OHIO | 6311 | 31-4156830 |
(State or other jurisdiction of incorporation or organization) | (Primary Standard Industrial Classification Code Number) | (I.R.S. Employer Identification Number) |
Denise L. Skingle Senior Vice President 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) |
415 under the Securities Act of 1933, check the following box. | ☑ |
statement for the same offering. | □ |
offering. | □ |
offering. | □ |
filer", "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act. | □ |
Large accelerated filer | □ |
Accelerated filer | □ |
Non-accelerated filer (Do not check if a smaller reporting company) | ☑ |
Smaller reporting company | □ |
Emerging growth company | □ |
Title of Each Class of Securities to be Registered | Amount to be Registered | Proposed Maximum Offering Price Per Unit | Proposed Maximum Aggregate Offering Price, including previously registered securities1 | Amount of Registration Fee, including fee paid for previously registered securities |
Flexible Purchase Payment Modified Guaranteed Annuity Contracts | N/A1 | N/A1 | $138,419,6722 | $14,810.913 |
1 | The amount to be registered and the proposed maximum offering price per unit are not applicable in that these contracts are not issued in predetermined amounts or units. The proposed maximum aggregate offering price is estimated solely for the purpose of determining the registration fee. |
2 | This registration statement includes unsold securities previously registered pursuant to Rule 462(b) under the Securities Act of 1933 ("Securities Act") on Form S-1 (File No. 333-133163) filed by the Registrant on April 10, 2006 ("Prior Registration Statement"). Pursuant to Rule 415(a)(6) under the Securities Act, unsold securities were added to a registration statement on Form S-1 (File No. 333-200329) filed by the Registrant on November 18, 2014, and subsequently added to a registration statement on Form S-1 (File No. 333-216964) filed by the Registrant on March 27, 2017. Pursuant to Rule 415(a)(6) under the Securities Act, all unsold securities from the Prior Registration Statement will be added to this Registration Statement and the offering of securities under the Prior Registration Statement will be deemed terminated as of the date of effectiveness of this Registration Statement. As of February 28, 2020, there were $138,419,672 of unsold securities registered pursuant to the Prior Registration Statement. |
3 | Pursuant to Rule 415(a)(6) under the Securities Act, $14,810.91 (calculated at the rate in effect at the time the Prior Registration Statement was filed) of filing fees paid in connection with the unsold securities shall continue to apply to the unsold securities, and no additional filing fee in respect to such unsold securities is due hereunder. |
certain risks (seeRisk Factors on page 6). For information on how to contact Nationwide, see
are referred to as Target Term Options)information indate of this prospectus is not complete andMay 1, 2020.Certain state insurance laws applicable to these investment options may preclude, or be interpreted to preclude, Nationwide Life Insurance Company ("Nationwide") from providing a contractual guarantee in conjunction with the Specified Interest Rate. In such jurisdictions, the investment options are referred to as "Target Term Options" as opposed to "Guaranteed Term Options."Despite this distinction in terminology, Nationwide will administer all obligations described in this prospectus, regardless of the jurisdiction, in precisely the same manner. Thus, there will be no difference between the calculation, crediting, and administration of Specified Interest Rates in "Guaranteed Term Options" issued in states permitting a contractual guarantee, and the calculation, crediting, and administration of Specified Interest Rates in "Target Term Options" issued in states not permitting a contractual guarantee. changed. We may not sell these securities until the registration statement filedread along with the Securitiesappropriate variable contract prospectus and Exchange Commission is effective.Preliminary Prospectus Dated January 28, 2019Nationwide Defined ProtectionSM AnnuityIndividual Single Purchase Payment Deferred Annuity Contract with Index-Linked StrategiesIssued byNATIONWIDE LIFE INSURANCE COMPANYProspectus Dated, 2019This prospectus describes the Nationwide Defined ProtectionSM Annuity Contract (the “Contract”), including all material rights and obligations underprospectuses describing the Contract.Pleaseunderlying mutual fund investment options. All of these prospectuses should be read this prospectus carefully and keep itmaintained for future reference. Special terms used throughout this prospectusdefinedavailable under “Defined Terms.”The Contract iscertain variable annuity contracts or variable life insurance policies (collectively, "variable contracts") issued by us,Nationwide. Generally, the variable contracts offered by Nationwide Life Insurance Company. The Contract is designed to help you invest on a tax-deferred basis and meet long-term financial goals. You may select one or moreprovide an array of underlying mutual fund investment options each linking to which the performance of a specific market index and including a defined level of protection against loss.We refer to thesecontract owner allocates his or her purchase payments. The GTOs are separate, guaranteed interest investment options available under variable contracts.“Strategies.” Currently, each Strategy is linked to one of the following indexes:S&P 500®IndexJ.P. Morgan Mozaic IISMIndexMSCI EAFEIndexNYSE® Zebra Edge®IndexEach Strategy has a start date and an end date, and we refer to the duration between those two dates as the “Strategy Term.” At the end of a Strategy Term, you may reinvest in the same Strategy or transfer your money to another Strategy available for investment. You cannot transfer between Strategies until the end of a Strategy Term.Your Contract will gain or lose value based on the performance of your Strategies. Your gains and losses depend on the application of important factors that make up the Strategy. In addition to the linked index, the length of the Strategy Term, and the defined downside protection, these factors include a “Participation Rate” and “Strategy Spread.”●The Participation Rate acts as a multiplier because it has the effect of multiplying the performance of the Index, positive or negative. If the Participation Rate is greater than 100%, it increases upside potential while also increasing risk of loss. Conversely, if the Participation Rate is lower than 100%, it decreases upside potential while also decreasing risk of loss. A Participation Rate may be set as low as 5%. A low Participation Rate would cause a Strategy to participate in the performance of the linked index to only a small extent.●The Strategy Spread is an annualized percentage used as a deduction in the calculation of gains and losses. If the Strategy Spread is greater than 0%, its application will operate to negatively impact the performance of the Strategy. This means it will reduce gains and potentially increase losses. The Strategy Spread can result in losses under a Strategy even if the linked Index has increased in value.Gains or losses related to the performance of a Strategy, which we refer to as “Strategy Earnings,”amounts invested are applied to your Contract at certain times during the Strategy Term.Strategy Earnings may be positive, negative, or equal to zero.We will apply Strategy Earnings to your Contract on the last day of the Strategy Term. We will also apply Strategy Earnings to your Contract when you take a withdrawalnot withdrawn prior to the end of the guaranteed term. In the event of a Strategy Term, and when we calculatewithdraw from the death benefit. Strategy Earnings are independent ofGTO for any contingent deferred sales charges or market value adjustments under the Contract.Before you purchase the Contract, you should carefully consider the consequences of taking withdrawals. Each year under the Contract, a certain percentage of your contract value may be withdrawn and will receive preferred treatment. We refer to these withdrawals as “Preferred Withdrawals.” If you take a Preferred Withdrawalreason prior to the endexpiration of the Guaranteed Term, the amount withdrawn may be subject to a Strategy Term, we calculate your ratemarket value adjustment. Please refer to the variable contract prospectus for specific information regarding variable contract transactions that may be subject to a Market Value Adjustment.returnGTO terms, and the applicability of the Market Value Adjustment. The prospectus for the variable contract must be read along with this prospectus.same way that we would calculate your rate of return at the end of the Strategy Term. Upon a Preferred Withdrawal, any losses will be limited by the Strategy’s defined downside protection.If you have taken the maximum amount of Preferred Withdrawals, any excess amounts withdrawn will be treated as “Non-Preferred Withdrawals.” Non-Preferred Withdrawals may have a more negative impact to the performance of your Contract when compared to Preferred Withdrawals.●Non-Preferred Withdrawals may be subject to contingent deferred sales charges and negative market value adjustments, both of which will negatively impact the performance of your Contract.●If you take a Non-Preferred Withdrawal prior to the end of a Strategy Term, which is also an event upon which we apply gains and losses to your Contract, we will calculate your rate of return in a different manner than if the withdrawal were a Preferred Withdrawal. The difference will reduce gains and may increase losses. In addition, losses related to the Non-Preferred Withdrawal could exceed the Strategy’s defined downside protection, exposing you to agreater risk of loss.Each Strategy includes a Lock-In feature. If you decide to exercise the Lock-In feature for a Strategy, the performance of the Index as of a certain date will be fixed for the remainder of the Strategy Term.You should understand that while the Contract provides some protection against loss, you can lose money under the Contract. It is possible to lose a substantial amount of your principal investment. You should not buy the Contract if you are not willing to assume the risks associated with the Contract. See “Risk Factors” beginning on page 19.An investment in a Strategy does not represent an investment in the linked index or any securities or other assets included in the linked index.Prospective purchasers may obtain an application to purchase the Contract through broker-dealers that have been appointed by us as insurance agents and that have selling agreements with Nationwide Investment Services Corporation (“NISC”), the principal underwriter for the Contracts. NISC will use its best efforts to sell the Contracts, but is not required to sell any number or dollar amount of Contracts. We may stop offering the Contracts at any time.Index-linked annuity contracts are complicated investments. You should speak with a financial professional about the Contract’s features, benefits, and risks, and whether the Contract is appropriate for you based on your financial situation and objectives.This prospectus does not constitute an offering in any jurisdiction in which the Contract may not lawfully be sold.All guarantees under the ContractMultiple Maturity Separate Account.our creditworthiness and claims-paying ability.The Contract is not a bank deposit, is not FDIC insured, and is not insured or endorsed by any bank or government agency. The Contract may not be available in every state.prospectus.Prospectus. Any representation to the contrary is a criminal offense.Contacting the Solutions Center
TABLE OF CONTENTS
Guaranteed Term – The period corresponding to a 1, 3, 5, 7 or 10 year GTO. Amounts allocated to a GTO will be credited with a Specified Interest Rate over the corresponding Guaranteed Term, so long as such amounts are not withdrawn from the GTO prior to the Maturity Date. Because every Guaranteed Term will end on the final day of a calendar quarter, the Guaranteed Term may last for up to three months beyond the 1, 3, 5, 7 or 10 year anniversary of the allocation to the GTO. | ||||
| Guaranteed Term Option or GTO – An investment option offered under variable contracts that provides a Specified Interest Rate over Guaranteed Terms, so long as certain conditions are met. In some jurisdictions the GTO is referred to as a Target Term Option or TTO. | |||
Market Value Adjustment – The upward or downward adjustment in value of amounts allocated to a GTO that are withdrawn from the GTO for any reason prior to the Maturity Date. | ||||
Maturity Date – The date on which a GTO matures. The date will be the last day of the calendar quarter during or within 30 days after the first, third, fifth, seventh or tenth anniversary on which amounts are allocated to a 1, 3, 5, 7 or 10 year GTO, respectively. | ||||
Maturity Period – The period during which the value of amounts allocated under a GTO may be withdrawn without any Market Value Adjustment. The Maturity Period will begin on the day following the Maturity Date and will end on the 30th day after the Maturity Date. | ||||
MVA Interest Rate – The rate of interest used in the Market Value Adjustment formula. Depending on the variable contracts under which the GTO is offered, the interest rate will be the Constant Maturity Treasury ("CMT") rates, or interest rate swaps, for maturity durations of 1, 3, 5, 7 and 10 years, as published, on a regular basis, by a commercially reasonable and publicly available source based on treasury bond yields. | ||||
Specified Interest Rate – The interest rate guaranteed to be credited to amounts allocated to a GTO as long as the allocations are not withdrawn prior to the Maturity Date. The Specified Interest Rate will not be less than the minimum required by applicable state law. | ||||
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Specified Value – The amount of a GTO allocation, plus interest accrued at the Specified Interest Rate, minus any other amounts withdrawn. The Specified Value is subject to a Market Value Adjustment at all times other than during the Maturity Period. |
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Available Table of Contents
Additional information about the GTOs
Provided below
Adjusted Index Performance (AIP) – A percent that representsderived from the Index Performance adjusted for a Strategy���s Participation Rate and Strategy Spread.Market Value Adjustment formula. The AIPMarket Value Adjustment factor is the Index Performance multiplied by the Participation Rate and then reduced by the productpart of the Strategy Spread multiplied by the Elapsed Term. The AIP is usedSpecified Value being withdrawn, resulting in either an increase or decrease in the Strategy Earnings Percentage and Non-Preferred Strategy Earnings Percentage calculations.
Annuitant-amount of the withdrawal. The person upon whose life any life-contingent annuity payments dependMarket Value Adjustment formula reflects the relationship between three components:
(1) | the MVA Interest Rate for the period coinciding with the Guaranteed Term of the GTO at investment; |
(2) | the MVA Interest Rate for the number of years remaining in a Guaranteed Term when the withdrawal from the GTO occurs; and |
(3) | the number of days remaining in the Guaranteed Term of the GTO. |
Annuitization Date - The date on which annuity payments begin.
Annuity Commencement Date - The date on which annuity payments are scheduled to begin.
Beneficiary- A person designated by the Contract Owner who may receive certain benefits under the Contract, including the Death Benefit.
Business Day - Each day that the New York Stock Exchange is open for regular trading. A Business Day ends at the same time that regular trading on the New York Stock Exchange closes (typically 4:00 p.m. Eastern Time).
Cash Withdrawal- The dollar amount paid to the Contract Owner upon a partial withdrawal or full surrender. A Cash Withdrawal is equal to the Gross Withdrawal minus any applicable CDSC and deducted taxes, and reflects the application of any MVA.
Charitable Remainder Trust - A trust meeting the requirements of Section 664end of the Code.
Code - The Internal Revenue Code of 1986, as amended.
Contingent Annuitant- The person who becomes the Annuitant if the Annuitant dies before the Annuitization Date.
Contingent Beneficiary - The person or entity designated by the Contract Owner to receive any benefits accorded to a Beneficiary if there are no surviving Beneficiaries when the Annuitant dies.
Contingent Deferred Sales Charge (CDSC)- A charge that maycalendar quarter will be assessed if you take a Non-Preferred Withdrawal during the first six Contract Years.
Contract - The Nationwide Defined ProtectionSM Annuity Contract, the individual single purchase payment deferred annuity contract with index-linked strategies described in this prospectus.
Contract Accumulation Value - The sum of your Strategy Accumulation Values as of a given date.
Contract Anniversary - Each recurring twelve-month anniversarynotified of the Dateimpending expiration of Issue while the Contract remains in force.
Contract Owner (you) - The person possessing all rights under the ContractGuaranteed Term at least 15 days and at most 30 days prior to the Annuitization Date, along withend of each calendar quarter. Contract owners will then have the option of directing the withdrawal of any Joint Owner. Asamount in the context requires, “you” refersGTO during the Maturity Period without any Market Value Adjustment. However, any amount withdrawn from the GTO during this period may be subject to a potential or existing Contract Owner.
Contract Value - The sum of your Strategy Values as of a given date.
Contract Year - The twelve-month period starting onsurrender charge assessed by the Date of Issue and each Contract Anniversary. A Contract Year ends on the day prior to a Contract Anniversary.
Crediting Factors - For any Strategy, the Index, Strategy Term, Protection Level, Participation Rate, and Strategy Spread. See “Crediting Factors” for a description of each Crediting Factor.
Date of Issue - The date we issue the Contract. Your Purchase Payment is appliedvariable contract. Please refer to the Contract onprospectus for the variable contract for more information about surrender charges.
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Death Benefit- The benefit triggered upon the death of the Annuitant, provided such death occurs before the Annuitization Date while the Contract is in force and there is no Contingent Annuitant.
Elapsed Term- The number of calendar days that have elapsed during a Strategy Term divided by 365.
Gross Withdrawal - A value that we calculate each time you take a partial withdrawal or full surrender representing the impact of the withdrawal. When you take a partial withdrawal or full surrender, the Gross Withdrawal equals the reduction in your Modified Contract Value and related Modified Strategy Value. A Gross Withdrawal equals the related Cash Withdrawal plus any applicable CDSC and deducted taxes, and minus any applicable MVA (which can be positive or negative).
Index - The market index associated with a Strategy.
Index Performance - The changeamounts in the value of an Index, expressed as a percentage, betweenGTO will be automatically transferred (with no Market Value Adjustment) to the money market sub-account available in the variable contract. For the period commencing with the first day after the Maturity Date and ending on the 30th day following the Maturity Date, the GTO will be credited with the same Specified Interest Rate in effect before the Maturity Date (seeGTOs at Maturity).
Index Value- On a Business Day, the closing value of an Index published for that day. On a day other than a Business Day, the Index Valuematurity date will be subject to a Market Value Adjustment.
Individual Retirement Account - An account that qualifies for favorable tax treatment under Section 408(a)establishment of Specified Interest Rates may be influenced by other factors, including competitive considerations, administrative costs and general economic trends. Nationwide has no way of precisely predicting what Specified Interest Rates may be declared in the Code but doesfuture, however, the Specified Interest Rate will not include Roth IRAs.
Individual Retirement Annuity (IRA) - An annuity contract that qualifies for favorable tax treatment under Section 408(b) of the Code, but does not include Roth IRAs or Simple IRAs.
