1933 Act File No. 333-________
United States
Securities and Exchange Commission
Washington, D.C. 20549
Form S-1
Registration Statement
Under
The Securities Act of 1933
Nationwide Life Insurance Company
(Exact name of registrant as specified in its charter)
OHIO | 6311 | 31-4156830 | ||
(State or other jurisdiction of incorporation or organization) | (Primary Standard Industrial Classification Code Number) | (I.R.S. Employer Identification Number) |
One Nationwide Plaza, Columbus, Ohio 43215
(Address, including zip code, and telephone number, including area code,
of registrant'sregistrant’s principal executive offices)
Denise L. Skingle
Vice President – Corporate Governance and Secretary
One Nationwide Plaza
Columbus, Ohio 43215
Telephone: (614) 249-7111
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Approximate date of commencement of proposed sale to the public: May 1, 2020
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large”large accelerated filer," "accelerated
Large accelerated filer |
☐ | Accelerated filer | ☐ | ||||||||
Non-accelerated filer | ☒ (Do not check if a smaller reporting company) |
Smaller reporting company | ☐ | |||||||||
Emerging growth company | ☐ |
Persons who are to respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB control number.
CALCULATION OF REGISTRATION FEE
| ||||||||
Title of Each Class of Securities to be Registered | Amount to be Registered | Proposed Maximum Offering Price Per Unit | Proposed Offering Price, | Amount of including fee paid | ||||
Single Purchase Payment Deferred Index-Linked Annuity Contract | N/A | N/A | $1,446,723.002 | $168.113 | ||||
| ||||||||
|
The amount to be registered and the proposed maximum offering price per unit are not applicable in that these contracts are not issued in predetermined amounts or units. The proposed maximum aggregate offering price is estimated solely for the purpose of determining the registration fee. |
2 | This registration statement includes unsold securities previously registered |
3 | Pursuant to Rule 415(a)(6) under the Securities Act, |
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
The Contract has no cash surrender value and does not provide a death benefit. |
• | Is not a bank deposit |
• | Is not FDIC insured |
• | Is not insured or endorsed by a bank or any government agency |
• | Is not available in every state |
For information on how to contact Nationwide, see |
Page | |
1 | |
1 | |
1 | |
2 | |
3 | |
4 | |
4 | |
15 | |
15 | |
15 | |
16 | |
16 | |
16 | |
16 | |
16 | |
17 | |
17 | |
17 | |
17 | |
17 | |
17 | |
18 | |
18 | |
18 | |
19 | |
19 | |
19 | |
20 | |
20 | |
20 | |
20 | |
21 | |
22 | |
22 | |
22 | |
22 | |
23 | |
25 | |
25 | |
25 | |
25 | |
25 | |
26 | |
26 | |
26 | |
26 | |
26 | |
26 | |
26 |
Page | |
26 | |
27 | |
27 | |
27 | |
28 | |
28 | |
28 | |
28 | |
29 | |
29 | |
29 | |
30 | |
31 | |
32 | |
32 | |
33 | |
36 | |
37 | |
38 | |
38 | |
39 | |
39 | |
39 | |
40 | |
40 | |
40 | |
41 | |
41 | |
41 | |
41 | |
41 | |
41 | |
42 | |
42 | |
44 | |
A-1 | |
"We," "us," "our," "Nationwide" or | |
• | "You" or "yours," "Owner" or "Contract Owner" means the |
"Your Account" means the unified managed account you own. As described further below, "Select UMA" is a unified managed account investment advisory program offered by MSSB. MSSB offers Your Account through registered representatives and investment advisor representatives ("Financial Advisors") of MSSB. You must purchase a Contract with the assistance of these Financial Advisors. Financial Advisors assist clients in analyzing whether the investment options are appropriate for the client. If your Financial Advisor recommends a MSSB account to you, upon your request, MSSB will open Your Account. MSSB acts as introducing broker to Citigroup Global Markets Inc. ("CGMI"), an indirect wholly-owned subsidiary of Citigroup Inc., which acts as clearing broker for Your Account. The |
• | The Spousal Continuation Option allows, upon your death, your surviving spouse to |
The | |
(a) | The current Guaranteed Lifetime Withdrawal Base, adjusted for transactions in the previous Contract Year that affected the Guaranteed Lifetime Withdrawal Base; |
(b) | Your Account Value as of that Contract Anniversary; or |
(c) | The original Guaranteed Lifetime Withdrawal Base with a 5% roll-up. This is equal to the original Guaranteed Lifetime Withdrawal Base plus 5% of the original Guaranteed Lifetime Withdrawal Base for each Contract Anniversary that has been reached. An adjustment will be made to the calculations for transactions that increase or decrease the Guaranteed Lifetime Withdrawal Base. |
• | Your Account Value, after the Withdrawal Start Date, falls below the greater of $10,000 or the Guaranteed Lifetime Withdrawal Amount (the "Minimum Account Value"); or |
• | Your Account Value is invested in the Minimum Account Value Eligible Portfolio, as discussed in the "Suspension and Termination Provisions" section later in this prospectus, and you reach the age of 55; or |
• | You, after the Withdrawal Start Date, affirmatively elect to begin the Income Phase by submitting the appropriate administrative forms. |
Maximum Recurring Contract Fees | |
(assessed on the first day of each calendar quarter against the Guaranteed Lifetime Withdrawal Base as of the last day of the previous calendar quarter) | |
Contract Fee | 1.45% 1 |
Spousal Continuation Option Fee | 0.30% 2 |
Total Contract Fee (including the Spousal Continuation Option) | 1.75% 3 |
1 | The current Contract Fee is 1.00%. |
2 | The current Spousal Continuation Option Fee is 0.20%. |
3 | The current Total Contract Fee is 1.20%. |
Capital Preservation oriented. Total return oriented, but may have higher current income. Suitable for short time horizon (3 to 5 years). | Capital appreciation oriented. Minimal income needs. Increasing equity exposure. Longer time horizon – at least a market cycle (5 years or more). | Aggressive growth oriented. No current income consideration. Greater volatility than broad stock market. Longest time horizon (10+ years). |
Eligible Portfolio | Target Allocations | ||||||
U.S. Equity | |||||||
Select UMA Model 1 w/o Municipal Bonds | U.S. Large Cap Value Equity | U.S. Large Cap Growth Equity | U.S. Mid Cap Value Equity | U.S. Mid Cap Growth Equity | U.S. Small Cap Value Equity | U.S. Small Cap Growth Equity | |
0% | 0% | 0% | 0% | 0% | 0% | ||
Composition | International Equity | U.S. Fixed Income | International Fixed Income | Cash | |||
Developed International Equity | Emerging Markets Equity | U.S. Core Fixed Income | U.S. High Yield Fixed Income | International Fixed Income | Cash/U.S. Short Duration Bond | ||
100% Fixed | 0% | 0% | 40 - 60% | 0 - 20% | 5 - 25% | 20 - 40% | |
Investment Strategy: Fixed Income- An all fixed income model for a most conservative investor that seeks conservative risk investments with minimal market volatility. This investment strategy is most appropriate for investors with an investment time horizon of 1 to 3 years. | |||||||
Investment Objective: The investment objective for this Model has a primary emphasis on capital preservation. This Model is classified to have low volatility. It is most suitable for an investor that is comfortable with minimal fluctuations in their portfolio, and the possibility of larger declines in value, in order to grow their portfolio over time. | |||||||
Investment Risk: Fixed income is historically considered less risky than equities. Model 1 has 100% of the assets in fixed income or cash. Therefore, of all of the Eligible Portfolios, this portfolio provides the most conservative investment risk. | |||||||
Benchmark: 70% BC Aggregate Bond (Fixed Income)/30% 90-Day T-Bills (Cash) |
Eligible Portfolio | Target Allocations | ||||||
U.S. Equity | |||||||
Select UMA Model 2 w/o Municipal Bonds | U.S. Large Cap Value Equity | U.S. Large Cap Growth Equity | U.S. Mid Cap Value Equity | U.S. Mid Cap Growth Equity | U.S. Small Cap Value Equity | U.S. Small Cap Growth Equity | |
0 - 20% | 0 - 20% | 0 - 10% | 0 - 10% | 0 - 10% | 0 - 10% | ||
Composition | International Equity | U.S. Fixed Income | International Fixed Income | Cash | |||
Developed International Equity | Emerging Markets Equity | U.S. Core Fixed Income | U.S. High Yield Fixed Income | International Fixed Income | Cash/U.S. Short Duration Bond | ||
25% Equity 75% Fixed | 0 - 20% | 0 - 10% | 30 - 50% | 0 - 20% | 0 - 20% | 5 - 25% | |
Investment Strategy: Global Balanced- A global balanced model with a higher emphasis on income for a conservative investor that seeks long term growth through achieving a balance between income and capital growth globally. This investment strategy is most appropriate for investors with an investment time horizon of 3 to 5 years. | |||||||
Investment Objective: The investment objective for this Model has a primary emphasis on income with some capital growth. This Model is classified to have low volatility. It is most suitable for an investor that is comfortable with minimal fluctuations in their portfolio, and the possibility of larger declines in value, in order to grow their portfolio over time. | |||||||
Investment Risk: Fixed income is historically considered less risky than equities. Model 2 has 75% of the assets in fixed income or cash and 25% in equities. Therefore, of all of the Eligible Portfolios, this portfolio provides a more aggressive investment risk than Model 1 and less aggressive than Models 3 and 4. | |||||||
Benchmark: 18% Russell 1000 (U.S Equity)/7% MSCI EAFE (International Equity)/60% BC Aggregate Bond (U.S. Fixed Income)/15% 90-Day T-Bills (Cash) |
Eligible Portfolio | Target Allocations | ||||||
U.S. Equity | |||||||
Select UMA Model 3 w/o Municipal Bonds | U.S. Large Cap Value Equity | U.S. Large Cap Growth Equity | U.S. Mid Cap Value Equity | U.S. Mid Cap Growth Equity | U.S. Small Cap Value Equity | U.S. Small Cap Growth Equity | |
0 - 20% | 0 - 20% | 0 - 15% | 0 - 15% | 0 - 10% | 0 - 10% | ||
Composition | International Equity | U.S. Fixed Income | International Fixed Income | Cash | |||
Developed International Equity | Emerging Markets Equity | U.S. Core Fixed Income | U.S. High Yield Fixed Income | International Fixed Income | Cash/U.S. Short Duration Bond | ||
40% Equity 60% Fixed | 0 - 20% | 0 - 10% | 25 - 45% | 0 - 15% | 0 - 20% | 0 - 20% | |
Investment Strategy: Global Balanced- A global balanced model utilizing equities, fixed income, and cash seeking some growth and moderate level of income for a moderate investor that seeks long term growth through achieving a balance between income and capital growth globally. This investment strategy is most appropriate for investors with an investment time horizon of 3 to 5 years. | |||||||
Investment Objective: The investment objective for this Model has a primary emphasis on capital growth and income. This Model is classified to have medium volatility. It is most suitable for an investor that is comfortable with fluctuations in their portfolio, and the possibility of larger declines in value, in order to grow their portfolio over time. | |||||||
Investment Risk: Fixed income is historically considered less risky than equities. Model 3 has 60% of the assets in fixed income or cash and 40% in equities. Therefore, of all of the Eligible Portfolios, this portfolio provides a more aggressive investment risk than Models 1 and 2 and less aggressive than Model 4. | |||||||
Benchmark: 28% Russell 3000 (U.S Equity)/12% MSCI EAFE (International Equity)/50% BC Aggregate Bond (Fixed Income)/10% 90-Day T-Bills (Cash) |
Eligible Portfolio | Target Allocations | ||||||
U.S. Equity | |||||||
Select UMA Model 4 w/o Municipal Bonds | U.S. Large Cap Value Equity | U.S. Large Cap Growth Equity | U.S. Mid Cap Value Equity | U.S. Mid Cap Growth Equity | U.S. Small Cap Value Equity | U.S. Small Cap Growth Equity | |
0 - 20% | 0 - 20% | 0 - 15% | 0 - 15% | 0 - 15% | 0 - 15% | ||
Composition | International Equity | U.S. Fixed Income | International Fixed Income | Cash | |||
Developed International Equity | Emerging Markets Equity | U.S. Core Fixed Income | U.S. High Yield Fixed Income | International Fixed Income | Cash/U.S. Short Duration Bond | ||
50% Equity 50% Fixed | 0 - 20% | 0 - 15% | 25 - 45% | 0 - 15% | 0 - 20% | 0 - 15% | |
Investment Strategy: Global Balanced- A global balanced model utilizing equities, fixed income, and cash seeking a moderate level of growth and income for a moderate investor that seeks long term growth through achieving a balance between income and capital growth globally. This investment strategy is most appropriate for investors with an investment time horizon of 5 to 7 years. | |||||||
Investment Objective: The investment objective for this Model has a primary emphasis on capital growth with some focus on income. This Model is classified to have medium volatility. It is most suitable for an investor that is comfortable with fluctuations in their portfolio, and the possibility of larger declines in value, in order to grow their portfolio over time. | |||||||
Investment Risk: Fixed income is historically considered less risky than equities. Model 4 has 50% of the assets in fixed income or cash and 50% in equities. Therefore, of all of the Eligible Portfolios, this portfolio provides the most aggressive investment risk. | |||||||
Benchmark: 35% Russell 3000 (U.S. Equity)/15% MSCI AC World x U.S. (International Equity)/50% BC Aggregate Bond (U.S. Fixed Income) |
Eligible Portfolio | Target Allocations | ||||||
U.S. Equity | |||||||
Select UMA Model 1 w/ Municipal Bonds | U.S. Large Cap Value Equity | U.S. Large Cap Growth Equity | U.S. Mid Cap Value Equity | U.S. Mid Cap Growth Equity | U.S. Small Cap Value Equity | U.S. Small Cap Growth Equity | |
0% | 0% | 0% | 0% | 0% | 0% | ||
Composition | International Equity | U.S. Fixed Income | International Fixed Income | Cash | |||
Developed International Equity | Emerging Markets Equity | U.S. Municipal Bond Fixed Income | U.S. High Yield Fixed Income | International Fixed Income | Cash/U.S. Short Duration Bond | ||
100% Fixed | 0% | 0% | 40 - 60% | 0 - 20% | 5 - 25% | 20 - 40% | |
Investment Strategy: Fixed Income- An all fixed income model for a most conservative investor that seeks conservative risk investments, with minimal market volatility. This investment strategy is most appropriate for investors with an investment time horizon of 1 to 3 years. | |||||||
Investment Objective: The investment objective for this Model has a primary emphasis on capital preservation. This Model is classified to have low volatility. It is most suitable for an investor that is comfortable with minimal fluctuations in their portfolio, and the possibility of larger declines in value, in order to grow their portfolio over time. One of the primary reasons municipal bonds are considered separately from other types of bonds is their special ability to provide tax-exempt income. Interest paid by the issuer (i.e., the municipality, state or local government) to bond holders is often exempt from all federal taxes, as well as state or local taxes depending on the state in which the issuer is located, subject to certain restrictions. Therefore, for taxable accounts, it can be a tax advantage to invest in municipal bonds in lieu of core fixed income investments. | |||||||
Investment Risk: Fixed income is historically considered less risky than equities. Model 1 has 100% of the assets in fixed income or cash. Therefore, of all of the Eligible Portfolios, this portfolio provides the most conservative investment risk. | |||||||
Benchmark: 70% BC Municipal Bond (U.S. Fixed Income)/30% 90-Day T-Bills (Cash) |
Eligible Portfolio | Target Allocations | ||||||
U.S. Equity | |||||||
Select UMA Model 2 w/ Municipal Bonds | U.S. Large Cap Value Equity | U.S. Large Cap Growth Equity | U.S. Mid Cap Value Equity | U.S. Mid Cap Growth Equity | U.S. Small Cap Value Equity | U.S. Small Cap Growth Equity | |
0 - 20% | 0 - 20% | 0 - 10% | 0 - 10% | 0 - 10% | 0 - 10% | ||
Composition | International Equity | U.S. Fixed Income | International Fixed Income | Cash | |||
Developed International Equity | Emerging Markets Equity | U.S. Municipal Bond Fixed Income | U.S. High Yield Fixed Income | International Fixed Income | Cash/U.S. Short Duration Bond | ||
25% Equity 75% Fixed | 0 - 20% | 0 - 10% | 30 - 50% | 0 - 20% | 0 - 20% | 5 - 25% | |
Investment Strategy: Global Balanced- A global balanced model with a higher emphasis on income for a conservative investor that seeks long term growth through achieving a balance between income and capital growth globally. This investment strategy is most appropriate for investors with an investment time horizon of 3 to 5 years. | |||||||
Investment Objective: The investment objective for this Model has a primary emphasis on income with some capital growth. This Model is classified to have low volatility. It is most suitable for an investor that is comfortable with minimal fluctuations in their portfolio, and the possibility of larger declines in value, in order to grow their portfolio over time. One of the primary reasons municipal bonds are considered separately from other types of bonds is their special ability to provide tax-exempt income. Interest paid by the issuer (i.e., the municipality, state or local government) to bond holders is often exempt from all federal taxes, as well as state or local taxes depending on the state in which the issuer is located, subject to certain restrictions. Therefore, for taxable accounts, it can be a tax advantage to invest in municipal bonds in lieu of core fixed income investments. | |||||||
Investment Risk: Fixed income is historically considered less risky than equities. Model 2 has 75% of the assets in fixed income or cash and 25% in equities. Therefore, of all of the Eligible Portfolios, this portfolio provides a slightly more aggressive investment risk than Model 1. | |||||||
Benchmark: 18% Russell 1000 (U.S. Equity)/7% MSCI EAFE (International Equity)/ 60% BC Municipal Bond (U.S. Fixed Income)/15% 90-Day T-Bills (Cash) |
Eligible Portfolio | Target Allocations | ||||||
U.S. Equity | |||||||
Select UMA Model 3 w/ Municipal Bonds | U.S. Large Cap Value Equity | U.S. Large Cap Growth Equity | U.S. Mid Cap Value Equity | U.S. Mid Cap Growth Equity | U.S. Small Cap Value Equity | U.S. Small Cap Growth Equity | |
0 - 20% | 0 - 20% | 0 - 15% | 0 - 15% | 0 - 10% | 0 - 10% | ||
Composition | International Equity | U.S. Fixed Income | International Fixed Income | Cash | |||
Developed International Equity | Emerging Markets Equity | U.S. Municipal Bond Fixed Income | U.S. High Yield Fixed Income | International Fixed Income | Cash/U.S. Short Term Bond | ||
40% Equity 60% Fixed | 0 - 20% | 0 - 10% | 25 - 45% | 0 - 15% | 0 - 20% | 0 - 20% | |
Investment Strategy: Global Balanced- A global balanced model utilizing equities, fixed income, and cash seeking some growth and moderate level of income for a moderate investor that seeks long term growth through achieving a balance between income and capital growth globally. This investment strategy is most appropriate for investors with an investment time horizon of 3 to 5 years. | |||||||
Investment Objective: The investment objective for this Model has a primary emphasis on capital growth and income. This Model is classified to have medium volatility. It is most suitable for an investor that is comfortable with fluctuations in their portfolio, and the possibility of larger declines in value, in order to grow their portfolio over time. One of the primary reasons municipal bonds are considered separately from other types of bonds is their special ability to provide tax-exempt income. Interest paid by the issuer (i.e., the municipality, state or local government) to bond holders is often exempt from all federal taxes, as well as state or local taxes depending on the state in which the issuer is located, subject to certain restrictions. Therefore, for taxable accounts, it can be a tax advantage to invest in municipal bonds in lieu of core fixed income investments. | |||||||
Investment Risk: Fixed income is historically considered less risky than equities. Model 3 has 60% of the assets in fixed income or cash and 40% in equities. Therefore, of all of the Eligible Portfolios, this portfolio provides a more aggressive investment risk than Models 1 and 2 and less aggressive than Model 4. | |||||||
Benchmark: 28% Russell 3000 (U.S. Equity)/12% MSCI EAFE (International Equity)/50% BC Municipal Bond (U.S. Fixed Income)/10% 90-Day T-Bills (Cash) |
Eligible Portfolio | Target Allocations | ||||||
U.S. Equity | |||||||
Select UMA Model 4 w/ Municipal Bonds | U.S. Large Cap Value Equity | U.S. Large Cap Growth Equity | U.S. Mid Cap Value Equity | U.S. Mid Cap Growth Equity | U.S. Small Cap Value Equity | U.S. Small Cap Growth Equity | |
0 - 20% | 0 - 20% | 0 - 15% | 0 - 15% | 0 - 15% | 0 - 15% | ||
Composition | International Equity | U.S. Fixed Income | International Fixed Income | Cash | |||
Developed International Equity | Emerging Markets Equity | U.S. Municipal Bond Fixed Income | U.S. High Yield Fixed Income | International Fixed Income | Cash/U.S. Short Term Bond | ||
50% Equity 50% Fixed | 0 - 20% | 0 - 15% | 25 - 45% | 0 - 15% | 0 - 20% | 0 - 15% | |
Investment Strategy: Global Balanced- A global balanced model utilizing equities, fixed income, and cash seeking a moderate level of growth and income for a moderate investor that seeks long term growth through achieving a balance between income and capital growth globally. This investment strategy is most appropriate for investors with an investment time horizon of 5 to 7 years. | |||||||
Investment Objective: The investment objective for this Model has a primary emphasis on capital growth with some focus on income. This Model is classified to have medium volatility. It is most suitable for an investor that is comfortable with fluctuations in their portfolio, and the possibility of larger declines in value, in order to grow their portfolio over time. One of the primary reasons municipal bonds are considered separately from other types of bonds is their special ability to provide tax-exempt income. Interest paid by the issuer (i.e., the municipality, state or local government) to bond holders is often exempt from all federal taxes, as well as state or local taxes depending on the state in which the issuer is located, subject to certain restrictions. Therefore, for taxable accounts, it can be a tax advantage to invest in municipal bonds in lieu of core fixed income investments. | |||||||
Investment Risk: Fixed income is historically considered less risky than equities. Model 4 has 50% of the assets in fixed income or cash and 50% in equities. Therefore, of all of the Eligible Portfolios, this portfolio provides the most aggressive investment risk. | |||||||
Benchmark: 35% Russell 3000 (U.S. Equity)/15% MSCI AC World x U.S. (International Equity)/ 50% BC Municipal Bond (U.S. Fixed Income). |
• | advising us and MSSB that you want to terminate the Contract; or |
• | liquidating all of the investments in Your Account; or |
• | terminating Your Account. |
(1) | The Annual Benefit Base Review. On each Contract Anniversary during the Accumulation Phase, we do an Annual Benefit Base Review to see if you are eligible for an increase to your Guaranteed Lifetime Withdrawal Base. We will examine the following three items and Your Guaranteed Lifetime Withdrawal Base will be set equal to the greatest of: |
(a) | the current Guaranteed Lifetime Withdrawal Base, adjusted for transactions in the previous Contract Year that affected the Guaranteed Lifetime Withdrawal Base; |
(b) | Your Account Value as of the Contract Anniversary; or |
(c) | the original Guaranteed Lifetime Withdrawal Base with a 5% roll-up. This is equal to the original Guaranteed Lifetime Withdrawal Base plus 5% of the original Guaranteed Lifetime Withdrawal Base for each Contract Anniversary that has been reached. An adjustment will be made to the calculations for transactions that increase or decrease the Guaranteed Lifetime Withdrawal Base. |
(2) | Additional Deposits to Your Account in the Accumulation Phase. The Contract permits you to make Additional Deposits to Your Account during the Accumulation Phase. Additional Deposits will result in an immediate increase to your Guaranteed Lifetime Withdrawal Base equal to the dollar amount of the Additional Deposit. |
(3) | Early Withdrawals from Your Account. An Early Withdrawal is any withdrawal you take from Your Account prior to your elected Withdrawal Start Date (discussed later in this provision). Early Withdrawals will result in a decrease to your Guaranteed Lifetime Withdrawal Base. The amount of that decrease will be the greater of (a) or (b), where: |
(a) | = | the dollar amount of the Early Withdrawal; and | ||
(b) | = | a "proportional amount" derived from the following calculation: (A ÷ B) × C, where: | ||
A | = | the dollar amount of the Early Withdrawal; | ||
B | = | Your Account Value on the date of the Early Withdrawal; and | ||
C | = | your Guaranteed Lifetime Withdrawal Base on the date of the Early Withdrawal. |
Example Early Withdrawal Calculations | ||||||
In this example, the Account Value is greater than the Guaranteed Lifetime Withdrawal Base. | In this example, the Account Value is less than the Guaranteed Lifetime Withdrawal Base: | |||||
At the time of the Early Withdrawal: | At the time of the Early Withdrawal: | |||||
Account Value | = | $500,000 | Account Value | = | $400,000 | |
Guaranteed Lifetime Withdrawal Base | = | $450,000 | Guaranteed Lifetime Withdrawal Base | = | $450,000 | |
Withdrawal Amount | = | $15,000 | Withdrawal Amount | = | $15,000 | |
Guaranteed Lifetime Withdrawal Base reduction calculations: | Guaranteed Lifetime Withdrawal Base reduction calculations: | |||||
Dollar amount | = | $15,000 | Dollar amount | = | $15,000 | |
Proportional amount ($15,000 ÷ $500,000) x $450,000 | = | $13,500 | Proportional amount ($15,000 ÷ $400,000) x $450,000 | = | $16,875 | |
After the Early Withdrawal: | After the Early Withdrawal: | |||||
Account Value ($500,000 - $15,000) | = | $485,000 | Account Value ($400,000 - $15,000) | = | $385,000 | |
Guaranteed Lifetime Withdrawal Base ($450,000 - $15,000) | = | $435,000 | Guaranteed Lifetime Withdrawal Base ($450,000 - $16,875) | = | $433,125 |
Your Age (or in the case of a Co-Annuitant, the age of the younger Co-Annuitant) at the time of the withdrawal | Guaranteed Lifetime Withdrawal Percentage | |
55 – 64 | 4% | |
65 or older | 5% |
Guaranteed Lifetime Withdrawal Amount | = | Guaranteed Lifetime Withdrawal Base | X | Guaranteed Lifetime Withdrawal Percentage |
(1) | The Annual Benefit Base Review. On each Contract Anniversary during the Withdrawal Phase, we do an Annual Benefit Base Review to see if you are eligible for an increase to your Guaranteed Lifetime Withdrawal Base. We will examine the following two items and your Guaranteed Lifetime Withdrawal Base will be set equal to the greater of: |
(a) | the current Guaranteed Lifetime Withdrawal Base, adjusted for transactions in the previous Contract Year that affected the Guaranteed Lifetime Withdrawal Base; or |
(b) | Your Account Value as of the Contract Anniversary. |
(2) | Additional Deposits to Your Account in the Withdrawal Phase. Just as in the Accumulation Phase, the Contract permits you to make Additional Deposits to Your Account during the Withdrawal Phase, which will result in an immediate increase to your Guaranteed Lifetime Withdrawal Base equal to the dollar amount of the Additional Deposit. |
(3) | Excess Withdrawals from Your Account. Excess Withdrawals are any withdrawals taken after your Withdrawal Start Date that, during any calendar year, exceed the Guaranteed Lifetime Withdrawal Amount. Excess Withdrawals will result in a decrease to your Guaranteed Lifetime Withdrawal Base. The amount of that decrease will be the greater of (a) or (b), where: |
(a) | = | the dollar amount of the Excess Withdrawal (the amount withdrawn during any calendar year in excess of the Guaranteed Lifetime Withdrawal Amount); and | ||
(b) | = | a "proportional amount" derived from the following calculation: (A ÷ B) × C, where: | ||
A | = | the dollar amount of the Excess Withdrawal; | ||
B | = | Your Account Value (which will be reduced by any Guaranteed Lifetime Withdrawal Amount taken) on the date of the Excess Withdrawal; and | ||
C | = | your Guaranteed Lifetime Withdrawal Base on the date of the Excess Withdrawal |
Example Excess Withdrawal Calculations | ||||||
In this example, the Account Value is greater than the Guaranteed Lifetime Withdrawal Base: | In this example, the Account Value is less than the Guaranteed Lifetime Withdrawal Base: | |||||
At the time of the Excess Withdrawal: | At the time of the Excess Withdrawal: | |||||
Account Value | = | $500,000 | Account Value | = | $400,000 | |
Guaranteed Lifetime Withdrawal Base | = | $450,000 | Guaranteed Lifetime Withdrawal Base | = | $450,000 | |
Guaranteed Lifetime Withdrawal Amount | = | $22,500 | Guaranteed Lifetime Withdrawal Amount | = | $22,500 | |
Withdrawal Amount | = | $30,000 | Withdrawal Amount | = | $30,000 | |
Excess Withdrawal Amount ($30,000 - $22,500) | = | $7,500 | Excess Withdrawal Amount ($30,000 - $22,500) | = | $7,500 | |
Guaranteed Lifetime Withdrawal Base reduction calculations: | Guaranteed Lifetime Withdrawal Base reduction calculations: | |||||
Dollar amount | = | $7,500 | Dollar amount | = | $7,500 | |
Proportional amount ($7,500 ÷ $477,500) x $450,000 | = | $7,068 | Proportional amount ($7,500 ÷ $377,500) x $450,000 | = | $8,940 | |
After the Excess Withdrawal: | After the Excess Withdrawal: | |||||
Account Value ($500,000 - $30,000) | = | $470,000 | Account Value ($400,000 - $30,000) | = | $370,000 | |
Guaranteed Lifetime Withdrawal Base ($450,000 - $7,500) | = | $442,500 | Guaranteed Lifetime Withdrawal Base ($450,000 - $8,940) | = | $441,060 |
• | |
• | |
• |
(1) | The Spousal Continuation Option must be elected at the time of application, and the younger spouse must be between 45 and 80 and the older spouse must be 84 or younger. |
(2) | Both spouses (or a revocable trust of which either or both of the spouses is/are grantor(s)) must be named as owners of Your Account and the Annuitant(s) of Your Contract. For Contracts issued to IRAs and Roth IRAs, you and your spouse must be Co-Annuitants, and the person for whom the IRA or Roth IRA was established must name their spouse the sole beneficiary of Your Account. |
(3) | If, prior to the Withdrawal Start Date, your marriage terminates due to divorce, dissolution, or annulment, or a Co-Annuitant dies, we will remove the Spousal Continuation Option from your Contract after you submit to the Service Center a written request and evidence of the marriage termination or death that is satisfactory to Nationwide. After removal of the Spousal Continuation Option, we will not charge you the Spousal Continuation Option Fee Percentage. Once the Spousal Continuation Option is removed from the Contract, the option may not be re-elected or added to cover a subsequent spouse. |
(4) | If, on or after the Withdrawal Start Date, your marriage terminates due to divorce, dissolution, or annulment, or a Co-Annuitant dies, you may not remove the Spousal Continuation Option from the Contract. The remaining Owner of the Contract will continue to be charged the Spousal Continuation Option Fee Percentage, and after the remaining Owner of the contract submits to the Service Center a written request in a form acceptable to Nationwide, the remaining Owner of the Contract's former spouse will no longer be eligible to receive withdrawals. |
(5) | For Contracts with non-natural owners (other than IRAs), one spouse must be the Annuitant and the other spouse must be the Co-Annuitant. |
(6) | Upon either Co-Annuitant's death, the surviving spouse must keep Your Account open and comply with all of the requirements of this Contract. |
(7) | If you enter the Income Phase of the Contract, both you and your spouse must be named primary beneficiaries of the Contract at that time to ensure the Guaranteed Lifetime Income Payments will continue for both lives. |
Contract Fee Percentage: | 1.00% |
Number of days in calendar quarter: | 90 |
Number of days in the calendar year: | 365 |
Guaranteed Lifetime Withdrawal Base (as of the end of the previous quarter): | $ 500,000 |
Contract Fee Calculation: $500,000 x [1.00% x (90 ÷ 365)] = | $1,232.87 |
First: | Early Withdrawals and Excess Withdrawals will reduce your Guaranteed Lifetime Withdrawal Base. The reduction may be substantial, especially if Your Account Value is significantly lower than it was when the Guaranteed Lifetime Withdrawal Base was last computed or adjusted. |
Second: | Once you are ready to begin taking withdrawals of the Guaranteed Lifetime Withdrawal Amount from Your Account, consider setting up a quarterly, monthly or other systematic withdrawal program. Doing so may help limit the risk that you will make an Excess Withdrawal. |
Third: | Consider the timing of your withdrawals. Because your Guaranteed Lifetime Withdrawal Base can increase on your Contract Anniversary via the automatic Annual Benefit Base Review, the higher Your Account Value is on your Contract Anniversary, the more likely you will be to receive an increase in your Guaranteed Lifetime Withdrawal Base. You might have a higher Guaranteed Lifetime Withdrawal Base if you defer withdrawals until after your Contract Anniversary. |
