------------- --------- --------- -------- -------- INCOME STATEMENT DATA Revenues: Net investment income $ 310.8 $ 281.5 $ 919.2 $ 834.9 Other 14.9 10.6 56.3 31.1 --------- --------- -------- -------- 325.7 292.1 975.5 866.0 --------- --------- -------- -------- Benefits and expenses: Interest credited to policyholder account balances 227.0 208.9 674.6 613.6 Other benefits and expenses 49.4 39.2 159.2 119.6 --------- --------- -------- -------- 276.4 248.1 833.8 733.2 --------- --------- -------- -------- Operating income before federal income tax expense $ 49.3 $ 44.0 $ 141.7 $ 132.8 ========= ========= ======== ======== OTHER DATA Statutory premiums and deposits (1) $ 1,270.0 $ 1,073.1 $3,180.8 $2,439.4 Policy reserves as of period end: Individual $ 7,507.2 $ 7,765.1 Group 7,818.5 8,048.3 Institutional 1,287.2 336.4 --------- --------- Total $16,612.9 $16,149.8 ========= ========= Pre-tax operating income to average policy reserves 1.20% 1.13% 1.15% 1.16%

16 17 ---------- (1) Statutory amounts have been derived from the Quarterly Statements of the Company's life insurance subsidiaries, as filed with insurance regulatory authorities and prepared in accordance with statutory accounting practices, which differ from Generally Accepted Accounting Principles. Fixed annuity segment results reflect an increase in interest spread income attributable to growth in fixed annuity policy reserves. 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, including the rate of prepayments, changes in market interest rates and other factors. The following table depicts the interest spreads on general account policy reserves in the Fixed Annuities segment.

THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ---------------- ---------------- 2000 1999 2000 1999 ---- ---- ---- ---- Net investment income 7.91% 7.48% 7.79% 7.57% Interest credited 5.78 5.55 5.72 5.57 ---- ---- ---- ---- 2.13% 1.93% 2.07% 2.00% ==== ==== ==== ====

Recent increases in interest rates have slowed mortgage loan and bond prepayment activity and the Company anticipates interest spreads over the next several quarters to range between 200 and 210 basis points, excluding the impact of mortgage loan and bond prepayment income. Fixed annuity policy reserves increased to $16.61 billion as of September 30, 2000 compared to $16.59 billion as of the end of 1999 and $16.15 billion a year ago. Third quarter fixed annuity premiums and deposits increased to $1.27 billion in 2000 compared to $1.07 billion in 1999 while sales for the first nine months of 2000 increased to $3.18 billion from $2.44 billion in 1999. Sales of institutional products were $484.2 million and $808.7 million during third quarter 2000 and the first nine months of 2000, respectively, compared to $316.9 in the third quarter and first nine months of 1999. Most of the Company's fixed annuity sales are premiums and deposits allocated to the fixed option of variable annuity contracts. Third quarter 2000 fixed annuity sales include $626.1 million in premiums allocated to the fixed option under a variable annuity contract, compared to $658.3 million in third quarter 1999. The increase in fixed annuity premiums and deposits is primarily attributable to sales of institutional products in the form of funding agreements issued in connection with the Company's medium-term note program partially offset by a decrease in the fixed option of variable annuity contract deposits in the third quarter of 2000 as compared to the third quarter of 1999. Other benefits and expenses increased 26% to $49.4 million in third quarter 2000 compared to a year ago. For the first nine months of 2000, other benefits and expenses totaled $159.2 million, up 33% from the first nine months of 1999. The increase primarily reflects an increase in immediate annuity benefits due to growth in new sales and contracts in force. Life Insurance The Life Insurance segment consists of insurance products, including variable universal life insurance and corporate-owned life insurance products, which provide a death benefit and may also allow the customer to build cash value on a tax-advantaged basis. 17 18 The following table summarizes certain selected financial data for the Company's Life Insurance segment for the periods indicated.

THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, --------------------- ------------------- (in millions) 2000 1999 2000 1999 ------------------------------------------------------ -------- -------- -------- ------ INCOME STATEMENT DATA Revenues $ 187.5 $ 162.5 $ 549.7 $466.9 Benefits and expenses 148.4 130.7 440.8 376.8 -------- -------- -------- ------ Operating income before federal income tax expense $ 39.1 $ 31.8 $ 108.9 $ 90.1 ======== ======== ======== ====== OTHER DATA Statutory premiums (1): Traditional and universal life insurance $ 59.2 $ 57.5 $ 179.8 $179.3 Individual investment life insurance 155.8 107.8 419.2 298.0 Corporate investment life insurance 222.9 145.7 874.9 372.8 -------- -------- -------- ------ Total $ 437.9 $ 311.0 $1,473.9 $850.1 ======== ======== ======== ====== Policy reserves as of period end: Traditional and universal life insurance $2,577.7 $2,525.5 Individual investment life insurance 2,152.1 1,532.9 Corporate investment life insurance 2,378.8 1,288.1 -------- -------- Total $7,108.6 $5,346.5 ======== ========

---------- (1) Statutory amounts have been derived from the Quarterly Statements of the Company's life insurance subsidiaries, as filed with insurance regulatory authorities and prepared in accordance with statutory accounting practices, which differ from Generally Accepted Accounting Principles. Life Insurance segment results reflect increased revenues driven by growth in investment life insurance in force and policy reserves, partially offset by higher benefits and expense levels. The increase in Life Insurance segment earnings is attributable to strong growth in investment life insurance products, which include individual variable universal life insurance and corporate investment life insurance, where the Company has aggressively expanded its distribution capabilities. Revenues from investment life products increased to $83.9 million in third quarter 2000 from $61.9 million in third quarter 1999 as a result of the sales growth and high persistency. On a year-to-date basis, investment life product revenues increased to $232.9 million in 2000 from $165.6 million in 1999. Individual investment life insurance statutory premiums increased 45% for the third quarter 2000 reaching $155.8 million compared to $107.8 million in third quarter 1999. Corporate investment life insurance statutory premiums reflected strong growth reaching $222.9 million in third quarter 2000, including $70 million in sales to an affiliate, compared to $145.7 million in third quarter 1999. Total investment life insurance in force reached $30.83 billion at September 30, 2000 representing 49% of all life insurance in force compared to $23.62 billion and 45% a year ago. Interest credited to policyholders increased $7.8 million in third quarter 2000 reaching $40.0 million compared to $32.2 million in the year ago third quarter. For the first nine months of 2000, interest credited to policyholders totaled $114.6 million, an increase of $18.2 million over 1999. Increased corporate investment life insurance business accounted for most of the increases. Corporate investment fixed life insurance reserves increased 47% to $1.38 billion as of September 30, 2000 compared to $939.5 million a year ago. Other policy benefits increased $3.2 million and $17.4 million, respectively, in the three and nine months ended September 30, 2000 over comparable periods in 1999, reflecting growth in insurance in force and an increase in claims. 18 19 Corporate and Other The following table summarizes certain selected financial data for the Corporate and Other segment for the periods indicated.

THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, -------------- ----------------- (in millions) 2000 1999 2000 1999 ---------------------------------------------------------- ----- ----- ------ ------ INCOME STATEMENT DATA Revenues $46.0 $75.0 $152.4 $200.4 Benefits and expenses 43.4 56.5 137.2 152.8 ----- ----- ------ ------ Operating income before federal income tax expense (1) $ 2.6 $18.5 $ 15.2 $ 47.6 ===== ===== ====== ======