Interim Strategy Earnings- The amount applied to your Strategy when you take a partial withdrawal or full surrender on a day otherbe less than the Strategy Term End Date.
Investment-Only Contract - A Contract purchasedminimum rate required by a qualified pension, profit-sharing, or stock bonus plan as defined by Section 401(a) ofapplicable state law.
Joint Owner - The person, if any, designated as a second person (in addition to the Contract Owner) to possess an undivided interest in the Contract. If there is a Joint Owner, references to Contract Owner and Joint Owner will apply to both of them, or either of them, unless the context requires otherwise.
Lock-In -The feature under the Contract that allows an Index Value as of a certain date to be locked-in for purposes of calculating the Index Performance for a Strategy for the remainder of the Strategy Term.
Lock-In Date -The date as of which the Index Value for a Strategy is locked in under the Lock-In feature.
Market Value Adjustment (MVA)- The adjustment that may be applied if you take a Non-Preferred Withdrawal during the MVA Period.
Modified Contract Value- The sum of your Modified Strategy Values as of a given date, which equals the maximum Gross Withdrawal that can be taken from the Contract on any given date.
Modified Strategy Value - The maximum Gross Withdrawal that may be taken from a Strategy as of a given date during a Strategy Term. On a Strategy Term End Date, the Modified Strategy Value is equal to your Strategy Value plus any Term Strategy Earnings. On any day other than the Strategy Term End Date, the Modified Strategy Value is equal to your Strategy Value plus any Interim Strategy Earnings that would be applied if you withdrew your entire Strategy Value.
MVA Period -The period of time during which Nationwide may applya particular Specified Interest Rate is in effect for new allocations to the MVA to partial withdrawals and a full surrender. The MVA Period begins on the Date of Issue and ends after the sixth Contract Year.
Nationwide (we, us, our) - Nationwide Life Insurance Company.
Non-Preferred Strategy Earnings Percentage (NSEP)- A rate of interest (which may be positive, negative, or equal to zero) used to calculate Interim Strategy Earnings appliedavailable GTOs. All allocations made to a StrategyGTO during an Investment Period are credited with the Specified Interest Rate in effect at the time of allocation. An Investment Period ends when a Non-Preferred Withdrawalnew Specified Interest Rate relative to the applicable GTO is takendeclared. Subsequent declarations of new Specified Interest Rates have no effect on allocations made to GTOs during prior Investment Periods. Prior allocations to the GTO will be credited with the Specified Interest Rate in effect when the allocation was made.
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Non-Preferred Withdrawal - Any portionis the period of time corresponding to the selected GTO for which the Specified Interest Rate is guaranteed to be in effect. A Guaranteed Term always expires on a Maturity Date which will be the last day of a Gross Withdrawalcalendar quarter. Consequently, a Guaranteed Term may last up to three months longer than the anniversary date of the allocation to the GTO.
(1) | surrender the GTO, in part or in whole, without a Market Value Adjustment during the Maturity Period; however, any surrender charges that may be applicable under the variable contract will be assessed; |
(2) | transfer (all or part) of the GTO, without a Market Value Adjustment, to any other permitted investment option under the variable contract, including any permitted underlying mutual fund sub-accounts, or another GTO of the same or different duration during the Maturity Period. A confirmation of any such transfer will be sent immediately after the transfer is processed; or |
(3) | elect not to transfer or surrender all or a portion of the GTO, in which case the GTO will be automatically transferred to the available money market sub-account of the contract at the end of the Maturity Period. A confirmation will be sent immediately after the automatic transfer is executed. |
Non-Preferred WithdrawalMarket Value Adjustment.
Non-Qualified Contract - A Contract whichSpecified Value being withdrawn. The Specified Value is the amount allocated to the GTO, plus interest accrued at the Specified Interest Rate, minus prior withdrawals. The Market Value Adjustment may either increase or decrease the amount of the withdrawal.
Participation Rate - The proportion9 year maturity), Nationwide will calculate such rates based on the relationship of the Index Performance thatpublished rates. For example, if the published 3-year rate is reflected6% and the published 5-year rate is 6.50%, the 4-year rate will be calculated as 6.25%.
(1) | the MVA Interest Rate for the period of time coinciding with the Guaranteed Term of the GTO; |
(2) | the MVA Interest Rate for a period coinciding with the time remaining in the Guaranteed Term of a GTO when a withdrawal giving rise to a Market Value Adjustment occurs; and |
(3) | the number of days remaining in the Guaranteed Term of the GTO. |
[ | ] | t | |
1 + a | |||
1 + b + .0025 | |||
a | = | the MVA Interest Rate for a period equal to the Guaranteed Term at the time of deposit in the GTO; |
b | = | the MVA Interest Rate at the time of withdrawal for a period of time equal to the time remaining in the Guaranteed Term. In determining the number of years to maturity, any partial year will be counted as a full year, unless it would cause the number of years to exceed the Guaranteed Term; and |
t | = | the number of days until the Maturity Date, divided by 365.25. |
Preferred Withdrawal - AnyMarket Value Adjustment formula.
Preferred Withdrawal Amount - The dollar amount of Gross Withdrawals that you can take during a given Contract Year without taking a Non-Preferred Withdrawal.
Preferred Withdrawal Percentage –Market Value Adjustment in addition to any surrender charge assessed pursuant to the percentage of your Contract Value that you can withdraw each Contract Year as a Preferred Withdrawal.
Protection Level - An amount of downside protection under a Strategy for a Strategy Term.
Purchase Payment - Money paid into the Contract by the Contract Owner.
Qualified Plan- A retirement plan that receives favorable tax treatment under Section 401terms of the Code, including Investment-Only Contracts. In thisvariable contract. Please refer to the variable contract prospectus all provisions applicable to Qualified Plans also apply to Investment-Only Contracts unless specifically stated otherwise.
Remaining Preferred Withdrawal Amount - The Preferred Withdrawal Amount for more information about variable contract transactions that may incur surrender charges and/or a Contract Year minus the total dollar amount of all Preferred Withdrawals from the Contract already takenMarket Value Adjustment.
Roth IRA - Anare annuitized. If a variable annuity contract which qualifies for favorable tax treatment under Section 408A of the Code.
Simplified Employee Pension IRA (SEP IRA) - An annuity contract which qualifies for favorable tax treatment under Section 408(k) of the Code. A SEP IRA is unrelated to the Strategy Earnings Percentage (SEP) described throughout this prospectus, which is a rate of return used to calculate Strategy Earnings.
Solutions 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 Solutions Center is Nationwide’s mail and document processing facility. For service and transaction requests communicated by telephone, the Solutions Center is Nationwide’s operations processing facility. Information on how to contact the Solutions Center may be found under “Contacting the Solutions Center.”
Simple IRA- An annuity contract which qualifies for favorable tax treatment under Section 408(p) of the Code.
Strategy - Each investment option to which you may allocate your Purchase Payment or Contract Value.
Strategy Accumulation Value - The value of a Strategy if unrealized Strategy Earnings were to be applied to the Strategy Value using only the SEP as of a given date during a Strategy Term. It is the daily value expressed in dollars that is provided to show how the Strategy is performing throughout a Strategy Term.
Strategy Earnings- The amount applied to a Strategy, including Term Strategy Earnings and/or Interim Strategy Earnings, on a given date or over a period of time. Strategy Earnings may be positive, negative, or equal to zero. Strategy Earnings may be negative when the Index Performance decreases or when the Index Performance increases but does not increase enough to offset the impact of any applicable Strategy Spread.
Strategy Earnings Percentage (SEP) - A rate of interest (which may be positive, negative, or equal to zero) used to calculate Term Strategy Earnings applied to a Strategy on the Strategy Term End Date, as well as any Interim Strategy Earnings applied to a Strategy when a Preferred Withdrawal is takenannuitized prior to the Strategy Term End Date. The SEP is also used in the calculationMaturity Date of the Death Benefit.
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Strategy Spread- An annualized percentage usedGTO, a Market Value Adjustment will apply to amounts transferred from the GTO to other investment options under the variable annuity contract (unless such an adjustment is not permitted in your jurisdiction).
Strategy Term - The duration of a Strategy, expressed in years.
Strategy Term End Date - The last day of a Strategy Term.
Strategy Value- The value of a Strategy without taking into account any potential gainsapplicable fee or losses caused by future Strategy Earnings.
Surrender Value - The amount available upon full surrender of the Contract. The Surrender Value is equal to the Modified Contract Value minus any applicable CDSC and after any applicable MVA. We may deduct taxes from the Surrender Value.
Term Strategy Earnings- Strategy Earnings applied to a Strategy upon the maturity of a Strategy on the Strategy Term End Date.
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This summary provides a brief overview of the Contract. You should carefully read the entire prospectus before you decide whether to purchase the Contract. The Contract may not be currently available in all states, may vary in your state, or may not be available from all selling firms or from all financial professionals.
Who is Nationwide?charge.
What
Each Strategy includes a defined level of downside protection that limits the amount of loss you can experience during a strategy term. We refer to this defined downside protection as a “Protection Level.” Each strategy also includes a percentage that determines the proportion of the index performance you receive over the course of a strategy term, which is referred to as a “Participation Rate.” Some strategies also have an annualized percentage that is deducted from earnings called a “Strategy Spread.”
You may access your money at any time prior to annuitization by taking partial withdrawals or fully surrendering your Contract. When you take a withdrawal or full surrender, you are withdrawing a portion or all of the value of your investment(s) in one or more Strategies, which is referred to as your “Strategy Value(s).” The Contract allows you to take a certain amount of “preferred” withdrawals on an annual basis. Withdrawals in excess of the permissible amount of preferred withdrawals are referred to as “Non-Preferred Withdrawals.” When you take a preferred withdrawal, we will calculate your earnings in the same manner as we calculate your earnings at the end of a Strategy Term. This manner for calculating earnings is generally more advantageous than when we calculate earnings for non-preferred withdrawals.
Non-preferred withdrawals taken in the first six years of the Contract are subject to contingent deferred sales charges and may be subject to a negative market value adjustment, both of which will negatively impact the performance of your Contract. All or a portion of any withdrawal may be subject to federal income taxes, and Contract Owners taking withdrawals before age 591⁄2 may be subject to a 10% penalty tax.
The Contract has a Death Benefit that may be triggered prior to the Annuitization Date upon the death of the Annuitant. See “Death Benefit and Succession Rights.”
Once you reach the Annuitization Date, we pay guaranteed income in the form of annuity payments. The duration and dollar amount of the annuity payments will depend on the dollar amount that you annuitize and the annuity payment option that you select. See “Annuitization.”
All payments under the Contract are subject to our financial strength and claims-paying ability, as well as the terms and conditions described in this prospectus.
You should not buy the Contract if you are looking for a short-term investment or if you plan on taking withdrawals in excess of the permitted amount of Preferred Withdrawals in any Contract Year, as described in this prospectus. You should understand that while the Contract provides some protection against loss, you can lose money under the Contract. It is possible to lose a substantial amount of your principal investment. You should not buy the Contract if you are not willing to assume the risks associated with the Contract. See “Risk Factors.”
How can the Contract be categorized under the Code? The Contract can be categorized under the Code as a:
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If you purchase the Contract as an Individual Retirement Account or Roth IRA, the Contract will not provide you with any additional tax deferral benefits.
See “Contract Types and Federal Tax Considerations” for additional detail.
How do I purchase the Contract? You may purchase the Contract by completing an application and submitting a Purchase Payment of at least $25,000 to our Solutions Center. Only one Purchase Payment is allowed under the Contract. We may agree to accept multiple payments as part of a single Purchase Payment.
What are the investment options under the Contract?You may allocate your money under the Contract to one or more of the index-linked Strategies that are available for investment under the Contract. If you are simultaneously invested in the same Strategy for Strategy Terms that began on different dates, those investments will be considered separate Strategies. You may be invested in no more than five Strategies at any given time. There is no minimum dollar amount that can be allocated to a Strategy. Allocations to Strategies must be in whole percentages.
The Contract currently offers the following Strategies*:
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*See“What are the Crediting Factors for a Strategy?” for information on the Participation Rate and Strategy Spread for each Strategy. Each Strategy has its own Minimum Participation Rate that will never be less than 5%, and each Strategy has its own Maximum Strategy Spread that will never be greater than the initial Strategy Spread identified in your Contract at the Date of Issue plus 2%. When a Strategy has both a Participation Rate less than 100% and a Strategy Spread greater than zero, the Participation Rate and Strategy Spread combine to reduce gains when Index Performance is positive. Additionally, when a Strategy has both a Participation Rate greater than 100% and a Strategy Spread greater than zero, the Participation Rate and Strategy Spread combine to increase losses when Index Performance is negative.
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Each Index is described in more detail under “Strategies – Indexes” and “Risk Factors – Index Risk.” We reserve the right to make Strategies available for investment that use Indexes other than those listed above. There is no guarantee that a Strategy using any of the Indexes listed above will always be available for investment.
Once you reach the Annuitization Date, the Strategies are not available for investment.
You should understand that Index Performance is important, but it is not the only factor used to calculate gains or losses under the Contract. Each Strategy has multiple components that impact your Strategy Earnings, either by adjusting the Index Performance or otherwise increasing or decreasing gain or loss.
What factors will affect my investment gains and losses under the Contract? Each Strategy has the following five Crediting Factors: an Index, a Strategy Term, a Protection Level, a Participation Rate, and a Strategy Spread. The Index, Strategy Term and Protection Level will not change for as long as we continue to offer the Strategy, while the Participation Rate and Strategy Spread can change for future Strategy Terms.
Any decrease to a Strategy’s Participation Rate in a future Strategy Term will lower future gains when the Index Performance is positive and lessen future losses when Index Performance is negative, while an increase to the Participation Rate will increase future losses when the Index Performance is negative and increase future gains when Index Performance is positive. Any increase to a Strategy’s Strategy Spread in a future Strategy Term will lower future gains when the Index Performance is positive and increase future losses when the Index Performance is negative.
When selecting a Strategy for investment, you should not select a Strategy based on any single Crediting Factor in isolation. While one Crediting Factor for a Strategy may be more or less favorable or attractive to you, the other Crediting Factors also impact whether that Strategy is appropriate for you based on your financial needs and goals. You should consult a financial professional prior to selecting a Strategy for investment.
The following provides a brief description of the five Crediting Factors. See “Crediting Factors” for additional information.
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The Index is the market index to which a Strategy is linked. The different Indexes under the Contract provide exposure to different markets and asset classes, all of which may perform differently compared to each other and during different time periods. When we calculate Strategy Earnings, if the Index Performance is negative, you will lose money under your Contract unless the Strategy’s downside protection protects you from the loss. When the Index Performance is positive, you may or may not gain money under your Contract, depending on the impact of the Strategy Spread.
We calculate the Index Performance on a point-to-point basis, which is done by comparing:
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The result of this comparison will be the percentage change in the value of the Index between those two points in time. We refer to that change as the “Index Performance.” For example, if the Index Value on the first and last day of a Strategy Term equals 1,000 and 1,100, respectively, the Index Performance between those two dates equals +10% (i.e., (10% = (1,100 – 1,000) / 1000). Conversely, if the Index Value on the first and last day of a Strategy Term equals 1,000 and 900, respectively, the Index Performance between those two dates equals -10% (i.e., -10% = (900 –1,000) / 1000).
Because we calculate Index Performance by comparing the value of the Index between two specific points in time, Index Performance may be negative or flat even if the Index performed positively for certain time periods between those two specific points in time. This is true even for Strategies with Strategy Terms longer than one year.
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Please note that there are certain exceptions to the manner in which we calculate Index Performance:
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For example, if the Index Value on the Strategy Term Start Date equals 1,000, and then on a given day during the Strategy Term, you lock-in an Index Value of 1,100, your Index Performance will be +10% for the remainder of the Strategy Term. This would be true even if the Index later increases in value above 1,100 or decreases in value below 1,100.
Index Performance may not equate to Strategy Earnings depending on the other Crediting Factors applicable to the Strategy. You should fully understand the operation and impact of the Lock-In feature prior to purchasing the Contract or exercising the Lock-In feature. See “Lock-In Risk” and “Lock-In” for additional information.
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For example, assume that we substitute the Index for a Strategy on a date during the Strategy Term. Also assume that the Index Performance for the old Index between the Strategy Term Start Date and the substitution date was +10%, and that the Index Performance for the new Index between the substitution date and the Strategy Term End Date was -5%. In this scenario, the Index Performance between the Strategy Term Start Date and the Strategy Term End Date would be +4.5%, i.e. (1+10%) x (1 + -5%) -1.
Certain Indexes available under this Contract do not include income from any dividends paid by component companies. The exclusion of dividends from an Index will lower the Index Performance, particularly over the course of time. Certain Indexes are comprised of foreign issuers and include exchange rate methodologies that may lower a Strategy’s returns. See “Crediting Factors – Indexes.”