Fourth: | Consider that the longer you wait to begin taking withdrawals of the Guaranteed Lifetime Withdrawal Amount, the less likely it is that you will receive any Guaranteed Lifetime Income Payments. Taking withdrawals reduces Your Account Value. If you wait to begin taking withdrawals, you are likely to reach the Minimum Account Value later in your life, and at the same time, your remaining life expectancy will be shorter. |
Annuitant's Death in Accumulation or Withdrawal Phase | Annuitant's Death in Income Phase | ||
Sole Contract Owner | Sole Annuitant (no Spousal Continuation Option) | The Contract terminates and we will make no payments under the Contract. We will return that portion of the current quarter's Contract Fee attributable to the time period between your death and the end of the current calendar quarter. | We will calculate the remaining amount of transferred Account Value that has not yet been paid to you in the form of Guaranteed Lifetime Income Payments. We will make payments to your beneficiary in the same frequency as the Withdrawal Phase in the amount equal to your Guaranteed Lifetime Withdrawals until that amount has been paid. If all remaining transferred Account Value has already been paid to you at the time of your death in the form of Guaranteed Lifetime Income Payments, we will make no further payments. |
Co-Annuitants (spouses with the Spousal Continuation Option) | If the Contract Owner/Co-Annuitant of the Contract dies, the Contract will continue with the surviving Co-Annuitant as the sole Contract Owner and sole Annuitant. | • If the Contract Owner/Co-Annuitant of the Contract dies, we will continue to make Guaranteed Lifetime Income Payments to the surviving Contract Owner/Co-Annuitant for the duration of his or her lifetime. • Upon the surviving Contract Owner/Co-Annuitant's death, we will calculate the remaining amount of transferred Account Value that has not yet been paid in the form of Guaranteed Lifetime Income Payments. We will make payments to your beneficiary in the same frequency as the Withdrawal Phase in the amount equal to the Guaranteed Lifetime Withdrawals until that amount has been paid. |
Annuitant's Death in Accumulation or Withdrawal Phase | Annuitant's Death in Income Phase | ||
Joint Contract Owners (spouses) | Sole Annuitant (no Spousal Continuation Option) | If a Joint Owner who is the Annuitant dies, the Contract terminates and we will make no payments under the Contract. We will return that portion of the current quarter's Contract Fee attributable to the time period between your death and the end of the current calendar quarter. | If a Joint Owner who is the Annuitant dies, we will calculate the remaining amount of transferred Account Value that has not yet been paid to you in the form of Guaranteed Lifetime Income Payments. We will make payments to your beneficiary in the same frequency as the Withdrawal Phase in the amount equal to your Guaranteed Lifetime Withdrawals until that amount has been paid. If all remaining transferred Account Value has already been paid to you at the time of your death in the form of Guaranteed Lifetime Income Payments, we will make no further payments. |
If a Joint Owner who is not the Annuitant dies, the Contract will continue with the surviving Joint Owner/Annuitant as the sole Contract Owner. | If a Joint Owner who is not the Annuitant dies, the Contract will continue with the surviving Joint Owner/Annuitant as the sole Contract Owner receiving Guaranteed Lifetime Income Payments. | ||
Co-Annuitants (spouses with the Spousal Continuation Option) | If a Joint Owner/Co-Annuitant dies, the Contract will continue with the surviving Joint Owner/Co-Annuitant as the sole Contract Owner and sole Annuitant. | • If a Joint Owner/Co-Annuitant dies, we will continue to make Guaranteed Lifetime Income Payments to the surviving Joint Owner/Co-Annuitant for the duration of his or her lifetime. • Upon the surviving Joint Owner/Co-Annuitant's death, we will calculate the remaining amount of transferred Account Value that has not yet been paid in the form of Guaranteed Lifetime Income Payments. We will make payments to your beneficiary in the same frequency as the Withdrawal Phase in the amount equal to the Guaranteed Lifetime Withdrawals until that amount has been paid. |
• | If you remain the sole owner of Your Account, there will be no change to the Contract. |
• | If your former spouse becomes the sole owner of Your Account, the Contract will be issued as a new Contract, with a new Guaranteed Lifetime Withdrawal Base (calculated as of the date the new Contract is issued) with your former spouse as Contract Owner and Annuitant, and the Contract will terminate upon the death of the Annuitant. Alternately, the former spouse may elect to terminate the Contract. |
• | If Your Account is divided between you and your former spouse, the Contract will be reissued as two Contracts (one to each of the former spouses). The Guarantee will not carry over and a new Guaranteed Lifetime Withdrawal Base will be established based on the value of each new account as of the date the new Contracts are issued. Each former spouse will be the named Contract Owner and Annuitant of their respective reissued Contract, and each Contract will terminate upon the death of the respective Annuitant. Alternately, each former spouse may elect to terminate their respective Contract. |
• | If Your Account is taken over solely by one of the Joint Owners (the "Receiving Joint Owner"), the Receiving Joint Owner may elect whether to have the Contract reissued with him/her as the sole Contract Owner and Annuitant, or continue the Contract with both former spouses remaining as Joint Owners and the Receiving Joint Owner as the annuitant. In either situation, the Contract will terminate upon the death of the Annuitant. Alternately, the Receiving Joint Owner may elect to terminate the Contract. |
• | If Your Account is divided between the Joint Owners (the former spouses), the Contract will be reissued as two Contracts (one to each of the former spouses), with the contractual Guarantee divided in proportion to the division of the assets in Your Account and a new Guaranteed Lifetime Withdrawal Base will be established for each Contract based on the value of each account as of the date the new Contracts are issued. The Joint Owners may remain as Joint Owners on each reissued Contract, with one former spouse named as Annuitant on each of the Contracts, or each may become the sole Contract Owner and Annuitant on their respective reissued Contract. In either situation, the Contract will terminate upon the death of the Annuitant. Alternately, each former spouse may elect to terminate their respective Contract. |
• | You do not comply with any provision of this prospectus, including, but not limited to, the requirement that you maintain Your Account at MSSB and invest the assets as required by an Eligible Portfolio or a Former Eligible Portfolio, and the requirement that you execute an agreement that provides for the deduction and remittance of the Contract Fee; |
• | Your Account Value falls below the Minimum Account Value; |
• | MSSB no longer manages any Eligible Portfolios or Former Eligible Portfolios; or |
• | You make an Additional Deposit to Your Account when Your Account already exceeds $2,000,000 in Total Gross Deposits, or you make an Additional Deposit to Your Account that causes Your Account to exceed $2,000,000 in Total Gross Deposits. |
(1) | Make Additional Deposits to Your Account to bring Your Account Value above the Minimum Account Value; |
(2) | Transfer Your Account Value to the Minimum Account Value Eligible Portfolio. The Minimum Account Value Eligible Portfolio is only available to Contract Owners whose Account Value falls below the Minimum Account Value before the Withdrawal Start Date; or |
(3) | Terminate the Contract. |
Eligible Portfolio | Target Allocations | ||||||
U.S. Equity | |||||||
Minimum Account Value Eligible Portfolio | U.S. Large Cap Value Equity | U.S. Large Cap Growth Equity | U.S. Mid Cap Value Equity | U.S. Mid Cap Growth Equity | U.S. Small Cap Value Equity | U.S. Small Cap Growth Equity | |
0% | 0% | 0% | 0% | 0% | 0% | ||
Composition | International Equity | U.S. Fixed Income | International Fixed Income | Cash | |||
Developed International Equity | Emerging Markets Equity | U.S. Core Fixed Income | U.S. High Yield Fixed Income | International Fixed Income | Cash/U.S. Short Duration Bond | ||
100% Fixed | 0% | 0% | 40 - 60% | 0 - 20% | 5 - 25% | 20 - 40% | |
Investment Strategy: Fixed Income- An all fixed income model for a most conservative investor that seeks conservative risk investments with minimal market volatility. In order to accommodate a lower account value, the portfolio is only comprised of exchange traded funds (ETFs) which have lower minimum investment requirements. | |||||||
Investment Objective: The investment objective for this Model has a primary emphasis on capital preservation. This Model is classified to have low volatility. It is most suitable for an investor that is comfortable with minimal fluctuations in their portfolio, and the possibility of larger declines in value, in order to grow their portfolio over time. | |||||||
Investment Risk: Fixed income is historically considered less risky than equities. The Minimum Account Value Eligible Portfolio has 100% of the assets in fixed income or cash. Therefore, of all of the Eligible Portfolios, this portfolio provides the most conservative investment risk. | |||||||
Benchmark: 70% BC Aggregate Bond (U.S. Fixed Income)/30% 90-Day T-Bills (Cash) | |||||||
For a summary of the asset categories and benchmark indices, please refer to the Eligible Portfolios summary earlier in the prospectus. | |||||||
If you do not notify us of your election by the end of the suspension period, we will assume that you intend to terminate the Contract. |
❍ | The charges for those products may be higher than the Contract Fee Percentage assessed in connection with your Contract; |
❍ | You will not be charged any transfer fees by us other than the termination fees imposed by your custodian consistent with your custodial agreement; and |
❍ | The value transferred for the Guarantee will be equal to the Guaranteed Lifetime Withdrawal Base on the Valuation Day of the transfer (a Valuation Day is any day the New York Stock Exchange is open for trading). |
• | If you decide to transfer Your Account Value to an annuity contract that we, or one of our affiliates, offer, the amount transferred to the new annuity contract will be equal to the value of Your Account on the Valuation Day of the transfer, and the basis for your Guarantee will be equal to the Guaranteed Lifetime Withdrawal Base on the Valuation Day of the transfer. |
• | If you choose not to transfer Your Account Value, or fail to transfer Your Account Value before the end of the suspension period, the Contract and the Guarantee will terminate. |
❍ | If we permit the application of all or a portion of an Additional Deposit to the Guaranteed Lifetime Withdrawal Base calculation, that amount will be reflected in your Guaranteed Lifetime Withdrawal Base at the time you deposit the Additional Deposit to Your Account, provided such deposit is made within 5 days of our notification of approval and provided that such deposit does not exceed the amount evaluated in the pre-deposit inquiry. If you make such Additional Deposit after the expiration of the permitted time period, or it is for an amount greater than that submitted in the pre-deposit inquiry, we will treat the Additional Deposit as if no pre-deposit inquiry was made (see "No Pre-Deposit Inquiry" below) and will immediately suspend your Contract. |
❍ | If we exercise our right to refuse to accept all or a portion of an Additional Deposit for the Guaranteed Lifetime Withdrawal Base (and you have not made the Additional Deposit), we will not suspend your Contract. If however, you proceed to make the Additional Deposit after our notification of our refusal to accept the Additional Deposit for your Guaranteed Lifetime Withdrawal Base, we will treat the Additional Deposit as if no pre-deposit inquiry was made (see "No Pre-Deposit Inquiry" below) and will immediately suspend your Contract. |
event of multiple Additional Deposits that cause Total Gross Deposits to exceed $2,000,000, each deposit will have its own suspension period and review determination. Multiple Additional Deposits will be evaluated in the order they are deposited. |
❍ | If we permit the application of all or a portion of an Additional Deposit to the Guaranteed Lifetime Withdrawal Base calculation, that amount will be reflected in your Guaranteed Lifetime Withdrawal Base as of the date you deposited the Additional Deposit to Your Account and we will immediately remove the Contract's suspension. We will notify you that the suspension has been removed. |
❍ | If we exercise our right to refuse to accept all or a portion of an Additional Deposit for the Guaranteed Lifetime Withdrawal Base, your Contract will continue to be suspended (as of the date of the Additional Deposit). We will notify you and your Financial Advisor immediately of the Contract's suspended status and will request that you remove the Additional Deposit(s) from Your Account. The notification will indicate that the Contract will remain suspended until you remove the Additional Deposit(s) that caused your Total Gross Deposits to exceed $2,000,000 from Your Account, and that if you do not withdraw the necessary amount from Your Account before the end of the suspension period, the Contract will terminate and you will not be eligible for any of the benefits associated with the Contract. During the suspension period, any withdrawal will not constitute an Early Withdrawal or an Excess Withdrawal. |
❍ | The charges for those products may be higher than the Contract Fee Percentage assessed in connection with your Contract; |
❍ | You will not be charged any transfer fees by us other than the termination fees imposed by your custodian consistent with your custodial agreement; |
❍ | The value transferred for the Guarantee will be equal to the Guaranteed Lifetime Withdrawal Base on the Valuation Day of the transfer. |
Excludable Amount | = | Guaranteed Lifetime Withdrawal | X | Contract Owner's investment in the Contract |
the expected total amount of Guaranteed Lifetime Income Payments over the life of the Contract* |
* | The "expected total amount of the Guaranteed Lifetime Income Payments over the life of the Contract" is equal to the amount of one Guaranteed Lifetime Withdrawal payment multiplied by a factor that is determined by your life expectancy. The life expectancy factor tables appear in Treasury Regulation 1.72-9. |
• | if you do not provide us with a taxpayer identification number; or |
• | if we receive notice from the Internal Revenue Service that the taxpayer identification number furnished by you is incorrect. |
• | Provide us with a properly completed withholding contract claiming the treaty benefit of a lower tax rate or exemption from tax; and |
• | Provide us with an individual taxpayer identification number. |
• | sufficient evidence that the distribution is connected to the non-resident alien's conduct of business in the United States; |
• | sufficient evidence that the distribution is includable in the non-resident alien's gross income for United States federal income tax purposes; and |
• | a properly completed withholding contract claiming the exemption. |
• | by telephone at 1-800-848-6331 (TDD 1-800-238-3035) |
• | by mail to P.O. Box 182021, Columbus, Ohio 43218-2021. |
[ | ] | d | |||
1 + a | 365.25 | ||||
MVA Factor | = | 1 + b + 0.0025 | |||
[ | ] | 985 | |||
1 + 0.08 | 365.25 | ||||
MVA Factor | = | 1 + 0.07 + 0.0025 | |||
MVA Factor | = | 1.01897 | |||
Surrender Value | = | Specified Value | x | MVA Factor | |
Surrender Value | = | $12,067.96 | x | 1.01897 | |
*Surrender Value | = | $12,296.89 |
Additional Deposit(s) – Payments applied to Your Account after the Contract is issued. |
Annuitant – The person whose life span is used to measure the Guarantee during the Accumulation, Withdrawal and Income Phases under the Contract. |
Annuity – The supplemental immediate fixed income annuity contract |
Annuity Commencement Date – The date the Annuity is |
Client Agreement – The agreement you sign that authorizes MSSB and the |
Co-Annuitant – If the Contract is |
Contract – The | ||
Contract Anniversary – The anniversary of the date we issue your Contract. | ||
Contract Fee or Fee – The fee that is assessed quarterly from Your Account during the Accumulation Phase and Withdrawal Phase and remitted to us by MSSB. | ||
Contract Fee Percentage – The percentage that is multiplied by your Guaranteed Lifetime Withdrawal Base to determine your Contract Fee. | ||
Contract Owner or you – The person, entity and/or Joint Owner that maintains all rights under the Contract, including the right to direct who receives Guaranteed Lifetime Income Payments. | ||
Contract Year – The one-year period starting on the date we issue the Contract and each Contract Anniversary thereafter. | ||
Early Withdrawal – Any withdrawal you take from Your Account prior to the | ||
Excess Withdrawal – The | ||
Guaranteed Lifetime Income Payments – Payments you receive during the Income Phase from Nationwide. | ||
Guaranteed Lifetime Withdrawals – Withdrawals you make after the Withdrawal Start Date during the Withdrawal Phase. The | ||
Guaranteed Lifetime Withdrawal Amount – The amount that you can withdraw from Your Account each calendar year during the Withdrawal Phase without reducing your Guaranteed Lifetime Withdrawal Base. This amount is non-cumulative, meaning that withdrawals not taken cannot be carried over from one year to the next. | ||
Guaranteed Lifetime Withdrawal Base – The amount multiplied by the Guaranteed |
[ | ] | d | |||
1 + a | 365.25 | ||||
MVA Factor | = | 1 + b + 0.0025 | |||
[ | ] | 985 | |||
1 + 0.08 | 365.25 | ||||
MVA Factor | = | 1 + 0.09 + 0.0025 | |||
MVA Factor | = | 0.96944 | |||
Surrender Value | = | Specified Value | x | MVA Factor | |
Surrender Value | = | $12,067.96 | x | 0.96944 | |
*Surrender Value | = | $11,699.17 |
Individual Retirement Account or IRA – An account that qualifies for favorable tax treatment under Section 408(a) of the Internal Revenue Code, but does not |
Joint Owner – One of two Contract Owners, each of which owns an undivided interest in the |
MSSB – Morgan Stanley Smith Barney, LLC, its affiliates, or any successors. |
Nationwide, we or us – Nationwide Life Insurance Company. |
Non-Qualified Contract – A Contract that does not qualify for favorable tax treatment under the |
Roth IRA – An account that qualifies for favorable tax treatment under Section 408A of the Internal Revenue Code. |
SEC or Commission – Securities and Exchange Commission. |
SEP IRA – An account that qualifies for favorable tax treatment under Section 408(k) of the Internal Revenue Code. |
Service Center – The department of Nationwide responsible for receiving all service and transaction requests relating to the contract. For service and transaction requests submitted other than by telephone (including fax requests), the Service Center is |
Simple IRA – An account that qualifies for favorable tax treatment under Section 408(p) of the Internal Revenue Code. |
Total Gross Deposits – The total of all deposits, including your initial deposit and excluding any withdrawals, made into Your Account. |
Valuation Date or Day – Each day the New York Stock Exchange is open for business. The value of Your Account is determined at the end of each Valuation Date, which is generally at 4:00 pm EST, but may be earlier on certain days when the New York Stock Exchange is closed early. |
Withdrawal Phase – The phase of the Contract during which you take Guaranteed Lifetime Withdrawals from Your Account. |
Withdrawal Start Date – The date we receive at the Service Center your completed Withdrawal Phase election form indicating your eligibility (and the Co-Annuitant's eligibility, if applicable) and desire to enter the Withdrawal Phase and begin taking annual withdrawals of the Guaranteed Lifetime Withdrawal Amount from Your Account. |
You – In this prospectus, "you" means the Contract Owner and/or Joint Owners. |
Your Account – The Select UMA account you own. |
[ | ] | d | |||
1 + a | 365.25 | ||||
MVA Factor | = | 1 + b + 0.0025 | |||
[ | ] | 985 | |||
1 + 0.08 | 365.25 | ||||
MVA Factor | = | 1 + 0.07 + 0.0025 | |||
MVA Factor | = | 1.01897 | |||
Surrender Value | = | Specified Value | x | MVA Factor | |
Surrender Value | = | $12,067.96 | x | 1.01897 | |
*Surrender Value | = | $12,296.89 |
[ | ] | d | |||
1 + a | 365.25 | ||||
MVA Factor | = | 1 + b + 0.0025 | |||
[ | ] | 985 | |||
1 + 0.08 | 365.25 | ||||
MVA Factor | = | 1 + 0.09 + 0.0025 | |||
MVA Factor | = | 0.96944 | |||
Surrender Value | = | Specified Value | x | MVA Factor | |
Surrender Value | = | $12,067.96 | x | 0.96944 | |
*Surrender Value | = | $11,699.17 |
Current Yield | Time Remaining to the End of the Guaranteed Term | Specified Value | Market Value Adjustment | Market Value | ||||
12.00% | 9 Years | $10,850 | -29.35% | $7,665 | ||||
7 Years | $12,776 | -23.68% | $9,751 | |||||
5 Years | $15,040 | -17.56% | $12,399 | |||||
2 Years | $19,215 | -7.43% | $17,786 | |||||
180 Days | $21,733 | -1.88% | $21,323 | |||||
10.00% | 9 Years | $10,850 | -16.94% | $9,012 | ||||
7 Years | $12,776 | -13.44% | $11,059 | |||||
5 Years | $15,040 | -9.80% | $13,566 | |||||
2 Years | $19,215 | -4.04% | $18,438 | |||||
180 Days | $21,733 | -1.01% | $21,513 | |||||
9.00% | 9 Years | $10,850 | -9.84% | $9,782 | ||||
7 Years | $12,776 | -7.74% | $11,787 | |||||
5 Years | $15,040 | -5.59% | $14,199 | |||||
2 Years | $19,215 | -2.28% | $18,777 | |||||
180 Days | $21,733 | -0.57% | $21,610 | |||||
8.00% | 9 Years | $10,850 | -2.06% | $10,627 | ||||
7 Years | $12,776 | -1.61% | $12,571 | |||||
5 Years | $15,040 | -1.15% | $14,867 | |||||
2 Years | $19,215 | -0.46% | $19,126 | |||||
180 Days | $21,733 | -0.11% | $21,708 | |||||
7.00% | 9 Years | $10,850 | 6.47% | $11,552 | ||||
7 Years | $12,776 | 5.00% | $13,414 | |||||
5 Years | $15,040 | 3.55% | $15,573 | |||||
2 Years | $19,215 | 1.40% | $19,484 | |||||
180 Days | $21,733 | 0.34% | $21,808 | |||||
6.00% | 9 Years | $10,850 | 15.84% | $12,569 | ||||
7 Years | $12,776 | 12.11% | $14,324 | |||||
5 Years | $15,040 | 8.51% | $16,321 | |||||
2 Years | $19,215 | 3.32% | $19,853 | |||||
180 Days | $21,733 | 0.81% | $21,909 | |||||
4.00% | 9 Years | $10,850 | 37.45% | $14,914 | ||||
7 Years | $12,776 | 28.07% | $16,362 | |||||
5 Years | $15,040 | 19.33% | $17,948 | |||||
2 Years | $19,215 | 7.32% | $20,623 | |||||
180 Days | $21,733 | 1.76% | $22,115 |
December 31, | December 31, | |||||||||||
(in millions) | 2019 | 2018 | 2017 | 2020 | 2019 | 2018 | ||||||
Total revenues | $883 | $895 | $911 | $834 | $883 | $895 | ||||||
Pre-tax operating earnings | $10 | $28 | $32 | $ (12) | $ 10 | $ 28 |
December 31, | December 31, | |||||||||||
(in millions) | 2019 | 2018 | 2017 | 2020 | 2019 | 2018 | ||||||
Total revenues | $6,010 | $5,656 | $6,183 | $5,247 | $6,010 | $5,656 | ||||||
Pre-tax operating earnings | $434 | $375 | $379 |
December 31, | ||||||
(in millions) | 2020 | 2019 | 2018 | |||
Pre-tax operating earnings | $355 | $434 | $375 |
December 31, | December 31, | |||||||||||
(in millions) | 2019 | 2018 | 2017 | 2020 | 2019 | 2018 | ||||||
Total revenues | $5,470 | $5,181 | $5,336 | $7,132 | $5,470 | $5,181 | ||||||
Pre-tax operating earnings | $128 | $118 | $118 | $ 115 | $ 128 | $ 118 |
December 31, | ||||||
(in millions) | 2019 | 2018 | 2017 | |||
Total revenues | $2,089 | $2,263 | $2,372 | |||
Pre-tax operating earnings | $461 | $489 | $456 |
December 31, | ||||||
(in millions) | 2020 | 2019 | 2018 | |||
Total revenues | $1,903 | $2,089 | $2,263 | |||
Pre-tax operating earnings | $ 608 | $ 461 | $ 489 |
• | Bonds are generally stated at amortized cost, except those with an NAIC designation of "6", which are stated at the lower of amortized cost or fair value. Changes in fair value of bonds stated at fair value are charged to capital and surplus. |
• | Loan-backed and structured securities, which are included in bonds in the statutory financial statements, are stated in a manner consistent with the bond guidelines, but with additional consideration given to the special valuation rules implemented by the NAIC applicable to residential mortgage-backed securities that are not backed by U.S. government agencies, commercial mortgage-backed securities and certain other structured securities. Under these guidelines, an initial and adjusted NAIC designation is determined for each security. The initial NAIC designation, which takes into consideration the security’s amortized cost relative to an NAIC-prescribed valuation matrix, is used to determine the reporting basis (i.e., amortized cost or lower of amortized cost or fair value). |
• | Preferred stocks are generally stated at amortized cost, except those with an NAIC designation of "4" through "6", which are stated at the lower of amortized cost or fair value. Common stocks are stated at fair value. Changes in fair value of stocks stated at fair value are charged to capital and surplus. |
• | The investment in the Company’s wholly-owned insurance subsidiaries, NLAIC and Eagle, and wholly-owned noninsurance subsidiaries, NISC and NIA, are carried using the equity method of accounting. The Company’s investment in JNF, an unaudited downstream noninsurance holding company, is based on the individual audited subsidiary, controlled and affiliated entities owned by the holding company in accordance with the "look through" provisions of Statements of Statutory Accounting Principles ("SSAP") No. 97, Investments in Subsidiary, Controlled and Affiliated Entities. Investments in NLAIC, JNF and NISC are included in stocks, and the investment in Eagle is included in other invested assets on the statutory statements of admitted assets, liabilities, capital and surplus. |
• | Commercial mortgage loans are recorded at unpaid principal balance, adjusted for premiums and discounts, less a valuation allowance. |
• | Policy loans, which are collateralized by the related insurance policy, are carried at the outstanding principal balance and do not exceed the cash surrender value of the policy. As such, no valuation allowance for policy loans is required. |
• | Cash equivalents include highly liquid investments with original maturities of less than three months and, effective December 31, 2020, amounts on deposit in internal qualified cash pools. |
• | Short-term investments consist primarily of government agency discount notes with maturities of twelve months or less at acquisition and are carried at amortized cost, which approximates fair value. Prior to December 31, 2020, included amounts on deposit in internal qualified cash pools. |
• | Alternative investments are generally reported based on the equity method of accounting. |
• | The Company’s investment portfolio (and, specifically, the valuations of investment assets held) has been, and may continue to be, adversely affected as a result of market developments from the COVID-19 pandemic and uncertainty regarding its outcome. Moreover, changes in interest rates, reduced liquidity or a continued slowdown in the U.S. or in global economic conditions may also adversely affect the values and cash flows of these assets. The Company’s investments in mortgages and mortgage-backed securities could be negatively affected by delays or failures of borrowers to make payments of principal and interest when due or delays or moratoriums on foreclosures or enforcement actions with respect to delinquent or defaulted mortgages imposed by governmental authorities. Further, extreme market volatility may leave the Company unable to react to market events in a prudent manner consistent with the Company’s historical investment practices in dealing with more orderly markets; |
• | The Company provided COVID-19 hardship assistance to its customers including suspending cancellation of certain policies, deferring premium payment deadlines and waiving certain late fees and may elect to do so again in the future as a result of the COVID-19 pandemic. |
• | Potential state or federal legislation and regulation intended to ease the impact of the COVID-19 pandemic on consumers that could mandate waiver of late fees and/or limit or eliminate the ability to cancel policies for non-payment of premiums; |
• | Potential impacts to financial product revenues due to the overall economic slowdown, including the decline in economic activity, reductions in the sale of financial products due to the current market conditions, a reduction in fees collected from assets under management, a reduction in new sales, and an increased number of customers experiencing difficulty in paying premiums; |
• | While the Company has implemented risk management and contingency plans and taken preventive measures and other precautions, no predictions of specific scenarios can be made with respect to the COVID-19 pandemic and such measures may not adequately predict the impact on the Company’s business from such events. An extended period of remote work arrangements could introduce operational risk and impair the Company’s ability to manage its business. |
• | The Company also outsources certain critical business activities to third parties. As a result, the Company relies upon the successful implementation and execution of the business continuity planning of such entities in the current environment. While the Company closely monitors the business continuity activities of these third parties, successful implementation and execution of their business continuity strategies are largely outside the Company’s control. If one or more of the third parties to whom the Company outsources certain critical business activities experience operational failures as a result of the impacts from the spread of COVID-19, or claim that they cannot perform due to a force majeure, it may have a material adverse effect on the Company’s business, financial condition, results of operations, liquidity and cash flows; and |
• | Potential impacts to the cost and availability of reinsurance. |
Year ended or as of December 31, | Year ended or as of December 31, | |||||||||||||||||||
(in millions) | 2019 | 2018 | 2017 | 2016 | 2015 | 2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||
Statutory Statements of Operations Data | ||||||||||||||||||||
Total revenues | $14,452 | $13,995 | $14,802 | $14,213 | $15,149 | $ 15,116 | $ 14,452 | $ 13,995 | $ 14,802 | $ 14,213 | ||||||||||
Total benefits and expenses | $13,419 | $12,985 | $13,817 | $13,245 | $14,420 | $ 14,050 | $ 13,419 | $ 12,985 | $ 13,817 | $ 13,245 | ||||||||||
Net income | $629 | $711 | $1,039 | $751 | $167 | $ 487 | $ 629 | $ 711 | $ 1,039 | $ 751 | ||||||||||
Statutory Statements of Admitted Assets, Liabilities, Capital and Surplus Data | ||||||||||||||||||||
Total invested assets | $48,044 | $45,020 | $42,507 | $41,115 | $38,520 | $ 50,281 | $ 48,044 | $ 45,020 | $ 42,507 | $ 41,115 | ||||||||||
Total admitted assets | $155,133 | $139,341 | $145,670 | $133,345 | $126,861 | $166,217 | $155,133 | $139,341 | $145,670 | $133,345 | ||||||||||
Total liabilities | $146,311 | $132,496 | $139,721 | $128,137 | $122,294 | $157,112 | $146,311 | $132,496 | $139,721 | $128,137 | ||||||||||
Total capital and surplus | $8,822 | $6,845 | $5,949 | $5,208 | $4,567 | $ 9,105 | $ 8,822 | $ 6,845 | $ 5,949 | $ 5,208 |
(a) |
(b) | actual claims losses exceeding reserves for claims; |
(c) | difficult economic and business conditions, including financial, capital and credit market conditions as a result of changes in interest rates or prolonged periods of low interest rates, equity prices, volatility, yields and liquidity in the equity and credit markets, as well as geopolitical conditions and the impact of political, regulatory, judicial, economic or financial events, including terrorism, epidemics or pandemics (such as the COVID-19 pandemic), impacting financial markets generally and companies in the Company’s investment portfolio specifically; |
(d) | the degree to which the Company chooses not to hedge risks, or the potential ineffectiveness or insufficiency of hedging or risk management strategies the Company does implement; |
(e) | changes in certain accounting and/or financial reporting standards issued by the Financial Accounting Standards Board ("FASB"), SEC, NAIC or other standard-setting bodies; |
(f) | the inability to maintain the availability of systems and facilities in the event of a disaster, natural or man-made catastrophe (such as the COVID-19 pandemic), blackout, terrorist attack or war; |
(g) | heightened competition that affects the cost of, and demand for, the Company’s products, specifically including the intensification of price competition, the entry of new competitors, consolidation, technological innovation and the development of new products by new and existing competitors; |
(h) | adverse state and federal legislation and regulation, including in response to the COVID-19 pandemic, with respect to, among other things, tax law changes impacting the federal estate tax and tax treatment of life insurance and investment products; limitations on premium levels; restrictions on product approval and policy issuance; increases in minimum capital and reserves and other financial viability requirements; restrictions on mutual fund service fee payments; changes affecting sales practices, including investigations and/or claims handling and escheat investigations; and regulatory actions of the DOL under ERISA, in particular proposed rule-making with respect to |