---------- (1) Excludes net realized gains and losses on investments. Revenues in the Corporate and Other segment consist of net investment income on invested assets not allocated to the three product segments, certain revenues and expenses of the Company's investment advisory and broker/dealer subsidiary, and net investment income and policy charges from group annuity contracts issued to Nationwide employee and agent benefit plans. During the third quarter 1999, the Company assigned its investment advisory and related agreements associated with Nationwide mutual funds to an affiliate. The decrease in revenues reflects an increase in net investment income offset by a decrease in investment advisory and related fees. The decrease in benefits and expenses is attributable to elimination costs associated with investment advisory activities effective third quarter 1999. In addition to the operating revenues previously presented, the Company also reports net realized gains and losses on investments in the Corporate and Other segment. The Company realized net investment (losses) gains of $(2.1) million and $6.2 million during the third quarter of 2000 and 1999, respectively. ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Omitted due to reduced disclosure format. 19 20 PART II - OTHER INFORMATION ITEM 1 LEGAL PROCEEDINGS The Company is a party to litigation and arbitration proceedings in the ordinary course of its business, none of which is expected to have a material adverse effect on the Company. In recent years, life insurance companies have been named as defendants in lawsuits, including class action lawsuits, relating to life insurance and annuity pricing and sales practices. A number of these lawsuits have resulted in substantial jury awards or settlements. As was previously disclosed in the Company's Form 10-Q for the quarterly period ended March 31, 2000, the Robert Young and David D. Distad v. Nationwide Life Insurance Company et al lawsuit was dismissed by the court with prejudice on February 9, 2000. On October 29, 1998, the Company was named in a lawsuit filed in Ohio state court related to the sale of deferred annuity products for use as investments in tax-deferred contributory retirement plans (Mercedes Castillo v. Nationwide Financial Services, Inc., Nationwide Life Insurance Company and Nationwide Life and Annuity Insurance Company). On May 3, 1999, the complaint was amended to, among other things, add Marcus Shore as a second plaintiff. The amended complaint is brought as a class action on behalf of all persons who purchased individual deferred annuity contracts or participated in group annuity contracts sold by the Company and the other named Company affiliates which were used to fund certain tax-deferred retirement plans. The amended complaint seeks unspecified compensatory and punitive damages. No class has been certified. On June 11, 1999, the Company and the other named defendants filed a motion to dismiss the amended complaint. On March 8, 2000, the court denied the motion to dismiss the amended complaint filed by the Company and other named defendants. The Company intends to defend this lawsuit vigorously. There can be no assurance that any litigation relating to pricing or sales practices will not have a material adverse effect on the Company in the future. ITEM 2 CHANGES IN SECURITIES AND USE OF PROCEEDS Omitted due to reduced disclosure format. ITEM 3 DEFAULTS UPON SENIOR SECURITIES Omitted due to reduced disclosure format. ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Omitted due to reduced disclosure format. 20 21 ITEM 5 OTHER INFORMATION None. ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: 10.26 Form of Employment Agreement, dated May 26, 2000, between Nationwide Mutual Insurance Company and W.G. Jurgensen (filed as exhibit 10.32 to Form 10-Q, Commission File Number 1-12785, filed November 13, 2000) 10.27 Form of Employment Agreement, dated July 1, 2000, between Nationwide Financial Services, Inc. and Joseph Gasper (filed as exhibit 10.33 to Form 10-Q, Commission File Number 1-12785, filed November 13, 2000) 10.28 Form of Retention Agreement, dated July 1, 2000, between Nationwide Financial Services, Inc. and Joseph Gasper (filed as exhibit 10.34 to Form 10-Q, Commission File Number 1-12785, filed November 13, 2000) 27 Financial Data Schedule (electronic filing only) (b) Reports on Form 8-K: No reports on Form 8-K were filed during the three-month period ended September 30, 2000. 21 22 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. NATIONWIDE LIFE INSURANCE COMPANY --------------------------------- (Registrant) Date: November 13, 2000 /s/Mark R. Thresher ---------------------------------- Mark R. Thresher Senior Vice President - Finance - Nationwide Financial (Chief Accounting Officer) 22