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The Strategy Term represents the duration of the Strategy, expressed in years. Currently, the Strategies offered under the contract have Strategy Terms of either 1 or 3 years. If you select a one-year Strategy Term, the performance of your investment will depend on the performance of the Index for up to a one-year period. If you select a three-year Strategy Term, the performance of your investment will depend on the performance of the Index for up to a three-year period.
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The Protection Level represents an amount of downside protection under a Strategy for a Strategy Term. The Protection Level is presented as a percentage (e.g., 100%, 95%, 90%). A higher Protection Level provides more protection against loss than a lower Protection Level.For example, if you select a Strategy with a 90% Protection Level, your rate of return that is calculated at the end of the Strategy Term cannot be lower than -10%. If you select a Strategy with a 100% Protection level, your rate of return that is calculated at the end of the Strategy Term cannot be lower than 0%.
The Protection Level only applies when we apply Strategy Earnings to your Contract at the end of a Strategy Term or when you take a Preferred Withdrawal prior to the end of a Strategy Term. Even when the Protection Level applies, unless the Protection Level is 100%, the Protection Level provides only limited protection against loss.
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The Protection Level’s defined downside protection does not apply to a Non-Preferred Withdrawal. There is some downside protection provided for Non-Preferred Withdrawals, but the Protection Level’s defined downside protection may be reduced by certain negative adjustments associated with the Non-Preferred Withdrawal. This means thatyour risk of loss increases when you take a Non-Preferred Withdrawalprior to the end of a Strategy Term.
It is possible to lose a substantial amount of your principal investment under this Contract. The CDSC and MVA may also result in a loss of principal and related earnings if you take a Non-Preferred Withdrawal from your Contract during the first six Contract Years. This risk exists even if you are invested in a Strategy with an Index that is performing positively as of the date of your withdrawal.
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The Participation Rate represents the proportion of the Index Performance that is reflected in the Strategy’s performance. The Participation Rate is presented as a percentage greater or less than, or equal to, 100% (e.g., 50% or 150%). The Participation Rate may have the effect of increasing or decreasing gains or losses as follows:
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A Participation Rate greater than 100% also increases your downside risk. For example, if your Participation Rate is 150%, we will multiply any negative Index Performance by 150% (subject to any applicable defined downside protection).
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A Participation Rate lower than 100% also decreases your downside risk when Index Performance is negative. For example, if your Participation Rate is 90%, we will only apply 90% of the negative Index Performance (subject to any applicable defined downside protection).
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We declare a new Participation Rate at the start of each Strategy Term, which may be different than the prior Participation Rate for the same Strategy. A Participation Rate may be set as low as 5%. A low Participation Rate would cause a Strategy to participate in the performance of the linked index to only a small extent. A Strategy’s Participation Rate for a particular Strategy Term may be different for newly issued Contracts than for existing Contracts.
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The Strategy Spread is an annualized percentage used as a deduction in the calculation of a Strategy’s performance. A Strategy Spread greater than 0% always has the effect of reducing a Strategy’s performance. A Strategy will never have a Strategy Spread lower than 0%.
The impact of a Strategy Spread increases over the course of the Strategy Term, reaching its full potential impact on the Strategy Term End Date. For instance, if a Strategy with a 1-year Strategy Term has a Strategy Spread of 2%, the potential impact of the Strategy Spread will not reach 2% until the Strategy Term End Date. If a Strategy with a 3-year Strategy Term has a Strategy Spread of 2%, the potential impact of the Strategy Spread will not reach 6% (2% per year) until the Strategy Term End Date.
A Strategy Spread can result in negative Strategy Earnings even if you have positive Index performance.
We declare a new Strategy Spread at the start of each new Strategy Term, which may be different than the prior Strategy Spread for the same Strategy. Each Strategy has its own Maximum Strategy Spread that will never be greater than the initial Strategy Spread plus 2%. A Strategy’s Strategy Spread for a particular Strategy Term may be different for newly issued Contracts than for existing Contracts.
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How do I know what the Crediting Factors are for a Strategy that I want to invest in? As long as we continue to offer any Strategy listed above under “What arethe investment options under the Contract,” its Index, Strategy Term, and Protection Level will not change.
The Participation Rate and Strategy Spread for each Strategy will be declared prior to the beginning of each Strategy Term and are subject to change from Strategy Term to Strategy Term. Such changes will be subject to the following conditions and considerations:
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When the Participation Rate increases from one Strategy Term to the next, your upside potential will increase, but your risk of loss also increases.
When the Participation Rate decreases from one Strategy Term to the next, your upside potential decreases, but your risk of loss also decreases.
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When the Strategy Spread increases from one Strategy Term to the next, the Strategy Spread will have a greater impact on your gains and losses, decreasing gains and potentially increasing losses.
Before purchasing this Contract, you should contact the Solutions Center or your financial representative for information on the available Strategies and the current Participation Rates and Strategy Spreads. For existing contract owners, at least 30 days prior to the end of the Strategy Term, we will send you a notice stating (i) the Strategies that will be available for investment at the end of the Strategy Term, (ii) their respective Crediting Factors, including the Participation Rate and Strategy Spread that we declared for the upcoming Strategy Term, and (iii) how to communicate your instructions to us regarding what to do with your money invested in the maturing Strategy.
When selecting a Strategy for investment, you should understand that your gains and losses for a Strategy will not equal the gains and losses in the Index you choose. Each Strategy has multiple components that impact your Strategy Earnings, either by adjusting the Index Performance or otherwise increasing or decreasing gain or loss. You should not select a Strategy based on any single Crediting Factor in isolation. While one Crediting Factor for a Strategy may be more or less favorable or attractive to you, the other Crediting Factors also impact whether that Strategy is appropriate for you based on your financial needs and goals. You should consult a financial professional prior to selecting a Strategy for investment.
When are gains and losses applied to my Contract? Strategy Earnings are applied to your Contract at the end of a Strategy Term. Strategy Earnings are also applied to your Contract if you take a withdrawal prior to the end of a Strategy Term. Depending on the amount of your withdrawal, when you take a withdrawal prior to the end of a Strategy Term, we may calculate your Strategy Earnings differently than at the end of a Strategy Term. See,How are my gains and losses calculated when I take a Preferred Withdrawal prior to the end of a Strategy Term? and How are my gains and losses calculated when I take a Non-Preferred Withdrawal prior to the end of a Strategy Term?
How does the point-to-point calculation of Index Performance impact my gains and losses?Each Strategy uses a point-to-point calculation to determine the Index Performance. Under a point-to-point calculation, the Index Performance will be the percentage change in the value of the Index between the first day of the Strategy Term and the Strategy Term End Date (unless the Lock-In feature has been exercised). If a withdrawal is taken, the Index Performance will be the percentage change in the value of the Index between the first day of the Strategy Term and the date of the withdrawal (unless the Lock-In feature has been exercised prior to the withdrawal).
Use of a point-to-point calculation results in Index Performance being calculated at a single point in time, even for a Strategy with a three-year Strategy Term. As a result, you may experience negative or flat performance even when the Index experienced gains through some, or most, of the Strategy Term or prior to a withdrawal.
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How are gains and losses calculated at the end of a Strategy Term?We calculate your Strategy Earnings at the end of a Strategy Term using the following process:
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The formula for calculating the Adjusted Index Performance is as follows: (Index Performance x Participation Rate) – (Strategy Spread x Elapsed Term). At the end of the Strategy Term, “Elapsed Term” will equal the length of the Strategy Term expressed in years, currently, 1 or 3.
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The table below provides examples of how your Strategy Earnings are calculated at the end of a Strategy Term. It assumes:
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The examples above assume a Participation Rate of 100%, which means that the Participation Rate neither increased nor decreased upside potential or downside risk. The table below compares how the Strategy Earnings in Example – Table 1 would change if the Participation Rate was increased to 110% or decreased to 90% and all other assumptions remained the same.
Example – Table 2 | ||||||
Index Performance | Strategy Earnings applied at end of a Strategy Term using different Participation Rates based on stated assumptions | |||||
100% Participation Rate (Example – Table 1) |
110% Participation Rate |
90% Participation Rate | ||||
Index Performance = 10% | +$800 | +$900 | +$700 | |||
Index Performance = -5% | -$700 | -$750 | -$650 | |||
Index Performance = -15% | -$1,000 | -$1,000 | -$1,000 |
As illustrated in the table above, compared to Example – Table 1 which assumed a 100% Participation Rate:
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When is a withdrawal a Preferred Withdrawal or Non-Preferred Withdrawal, and what is the difference?Whenever you take a withdrawal, including at the end of a Strategy Term, the withdrawal will be treated as either a “Preferred Withdrawal” or a “Non-Preferred Withdrawal.” The Contract allows you to take a certain amount of Preferred Withdrawals each Contract Year, which we refer to as the “Preferred Withdrawal Amount.” Any withdrawals in excess of the Preferred Withdrawal Amount will be Non-Preferred Withdrawals. If a given withdrawal exceeds the limit on Preferred Withdrawals, the non-excess portion will be treated as a Preferred Withdrawal and the excess portion will be treated as a Non-Preferred Withdrawal.
Each Contract year, we track your “Remaining Preferred Withdrawal Amount” for each Strategy, which is the remaining amount of Preferred Withdrawals that may be taken from that Strategy. If you are invested in multiple Strategies, your Strategies will have different Remaining Preferred Withdrawal Amounts. As a result, a partial withdrawal or full surrender will not result in the same level of Preferred Withdrawals across your Strategies.
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Preferred Withdrawal Amount. At the beginning of each Contract Year prior to annuitization, your Preferred Withdrawal Amount for that Contract Year is equal to the greater of:
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The table below includes the Preferred Withdrawal Percentages under the Contract. As reflected in the table, the Preferred Withdrawal Percentage increases from 7.00% to 10.00% after you have completed six Contract Years.
Number of Completed Contract Years | Preferred Withdrawal Percentage | |
0 | 7.00% | |
1 | 7.00% | |
2 | 7.00% | |
3 | 7.00% | |
4 | 7.00% | |
5 | 7.00% | |
6+ | 10.00% |
Below we summarize the differences between Preferred Withdrawals and Non-Preferred Withdrawals under the Contract:
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How are my gains and losses calculated when I take a Preferred Withdrawal prior to the end ofa Strategy Term?If you take a Preferred Withdrawalprior to the end of a Strategy Term, we will calculate Strategy Earnings using the same rate of return calculation that we use to calculate Strategy Earnings at the end of a Strategy Term (the Strategy Earnings Percentage), although you should understand how that process operates in the context of a withdrawal.
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The table below provides examples of how your gains and losses are calculated when you take a Preferred Withdrawal prior to the end of a Strategy Term. It assumes the following:
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All or a portion of any withdrawal may be subject to federal income taxes, and Contract Owners taking withdrawals before age 591⁄2 may be subject to a 10% penalty tax.
How are my gains and losses calculated when I take a Non-Preferred Withdrawal prior to the end of a Strategy Term?If you take a Non-Preferred Withdrawal prior to the end of a Strategy Term, we calculate the Strategy Earnings applied to your Contract using a process that differs (except as otherwise noted below) from the process we would use if you were taking a Preferred Withdrawal.
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When we calculate the Non-Preferred Strategy Earnings Percentage, the calculation proportionately reduces your gains based on the amount of time remaining in the Strategy Term (i.e., any gains are pro-rated). The calculation also may increase losses. Losses may be increased due to the application of the “Non-Preferred Withdrawal Adjustment Percentage,” which reduces your downside protection and exposes you to a greater risk of loss.
The negative impacts of taking a Non-Preferred Withdrawal prior to the end of a Strategy Term can be magnified or reduced depending on the length of the Strategy Term and the amount of time that has elapsed during a Strategy Term. See “Risk Factors – Non-Preferred Withdrawal Risk.”
See “Appendix C: Non-Preferred Strategy Earnings Percentage” for a detailed explanation of how we calculate the Non-Preferred Strategy Earnings Percentage.
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How do Gains and Losses compare for a Preferred Withdrawal and a Non-Preferred Withdrawal based on the same withdrawal assumptions? The table below compares how your Strategy Earning would change if the $1,000 Preferred Withdrawal reflected in Example – Table 3 above was instead a $1,000 Non-Preferred Withdrawal, also taken at the midpoint of the Strategy Term. For the Non-Preferred Withdrawal, the table below assumes a Non-Preferred Withdrawal Adjustment Percentage of 2%. All other assumptions are the same as in Table 3.
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Example – Table 4
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Index Performance | Gains and Losses on a Preferred Withdrawal (Example – Table 3) | Gains and Losses on a Non-Preferred Withdrawal* | ||
Index Performance = 10% | +$82.57 | +$43.06 | ||
Index Performance = -5% | -$63.83 | -$63.83 | ||
Index Performance = -15% | -$111.11
In this scenario, the Protection Level limited the amount of negative Strategy Earnings applied to the Contract. If there was no downside protection, the Strategy Earnings would have been -$190.48. | -$123.60
In this scenario, the Protection Level did not apply, but the amount of negative Strategy Earnings was limited by the reduced downside protection. If there was no downside protection, the Strategy Earnings would have been -$190.48. |
As illustrated in the table above, other than gains calculated at the end of a Strategy Term, any gain that you realize on a Non-Preferred Withdrawal will be less than the gain you would have realized on a Preferred Withdrawal. While the loss that you realize on a Non-Preferred Withdrawal may be equal to the loss you would have realized on a Preferred Withdrawal, your downside protection will be lower, exposing you to a greater risk of loss.
If taken during the first six Contract Years, the Non-Preferred Withdrawal would also be subject to a contingent deferred sales charge as well as a market value adjustment that may be negative. See “How and why are Contingent Deferred Sales Charges (CDSCs) and Market Value Adjustments (MVAs) applied to Non-Preferred Withdrawals?” below. The table above does not include the reduction in Strategy Value due to such a contingent deferred sales charge or market value adjustment.Contingent deferred sales charges and negative market value adjustments will further reduce the value of your Contract when you take a Non-Preferred Withdrawal (perhaps significantly) and they are not subject to any downside protection under the Contract.
Additionally, all or a portion of any withdrawal may be subject to federal income taxes, and Contract Owners taking withdrawals before age 591⁄2 may be subject to a 10% penalty tax.
What is the downside protection when I take a Non-Preferred Withdrawal prior to the end of a Strategy Term?When you take a Non-Preferred Withdrawal prior to the end of a Strategy Term, the defined downside protection provided by the Protection Level does not apply to the Non-Preferred Withdrawal. The Contract still provides downside protection to the withdrawal, but the downside protection is reduced.
For comparison purposes, when you take a Preferred Withdrawal prior to the end of a Strategy Term, your rate of return will be no lower than the Protection Level minus 100%. For example, if your Strategy has a 90% Protection Level, your rate of return will be no lower than -10%. When you take a Non-Preferred Withdrawal prior to the end of a Strategy Term, your rate of return will be no lower than the Protection Level minus 100%,minus an additionalamount related to the Non-Preferred Withdrawal Adjustment Percentage. The Non-Preferred Withdrawal Adjustment Percentage therefore operates to reduce your downside protection when you take a Non-Preferred Withdrawal prior to the Strategy Term End Date.
The Non-Preferred Withdrawal Adjustment Percentage for all Strategies is 2% on an annualized basis. See “Calculation of Strategy Earnings – Non-Preferred Withdrawal Adjustment Percentage” for more information on the purpose of the Non-Preferred Withdrawal Adjustment Percentage.
The negative impact of the Non-Preferred Withdrawal Adjustment Percentage on downside protection decreases as the Strategy Term elapses. This is because the impact of the Non-Preferred Withdrawal Adjustment Percentage is calculated by multiplying the Non-Preferred Withdrawal Adjustment Percentage by a factor that decreases as time elapses, nearly reaching zero on the day prior to the Strategy Term End Date. At the beginning of the Strategy Term, the impact of Non-Preferred Withdrawal Adjustment Percentage is at its greatest, resulting in the least possible downside protection. On the day prior to the Strategy Term End Date, the impact of the Non-Preferred Withdrawal Adjustment Percentage is at its least, only slightly decreasing your downside protection that would otherwise apply under the Protection Level.
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For example, assuming a one-year Strategy Term and a Protection Level of 90%:
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Because the Non-Preferred Withdrawal Percentage is annualized, its impact is magnified for Strategy Terms longer than one year.
For example, assuming a three-year Strategy Term and a Protection Level of 90%:
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You should understand that any reduced downside protection associated with Non-Preferred Withdrawals is in addition to any applicable contingent deferred sales charges or negative market value adjustments.
How and why are Contingent Deferred Sales Charges (CDSCs) and Market Value Adjustments (MVAs) applied to Non-Preferred Withdrawals?
Contingent Deferred Sales Charges.During the first six Contract Years, if you take a Non-Preferred Withdrawal (including at the end of a Strategy Term), the Non-Preferred Withdrawal will be subject to a CDSC. After the sixth Contract Year, no withdrawals are subject to CDSCs. CDSCs are not subject to any downside protection under the Contract and are in addition to any applicable MVA.