fiduciary obligations, rule-making adopted by regulatory authorities under the Dodd-Frank Act and the Federal Deposit Insurance Act, including SEC comprehensive rulemaking and guidance regarding standards of conduct for broker dealers and investment advisers; |
(i) | the inability to mitigate the capital impact associated with statutory reserving and capital requirements; |
(j) | failure to maintain or expand distribution channels; |
(k) | possible difficulties in executing, integrating and realizing projected results of acquisitions, divestitures and restructurings; |
(l) | loss of key vendor relationships or failure of a vendor to protect confidential and proprietary |
(m) | changes in interest rates and the equity markets causing a reduction in the market value of the Company’s investment portfolio, investment income and/or asset fees; an acceleration of other expenses; a reduction in separate account assets or a reduction in the demand for the Company’s products; increased liabilities related to living benefits and death benefit guarantees; or an impact on ultimate realizability of deferred tax assets; |
(n) | outlook changes and downgrades in the financial strength and claims-paying ability ratings of the Company assigned by NRSROs; |
(o) | competitive, regulatory or tax changes that affect the cost of, or demand for, products; |
(p) | fluctuations in RBC |
(q) | settlement of tax liabilities for amounts that differ significantly from those recorded on the balance sheets; |
(r) | deviations from assumptions regarding future persistency, mortality and morbidity rates (including as a result of natural and man-made catastrophes, pandemics, including the COVID-19 pandemic, epidemics, malicious acts, terrorist acts and climate change), and interest rates used in calculating reserve amounts and in pricing products; |
(s) | adverse results and/or resolution of litigation, arbitration, regulatory investigation and/or inquiry; |
(t) | the availability, pricing and effectiveness of reinsurance; |
(u) | the effectiveness of policies and procedures for managing risk; |
(v) | interruption in telecommunication, information technology or other operational systems or failure to maintain the security, confidentiality or privacy of sensitive data on such systems; |
(w) | adverse consequences, including financial and reputational costs, regulatory problems and potential loss of customers resulting from a breach of information security, a failure to meet privacy regulations, or inability to secure and maintain the confidentiality of proprietary or customers’ personal information; |
(x) | the inability to protect intellectual property and defend against claims of infringement; |
(y) | realized losses with respect to impairments of assets in the investment portfolio of the Company; |
(z) | exposure to losses related to variable annuity guarantee benefits, including from downturns and volatility in equity markets; |
(aa) | statutory reserve requirements associated with term and universal life insurance policies under Regulation XXX, Guideline AXXX and principles-based reserving requirements; |
(ab) | lack of liquidity in certain investments, access to credit facilities, or other inability to access capital; and |
(ac) | defaults on commercial mortgages and volatility in their performance. |
December 31, | ||||||
(in millions) | 2020 | 2019 | Change | |||
Revenues | ||||||
Premiums and annuity considerations | $10,637 | $10,168 | 5% | |||
Net investment income | 2,107 | 1,974 | 7% | |||
Amortization of interest maintenance reserve | - | (2) | 100% | |||
Other revenues | 2,372 | 2,312 | 3% | |||
Total revenues | $15,116 | $14,452 | 5% | |||
Benefits and expenses | ||||||
Benefits to policyholders and beneficiaries | $15,013 | $14,782 | 2% | |||
Increase in reserves for future policy benefits and claims | 1,627 | 1,501 | 8% | |||
Net transfers from separate accounts | (3,544) | (3,747) | 5% | |||
Commissions | 646 | 674 | (4%) | |||
Dividends to policyholders | 36 | 38 | (5%) | |||
Reserve adjustment on reinsurance assumed | (172) | (246) | 30% | |||
Other expenses | 444 | 417 | 6% | |||
Total benefits and expenses | $14,050 | $13,419 | 5% | |||
Income before federal income tax expense and net realized capital losses on investments | $ 1,066 | $ 1,033 | 3% | |||
Federal income tax expense (benefit) | 4 | (73) | 105% | |||
Income before net realized capital losses on investments | $ 1,062 | $ 1,106 | (4%) | |||
Net realized capital losses on investments, net of tax and transfers to the interest maintenance reserve | (575) | (477) | (21%) | |||
Net income | $ 487 | $ 629 | (23%) |
December 31, | December 31, | |||||||||||
(in millions) | 2019 | 2018 | Change | 2019 | 2018 | Change | ||||||
Revenues | ||||||||||||
Premiums and annuity considerations | $10,168 | $9,829 | 3% | $10,168 | $ 9,829 | 3% | ||||||
Net investment income | 1,974 | 1,927 | 2% | 1,974 | 1,927 | 2% | ||||||
Amortization of interest maintenance reserve | (2) | (1) | (100%) | (2) | (1) | (100%) | ||||||
Other revenues | 2,312 | 2,240 | 3% | 2,312 | 2,240 | 3% | ||||||
Total revenues | $14,452 | $13,995 | 3% | $14,452 | $13,995 | 3% | ||||||
Benefits and expenses | ||||||||||||
Benefits to policyholders and beneficiaries | $14,782 | $13,961 | 6% | $14,782 | $13,961 | 6% | ||||||
Increase in reserves for future policy benefits and claims | 1,501 | 736 | 104% | 1,501 | 736 | 104% | ||||||
Net transfers from separate accounts | (3,747) | (2,468) | (52%) | (3,747) | (2,468) | (52%) | ||||||
Commissions | 674 | 670 | 1% | 674 | 670 | 1% | ||||||
Dividends to policyholders | 38 | 40 | (5%) | 38 | 40 | (5%) | ||||||
Reserve adjustment on reinsurance assumed | (246) | (352) | 30% | (246) | (352) | 30% | ||||||
Other expenses | 417 | 398 | 5% | 417 | 398 | 5% | ||||||
Total benefits and expenses | $13,419 | $12,985 | 3% | $13,419 | $12,985 | 3% | ||||||
Income before federal income tax expense and net realized capital losses on investments | $1,033 | $1,010 | 2% | $ 1,033 | $ 1,010 | 2% | ||||||
Federal income tax (benefit) expense | (73) | 64 | (214%) | (73) | 64 | (214%) | ||||||
Income before net realized capital losses on investments | $1,106 | $946 | 17% | $ 1,106 | $ 946 | 17% | ||||||
Net realized capital losses on investments, net of tax and transfers to the interest maintenance reserve | (477) | (235) | (103%) | (477) | (235) | (103%) | ||||||
Net income | $629 | $711 | (12%) | $ 629 | $ 711 | (12%) |
December 31, | December 31, | |||||||||||
(in millions) | 2018 | 2017 | Change | 2020 | 2019 | Change | ||||||
Results of Operations | ||||||||||||
Revenues | ||||||||||||
Premiums and annuity considerations | $9,829 | $10,403 | (6%) | $394 | $ 413 | (5%) | ||||||
Net investment income | 1,927 | 1,958 | (2%) | 247 | 262 | (6%) | ||||||
Amortization of interest maintenance reserve | (1) | (2) | 50% | |||||||||
Other revenues | 2,240 | 2,443 | (8%) | 193 | 208 | (7%) | ||||||
Total revenues | $13,995 | $14,802 | (5%) | $834 | $ 883 | (6%) | ||||||
Benefits and expenses | ||||||||||||
Benefits to policyholders and beneficiaries | $13,961 | $12,879 | 8% | $689 | $ 756 | (9%) | ||||||
Increase in reserves for future policy benefits and claims | 736 | 1,246 | (41%) | 62 | 21 | 195% | ||||||
Net transfers from separate accounts | (2,468) | (950) | (160%) | (85) | (105) | 19% | ||||||
Commissions | 670 | 683 | (2%) | 21 | 30 | (30%) | ||||||
Dividends to policyholders | 40 | 46 | (13%) | 36 | 38 | (5%) | ||||||
Reserve adjustment on reinsurance assumed | (352) | (553) | 36% | |||||||||
Other expenses | 398 | 466 | (15%) | 123 | 133 | (8%) | ||||||
Total benefits and expenses | $12,985 | $13,817 | (6%) | $846 | $ 873 | (3%) | ||||||
Income before federal income tax expense and net realized capital losses on investments | $1,010 | $985 | 3% | |||||||||
Federal income tax expense (benefit) | 64 | (455) | 114% | |||||||||
Income before net realized capital losses on investments | $946 | $1,440 | (34%) | |||||||||
Net realized capital losses on investments, net of tax and transfers to the interest maintenance reserve | (235) | (401) | 41% | |||||||||
Net income | $711 | $1,039 | (32%) | |||||||||
Pre-tax operating earnings | $ (12) | $ 10 | (220%) |
December 31, | December 31, | |||||||||||
(in millions) | 2019 | 2018 | Change | 2019 | 2018 | Change | ||||||
Results of Operations | ||||||||||||
Revenues | ||||||||||||
Premiums and annuity considerations | $413 | $410 | 1% | $ 413 | $410 | 1% | ||||||
Net investment income | 262 | 270 | (3%) | 262 | 270 | (3%) | ||||||
Amortization of interest maintenance reserve | - | 1 | (100%) | - | 1 | (100%) | ||||||
Other revenues | 208 | 214 | (3%) | |||||||||
Total revenues | $ 883 | $895 | (1%) | |||||||||
Benefits and expenses | ||||||||||||
Benefits to policyholders and beneficiaries | $ 756 | $713 | 6% | |||||||||
Increase in reserves for future policy benefits and claims | 21 | 4 | 425% | |||||||||
Net transfers from separate accounts | (105) | (71) | (48%) | |||||||||
Commissions | 30 | 27 | 11% |
December 31, | ||||||
(in millions) | 2019 | 2018 | Change | |||
Other revenues | 208 | 214 | (3%) | |||
Total revenues | $883 | $895 | (1%) | |||
Benefits and expenses | ||||||
Benefits to policyholders and beneficiaries | $756 | $713 | 6% | |||
Increase in reserves for future policy benefits and claims | 21 | 4 | 425% | |||
Net transfers from separate accounts | (105) | (71) | (48%) | |||
Commissions | 30 | 27 | 11% | |||
Dividends to policyholders | 38 | 40 | (5%) | |||
Other expenses | 133 | 154 | (14%) | |||
Total benefits and expenses | $873 | $867 | 1% | |||
Pre-tax operating earnings | $10 | $28 | (64%) |
December 31, | ||||||
(in millions) | 2019 | 2018 | Change | |||
Dividends to policyholders | 38 | 40 | (5%) | |||
Other expenses | 133 | 154 | (14%) | |||
Total benefits and expenses | $873 | $867 | 1% | |||
Pre-tax operating earnings | $ 10 | $ 28 | (64%) |
December 31, | December 31, | |||||||||||
(in millions) | 2018 | 2017 | Change | 2020 | 2019 | Change | ||||||
Results of Operations | ||||||||||||
Revenues | ||||||||||||
Premiums and annuity considerations | $410 | $413 | (1%) | $ 3,407 | $ 4,202 | (19%) | ||||||
Net investment income | 270 | 279 | (3%) | 338 | 319 | 6% | ||||||
Amortization of interest maintenance reserve | 1 | 1 | 0% | 4 | 1 | 300% | ||||||
Other revenues | 214 | 218 | (2%) | 1,498 | 1,488 | 1% | ||||||
Total revenues | $895 | $911 | (2%) | $ 5,247 | $ 6,010 | (13%) | ||||||
Benefits and expenses | ||||||||||||
Benefits to policyholders and beneficiaries | $713 | $761 | (6%) | $ 7,140 | $ 7,993 | (11%) | ||||||
Increase (decrease) in reserves for future policy benefits and claims | 4 | (8) | 150% | |||||||||
(Decrease) increase in reserves for future policy benefits and claims | (78) | 25 | (412%) | |||||||||
Net transfers from separate accounts | (71) | (97) | 27% | (2,490) | (2,695) | 8% | ||||||
Commissions | 27 | 26 | 4% | 437 | 442 | (1%) | ||||||
Dividends to policyholders | 40 | 46 | (13%) | |||||||||
Reserve adjustment on reinsurance assumed | (172) | (246) | 30% | |||||||||
Other expenses | 154 | 151 | 2% | 55 | 57 | (4%) | ||||||
Total benefits and expenses | $867 | $879 | (1%) | $ 4,892 | $ 5,576 | (12%) | ||||||
Pre-tax operating earnings | $28 | $32 | (13%) | $ 355 | $ 434 | (18%) |
December 31, | December 31, | |||||||||||
(in millions) | 2019 | 2018 | Change | 2019 | 2018 | Change | ||||||
Results of Operations | ||||||||||||
Revenues | ||||||||||||
Premiums and annuity considerations | $4,202 | $3,868 | 9% | $ 4,202 | $ 3,868 | 9% | ||||||
Net investment income | 319 | 319 | 0% | 319 | 319 | 0% | ||||||
Amortization of interest maintenance reserve | 1 | 1 | 0% | 1 | 1 | 0% | ||||||
Other revenues | 1,488 | 1,468 | 1% | 1,488 | 1,468 | 1% | ||||||
Total revenues | $6,010 | $5,656 | 6% | $ 6,010 | $ 5,656 | 6% | ||||||
Benefits and expenses | ||||||||||||
Benefits to policyholders and beneficiaries | $7,993 | $7,980 | 0% | $ 7,993 | $ 7,980 | 0% | ||||||
Increase (decrease) in reserves for future policy benefits and claims | 25 | (211) | 112% | 25 | (211) | 112% | ||||||
Net transfers from separate accounts | (2,695) | (2,618) | (3%) | (2,695) | (2,618) | (3%) | ||||||
Commissions | 442 | 434 | 2% | 442 | 434 | 2% | ||||||
Reserve adjustment on reinsurance assumed | (246) | (352) | 30% | (246) | (352) | 30% | ||||||
Other expenses | 57 | 48 | 19% | 57 | 48 | 19% | ||||||
Total benefits and expenses | $5,576 | $5,281 | 6% | $ 5,576 | $ 5,281 | 6% | ||||||
Pre-tax operating earnings | $434 | $375 | 16% | $ 434 | $ 375 | 16% |
December 31, | December 31, | |||||||||||
(in millions) | 2018 | 2017 | Change | 2020 | 2019 | Change | ||||||
Results of Operations | ||||||||||||
Revenues | ||||||||||||
Premiums and annuity considerations | $3,868 | $4,424 | (13%) | $ 5,939 | $ 4,324 | 37% | ||||||
Net investment income | 319 | 324 | (2%) | 843 | 824 | 2% | ||||||
Amortization of interest maintenance reserve | 1 | 1 | 0% | (4) | (4) | 0% | ||||||
Other revenues | 1,468 | 1,434 | 2% | 354 | 326 | 9% | ||||||
Total revenues | $5,656 | $6,183 | (9%) | $ 7,132 | $ 5,470 | |||||||
Benefits and expenses | ||||||||||||
Benefits to policyholders and beneficiaries | $7,980 | $7,297 | 9% | $ 6,582 | $ 5,308 | 24% | ||||||
Decrease in reserves for future policy benefits and claims | (211) | (311) | 32% | |||||||||
Increase in reserves for future policy benefits and claims | 1,582 | 1,135 | 39% | |||||||||
Net transfers from separate accounts | (2,618) | (1,149) | (128%) | (1,372) | (1,319) | (4%) | ||||||
Commissions | 434 | 466 | (7%) | 94 | 96 | (2%) | ||||||
Reserve adjustment on reinsurance assumed | (352) | (553) | 36% | |||||||||
Other expenses | 48 | 54 | (11%) | 131 | 122 | 7% |
December 31, | December 31, | |||||||||||
(in millions) | 2018 | 2017 | Change | 2020 | 2019 | Change | ||||||
Total benefits and expenses | $5,281 | $5,804 | (9%) | $7,017 | $5,342 | 31% | ||||||
Pre-tax operating earnings | $375 | $379 | (1%) | $ 115 | $ 128 | (10%) |
December 31, | December 31, | |||||||||||
(in millions) | 2019 | 2018 | Change | 2019 | 2018 | Change | ||||||
Results of Operations | ||||||||||||
Revenues | ||||||||||||
Premiums and annuity considerations | $4,324 | $4,095 | 6% | $ 4,324 | $4,095 | 6% | ||||||
Net investment income | 824 | 798 | 3% | 824 | 798 | 3% | ||||||
Amortization of interest maintenance reserve | (4) | (3) | (33%) | (4) | (3) | (33%) | ||||||
Other revenues | 326 | 291 | 12% | 326 | 291 | 12% | ||||||
Total revenues | $5,470 | $5,181 | 6% | $ 5,470 | $5,181 | 6% | ||||||
Benefits and expenses | ||||||||||||
Benefits to policyholders and beneficiaries | $5,308 | $4,685 | 13% | $ 5,308 | $4,685 | 13% | ||||||
Increase in reserves for future policy benefits and claims | 1,135 | 876 | 30% | 1,135 | 876 | 30% | ||||||
Net transfers from separate accounts | (1,319) | (725) | (82%) | (1,319) | (725) | (82%) | ||||||
Commissions | 96 | 95 | 1% | 96 | 95 | 1% | ||||||
Other expenses | 122 | 132 | (8%) | 122 | 132 | (8%) | ||||||
Total benefits and expenses | $5,342 | $5,063 | 6% | $ 5,342 | $5,063 | 6% | ||||||
Pre-tax operating earnings | $128 | $118 | 8% | $ 128 | $ 118 | 8% |
December 31, | December 31, | |||||||||||
(in millions) | 2018 | 2017 | Change | 2020 | 2019 | Change | ||||||
Results of Operations | ||||||||||||
Revenues | ||||||||||||
Premiums and annuity considerations | $4,095 | $3,986 | 3% | $ 897 | $1,229 | (27%) | ||||||
Net investment income | 798 | 807 | (1%) | 679 | 569 | 19% | ||||||
Amortization of interest maintenance reserve | (3) | (2) | (50%) | - | 1 | 0% | ||||||
Other revenues | 291 | 545 | (47%) | 327 | 290 | 13% | ||||||
Total revenues | $5,181 | $5,336 | (3%) | $1,903 | $2,089 | (9%) | ||||||
Benefits and expenses | ||||||||||||
Benefits to policyholders and beneficiaries | $4,685 | $4,237 | 11% | $ 602 | $ 725 | (17%) | ||||||
Increase in reserves for future policy benefits and claims | 876 | 1,329 | (34%) | 61 | 320 | (81%) | ||||||
Net transfers from separate accounts | (725) | (595) | (22%) | |||||||||
Net transfers to separate accounts | 403 | 372 | 8% | |||||||||
Commissions | 95 | 96 | (1%) | 94 | 106 | (11%) | ||||||
Other expenses | 132 | 151 | (13%) | 135 | 105 | 29% | ||||||
Total benefits and expenses | $5,063 | $5,218 | (3%) | $1,295 | $1,628 | (20%) | ||||||
Pre-tax operating earnings | $118 | $118 | 0% | $ 608 | $ 461 | 32% |
December 31, | December 31, | |||||||||||
(in millions) | 2019 | 2018 | Change | 2019 | 2018 | Change | ||||||
Results of Operations | ||||||||||||
Revenues | ||||||||||||
Premiums and annuity considerations | $1,229 | $1,456 | (16%) | $1,229 | $1,456 | (16%) | ||||||
Net investment income | 569 | 540 | 5% | 569 | 540 | 5% | ||||||
Amortization of interest maintenance reserve | 1 | - | 0% | 1 | - | 0% | ||||||
Other revenues | 290 | 267 | 9% | 290 | 267 | 9% | ||||||
Total revenues | $2,089 | $2,263 | (8%) | $2,089 | $2,263 | (8%) | ||||||
Benefits and expenses | ||||||||||||
Benefits to policyholders and beneficiaries | $725 | $583 | 24% | $ 725 | $ 583 | 24% | ||||||
Increase in reserves for future policy benefits and claims | 320 | 67 | 378% | 320 | 67 | 378% | ||||||
Net transfers to separate accounts | 372 | 946 | (61%) | 372 | 946 | (61%) | ||||||
Commissions | 106 | 114 | (7%) | |||||||||
Other expenses | 105 | 64 | 64% |
December 31, | December 31, | |||||||||||
(in millions) | 2019 | 2018 | Change | 2019 | 2018 | Change | ||||||
Commissions | 106 | 114 | (7%) | |||||||||
Other expenses | 105 | 64 | 64% | |||||||||
Total benefits and expenses | $1,628 | $1,774 | (8%) | $1,628 | $1,774 | (8%) | ||||||
Pre-tax operating earnings | $461 | $489 | (6%) | $ 461 | $ 489 | (6%) |
December 31, | ||||||
(in millions) | 2018 | 2017 | Change | |||
Results of Operations | ||||||
Revenues | ||||||
Premiums and annuity considerations | $1,456 | $1,580 | (8%) | |||
Net investment income | 540 | 548 | (1%) | |||
Amortization of interest maintenance reserve | - | (2) | 100% | |||
Other revenues | 267 | 246 | 9% | |||
Total revenues | $2,263 | $2,372 | (5%) | |||
Benefits and expenses | ||||||
Benefits to policyholders and beneficiaries | $583 | $584 | (0%) | |||
Increase in reserves for future policy benefits and claims | 67 | 236 | (72%) | |||
Net transfers to separate accounts | 946 | 891 | 6% | |||
Commissions | 114 | 95 | 20% | |||
Other expenses | 64 | 110 | (42%) | |||
Total benefits and expenses | $1,774 | $1,916 | (7%) | |||
Pre-tax operating earnings | $489 | $456 | 7% |
Payments due by period | Payments due by period | |||||||||||||||||||
(in millions) | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | Total | Less than 1 year | 1-3 years | More 3-5 years | than 5 years | Total | ||||||||||
Future policy benefits and claims1,2,3,4 | $5,137 | 8,336 | 7,422 | 80,877 | 101,772 | $5,710 | 8,878 | 7,987 | 82,011 | 104,586 | ||||||||||
Policyholders dividends accumulation5 | 452 | - | - | - | 452 | 430 | - | - | - | 430 | ||||||||||
Short-term debt6 | 203 | - | - | - | 203 | 3 | - | - | - | 3 | ||||||||||
Securities lending payable7 | 133 | 133 | 102 | 102 | ||||||||||||||||
Surplus notes8 | 70 | 141 | 141 | 2,100 | 2,452 | 71 | 141 | 141 | 2,029 | 2,382 | ||||||||||
Total | $5,995 | $8,477 | $7,563 | $82,977 | $105,012 | $6,316 | $9,019 | $8,128 | $84,040 | $107,503 |
1 | A significant portion of policy contract benefits and claims to be paid do not have stated contractual maturity dates and may not result in any ultimate payment obligation. Amounts reported represent estimated undiscounted cash flows out of the Company’s general account related to death, surrender, annuity and other benefit payments under policy contracts in force as of December 31, |
lapse rates (including the impact of customer decisions to make future premium payments to keep the related policies in force); coverage levels remaining unchanged from those provided under contracts in force as of December 31, | |
2 | Contractual provisions exist which could adjust the amount and/or timing of those obligations reported. Key assumptions related to payments due by period include customer lapse and withdrawal rates (including timing of death), exchanges to and from the fixed and separate accounts of the variable annuities, claim experience with respect to guarantees, and future interest crediting levels. Assumptions for future interest crediting levels were made based on processes consistent with the Company’s past practices, which are at the discretion of the Company, subject to guaranteed minimum crediting rates in many cases and/or subject to contractually obligated increases for specified time periods. Many of the contracts with potentially accelerated payments are subject to surrender charges, which are generally calculated as a percentage of deposits made and are assessed at declining rates during the first seven years after a deposit is made. Amounts disclosed include an estimate of those accelerated payments, net of applicable surrender charges. See Note 2 to the audited statutory financial statements included in the F pages of this report for a description of the Company’s method for establishing life and annuity reserves. |
3 | Certain assumptions have been made about mortality experience and retirement patterns in the amounts reported. Actual deaths and retirements may differ significantly from those projected, which could cause the timing of the obligations reported to vary significantly. In addition, contractual surrender provisions exist on an immaterial portion of these contracts that could accelerate those obligations presented. Amounts disclosed do not include an estimate of those accelerated payments. Most of the contracts with potentially accelerated payments are subject to surrender charges, which are generally calculated as a percentage of the commuted value of the remaining term certain benefit payments and are assessed at declining rates during the first seven policy years. |
4 | Contractual provisions exist that could increase those obligations presented. The process for determining future interest crediting rates, as described in Note 2 above, was used to develop the estimates of payments due by period. |
5 | The provision for policyholders' dividends payable represents the liabilities related to dividends payable in the following year on participating policies. As such, the obligations related to these liabilities are presented in the table above in the less than one year category in the amounts of the liabilities presented in the Company's Statement of Admitted Assets, Liabilities, Capital and Surplus. |
6 | No contractual provisions exist that could create, increase or accelerate those obligations presented. The amount presented includes |
7 | Since the timing of the return is uncertain, these obligations have been reflected in payments due in less than one year. |
8 | See Note 10 to the audited statutory financial statements included in the F pages of this report for a discussion of the Company’s surplus notes. |
December 31, 2019 | December 31, 2018 | |||||||
(in millions) | Carrying value | % of total | Carrying value | % of total | ||||
Invested assets: | ||||||||
Bonds | $35,124 | 73% | $32,348 | 72% | ||||
Stocks | 2,622 | 6% | 1,820 | 4% | ||||
Mortgage loans, net of allowance | 7,655 | 16% | 7,764 | 17% | ||||
Policy loans | 903 | 2% | 905 | 2% | ||||
Derivative assets | 94 | 0% | 100 | 0% | ||||
Cash, cash equivalents and short-term investments | 556 | 1% | 1,099 | 3% |
December 31, 2019 | December 31, 2018 | December 31, 2020 | December 31, 2019 | |||||||||||||
(in millions) | Carrying value | % of total | Carrying value | % of total | Carrying value | % of total | Carrying value | % of total | ||||||||
Invested assets: | ||||||||||||||||
Bonds | $37,207 | 74% | $35,124 | 73% | ||||||||||||
Stocks | 2,835 | 6% | 2,622 | 6% | ||||||||||||
Mortgage loans, net of allowance | 7,783 | 15% | 7,655 | 16% | ||||||||||||
Policy loans | 888 | 2% | 903 | 2% | ||||||||||||
Derivative assets | 51 | 0% | 94 | 0% | ||||||||||||
Cash, cash equivalents and short-term investments | 461 | 1% | 556 | 1% | ||||||||||||
Securities lending collateral assets | 132 | 0% | 101 | 0% | 101 | 0% | 132 | 0% | ||||||||
Other invested assets | 958 | 2% | 883 | 2% | 955 | 2% | 958 | 2% | ||||||||
Total invested assets | $48,044 | 100% | $45,020 | 100% | $50,281 | 100% | $48,044 | 100% |
(in millions) | December 31, 2019 | December 31, 2018 | December 31, 2020 | December 31, 2019 | ||||||||||||||||||||
NAIC designation | Carrying value | Fair value | % of total statement value | Carrying value | Fair value | % of total statement value | Carrying value | Fair value | % of total statement value | Carrying value | Fair value | % of total statement value | ||||||||||||
1 | $19,561 | $21,185 | 55% | $17,760 | $18,054 | 56% | $20,212 | $22,806 | 54% | $19,561 | $21,185 | 55% | ||||||||||||
2 | 13,933 | 14,919 | 40% | 13,075 | 12,944 | 40% | 14,886 | 16,833 | 40% | 13,933 | 14,919 | 40% | ||||||||||||
3 | 1,115 | 1,119 | 3% | 1,085 | 1,013 | 3% | 1,635 | 1,695 | 5% | 1,115 | 1,119 | 3% | ||||||||||||
4 | 296 | 299 | 1% | 324 | 282 | 1% | 353 | 347 | 1% | 296 | 299 | 1% | ||||||||||||
5 | 199 | 170 | 1% | 82 | 79 | 0% | 113 | 109 | 0% | 199 | 170 | 1% | ||||||||||||
6 | 20 | 43 | 0% | 22 | 47 | 0% | 8 | 20 | 0% | 20 | 43 | 0% | ||||||||||||
$35,124 | $37,735 | 100% | $32,348 | $32,419 | 100% | |||||||||||||||||||
7 | $ 37,20 | $41,810 | 100% | $35,124 | $37,735 | 100% |
(in millions) | December 31, 2019 | December 31, 2018 | ||||||||||
NAIC designation | Statement Value | Fair Value | % of total statement value | Statement Value | Fair Value | % of total statement value | ||||||
1 | $5,035 | $5,200 | 94% | $4,560 | $4,625 | 91% | ||||||
2 | 231 | 260 | 4% | 233 | 281 | 5% | ||||||
3 | 67 | 62 | 1% | 112 | 109 | 3% | ||||||
4 | 63 | 60 | 1% | 67 | 59 | 1% | ||||||
5 | 19 | 18 | 0% | 14 | 16 | 0% | ||||||
6 | 18 | 40 | 0% | 19 | 44 | 0% | ||||||
$5,433 | $5,640 | 100% | $5,005 | $5,134 | 100% |
(in millions) | December 31, 2020 | December 31, 2019 | ||||||||||
NAIC designation | Statement Value | Fair Value | % of total statement value | Statement Value | Fair Value | % of total statement value | ||||||
1 | $6,759 | 7,024 | 95% | $5,035 | 5,200 | 94% | ||||||
2 | 191 | 223 | 3% | 231 | 260 | 4% | ||||||
3 | 111 | 105 | 2% | 67 | 62 | 1% | ||||||
4 | 55 | 51 | 0% | 63 | 60 | 1% | ||||||
5 | 20 | 19 | 0% | 19 | 18 | 0% | ||||||
6 | 5 | 18 | 0% | 18 | 40 | 0% | ||||||
$7,141 | $7,440 | 100% | $5,433 | $5,640 | 100% |
December 31, | December 31, | |||||||
(in millions) | 2019 | 2018 | 2020 | 2019 | ||||
Alternative investments: | ||||||||
Private equity funds | $267 | $197 | $321 | $267 | ||||
Real estate partnerships | 299 | 215 | 366 | 299 | ||||
Tax credit funds | 192 | 187 | 177 | 192 | ||||
Investment in Eagle | 65 | 60 | 52 | 65 | ||||
Total alternative investments | $823 | $659 | $916 | $823 | ||||
Derivatives collateral and receivables | 135 | 224 | 39 | 135 | ||||
Total other invested assets | $958 | $883 | $955 | $958 |
Life Insurance1 | Annuities2 | Corporate Solutions and Other | Workplace Solutions3 | Life Insurance1 | Annuities 2 | Retirement Solutions3 | Corporate Solutions and Other | |||||||||||||||||||||||||||
(in millions) | Account value | Weighted average crediting rate | Account value | Weighted average crediting rate | Account value | Weighted average crediting rate | Account value | Weighted average crediting rate | Account value | Weighted average crediting rate | Account value | Weighted average crediting rate | Account value | Weighted average crediting rate | Account value | Weighted average crediting rate | ||||||||||||||||||
December 31, 2020 | ||||||||||||||||||||||||||||||||||
Minimum guaranteed crediting rate of 3.51% or greater | $594 | 4.00% | $ - | -% | $ 38 | 3.95% | $ - | -% | ||||||||||||||||||||||||||
Minimum guaranteed crediting rate of 3.01% to 3.50% | $ - | -% | $ 210 | 3.64% | $ 6,346 | 3.42% | $ - | -% | ||||||||||||||||||||||||||
Minimum guaranteed crediting rate of 2.01% to 3.00% | $575 | 3.05% | $1,451 | 3.04% | $ 4,172 | 2.83% | $2,306 | 3.04% | ||||||||||||||||||||||||||
Minimum guaranteed crediting rate of 0.01% to 2.00% | $ 55 | 2.56% | $ 553 | 1.12% | $10,548 | 2.92% | $ 979 | 3.07% | ||||||||||||||||||||||||||
No minimum guaranteed crediting rate4 | $ - | -% | $ 56 | 0.55% | $ 1,246 | 2.39% | $ - | -% | ||||||||||||||||||||||||||
December 31, 2019 | ||||||||||||||||||||||||||||||||||
Minimum guaranteed crediting rate of 3.51% or greater | $607 | 4.00 % | $- | - % | $- | - % | $280 | 3.66 % | $607 | 4.00% | $ - | -% | $ 280 | 3.66% | $ - | -% | ||||||||||||||||||
Minimum guaranteed crediting rate of 3.01% to 3.50% | $- | - % | $203 | 3.54 % | $- | - % | $13,800 | 3.31 % | $ - | -% | $ 203 | 3.54% | $13,800 | 3.31% | $ - | -% | ||||||||||||||||||
Minimum guaranteed crediting rate of 2.01% to 3.00% | $562 | 3.13 % | $1,459 | 3.01 % | $2,336 | 3.12 % | $2,195 | 2.80 % | $562 | 3.13% | $1,459 | 3.01% | $ 2,195 | 2.80% | $2,336 | 3.12% | ||||||||||||||||||
Minimum guaranteed crediting rate of 0.01% to 2.00% | $37 | 2.79 % | $539 | 1.22 % | $919 | 3.25 % | $1,610 | 2.47 % | $ 37 | 2.79% | $ 539 | 1.22% | $ 1,610 | 2.47% | $ 919 | 3.25% | ||||||||||||||||||
No minimum guaranteed crediting rate4 | $- | - % | $10 | 2.27 % | $- | - % | $2,882 | 2.29 % | $ - | -% | $ 10 | 2.27% | $ 2,882 | 2.29% | $ - | -% | ||||||||||||||||||
December 31, 2018 | ||||||||||||||||||||||||||||||||||
Minimum guaranteed crediting rate of 3.51% or greater | $632 | 4.00 % | $- | - % | $- | - % | $85 | 4.03 % | ||||||||||||||||||||||||||
Minimum guaranteed crediting rate of 3.01% to 3.50% | $- | - % | $206 | 3.56 % | $- | - % | $14,301 | 3.01 % | ||||||||||||||||||||||||||
Minimum guaranteed crediting rate of 2.01% to 3.00% | $547 | 3.13 % | $1,499 | 2.99 % | $2,279 | 3.18 % | $2,185 | 2.38 % | ||||||||||||||||||||||||||
Minimum guaranteed crediting rate of 0.01% to 2.00% | $22 | 3.00 % | $576 | 1.03 % | $653 | 3.30 % | $1,082 | 2.20 % | ||||||||||||||||||||||||||
No minimum guaranteed crediting rate4 | $- | - % | $12 | 2.58 % | $- | - % | $1,980 | 3.40 % |
1 | Includes universal life products and the fixed investment options selected within variable life products. |
2 | Includes individual fixed annuity products and the fixed investment options selected within variable annuity and indexed products. |
3 | Includes group fixed annuity products. |
4 | Includes certain products with a stated minimum guaranteed crediting rate of 0%. |
Name | Age | Date Service Began | ||
John L. Carter | ||||
Timothy G. Frommeyer | January 2009 | |||
Steven A. Ginnan | June 2018 | |||
Eric S. Henderson | March 2012 | |||
Mark R. Thresher | January 2009 | |||
Kirt A. Walker |
Name | Age | Position with NLIC | ||
Gale V. King | Executive Vice President-Chief Administrative Officer | |||
Mark R. Thresher | Executive Vice President | |||
James R. Fowler | Executive Vice President-Chief Information Officer | |||
Tina Ambrozy | Senior Vice President-NF Strategic Customer Solutions | |||
Ann S. Bair | Senior Vice | |||
Pamela A. Biesecker | Senior Vice President-Head of Taxation | |||
John L. Carter | President and Chief Operating | |||
Joel L. Coleman | 55 | Senior Vice President-Chief Investment Officer | ||
Rae Ann Dankovic | Senior Vice President-Nationwide Financial Services Legal | |||
Steven M. English | 46 | Senior Vice President-External Affairs | ||
Timothy G. Frommeyer | Senior Vice President-Chief Financial Officer | |||
Steven A. Ginnan | Senior Vice President-Chief Financial Officer-Nationwide Financial | |||
Mia S. Hairston | Senior Vice | |||
Craig A. Hawley | Senior Vice President-Annuity Distribution | |||
Eric S. Henderson | Senior Vice President-Nationwide | |||
David LaPaul | Senior Vice President and Treasurer | |||
Kevin G. O’Brien | Senior Vice President-IT Chief Financial Officer, Procurement & BTO | |||
Juan J. Perez | 40 | Senior Vice President-Corporate Solutions | ||
Scott Ramey | 49 | Senior Vice President-Retirement Plan Sales | ||
Sandra L. Rich | Senior Vice President | |||
Michael A. Richardson | Senior Vice President-Chief | |||
Kristi L. Rodriquez | 47 | Senior Vice President-Nationwide Retirement Institute | ||
Denise L. Skingle | Senior Vice | |||
Holly R. Snyder | Senior Vice President-Nationwide Life | |||
Michael S. Spangler | Senior Vice President-Investment Management Group | |||
Name and address of beneficial owner | Amount and nature of beneficial ownership | Percent of class | ||
Nationwide Financial Services, Inc. 1 Nationwide Plaza Columbus, Ohio 43215 | 3,814,779 shares | 100% |
• | using position at Nationwide or affiliation with any Nationwide company for personal gain or advantage; and |
• | any interest or association that interferes with independent exercise of judgment in the best interest of Nationwide. |
NATIONWIDE LIFE INSURANCE COMPANY
FOR THE YEAR ENDED DECEMBER 31, 2020
Audit Committee of the Board of Directors Nationwide Life Insurance Company:
We have audited the accompanying financial statements of Nationwide Life Insurance Company (the Company), which comprise the statutory statements of admitted assets, liabilities, capital and surplus as of December 31, 2020 and 2019, and the related statutory statements of operations, changes in capital and surplus, and cash flow for each of the years in the three-year period ended December 31, 2020, and the related notes to the statutory financial statements (“statutory financial statements”).
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with statutory accounting practices prescribed or permitted by the Ohio Department of Insurance (the Department). Management is also responsible for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.
Basis for Adverse Opinion on U.S. Generally Accepted Accounting Principles
As described in Note 2 to the financial statements, the financial statements are prepared by the Company using statutory accounting practices prescribed or permitted by the Department, which is a basis of accounting other than U.S. generally accepted accounting principles. Accordingly, the financial statements are not intended to be presented in accordance with U.S. generally accepted accounting principles.
The effects on the financial statements of the variances between the statutory accounting practices described in Note 2 and U.S. generally accepted accounting principles, although not reasonably determinable, are presumed to be material.
Adverse Opinion on U.S. Generally Accepted Accounting Principles
In our opinion, because of the significance of the variances between statutory accounting practices and U.S. generally accepted accounting principles discussed in the Basis for Adverse Opinion on U.S. Generally Accepted Accounting Principles paragraph, the financial statements referred to above do not present fairly, in accordance with U.S. generally accepted accounting principles, the financial position of the Company as of December 31, 2020 and 2019, or the results of its operations or its cash flows for each of the years in the three-year period ended December 31, 2020.
Opinion on Statutory Basis of Accounting
In our opinion, the financial statements referred to above present fairly, in all material respects, the admitted assets, liabilities, capital and surplus of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flow for each of the years in the three-year period ended December 31, 2020, in accordance with statutory accounting practices prescribed or permitted by the Department described in Note 2.
Other Matter
Our audits were conducted for the purpose of forming an opinion on the financial statements as a whole. The supplementary information included in Schedule I Consolidated Summary of Investments – Other Than Investments in Related Parties, Schedule III Supplementary Insurance Information, Schedule IV Reinsurance and Schedule V Valuation and Qualifying Accounts is presented for purposes of additional analysis and is not a required part of the financial statements but is supplementary information required by the Securities and Exchange Commission’s Regulation S-X. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audits of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole.
Columbus, Ohio
March 19, 2021
F-2
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Statutory Statements of Admitted Assets, Liabilities, Capital and Surplus
December 31, | ||||||||
(in millions, except share amounts) | 2020 | 2019 | ||||||
Admitted assets | ||||||||
Invested assets | ||||||||
Bonds | $ | 37,207 | $ | 35,124 | ||||
Stocks | 2,835 | 2,622 | ||||||
Mortgage loans, net of allowance | 7,783 | 7,655 | ||||||
Policy loans | 888 | 903 | ||||||
Derivative assets | 51 | 94 | ||||||
Cash, cash equivalents and short-term investments | 461 | 556 | ||||||
Securities lending collateral assets | 101 | 132 | ||||||
Other invested assets | 955 | 958 | ||||||
Total invested assets | $ | 50,281 | $ | 48,044 | ||||
Accrued investment income | 692 | 573 | ||||||
Deferred federal income tax assets, net | 642 | 601 | ||||||
Federal income tax receivable | 11 | 108 | ||||||
Other assets | 184 | 152 | ||||||
Separate account assets | 114,407 | 105,655 | ||||||
Total admitted assets | $ | 166,217 | $ | 155,133 | ||||
Liabilities, capital and surplus | ||||||||
Liabilities | ||||||||
Future policy benefits and claims | $ | 41,002 | $ | 39,139 | ||||
Policyholders dividend accumulation | 430 | 452 | ||||||
Short-term debt | 3 | 203 | ||||||
Asset valuation reserve | 466 | 479 | ||||||
Payable for securities | 177 | 113 | ||||||
Derivative liabilities | 87 | 23 | ||||||
Securities lending payable | 101 | 132 | ||||||
Other liabilities | 1,929 | 1,682 | ||||||
Accrued transfers from separate accounts | (1,490 | ) | (1,567 | ) | ||||
Separate account liabilities | 114,407 | 105,655 | ||||||
Total liabilities | $ | 157,112 | $ | 146,311 | ||||
Capital and surplus | ||||||||
Capital shares ($1 par value; authorized - 5,000,000 shares, issued and outstanding - 3,814,779 shares) | $ | 4 | $ | 4 | ||||
Surplus notes | 1,100 | 1,100 | ||||||
Additional paid-in capital | 1,998 | 1,998 | ||||||
Unassigned surplus | 6,003 | 5,720 | ||||||
Total capital and surplus | $ | 9,105 | $ | 8,822 | ||||
Total liabilities, capital and surplus | $ | 166,217 | $ | 155,133 |
See accompanying notes to statutory financial statements.
F-3
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Statutory Statements of Operations
Year ended December 31, | ||||||||||||
(in millions) | 2020 | 2019 | 2018 | |||||||||
Revenues | ||||||||||||
Premiums and annuity considerations | $ | 10,637 | $ | 10,168 | $ | 9,829 | ||||||
Net investment income | 2,107 | 1,974 | 1,927 | |||||||||
Amortization of interest maintenance reserve | - | (2 | ) | (1 | ) | |||||||
Other revenues | 2,372 | 2,312 | 2,240 | |||||||||
Total revenues | $ | 15,116 | $ | 14,452 | $ | 13,995 | ||||||
Benefits and expenses | ||||||||||||
Benefits to policyholders and beneficiaries | $ | 15,013 | $ | 14,782 | $ | 13,961 | ||||||
Increase in reserves for future policy benefits and claims | 1,627 | 1,501 | 736 | |||||||||
Net transfers from separate accounts | (3,544 | ) | (3,747 | ) | (2,468 | ) | ||||||
Commissions | 646 | 674 | 670 | |||||||||
Dividends to policyholders | 36 | 38 | 40 | |||||||||
Reserve adjustment on reinsurance assumed | (172 | ) | (246 | ) | (352 | ) | ||||||
Other expenses | 444 | 417 | 398 | |||||||||
Total benefits and expenses | $ | 14,050 | $ | 13,419 | $ | 12,985 | ||||||
Income before federal income tax expense and net realized capital losses on investments | $ | 1,066 | $ | 1,033 | $ | 1,010 | ||||||
Federal income tax expense (benefit) | 4 | (73 | ) | 64 | ||||||||
Income before net realized capital losses on investments | $ | 1,062 | $ | 1,106 | $ | 946 | ||||||
Net realized capital (losses) on investments, net of federal income tax (benefit) expense of $(26), $7 and $8 in 2020, 2019 and 2018, respectively, and excluding $(4), $0 and $(1) of net realized capital (losses) transferred to the interest maintenance reserve in 2020, 2019 and 2018, respectively | (575 | ) | (477 | ) | (235 | ) | ||||||
Net income | $ | 487 | $ | 629 | $ | 711 |
See accompanying notes to statutory financial statements.
F-4
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Statutory Statements of Changes in Capital and Surplus
(in millions) | Capital shares | Surplus notes | Additional paid-in capital | Unassigned surplus | Capital and surplus | |||||||||||||||
Balance as of December 31, 2017 | $ | 4 | $ | 700 | $ | 963 | $ | 4,282 | $ | 5,949 | ||||||||||
Net income | - | - | - | 711 | 711 | |||||||||||||||
Change in asset valuation reserve | - | - | - | (12 | ) | (12 | ) | |||||||||||||
Change in deferred income taxes | - | - | - | 72 | 72 | |||||||||||||||
Change in net unrealized capital gains and losses, net of tax expense of $88 | - | - | - | (304 | ) | (304 | ) | |||||||||||||
Change in nonadmitted assets | - | - | - | (6 | ) | (6 | ) | |||||||||||||
Capital contribution from Nationwide | ||||||||||||||||||||
Financial Services, Inc. | - | - | 435 | - | 435 | |||||||||||||||
Balance as of December 31, 2018 | $ | 4 | $ | 700 | $ | 1,398 | $ | 4,743 | $ | 6,845 | ||||||||||
Net income | - | - | - | 629 | 629 | |||||||||||||||
Change in asset valuation reserve | - | - | - | (107 | ) | (107 | ) | |||||||||||||
Change in deferred income taxes | - | - | - | (29 | ) | (29 | ) | |||||||||||||
Change in net unrealized capital gains and losses, net of tax (benefit) of ($29) | - | - | - | 426 | 426 | |||||||||||||||
Change in nonadmitted assets | - | - | - | 59 | 59 | |||||||||||||||
Change in surplus notes | - | 400 | - | - | 400 | |||||||||||||||
Capital contribution from Nationwide Financial Services, Inc. | - | - | 600 | - | 600 | |||||||||||||||
Other, net | - | - | - | (1 | ) | (1 | ) | |||||||||||||
Balance as of December 31, 2019 | $ | 4 | $ | 1,100 | $ | 1,998 | $ | 5,720 | $ | 8,822 | ||||||||||
Change in reserve on account of change in valuation basis | - | - | - | 78 | 78 | |||||||||||||||
Cumulative effect of change in accounting principle | - | - | - | 5 | 5 | |||||||||||||||
Balance as of January 1, 2020 | $ | 4 | $ | 1,100 | $ | 1,998 | $ | 5,803 | $ | 8,905 | ||||||||||
Net income | - | - | - | 487 | 487 | |||||||||||||||
Change in asset valuation reserve | - | - | - | 13 | 13 | |||||||||||||||
Change in deferred income taxes | - | - | - | 41 | 41 | |||||||||||||||
Change in net unrealized capital gains and losses, net of tax (benefit) of ($3) | - | - | - | (313 | ) | (313 | ) | |||||||||||||
Change in nonadmitted assets | - | - | - | (21 | ) | (21 | ) | |||||||||||||
Other, net | - | - | - | (7 | ) | (7 | ) | |||||||||||||
Balance as of December 31, 2020 | $ | 4 | $ | 1,100 | $ | 1,998 | $ | 6,003 | $ | 9,105 |
See accompanying notes to statutory financial statements.
F-5
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Statutory Statements of Cash Flow
Years ended December 31, | ||||||||||||
(in millions) | 2020 | 2019 | 2018 | |||||||||
Cash flows from operating activities: | ||||||||||||
Premiums collected, net of reinsurance | $ | 10,648 | $ | 10,184 | $ | 9,812 | ||||||
Net investment income | 2,034 | 1,825 | 2,041 | |||||||||
Other revenue | 2,664 | 2,708 | 2,329 | |||||||||
Policy benefits and claims paid | (14,886 | ) | (14,778 | ) | (13,947 | ) | ||||||
Commissions, operating expenses and taxes, other than federal income tax paid | (885 | ) | (847 | ) | (710 | ) | ||||||
Net transfers from separate accounts | 3,620 | 3,805 | 2,606 | |||||||||
Policyholders’ dividends paid | (38 | ) | (40 | ) | (45 | ) | ||||||
Federal income taxes recovered | 121 | 87 | 74 | |||||||||
Net cash provided by operating activities | $ | 3,278 | $ | 2,944 | $ | 2,160 | ||||||
Cash flows from investing activities: | ||||||||||||
Proceeds from investments sold, matured or repaid: | ||||||||||||
Bonds | $ | 3,404 | $ | 3,547 | $ | 3,366 | ||||||
Stocks | 37 | 58 | 1 | |||||||||
Mortgage loans | 640 | 910 | 580 | |||||||||
Derivative assets | - | 4 | 560 | |||||||||
Other assets | 905 | 381 | 190 | |||||||||
Total investment proceeds | $ | 4,986 | $ | 4,900 | $ | 4,697 | ||||||
Cost of investments acquired: | ||||||||||||
Bonds | $ | (5,527 | ) | $ | (6,327 | ) | $ | (4,499 | ) | |||
Stocks | (517 | ) | (454 | ) | (608 | ) | ||||||
Mortgage loans | (769 | ) | (800 | ) | (762 | ) | ||||||
Derivative assets | (580 | ) | (687 | ) | - | |||||||
Other assets | (837 | ) | (340 | ) | (610 | ) | ||||||
Total investments acquired | $ | (8,230 | ) | $ | (8,608 | ) | $ | (6,479 | ) | |||
Net decrease in policy loans | 15 | 2 | 36 | |||||||||
Net cash used in investing activities | $ | (3,229 | ) | $ | (3,706 | ) | $ | (1,746 | ) | |||
Cash flows from financing activities and miscellaneous sources: | ||||||||||||
Surplus notes | $ | - | $ | 400 | $ | - | ||||||
Capital contribution from Nationwide Financial Services, Inc. | - | 600 | 435 | |||||||||
Net change in deposits on deposit-type contract funds and other insurance liabilities | 160 | (714 | ) | 228 | ||||||||
Net change in short-term debt | (200 | ) | (162 | ) | 365 | |||||||
Derivative liabilities | 65 | 2 | (135 | ) | ||||||||
Other cash (used) provided | (169 | ) | 93 | (172 | ) | |||||||
Net cash (used in) provided by financing activities and miscellaneous | $ | (144 | ) | $ | 219 | $ | 721 | |||||
Net (decrease) increase in cash, cash equivalents and short-term investments | $ | (95 | ) | $ | (543 | ) | $ | 1,135 | ||||
Cash, cash equivalents and short-term investments at beginning of year | 556 | 1,099 | (36 | ) | ||||||||
Cash, cash equivalents and short-term investments at end of year | $ | 461 | $ | 556 | $ | 1,099 | ||||||
Supplemental disclosure of non-cash activities: | ||||||||||||
Exchange of bond investments | $ | 799 | $ | 592 | $ | 573 | ||||||
Intercompany transfer of securities | $ | - | $ | 6 | $ | 108 | ||||||
Intercompany transfer of mortgages | $ | - | $ | - | $ | 155 |
See accompanying notes to statutory financial statements.
F-6
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2020, 2019 and 2018 Statutory Financial Statements
(1) | Nature of Operations |
Nationwide Life Insurance Company (“NLIC” or “the Company”) was incorporated in 1929 and is an Ohio domiciled stock life insurance company. The Company is a member of the Nationwide group of companies (“Nationwide”), which is comprised of Nationwide Mutual Insurance Company (“NMIC”) and all of its subsidiaries and affiliates.
All of the outstanding shares of NLIC’s common stock are owned by Nationwide Financial Services, Inc. (“NFS”), a holding company formed by Nationwide Corporation, a majority-owned subsidiary of NMIC.
The Company is a leading provider of long-term savings and retirement products in the United States of America (“U.S.”). The Company develops and sells a wide range of products and services, which include fixed and variable individual annuities, private and public sector group retirement plans, life insurance, investment advisory services and other investment products. The Company is licensed to conduct business in all fifty states, the District of Columbia, Guam, Puerto Rico and the U.S. Virgin Islands.
The Company sells its products through a diverse distribution network. Unaffiliated entities that sell the Company’s products to their own customer bases include independent broker-dealers, financial institutions, wirehouses and regional firms, pension plan administrators, life insurance agencies, life insurance specialists and registered investment advisors. Representatives of affiliates who market products directly to a customer base include Nationwide Retirement Solutions, Inc. and Nationwide Financial Network producers, which includes the agency distribution force of the Company’s ultimate parent company, NMIC. NMIC completed the transition away from utilizing the exclusive agent model in 2020. The Company believes its broad range of competitive products, strong distributor relationships and diverse distribution network position it to compete effectively under various economic conditions.
Wholly-owned subsidiaries of NLIC as of December 31, 2020 include Nationwide Life and Annuity Insurance Company (“NLAIC”) and its wholly-owned subsidiaries, Olentangy Reinsurance, LLC (“Olentangy”) and Nationwide SBL, LLC (“NWSBL”), Jefferson National Financial Corporation (“JNF”) and its wholly-owned subsidiaries, Jefferson National Securities Corporation (“JNSC”) and Jefferson National Life Insurance Company (“JNLIC”), and its wholly-owned subsidiary, Jefferson National Life Insurance Company of New York (“JNLNY”), Eagle Captive Reinsurance, LLC (“Eagle”), Nationwide Investment Services Corporation (“NISC”) and Nationwide Investment Advisor, LLC (“NIA”). NLAIC primarily offers fixed indexed annuity contracts and individual annuity contracts, universal life insurance, variable universal life insurance, term life insurance and corporate-owned life insurance on a non-participating basis. Olentangy is a Vermont domiciled special purpose financial captive insurance company. NWSBL offers a securities-based lending product and is an Ohio limited liability company and nonadmitted subsidiary. JNF is a distributor of tax-advantaged investing solutions for registered investment advisors, fee-based advisors and the clients they serve. JNSC is a registered broker-dealer. JNLIC and JNLNY are licensed to underwrite both fixed and variable annuity products. Eagle is an Ohio domiciled special purpose financial captive insurance company. NISC is a registered broker-dealer. NIA is a registered investment advisor.
The Company is subject to regulation by the insurance departments of states in which it is domiciled and/or transacts business and undergoes periodic examinations by those departments.
As of December 31, 2020 and 2019, the Company did not have a significant concentration of financial instruments in a single investee, industry or geographic region. Also, the Company did not have a concentration of business transactions with a particular customer, lender, distribution source, market or geographic region in which a single event could cause a severe impact on the Company’s financial position after considering insurance risk that has been transferred to external reinsurers.
(2) | Summary of Significant Accounting Policies |
Use of Estimates
The preparation of the statutory financial statements requires the Company to make estimates and assumptions that affect the amounts reported in the statutory financial statements and accompanying notes. Significant estimates include legal and regulatory reserves, certain investment and derivative valuations, future policy benefits and claims, provision for income taxes and valuation of deferred tax assets. Actual results could differ significantly from those estimates.
Basis of Presentation
The statutory financial statements of the Company are presented on the basis of accounting practices prescribed or permitted by the Ohio Department of Insurance (“the Department”). Prescribed statutory accounting practices are those practices incorporated directly or by reference in state laws, regulations and general administrative rules applicable to all insurance enterprises domiciled in a particular state. Permitted statutory accounting practices include practices not prescribed by the domiciliary state, but allowed by the domiciliary state regulatory authority.
F-7
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2020, 2019 and 2018 Statutory Financial Statements
The Company’s subsidiary, Eagle, applies a prescribed practice which values assumed guaranteed minimum death benefits (“GMDB”) and guaranteed lifetime withdrawal benefits (“GLWB”) risks on variable annuity contracts from NLIC and GLWB risks on fixed indexed annuity contracts from NLAIC using separate alternative reserving bases from the Statutory Accounting Principles detailed within the National Association of Insurance Commissioners (“NAIC”) Accounting Practices and Procedures manual (“NAIC SAP”) pursuant to Ohio Revised Code Chapter 3964 and approved by the Department. The prescribed practice related to NLIC guaranteed risks decreased the Company’s subsidiary valuation of Eagle, included in other invested assets on the statutory statements of admitted assets, liabilities, capital and surplus, by $711 million and $411 million as of December 31, 2020 and 2019, respectively. The prescribed practice related to NLAIC guaranteed risks, increased the Company’s subsidiary valuation of Eagle, included in other invested assets on the statutory statements of admitted assets, liabilities, capital and surplus, by $523 million and $226 million as of December 31, 2020 and 2019, respectively.
Olentangy was granted a permitted practice from the State of Vermont allowing Olentangy to carry the assets placed into a trust account by Union Hamilton Reinsurance Ltd. (“UHRL”) on its statutory statements of admitted assets, liabilities, capital and surplus at net admitted asset value. This permitted practice increased NLAIC’s valuation of this subsidiary, included in stocks on the statutory statements of admitted assets, liabilities, capital and surplus, by $67 million as of December 31, 2020 and 2019.
There was no difference in the Company’s net income as a result of prescribed or permitted practices. If the prescribed or permitted practices were not applied, the Company’s risk-based capital would continue to be above regulatory action levels. A reconciliation of the Company’s capital and surplus between NAIC SAP and prescribed and permitted practices is shown below:
(in millions) | | SSAP # | | F/S Page | | State of domicile | | | As of December 31, 2020 |
| | As of December 31, 2019 |
| |||||||
Capital and Surplus | ||||||||||||||||||||
Statutory Capital and Surplus | OH | $ | 9,105 | $ | 8,822 | |||||||||||||||
State Prescribed Practice: | ||||||||||||||||||||
Subsidiary valuation - Eagle: NLIC risks ceded | 52 | 3 | OH | 711 | 411 | |||||||||||||||
Subsidiary valuation - Eagle: NLAIC risks ceded | 52 | 3 | OH | (523 | ) | (226 | ) | |||||||||||||
State Permitted Practice: | ||||||||||||||||||||
Subsidiary valuation - Olentangy | 20 | 3 | VT | (67 | ) | (67 | ) | |||||||||||||
Statutory Capital and Surplus, NAIC SAP | $ | 9,226 | $ | 8,940 | ||||||||||||||||
Statutory accounting practices vary in some respects from U.S. generally accepted accounting principles (“GAAP”), including the following practices:
Financial Statements
● | Statutory financial statements are prepared using language and groupings substantially the same as the annual statements of the Company filed with the NAIC and state regulatory authorities; |
● | assets must be included in the statutory statements of admitted assets, liabilities, capital and surplus at net admitted asset value and nonadmitted assets are excluded through a charge to capital and surplus; |
● | an asset valuation reserve (“AVR”) is established in accordance with the NAIC Annual Statement Instructions for Life and Accident and Health Insurance Companies and is reported as a liability, and changes in the AVR are reported directly in capital and surplus; |
● | an interest maintenance reserve (“IMR”) is established in accordance with the NAIC Annual Statement Instructions for Life and Accident and Health Insurance Companies and is reported as a liability, and the amortization of the IMR is reported as revenue; |
● | the expense allowance associated with statutory reserving practices for investment contracts held in the separate accounts is reported in the general account as a negative liability; |
● | accounting for contingencies requires recording a liability at the midpoint of a range of estimated possible outcomes when no better estimate in the range exists; |
● | surplus notes are accounted for as a component of capital and surplus; |
● | costs related to successful policy acquisitions are charged to operations in the year incurred; |
● | negative cash balances are reported as negative assets; |
F-8
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2020, 2019 and 2018 Statutory Financial Statements
● | certain income and expense items are charged or credited directly to capital and surplus; |
● | amounts on deposit in internal qualified cash pools are reported as cash equivalents; |
● | the statutory statements of cash flows are presented on the basis prescribed by the NAIC; and |
● | the statutory financial statements do not include accumulated other comprehensive income. |
Future Policy Benefits and Claims
● | Deposits to universal life contracts, investment contracts and limited payment contracts are included in revenue; and |
● | future policy benefit reserves are based on statutory requirements. |
Reinsurance Ceded
● | Certain assets and liabilities are reported net of ceded reinsurance balances; and |
● | provision is made for amounts receivable and outstanding for more than 90 days through a charge to capital and surplus. |
Investments
● | Investments in bonds are generally stated at amortized cost, except those with an NAIC designation of “6”, which are stated at the lower of amortized cost or fair value; |
● | investments in preferred stocks are generally stated at amortized cost, except those with an NAIC designation of “4” through “6”, which are stated at the lower of amortized cost or fair value; |
● | other-than-temporary impairments on bonds, excluding loan-backed and structured securities, are measured based on fair value and are not reversible; |
● | the proportional amortized cost method is utilized to determine the liquidation value of Low-Income Housing Tax Credit Funds (“Tax Credit Funds”); |
● | admitted subsidiary, controlled and affiliated entities are not consolidated; rather, those investments are generally carried at audited statutory capital and surplus or GAAP equity, as appropriate, and are recorded as an equity investment in stocks or other invested assets; |
● | equity in earnings of subsidiary companies is recognized directly in capital and surplus as net unrealized capital gains or losses, while dividends from unconsolidated companies are recorded in operations as net investment income; |
● | undistributed earnings and valuation adjustments from investments in joint ventures, partnerships and limited liability companies are recognized directly in capital and surplus as net unrealized capital gains or losses; |
● | changes in non-specific mortgage loan reserves are measured under an incurred loss model and are recorded directly in capital and surplus as net unrealized capital gains or losses; and |
● | gains on sales of investments between affiliated companies representing economic transactions are deferred at the parent level until the related assets are paid down or an external sale occurs. |
Separate Accounts
● | Assets and liabilities of guaranteed separate accounts are reported as separate account assets and separate account liabilities, respectively. |
Derivative Instruments
● | Derivatives used in effective hedging transactions are valued in a manner consistent with the hedged asset or liability; |
● | unrealized gains and losses on derivatives that are not considered to be effective hedges are charged to capital and surplus; |
● | interest earned on derivatives is charged to net investment income; and |
● | embedded derivatives are not separated from the host contract and accounted for separately as a derivative instrument. |
F-9
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2020, 2019 and 2018 Statutory Financial Statements
Goodwill
● | Goodwill is limited to 10% of the prior reporting period’s adjusted statutory surplus, with any goodwill in excess of this limitation nonadmitted through a charge to surplus; and |
● | goodwill is amortized and charged to surplus. |
Federal Income Taxes
● | Changes in deferred federal income taxes are recognized directly in capital and surplus with limitations on the amount of deferred tax assets that can be reflected as an admitted asset (15% of surplus); and |
● | uncertain tax positions are subject to a “more likely than not” standard for federal and foreign income tax loss contingencies only. |
Nonadmitted Assets
● | In addition to the nonadmitted assets described above, certain other assets are nonadmitted and charged directly to capital and surplus. These include prepaid assets, certain software, disallowed IMR and other receivables outstanding for more than 90 days. |
The financial information included herein is prepared and presented in accordance with SAP prescribed or permitted by the Department. Certain differences exist between SAP and GAAP, which are presumed to be material.
Revenues and Benefits
Life insurance premiums are recognized as revenue over the premium paying period of the related policies when due. Annuity considerations are recognized as revenue when received. Health insurance premiums are earned ratably over the terms of the related insurance and reinsurance contracts or policies. Policy benefits and claims that are expensed include interest credited to policy account balances, benefits and claims incurred in the period in excess of related policy reserves and other changes in future policy benefits.
Future Policy Benefits and Claims
Future policy benefits for traditional products are based on statutory mortality and interest requirements without consideration of withdrawals. The principal statutory mortality tables and interest assumptions used on policies in force are the 1958 Commissioner’s Standard Ordinary (“CSO”) table at interest rates of 2.5%, 3.0%, 3.5%, 4.0% and 4.5%, the 1941 CSO table at an interest rate of 2.5%, the 1980 CSO table at interest rates of 4.0%, 4.5%, 5.0% and 5.5%, the 2001 CSO table at an interest rate of 4.0% and 3.5% and the 2017 CSO table at an interest rate of 3.5% and 4.5%. Beginning January 1, 2020, the Company has applied principles-based reserving to all new individual life business. For business subject to principles-based reserving, additional reserves may be held where the deterministic and/or stochastic reserves are in excess of net premium reserves, as defined by Valuation Manual 20, Requirements for Principle-Based Reserves for Life Products (“VM-20”).
Future policy benefits for universal life and variable universal life contracts have been calculated based on participants’ contributions plus interest credited on any funds in the fixed account less applicable contract charges. These policies have been adjusted for possible future surrender charges in accordance with the Commissioner’s Reserve Valuation Method (“CRVM”). For business subject to principles-based reserving, the Company has calculated reserves under VM-20.
Future policy benefits for annuity products have been established based on contract term, interest rates and various contract provisions. Individual deferred annuity contracts issued in 1990 and after have been adjusted for possible future surrender charges in accordance with the Commissioner’s Annuity Reserve Valuation Method (“CARVM”).
As of 2019, the Company calculated its reserves for variable annuity products with guaranteed minimum death, accumulation and withdrawal benefits and other contracts involving guaranteed benefits similar to those offered with variable annuities under the standard scenario of Actuarial Guideline XLIII “CARVM for Variable Annuities”, which exceeded the stochastic 70th percentile Conditional Tail Expectations scenario. Effective January 1, 2020, the Company changed its reserve valuation basis for variable annuities due to changes to Valuation Manual 21, Requirements for Principle-Based Reserves for Variable Annuities (“VM-21”) and as a result, the Company calculated its reserves using a stochastic reserve, which is floored at the cash surrender value.
The aggregate reserves for individual accident and health policies consist of active life reserves, disabled life reserves and unearned premium reserves. The active life reserves for disability income are reserved for on the net level basis, at a 3.0% interest rate, using either the 1964 Commissioner’s Disability Table (for policies issued prior to 1982) or the 1985 Commissioner’s Individual Disability Table A (for policies issued after 1981). The active life reserves for major medical insurance (both scheduled and unscheduled benefits) are based on the benefit ratio method for policies issued after 1981.