The Contract is designed to be a long-term investment. We charge the CDSC during the first six Contract Years to offset costs associated with the distribution of the Contract.
When a CDSC is imposed, the charge will equal the applicable “CDSC Percentage” multiplied by the dollar amount of the Non-Preferred Withdrawal. The CDSC Percentage will depend on the number of Contract Years you have completed when you take a Non-Preferred Withdrawal. The CDSC Percentage schedule is set forth below. The CDSC Percentage schedule starts at 6.00% and declines with each completed Contract Year until it reaches 0% after six completed Contract Years.
Number of Completed Contract Years | CDSC Percentage | |
0 | 6.00% | |
1 | 5.00% | |
2 | 4.00% | |
3 | 3.00% | |
4 | 2.00% | |
5 | 1.00% | |
6+ | 0.00% |
There are circumstances under which a CDSC may be waived.See“Waiver or Reduction of the CDSC or MVA” and “Increase in Remaining Preferred Withdrawal Amount after a Long-Term Care and Terminal Illness or Injury (CDSC and MVA Waiver).”
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Market Value Adjustments.During the first six Contract Years, if you take a Non-Preferred Withdrawal (including at the end of a Strategy Term), the Non-Preferred Withdrawal will be subject to an MVA. After the sixth Contract Year, no withdrawals are subject to MVAs. MVAs may be positive or negative. Negative MVAs are not subject to any downside protection under the Contract and are in addition to any applicable CDSC.
The Contract is designed to be a long-term investment. When you take a withdrawal, we may be required to liquidate interest rate sensitive fixed-income assets that we hold in order to satisfy our payment obligations under the Contract. The MVA is intended to approximate, without duplicating, our investment experience when we liquidate those assets. When interest rates have increased, the MVA will be negative. Conversely, when interest rates have decreased, the MVA will be positive.
When an MVA is imposed, the MVA will equal the calculated “MVA Factor” multiplied by the dollar amount of the Non-Preferred Withdrawal. See “Contingent Deferred Sales Charges and Market Value Adjustment—Market Value Adjustment” for an explanation of how we calculate the MVA Factor, as well as “Appendix E: MVA Examples” for examples of how we calculate an MVA.
There are circumstances under which an MVA may be waived.See“Waiver or Reduction of the CDSC or MVA” and “Increase in Remaining Preferred Withdrawal Amount after a Long-Term Care and Terminal Illness or Injury (CDSC and MVA Waiver).”
Example Impact of CDSC and Negative MVA.If applicable, a CDSC and negative MVA will reduce your return on the Contract (perhaps significantly). For example, assume that you take a $1,000 Non-Preferred Withdrawal. Further, assume a 6% CDSC and a 3% negative MVA. In addition to the $1,000 withdrawal, an additional $90 would be deducted from the value of your Contract as a result of the CDSC and the MVA (i.e., (6% x $1,000) + (3% x $1,000) = $90). The CDSC and MVA are applied independently of any Strategy Earnings that may be applied to your Contract, either on a Strategy Term End Date or upon taking a Non-Preferred Withdrawal prior to a Strategy Term End Date.
What may I do at the end of a Strategy Term?A Strategy Term begins on the first day of the Strategy Term and ends on its Strategy Term End Date. Prior to the close of business on the Strategy Term End Date, you may take any one or more of the permissible actions listed below.
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If you do not take any action prior to the close of business on a Strategy Term End Date, your Strategy Value will be reinvested in the same Strategy, but with the Participation Rate and Strategy Spread that we declare for the upcoming Strategy Term. If the same Strategy is no longer available for investment, the Strategy Value will be transferred to the Strategy that is specified in your Contract as the “default option” for the upcoming Strategy Term.
Does the Contract provide a death benefit?Yes. Prior to the Annuitization Date, the Death Benefit is triggered on the death of the Annuitant, provided that (i) the death occurs prior to the Annuitization Date; (ii) the Contract is in force at the time of the death; and (iii) there is no Contingent Annuitant. Except as otherwise provided in this prospectus, the Death Benefit will equal the Contract Accumulation Value (which may be more, less, or equal to your Contract Value).
What annuity payment options are available once I reach the Annuitization Date?Subject to certain restrictions described in this prospectus, you may select from the following three annuity payment options under the Contract:
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Other annuity payments options may be available. If no annuity payment option is selected prior to the latest possible Annuitization Date, we will automatically select the single life annuity with a 20-year term certain for you. Once an annuity payment option is selected—whether by you or automatically by us—it may not be changed. All annuity payments are paid on a fixed basis.
How do I contact Nationwide?If you need more information, or you wish to submit a request, you should contact us at our Solutions Center:
The purchase and continued ownership of the Contract involves certain risks. You should carefully consider the following factors, in addition to the matters set forth elsewhere in this prospectus, prior to purchasing the Contract or deciding whether to maintain the Contract.
We designed the Contract to be a long-term investment, not a short-term investment. You may take partial withdrawals or a full surrender at any time while your Contract is invested in one or more Strategies, but there may be negative consequences for doing so if the withdrawal amount exceeds the Remaining Preferred Withdrawal Amount. Withdrawals in excess of the Remaining Preferred Withdrawal Amount will be calculated in a different manner than if the withdrawal were a Preferred Withdrawal, and it may be subject to a CDSC and a negative MVA, which will negatively impact the performance of your Contract.
It’s important to note that while the CDSC and MVA are only applicable for the first six Contract Years, withdrawals will always be treated as either Preferred Withdrawals or Non-Preferred Withdrawals, even after the first six Contract Years. This means there is no “surrender period” after which all withdrawals will be treated the same. See “Non-Preferred Withdrawal Risk” below. In addition, any partial withdrawal or full surrender may also be subject to a 10% additional federal tax if taken before age 591⁄2. If you plan on taking Non-Preferred Withdrawals, or if you plan to take partial withdrawals or a full surrender prior to age 591⁄2, this Contract may not be appropriate for you.
We may defer payment for a partial withdrawal or full surrender under this Contract for up to six months if the insurance regulatory authority of the state in which we issued the Contract approves such deferral. There are other circumstances under which we may delay the payment of partial withdrawals or full surrenders, as described in this prospectus. See “Withdrawals – General.”
It is not possible to take withdrawals or surrender your Contract once you reach the Annuitization Date.
When you invest in a Strategy, you are not directly participating in the performance of any stocks or other assets. Instead, the performance of the Strategy depends (in part) on the performance of its Index. The performance of an Index is based on changes in the values of the securities or other assets that comprise or define the Index. The securities comprising or defining the Indexes are subject to a variety of investment risks, many of which are complicated and interrelated. These risks may affect capital markets generally, specific market segments, or specific issuers.The performance of the Indexes may fluctuate, sometimes rapidly and unpredictably. Negative Index performance may cause you to realize investment losses. Your investment losses may be significant.
The historical performance of an Index or a Strategy does not guarantee future results. It is impossible to predict whether an Index or a Strategy will perform positively or negatively over the course of a Strategy Term.
While it is not possible to invest directly in an Index under the Contract or otherwise, when you invest in a Strategy, you are indirectly exposed to the investment risks associated with its Index. If you invest in a Strategy that has an Index with higher investment risks, your investment in that Strategy indirectly exposes you to those higher investment risks.
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Because the Indexes under the Contract are all comprised or defined (at least in part) by a collection of equity securities, each Index is exposed to market risk and issuer risk. Market risk is the risk that market fluctuations may cause the value of a security or asset to fluctuate, sometimes rapidly and unpredictably. Issuer risk is the risk that the value of an issuer’s securities may decline for reasons directly related to the issuer, as opposed to the market generally.
We calculate Index Performance by comparing the value of the Index between two specific points in time which means Index Performance may be negative or flat even if the Index performed positively for certain time periods between those two specific points in time. This is true even for Strategies with three-year Strategy Terms.
Certain Indexes available under this Contract do not include income from any dividends paid by component companies. The exclusion of dividends from an Index will lower the Index Performance, particularly over the course of time. Additionally, certain Indexes are comprised of foreign issuers and include exchange rate methodologies that may lower a Strategy’s returns. See, “Strategies – Indexes” for a summary of other important investment risks to which each Index under the Contract is exposed.
LIMITED GROWTH POTENTIAL RISK (STRATEGY SPREAD AND PARTICIPATION RATE RISK)
When you invest in a Strategy, the growth (or upside) potential of your investment is not capped, but if your Strategy has a Strategy Spread greater than 0%, it will reduce the upside potential of your investment. In addition, if the Participation Rate is less than 100%, the Participation Rate will also dampen the upside potential of your investment.
As part of the process for calculating Strategy Earnings, we calculate the AIP, which is then used to calculate the Strategy Earnings Percentage (SEP) and Non-Preferred Strategy Earnings Percentage (NSEP). See “Calculation of Strategy Earnings.” The AIP is the Index Performance after the application of the Strategy Spread and the Participation Rate.
The Strategy Spread represents an annualized percentage rate that always has the effect of reducing the Index Performance. The effect of the Strategy Spread gradually increases over the course of the Strategy Term, reaching its full impact on the Strategy Term End Date.
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The Participation Rate represents the proportion of Index Performance that is reflected in the AIP, and may have the effect of amplifying or dampening the Index Performance.
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When selecting a Strategy for investment, you should not select a Strategy based on any single Crediting Factor, including the Participation Rate or the Strategy Spread. While one Crediting Factor for a Strategy may be more or less favorable or attractive to you, the other Crediting Factors also impact whether that Strategy is appropriate for you based on your financial needs and goals. You should consult with a financial professional prior to selecting a Strategy for investment.
Except in the limited circumstances under which we may substitute an Index, the Index, Strategy Term and Protection Level will not change for as long as we offer a Strategy. However, the Participation Rate and Strategy Spread may change from Strategy Term to Strategy Term. You do not have the right to reject any Participation Rate or Strategy Spread that we declare for a future Strategy Term. If you do not wish to invest in any of the Strategies at some point in the future, your only option will be to fully surrender your Contract. A full surrender may be subject to a CDSC and an MVA, and may also have negative tax consequences.
The extent to which you may transfer Strategy Value among the Strategies is restricted. Strategy Value in a Strategy cannot be transferred until the end of the Strategy Term, even if we substitute an Index during the Strategy Term, and you cannot transfer Strategy Value into a Strategy while its Strategy Term is ongoing. This restricts your ability to react to changes in market conditions during a Strategy Term other than through withdrawals and by exercising the Lock-In feature, which also has risks. You should consider whether the inability to reallocate Strategy Value at any time is consistent with your financial needs.
At least 30 days prior to the end of the Strategy Term, we will send you a notice stating (i) the Strategies that will be available for investment at the end of the Strategy Term, (ii) their respective Crediting Factors, including the Participation Rate and Strategy Spread that we declared for the upcoming Strategy Term, and (iii) how to communicate your instructions to us regarding what to do with your money invested in the maturing Strategy. In order to transfer Strategy Value from a Strategy on the Strategy Term End Date to another Strategy that is available for investment, we must receive your transfer request prior to the close of business on the Strategy Term End Date (or if the Strategy Term End Date is not a Business Day, then at least one Business Day prior to the Strategy Term End Date). If we do not receive such a transfer request, your Strategy Value will be treated in the following manner:
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If you are reinvested in the same Strategy or transferred into the default option because we did not receive a transfer request from you, and you do not wish to be invested in that Strategy or the default option and want to make a change before the end of the new Strategy Term, your only option will be to fully surrender the Contract. You can take a partial withdrawal to mitigate your unwanted investment exposure, but if you are invested in multiple Strategies, you cannot instruct us to take the partial withdrawal solely from the undesired Strategy. Instead, your partial withdrawal will be allocated among all of your Strategies.
In addition, taking a partial withdrawal or full surrender may result in adjustments and charges, and may result in loss of principal or related earnings even if the Index was performing positively at the time of the partial withdrawal or full surrender. See “Non-Preferred Withdrawal or Excessive Risk” below. Taking a partial withdrawal or a full surrender may also have negative tax consequences.
NON-PREFERRED OR EXCESSIVE WITHDRAWAL RISK
To the extent possible, you should carefully manage the amount of your partial withdrawals, and the timing of any full surrender, to avoid taking withdrawals greater than the Preferred Withdrawal Amount (Non-Preferred Withdrawals).
Non-Preferred Withdrawals are subject to applicable CDSCs. The amount of a CDSC, if any, will depend on the amount of a Non-Preferred Withdrawal and the number of Contract Years that you have completed when you take a Non-Preferred Withdrawal. The CDSC schedule starts at 6.00% and declines with each completed Contract Year until it reaches 0% after six completed Contract Years. When a CDSC applies to a Non-Preferred Withdrawal, the CDSC will reduce the amount of your Cash Withdrawal. Preferred Withdrawals are not subject to CDSCs.
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Non-Preferred Withdrawals are subject to MVAs during the MVA Period, which lasts until you have completed six Contract Years. An MVA—which may be positive, negative, or equal to zero—is assessed as a percentage of the Non-Preferred Withdrawal. If an MVA is negative, the MVA will reduce the amount of your Cash Withdrawal. Preferred Withdrawals are not subject to MVAs.
When you take a Non-Preferred Withdrawal prior to the Strategy Term End Date, we use the NSEP rather than the SEP to calculate earnings. The NSEP formula is typically less advantageous to you than the SEP formula, which is used to calculate any earnings when you take a Preferred Withdrawal. The NSEP formula is less advantageous to you than the SEP formula under the following conditions:
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It is important to note that the potential impact of the Non-Preferred Withdrawal Adjustment Percentage on the NSEP decreases over the course of a Strategy Term. There is a risk that you may require Non-Preferred Withdrawals when the impact on the NSEP is higher.
It is also important to understand that the Non-Preferred Withdrawal Adjustment Percentage is an annualized percentage. This means that the maximum impact that the Non-Preferred Withdrawal Adjustment Percentage can have on a one-year Strategy Term is a 2% greater loss than the amount of downside protection provided by the Strategy’s Protection Level. The maximum impact that the Non-Preferred Withdrawal Adjustment Percentage can have on a three-year Strategy Term is a 6% greater loss than the amount of downside protection provided by the Strategy’s Protection Level.
CHANGES TO PARTICIPATION RATE AND STRATEGY SPREAD RISK
Except in the limited circumstances under which we may substitute an Index, the Crediting Factors for a Strategy will not change for the duration of an ongoing Strategy Term. Also, except in the limited circumstances under which we may substitute an Index, the Index, Strategy Term and Protection Level will not change for as long as we offer a Strategy. However, the Participation Rate and Strategy Spread may change from Strategy Term to Strategy Term. Other than the guaranteed minimums and maximums associated with a Strategy’s Participation Rate and Strategy Spread, which will not change for the entire time that the Strategy is offered under the Contract, there is no guarantee that a Strategy’s current Participation Rate and Strategy Spread will remain the same while you own the Contract.
You do not have the right to reject any Participation Rate or Strategy Spread that we declare for a future Strategy Term. If you do not wish to invest inany of the Strategies at some point in the future, your only option will be to fully surrender your Contract. A full surrender may be subject to a CDSC and an MVA, and any earnings on a Non-Preferred Withdrawal would be calculated using the Non-Preferred Strategy Earnings Percentage (NSEP). A full surrender may also have negative tax consequences.
You should evaluate whether our ability to change the Participation Rate and Strategy Spread, and your inability to reject such changes, is consistent with your investment goals. When such changes occur, you should also evaluate whether those changes are appropriate for you based on your investment goals and, if not, you should evaluate your options under the Contract, which may be limited and may have negative consequences associated with them, as described throughout this prospectus.
Under the Lock-In feature, you may lock in an Index Value for a Strategy prior to the Strategy Term End Date. If you exercise the Lock-In feature, the Index Value that is next calculated after we receive your request will be locked in for purposes of calculating the Index Performance for the remainder of the Strategy Term. You should consider the following risks related to the Lock-In feature:
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The Index for a Strategy generally will not change for the duration of an ongoing Strategy Term. However, we may substitute the Index during a Strategy Term in limited circumstances. Subject to regulatory approval, we may substitute the Index if (a) the Index is discontinued or (b) there is a substantial change to the calculation of the Index. If we substitute an Index, the new Index will be similar in composition to the old Index. We will seek to notify you at least 30 days prior to substituting an Index for any Strategy in which you are invested. However, in the event that it is necessary to substitute on less than 30 days’ notice due to circumstances outside of our control, we will provide notice of the substitution as soon as practicable.
You will have no right to reject the substitution of an Index. If we substitute the Index for a Strategy in which you are invested, you will not be permitted to transfer your Strategy Value until the end of the Strategy Term. See “Reinvestment Risk” above.
If we substitute the Index for a Strategy in which you are invested, the performance of the new Index may differ significantly from the performance of the old Index. This may negatively affect the Strategy Earnings applied to your Strategy and the Index Values that you can lock-in under the Lock-In feature.
Under state insurance laws, you have the right, during a limited period of time, to examine the Contract and decide if you want to keep it or cancel it. This right is referred to as a “free look” right. The length of this time period depends on state law and may vary depending on whether the purchase is a replacement of another annuity contract. For ease of administration, Nationwide will honor any free look cancellation request that is in good order and received at the Solutions Center or postmarked within 30 days after the Date of Issue.
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Where state law requires the return of purchase payments for free look cancellations, Nationwide will return the Purchase Payment applied to the Contract, less any withdrawals from the Contract and any applicable federal and state income tax withholding. Where state law requires the return of contract value for free look cancellations, Nationwide will return the Contract Accumulation Value as of the date of the cancellation, less any withdrawals from the Contract and any applicable federal and state income tax withholding. It is possible that your Contract Accumulation Value may be less than your Purchase Payment.
NATIONWIDE’S FINANCIAL STRENGTH AND CLAIMS-PAYING ABILITY RISK
Our general account assets support our guarantees under the Contract and are subject to claims by our creditors. As such, our guarantees under the Contract are subject to our financial strength and claims-paying ability. There is a risk that we may default on those guarantees. You need to consider our financial strength and claims-paying ability in meeting our guarantees under the Contract. You may obtain information on our financial condition by reviewing our financial statements included in this prospectus. Additionally, information concerning our business and operations is set forth under “Nationwide LifeMutual Insurance Company and Subsidiaries.”Nationwide Mutual Fire Insurance Company (the "Companies") are the ultimate controlling persons of the Nationwide group of companies. The Companies were organized under Ohio law in December of 1925 and 1933 respectively. The Companies engage in a general insurance and reinsurance business, except life insurance.
Our general account assets do not include
To request additional information about Nationwide, contact the Solutions Center.
1934 Act.
Cyber-attacks may negatively affect your investment in the Contract.
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GENERAL INFORMATION ABOUT THE CONTRACT
This prospectus describes the Contract. The Contract is an agreement between
• | In writing: P.O. Box 182021, Columbus, Ohio 43218-2021 |
• | By telephone: 1-800-848-6331, TDD 1-800-238-3035 |
• | By the internet: http://www.nationwide.com/nw/investor-relations/index.htm |
On the Annuitization Date, if it occurs, we promise to begin paying annuity payments based on the amount annuitized and the annuity payment option selected. You may not invest in the Strategies once you reach the Annuitization Date. See “Annuitization” for information on annuitizing the Contract.
The Contract has a Death Benefit that may be triggered prior to the Annuitization Date upon the death of the Annuitant. A surviving spouse may be eligible to continue the Contract. See “Death Benefit and Succession Rights.”
All payments under the Contract are subject to the terms and conditions described in this prospectus, as well as our financial strength and claims-paying ability.
The Contract is available as a Non-Qualified Contract, which will provide you with certain tax deferral features under the Code. On the other hand, if you purchase the Contract as an Individual Retirement Account or Roth IRA, the Contract will not provide you with any additional tax deferral benefits.
This prospectus describes the material rights and obligations under the Contract. Certain provisions of the Contract may be different from the general description in this prospectus due to variations required by state law. For example, state law may require different right to examine and cancel periods. The state in which your Contract is issued also governs whether certain features will vary under your Contract. Please see your Contract for the material rights and obligations specific to you. All material rights and obligations under your Contract will be included in your Contract or in riders or endorsements attached to your Contract. To review a copy of your Contract and any riders or endorsements, contact the Solutions Center.
We will charge against your Contract any premium taxes levied by a state or other government entity in connection with your Contract. Premium tax rates currently range from 0% to 5.0%. This range is subject to change. The method that we use to assess premium taxes will be determined by us at our sole discretion in compliance with state law. Nationwide will assess premium taxes to the Contract at the time Nationwide is assessed the premium taxes by the state. Premium taxes may be deducted from death benefit proceeds.
The Contract is non-participating, meaning that the Contract will not share in our profits or surplus.
To the extent allowed by state law, we reserve the right to refuse our consent to any assignment at any time on a non-discriminatory basis if the assignment would violate or result in noncompliance with any applicable state or federal law or regulation. The Contract Owner may request to assign or transfer rights under the Contract by sending us a signed and dated request. We will not be bound by an assignment until we acknowledge it.
If we consent to an assignment, the assignment takes effect on the date it is signed, unless otherwise specified by the request. We are not responsible for the validity of an assignment, any tax consequences of any assignment, or for any payment or other settlement made prior to our receipt and consent of and assignment.
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Upon assignment or a change in ownership of the Contract, the Death Benefit under the Contract will be the Surrender Value (rather than the Contract Accumulation Value) unless the requirements specified under “Death Benefit and Succession Rights – Calculation of the Death Benefit” are satisfied.
The Contract is issued in consideration of the single Purchase Payment paid by the Contract Owner. Only one Purchase Payment is allowed under the Contract. The minimum Purchase Payment is $25,000.
Your Purchase Payment should be made payable to Nationwide Life Insurance Company and submitted to our Solutions Center. Your Purchase Payment must be made in U.S. dollars and must be in a form acceptable to us. You may choose to make your Purchase Payment by personal check, Electronic Funds Transfer (EFT), or wire transfer. We will not accept a Purchase Payment in cash, by credit card, or by money order or travelers check. We reserve the right not to accept third-party checks.
We reserve the right to reject a Purchase Payment that is comprised of multiple payments paid to us over a period of time. If we permit you to make multiple payments as part of your Purchase Payment, the Contract will not be issued until all such payments are received. We reserve the right to hold such multiple payments in a non-interest bearing account until the Date of Issue.
Unless we agree in writing, we will not accept your Purchase Payment if your Purchase Payment plus any other purchase payments for any other annuity contracts issued by Nationwide to the Contract Owner, Annuitant, or Contingent Annuitant exceeds $1,000,000.
We reserve the right to refuse any application for the Contract. If we refuse your application, we will return your Purchase Payment.
We may be required to provide information about your Contract to government regulators. If mandated under applicable law, we may be required to reject a Purchase Payment and to refuse to process transaction requests under the Contract until instructed otherwise by the appropriate regulator.
The Date of Issue is the date we issue your Contract. Your Purchase Payment is applied to the Contract on the Date of Issue. The Date of Issue will be the date as of which we have both received your Purchase Payment and approved your Contract application.
ALLOCATING YOUR PURCHASE PAYMENT
You tell us how to apply your Purchase Payment by specifying in the Contract application your desired allocation among the Strategies that are available for investment on the Date of Issue. You may invest your Purchase Payment in a single Strategy or in multiple Strategies. You may be invested in no more than five Strategies at any given time. If you are simultaneously invested in the same Strategy for Strategy Terms that began on different dates, those investments are considered separate Strategies for purposes of the maximum number of Strategies that you can have and for calculating the values and Strategy Earnings under this Contract. There is no minimum dollar amount that can beamounts allocated to a Strategy. Allocations to Strategies must beGTOs in whole percentages.
You have the right to examinehigh quality, fixed interest investments (investment grade bonds, mortgages, and cancel the Contract. If you elect to cancel the Contract, you may return it to the Solutions Center within a certain period of time known as the “free look” period. Depending on the state in which the Contract was purchased (and, in some states, if the Contract is purchased as a replacement for another annuity contract), the free look period may be 10 days or longer. For ease of administration, Nationwide will honor any free look cancellation request that is in good order and received at the Solutions Center or postmarked within 30 days after the Date of Issue.
Where state law requires the return of purchase payments for free look cancellations, Nationwide will return the Purchase Payment applied to the Contract, less any withdrawals from the Contract and any applicable federal and state income tax withholding. Where state law requires the return of contract value for free look cancellations, Nationwide will return the Contract Accumulation Value as of the date of the cancellation, less any withdrawals from the Contract and any applicable federal and state income tax withholding.
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PARTIAL NON-PREFERRED WITHDRAWAL TREATED AS A FULL SURRENDER
Nationwide may treat a request for a partial withdrawal as a request for a full surrender of the Contract if the following three criteria exist: (i) any portion of the partial withdrawal is a Non-Preferred Withdrawal; (ii) the partial withdrawal would reduce the Contract Value to an amount less than $5,000; and (iii) the Purchase Payment minus the sum of any Gross Withdrawals since the Date of Issue is less than $5,000.
PARTIES TO THE CONTRACT AND RELATED PERSONS
Nationwide and the Contract Owner (including any Joint Owner) are the parties to the Contract. Other related persons—including any Annuitant, Contingent Annuitant, Beneficiary, and Contingent Beneficiary—have certain rights under the Contract. If the person purchasing the Contract names someone else as the Contract Owner, the purchaser will have no rights under the Contract unless he or she is named under the Contract as one of the other related persons listed above.
Nationwide issues the Contract to the Contract Owner (and any Joint Owner). Nationwide assumes certain risks and promises to make certain payments under the Contract, as described in this prospectus.
The Contract Owner has all rights under the Contract before the Annuitization Date, unless a Joint Owner is named, in which case the Contract Owner and the Joint Owner have equal rights under the Contract before the Annuitization Date. If you are purchasing the Contract for someone else and you will not be a Contract Owner, then you will have no rights under the Contract.
As of the Annuitization Date, the Annuitant(s) exercise all remaining rights under the Contract. See “Annuitization.”
If a Contract has a Joint Owner, the Contract Owner and the Joint Owner have an undivided interest in the Contract.
Non-Qualified Contract Owners can name a Joint Owner at any time before the Annuitization Date. However, Joint Owners must be spouses at the time joint ownership is requested, unless state law requires Nationwide to allow non-spousal Joint Owners. Joint ownership is not permitted for Contracts owned by a non-natural Contract Owner.
Generally, the exercise of any ownership rights under the Contract must be in writing and signed by both Joint Owners. However, if a written election, signed by both Contract Owners, authorizing Nationwide to allow the exercise of ownership rights independently by either Joint Owner is submitted, Nationwide will permit Joint Owners to act independently. If such an authorization is submitted, Nationwide will not be liable for any loss, liability, cost, or expense for acting in accordance with the instructions of either Joint Owner.
If either Joint Owner dies before the Annuitization Date, the Contract continues with the surviving Joint Owner as the remaining Contract Owner.
ANNUITANT AND CONTINGENT ANNUITANT
Annuitant
The Annuitant is the person who will receive annuity payments once you reach the Annuitization Date. The Annuitant is also the person whose death prior to the Annuitization Date triggers payment of the Death Benefit.
On the Date of Issue, the Annuitant must be age 85 or younger unless we approve a request to name an older Annuitant.
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Only a Non-Qualified Contract Owner may name someone other than himself/herself as the Annuitant. The Contract Owner may not name a new Annuitant without Nationwide’s consent.
Contingent Annuitant
If a Contingent Annuitant is named and the Annuitant dies before the Annuitization Date, the Contingent Annuitant becomes the Annuitant. If the Contingent Annuitant becomes the Annuitant, all provisions of the Contract which are based on the death of the Annuitant will become based on the death of the Contingent Annuitant. In addition, once the Contingent Annuitant becomes the Annuitant, a new Contingent Annuitant cannot be named.
Only Non-Qualified Contract Owners may name a Contingent Annuitant.
On the Date of Issue, the Contingent Annuitant must be age 85 or younger unless we approve a request to name an older Contingent Annuitant.
BENEFICIARIES AND CONTINGENT BENEFICIARIES
The Beneficiary is the person who is entitled to the Death Benefit if the Annuitant (and Contingent Annuitant, if applicable) dies before the Annuitization Date and there is no Joint Owner. The Contract Owner can name more than one Beneficiary. Multiple Beneficiaries will share the Death Benefit equally, unless otherwise specified.
A Contingent Beneficiary will succeed to the rights of the Beneficiary if no Beneficiary is alive when a Death Benefit is paid. The Contract Owner can name more than one Contingent Beneficiary. Multiple Contingent Beneficiaries will share the Death Benefit equally, unless otherwise specified.
Unless otherwise directed by the Contract Owner, the following applies with respect to Beneficiaries and Contingent Beneficiaries under the Contract:
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If there is more than one Beneficiary under the Contract, they share equally in any payment or rights under the Contract to which they are entitled.
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CHANGES TO PERSONS NAMED UNDER THE CONTRACT
To the extent allowed by state law, we reserve the right to refuse our consent to any request to change the Contract Owner at any time on a non-discriminatory basis if the change would violate or result in noncompliance with any applicable state or federal law or regulation. Prior to the Annuitization Date (and subject to any existing assignments), the Contract Owner may request to change the following:
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The Contract Owner must submit the request to Nationwide in writing and Nationwide must receive the request at the Solutions Center before the Annuitization Date. Once Nationwide receives and records the change request, the change will be effective as of the date the written request was signed (unless otherwise specified by the Contract Owner), whether or not the Contract Owner or Annuitant is living at the time it was recorded. The change will not affect any action taken by Nationwide before the change was recorded.
Any request to change the Contract Owner must be signed by the existing Contract Owner and the person designated as the new Contract Owner. Nationwide may require a signature guarantee.
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If the Contract Owner is not a natural person and there is a change of the Annuitant, distributions will be made as if the Contract Owner died at the time of the change, regardless of whether the Contract Owner named a Contingent Annuitant.
Nationwide reserves the right to reject any change request that would alter the nature of the risk that Nationwide assumed when it originally issued the Contract.
Certain features under the Contract may have specific requirements as to who can be named as the Contract Owner, Annuitant, and/or Beneficiary in order to receive the benefit of the feature. Changes to the parties to the Contract may result in the termination or loss of benefit of these features.
If we permit an assignment or a change in ownership of the Contract, the Death Benefit under the Contract will be the Surrender Value (rather than the Contract Accumulation Value) unless the requirements specified under “Death Benefit and Succession Rights – Calculation of the Death Benefit” are satisfied.
You may invest in one or more of the Strategies offered under the Contract. When you invest in a Strategy, you remain invested in that Strategy for the length of the Strategy Term. The total amount of Strategy Earnings applied over the life of your Contract, if any, will depend on the Strategies that you select for investment and the actions that you take under the Contract.
You may have no more than five Strategies at any given time. Strategy Earnings are calculated separately for each Strategy. If you are simultaneously invested in the same Strategy for Strategy Terms that began on different dates, those investments are considered separate Strategies for purposes of the maximum number of Strategies that you can have and for calculating the values and Strategy Earnings under the Contract.
The amount of Strategy Earnings applied to a Strategy during and at the end of a Strategy Term depends on several factors, including:
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We reserve the right to add or remove Strategies, subject to any necessary regulatory approval. We will not remove a Strategy during an ongoing Strategy Term.
The Contract currently offers the following Strategies*:
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*See“What are the Crediting Factors for a Strategy?” for information on the Participation Rate and Strategy Spread for each Strategy. Each Strategy has its own Minimum Participation Rate which will never be less than 5%, and each Strategy has its own Maximum Strategy Spread that will never be greater than the initial Strategy Spread identified in your Contract at the Date of Issue plus 2%. When a Strategy has both a Participation Rate less than 100% and a Strategy Spread greater than zero, the Participation Rate and Strategy Spread combine to reduce gains when Index Performance is positive. Additionally, when a Strategy has both a Participation Rate greater than 100% and a Strategy Spread greater than zero, the Participation Rate and Strategy Spread combine to increase losses when Index Performance is negative.
We credit Strategy Earnings to a Strategy on the Strategy Term End Date. We refer to this form of Strategy Earnings as “Term Strategy Earnings.” Term Strategy Earnings represent Strategy Earnings paid on the Strategy Value of a Strategy as of the Strategy Term End Date. Term Strategy Earnings take into account the performance of the Strategy’s Index over the course of the entire Strategy Term (except when the Lock-In feature has been exercised or in the event that the Index has been substituted).
We also credit Strategy Earnings to a Strategy when you take a partial withdrawal or full surrender prior to the Strategy Term End Date. We refer to this form of Strategy Earnings as “Interim Strategy Earnings.” Interim Strategy Earnings represent both (i) any Strategy Earnings paid on any portion of the partial withdrawal or full surrender that is a Preferred Withdrawal and (ii) any Strategy Earnings paid on any portion of the partial withdrawal or full surrender that is a Non-Preferred Withdrawal. Interim Strategy Earnings take into account the performance of the Strategy’s Index between the beginning of the Strategy Term and the date on which the partial withdrawal or full surrender was taken (except when the Lock-In feature has been exercised or in the event that the Index has been substituted). Interim Strategy Earnings are not applied on a Strategy Term End Date, because only Term Strategy Earnings are applied on a Strategy Term End Date.
If you exercise the Lock-In feature for a Strategy, Term Strategy Earnings and Interim Strategy Earnings will take into account the performance of the Strategy’s Index from the beginning of the Strategy Term until the Lock-In Date. See “Calculation of Strategy Earnings – Lock-In.”
See “Calculation of Strategy Earnings” for information about how Term Strategy Earnings and Interim Strategy Earnings are calculated.