F-10
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2020, 2019 and 2018 Statutory Financial Statements
The active life reserves for accident and health policies are reserved for on the net level basis, at a 3.0% interest rate, using either the 1956 Inter-Company Hospital-Surgical tables, the 1974 Medical Expense tables or the 1959 Accidental Death Benefits table.
The disabled life reserves for accident and health policies are calculated using the 1985 Commissioner’s Individual Disability Table A at a 3.0% interest rate. Unearned premium reserves are based on the actual gross premiums and actual days.
The aggregate reserves for group accident and health and franchise accident and health policies consist of disabled life reserves and unearned premium reserves. Reserves for benefits payable on disabled life claims are based on the 2012 Group Long-Term Disability (GLTD) Valuation Table, at varying interest rates of 2.75% - 6.0%, for group policies and the 1987 Commissioner’s Group Disability Table, at varying interest rates of 2.75% - 10.25%, for franchise policies.
Future policy benefits and claims for group long-term disability policies are the present value (discounted between 2.75% and 6.00%) of amounts not yet due on reported claims and an estimate of amounts to be paid on incurred but unreported claims. Future policy benefits and claims on other group health policies are not discounted.
The Company issues fixed and floating rate funding agreements to the Federal Home Loan Bank of Cincinnati (“FHLB”). The liabilities for such funding agreements are treated as annuities under Ohio law for life insurance companies and recorded in future policy benefits and claims. Refer to Note 9 for additional details.
Separate Accounts
Separate account assets represent contractholders’ funds that have been legally segregated into accounts with specific investment objectives. Separate account assets are primarily recorded at fair value, with the value of separate account liabilities set to equal the fair value of separate account assets. Separate account assets are primarily comprised of public, privately-registered and non-registered mutual funds, whose fair value is primarily based on the funds’ net asset value. Other separate account assets are recorded at fair value based on the methodology that is applicable to the underlying assets. In limited circumstances, other separate account assets are recorded at book value when the policyholder does not participate in the underlying portfolio experience.
Separate account liabilities, in conjunction with accrued transfers from separate accounts, represent contractholders’ funds adjusted for possible future surrender charges in accordance with the CARVM and the CRVM, respectively. The difference between full account value and CARVM/CRVM is reflected in accrued transfers to separate accounts, as prescribed by the NAIC, in the statutory statements of admitted assets, liabilities, capital and surplus. The annual change in the difference between full account value and CARVM/CRVM and its applicable federal income tax is reflected in the statutory statements of operations as part of the net transfers to separate accounts and federal income tax, respectively.
Retained Assets
The Company does not retain beneficiary assets. During a death benefit claim, the death benefit settlement method is payment to the beneficiary in the form of a check or electronic funds transfer.
Investments
Bonds and stocks of unaffiliated companies. Bonds are generally stated at amortized cost, except those with an NAIC designation of “6”, which are stated at the lower of amortized cost or fair value. Preferred stocks are generally stated at amortized cost, except those with an NAIC designation of “4” through “6”, which are stated at the lower of amortized cost or fair value. Common stocks are stated at fair value. Changes in the fair value of bonds and stocks stated at fair value are charged to capital and surplus.
Loan-backed and structured securities, which are included in bonds in the statutory financial statements, are stated in a manner consistent with the bond guidelines, but with additional consideration given to the special valuation rules implemented by the NAIC applicable to residential mortgage-backed securities that are not backed by U.S. government agencies, commercial mortgage-backed securities and certain other structured securities. Under these guidelines, an initial and adjusted NAIC designation is determined for each security. The initial NAIC designation, which takes into consideration the security’s amortized cost relative to an NAIC-prescribed valuation matrix, is used to determine the reporting basis (i.e., amortized cost or lower of amortized cost or fair value).
Interest income is recognized when earned, while dividends are recognized when declared. The Company nonadmits investment income due and accrued when amounts are over 90 days past due.
F-11
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2020, 2019 and 2018 Statutory Financial Statements
For investments in loan-backed and structured securities, the Company recognizes income and amortizes discounts and premiums using the effective-yield method based on prepayment assumptions, generally obtained using a model provided by a third-party vendor, and the estimated economic life of the securities. When actual prepayments differ significantly from estimated prepayments, the effective-yield is recalculated to reflect actual payments to date and anticipated future payments. Any resulting adjustment is included in net investment income in the period the estimates are revised. All other investment income is recorded using the effective-yield method without anticipating the impact of prepayments.
Purchases and sales of bonds and stocks are recorded on the trade date, with the exception of private placement bonds, which are recorded on the funding date. Realized gains and losses are determined on a specific identification method on the trade date.
Independent pricing services are most often utilized, and compared to pricing from additional sources, to determine the fair value of bonds and stocks for which market quotations or quotations on comparable securities are available. For these bonds and stocks, the Company obtains the pricing services’ methodologies and classifies the investments accordingly in the fair value hierarchy.
A corporate pricing matrix is used in valuing certain corporate bonds. The corporate pricing matrix was developed using publicly available spreads for privately-placed corporate bonds with varying weighted average lives and credit quality ratings. The weighted average life and credit quality rating of a particular bond to be priced using the corporate pricing matrix are important inputs into the model and are used to determine a corresponding spread that is added to the appropriate U.S. Treasury yield to create an estimated market yield for that bond. The estimated market yield and other relevant factors are then used to estimate the fair value of the particular bond.
Non-binding broker quotes are also utilized to determine the fair value of certain bonds when deemed appropriate or when valuations are not available from independent pricing services or a corporate pricing matrix. These bonds are classified with the lowest priority in the fair value hierarchy as only one broker quote is ordinarily obtained, the investment is not traded on an exchange, the pricing is not available to other entities and/or the transaction volume in the same or similar investments has decreased. Inputs used in the development of prices are not provided to the Company by the brokers as the brokers often do not provide the necessary transparency into their quotes and methodologies. At least annually, the Company performs reviews and tests to ensure that quotes are a reasonable estimate of the investments’ fair value. Price movements of broker quotes are subject to validation and require approval from the Company’s management. Management uses its knowledge of the investment and current market conditions to determine if the price is indicative of the investment’s fair value.
For all bonds, the Company considers its ability and intent to hold the security for a period of time sufficient to allow for the anticipated recovery in value, the expected recovery of principal and interest and the extent to which the fair value has been less than amortized cost. If the decline in fair value to below amortized cost is determined to be other-than-temporary, a realized loss is recorded equal to the difference between the amortized cost of the investment and its fair value.
The Company periodically reviews loan-backed and structured securities in an unrealized loss position by comparing the present value of cash flows, including estimated prepayments, expected to be collected from the security to the amortized cost basis of the security. If the present value of cash flows expected to be collected, discounted at the security’s effective interest rate, is less than the amortized cost basis of the security, the impairment is considered other-than-temporary and a realized loss is recorded.
All other bonds in an unrealized loss position are periodically reviewed to determine if a decline in fair value to below amortized cost is other-than-temporary. Factors considered during this review include timing and amount of expected cash flows, ability of the issuer to meet its obligations, financial condition and future prospects of the issuer, amount and quality of any underlying collateral and current economic and industry conditions that may impact an issuer.
Stocks may experience other-than-temporary impairment based on the prospects for full recovery in value in a reasonable period of time and the Company’s ability and intent to hold the stock to recovery. If a stock is determined to be other-than-temporarily impaired, a realized loss is recorded equal to the difference between the cost basis of the investment and its fair value.
F-12
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2020, 2019 and 2018 Statutory Financial Statements
Investments in subsidiaries. The investment in the Company’s wholly-owned insurance subsidiaries, NLAIC and Eagle, are carried using the equity method of accounting applicable to U.S. insurance subsidiary, controlled and affiliated (“SCA”) entities. This requires the investment to be recorded based on the value of its underlying audited statutory surplus. Furthermore, the equity method of accounting would be discontinued if the investment is reduced to zero, unless the Company has guaranteed obligations of the subsidiary or otherwise committed to provide further financial support. In accordance with the “look through” provisions of Statements of Statutory Accounting Principles (“SSAP”) No. 97, Investments in Subsidiary, Controlled and Affiliated Entities, the valuation of JNF, an unaudited downstream noninsurance holding company, is based on the individual audited SCA entities owned by the holding company. Additionally, all non-affiliated liabilities, commitments, contingencies, guarantees or obligations of the holding company are reflected in the determination of the carrying value of the investments. The Company’s investment in NISC and NIA, wholly-owned non-insurance subsidiaries, are carried using the equity method of accounting applicable to U.S. non-insurance subsidiary, controlled and affiliated entities. This requires the investment to be recorded based on its underlying audited GAAP equity. Investments in NLAIC, JNF and NISC are included in stocks, and the investment in Eagle is included in other invested assets on the statutory statements of admitted assets, liabilities, capital and surplus.
Mortgage loans, net of allowance.The Company holds commercial mortgage loans that are collateralized by properties throughout the U.S. Mortgage loans are held at unpaid principal balance adjusted for premiums and discounts, less a valuation allowance. The Company also holds commercial mortgage loans of these property types that are under development. Mortgage loans under development are collateralized by the borrower’s common stock.
As part of the underwriting process, specific guidelines are followed to ensure the initial quality of a new mortgage loan. Third-party appraisals are obtained to support loaned amounts as the loans are collateral dependent or guaranteed.
The collectability and value of a mortgage loan is based on the ability of the borrower to repay and/or the value of the underlying collateral. Many of the Company’s mortgage loans are structured with balloon payment maturities, exposing the Company to risks associated with the borrowers’ ability to make the balloon payment or refinance the property. Loans are considered delinquent when contractual payments are 90 days past due.
Mortgage loans require a loan-specific reserve when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. When management determines that a loan requires a loan-specific reserve, a provision for loss is established equal to the difference between the carrying value and the fair value of the collateral less costs to sell. Loan-specific reserve charges are recorded in net realized capital gains and losses. In the event a loan-specific reserve charge is reversed, the recovery is also recorded in net realized capital gains and losses.
In addition to the loan-specific reserves, the Company maintains a non-specific reserve based primarily on loan surveillance categories and property type classes, which reflects management’s best estimates of probable credit losses inherent in the portfolio of loans without specific reserves as of the date of the statutory statements of admitted assets, liabilities, capital and surplus. Management’s periodic evaluation of the adequacy of the non-specific reserve is based on past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect a group of borrowers’ ability to repay, the estimated value of the underlying collateral, composition of the loan portfolio, current economic conditions and other relevant factors. Non-specific reserve changes are recorded directly in capital and surplus as net unrealized capital gains and losses.
Management evaluates the credit quality of individual mortgage loans and the portfolio as a whole through a number of loan quality measurements, including, but not limited to, loan-to-value (“LTV”) and debt service coverage (“DSC”) ratios. The LTV ratio is calculated as a ratio of the amortized cost of a loan to the estimated value of the underlying collateral. DSC is the amount of cash flow generated by the underlying collateral of the mortgage loan available to meet periodic interest and principal payments of the loan. These loan quality measurements contribute to management’s assessment of relative credit risk in the mortgage loan portfolio. Based on underwriting criteria and ongoing assessment of the properties’ performance, management believes the amounts, net of valuation allowance, are collectible. This process identifies the risk profile and potential for loss individually and in the aggregate for the commercial mortgage loan portfolios. These factors are updated and evaluated at least annually. Due to the nature of the collateral underlying mortgage loans under development, these loans are not evaluated using the LTV and DSC ratios described above.
Interest income on performing mortgage loans is recognized in net investment income over the life of the loan using the effective-yield method. Loans in default or in the process of foreclosure are placed on non-accrual status. Interest received on non-accrual status mortgage loans is included in net investment income in the period received. Loans are restored to accrual status when the principal and interest is current and it is determined the future principal and interest payments are probable or the loan is modified.
Policy loans. Policy loans, which are collateralized by the related insurance policy, are held at the outstanding principal balance and do not exceed the net cash surrender value of the policy. As such, no valuation allowance for policy loans is required.
F-13
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2020, 2019 and 2018 Statutory Financial Statements
Cash and cash equivalents. Cash and cash equivalents include highly liquid investments with original maturities of less than three months and, effective December 31, 2020, amounts on deposit in internal qualified cash pools. The Company and various affiliates maintain agreements with Nationwide Cash Management Company (“NCMC”), an affiliate, under which NCMC acts as a common agent in handling the purchase and sale of short-term securities for the respective accounts of the participants in the internal qualified cash pool.
Short-term investments. Short-term investments consist primarily of government agency discount notes with maturities of twelve months or less at acquisition. Short-term investments also include outstanding promissory notes with initial maturity dates of one-year or less with certain affiliates. The Company carries short-term investments at amortized cost, which approximates fair value. As of December 31, 2019, short-term investments also included amounts on deposit with NCMC.
Other invested assets. Other invested assets consist primarily of alternative investments in private equity funds, private debt funds, tax credit funds, real estate partnerships and the investment in Eagle. Except for investments in certain tax credit funds, these investments are recorded using the equity method of accounting. Changes in carrying value as a result of the equity method are reflected as net unrealized capital gains and losses as a direct adjustment to capital and surplus. Gains and losses are generally recognized through income at the time of disposal or when operating distributions are received. Partnership interests in tax credit funds are held at amortized cost with amortization charged to net investment income over the period in which the tax benefits, primarily credits, are earned. Tax credits are recorded as an offset to tax expense in the period utilized.
The Company has sold $2.3 billion, $2.2 billion and $2.0 billion in Tax Credit Funds to unrelated third parties with outstanding guarantees as of December 31, 2020, 2019 and 2018, respectively. The Company has guaranteed after-tax benefits to the third-party investors through periods ending in 2037. These guarantees are in effect for periods of approximately 15 years each. The Tax Credit Funds provide a stream of tax benefits to the investors that will generate a yield and return of capital. If the tax benefits are not sufficient to provide these cumulative after-tax yields, the Company must fund any shortfall. The maximum amount of undiscounted future payments that the Company could be required to pay the investors under the terms of the guarantees is $1.4 billion, but the Company does not anticipate making any material payments related to the guarantees. The Company’s risks are mitigated in the following ways: (1) the Company has the right to buyout the equity related to the guarantee under certain circumstances, (2) the Company may replace underperforming properties to mitigate exposure to guarantee payments, (3) the Company oversees the asset management of the deals and (4) changes in tax laws are explicitly excluded from the Company’s guarantees of after-tax benefits.
Securities Lending. The Company has entered into securities lending agreements with a custodial bank whereby eligible securities are loaned to third parties, primarily major brokerage firms. These transactions are used to generate additional income in the securities portfolio. The Company is entitled to receive from the borrower any payments of interest and dividends received on loaned securities during the loan term. The agreements require a minimum of 102% of the fair value of the loaned securities to be held as collateral. Cash collateral is invested by the custodial bank in investment-grade securities, which are included in the total invested assets of the Company. Periodically, the Company may receive non-cash collateral, which would be recorded off-balance sheet. The Company recognizes loaned securities in bonds. A securities lending payable is recorded in other liabilities for the amount of cash collateral received. If the fair value of the collateral received (cash and/or securities) is less than the fair value of the securities loaned, the shortfall is nonadmitted. Net income received from securities lending activities is included in net investment income. Because the borrower or the Company may terminate a securities lending transaction at any time, if loans are terminated in advance of the reinvested collateral asset maturities, the Company would repay its securities lending obligations from operating cash flows or the proceeds of sales from its investment portfolio, which includes significant liquid securities.
Derivative Instruments
The Company uses derivative instruments to manage exposures and mitigate risks primarily associated with interest rates, equity markets and foreign currency. These derivative instruments primarily include interest rate swaps, cross-currency swaps, futures and options.
Derivative instruments used in hedging transactions considered to be effective hedges are reported in a manner consistent with the hedged items. Derivative instruments used in hedging transactions that do not meet or no longer meet the criteria of an effective hedge are accounted for at fair value with changes in fair value recorded in capital and surplus as unrealized gains or losses.
The fair value of derivative instruments is determined using various valuation techniques relying predominantly on observable market inputs. These inputs include interest rate swap curves, credit spreads, interest rates, counterparty credit risk, equity volatility and equity index levels.
F-14
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2020, 2019 and 2018 Statutory Financial Statements
The Company’s derivative transaction counterparties are generally financial institutions. To reduce the credit risk associated with open contracts, the Company enters into master netting agreements which permit the closeout and netting of transactions with the same counterparty upon the occurrence of certain events. In addition, the Company attempts to reduce credit risk by obtaining collateral from counterparties. The determination of the need for and the levels of collateral vary based on an assessment of the credit risk of the counterparty. The Company accepts collateral in the forms of cash and marketable securities. Non-cash collateral received is recorded off-balance sheet.
Cash flows and payment accruals on derivatives are recorded in net investment income.
Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources while unobservable inputs reflect the Company’s view of market assumptions in the absence of observable market information. The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. In determining fair value, the Company uses various methods, including market, income and cost approaches.
The Company categorizes its financial instruments into a three-level hierarchy based on the priority of the inputs to the valuation technique. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure fair value fall within different levels of the hierarchy, the category level is based on the lowest priority level input that is significant to the fair value measurement of the instrument in its entirety.
The Company categorizes assets and liabilities held at fair value in the statutory statements of admitted assets, liabilities, capital and surplus as follows:
Level 1. Unadjusted quoted prices accessible in active markets for identical assets or liabilities at the measurement date and mutual funds where the value per share (unit) is determined and published daily and is the basis for current transactions.
Level 2.Unadjusted quoted prices for similar assets or liabilities in active markets or inputs (other than quoted prices) that are observable or that are derived principally from or corroborated by observable market data through correlation or other means. Primary inputs to this valuation technique may include comparative trades, bid/asks, interest rate movements, U.S. Treasury rates, London Interbank Offered Rate (“LIBOR”), prime rates, cash flows, maturity dates, call ability, estimated prepayments and/or underlying collateral values.
Level 3. Prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. Inputs reflect management’s best estimates of the assumptions market participants would use at the measurement date in pricing the asset or liability. Consideration is given to the risk inherent in both the method of valuation and the valuation inputs. Primary inputs to this valuation technique include broker quotes and comparative trades.
The Company reviews its fair value hierarchy classifications for assets and liabilities quarterly. Changes in observability of significant valuation inputs identified during these reviews may trigger reclassifications. Reclassifications are reported as transfers at the beginning of the period in which the change occurs.
Asset Valuation Reserve
The Company maintains an AVR as prescribed by the NAIC for the purpose of offsetting potential credit related investment losses on each invested asset category, excluding cash, policy loans and income receivable. The AVR contains a separate component for each category of invested assets. The change in AVR is charged or credited directly to capital and surplus.
F-15
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2020, 2019 and 2018 Statutory Financial Statements
Interest Maintenance Reserve
The Company records an IMR as prescribed by the NAIC, which represents the net deferral for interest-related gains or losses arising from the sale of certain investments, such as bonds, mortgage loans and loan-backed and structured securities sold. The IMR is applied as follows:
for bonds, the designation from the NAIC Capital Markets and Investments Analysis Office must not have changed more than one designation between the beginning of the holding period and the date of sale;
the bond must never have been classified as a default security;
for mortgage loans, during the prior two years, they must not have had interest more than 90 days past due, been in the process of foreclosure or in the course of voluntary conveyance, nor had restructured terms; and
for loan-backed and structured securities, all interest-related other-than-temporary impairments and interest-related realized gains or losses on sales of the securities.
The realized gains or losses, net of related federal income tax, from the applicable bonds and mortgage loans sold, have been removed from the net realized gain or loss amounts and established as a net liability. This liability is amortized into income such that the amount of each capital gain or loss amortized in a given year is based on the excess of the amount of income which would have been reported that year, if the asset had not been disposed of over the amount of income which would have been reported had the asset been repurchased at its sale price. In the event the unamortized IMR liability balance is negative, the balance is reclassified as an asset and fully nonadmitted. The Company utilizes the grouped method for amortization. Under the grouped method, the liability is amortized into income over the remaining period to expected maturity based on the groupings of the individual securities into five-year bands.
Goodwill
For companies whose operations are primarily insurance related, goodwill is the excess of the cost to acquire a company over the Company’s share of the statutory book value of the acquired entity. Goodwill is recorded in stocks in the statutory statements of admitted assets, liabilities and surplus. Goodwill is amortized on a straight-line basis over the period of economic benefit, not to exceed ten years, with a corresponding charge to surplus.
Unamortized goodwill totaled $100 million and $116 million as of December 31, 2020 and 2019, respectively. All unamortized goodwill as of December 31, 2020 and 2019, is related to the acquisition of JNF, which represents 55% and 69%, respectively, of JNF’s gross SCA value. All goodwill was admitted as of December 31, 2020 and 2019. Amortization of goodwill totaled $16 million for the years ended December 31, 2020, 2019 and 2018. No goodwill was impaired during these periods.
Federal Income Taxes
The Company utilizes the asset and liability method of accounting for income taxes. Under this method, deferred tax assets, net of any nonadmitted portion and statutory valuation allowance, and deferred tax liabilities, are recognized for the expected future tax consequences attributable to differences between the statutory financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income or loss in the years in which those temporary differences are expected to be recovered or settled. The change in deferred taxes, excluding the impact of taxes on unrealized capital gains or losses and nonadmitted deferred taxes, is charged directly to surplus.
The Company provides for federal income taxes based on amounts the Company believes it ultimately will owe. Inherent in the provision for federal income taxes are estimates regarding the deductibility of certain items and the realization of certain tax credits. In the event the ultimate deductibility of certain items or the realization of certain tax credits differs from estimates, the Company may be required to change the provision for federal income taxes recorded in the statutory financial statements, which could be significant.
Tax reserves are reviewed regularly and are adjusted as events occur that the Company believes impact its liability for additional taxes, such as lapsing of applicable statutes of limitations, conclusion of tax audits or substantial agreement with taxing authorities on the deductibility/nondeductibility of uncertain items, additional exposure based on current calculations, identification of new issues, release of administrative guidance or rendering of a court decision affecting a particular tax issue. The Company believes its tax reserves reasonably provide for potential assessments that may result from Internal Revenue Service (“IRS”) examinations and other tax-related matters for all open tax years.
The Company is included in the NMIC consolidated federal income tax return.
F-16
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2020, 2019 and 2018 Statutory Financial Statements
Reinsurance Ceded
The Company cedes insurance to other companies in order to limit potential losses and to diversify its exposures. Such agreements do not relieve the Company of its primary obligation to the policyholder in the event the reinsurer is unable to meet the obligations it has assumed. Reinsurance premiums ceded and reinsurance recoveries on benefits and claims incurred are deducted from the respective income and expense accounts. Assets and liabilities related to reinsurance ceded are reported in the statutory statements of admitted assets, liabilities, capital and surplus on a net basis within the related future policy benefits and claims of the Company.
Participating Business
Participating business, which refers to policies that participate in profits through policyholder dividends, represented approximately 4% of the Company’s life insurance in force in 2020 and 2019, and 50% of the number of life insurance policies in force in 2020 and 2019. The provision for policyholder dividends was based on the respective year’s dividend scales, as approved by the Board of Directors. Policyholder dividends are recognized when declared. No additional income was allocated to participating policyholders during 2020 and 2019.
Accounting Changes and Corrections of Errors
During 2020, the Company identified and corrected an error in the variable annuity ceded premium calculation under the intercompany 100% coinsurance agreement with Eagle. The error resulted in an understatement of ceded premiums for the years ended December 31, 2019 and 2018. In accordance with SSAP No. 3, Accounting Changes and Corrections of Errors, the total prior period correction of $9 million was reported in 2020 as a negative adjustment to unassigned funds (surplus) and consisted of $11 million of ceded premiums, offset by $2 million of taxes.
Effective January 1, 2020, the Company changed its reserve valuation basis for variable annuities due to changes to VM-21. As a result of this change, the Company records stochastic reserves, floored at the cash surrender value, instead of reserves using the standard scenario previously required under Actuarial Guideline XLIII “CARVM for Variable Annuities”. The impacts of the valuation basis change were recognized as of January 1, 2020, resulting in an increase to statutory capital and surplus of $78 million. In addition, the Company changed its reserve valuation basis for stable value wraps covering certain group life insurance policies from Separate Accounts Funding Guaranteed Minimum Benefits Under Group Contracts, to VM-21. There was no impact to statutory capital and surplus as a result of this change.
During 2020, the Company modified its approach used to schedule the reversals of its deferred tax assets for policyholder reserves under SSAP No. 101, Income Taxes (“SSAP No. 101”). Prior to 2020 the Company scheduled the reversals of its deferred tax assets for policyholder reserves by estimating the reserve reversal using the aggregate policyholder reserve. As of January 1, 2020, the Company is now taking a disaggregate approach and calculates reversal of the deferred tax assets for policyholder reserves on a product-by-product basis. The new method is more precise and better reflects how the deferred tax assets for policyholder reserves moves with the underlying reserve liability. SSAP No. 101 permits a company to modify its scheduling method so long as the modification is treated as change in accounting principle. The impact of the change increases the Company’s net admitted deferred tax asset $6 million and $5 million as of December 31, 2020 and January 1, 2020, respectively, with a commensurate increase in capital and surplus. There was no impact on net income.
Recently Adopted Accounting Standard
In December 2020, the Company adopted revisions to SSAP No. 2R, Cash, Cash Equivalents, Drafts and Short-Term Investments (“SSAP No. 2R”). The adopted revisions require internal cash pooling arrangements to meet certain criteria to be considered qualified cash pools, with investments in qualifying pools reported as cash equivalents on the statutory statements of admitted assets, liabilities, capital and surplus. The Company’s cash pool meets the criteria to be considered a qualified cash pool under SSAP No. 2R. The internal cash pooling arrangement with NCMC was historically classified as short-term investments, resulting in a change in classification to cash equivalents.
COVID-19
On March 11, 2020, the World Health Organization declared the novel coronavirus (“COVID-19”) a pandemic. The COVID-19 pandemic conditions create financial market volatility and uncertainty regarding whether and when certain customer behaviors will return to historical patterns, including sales of new and retention of existing policies, life insurance mortality and credit allowance exposure. Although impacting certain sales and revenues, none of the aforementioned items have had a material impact on the overall financial condition of the Company. The extent to which the COVID-19 pandemic may impact the Company’s ongoing operations and financial condition will depend on future developments that are evolving and uncertain.
F-17
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2020, 2019 and 2018 Statutory Financial Statements
Subsequent Events
The Company evaluated subsequent events through March 19, 2021, the date the statutory financial statements were issued.
The Department is in the process of implementing Ohio Administrative Code 3901-1-67, Alternative Derivative and Reserve Accounting Practices (“the Rule”). Once adopted and implemented, the Rule will constitute a prescribed practice as contemplated by the NAIC SAP. The prescribed practice is to allow Ohio-domiciled insurance companies to utilize certain alternative derivative and reserve accounting practices for eligible derivative instruments and indexed products, respectively, in order to better align the measurement of indexed product reserves and the derivatives that hedge them. Effective March 15, 2021, the Department allows Ohio-domiciled insurance companies the option to immediately utilize the alternative derivative and reserve accounting practices contemplated by the Rule. The Company plans to adopt the prescribed practice allowed under the Rule effective January 1, 2021. The Company continues to evaluate the impact of the adoption.
On March 9, 2021, the Company’s Board of Directors declared an ordinary dividend of up to $550 million payable to NFS on or around March 24, 2021.
F-18
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2020, 2019 and 2018 Statutory Financial Statements
(3) | Analysis of Actuarial Reserves and Deposit Liabilities by Withdrawal Characteristics |
The following table summarizes the analysis of individual annuities actuarial reserves by withdrawal characteristics, as of the dates indicated:
(in millions) | General account | Separate account with guarantees | Separate account non- guaranteed | Total | % of Total | |||||||||||||||
December 31, 2020 | ||||||||||||||||||||
Subject to discretionary withdrawal: | ||||||||||||||||||||
With market value adjustment | $ | 190 | $ | 162 | $ | - | $ | 352 | 0 | % | ||||||||||
At book value less current surrender charge of 5% or more | 219 | - | - | 219 | 0 | % | ||||||||||||||
At fair value | - | - | 65,990 | 65,990 | 92 | % | ||||||||||||||
Total with market value adjustment or at fair value | $ | 409 | $ | 162 | $ | 65,990 | $ | 66,561 | 92 | % | ||||||||||
At book value without adjustment (minimal or no charge or adjustment) | 3,480 | - | 8 | 3,488 | 5 | % | ||||||||||||||
Not subject to discretionary withdrawal | 1,755 | - | 62 | 1,817 | 3 | % | ||||||||||||||
Total, gross | $ | 5,644 | $ | 162 | $ | 66,060 | $ | 71,866 | 100 | % | ||||||||||
Less: Reinsurance ceded | (112 | ) | - | - | (112 | ) | ||||||||||||||
Total, net | $ | 5,532 | $ | 162 | $ | 66,060 | $ | 71,754 | ||||||||||||
Amount included in ‘Subject to discretionary withdrawal at book value less current surrender charge of 5% or more’ that will move to ‘Subject to discretionary withdrawal at book value without adjustment (minimal or no charge or adjustment)’ | $ | 67 | $ | - | $ | - | $ | 67 | ||||||||||||
December 31, 2019 | ||||||||||||||||||||
Subject to discretionary withdrawal: | ||||||||||||||||||||
With market value adjustment | $ | 19 | $ | 181 | $ | 29 | $ | 229 | 0 | % | ||||||||||
At book value less current surrender charge of 5% or more | 270 | - | - | 270 | 1 | % | ||||||||||||||
At fair value | - | - | 61,535 | 61,535 | 91 | % | ||||||||||||||
Total with market value adjustment or at fair value | $ | 289 | $ | 181 | $ | 61,564 | $ | 62,034 | 92 | % | ||||||||||
At book value without adjustment (minimal or no charge or adjustment) | 3,587 | - | 11 | 3,598 | 5 | % | ||||||||||||||
Not subject to discretionary withdrawal | 1,761 | - | 56 | 1,817 | 3 | % | ||||||||||||||
Total, gross | $ | 5,637 | $ | 181 | $ | 61,631 | $ | 67,449 | 100 | % | ||||||||||
Less: Reinsurance ceded | (104 | ) | - | - | (104 | ) | ||||||||||||||
Total, net | $ | 5,533 | $ | 181 | $ | 61,631 | $ | 67,345 | ||||||||||||
Amount included in ‘Subject to discretionary withdrawal at book value less current surrender charge of 5% or more’ that will move to ‘Subject to discretionary withdrawal at book value without adjustment (minimal or no charge or adjustment)’ | $ | 128 | $ | - | $ | - | $ | 128 |
F-19
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2020, 2019 and 2018 Statutory Financial Statements
The following table summarizes the analysis of group annuities actuarial reserves by withdrawal characteristics, as of the dates indicated:
(in millions) | General account | Separate account with guarantees | Separate account non- guaranteed | Total | % of Total | |||||||||||||||
December 31, 2020 | ||||||||||||||||||||
Subject to discretionary withdrawal: | ||||||||||||||||||||
With market value adjustment | $ | 17,393 | $ | 2,483 | $ | - | $ | 19,876 | 43 | % | ||||||||||
At book value less current surrender charge of 5% or more | 3 | - | - | 3 | 0 | % | ||||||||||||||
At fair value | - | - | 19,670 | 19,670 | 43 | % | ||||||||||||||
Total with market value adjustment or at fair value | $ | 17,396 | $ | 2,483 | $ | 19,670 | $ | 39,549 | 86 | % | ||||||||||
At book value without adjustment (minimal or no charge or adjustment) | 6,000 | - | - | 6,000 | 13 | % | ||||||||||||||
Not subject to discretionary withdrawal | 591 | - | 3 | 594 | 1 | % | ||||||||||||||
Total, gross | $ | 23,987 | $ | 2,483 | $ | 19,673 | $ | 46,143 | 100 | % | ||||||||||
Less: Reinsurance ceded | (58 | ) | - | - | (58 | ) | ||||||||||||||
Total, net | $ | 23,929 | $ | 2,483 | $ | 19,673 | $ | 46,085 | ||||||||||||
Amount included in ‘Subject to discretionary withdrawal at book value less current surrender charge of 5% or more’ that will move to ‘Subject to discretionary withdrawal at book value without adjustment (minimal or no charge or adjustment)’ | $ | 3 | $ | - | $ | - | $ | 3 | ||||||||||||
December 31, 2019 | ||||||||||||||||||||
Subject to discretionary withdrawal: | ||||||||||||||||||||
With market value adjustment | $ | 16,485 | $ | 2,166 | $ | - | $ | 18,651 | 44 | % | ||||||||||
At book value less current surrender charge of 5% or more | 1 | - | - | 1 | 0 | % | ||||||||||||||
At fair value | - | - | 18,284 | 18,284 | 43 | % | ||||||||||||||
Total with market value adjustment or at fair value | $ | 16,486 | $ | 2,166 | $ | 18,284 | $ | 36,936 | 87 | % | ||||||||||
At book value without adjustment (minimal or no charge or adjustment) | 5,354 | - | - | 5,354 | 12 | % | ||||||||||||||
Not subject to discretionary withdrawal | 584 | 2 | - | 586 | 1 | % | ||||||||||||||
Total, gross | $ | 22,424 | $ | 2,168 | $ | 18,284 | $ | 42,876 | 100 | % | ||||||||||
Less: Reinsurance ceded | (60 | ) | - | - | (60 | ) | ||||||||||||||
Total, net | $ | 22,364 | $ | 2,168 | $ | 18,284 | $ | 42,816 | ||||||||||||
Amount included in ‘Subject to discretionary withdrawal at book value less current surrender charge of 5% or more’ that will move to ‘Subject to discretionary withdrawal at book value without adjustment (minimal or no charge or adjustment)’ | $ | 1 | $ | - | $ | - | $ | 1 |
F-20
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2020, 2019 and 2018 Statutory Financial Statements
The following table summarizes the analysis of deposit-type contracts and other liabilities without life or disability contingencies by withdrawal characteristics, as of the dates indicated:
(in millions) | General account | Separate account non- guaranteed | Total | % of Total | ||||||||||||
December 31, 2020 | ||||||||||||||||
Subject to discretionary withdrawal: | ||||||||||||||||
With market value adjustment | $ | 2 | $ | - | $ | 2 | 0 | % | ||||||||
At fair value | 12 | - | 12 | 0 | % | |||||||||||
Total with market value adjustment or at fair value | $ | 14 | $ | - | $ | 14 | 0 | % | ||||||||
At book value without adjustment (minimal or no charge or adjustment) | 728 | 3 | 731 | 22 | % | |||||||||||
Not subject to discretionary withdrawal | 2,540 | 13 | 2,553 | 78 | % | |||||||||||
Total, gross | $ | 3,282 | $ | 16 | $ | 3,298 | 100 | % | ||||||||
Less: Reinsurance ceded | - | - | - | |||||||||||||
Total, net | $ | 3,282 | $ | 16 | $ | 3,298 | ||||||||||
December 31, 2019 | ||||||||||||||||
Subject to discretionary withdrawal: | ||||||||||||||||
With market value adjustment | $ | 3 | $ | - | $ | 3 | 0 | % | ||||||||
At fair value | 13 | - | 13 | 0 | % | |||||||||||
Total with market value adjustment or at fair value | $ | 16 | $ | - | $ | 16 | 0 | % | ||||||||
At book value without adjustment (minimal or no charge or adjustment) | 775 | 4 | 779 | 25 | % | |||||||||||
Not subject to discretionary withdrawal | 2,331 | 12 | 2,343 | 75 | % | |||||||||||
Total, gross | $ | 3,122 | $ | 16 | $ | 3,138 | 100 | % | ||||||||
Less: Reinsurance ceded | - | - | - | |||||||||||||
Total, net | $ | 3,122 | $ | 16 | $ | 3,138 |
The following table is a reconciliation of total annuity actuarial reserves and deposit fund liabilities, as of the dates indicated:
December 31, | ||||||||
(in millions) | 2020 | 2019 | ||||||
Life, accident and health annual statement: | ||||||||
Annuities, net (excluding supplemental contracts with life contingencies) | $ | 29,445 | $ | 27,880 | ||||
Supplemental contracts with life contingencies, net | 16 | 17 | ||||||
Deposit-type contracts | 3,282 | 3,122 | ||||||
Subtotal | $ | 32,743 | $ | 31,019 | ||||
Separate accounts annual statement: | ||||||||
Annuities, net (excluding supplemental contracts with life contingencies) | $ | 88,378 | $ | 82,264 | ||||
Other contract deposit funds | 16 | 16 | ||||||
Subtotal | $ | 88,394 | $ | 82,280 | ||||
Total annuity actuarial reserves and deposit fund liabilities, net | $ | 121,137 | $ | 113,299 |
F-21
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2020, 2019 and 2018 Statutory Financial Statements
The following table summarizes the analysis of life actuarial reserves by withdrawal characteristics, as of the dates indicated:
General account | Separate account - nonguaranteed1 | |||||||||||||||||||||||
(in millions) | Account value | Cash value | Reserve | Account value | Cash value | Reserve | ||||||||||||||||||
December 31, 2020 | ||||||||||||||||||||||||
Subject to discretionary withdrawal, surrender values or policy loans: | ||||||||||||||||||||||||
Term policies with cash value | $ | - | $ | 11 | $ | 11 | $ | - | $ | - | $ | - | ||||||||||||
Universal life | 2,585 | 2,600 | 2,764 | - | - | - | ||||||||||||||||||
Universal life with secondary guarantees | 360 | 288 | 720 | - | - | - | ||||||||||||||||||
Indexed universal life with secondary guarantees | 179 | 130 | 191 | - | - | - | ||||||||||||||||||
Other permanent cash value life insurance | - | 1,300 | 2,607 | - | - | - | ||||||||||||||||||
Variable life | 1,887 | 1,965 | 2,060 | 24,591 | 24,581 | 24,582 | ||||||||||||||||||
Miscellaneous reserves | - | - | - | - | - | 9 | ||||||||||||||||||
Subtotal | $ | 5,011 | $ | 6,294 | $ | 8,353 | $ | 24,591 | $ | 24,581 | $ | 24,591 | ||||||||||||
Not subject to discretionary withdrawal or no cash value: | ||||||||||||||||||||||||
Term policies without cash value | - | - | 275 | - | - | - | ||||||||||||||||||
Accidental death benefits | - | - | 1 | - | - | - | ||||||||||||||||||
Disability - active lives | - | - | 13 | - | - | - | ||||||||||||||||||
Disability - disabled lives | - | - | 58 | - | - | - | ||||||||||||||||||
Miscellaneous reserves | - | - | 30 | - | - | - | ||||||||||||||||||
Total, gross | $ | 5,011 | $ | 6,294 | $ | 8,730 | $ | 24,591 | $ | 24,581 | $ | 24,591 | ||||||||||||
Less: reinsurance ceded | (10 | ) | (10 | ) | (240 | ) | - | - | - | |||||||||||||||
Total, net | $ | 5,001 | $ | 6,284 | $ | 8,490 | $ | 24,591 | $ | 24,581 | $ | 24,591 |
1 | In 2020, the classification of certain group life insurance policies was changed from separate accounts with guarantees to separate accounts nonguaranteed as a result of a change in the reserve valuation basis, as described in Note 2. |
F-22
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2020, 2019 and 2018 Statutory Financial Statements
General account | Separate account - nonguaranteed | |||||||||||||||||||||||
(in millions) | Account value | Cash value | Reserve | Account value | Cash value | Reserve | ||||||||||||||||||
December 31, 2019 | ||||||||||||||||||||||||
Subject to discretionary withdrawal, surrender values or policy loans: | ||||||||||||||||||||||||
Term policies with cash value | $ | - | $ | 11 | $ | 11 | $ | - | $ | - | $ | - | ||||||||||||
Universal life | 2,549 | 2,561 | 2,728 | - | - | - | ||||||||||||||||||
Universal life with secondary guarantees | 335 | 265 | 613 | - | - | - | ||||||||||||||||||
Indexed universal life with secondary guarantees | 140 | 99 | 146 | - | - | - | ||||||||||||||||||
Other permanent cash value life insurance | - | 1,328 | 2,676 | - | - | - | ||||||||||||||||||
Variable life | 1,903 | 1,992 | 2,080 | 21,853 | 21,840 | 19,596 | ||||||||||||||||||
Subtotal | $ | 4,927 | $ | 6,256 | $ | 8,254 | $ | 21,853 | $ | 21,840 | $ | 19,596 | ||||||||||||
Not subject to discretionary withdrawal or no cash value: | ||||||||||||||||||||||||
Term policies without cash value | - | - | 299 | - | - | - | ||||||||||||||||||
Accidental death benefits | - | - | 1 | - | - | - | ||||||||||||||||||
Disability - active lives | - | - | 12 | - | - | - | ||||||||||||||||||
Disability - disabled lives | - | - | 57 | - | - | - | ||||||||||||||||||
Miscellaneous reserves | - | - | 36 | - | - | - | ||||||||||||||||||
Total, gross | $ | 4,927 | $ | 6,256 | $ | 8,659 | $ | 21,853 | $ | 21,840 | $ | 19,596 | ||||||||||||
Less: reinsurance ceded | (10 | ) | (10 | ) | (272 | ) | - | - | - | |||||||||||||||
Total, net | $ | 4,917 | $ | 6,246 | $ | 8,387 | $ | 21,853 | $ | 21,840 | $ | 19,596 |
The following table is a reconciliation of life actuarial reserves, as of the dates indicated:
December 31, | ||||||||
(in millions) | 2020 | 2019 | ||||||
Life, accident and health annual statement: | ||||||||
Life Insurance, net | $ | 8,400 | $ | 8,292 | ||||
Accidental death benefits, net | 1 | 1 | ||||||
Disability - active lives, net | 12 | 10 | ||||||
Disability - disabled lives, net | 51 | 52 | ||||||
Miscellaneous reserves, net | 26 | 32 | ||||||
Subtotal | $ | 8,490 | $ | 8,387 | ||||
Separate accounts annual statement: | ||||||||
Life insurance1 | $ | 24,884 | $ | 22,138 | ||||
Miscellaneous reserves | 9 | 5 | ||||||
Subtotal | $ | 24,893 | $ | 22,143 | ||||
Total life actuarial reserves, net | $ | 33,383 | $ | 30,530 |
1 | In 2020, life insurance account value, cash value and reserve includes separate accounts with guarantees of $302 million for universal life. In 2019, life insurance account value, cash value and reserve includes separate accounts with guarantees of $297 million and $2.2 billion for universal life and variable life, respectively. |
F-23
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2020, 2019 and 2018 Statutory Financial Statements
Direct Premium Written by Managing General Agents and Third Party Administrators
The following table summarizes direct premium written by managing general agents and third party administrators as of December 31, 2020:
(in millions) | ||||||||||||||
Managing general agent/ third party reserve | FEIN number | Exclusive contract | Types of written | Types of authority granted1 | Total Direct Premium | |||||||||
Meridian Management Group, LLC | 22-3713596 | Not Exclusive | Accident & health | U / P / B | $ | 42 | ||||||||
RMTS - Manufacturers & Traders Trust Co. | 20-1049240 | Not Exclusive | Accident & health | C / CA / B / P / U | 26 | |||||||||
Fringe Insurance Benefits, Inc. | 74-2616364 | Not Exclusive | Accident & health | B / P / U | 41 | |||||||||
Star Line Group | 04-3499188 | Not Exclusive | Accident & health | C / CA / B / P / U | 7 | |||||||||
AccuRisk Solutions, LLC | 31-1777676 | Not Exclusive | Accident & health | C / CA / B / P /U | 90 | |||||||||
Merchants Benefit Administration, Inc. | 86-0875918 | Exclusive | Accident & health | B / C / CA / P | 14 | |||||||||
Roundstone Management, Ltd. | 27-0371422 | Not Exclusive | Accident & health | C / CA / B / P / U | 75 | |||||||||
Gilsbar, Inc. | 72-0519951 | Not Exclusive | Accident & health | B / P / U | 75 | |||||||||
Matrix | 01-0544915 | Not Exclusive | Accident & health | C / CA / B / P / U | 19 | |||||||||
IRC | 74-2824053 | Not Exclusive | Accident & health | C / CA / B / P / U | 28 | |||||||||
TMS RE Inc | 65-0644164 | Not Exclusive | Accident & health | C / CA / B / P / U | 70 | |||||||||
United Group Programs Inc. | 59-1896277 | Not Exclusive | Accident & health | C / CA / B / P / U | 9 | |||||||||
USMGU | 46-4619917 | Not Exclusive | Accident & health | C / CA / B / P / U | 1 | |||||||||
Total Direct Premiums Written and Produced | $ | 497 |
1 | Authority code key includes: C– claims payment, CA– claims adjustment, B- binding authority, P-premium collection, U- underwriting. |
F-24
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2020, 2019 and 2018 Statutory Financial Statements
(4) | Separate Accounts |
The Company’s separate account statement includes assets legally insulated from the general account as of the dates indicated, attributed to the following product lines:
December 31, 2020 | December 31, 2019 | |||||||||||||||
(in millions) | Separate assets | Separate assets (not legally | Separate assets | Separate assets (not legally | ||||||||||||
Product / Transaction: | ||||||||||||||||
Individual annuities | $ | 71,875 | $ | - | $ | 67,222 | $ | - | ||||||||
Group annuities | 17,550 | - | 16,187 | - | ||||||||||||
Life insurance | 24,982 | - | 22,246 | - | ||||||||||||
Total | $ | 114,407 | $ | - | $ | 105,655 | $ | - |
The following table summarizes amounts paid towards separate account guarantees by the general account and related risk charges paid by the separate account for the years ended:
(in millions) | Total paid toward separate account guarantees | Risk charges paid to general account | ||||||
2020 | $ | 26 | $ | 631 | ||||
2019 | $ | 58 | $ | 612 | ||||
2018 | $ | 18 | $ | 594 | ||||
2017 | $ | 13 | $ | 559 | ||||
2016 | $ | 36 | $ | 507 |
The Company does not engage in securities lending transactions within its separate accounts.
Most separate accounts held by the Company relate to individual and group variable annuity and variable universal life insurance contracts of a non-guaranteed return nature. The net investment experience of the separate accounts is credited directly to the contract holder and can be positive or negative. The individual variable annuity contracts generally provide an incidental death benefit of the greater of account value or premium paid (net of prior withdrawals). However, many individual variable annuity contracts also provide death benefits equal to (i) the most recent fifth-year anniversary account value, (ii) the highest account value on any previous anniversary, (iii) premiums paid increased 5% or certain combinations of these, all adjusted for prior withdrawals. The death benefit and cash value under the variable universal life policies may vary with the investment performance of the underlying investments in the separate accounts. The assets and liabilities of these separate accounts are carried at fair value and are non-guaranteed.
Certain other separate accounts offered by the Company contain groups of variable universal life policies wherein the assets supporting account values on the underlying policies reside in Private Placement Separate Accounts. They provide a quarterly interest rate based on a crediting formula that reflects the market value to book value ratio of the investments, investment portfolio yield and a specified duration.
Certain other separate accounts relate to a guaranteed term option, which provides a guaranteed interest rate that is paid over certain maturity durations ranging from three to ten years, so long as certain conditions are met. If amounts allocated to the guaranteed term option are distributed prior to the maturity period, a market value adjustment can be assessed. The assets and liabilities of these separate accounts are carried at fair value.
Another separate account offered by the Company contains a group of universal life policies wherein the assets supporting the account values on the underlying policies reside in a Private Placement Separate Account. It provides an annual interest rate guarantee, subject to a minimum guarantee of 3%. The interest rate declared each year reflects the anticipated investment experience of the account. The business has been included as a nonindexed guarantee less than or equal to 4%.
F-25
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2020, 2019 and 2018 Statutory Financial Statements
The following tables summarize the separate account reserves of the Company, as of the dates indicated:
(in millions) | Indexed | Nonindexed guarantee less than or equal to 4% | Nonindexed guarantee more than 4% | Nonguaranteed separate accounts | Total | |||||||||||||||
December 31, 2020 | ||||||||||||||||||||
Premiums, considerations or deposits | $ | - | $ | 417 | $ | - | $ | 5,392 | $ | 5,809 | ||||||||||
Reserves | ||||||||||||||||||||
For accounts with assets at: | ||||||||||||||||||||
Fair value | $ | - | $ | 2,480 | $ | 166 | $ | 110,340 | $ | 112,986 | ||||||||||
Amortized cost | - | 302 | - | - | 302 | |||||||||||||||
Total reserves | $ | - | $ | 2,782 | $ | 166 | $ | 110,340 | $ | 113,288 | ||||||||||
By withdrawal characteristics: | ||||||||||||||||||||
With market value adjustment | $ | - | $ | 2,480 | $ | 166 | $ | - | $ | 2,646 | ||||||||||
At book value without market value adjustment and with current surrender charge of 5% or more | - | - | - | - | - | |||||||||||||||
At fair value | - | - | - | 110,252 | 110,252 | |||||||||||||||
At book value without market value adjustment and with current surrender charge less than 5% | - | 302 | - | 11 | 313 | |||||||||||||||
Subtotal | $ | - | $ | 2,782 | $ | 166 | $ | 110,263 | $ | 113,211 | ||||||||||
Not subject to discretionary withdrawal | - | - | - | 77 | 77 | |||||||||||||||
Total reserves1 | $ | - | $ | 2,782 | $ | 166 | $ | 110,340 | $ | 113,288 |
1 | The total reserves balance does not equal the liabilities related to separate accounts of $114.4 billion in the statutory statements of admitted assets, liabilities, capital and surplus by $1.1 billion, due to an adjustment for CARVM/CRVM reserves and other liabilities that have not been allocated to the categories outlined above. |
F-26
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2020, 2019 and 2018 Statutory Financial Statements
Nonindexed | Nonindexed | |||||||||||||||||||
guarantee | guarantee | Nonguaranteed | ||||||||||||||||||
less than or | more than | separate | ||||||||||||||||||
(in millions) | Indexed | equal to 4% | 4% | accounts | Total | |||||||||||||||
December 31, 2019 | ||||||||||||||||||||
Premiums, considerations or deposits | $ | - | $ | 135 | $ | - | $ | 6,007 | $ | 6,142 | ||||||||||
Reserves | ||||||||||||||||||||
For accounts with assets at: | ||||||||||||||||||||
Fair value | $ | - | $ | 2,202 | $ | 146 | $ | 99,612 | $ | 101,960 | ||||||||||
Amortized cost | - | 2,463 | - | - | 2,463 | |||||||||||||||
Total reserves | $ | - | $ | 4,665 | $ | 146 | $ | 99,612 | $ | 104,423 | ||||||||||
By withdrawal characteristics: | ||||||||||||||||||||
With market value adjustment | $ | - | $ | 2,202 | $ | 146 | $ | 29 | $ | 2,377 | ||||||||||
At book value without market value adjustment and with current surrender charge of 5% or more | - | - | - | - | - | |||||||||||||||
At fair value | - | - | - | 99,499 | 99,499 | |||||||||||||||
At book value without market value adjustment and with current surrender charge less than 5% | - | 2,463 | - | 13 | 2,476 | |||||||||||||||
Subtotal | $ | - | $ | 4,665 | $ | 146 | $ | 99,541 | $ | 104,352 | ||||||||||
Not subject to discretionary withdrawal | - | - | - | 71 | 71 | |||||||||||||||
Total reserves1 | $ | - | $ | 4,665 | $ | 146 | $ | 99,612 | $ | 104,423 |
1 | The total reserves balance does not equal the liabilities related to separate accounts of $105.7 billion in the statutory statements of admitted assets, liabilities, capital and surplus by $1.2 billion, due to an adjustment for CARVM/CRVM reserves and other liabilities that have not been allocated to the categories outlined above. |
The following table is a reconciliation of net transfers to (from) separate accounts, as of the dates indicated:
December 31, | ||||||||||||
(in millions) | 2020 | 2019 | 2018 | |||||||||
Transfers as reported in the statutory statements of operations of the separate accounts: | ||||||||||||
Transfers to separate accounts | $ | 5,809 | $ | 6,142 | $ | 6,392 | ||||||
Transfers from separate accounts | (8,921) | (9,470) | (8,461) | |||||||||
Net transfers from separate accounts | $ | (3,112) | $ | (3,328) | $ | (2,069) | ||||||
Reconciling adjustments: | ||||||||||||
Exchange accounts offsetting in the general account | (337) | (321) | (303) | |||||||||
Fees not included in general account transfers | (67) | (68) | (58) | |||||||||
Other miscellaneous adjustments not included in the general account balance | (28) | (30) | (38) | |||||||||
Transfers as reported in the statutory statements of operations | $ | (3,544) | $ | (3,747) | $ | (2,468) |
F-27
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2020, 2019 and 2018 Statutory Financial Statements
(5) | Investments |
Bonds and Stocks
The following table summarizes the carrying value, the excess of fair value over carrying value, the excess of carrying value over fair value and the fair value of bonds and stocks, as of the dates indicated:
(in millions) | Carrying value | Fair value in excess of carrying value | Carrying value in excess of fair value | Fair value | ||||||||||||
December 31, 2020 | ||||||||||||||||
Bonds: | ||||||||||||||||
U.S. Government | $ | 7 | $ | - | $ | - | $ | 7 | ||||||||
States, territories and possessions | 370 | 59 | - | 429 | ||||||||||||
Political subdivisions | 343 | 71 | - | 414 | ||||||||||||
Special revenues | 2,763 | 564 | - | 3,327 | ||||||||||||
Industrial and miscellaneous | 26,583 | 3,656 | 46 | 30,193 | ||||||||||||
Loan-backed and structured securities | 7,141 | 336 | 37 | 7,440 | ||||||||||||
Total bonds | $ | 37,207 | $ | 4,686 | $ | 83 | $ | 41,810 | ||||||||
Common stocks unaffiliated | $ | 142 | $ | - | $ | - | $ | 142 | ||||||||
Preferred stocks unaffiliated | 97 | 12 | - | 109 | ||||||||||||
Total unaffiliated stocks1 | $ | 239 | $ | 12 | $ | - | $ | 251 | ||||||||
Total bonds and unaffiliated stocks1 | $ | 37,446 | $ | 4,698 | $ | 83 | $ | 42,061 | ||||||||
December 31, 2019 | ||||||||||||||||
Bonds: | ||||||||||||||||
U.S. Government | $ | 7 | $ | - | $ | - | $ | 7 | ||||||||
States, territories and possessions | 398 | 42 | 1 | 439 | ||||||||||||
Political subdivisions | 344 | 52 | 1 | 395 | ||||||||||||
Special revenues | 2,702 | 370 | 5 | 3,067 | ||||||||||||
Industrial and miscellaneous | 26,240 | 2,012 | 65 | 28,187 | ||||||||||||
Loan-backed and structured securities | 5,433 | 238 | 31 | 5,640 | ||||||||||||
Total bonds | $ | 35,124 | $ | 2,714 | $ | 103 | $ | 37,735 | ||||||||
Common stocks unaffiliated | $ | 181 | $ | - | $ | - | $ | 181 | ||||||||
Preferred stocks unaffiliated | 55 | 4 | - | 59 | ||||||||||||
Total unaffiliated stocks1 | $ | 236 | $ | 4 | $ | - | $ | 240 | ||||||||
Total bonds and unaffiliated stocks1 | $ | 35,360 | $ | 2,718 | $ | 103 | $ | 37,975 |
1 | Excludes affiliated common stocks with a carrying value of $2.6 billion and $2.4 billion as of December 31, 2020 and 2019, respectively. Affiliated common stocks includes investment in NLAIC and JNF of $2.4 billion and $180 million as of December 31, 2020, respectively, and $2.2 billion and $169 million as of December 31, 2019, respectively. |
The carrying value of bonds on deposit with various states as required by law or special escrow agreement was $3 million as of December 31, 2020 and 2019.
F-28
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2020, 2019 and 2018 Statutory Financial Statements
The following table summarizes the carrying value and fair value of bonds, by contractual maturity, as of December 31, 2020. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without early redemption penalties:
(in millions) | Carrying value | Fair value | ||||||
Bonds: | ||||||||
Due in one year or less | $ | 1,314 | $ | 1,331 | ||||
Due after one year through five years | 7,925 | 8,441 | ||||||
Due after five years through ten years | 9,450 | 10,557 | ||||||
Due after ten years | 11,377 | 14,041 | ||||||
Total bonds excluding loan-backed and structured securities | $ | 30,066 | $ | 34,370 | ||||
Loan-backed and structured securities | 7,141 | 7,440 | ||||||
Total bonds | $ | 37,207 | $ | 41,810 |
The following table summarizes the fair value and unrealized losses on bonds and stocks (amount by which cost or amortized cost exceeds fair value), for which other-than-temporary declines in value have not been recognized, based on the amount of time each type of bond or stock has been in an unrealized loss position, as of the dates indicated:
Less than or equal to one year | More than one year | Total | ||||||||||||||||||||||
(in millions) | Fair value | Unrealized losses | Fair value | Unrealized losses | Fair value | Unrealized losses | ||||||||||||||||||
December 31, 2020 | ||||||||||||||||||||||||
Bonds: | ||||||||||||||||||||||||
States, territories and possessions | $ | 1 | $ | - | $ | - | $ | - | $ | 1 | $ | - | ||||||||||||
Special revenues | 14 | - | - | - | 14 | - | ||||||||||||||||||
Industrial and miscellaneous | 636 | 27 | 408 | 38 | 1,044 | 65 | ||||||||||||||||||
Loan-backed and structured securities | 1,454 | 15 | 870 | 23 | 2,324 | 38 | ||||||||||||||||||
Total bonds | $ | 2,105 | $ | 42 | $ | 1,278 | $ | 61 | $ | 3,383 | $ | 103 | ||||||||||||
Common stocks unaffiliated | 21 | 4 | - | - | 21 | 4 | ||||||||||||||||||
Preferred stocks unaffiliated | 9 | - | - | - | 9 | - | ||||||||||||||||||
Total bonds and stocks | $ | 2,135 | $ | 46 | $ | 1,278 | $ | 61 | $ | 3,413 | $ | 107 | ||||||||||||
December 31, 2019 | ||||||||||||||||||||||||
Bonds: | ||||||||||||||||||||||||
States, territories and possessions | $ | 23 | $ | 1 | $ | - | $ | - | $ | 23 | $ | 1 | ||||||||||||
Political subdivisions | 65 | 1 | - | - | 65 | 1 | ||||||||||||||||||
Special revenues | 397 | 5 | - | - | 397 | 5 | ||||||||||||||||||
Industrial and miscellaneous | 852 | 9 | 911 | 103 | 1,763 | 112 | ||||||||||||||||||
Loan-backed and structured securities | 704 | 6 | 1,124 | 28 | 1,828 | 34 | ||||||||||||||||||
Total bonds | $ | 2,041 | $ | 22 | $ | 2,035 | $ | 131 | $ | 4,076 | $ | 153 | ||||||||||||
Common stocks unaffiliated | 32 | - | 16 | 1 | 48 | 1 | ||||||||||||||||||
Preferred stocks unaffiliated | 1 | - | - | - | 1 | - | ||||||||||||||||||
Total bonds and stocks | $ | 2,074 | $ | 22 | $ | 2,051 | $ | 132 | $ | 4,125 | $ | 154 |
As of December 31, 2020, management evaluated securities in an unrealized loss position and all non-marketable securities for impairment. As of the reporting date, the Company has the intent and ability to hold these securities until the fair value recovers, which may be maturity, and therefore, does not consider the securities to be other-than-temporarily impaired.
There was no intent to sell other-than-temporary impairments on loan-backed and structured securities for the years ended December 31, 2020 and 2019.
F-29
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2020, 2019 and 2018 Statutory Financial Statements
Mortgage Loans, Net of Allowance
The following table summarizes the amortized cost of mortgage loans by method of evaluation for credit loss, and the related valuation allowances by type of credit loss, as of the dates indicated:
December 31, | ||||||||
(in millions) | 2020 | 2019 | ||||||
Amortized cost: | ||||||||
Loans with non-specific reserves | $ | 7,819 | $ | 7,675 | ||||
Loans with specific reserves | 12 | 14 | ||||||
Total amortized cost | $ | 7,831 | $ | 7,689 | ||||
Valuation allowance: | ||||||||
Non-specific reserves | $ | 45 | $ | 31 | ||||
Specific reserves | 3 | 3 | ||||||
Total valuation allowance1 | $ | 48 | $ | 34 | ||||
Mortgage loans, net of allowance | $ | 7,783 | $ | 7,655 |
1 | Changes in the valuation allowance are due to current period provisions. These changes in the valuation allowance for the years ended December 31, 2020, 2019, and 2018 were immaterial. |
As of December 31, 2020 and 2019, the Company’s mortgage loans classified as delinquent and/or in non-accrual status were immaterial in relation to the total mortgage loan portfolio.
The following table summarizes the LTV ratio and DSC ratio of the mortgage loan portfolio as of the dates indicated:
LTV ratio | DSC ratio | |||||||||||||||||||||||||||||||
(in millions) | Less than 90% | 90% or greater | Total | Greater than 1.00 | Less than or equal to 1.00 | Total | ||||||||||||||||||||||||||
December 31, 2020 | ||||||||||||||||||||||||||||||||
Apartment | $ | 2,988 | $ | 25 | $ | 3,013 | $ | 2,993 | $ | 20 | $ | 3,013 | ||||||||||||||||||||
Industrial | 1,026 | - | 1,026 | 1,005 | 21 | 1,026 | ||||||||||||||||||||||||||
Office | 1,307 | - | 1,307 | 1,304 | 3 | 1,307 | ||||||||||||||||||||||||||
Retail | 2,155 | 27 | 2,182 | 2,169 | 13 | 2,182 | ||||||||||||||||||||||||||
Other | 218 | - | 218 | 218 | - | 218 | ||||||||||||||||||||||||||
Total1 | $ | 7,694 | $ | 52 | $ | 7,746 | $ | 7,689 | $ | 57 | $ | 7,746 | ||||||||||||||||||||
Weighted average DSC ratio | 2.21 | 1.52 | 2.20 | 2.21 | 0.91 | 2.20 | ||||||||||||||||||||||||||
Weighted average LTV ratio | 57 | % | 98 | % | 57 | % | 57 | % | 65 | % | 57% | |||||||||||||||||||||
December 31, 2019 | ||||||||||||||||||||||||||||||||
Apartment | $ | 2,906 | $ | 124 | $ | 3,030 | $ | 3,018 | $ | 12 | $ | 3,030 | ||||||||||||||||||||
Industrial | 906 | - | 906 | 905 | 1 | 906 | ||||||||||||||||||||||||||
Office | 1,306 | - | 1,306 | 1,291 | 15 | 1,306 | ||||||||||||||||||||||||||
Retail | 2,162 | 9 | 2,171 | 2,151 | 20 | 2,171 | ||||||||||||||||||||||||||
Other | 205 | - | 205 | 205 | - | 205 | ||||||||||||||||||||||||||
Total1 | $ | 7,485 | $ | 133 | $ | 7,618 | $ | 7,570 | $ | 48 | $ | 7,618 | ||||||||||||||||||||
Weighted average DSC ratio | 2.13 | 1.19 | 2.11 | 2.12 | 0.90 | 2.11 | ||||||||||||||||||||||||||
Weighted average LTV ratio | 54 | % | 95 | % | 54 | % | 54 | % | 72 | % | 54% |
1 | Excludes $85 million and $71 million of commercial mortgage loans that were under development as of December 31, 2020 and 2019, respectively. |
As of December 31, 2020 and 2019, the Company has a diversified mortgage loan portfolio with no more than 24% and 23%, respectively, in a geographic region in the U.S. and no more than 1% with any one borrower. The maximum and minimum lending rates for mortgage loans originated or acquired during 2020 were 4.3% and 1.9%, respectively, and for those originated or acquired during 2019 were 12.0% and 3.1%, respectively. As of December 31, 2020 and 2019, the maximum LTV ratio of any one loan at the time of loan origination was 80% and 82%, respectively. As of December 31, 2020 and 2019, the Company did not hold mortgage loans with interest 90 days or more past due. Additionally, there were no taxes, assessments or any amounts advanced and not included in the mortgage loan portfolio.
F-30
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2020, 2019 and 2018 Statutory Financial Statements
Securities Lending
The fair value of loaned securities was $244 million and $306 million as of December 31, 2020 and 2019, respectively. The Company held $101 million and $132 million of cash collateral on securities lending as of December 31, 2020 and 2019, respectively. As of December 31, 2020, the carrying value and fair value of reinvested collateral assets was $101 million. As of December 31, 2019, the carrying value and fair value of reinvested collateral assets was $133 million. The fair value of bonds acquired with reinvested collateral assets was $103 million and $134 million as of December 31, 2020 and 2019, respectively. There are no securities lending transactions that extend beyond one year as of the reporting date.The Company received $148 million and $180 million of non-cash collateral on securities lending as of December 31, 2020 and 2019, respectively.