ACTIONS ON STRATEGY TERM END DATES
At the end of a Strategy Term, you may take any one or more of the permissible actions listed below.
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Transfer – You may transfer some or all of your Strategy Value to another Strategy that is available for investment for a Strategy Term (with the Participation Rate and Strategy Spread that we declare for the upcoming Strategy Term).
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For each of your Strategies, at least 30 days prior to the end of the Strategy Term, we will send you a notice stating (i) the Strategies that will be available for investment at the end of the Strategy Term, (ii) their respective Crediting Factors, including the Participation Rate and Strategy Spread that we declared for the upcoming Strategy Term, and (iii) how to communicate your instructions to us regarding what to do with the Strategy Value invested in the maturing Strategy.
If we do not receive instructions from you prior to the close of business on the Strategy Term End Date (or if the Strategy Term End Date is not a Business Day, then at least one Business Day prior to the Strategy Term End Date), your Strategy Value in the maturing Strategy will be treated as follows:
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If your Strategy Value is invested in the same Strategy or the default option as described above, and you do not wish to be invested in that Strategy or the default option, your only option will be to fully surrender the Contract. You can take a partial withdrawal to mitigate your unwanted investment exposure, but if you are invested in multiple Strategies, you cannot instruct us to take the partial withdrawal solely from the undesired Strategy. Instead, your partial withdrawal will be allocated among all of your Strategies.
As described above, if you have Strategy Value invested in a Strategy that will not be available for reinvestment for the next Strategy Term, and if we do not receive instructions from you prior to the close of business on the Strategy Term End Date (or if the Strategy Term End Date is not a Business Day, then at least one Business Day prior to the Strategy Term End Date), your entire Strategy Value in the maturing Strategy will be transferred to the default option specified in your Contract.
If you have Strategy Value invested in a Strategy that will not be available for reinvestment for the next Strategy Term, we will send you the default option’s Participation Rate and Strategy Spread for the next Strategy Term at least 30 days prior to the end of the Strategy Term End Date.
We will not change the Index for the default option unless the Index of the default option is discontinued or there is a substantial change to the calculation of the Index as described in “Crediting Factors – Indexes.”
On a Strategy Term End Date, you may transfer free of charge some or all of your Strategy Value in the maturing Strategy to another Strategy that is available for investment.
You are not permitted to transfer Strategy Value from a Strategy other than on its Strategy Term End Date. Nor are you permitted to transfer Strategy Value into a Strategy if its Strategy Term is ongoing.
If your Strategy Term End Date is a Business Day, a transfer request must be received by our Solutions Center prior to the close of business on that Business Day. If we do not receive a transfer request from you prior to the close of business on that Business Day, the transfer will not occur. If your Strategy Term End Date is not a Business Day, a transfer request must be received by our Solutions Center at least one Business Day prior to the Strategy Term End Date. If we do not receive a transfer request from you at least one Business Day prior to the Strategy Term End Date, the transfer will not occur. Transfer requests may be submitted in writing to our Solutions Center and must be signed by the Contract Owner. At our discretion, we may accept transfer requests by telephone or, if available, by Internet.
Your transfer request will not be deemed to be received by our Solutions Center until it is in good order. To be in good order, the transfer request must identify:
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Each Strategy has Crediting Factors that serve different purposes and impact your investment differently. We use the Crediting Factors to calculate the Strategy Earnings for each Strategy.
Each Strategy has the following five Crediting Factors:
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When selecting a Strategy for investment, you should not select a Strategy based on any single Crediting Factor in isolation. While one Crediting Factor for a Strategy may be more or less favorable or attractive to you, the other Crediting Factors also impact whether that Strategy is appropriate for you based on your financial needs and goals. You should consult with a financial professional prior to selecting a Strategy for investment.
Except in the limited circumstances under which we may substitute an Index (see “Index” below), the Crediting Factors for a Strategy will not change for the duration of a given Strategy Term. The Index, Strategy Term and Protection Level will not change for as long as we continue offering a Strategy. However, the Participation Rate and Strategy Spread may change from Strategy Term to Strategy Term, subject to guaranteed minimums and maximums. More specifically:
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A Strategy’s Participation Rate and Strategy Spread for a particular Strategy Term may be different for newly issued Contracts than for existing Contracts.
The remainder of this section provides information about the Crediting Factors and the purposes that they serve under the Contract.
The Strategies are index-linked investment options. This means that the performance of a Strategy will depend, in part, on the performance of a particular market index over the course of a Strategy Term. The Indexes among the Strategies may vary.
The different Indexes under the Contract provide exposure to different markets and asset classes, all of which may perform differently compared to each other and during different time periods. When we calculate Strategy Earnings, if the Index Performance is negative, you will lose money under your Contract unless the Strategy’s downside protection protects you from the loss. When the Index Performance is positive, you may or may not gain money under your Contract, depending on the impact of the Strategy Spread.
We calculate the Index Performance on a point-to-point basis, which is done by comparing:
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The Indexes for the Strategies that we are offering for investment currently include:
S&P 500® Index – The S&P 500® is widely regarded as the best single gauge of large-cap U.S. equities. The index includes 500 leading companies and captures approximately 80% coverage of available market capitalization. The S&P 500® Index does not include dividends declared by any of the companies in this Index.
In general, large-capitalization companies may be unable to respond quickly to new competitive challenges, and may not be able to attain the high growth rate of successful smaller companies.
J.P. Morgan Mozaic IISM Index – The J.P. Morgan Mozaic IISM Index (“J.P. Morgan Index”) tracks futures contracts referencing a diversified group of equity and fixed income assets, and indexes referencing commodities futures. The index is an “excess return” (rather than “total return”) index as it tracks the value and rolls returns on its component futures contracts and indexes, but not does include any notional interest earned on cash deposited as collateral for the purchase of the corresponding futures contracts.
A futures contract is a financial instrument in which a party agrees to pay a fixed price for the delivery of an asset at a specified future date. The market value of a futures contract is affected by the price or value of the underlying asset referenced by the contract. In general, while the value of a futures contract may or may not track the price or value of the referenced asset, as the price or value of the referenced asset rises (or falls), the market value of the futures contract will generally rise (or fall)). The market value of a futures contract is affected by other factors in addition to the referenced asset’s price or value, including but not limited to changing supply and demand relationships, interest rates, governmental and regulatory policies, and the policies of exchanges on which futures contracts trade. In addition, futures markets are subject to disruptions due to various factors, including lack of liquidity, participation of speculators, and government regulation and intervention. These factors and others can cause the price of futures contracts to be volatile and could adversely affect the value of the index. The index is currently comprised solely of futures contracts (or indexes referencing futures contracts) traded on regulated futures exchanges, but the index may in the future include over-the-counter contracts traded through facilities that are subject to lesser degrees of regulation or no substantive regulation.
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The index’s exposure to its fixed income components may be greater, perhaps significantly greater, than its exposure to its equity or commodities components. If the index has greater exposure to its fixed income components, a change in the value of the index’s fixed income futures contracts may have a greater impact on the index’s return than a change in the value of the index’s equity or commodities components.
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The J.P. Morgan Index utilizes a rules-based methodology based on momentum and smoothing volatility. The index’s methodology identifies market directions in trending markets. As such, the index may not perform well in markets characterized by short-term volatility.
On a monthly basis, the index is rebalanced to strategically adjust its composition to include the equity, fixed income, and commodities components with the greatest returns over the previous six months, and those components are weighted based on the index’s target annualized volatility. There can be no assurance that the index’s methodology will generate positive performance or achieve its target volatility. As part of its methodology for seeking the target volatility, the index may not be fully exposed to its equity, fixed income, or commodity components at all times. Any portion of the index without market exposure will not participate in positive market movements.
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The J.P. Morgan Index also includes a “stop-loss” feature. If on any day the overall index’s weekly return is less than -3%, the index removes its market exposure entirely. After one week, the index re-establishes its market exposure. The stop-loss feature may reduce the risk of potential short-term loss in the index during a period of significant market distress but may also cause the index to miss a potential recovery in the underlying asset classes.
Use of the J.P. Morgan Index in connection with annuity contracts has been exclusively licensed to Nationwide.
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In general, large-capitalization companies may be unable to respond quickly to new competitive challenges, and may not be able to attain the high growth rate of successful smaller companies. Generally, the securities of mid-capitalization companies may be more volatile and may involve more risk than the securities of larger companies. Mid-capitalization companies are also more likely to fail than larger companies. Securities issued by non-U.S. companies are subject to the risks related to investments in foreign markets (e.g., increased price volatility; changes in currency exchange rates; and greater political, regulatory, and economic uncertainty).
NYSE® Zebra Edge® Index – The NYSE® Zebra Edge® Index is an equally-weighted index that uses a rules-based contrarian methodology favoring “cool” stocks over “hot” stocks within the universe of the 500 stocks included in the NYSE® U.S. Large Cap Equal Weight IndexTM. Cool stocks are stocks that have experienced lower trading frequency over the last two years and lower volatility over the last three months and one year. Hot stocks are stocks that have experienced the highest trading frequency over the last two years and the highest volatility over the last three months and one year. The index rebalances quarterly based on its methodology. There can be no assurance that the index’s methodology will generate positive performance.
The index also rebalances daily as part of its risk control process designed to mitigate volatility. When certain volatility thresholds are triggered, the index moves a portion of its equity allocation to U.S. Treasury futures or cash. The index’s exposure to U.S. Treasury futures and cash is adjusted on a daily basis. To the extent that the index reduces its exposure to the equity markets, the index will not be fully participating in any equity market growth. The risk control overlay strategies may not successfully manage volatility.
The NYSE® Zebra Edge® Index is primarily comprised of stocks of large-capitalization U.S. companies. In general, large-capitalization companies may be unable to respond quickly to new competitive challenges, and may not be able to attain the high growth rate of successful smaller companies. The index may also include U.S. Treasury bond futures. Fixed income investments like U.S. Treasury bonds are subject to investment risks such as interest rate risk (i.e., negative fluctuations in market value due to changes in interest rates) and credit risk (i.e., the risk of default). To the extent that the index includes U.S. Treasury bond futures, it is exposed to the risks associated with fixed income investments. U.S. Treasury bonds and futures may not experience (and historically have not experienced) the growth rate of equity investments.
We reserve the right to add or remove any Index in the future. There is no guarantee that a Strategy using any of the Indexes listed above will always be available for investment.
The Index for a Strategy generally will not change for the duration of an ongoing Strategy Term. However, we also reserve the right to substitute the Index during a Strategy Term at any time, in limited circumstances. Subject to regulatory approval, we may substitute the Index if (a) the Index is discontinued or (b) there is a substantial change to the calculation of the Index. If we substitute an Index, the new Index will be similar in composition to the old Index. We will seek to notify you at least 30 days prior to substituting an Index for any Strategy in which you are invested. However, in the event that it is necessary to substitute on less than 30 days’ notice due to circumstances outside of our control, we will provide notice of the substitution as soon as practicable.
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The Strategy Term represents the duration of the Strategy, expressed in years. Each Strategy has its own Strategy Term. The lengths of Strategy Terms may vary among Strategies. The length of a Strategy Term will not change for as long as we continue to offer that Strategy. Currently, the Strategies offered under the contract have Strategy Terms of either 1 or 3 years.
A Strategy Term may begin on the Date of Issue or a Contract Anniversary. A Strategy Term ends on its Strategy Term End Date, which will always be a Contract Anniversary.
Because you are not permitted to transfer Contract Value during a Strategy Term, you should understand that a Strategy with a longer Strategy Term provides less flexibility to allocate your Contract Value than a Strategy with a shorter Strategy Term. This means if you invest in Strategies with longer Strategy Terms, you will have fewer opportunities to transfer Contract Value among the Strategies.
The Protection Level represents an amount of downside protection under a Strategy for a Strategy Term. The Protection Level is presented as a percentage (e.g., 100%, 95%, 90%). A higher Protection Level provides more protection against loss than a lower Protection Level. For example, if you select a Strategy with a 90% Protection Level, your rate of return that is calculated at the end of the Strategy Term cannot be lower than -10%. If you select a Strategy with a 100% Protection level, your rate of return that is calculated at the end of the Strategy Term cannot be lower than 0%. The Protection Level for a Strategy will not change for as long as we offer that Strategy.
The maximum amount of loss that you may realize on a Strategy Term End Date, or when you take a Preferred Withdrawal, is your Protection Level minus 100% (e.g. a 100% Protection Level minus 100% protects you from all market loss; a 90% Protection Level minus 100% protects you from loss in excess of -10%; etc.). In those circumstances, we use the Strategy Earnings Percentage (SEP) to calculate your Strategy Earnings.
The Protection Level’s defined downside protection does not apply to a Non-Preferred Withdrawal. There is some downside protection provided for Non-Preferred Withdrawals, but the maximum amount of loss that you may realize is greater when you take a Non-Preferred Withdrawal. In that circumstance, we use the Non-Preferred Strategy Earnings Percentage (NSEP) to calculate your Strategy Earnings. For the NSEP, the maximum amount of loss that you may realize is greater than the maximum amount of loss under the SEP due to the Non-Preferred Withdrawal Adjustment Percentage.
You should understand that the Protection Level provides only limited protection against downside potential. The Protection Level does not provide absolute protection against negative Strategy Earnings. You may lose money, and it is possible to lose a substantial amount of your principal investment under this Contract. When comparing Strategies with different Protection Levels, a higher Protection Level provides more protection against loss than a lower Protection Level.
You should also understand that the downside protection provided by a Strategy’s Protection Level only applies to a single Strategy Term. If you remain invested in the Strategy over multiple Strategy Terms, you can experience losses up to the downside protection (and more, if you take a Non-Preferred Withdrawal) each Strategy Term. In effect, the cumulative losses over multiple Strategy Terms could significantly exceed the level of downside protection provided by the Protection Level for one Strategy Term.
Example
The table below illustrates the impact of the Protection Level on the SEP and the NSEP. See “Calculation of Strategy Earnings – Strategy Earnings Percentage (SEP) and Non-Preferred Strategy Earnings Percentage (NSEP).”
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Protection Level | Your Maximum Amount of Loss using the SEP for 1 and 3 Year Strategy Terms | Your Maximum Amount of 1-Year Strategy Term | Your Maximum Amount of Loss using the NSEP* for 3-Year Strategy Term | |||
100% | 0% | -2% | -6% | |||
95% | -5% | -7% | -11% | |||
90% | -10% | -12% | -16% | |||
* Assumes a withdrawal on the first day of the Strategy Term and therefore the highest possible impact of the Non-Preferred Withdrawal Adjustment Percentage of 2%. The potential impact of the Non-Preferred Withdrawal Adjustment Percentage on the NSEP gradually decreases over the course of a Strategy Term, reaching its least potential impact on the day prior to the Strategy Term End Date. As a result, your maximum amount of loss using the NSEP will gradually decrease as the Strategy Term elapses. |
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The Participation Rate represents the portion of the Index Performance that is used to calculate the AIP. The Participation Rate is presented as a percentage greater or less than, or equal to, 100% (e.g., 50% or 150%). The Participation Rate may have the effect of increasing gains or losses (or neither) as follows:
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A Participation Rate greater than 100% also increases your downside risk. For example, if your Participation Rate is 150%, we will multiply any negative Index Performance by 150% (subject to any applicable defined downside protection).
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A Participation Rate lower than 100% also decreases your downside risk when Index Performance is negative. For example, if your Participation Rate is 90%, we will only apply 90% of the negative Index Performance (subject to any applicable defined downside protection).
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The Participation Rate for a Strategy will not change for the duration of a Strategy Term. However, we may change a Strategy’s Participation Rate for future Strategy Terms. The Participation Rate for a Strategy is guaranteed to never be lower than the applicable “Minimum Participation Rate.” Each Strategy has its own Minimum Participation Rate, which will never be less than 5%.
Example
The table below illustrates the impact of the Participation Rate on the AIP. The Participation Rate is used to calculate the AIP, which is an adjusted Index Performance. The formula for the AIP may be found under “Calculation of Strategy Earnings – Adjusted Index Performance.”
Index Performance | Participation Rate | Adjusted Index Performance (Assuming 0% Strategy Spread) | ||
+10% | 125% | +12.5% | ||
+10% | 100% | +10% | ||
+10% | 50% | +5% | ||
+10% | 15% | 1.5% | ||
-10% | 125% | -12.5% | ||
-10% | 100% | -10% | ||
-10% | 50% | -5% | ||
-10% | 15% | -1.5% |
The Strategy Spread is an annualized percentage used as a deduction in the calculation of a Strategy’s performance. A Strategy Spread greater than 0% always has the effect of reducing a Strategy’s performance. A Strategy will never have a Strategy Spread lower than 0%. With all other Crediting Factors being equal, a Strategy Spread allows Nationwide to offer a higher Participation Rate for a Strategy than what would be offered on the same Strategy without the Strategy Spread.