Net Investment Income
The following table summarizes net investment income by investment type, for the years ended:
December 31, | ||||||||||||
(in millions) | 2020 | 2019 | 2018 | |||||||||
Bonds | $ | 1,419 | $ | 1,408 | $ | 1,378 | ||||||
Mortgage loans | 339 | 353 | 335 | |||||||||
Other invested assets | 384 | 225 | 228 | |||||||||
Policy loans | 43 | 45 | 54 | |||||||||
Other | 41 | 51 | 41 | |||||||||
Gross investment income | $ | 2,226 | $ | 2,082 | $ | 2,036 | ||||||
Investment expenses | (119) | (108) | (109) | |||||||||
Net investment income | $ | 2,107 | $ | 1,974 | $ | 1,927 |
There was no investment income due and accrued that was nonadmitted as of December 31, 2020 and 2019.
Net Realized Capital Gains and Losses
The following table summarizes net realized capital gains and losses for the years ended:
December 31, | ||||||||||||
(in millions) | 2020 | 2019 | 2018 | |||||||||
Gross gains on sales | $ | 36 | $ | 71 | $ | 22 | ||||||
Gross losses on sales | (42) | (21) | (16) | |||||||||
Net realized (losses) gains on sales | $ | (6) | $ | 50 | $ | 6 | ||||||
Net realized derivative losses | (521) | (515) | (226) | |||||||||
Other-than-temporary impairments | (78) | (5) | (8) | |||||||||
Total net realized losses on sales | $ | (605) | $ | (470) | $ | (228) | ||||||
Tax (benefit) expense on net losses | (26) | 7 | 8 | |||||||||
Net realized capital losses, net of tax | $ | (579) | $ | (477) | $ | (236) | ||||||
Less: Realized losses transferred to the IMR | (4) | - | (1) | |||||||||
Net realized capital losses, net of tax and transfers to the IMR | $ | (575) | $ | (477) | $ | (235) |
For the year ended December 31, 2020, gross realized gains and gross realized losses on sales of bonds were $26 million and $38 million, respectively. For the year ended December 31, 2019, gross realized gains and gross realized losses on sales of bonds were $56 million and $19 million, respectively. For the year ended December 31, 2018, gross realized gains and gross realized losses on sales of bonds were $15 million and $13 million, respectively.
The Company did not enter into any material repurchase transactions that would be considered wash sales during the years ended December 31, 2020 and 2019.
Investment Commitments
The Company had unfunded commitments related to its investment in limited partnerships and limited liability companies totaling $483 million and $496 million as of December 31, 2020 and 2019, respectively. As of December 31, 2020 and 2019, there were $21 million and $45 million of commitments to purchase private placement bonds and $114 million and $147 million of outstanding commitments to fund mortgage loans, respectively.
F-31
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2020, 2019 and 2018 Statutory Financial Statements
(6) | Derivative Instruments |
The Company is exposed to certain risks related to its ongoing business operations which are managed using derivative instruments.
Interest rate risk management. In the normal course of business, the Company enters into transactions that expose it to interest rate risk arising from mismatches between assets and liabilities. The Company may use interest rate swaps and futures to reduce or alter interest rate exposure.
Interest rate contracts are used by the Company in association with fixed and variable rate investments to achieve cash flow streams that support certain financial obligations of the Company and to produce desired investment returns. As such, interest rate contracts are generally used to convert fixed rate cash flow streams to variable rate cash flow streams or vice versa.
Equity market risk management. The Company issues a variety of insurance products that expose it to equity risks. To mitigate these risks, the Company enters into a variety of derivatives including equity index futures and options.
Other risk management. As part of its regular investing activities, the Company may purchase foreign currency denominated investments. These investments and the associated income expose the Company to volatility associated with movements in foreign exchange rates. As foreign exchange rates change, the increase or decrease in the cash flows of the derivative instrument are intended to mitigate the changes in the functional-currency equivalent cash flows of the hedged item. To mitigate this risk, the Company uses cross-currency swaps.
Credit risk associated with derivatives transactions. The Company periodically evaluates the risks within the derivative portfolios due to credit exposure. When evaluating this risk, the Company considers several factors which include, but are not limited to, the counterparty credit risk associated with derivative receivables, the Company’s own credit as it relates to derivative payables, the collateral thresholds associated with each counterparty and changes in relevant market data in order to gain insight into the probability of default by the counterparty. The Company also considers the impact credit exposure could have on the effectiveness of the Company’s hedging relationships. As of December 31, 2020 and 2019, the impact of the exposure to credit risk on the fair value measurement of derivatives and the effectiveness of the Company’s hedging relationships was immaterial.
The following table summarizes the fair value, carrying value and related notional amounts of derivative instruments, as of the dates indicated:
(in millions) | Notional amount | Net Carrying Value | Fair value asset | Fair value liability | Average fair value | |||||||||||||||
December 31, 2020 | ||||||||||||||||||||
Interest rate swaps | $ | 7 | $ | (1) | $ | - | $ | (1) | $ | (1) | ||||||||||
Options | - | - | - | - | - | |||||||||||||||
Cross currency swaps | 1,524 | (36) | 75 | (49) | - | |||||||||||||||
Futures | 3,342 | - | - | - | - | |||||||||||||||
Total | $ | 4,873 | $ | (37) | $ | 75 | $ | (50) | $ | (1) | ||||||||||
December 31, 2019 | ||||||||||||||||||||
Interest rate swaps | $ | 7 | $ | (1) | $ | - | $ | (1) | $ | - | ||||||||||
Options | 202 | 6 | 6 | - | 1 | |||||||||||||||
Cross currency swaps | 1,537 | 66 | 99 | (19) | 1 | |||||||||||||||
Futures | 3,153 | - | - | - | - | |||||||||||||||
Total | $ | 4,899 | $ | 71 | $ | 105 | $ | (20) | $ | 2 |
Of the $75 million and $105 million of fair value of derivative assets as of December 31, 2020 and 2019, $24 million and $14 million were subject to master netting agreements as of December 31, 2020 and 2019, the Company received $35 million and $68 million of cash collateral and $22 million and $45 million in pledged securities, respectively, resulting in an immaterial uncollateralized position as of December 31, 2020 and 2019. Of the $50 million and $20 million of fair value of derivative liabilities as of December 31, 2020 and 2019, $24 million and $14 million were subject to master netting agreements as of December 31, 2020 and 2019, the Company posted $28 million and $3 million of cash collateral, respectively, resulting in an immaterial uncollateralized position as of December 31, 2020 and 2019. Securities received as collateral are recorded off-balance sheet and exclude initial margin posted on derivatives of $280 million and $128 million as of December 31, 2020 and 2019, respectively.
F-32
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2020, 2019 and 2018 Statutory Financial Statements
The following table summarizes net gains and losses on derivatives programs by type of derivative instrument, as of the dates indicated:
Net realized (losses) gains recorded in operations | Unrealized (losses) gains recorded in capital and surplus | |||||||||||||||||||||||
December 31, | December 31, | |||||||||||||||||||||||
(in millions) | 2020 | 2019 | 2018 | 2020 | 2019 | 2018 | ||||||||||||||||||
Interest rate swaps | $ | - | $ | - | $ | (5) | $ | - | $ | - | $ | 35 | ||||||||||||
Options | - | 3 | (313) | (1) | 4 | 244 | ||||||||||||||||||
Cross currency swaps | 4 | (1) | - | (102) | (13) | 65 | ||||||||||||||||||
Futures | (525) | (517) | 92 | 1 | (169) | 132 | ||||||||||||||||||
Total | $ | (521) | $ | (515) | $ | (226) | $ | (102) | $ | (178) | $ | 476 |
(7) | Fair Value Measurements |
The following table summarizes assets and liabilities held at fair value as of December 31, 2020:
(in millions) | Level 1 | Level 2 | Level 3 | Net Asset Value (NAV) | Total | |||||||||||||||
Assets | ||||||||||||||||||||
Bonds | $ | - | $ | 4 | $ | 1 | $ | - | $ | 5 | ||||||||||
Common stocks unaffiliated | 53 | 88 | 1 | - | 142 | |||||||||||||||
Separate account assets | 109,265 | 2,047 | 58 | 2,720 | 114,090 | |||||||||||||||
Assets at fair value | $ | 109,318 | $ | 2,139 | $ | 60 | $ | 2,720 | $ | 114,237 | ||||||||||
Liabilities | ||||||||||||||||||||
Derivative liabilities | $ | - | $ | 1 | $ | - | $ | - | $ | 1 | ||||||||||
Liabilities at fair value | $ | - | $ | 1 | $ | - | $ | - | $ | 1 |
The following table presents the rollforward of Level 3 assets and liabilities held at fair value during the year ended December 31, 2020:
(in millions) | Bonds | Common stocks | Derivative assets1 | Separate account assets | Assets at fair | |||||||||||||||
Balance as of December 31, 2019 | $ | 6 | $ | 1 | $ | 6 | $ | 87 | $ | 100 | ||||||||||
Net gains (losses): | ||||||||||||||||||||
In operations | (2) | - | - | - | (2) | |||||||||||||||
In surplus | 5 | - | (1) | (17) | (13) | |||||||||||||||
Purchases | 2 | - | - | - | 2 | |||||||||||||||
Sales | (9) | - | (5) | (12) | (26) | |||||||||||||||
Transfers into Level 3 | 1 | - | - | - | 1 | |||||||||||||||
Transfers out of Level 3 | (2) | - | - | - | (2) | |||||||||||||||
Balance as of December 31, 2020 | $ | 1 | $ | 1 | $ | - | $ | 58 | $ | 60 |
1 | Non-binding broker quotes are utilized to determine fair value of all Level 3 derivative assets. |
Bonds transfers into and/or out of Level 3 during the year ended December 31, 2020 are due to the changes in observability of pricing inputs and changes resulting from application of the lower of amortized cost or fair value rules based on the security’s NAIC designation.
F-33
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2020, 2019 and 2018 Statutory Financial Statements
The following table summarizes assets and liabilities held at fair value as of December 31, 2019:
(in millions) | Level 1 | Level 2 | Level 3 | Net Asset Value (NAV) | Total | |||||||||||||||
Assets | ||||||||||||||||||||
Bonds | $ | - | $ | 3 | $ | 6 | $ | - | $ | 9 | ||||||||||
Common stocks unaffiliated | 68 | 112 | 1 | - | 181 | |||||||||||||||
Derivative assets | - | - | 6 | - | 6 | |||||||||||||||
Separate account assets | 101,312 | 1,857 | 87 | 2,091 | 105,347 | |||||||||||||||
Assets at fair value | $ | 101,380 | $ | 1,972 | $ | 100 | $ | 2,091 | $ | 105,543 | ||||||||||
Liabilities | ||||||||||||||||||||
Derivative liabilities | $ | - | $ | 1 | $ | - | $ | - | $ | 1 | ||||||||||
Liabilities at fair value | $ | - | $ | 1 | $ | - | $ | - | $ | 1 |
The following table presents the rollforward of Level 3 assets and liabilities held at fair value during the year ended December 31, 2019:
(in millions) | Bonds | Common stocks | Derivative assets1 | Separate account assets | Assets at fair value | |||||||||||||||
Balance as of December 31, 2018 | $ | 8 | $ | 1 | $ | 2 | $ | 80 | $ | 91 | ||||||||||
Net gains (losses): | ||||||||||||||||||||
In operations | - | - | 3 | - | 3 | |||||||||||||||
In surplus | (4) | - | 4 | 7 | 7 | |||||||||||||||
Purchases | 3 | - | 6 | - | 9 | |||||||||||||||
Sales | (5) | - | (9) | - | (14) | |||||||||||||||
Transfers into Level 3 | 24 | - | - | - | 24 | |||||||||||||||
Transfers out of Level 3 | (20) | - | - | - | (20) | |||||||||||||||
Balance as of December 31, 2019 | $ | 6 | $ | 1 | $ | 6 | $ | 87 | 100 |
1 | Non-binding broker quotes are utilized to determine fair value of all Level 3 derivative assets. |
Bond transfers into and/or out of Level 3 during the year ended December 31, 2019 are due to the changes in observability of pricing inputs and changes resulting from application of the lower of amortized cost or fair value rules based on the security’s NAIC designation.
F-34
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2020, 2019 and 2018 Statutory Financial Statements
The following table summarizes the carrying value and fair value of the Company’s assets and liabilities not held at fair value as of the dates indicated. The valuation techniques used to estimate these fair values are described below or in Note 2.
Fair Value | ||||||||||||||||||||
(in millions) | Level 1 | Level 2 | Level 3 | Total fair value | Carrying value | |||||||||||||||
December 31, 2020 | ||||||||||||||||||||
Assets: | ||||||||||||||||||||
Bonds1 | $ | 1,366 | $ | 39,072 | $ | 1,367 | $ | 41,805 | $ | 37,202 | ||||||||||
Preferred stocks unaffiliated | - | 104 | 5 | 109 | 97 | |||||||||||||||
Mortgage loans, net of allowance | - | - | 7,952 | 7,952 | 7,783 | |||||||||||||||
Policy loans | - | - | 888 | 888 | 888 | |||||||||||||||
Derivative assets | - | 75 | - | 75 | 51 | |||||||||||||||
Cash, cash equivalents and short-term investments | (90 | ) | 551 | - | 461 | 461 | ||||||||||||||
Securities lending collateral assets | 101 | - | - | 101 | 101 | |||||||||||||||
Separate account assets | 7 | 368 | - | 375 | 317 | |||||||||||||||
Total assets | $ | 1,384 | $ | 40,170 | $ | 10,212 | $ | 51,766 | $ | 46,900 | ||||||||||
Liabilities: | ||||||||||||||||||||
Investment contracts | $ | - | $ | - | $ | 1,249 | $ | 1,249 | $ | 2,076 | ||||||||||
Derivative liabilities | - | 48 | - | 48 | 86 | |||||||||||||||
Total liabilities | $ | - | $ | 48 | $ | 1,249 | $ | 1,297 | $ | 2,162 | ||||||||||
December 31, 2019 | ||||||||||||||||||||
Assets: | ||||||||||||||||||||
Bonds1 | $ | 1,494 | $ | 35,302 | $ | 930 | $ | 37,726 | $ | 35,115 | ||||||||||
Preferred stocks unaffiliated | - | 59 | - | 59 | 55 | |||||||||||||||
Mortgage loans, net of allowance | - | - | 7,856 | 7,856 | 7,655 | |||||||||||||||
Policy loans | - | - | 903 | 903 | 903 | |||||||||||||||
Derivative assets | - | 99 | - | 99 | 88 | |||||||||||||||
Short-term investments | 7 | 615 | - | 622 | 622 | |||||||||||||||
Securities lending collateral assets | 132 | - | - | 132 | 132 | |||||||||||||||
Separate account assets | 3 | 334 | - | 337 | 308 | |||||||||||||||
Total assets | $ | 1,636 | $ | 36,409 | $ | 9,689 | $ | 47,734 | $ | 44,878 | ||||||||||
Liabilities: | ||||||||||||||||||||
Investment contracts² | $ | - | $ | - | $ | 953 | $ | 953 | $ | 1,801 | ||||||||||
Derivative liabilities | - | 19 | - | 19 | 22 | |||||||||||||||
Total liabilities | $ | - | $ | 19 | $ | 953 | $ | 972 | $ | 1,823 |
1 | Level 3 is primarily composed of industrial and miscellaneous bonds. |
2 | Prior period balances updated to conform to current period presentation. |
Mortgage loans, net of allowance. The fair values of mortgage loans are estimated using discounted cash flow analyses based on interest rates currently being offered for similar loans to borrowers with similar credit ratings.
Policy loans. The carrying amount reported in the statutory statements of admitted assets, liabilities, capital and surplus approximates fair value as policy loans are fully collateralized by the cash surrender value of underlying insurance policies.
Securities lending collateral assets. These assets are comprised of bonds and short-term investments and the respective fair values are estimated based on the fair value methods described in Note 2.
F-35
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2020, 2019 and 2018 Statutory Financial Statements
Investment contracts. For investment contracts without defined maturities, fair value is the amount payable on demand, net of surrender charges. For investment contracts with known or determined maturities, fair value is estimated using discounted cash flow analysis. Interest rates used in this analysis are similar to currently offered contracts with maturities consistent with those remaining for the contracts being valued. The fair value of adjustable rate contracts approximates their carrying value.
(8) | Federal Income Taxes |
The following tables summarize the net admitted deferred tax assets, as of the dates indicated:
December 31, 2020 | ||||||||||||
(in millions) | Ordinary | Capital | Total | |||||||||
Total gross deferred tax assets | $ | 770 | $ | 16 | $ | 786 | ||||||
Statutory valuation allowance adjustment | - | - | - | |||||||||
Adjusted gross deferred tax assets | $ | 770 | $ | 16 | $ | 786 | ||||||
Less: Deferred tax assets nonadmitted | (41 | ) | - | (41) | ||||||||
Net admitted deferred tax assets | $ | 729 | $ | 16 | $ | 745 | ||||||
Less: Deferred tax liabilities | (94 | ) | (9 | ) | (103) | |||||||
Net admitted deferred tax assets | $ | 635 | $ | 7 | $ | 642 | ||||||
December 31, 2019 | ||||||||||||
(in millions) | Ordinary | Capital | Total | |||||||||
Total gross deferred tax assets | $ | 730 | $ | 44 | $ | 774 | ||||||
Statutory valuation allowance adjustment | - | - | - | |||||||||
Adjusted gross deferred tax assets | $ | 730 | $ | 44 | $ | 774 | ||||||
Less: Deferred tax assets nonadmitted | (13 | ) | (24 | ) | (37) | |||||||
Net admitted deferred tax assets | $ | 717 | $ | 20 | $ | 737 | ||||||
Less: Deferred tax liabilities | (134 | ) | (2 | ) | (136) | |||||||
Net admitted deferred tax assets | $ | 583 | $ | 18 | $ | 601 |
The following table summarizes components of the change in deferred income taxes reported in capital and surplus before consideration of nonadmitted assets and changes from the prior year, as of the dates indicated:
December 31, | ||||||||||||
(in millions) | 2020 | 2019 | Change | |||||||||
Adjusted gross deferred tax assets | $ | 786 | $ | 774 | $ | 12 | ||||||
Total deferred tax liabilities | (103 | ) | (136 | ) | 33 | |||||||
Net deferred tax assets | $ | 683 | $ | 638 | $ | 45 | ||||||
Less: Tax effect of unrealized gains | 3 | |||||||||||
Change in deferred income tax | $ | 42 |
F-36
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2020, 2019 and 2018 Statutory Financial Statements
The following tables summarize components of the admitted deferred tax assets calculation, as of the dates indicated:
December 31, 2020 | ||||||||||||
(in millions) | Ordinary | Capital | Total | |||||||||
Federal income taxes recoverable through loss carryback | $ | - | $ | 7 | $ | 7 | ||||||
Adjusted gross deferred tax assets expected to be realized1 | 633 | 2 | 635 | |||||||||
Adjusted gross deferred tax assets offset against existing gross deferred tax liabilities | 96 | 7 | 103 | |||||||||
Admitted deferred tax assets | $ | 729 | $ | 16 | $ | 745 |
December 31, 2019 | ||||||||||||
(in millions) | Ordinary | Capital | Total | |||||||||
Federal income taxes recoverable through loss carryback | $ | - | $ | 6 | $ | 6 | ||||||
Adjusted gross deferred tax assets expected to be realized1 | 583 | 12 | 595 | |||||||||
Adjusted gross deferred tax assets offset against existing gross deferred tax liabilities | 134 | 2 | 136 | |||||||||
Admitted deferred tax assets | $ | 717 | $ | 20 | $ | 737 |
1 | Note that this amount is calculated as the lesser of the adjusted gross deferred tax assets expected to be realized following the balance sheet due date or the adjusted gross deferred tax assets allowed per the limitation threshold. For the years ended December 31, 2020 and 2019, the threshold limitation for adjusted capital and surplus was $1.3 billion and $1.2 billion, respectively. |
The adjusted capital and surplus used to determine the recovery period and adjusted gross deferred tax assets allowed per the limitation threshold was $8.4 billion and $8.1 billion as of December 31, 2020 and 2019, respectively. The ratio percentage used to determine the recovery period and adjusted gross deferred tax assets allowed per the limitation threshold was 1,176% and 1,296% as of December 31, 2020 and 2019, respectively.
The following tables summarize the impact of tax planning strategies, as of the dates indicated:
December 31, 2020 | ||||||||||||
Ordinary | Capital | Total | ||||||||||
Adjusted gross deferred tax assets | 0.00 | % | 0.00 | % | 0.00 | % | ||||||
Net admitted adjusted gross deferred tax assets | 32.64 | % | 0.00 | % | 32.64 | % |
December 31, 2019 | ||||||||||||
Ordinary | Capital | Total | ||||||||||
Adjusted gross deferred tax assets | 0.00 | % | 0.00 | % | 0.00 | % | ||||||
Net admitted adjusted gross deferred tax assets | 35.23 | % | 0.00 | % | 35.23 | % |
The Company’s tax planning strategies included the use of affiliated reinsurance for the years ended December 31, 2020 and 2019.
There are no temporary differences for which deferred tax liabilities are not recognized for the years ended December 31, 2020 and 2019.
F-37
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2020, 2019 and 2018 Statutory Financial Statements
The following table summarizes the tax effects of temporary differences and the change from the prior year, for the years ended:
December 31, | ||||||||||||
(in millions) | 2020 | 2019 | Change | |||||||||
Deferred tax assets | ||||||||||||
Ordinary: | ||||||||||||
Future policy benefits and claims | $ | 108 | $ | 108 | $ | - | ||||||
Investments | 116 | 88 | 28 | |||||||||
Deferred acquisition costs | 202 | 201 | 1 | |||||||||
Policyholders’ dividends accumulation | 5 | 5 | - | |||||||||
Compensation and benefits accrual | 10 | 10 | - | |||||||||
Tax credit carry-forward | 316 | 303 | 13 | |||||||||
Other | 13 | 15 | (2 | ) | ||||||||
Subtotal | $ | 770 | $ | 730 | $ | 40 | ||||||
Nonadmitted | (41 | ) | (13 | ) | (28 | ) | ||||||
Admitted ordinary deferred tax assets | $ | 729 | $ | 717 | $ | 12 | ||||||
Capital: | ||||||||||||
Investments | 16 | 44 | (28 | ) | ||||||||
Subtotal | $ | 16 | $ | 44 | $ | (28 | ) | |||||
Nonadmitted | - | (24 | ) | 24 | ||||||||
Admitted capital deferred tax assets | $ | 16 | $ | 20 | $ | (4 | ) | |||||
Admitted deferred tax assets | $ | 745 | $ | 737 | $ | 8 | ||||||
Deferred tax liabilities | ||||||||||||
Ordinary: | ||||||||||||
Investments | $ | (2 | ) | $ | (26 | ) | $ | 24 | ||||
Deferred and uncollected premium | (6 | ) | (6 | ) | - | |||||||
Future policy benefits and claims | (57 | ) | (58 | ) | 1 | |||||||
Deferred acquisition costs | (28 | ) | (43 | ) | 15 | |||||||
Other | (1 | ) | (1 | ) | - | |||||||
Subtotal | $ | (94 | ) | $ | (134 | ) | $ | 40 | ||||
Capital: | ||||||||||||
Investments | (9 | ) | (2 | ) | (7 | ) | ||||||
Subtotal | $ | (9 | ) | $ | (2 | ) | $ | (7 | ) | |||
Deferred tax liabilities | $ | (103 | ) | $ | (136 | ) | $ | 33 | ||||
Net deferred tax assets | $ | 642 | $ | 601 | $ | 41 |
In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion of the total deferred tax assets will not be realized. Valuation allowances are established when necessary to reduce the deferred tax assets to amounts expected to be realized. Based on the Company’s analysis, it is more likely than not that the results of future operations and the implementation of tax planning strategies will generate sufficient taxable income to enable the Company to realize all deferred tax assets. Therefore, no valuation allowances have been established as of December 31, 2020 and 2019.
F-38
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2020, 2019 and 2018 Statutory Financial Statements
The following table summarizes the Company’s income tax incurred and change in deferred income tax. The total income tax and change in deferred income tax differs from the amount obtained by applying the federal statutory rate to income (loss) before tax as follows, for the years ended:
December 31, | ||||||||||||
(in millions) | 2020 | 2019 | 2018 | |||||||||
Current income tax (benefit) expense | $ | (22 | ) | $ | (66 | ) | $ | 73 | ||||
Change in deferred income tax (without tax on unrealized gains and losses) | (41 | ) | 29 | (72 | ) | |||||||
Total income tax (benefit) expense reported | $ | (63 | ) | $ | (37 | ) | $ | 1 | ||||
Income before income and capital gains taxes | $ | 465 | $ | 563 | $ | 783 | ||||||
Federal statutory tax rate | 21 | % | 21 | % | 21 | % | ||||||
Expected income tax expense at statutory tax rate | $ | 98 | $ | 118 | $ | 164 | ||||||
Decrease in actual tax reported resulting from: | ||||||||||||
Dividends received deduction | (117 | ) | (101 | ) | (99 | ) | ||||||
Change in tax reserves | 16 | - | 16 | |||||||||
Tax credits | (48 | ) | (53 | ) | (51 | ) | ||||||
Tax (benefit) expense related to the Tax Cuts and Jobs Act1 | - | - | (26 | ) | ||||||||
Loss carryback rate differential | (10 | ) | - | - | ||||||||
Other | (2 | ) | (1 | ) | (3 | ) | ||||||
Total income tax (benefit) expense reported | $ | (63 | ) | $ | (37 | ) | $ | 1 |
1 | Prior year amount represents the remeasurement of deferred tax assets revised after return filing as a result of the Tax Cuts and Jobs Act. |
The Company incurred $6 million in federal income tax expense in 2019 which is available for recoupment in the event of future net losses.
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law and includes certain income tax provisions relevant to businesses. The Company is required to recognize the effect on the financial statements in the period the law was enacted. For year ended December 31, 2020, the CARES Act did not have a material impact on the Company’s financial statements.
The CARES Act amended the Tax Cuts and Jobs Act, to accelerate the ability of companies to fully recover AMT credits in 2020 versus 2021. The Company had $159 million of an income tax receivable that was previously AMT credit carryforwards as of December 31, 2019. In 2020, the Company received a refund of $158 million of its AMT credits.
The following table summarizes operating loss or tax credit carry-forwards available as of December 31, 2020:
(in millions) | Amount | Origination | Expiration | |||||||||
Business credits | $ | 5 | 2011 | 2031 | ||||||||
Business credits | $ | 9 | 2012 | 2032 | ||||||||
Business credits | $ | 6 | 2013 | 2033 | ||||||||
Business credits | $ | 39 | 2014 | 2034 | ||||||||
Business credits | $ | 47 | 2015 | 2035 | ||||||||
Business credits | $ | 62 | 2016 | 2036 | ||||||||
Business credits | $ | 62 | 2017 | 2037 | ||||||||
Business credits | $ | 30 | 2018 | 2038 | ||||||||
Business credits | $ | 27 | 2019 | 2039 | ||||||||
Business credits | $ | 29 | 2020 | 2040 |
F-39
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2020, 2019 and 2018 Statutory Financial Statements
The Company is included in the NMIC consolidated federal income tax return which includes the following entities:
Nationwide Mutual Insurance Company AGMC Reinsurance, Ltd Allied Group, Inc. Allied Holding (Delaware), Inc. Allied Insurance Company of America Allied Property & Casualty Insurance Company Allied Texas Agency, Inc. AMCO Insurance Company American Marine Underwriters Crestbrook Insurance Company Depositors Insurance Company DVM Insurance Agency, Inc. Eagle Captive Reinsurance, LLC Freedom Specialty Insurance Company Harleysville Group Inc. Harleysville Insurance Co. of New York Harleysville Insurance Company Harleysville Insurance Company of New Jersey Harleysville Lake States Insurance Company Harleysville Life Insurance Company Harleysville Preferred Insurance Company Harleysville Worcester Insurance Company Jefferson National Financial Corporation Jefferson National Securities Corporation Lone Star General Agency, Inc. National Casualty Company Nationwide Advantage Mortgage Company Nationwide Affinity Insurance Company of America Nationwide Agent Risk Purchasing Group. Inc. Nationwide Agribusiness Insurance Company Nationwide Assurance Company Nationwide Cash Management Company | Nationwide Corporation Nationwide Financial Assignment Company Nationwide Financial General Agency, Inc. Nationwide Financial Services, Inc. Nationwide General Insurance Company Nationwide Global Holdings, Inc. Nationwide Indemnity Company Nationwide Insurance Company of America Nationwide Insurance Company of Florida Nationwide Investment Services Corporation Nationwide Life and Annuity Ins. Company Nationwide Life Insurance Company Nationwide Lloyds Nationwide Property & Casualty Ins. Company Nationwide Retirement Solutions, Inc. Nationwide Sales Solutions, Inc. Nationwide Trust Company, FSB NBS Insurance Agency, Inc. NFS Distributors, Inc. NWD Investment Management, Inc. Registered Investment Advisors Services, Inc. Scottsdale Indemnity Company Scottsdale Insurance Company Scottsdale Surplus Lines Insurance Company THI Holdings (Delaware), Inc. Titan Insurance Company Titan Insurance Services, Inc. Veterinary Pet Insurance Company Victoria Fire & Casualty Company Victoria National Insurance Company Victoria Select Insurance Company VPI Services, Inc. |
The method of allocation among the companies is based upon separate return calculations with current benefit for tax losses and credits utilized in the consolidated return.
The Company did not have any protective tax deposits under Section 6603 of the Internal Revenue Code as of December 31, 2020 and 2019.
The Company does not have any tax loss contingencies for which it is reasonably possible that the total liability will significantly increase within twelve months of the reporting date.
F-40
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2020, 2019 and 2018 Statutory Financial Statements
(9) | Short-Term Debt and Federal Home Loan Bank Funding Agreement |
Short-Term Debt
The following table summarizes the carrying value of short-term debt and weighted average annual interest rates, as of the dates indicated:
December 31, | ||||||||
(in millions) | 2020 | 2019 | ||||||
$750 million commercial paper program (0.00%) | $ | - | $ | 200 | ||||
Accrued interest payable | 3 | 3 | ||||||
Total short-term debt | $ | 3 | $ | 203 |
The Company participates in a commercial paper program with a limit of $750 million. The rating agency guidelines recommend that the Company maintain minimum liquidity backup, which includes cash and liquid assets, as well as committed bank lines, equal to 50% of any amounts outstanding under the commercial paper program. The commercial paper will not be redeemed prior to maturity or be subject to voluntary prepayment. Proceeds from the sale of the commercial paper will be used to meet working capital requirements and for general corporate purposes, including the funding of acquisitions.
As of December 31, 2019, the Company had access to borrow up to $300 million from the FHLB to provide financing for operations that expired on March 22, 2020. In March 2020, the Company renewed the agreement with the FHLB until March 19, 2021. The Company had $4.3 billion and $4.0 billion in eligible collateral and no amounts outstanding under the agreement as of December 31, 2020 and 2019, respectively. In February 2021, the Company terminated this agreement and entered into a new agreement with the FHLB, which expires February 4, 2022, that allows the Company and NLAIC access to collectively borrow up to $1.1 billion in the aggregate, which would be collateralized by pledged securities.
The Company has entered into an agreement with its custodial bank to borrow against the cash collateral that is posted in connection with its securities lending program. The maximum amount available under the agreement is $350 million. The borrowing rate on this program is equal to one-month U.S. LIBOR. The Company had no amounts outstanding under this agreement as of December 31, 2020 and 2019.
The terms of certain debt instruments contain various restrictive covenants, including, but not limited to, minimum statutory surplus defined in the agreements. The Company was in compliance with all covenants as of December 31, 2020 and 2019.
The amount of interest paid on short-term debt was immaterial in 2020, 2019 and 2018.
Federal Home Loan Bank Funding Agreements
The Company is a member of the FHLB. Through its membership, the FHLB established the Company’s capacity for short-term borrowings and cash advances under the funding agreement program at up to 50% of total admitted assets.
The Company’s Board of Directors has authorized the issuance of funding agreements up to $4.0 billion to the FHLB, shared between the Company and NLAIC, in exchange for cash advances, which are collateralized by pledged securities. The Company uses these funds in an investment spread strategy, consistent with its other investment spread operations. As such, the Company applies SSAP No. 52, Deposit-Type Contracts, accounting treatment to these funds, consistent with its other deposit-type contracts. It is not part of the Company’s strategy to utilize these funds for operations, and any funds obtained from the FHLB for use in general operations would be accounted for consistent with SSAP No. 15, Debt and Holding Company Obligations, as borrowed money. Membership requires the Company to purchase and hold a minimum amount of FHLB capital stock plus additional stock based on outstanding advances. The Company has $30 million in membership stock as of December 31, 2020 and 2019. As part of the agreement, the Company purchased and held an additional $58 million and $53 million in activity stock as of December 31, 2020 and 2019, respectively, which is included in the general account in stocks on the statutory statements of admitted assets, liabilities, capital and surplus. The Company’s liability for advances from the FHLB was $2.1 billion and $1.8 billion as of December 31, 2020 and 2019, respectively, which is included in future policy benefits and claims on the statutory statements of admitted assets, liabilities, capital and surplus. The advances were collateralized by bonds and mortgage loans with carrying values of $2.4 billion (1.5% of total admitted assets) as of December 31, 2020 and $2.2 billion (1.4% of total admitted assets) as of December 31, 2019, which are included in the general account in bonds and mortgage loans on the statutory statements of admitted assets, liabilities, capital and surplus.
F-41
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2020, 2019 and 2018 Statutory Financial Statements
(10) | Surplus Notes |
The following table summarizes the carrying value of surplus notes issued by the Company to NFS, as of the dates indicated:
(in millions) | ||||||||||||||||||||||||||||
Date issued | Interest rate | Par value | Carrying value | Interest and/ or principal paid in current year | Total interest and/ or principal paid | Unapproved interest and/ or principal | Date of maturity | |||||||||||||||||||||
December 31, 2020 | ||||||||||||||||||||||||||||
12/19/2001 | 7.50 | % | $ | 300 | $ | 300 | $ | 22 | $ | 428 | $ | - | 12/31/2031 | |||||||||||||||
6/27/2002 | 8.15 | % | 300 | 300 | 25 | 448 | - | 6/27/2032 | ||||||||||||||||||||
12/23/2003 | 6.75 | % | 100 | 100 | 7 | 112 | - | 12/23/2033 | ||||||||||||||||||||
12/20/2019 | 4.21 | % | 400 | 400 | 17 | 17 | - | 12/19/2059 | ||||||||||||||||||||
Total | $ | 1,100 | $ | 1,100 | $ | 71 | $ | 1,005 | $ | - | ||||||||||||||||||
December 31, 2019 | ||||||||||||||||||||||||||||
12/19/2001 | 7.50 | % | $ | 300 | $ | 300 | $ | 23 | $ | 406 | $ | - | 12/31/2031 | |||||||||||||||
6/27/2002 | 8.15 | % | 300 | 300 | 24 | 423 | - | 6/27/2032 | ||||||||||||||||||||
12/23/2003 | 6.75 | % | 100 | 100 | 7 | 105 | - | 12/23/2033 | ||||||||||||||||||||
12/20/2019 | 4.21 | % | 400 | 400 | - | - | - | 12/19/2059 | ||||||||||||||||||||
Total | $ | 1,100 | $ | 1,100 | $ | 54 | $ | 934 | $ | - |
The surplus notes were issued in accordance with Section 3901.72 of the Ohio Revised Code. The principal and interest on these surplus notes shall not be a liability or claim against NLIC, or any of its assets, except as provided in Section 3901.72 of the Ohio Revised Code. The Department must approve interest and principal payments before they are paid.
(11) | Reinsurance |
The Company has a 100% coinsurance agreement with funds withheld with Eagle to cede specified GMDB and GLWB obligations provided under substantially all of the variable annuity contracts issued and to be issued by NLIC. While the GMDB and GLWB contract riders are ceded by NLIC to Eagle, the base annuity contracts and any non-reinsured risks will be retained by NLIC.
Amounts ceded to Eagle during 2020, 2019 and 2018 included premiums of $627 million, $529 million and $506 million, respectively, benefits and claims, net of third party reinsurance recoveries of $23 million, $17 million, and $14 million respectively, net investment earnings on funds withheld assets of $49 million, $33 million and $20 million, respectively, and an expense allowance for third party reinsurance premiums of $1 million, $1 million and $1 million, respectively. As of December 31, 2020 and 2019, the carrying value of the funds withheld assets was $965 million and $795 million, respectively, which consists of bonds and short-term investments that had a carrying value of $856 million and $722 million, respectively, and mortgage loans that had a carrying value of $108 million and $73 million, respectively. As of December 31, 2020 and 2019, the Company’s reserve credit for guaranteed benefits ceded under the reinsurance agreement was $65 million and $275 million, respectively. Amounts payable to Eagle related to the reinsurance agreement were $402 million and $248 million as of as of December 31, 2020 and December 31, 2019, respectively.
The Company has a reinsurance agreement with NMIC whereby nearly all of the Company’s accident and health business not ceded to unaffiliated reinsurers is ceded to NMIC on a modified coinsurance basis. Either party may terminate the agreement on January 1 of any year with prior notice. Under a modified coinsurance agreement, the ceding company retains invested assets, and investment earnings are paid to the reinsurer. Under the terms of the Company’s agreement, the investment risk associated with changes in interest rates is borne by the reinsurer. Risk of asset default is retained by the Company, although a fee is paid to the Company for the retention of such risk. The ceding of risk does not discharge the Company, as the original insurer, from its primary obligation to the policyholder. Amounts ceded to NMIC include revenues of $281 million, $279 million and $257 million for the years ended December 31, 2020, 2019 and 2018, respectively, while benefits, claims and expenses ceded were $260 million, $273 million and $237 million, respectively.
F-42
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2020, 2019 and 2018 Statutory Financial Statements
The Company has an intercompany reinsurance agreement with NLAIC whereby certain inforce and subsequently issued fixed individual deferred annuity contracts are assumed on a modified coinsurance basis. Under modified coinsurance agreements, the ceding company retains invested assets and investment earnings are paid to the reinsurer. Under terms of the agreement, the Company bears the investment risk associated with changes in interest rates. Risk of asset default remains with NLAIC, and the Company pays a fee to NLAIC for the retention of such risk. The agreement will remain inforce until all contract obligations are settled. The ceding of risk does not discharge the original insurer from its primary obligation to the contractholder. Amounts assumed from NLAIC are included in the Company’s statutory statement of operations for 2020, 2019 and 2018 and include premiums of $12 million, $14 million and $14 million, respectively, net investment income of $46 million, $49 million and $58 million, respectively, and benefits, change in reserves and other expenses of $171 million, $251 million and $358 million, respectively. The reserve adjustment for 2020, 2019 and 2018 of $(172) million, $(246) million and $(352) million, respectively, represents changes in reserves related to this fixed block of business, offset by investment earnings on the underlying assets. Policy reserves assumed under this agreement totaled $1.1 billion and $1.2 billion as of December 31, 2020 and 2019, respectively, and amounts payable related to this agreement were $8 million and $0.4 million, respectively.
The Company has an intercompany reinsurance agreement with NLAIC whereby certain variable universal life insurance, whole life insurance and universal life insurance policies are assumed on a modified coinsurance basis. Total policy reserves under this treaty were $37 million and $39 million as of December 31, 2020 and 2019, respectively. Total premiums assumed under this treaty were $8 million, $11 million and $8 million during 2020, 2019 and 2018, respectively.
The Company has an intercompany reinsurance agreement with NLAIC whereby a certain life insurance contract is assumed on a 100% coinsurance basis. Policy reserves assumed under this agreement totaled $158 million and $157 million as of December 31, 2020 and 2019, respectively.
The Company has entered into reinsurance contracts to cede a portion of its individual annuity and life insurance business to unrelated reinsurers. Total reserve credits taken as of December 31, 2020 and 2019 were $420 million and $438 million, respectively. The three largest contracts are with Security Benefit Life Insurance Company (“SBL”), SCOR Global Life Americas Reinsurance (“SGLAR”), and Security Life of Denver Insurance Company (“SLD”) as of December 31, 2020. Total reserve credits taken on these contracts as of December 31, 2020 and 2019 totaled $100 million and $90 million for each year, from SBL, $44 million and $0, respectively, from SGLAR and $36 million and $41 million, respectively, from SLD. The ceding of risk does not relieve the Company, as the original insurer, from its primary obligation to the policyholder. Under the terms of the contracts, SBL has established a trust as collateral for the recoveries, whereby the trust assets are invested in investment grade securities, the fair value of which must at all times be greater or equal to 100% of the reinsured reserves.
F-43
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2020, 2019 and 2018 Statutory Financial Statements
(12) | Transactions with Affiliates |
The Company has entered into significant, recurring transactions and agreements with NMIC, other affiliates and subsidiaries as a part of its ongoing operations. These include annuity and life insurance contracts, office space cost sharing arrangements, and agreements related to reinsurance, cost sharing, tax sharing, administrative services, marketing, intercompany loans, intercompany repurchases, cash management services and software licensing. In addition, several benefit plans sponsored by NMIC are available to Nationwide employees, for which the Company has no legal obligations. Measures used to determine the allocation among companies includes individual employee estimates of time spent, special cost studies, the number of full-time employees and other methods agreed to by the participating companies.
In addition, Nationwide Services Company, LLC (“NSC”), a subsidiary of NMIC, provides data processing, systems development, hardware and software support, telephone, mail and other services to the Company, based on specified rates for units of service consumed pursuant to the Enterprise Cost Sharing Agreement. For the years ended December 31, 2020, 2019 and 2018, the Company was allocated costs from NMIC and NSC totaling $281 million, $220 million and $235 million, respectively.
The Company has issued group annuity and life insurance contracts and performs administrative services for various employee benefit plans sponsored by NMIC or its affiliates. Total account values of these contracts were $3.7 billion, $3.5 billion and $3.4 billion as of December 31, 2020, 2019 and 2018, respectively. Total revenues from these contracts were $122 million, $120 million and $119 million for the years ended December 31, 2020, 2019 and 2018, respectively, and include policy charges, net investment income from investments backing the contracts and administrative fees. Total interest credited to the account balances were $115 million, $112 million and $107 million for the years ended December 31, 2020, 2019 and 2018, respectively.
The Company may underwrite insurance policies for its officers, directors, and/or other personnel providing services to the Company. The Company may offer discounts on certain products that are subject to applicable state insurance laws and approvals.
Under the Enterprise Cost Sharing Agreement, the Company has a cost sharing arrangement with NMIC to occupy office space. For the years ended December 31, 2020, 2019 and 2018, the Company was allocated costs from NMIC of $13 million, $11 million and $10 million, respectively.
The Company receives an annual fee payable from the Tax Credit Funds, for which it is a guarantor and Managing Member, for its services in connection with the oversight of the performance of the Investee Partnerships and the compliance by their managing members and managing agents thereof with the provisions of the various operating level agreements and applicable laws. The Company earned $2 million for the years ended December 31, 2020, 2019 and 2018.
Funds of Nationwide Funds Group (“NFG”), a group of Nationwide businesses that develops, sells and services mutual funds, are offered to the Company’s customers as investment options in certain of the Company’s products. As of December 31, 2020, 2019 and 2018, customer allocations to NFG funds totaled $69.2 billion, $66.8 billion and $60.7 billion, respectively. For the years ended December 31, 2020, 2019 and 2018, NFG paid the Company $229 million, $227 million and $227 million, respectively, for the distribution and servicing of these funds.
Amounts on deposit with NCMC for the benefit of the Company were $551 million and $616 million as of December 31, 2020 and 2019, respectively. As of December 31, 2020, amounts on deposit with NCMC were comprised of $547 million of cash equivalents, with remaining amounts in short-term investments.
Certain annuity products are sold through affiliated companies, which are also subsidiaries of NFS. Total commissions and fees paid to these affiliates for the years ended December 31, 2020, 2019 and 2018 was $69 million, $71 million and $72 million, respectively.
The Company provides financing to Nationwide Realty Investors, LTD, a subsidiary of NMIC with interest rates ranging from 3.3% to 5.0% and maturity dates ranging from January 2022 to June 2041. As of December 31, 2020 and 2019, the Company had mortgage loans outstanding of $414 million and $348 million, respectively.
The Company also participates in intercompany repurchase agreements with affiliates whereby the seller transfers securities to the buyer at a stated value. Upon demand or after a stated period, the seller repurchases the securities from the buyer at the original sales price plus interest. As of December 31, 2020 and 2019, the Company had no outstanding borrowings from affiliated entities under such agreements. During 2020 and 2019, there was no outstanding borrowings from affiliated entities at any given time. The amount the Company incurred for interest expense on intercompany repurchase agreements during 2020, 2019 and 2018 were immaterial.
During 2020, 2019 and 2018, the Company received capital contributions of $0, $600 million and $435 million, respectively, from NFS.
F-44
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2020, 2019 and 2018 Statutory Financial Statements
During 2020, the Company sold securities of $59 million to Nationwide Mutual Fire Insurance Company for cash, which resulted in a realized loss of $2 million.
During 2020, 2019 and 2018, the Company paid capital contributions of $500 million, $400 million and $565 million, respectively, to NLAIC.
On February 11, 2020, the Company entered into an unsecured promissory note and revolving line of credit with JNLNY whereby JNLNY can borrow up to $5 million. As of December 31, 2020, no amounts were drawn on the note.
On November 21, 2019, NFS and the Company entered into a promissory note, where the Company borrowed $386 million from NFS at 1-month LIBOR plus 0.785%. This note was fully repaid on December 20, 2019.
During 2018, NLAIC borrowed $340 million from the Company at interest rates ranging from 3-month LIBOR plus 0.785% to 3.57% with maturity dates ranging from January 16, 2019 to March 21, 2019. During 2019, NLAIC made payments of principal and interest and, as of March 21, 2019, the promissory notes were repaid in full.
Pursuant to financial support agreements, the Company has agreed to provide NLAIC and JNLIC with the minimum capital and surplus required by each state in which NLAIC and JNLIC does business. These agreements do not constitute the Company as guarantor of any obligation or indebtedness of NLAIC or JNLIC or provide any creditor of NLAIC or JNLIC with recourse to or against any of the assets of the Company.
Eagle’s surplus position is evaluated quarterly to determine if an additional surplus contribution is required from the Company or if a distribution to the Company can be declared as of each quarter end.
During 2020 and 2019, the Company made surplus contributions to Eagle. On March 31, 2020 and April 17, 2020, the Company made surplus contributions to Eagle of $555 million and $50 million, respectively. On October 17, 2019, the Company made a surplus contribution to Eagle of $9 million.
During 2020 and 2019 Eagle declared distributions to the Company based on their earned surplus position. On February 10, 2021, the Company received a dividend distribution of $292 million from Eagle that was declared on December 31, 2020. The dividend receivable was recorded in accrued investment income on the December 31, 2020 statutory statement of admitted assets, liabilities, capital and surplus. On November 10, 2020 the Company received a total distribution of $267 million from Eagle that was declared on September 30, 2020 and consisted of a return of contributed surplus of $184 million and a dividend of $83 million. On August 10, 2020 the Company received a return of contributed surplus distribution of $421 million from Eagle that was declared on June 30, 2020. On February 10, 2020, the Company received a total distribution of $180 million from Eagle that was declared on December 31, 2019 and consisted of a return of contributed surplus of $9 million and a dividend of $171 million. The return of contributed surplus was recorded in other assets and the dividend receivable was recorded in accrued investment income on the December 31, 2019 statutory statement of admitted assets, liabilities, capital and surplus. On August 9, 2019, the Company received a dividend distribution of $41 million from Eagle that was declared on June 28, 2019. On May 10, 2019, the Company received a total distribution of $212 million from Eagle that was declared on March 26, 2019 and consisted of a return of contributed surplus of $190 million and a dividend of $22 million.
The Company utilizes the look-through approach in valuing its investment in Nationwide Real Estate Investors (NLIC), LLC (“NW REI (NLIC)”), a subsidiary of NMIC, at $90 million and $69 million as of December 31, 2020 and 2019, respectively. NW REI (NLIC)’s financial statements are not audited and the Company has limited the value of its investment in NW REI (NLIC) to the value contained in the audited statutory financial statements of the underlying investments. All liabilities, commitments, contingencies, guarantees or obligations of the NW REI (NLIC), which are required under applicable accounting guidance, are reflected in the Company’s determination of the carrying value of the investment in NW REI (NLIC), if not already recorded in the financial statements of NW REI (NLIC).
(13) Contingencies
Legal and Regulatory Matters
The Company is subject to legal and regulatory proceedings in the ordinary course of its business. These include proceedings specific to the Company and proceedings generally applicable to business practices in the industries in which the Company operates. The outcomes of these proceedings cannot be predicted due to their complexity, scope, and many uncertainties. The Company believes, however, that based on currently known information, the ultimate outcome of all pending legal and regulatory proceedings is not likely to have a material adverse effect on the Company’s financial condition.
F-45
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2020, 2019 and 2018 Statutory Financial Statements
The various businesses conducted by the Company are subject to oversight by numerous federal and state regulatory entities, including but not limited to the Securities and Exchange Commission, the Financial Industry Regulatory Authority, the Department of Labor, the IRS, the Office of the Comptroller of the Currency and state insurance authorities. Such regulatory entities may, in the normal course of business, be engaged in general or targeted inquiries, examinations and investigations of the Company and/or its affiliates. With respect to all such scrutiny directed at the Company or its affiliates, the Company is cooperating with regulators.
Guarantees
In accordance with SSAP No. 5R, Liabilities, Contingencies and Impairments of Assets, for all guarantees made to or on behalf of wholly-owned subsidiaries, no initial liability recognition has been made and there is no net financial statement impact related to these guarantees.
The contractual obligations under NLAIC’s single premium deferred annuity (“SPDA”) contracts in force and issued before September 1, 1988 are guaranteed by the Company. Total SPDA contracts affected by this guarantee in force as of December 31, 2020 and 2019 were approximately $8 million and $9 million, respectively.
The Company has guaranteed the obligations and liabilities of NISC, including, without limitation, the full and prompt payment of all accounts payable to any party now or in the future. If for any reason NISC fails to satisfy any of its obligations, the Company will cause such obligation, loss or liability to be fully satisfied.
Indemnifications
In the normal course of business, the Company provides standard indemnifications to contractual counterparties. The types of indemnifications typically provided include breaches of representations and warranties, taxes and certain other liabilities, such as third-party lawsuits. The indemnification clauses are often standard contractual terms and are entered into in the normal course of business based on an assessment that the risk of loss would be remote. The terms of the indemnifications vary in duration and nature. In many cases, the maximum obligation is not explicitly stated, and the contingencies triggering the obligation to indemnify have not occurred and are not expected to occur. Consequently, the amount of the obligation under such indemnifications is not determinable. Historically, the Company has not made any material payments pursuant to these obligations.
(14) | Regulatory Risk-Based Capital, Dividend Restrictions and Unassigned Surplus |
The NAIC Risk-Based Capital (“RBC”) model law requires every insurer to calculate its total adjusted capital and RBC requirement to ensure insurer solvency. Regulatory guidelines provide for an insurance commissioner to intervene if the insurer experiences financial difficulty, as evidenced by a company’s total adjusted capital falling below established relationships to required RBC. The model includes components for asset risk, liability risk, interest rate exposure and other factors. The State of Ohio, where the Company is domiciled, imposes minimum RBC requirements that are developed by the NAIC. The formulas in the model for determining the amount of RBC specify various weighting factors that are applied to financial balances or various levels of activity based on the perceived degree of risk. Regulatory compliance is determined by a ratio of total adjusted capital to authorized control level RBC, as defined by the NAIC. Companies below specific trigger points or ratios are classified within certain levels, all of which require specified corrective action. The Company exceeded the minimum RBC requirements for all periods presented.
The State of Ohio insurance laws require insurers to seek prior regulatory approval to pay a dividend or distribution of cash or other property if the fair market value thereof, together with that of other dividends or distributions made in the preceding twelve months, exceeds the greater of (i) 10% of statutory-basis capital and surplus as of the prior December 31 or (ii) the statutory-basis net income of the insurer for the prior year. During the years ended December 31, 2020, 2019 and 2018, the Company did not pay any dividends to NFS. The Company’s statutory capital and surplus as of December 31, 2020, was $9.1 billion and statutory net income for 2020 was $487 million. As of January 1, 2021, the Company has the ability to pay dividends to NFS totaling $911 million without obtaining prior approval.
The State of Ohio insurance laws also require insurers to seek prior regulatory approval for any dividend paid from other than earned capital and surplus. Earned capital and surplus is defined under the State of Ohio insurance laws as the amount equal to the Company’s unassigned funds as set forth in its most recent statutory financial statements, including net unrealized capital gains and losses or revaluation of assets. Additionally, following any dividend, an insurer’s policyholder capital and surplus must be reasonable in relation to the insurer’s outstanding liabilities and adequate for its financial needs. The payment of dividends by the Company may also be subject to restrictions set forth in the insurance laws of the State of New York that limit the amount of statutory profits on the Company’s participating policies (measured before dividends to policyholders) available for the benefit of the Company and its stockholders.
The Company currently does not expect such regulatory requirements to impair the ability to pay operating expenses and dividends in the future.
F-46
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Schedule I Summary of Investments – Other Than Investments in Related Parties
As of December 31, 2020:
(in millions) | Column A | Column B | Column C | Column D | ||||||||||
Type of investment | Cost | Fair value | Amount at which is shown in the assets, liabilities, capital and surplus | |||||||||||
Bonds: | ||||||||||||||
U.S. Treasury securities and obligations of U.S. government corporations | $ | 2 | $ | 2 | $ | 2 | ||||||||
U.S. government and agencies | 120 | 150 | 120 | |||||||||||
Obligations of states and political subdivisions | 3,323 | 3,988 | 3,323 | |||||||||||
Foreign governments | 63 | 71 | 63 | |||||||||||
Public utilities | 3,784 | 4,280 | 3,790 | |||||||||||
All other corporate, mortgage-backed and asset-backed securities | 29,876 | 33,319 | 29,909 | |||||||||||
Total fixed maturity securities | $ | 37,168 | $ | 41,810 | $ | 37,207 | ||||||||
Equity securities: | ||||||||||||||
Common Stocks: | ||||||||||||||
Banks, trust and insurance companies | 30 | 33 | 33 | |||||||||||
Industrial, miscellaneous and all other | 113 | 109 | 109 | |||||||||||
Nonredeemable preferred stocks | 97 | 109 | 97 | |||||||||||
Total equity securities1 | $ | 240 | $ | 251 | $ | 239 | ||||||||
Mortgage loans2 | 7,831 | 7,783 | ||||||||||||
Short-term investments | 461 | 461 | ||||||||||||
Policy loans | 888 | 888 | ||||||||||||
Other long-term investments3 | 950 | 950 | ||||||||||||
Total invested assets | $ | 47,538 | $ | 47,528 |
1 | Amount does not agree to the statutory statements of admitted assets, liabilities, capital and surplus as investments in related parties of $2.6 billion are excluded. |
2 | Difference from Column B is attributable to valuation allowances on mortgage loans (see Note 5 to the audited statutory financial statements). |
3 | Includes derivatives, securities lending reinvested collateral assets and other invested assets. Amount does not agree to the statutory statements of admitted assets, liabilities, capital and surplus as investments in related parties of $157 million are excluded. |
See accompanying notes to statutory financial statements and report of independent registered public accounting firm.
F-47
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Schedule III Supplementary Insurance Information
As of December 31, 2020, 2019 and 2018 and for each of the years then ended (in millions):
Column A | Column B | Column C | Column D | Column E | Column F | |||||||||||||||
Year: Segment | Deferred policy acquisition costs1 | Future policy benefits, loss | Unearned premiums2 | Other policy and benefits | Premium revenue | |||||||||||||||
2020 | ||||||||||||||||||||
Life Insurance | $ | 5,204 | $ | 394 | ||||||||||||||||
Annuities | 7,837 | 3,443 | ||||||||||||||||||
Retirement Solutions | 22,362 | 5,939 | ||||||||||||||||||
Corporate Solutions and Other | 5,599 | 861 | ||||||||||||||||||
|
|
|
|
| ||||||||||||||||
Total | $41,002 | $10,637 | ||||||||||||||||||
2019 | ||||||||||||||||||||
Life Insurance | $ | 5,125 | $ | 413 | ||||||||||||||||
Annuities | 7,955 | 4,202 | ||||||||||||||||||
Retirement Solutions | 20,781 | 4,324 | ||||||||||||||||||
Corporate Solutions and Other | 5,278 | 1,229 | ||||||||||||||||||
|
|
|
|
| ||||||||||||||||
Total | $ | 39,139 | $ | 10,168 | ||||||||||||||||
|
|
|
|
| ||||||||||||||||
2018 | ||||||||||||||||||||
Life Insurance | $ | 5,087 | $ | 410 | ||||||||||||||||
Annuities | 7,934 | 3,868 | ||||||||||||||||||
Retirement Solutions | 19,646 | 4,095 | ||||||||||||||||||
Corporate Solutions and Other | 5,670 | 1,456 | ||||||||||||||||||
|
|
|
|
| ||||||||||||||||
Total | $ | 38,337 | $ | 9,829 | ||||||||||||||||
|
|
|
|
|
Column A | Column G | Column H | Column I | Column J | Column K | |||||||||||||||
Year: Segment | Net investment income3 | Benefits, claims, losses and settlement expenses4 | Amortization of deferred policy acquisition costs1 | Other operating expenses | Premiums written | |||||||||||||||
2020 | ||||||||||||||||||||
Life Insurance | $ | 247 | $ | 772 | $ | 123 | ||||||||||||||
Annuities | 338 | 7,539 | 55 | |||||||||||||||||
Retirement Solutions | 843 | 8,258 | 131 | |||||||||||||||||
Corporate Solutions and Other | 679 | 717 | 135 | |||||||||||||||||
|
|
| ||||||||||||||||||
Total | $ | 2,107 | $ | 17,286 | $ | 444 | ||||||||||||||
|
|
| ||||||||||||||||||
2019 | ||||||||||||||||||||
Life Insurance | $ | 262 | $ | 807 | $ | 133 | ||||||||||||||
Annuities | 319 | 8,460 | 57 | |||||||||||||||||
Retirement Solutions | 824 | 6,539 | 122 | |||||||||||||||||
Corporate Solutions and Other | 569 | 1,151 | 105 | |||||||||||||||||
|
|
| ||||||||||||||||||
Total | $ | 1,974 | $ | 16,957 | $ | 417 | ||||||||||||||
|
|
| ||||||||||||||||||
2018 | ||||||||||||||||||||
Life Insurance | $ | 270 | $ | 744 | $ | 154 | ||||||||||||||
Annuities | 319 | 8,203 | 48 | |||||||||||||||||
Retirement Solutions | 798 | 5,656 | 132 | |||||||||||||||||
Corporate Solutions and Other | 540 | 764 | 64 | |||||||||||||||||
|
|
| ||||||||||||||||||
Total | $ | 1,927 | $ | 15,367 | $ | 398 | ||||||||||||||
|
|
|
1 | Deferred policy acquisition costs and amortization of deferred policy acquisition costs are not applicable for statutory basis of accounting. |
2 | Unearned premiums and other policy claims and benefits payable are included in Column C amounts. |
3 | Allocations of net investment income and certain operating expenses are based on numerous assumptions and estimates and reported segment operating results would change if different methods were applied. |
4 | Benefits to policyholders and beneficiaries, reserves for future policy benefits and claims and commissions are included in Column H amounts. |
See accompanying notes to statutory financial statements and report of independent registered public accounting firm.
F-48
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
As of December 31, 2020, 2019 and 2018 and each of the years then ended:
(in millions) | ||||||||||||||||
Column A | Column B | Column C | Column D | Column E | ||||||||||||
Ceded to | Assumed | |||||||||||||||
Gross | other | from other | Net | |||||||||||||
amount | companies | companies | amount | |||||||||||||
2020 | ||||||||||||||||
Life insurance in force | $ | 146,855 | $ | (31,055 | ) | $ | 686 | $ | 116,486 | |||||||
Premiums: | ||||||||||||||||
Life Insurance1 | $ | 1,378 | $ | (133 | ) | $ | 8 | $ | 1,253 | |||||||
Accident and health insurance | 441 | (440 | ) | - | 1 | |||||||||||
Total | $ | 1,819 | $ | (573 | ) | $ | 8 | $ | 1,254 | |||||||
2019 | ||||||||||||||||
Life insurance in force | $ | 146,044 | $ | (31,691 | ) | $ | 728 | $ | 115,081 | |||||||
Premiums: | ||||||||||||||||
Life Insurance1 | $ | 1,761 | $ | (661 | ) | $ | 10 | $ | 1,110 | |||||||
Accident and health insurance | 444 | (445 | ) | 2 | 1 | |||||||||||
Total | $ | 2,205 | $ | (1,106 | ) | $ | 12 | $ | 1,111 | |||||||
2018 | ||||||||||||||||
Life insurance in force | $ | 141,650 | $ | (32,380 | ) | $ | 788 | $ | 110,058 | |||||||
Premiums: | ||||||||||||||||
Life Insurance1 | $ | 1,985 | $ | (130 | ) | $ | 8 | $ | 1,863 | |||||||
Accident and health insurance | 289 | (373 | ) | 85 | 1 | |||||||||||
Total | $ | 2,274 | $ | (503 | ) | $ | 93 | $ | 1,864 |
1 | Primarily represents premiums from traditional life insurance and life-contingent immediate annuities and excludes deposits on investment and universal life insurance products. |
See accompanying notes to statutory financial statements and report of independent registered public accounting firm.
F-49
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Schedule V Valuation and Qualifying Accounts
Years ended December 31, 2020, 2019 and 2018:
(in millions) | ||||||||||||||||
Column A | Column B | Column C | Column D | Column E | ||||||||||||
Balance at | Charged to | Balance at | ||||||||||||||
beginning | costs and | end of | ||||||||||||||
Description | of period | expenses | Deductions1 | period | ||||||||||||
2020 | ||||||||||||||||
Valuation allowances - mortgage loans | $ | 34 | $ | 14 | $ | - | $ | 48 | ||||||||
2019 | ||||||||||||||||
Valuation allowances - mortgage loans | $ | 25 | $ | 9 | $ | - | $ | 34 | ||||||||
2018 | ||||||||||||||||
Valuation allowances - mortgage loans | $ | 23 | $ | 2 | $ | - | $ | 25 |
1 | Amounts generally represent recoveries, payoffs and sales. |
See accompanying notes to statutory financial statements and report of independent registered public accounting firm.
F-50
Item 13. | Other Expenses of Issuance and Distribution |
Item 14. | Indemnification of Directors and Officers |
• | any threatened, pending or completed civil action, suit or proceeding; |
• | any threatened, pending or completed criminal action, suit or proceeding; |
• | any threatened, pending or completed administrative action or proceeding; |
• | any threatened, pending or completed investigative action or proceeding. |
Item 15. | Recent Sales of Unregistered Securities. |
Item 16. | Exhibits and Financial Statement Schedules |
Exhibits | |
Item 17. | Undertakings |
(1) | To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: |
(a) | To include any prospectus required by section 10(a)(3) of the Securities Act of 1933; |
(b) | To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; |
(c) | To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement. |
(2) | That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
(3) | To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. |
(4) | That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use. |
(5) | That, for the purpose of determining liability of the Registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities: The undersigned Registrant undertakes that in a primary offering of securities of the undersigned Registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned Registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser: |
(a) | Any preliminary prospectus or prospectus of the undersigned Registrant relating to the offering required to be filed pursuant to Rule 424; |
(b) | Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned Registrant or used or referred to by the undersigned Registrant; |
(c) | The portion of any other free writing prospectus relating to the offering containing material information about the undersigned Registrant or its securities provided by or on behalf of the undersigned Registrant; and |
(d) | Any other communication that is an offer in the offering made by the undersigned Registrant to the purchaser. |
(B) | Insofar as indemnification for liabilities arising under the Securities Act of 1933 ("Act") may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officers or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. |
NATIONWIDE LIFE INSURANCE COMPANY |
(Registrant) |
By: /s/ JAMIE RUFF CASTO |
Jamie Ruff Casto Attorney-in-Fact |
JOHN L. CARTER | |
John L. Carter, President and Chief Operating Officer, and Director | |
MARK R. THRESHER | |
Mark R. Thresher, Executive Vice President and Director | |
TIMOTHY G. FROMMEYER | |
Timothy G. Frommeyer, Senior Vice President-Chief Financial Officer and Director | |
ERIC S. HENDERSON | |
Eric S. Henderson, Senior | |
STEVEN A. GINNAN | |
Steven A. Ginnan, Senior Vice President-Chief Financial Officer-Nationwide Financial and Director | |
KIRT A. WALKER | |
Director | |
By /s/ Jamie Ruff Casto | |
Jamie Ruff Casto Attorney-in-Fact |