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The Strategy Spread will not change for the duration of a Strategy Term. However, we may change a Strategy’s Strategy Spread for future Strategy Terms. The Strategy Spread is guaranteed to never be greater than the applicable “Maximum Strategy Spread.” Each Strategy has its own Maximum Strategy Spread that will never be greater than the initial Strategy Spread at Date of Issue plus 2%.
To calculate the Strategy Spread’s impact at any point in time, it is multiplied by the Elapsed Term. As an annualized percentage, the Strategy Spread’s potential impact increases over the course of the Strategy Term, reaching its full impact on the Strategy Term End Date. For instance, if a Strategy has a one-year Strategy Term and a Strategy Spread of 2%, the impact of the Strategy Spread will not reach 2% until the Strategy Term End Date. Further, if a Strategy has a three-year Strategy Term and a Strategy Spread of 2%, the impact of the Strategy Spread will not reach 6% until the Strategy Term End Date.
During a leap year there may be an additional day of accrual of the Strategy Spread if leap day is part of the Strategy Term (e.g. for a 1-year Strategy Term, in non-leap years the Elapsed Term at the end of the Strategy Term would be 1, but in a leap year the Elapsed Term would be 1.0027.)
A Strategy Spread can result in negative Strategy Earnings even if you have positive Index performance. See “Limited Growth Potential Risk (Strategy Spread and Participation Rate Risk)” for additional risk information about the Strategy Spread.
Examples
The table below illustrates the impact of the Strategy Spread on a Strategy with a one-year Strategy Term. The Strategy Spread is used to calculate the Adjusted Index Performance (AIP), which is effectively the Index Performance adjusted for the Participation Rate and Strategy Spread. The table assumes the AIP is calculated at the end of the Strategy Term. See “Calculation of Strategy Earnings – Adjusted Index Performance.”
Index Performance | Strategy Spread* | Adjusted Index Performance* (Assuming 100% Participation Rate) | ||
+10% | 2% | +8.0% | ||
+5% | 2% | +3.0% | ||
+1% | 2% | -1.0% | ||
-5% | 2% | -7.0% | ||
-10% | 2% | -12.0% |
*This column assumes that the Strategy has a Strategy Spread of 2%.
As reflected in the table below, there are various values associated with each of your Strategies, and there are related values associated with your entire Contract. This section provides additional detail about each of these values.
In addition to the values included in the table above, your Contract also has a Surrender Value. The Surrender Value is the amount available upon full surrender of the Contract. The Surrender Value is equal to the Modified Contract Value minus any applicable CDSC and after any applicable MVA. We may deduct taxes from the Surrender Value.
See “Appendix B: Modified Strategy Value Formula and Examples” for examples of the Surrender Value calculation.
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STRATEGY VALUE AND CONTRACT VALUE
Strategy Value
The Strategy Value represents, as of a given date during a Strategy Term, the value of a Strategy without taking into account any unrealized Strategy Earnings. The Strategy Value is not a cash value that can be withdrawn. Instead, it is a value that we use to calculate your Term Strategy Earnings, the Strategy Accumulation Value, and the Modified Strategy Value. A Strategy’s Strategy Value only changes when we apply Term Strategy Earnings on a Strategy Term End Date, or when you take a partial withdrawal or transfer amounts in or out of the Strategy.
If the first day of a Strategy Term is the Date of Issue, the Strategy Value equals the portion of the Purchase Payment allocated to the Strategy. If the first day of a Strategy Term is a Contract Anniversary, the Strategy Value is the Strategy Value for the Strategy Account on the previous Strategy Term End Date (if any), minus transfers to other Strategy(s) plus transfers from other Strategy(s).
Each subsequent day during the Strategy Term, the Strategy Value equals:
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Contract Value
Your Contract Value always equals the sum of all your Strategy Values. Like your Strategy Value(s), your Contract Value is not a cash value that can be withdrawn.
STRATEGY ACCUMULATION VALUE AND CONTRACT ACCUMULATION VALUE
Strategy Accumulation Value
The Strategy Accumulation Value is the value of a Strategy if unrealized Strategy Earnings were to be applied to the entire Strategy Value using the Strategy Earnings Percentage (or SEP) as of a given date. The Strategy Accumulation Value is not a cash value that can be withdrawn. The Strategy Accumulation Value is a daily value expressed in dollars that is provided to show how a Strategy is performing throughout a Strategy Term.
Each day during a Strategy Term, the Strategy Accumulation Value is equal to the Strategy Value x (1 + SEP).
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Contract Accumulation Value
Your Contract Accumulation Value always equals the sum of your Strategy Accumulation Values as of a given date. Like your Strategy Accumulation Value(s), your Contract Accumulation Value is not a cash value that may be withdrawn.
MODIFIED STRATEGY VALUE AND MODIFIED CONTRACT VALUE
Modified Strategy Value
The Modified Strategy Value is the maximum Gross Withdrawal that may be taken from a Strategy as of a given date during a Strategy Term. On a Strategy Term End Date, the Modified Strategy Value is equal to your Strategy Value plus any Term Strategy Earnings. On any day other than the Strategy Term End Date, the Modified Strategy Value is equal to your Strategy Value plus any Interim Strategy Earnings that would be applied if you withdrew your entire Strategy Value. You should understand the following:
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On the Strategy Term End Date, your Strategy Value and your Modified Strategy Value will always be the same.
See “Appendix B: Modified Strategy Value Formula and Examples” for the formula we use when calculating the Modified Strategy Value and for examples of the calculation.
Modified Contract Value
Your Modified Contract Value always equals the sum of your Modified Strategy Values as of a given date. Your Modified Contract Value represents the maximum Gross Withdrawal that you may take from your Contract as of a given date.
In order to take the maximum Gross Withdrawal from the Contract, you must fully surrender your Contract. Afull surrender will terminate the Contract.
The Surrender Value is the amount available upon full surrender of the Contract. The Surrender Value is equal to the Modified Contract Value minus any applicable CDSC and plus any applicable MVA. We may deduct taxes from the Surrender Value.
CALCULATION OF STRATEGY EARNINGS
We credit Strategy Earnings to a Strategy on the Strategy Term End Date. We refer to this form of Strategy Earnings as “Term Strategy Earnings.” Term Strategy Earnings represent Strategy Earnings paid on the Strategy Value of a Strategy as of the Strategy Term End Date. Term Strategy Earnings take into account the performance of the Strategy’s Index (except when the Lock-In feature has been exercised or in the event that the Index has been substituted) and the other Crediting Factors over the course of the entire Strategy Term.
We also apply Strategy Earnings to a Strategy when you take a partial withdrawal or full surrender prior to the Strategy Term End Date. We refer to this form of Strategy Earnings as “Interim Strategy Earnings.”
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Interim Strategy Earnings take into account the performance of the Strategy’s Index between the beginning of the Strategy Term and the date on which the partial withdrawal or full surrender was taken (except when the Lock-In feature has been exercised or in the event that the Index has been substituted) and other Crediting Factors.
If you exercise the Lock-In feature for a Strategy, Term Strategy Earnings and Interim Strategy Earnings will take into account the performance of the Strategy’s Index from the beginning of the Strategy Term until the Lock-In Date. See “Calculation of Strategy Earnings – Lock-In.”
All Strategy Earnings may be positive, negative, or equal to zero.
On a Strategy Term End Date, the Term Strategy Earnings that will be applied to a Strategy are equal to the Strategy Value multiplied by the Strategy Earnings Percentage (SEP).
Term Strategy Earnings are always calculated using only the SEP, which differs from Interim Strategy Earnings, which may be calculated using the SEP and/or the Non-Preferred Strategy Earnings Percentage (NSEP), depending on whether or not your gross withdrawal amount exceeds the Remaining Preferred Withdrawal Amount.
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Interim Strategy Earnings represent both:
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As reflected in the three-step process below, Interim Strategy Earnings may be calculated using either the SEP, the NSEP, or both. For a particular Strategy:
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Upon taking a partial withdrawal or full surrender prior to the Strategy Term End Date, we calculate Interim Strategy Earnings (your gains or losses) using the following three-step process:
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Interim Strategy Earnings on a Preferred Withdrawal = SEP x amount of the Preferred Withdrawal attributable to the Strategy / (1 + SEP)
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Interim Strategy Earnings on a Non-Preferred Withdrawal = NSEP x amount of the Non-Preferred Withdrawal attributable to the Strategy / (1 + NSEP)
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Interim Strategy Earnings will impact the amount of Strategy Value that we deduct from your Contract in order to satisfy a withdrawal. When you have a gain, we will deduct less Strategy Value than the amount of the Gross Withdrawal that you requested. When you have a loss, we will deduct more Strategy Value than the amount of the Gross Withdrawal that you requested. In either case, the amount of the Gross Withdrawal that you requested does not change based on the Interim Strategy Earnings. A withdrawal’s impact to the Strategy Value is called the “Net Withdrawal”, which is equal to the amount of the Gross Withdrawal requested minus the Interim Strategy Earnings calculated under the three-step process above.
If you take a withdrawal on the Strategy Term End Date, the withdrawal is processed after any Term Strategy Earnings are applied to your Contract and there will be no Interim Strategy Earnings calculated on the withdrawal. This is because the SEP and NSEP will always equal zero immediately after the Term Strategy Earnings are applied on the Strategy Term End Date.
The three-step process described above is applied on a Strategy by Strategy basis. If you are invested in multiple Strategies, your Strategies will likely have different Remaining Preferred Withdrawal Amounts attributable to each Strategy. As a result, it is unlikely that a partial withdrawal or full surrender will result in the same level of Preferred Withdrawals across your Strategies. A Preferred Withdrawal is proportionately allocated among the Strategies based on the Strategy Accumulation Values at the time of the withdrawal. A Non-Preferred Withdrawal is proportionately allocated among the Strategies based on the Modified Strategy Values at the time of the withdrawal, or if the withdrawal is part Preferred Withdrawal and part Non-Preferred Withdrawal, a Non-Preferred Withdrawal is proportionately allocated among the Strategies based on the Modified Strategy Values that remain after the Preferred Withdrawal is taken.
Examples
The tables below illustrate the calculation of Interim Strategy Earnings applied to a Strategy. In these examples, the partial withdrawal from a Strategy is greater than the Remaining Preferred Withdrawal Amount. A portion of the Gross Withdrawal is a Preferred Withdrawal, and a portion is a Non-Preferred Withdrawal.
Positive Strategy Earnings
Preferred Withdrawal | Interim Strategy (Step One)* | Non- Preferred Withdrawal | Interim Strategy (Step Two)** | Total Interim (Step Three) | ||||
$7,000 | $913 | $4,000 | $364 | $1,277 |
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Negative Strategy Earnings
Preferred Withdrawal | Interim Strategy (Step One)* | Non- Preferred Withdrawal | Interim Strategy (Step Two)** | Total Interim (Step Three) | ||||
$7,000 | -$778 | $4,000 | -$545 | -$1,323 |
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STRATEGY EARNINGS PERCENTAGE (SEP) AND NON-PREFERRED STRATEGY EARNINGS PERCENTAGE (NSEP)
On each day during a Strategy Term, we calculate the SEP and the NSEP for each Strategy. The SEP and NSEP generally change on a day-to-day basis. Neither the SEP nor the NSEP will impact the performance of your Strategy until Strategy Earnings are applied.
SEP
The SEP is the rate of return used to calculate Strategy Earnings when you receive Term Strategy Earnings and when you receive Interim Strategy Earnings on a Preferred Withdrawal. The SEP compares the Adjusted Index Performance to the amount of downside protection provided by a Strategy’s Protection Level, and applies whichever is greater, resulting in gains based on the full AIP or losses subject to the downside protection provided by the Strategy’s Protection Level.
More specifically, the SEP for a Strategy is the greater of (a) the Adjusted Index Performance or (b) the Protection Level minus 100%.
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NSEP
The NSEP is the rate of return used to calculate Strategy Earnings upon a Non-Preferred Withdrawal. Like the SEP, the NSEP compares the AIP to the amount of downside protection provided by the Strategy’s Protection Level; however, the NSEP is different because it prorates (reduces) positive earnings and includes the Non-Preferred Withdrawal Adjustment Percentage when the AIP would result in a loss that exceeds the amount of downside protection provided by the Strategy’s Protection Level.
The NSEP calculation effectively works as follows:
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It’s important to note that while the NSEP can be less than the downside protection provided by a Strategy’s Protection Level, the Protection Level does limit how negative the NSEP can be. The most negative the NSEP could be for a Strategy is: (the Strategy’s Protection Level – 100%) – (Non-Preferred Withdrawal Adjustment Percentage x Strategy Term).
Importantly, your potential maximum amount of loss under the SEP and the NSEP are not the same. Your potential maximum amount of loss under the NSEP will be greater due to the assessment of the Non-Preferred Withdrawal Adjustment Percentage. See “Calculation of Strategy Earnings – Non-Preferred Withdrawal Adjustment Percentage” for additional information.
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The Non-Preferred Withdrawal Adjustment Percentage will only be applicable if the AIP is less than the downside protection provided by the Protection Level (Protection Level minus 100%) when you take a Non-Preferred Withdrawal.
See “Appendix C: Non-Preferred Strategy Earnings Percentage” for the NSEP formula and examples of the NSEP calculation.
NON-PREFERRED WITHDRAWAL ADJUSTMENT PERCENTAGE
The Non-Preferred Withdrawal Adjustment Percentage is a factor in the NSEP formula (see “Appendix C: Non-Preferred Strategy Earnings Percentage” for the NSEP formula). The assessment of the Non-Preferred Withdrawal Adjustment Percentage is the reason why your potential maximum amount of loss under the NSEP is greater than under the SEP. The Non-Preferred Withdrawal Adjustment Percentage is 2%.
We buy various assets to support our obligation to pay the strategy earnings under the contract. When you take a withdrawal before a Strategy’s Strategy Term End Date, we may realize costs associated with changes in the market value of these assets and any unamortized expenses from purchasing these assets. We use the Non-Preferred Withdrawal Adjustment Percentage, when applicable, to take into account the approximate current market value of assets in tandem with the unamortized cost of the purchase of these assets.
The potential impact of the Non-Preferred Withdrawal Adjustment Percentage on the NSEP gradually decreases over the course of a Strategy Term, reaching its least potential impact on the day prior to the Strategy Term End Date. As a result, your maximum amount of loss under the NSEP will gradually decrease as the Strategy Term elapses. Nonetheless, your maximum amount of loss under the NSEP will never be equal to or less than your maximum amount of loss under the SEP.
Based on the NSEP formula, the potential impact of a Non-Preferred Withdrawal Adjustment Percentage within the NSEP formula is directly related to the length of a Strategy Term. For example, if one Strategy has a one-year Strategy Term and another Strategy has a three-year Strategy Term, the potential impact of the Non-Preferred Withdrawal Adjustment Percentage for the three-year Strategy Term is three times greater than for the one-year Strategy Term.
If you do not take any Non-Preferred Withdrawals, the Non-Preferred Withdrawal Adjustment Percentage will not affect your Contract.
ADJUSTED INDEX PERFORMANCE (AIP)
Each day during a Strategy Term, including the Strategy Term End Date, we calculate the AIP. The AIP is calculated for each Strategy using the Index Performance, the Participation Rate, and the Strategy Spread. The AIP generally changes on a day-to-day basis. The AIP does not directly affect your Strategy Earnings. Rather the AIP is used in the calculation of the Strategy Earnings Percentage (or SEP) and the Non-Preferred Strategy Earnings Percentage (or NSEP).
The AIP for a Strategy is calculated as follows: (Index Performance x Participation Rate) – (Strategy Spread x Elapsed Term).
For example, if a Strategy with a 1-year Strategy Term has a Participation Rate of 120% and a Strategy Spread of 2%:
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You should understand that the AIP does not equal the percentage change in the value of Strategy’s Index between the beginning of a Strategy Term and a future date during the Strategy Term. Instead, the AIP represents an adjusted Index Performance since it reflects the impact of the Participation Rate and the Strategy Spread.
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Each day during a Strategy Term, including the Strategy Term End Date, we calculate the Index Performance. We calculate the Index Performance for a Strategy on a point-to-point basis, and the Index Performance generally fluctuates day to day. Use of a point-to-point calculation results in Index Performance being calculated at a single point in time, even for a Strategy with a three-year Strategy Term. As a result, you may experience negative or flat performance even when the Index experienced gains through some, or most, of the Strategy Term or prior to a withdrawal.
While the Index Performance is important to the amount of Strategy Earnings that are ultimately applied to a Strategy, you should understand that we do not calculate Strategy Earnings based solely on the Index Performance. Rather, the Index Performance is used in the calculation of the AIP.
We calculate the Index Performance for a Strategy as follows:
Index Performance = (A – B) / B, where:
A = Index Value on that specific date during the Strategy Term
B = Index Value on the first day of a Strategy Term
For example, if the Index Value on the first and last day of a Strategy Term equals 1,000 and 1,100, respectively, the Index Performance between those two dates equals +10% (i.e., (1,100 – 1,000) / 1,000). Conversely, if the Index Value on the first and last day of a Strategy Term equals 1,000 and 900, respectively, the Index Performance between those two dates equals -10% (i.e., ((900 –1,000) / 1,000).
If an Index Value is not provided to us by an Index provider or is otherwise unavailable on a Business Day, the Index Value will be the closing value of the Index for the previous Business Day.
As described under “Crediting Factors – Indexes,” there are circumstances under which we may substitute an Index during a Strategy Term. If we substitute an Index during a Strategy Term, we will calculate the Index Performance for the old Index between the first day of the Strategy Term (or the first day on which the old Index was used, whichever is later) until the date of substitution. After the date of substitution, we will calculate the Index Performance for the new Index from the date of substitution until the calculation date. We will then add the Index Performance for the old Index (which may be positive, negative, or equal to zero) to the Index Performance of the new Index (which may be positive, negative, or equal to zero).
For any Strategy, on any Business Day prior to the Strategy Term End Date, you may lock in the Index Value for that Strategy. The locked-in Index Value will be used for purposes of calculating the Index Performance for the remainder of the Strategy Term. As a result, the Index Performance will not change for the remainder of the Strategy Term. If you are simultaneously invested in the same Strategy for Strategy Terms that began on different dates, those investments will be considered separate Strategies.
For example, if the Index Value on the first day of a Strategy Term equals 1,000, and then on a given day during the Strategy Term, you lock-in an Index Value of 1,100, your Index Performance will be +10% for the remainder of the Strategy Term, even if the Index is later valued during the Strategy Term at an amount greater than 1,100 or less than 1,100.
For each Strategy, the Lock-In feature may be exercised only once during a Strategy Term. If you have multiple Strategies, you may exercise the Lock-In feature for any, all, or none of the Strategies during their respective Strategy Terms, and you may exercise the Lock-In feature at different times during the Strategies’ respective Strategy Terms. Exercise of the Lock-In feature is irrevocable.
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To exercise the Lock-In feature for a Strategy, you must submit a request to our Solutions Center. If we receive your request prior to the close of business on a Business Day, we will lock-in the Index Value for that Strategy calculated on that Business Day as of the close of business. If we receive your request on a non-Business Day, or after the close of a Business Day, we will lock in the Index Value for that Strategy calculated on the next Business Day as of the close of business.
If the Index for a Strategy is substituted after you exercise the Lock-In feature for that Strategy, as described under “Crediting Factors – Index,” changes in the value of the new Index will not impact your Strategy. We will use the Index Performance for the old Index as of the Lock-In Date for purposes of calculating your Strategy Earnings. That Index Performance will not change under any circumstances for the remainder of the Strategy Term.
You should fully understand the risks associated with the Lock-In feature. See “Risk Factors – Lock-In Risk.”
At any time prior to the Annuitization Date, you may take a partial withdrawal or fully surrender the Contract.
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If you are invested in multiple Strategies at the time that you request a partial withdrawal, you cannot select the specific Strategy(s) from which a partial withdrawal is to be taken. The withdrawal is allocated so that after the withdrawal is processed, the Strategy Values are allocated in the same proportion as before the withdrawal. This is described under “Preferred Withdrawals and Non-Preferred Withdrawals” below.
You should carefully consider the consequences of taking withdrawals greater than the Preferred Withdrawal Amount (referred to as Non-Preferred Withdrawals) before you purchase the Contract, as they may be subject to CDSCs and MVAs, and the earnings calculation applicable to these withdrawals is less advantageous to you than the earnings calculation applicable to Preferred Withdrawals.
You must submit a request for a partial withdrawal or full surrender to our Solutions Center. We will not process a request until it is received by us in good order. We will not consider the request to be in good order unless the request (i) is in writing or another form that we deem acceptable and (ii) includes all the information necessary for us to process the request.
We reserve the right to:
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If you wish to fully surrender the Contract, you will receive the Surrender Value. The Surrender Value equals your Modified Contract Value minus any applicable CDSC and after the application of any MVA. We may also deduct taxes from the amount payable to you.
Nationwide may treat a request for a partial withdrawal as a request for a full surrender of the Contract if the following three criteria exist: (i) any portion of the partial withdrawal is a Non-Preferred Withdrawal; (ii) the partial withdrawal would reduce the Contract Value to an amount less than $5,000; and (iii) the Purchase Payment minus the sum of any Gross Withdrawals since the Date of Issue is less than $5,000.
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GROSS WITHDRAWALS, NET WITHDRAWALS, AND CASH WITHDRAWALS
When you take a partial withdrawal or full surrender, we calculate the Gross Withdrawal(s), Net Withdrawal(s), and Cash Withdrawal(s) associated with that transaction.
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When you take a partial withdrawal, you must indicate the dollar amount of the withdrawal. You must also indicate whether that dollar amount should be taken in the form of a Gross Withdrawal or a Cash Withdrawal under the Contract.
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PREFERRED WITHDRAWALS AND NON-PREFERRED WITHDRAWALS
General
Preferred Withdrawals are not subject to any CDSC or MVA, and Interim Strategy Earnings for a Preferred Withdrawal are calculated using the Strategy Earnings Percentage (SEP).
Non-Preferred Withdrawals may be subject to CDSCs and MVAs, and Interim Strategy Earnings for a Non-Preferred Withdrawal are calculated using the Non-Preferred Strategy Earnings Percentage (or NSEP).
Each Contract Year, your total Gross Withdrawals (if any) up to your Preferred Withdrawal Amount will be treated as Preferred Withdrawals. Any Gross Withdrawal in excess of your Preferred Withdrawal Amount will be treated as a Non-Preferred Withdrawal.
At any given time during a Contract Year, your Remaining Preferred Withdrawal Amount represents the total amount of Gross Withdrawals that may be taken from your Contract during the remainder of the Contract Year as Preferred Withdrawals. If only a portion of a Gross Withdrawal exceeds your Remaining Preferred Withdrawal Amount, the amounts up to the Remaining Preferred Withdrawal Amount will be treated as a Preferred Withdrawal and the excess portion will be treated as a Non-Preferred Withdrawal.
You should carefully consider the consequences of taking Non-Preferred Withdrawals, as these withdrawals may be subject to CDSCs and MVAs. In addition, when you take a Non-Preferred Withdrawal prior to the Strategy Term End Date, we use the NSEP rather than the SEP to calculate Interim Strategy Earnings. The NSEP formula is typically less advantageous to you than the SEP formula, which is used to calculate any Interim Strategy Earnings when you take a Preferred Withdrawal.
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Calculating the Preferred Withdrawal Amount and the Remaining Preferred Withdrawal Amount
At the beginning of each Contract Year prior to the Annuitization Date, your Preferred Withdrawal Amount for that Contract Year will be the greater of (1) your Contract Value at the beginning of the Contract Year (immediately prior to any partial withdrawal or full surrender on such day) multiplied by the applicable Preferred Withdrawal Percentage, or (2) the amount required to meet minimum distribution requirements for this Contract under the Code. The table below sets forth the Preferred Withdrawal Percentages under the Contract. The applicable Preferred Withdrawal Percentage will depend on the number of completed Contract Years. As reflected in the table below, the Preferred Withdrawal Percentage increases after you have completed six Contract Years.
Number of Completed Contract Years | Preferred Withdrawal Percentage | |
0 | 7.00% | |
1 | 7.00% | |
2 | 7.00% | |
3 | 7.00% | |
4 | 7.00% | |
5 | 7.00% | |
6+ | 10.00% |
On any day during a Contract Year, your Remaining Preferred Withdrawal Amount equals the Preferred Withdrawal Amount for that Contract Yearminus the total dollar amount of all Gross Withdrawals already taken during the Contract Year. The Remaining Preferred Withdrawal Amount will never be less than zero.
Each Contract Year’s Preferred Withdrawal Amount is non-cumulative. If you have a Remaining Preferred Withdrawal Amount greater than zero at the end of a Contract Year, that Remaining Preferred Withdrawal Amount will not be added to your Preferred Withdrawal Amount for the next Contract Year or any later Contract Year. Each Gross Withdrawal during a Contract Year will decrease your Preferred Withdrawal Amount dollar-for-dollar.
Preferred Withdrawals and Non-Preferred Withdrawals at a Strategy Level
When you take a withdrawal, we determine how the Gross Withdrawal is allocated among your Strategies based on whether the withdrawal is a Preferred Withdrawal and/or Non-Preferred Withdrawal. A Preferred Withdrawal is proportionately allocated among the Strategies based on the Strategy Accumulation Values at the time of the withdrawal. A Non-Preferred Withdrawal is proportionately allocated among the Strategies based on the Modified Strategy Values at the time of the withdrawal, or if the withdrawal is part Preferred Withdrawal and part Non-Preferred Withdrawal, a Non-Preferred Withdrawal is proportionately allocated among the Strategies based on the Modified Strategy Values that remain after the Preferred Withdrawal is taken.
Withdrawals are proportioned differently among the Strategies for Preferred Withdrawals and Non-Preferred Withdrawals as a result of the different Interim Strategy Earnings calculations used for Preferred Withdrawals and Non-Preferred Withdrawals. Interim Strategy Earnings on a Preferred Withdrawal use the SEP, and Interim Strategy Earnings on Non-Preferred Withdrawals use the NSEP.
After a withdrawal is processed, the Strategy Values will be allocated in the same proportion as before the withdrawal.
More specifically, when you take a withdrawal, we determine the Preferred Withdrawal and Non-Preferred Withdrawal amounts attributable to each Strategy using the following two-step process:
Step One– We first determine the portion of the Preferred Withdrawal attributable to each Strategy as follows:
Portion of a Preferred Withdrawal attributable to a Strategy = A x B / C, where:
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Step Two– We next determine the portion of the Non-Preferred Withdrawal attributable to each Strategy as follows:
Portion of a Non-Preferred Withdrawal attributable to a Strategy = A x (B – C) / (D – E), where:
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See “Appendix D: Withdrawal Examples” for examples of Preferred Withdrawals and Non-Preferred Withdrawals.
CONTINGENT DEFERRED SALES CHARGE AND MARKET VALUE ADJUSTMENT
CONTINGENT DEFERRED SALES CHARGE
When you take a Non-Preferred Withdrawal under the Contract during the first six Contract Years, the Non-Preferred Withdrawal will be subject to a Contingent Deferred Sales Charge (CDSC). After the sixth Contract Year, no withdrawals will be subject to a CDSC. A CDSC always has the effect of reducing your Cash Withdrawal. We will never apply a CDSC to a Preferred Withdrawal.
When a CDSC is imposed, the CDSC will equal the CDSC Base x CDSC Percentage.
The CDSC Base will equal the dollar amount of the Non-Preferred Withdrawal. If only a portion of a Gross Withdrawal is treated as a Non-Preferred Withdrawal, the CDSC Base will equal the portion of the Gross Withdrawal that is a Non-Preferred Withdrawal.
The CDSC Percentage will depend on the number of Contract Years you have completed when you take a Non-Preferred Withdrawal. The CDSC Percentage schedule is set forth below. The CDSC Percentage schedule starts at 6.00% and declines with each completed Contract Year until it reaches 0% after six completed Contract Years.
Number of Completed Contract Years | CDSC Percentage (as a percentage of the CDSC Base) | |
0 | 6.00% | |
1 | 5.00% | |
2 | 4.00% | |
3 | 3.00% | |
4 | 2.00% | |
5 | 1.00% | |
6+ | 0.00% |
No CDSC is charged on the payment of the Death Benefit, any partial withdrawals or full surrender after the Death Benefit is paid, or annuity payments made after Annuitization Date.
CDSCs are intended to reimburse us for expenses that we incur in connection with the sale of the Contract.
When you take a Non-Preferred Withdrawal during the MVA Period, which is the first six Contract Years, the Non-Preferred Withdrawal will be subject to a Market Value Adjustment (MVA). After the sixth Contract Year, Non-Preferred Withdrawals will not be subject to MVAs. We will never apply an MVA to a Preferred Withdrawal.
An MVA, when applied, may be positive, negative, or equal to zero. If an MVA is negative, it will decrease your Cash Withdrawal. If an MVA is positive, it will increase your Cash Withdrawal. If an MVA is equal to zero, it will have no effect on your Cash Withdrawal.
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The MVA is intended to approximate, without duplicating, our experience when we liquidate fixed-income assets in order to satisfy our payment obligations under the Contract. We utilize a market value reference rate to determine this approximation. When liquidating assets, Nationwide may realize either a gain or a loss. If the market value reference rate has increased relative to the market value reference rate on the Date of Issue, the MVA will be negative. Conversely, if the market value reference rate has decreased relative to the market value reference rate on the Date of Issue, the MVA will be positive.
When an MVA is imposed, the MVA will equal the MVA Base x MVA Factor.
In the formula above, the MVA Base equals the dollar amount of the Non-Preferred Withdrawal. If only a portion of a Gross Withdrawal is treated as a Non-Preferred Withdrawal, the MVA Base will equal the portion of the Gross Withdrawal that is a Non-Preferred Withdrawal.
We calculate the MVA Factor using the following formula:
MVA Factor = MVA Scaling Factor x (A – B) x N/12, where:
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In the formula above, the MVA Scaling Factor will be greater or less than, or equal to, 1.0. The MVA Scaling Factor is declared by Nationwide and is included in your Contract. Within the formula, the MVA Scaling Factor serves to amplify or dampen the MVA Factor for purposes of the MVA calculation. An MVA Scaling Factor greater than 1.0 increases the magnitude of the MVA, an MVA Scaling Factor less than 1.0 dampens the magnitude of the MVA. An MVA Scaling Factor equal to 1 has no effect on the MVA.
The Market Value Reference Rate refers to the yield of the MVA Index, which is the Bloomberg Barclays U.S. Corporate Index. The Market Value Reference Rate of the MVA Index as of the Date of Issue (the Initial Market Value Reference Rate) is included in your Contract. The daily Market Value Reference Rate may be obtained thereafter by contacting the Solutions Center. If the daily Market Value Reference Rate is not available on any day on which the value is needed, we will use the Market Value Reference Rate for the previous Business Day.
If the Market Value Reference Rate is no longer available, or if we at our sole discretion determine that the Market Value Reference Rate is no longer appropriate for purposes of calculating the MVA, we will substitute another method for determining the MVA, subject to any required regulatory approval. We will notify you of any such change.
See “Appendix E: MVA Examples” for examples of the MVA calculation.
WAIVER OR REDUCTION OF THE CDSC OR MVA
Nationwide may waive (or reduce) any applicable CDSC and waive some or part of the MVA for the following transactions:
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INCREASE IN REMAINING PREFERRED WITHDRAWAL AMOUNT AFTER A LONG-TERM CARE AND TERMINAL ILLNESS OR INJURY (CDSC AND MVA WAIVER)
General
After the occurrence of a Long-Term Care Event (“LTC Event”) or Terminal Illness or Injury Event (“TI Event”) all partial withdrawals and any full surrender will be treated entirely as Preferred Withdrawals (thereby requiring us to waive any otherwise applicable CDSCs and MVAs). This CDSC and MVA waiver is only available if the Contract Owner and Annuitant are the same person, and as of the Date of Issue that person is no older than 80 years old.
In addition, for purposes of this CDSC and MVA waiver, if the Contract Owner is not a natural person, we will treat the Annuitant as the Contract Owner.
There are no charges associated with these waivers.
Long-Term Care Event
An LTC Event occurs if at any time after the first Contract Anniversary, the Contract Owner (or Annuitant if the Contract Owner is not a natural person) is confined to a Long-Term Care Facility or Hospital beginning after the Date of Issue and is confined for a continuous period of 90 days or more. If there is a Joint Owner, the confinement of the Contract Owner or Joint Owner may qualify as an LTC Event. An LTC Event waiver claim (including written proof of confinement) must be received by us while the confinement is ongoing or within 90 days after the confinement ends. If it was not reasonably possible to give written proof of confinement in the time required, we will not reduce or deny the waiver if such proof is given as soon as reasonably possible. In any event, the written proof required must be given no later than one year from after the confinement ends unless the Contract Owner was legally incapacitated.
A “Hospital” is defined as a state licensed facility which is operated as a hospital according to the law of the jurisdiction in which it is located; operates primarily for the care and treatment of sick or injured persons as inpatients; provides continuous 24 hours a day nursing service by or under the supervision of a registered graduate professional nurse (R.N.) or a licensed practical nurse (L.P.N.); is supervised by a staff of physicians; and has medical and diagnostic facilities.
A “Long-Term Care Facility” is defined as a state licensed skilled nursing facility or intermediate care facility that does not include: a home for the aged or mentally ill, a community living center, or a place that primarily provides domiciliary, residency, or retirement care; or a place owned or operated by a member of the Contract Owner’s immediate family.
Terminal Illness or Injury Event
A TI Event occurs if at any time after the first Contract Anniversary, the Contract Owner (or Annuitant if the Contract Owner is not a natural person) is diagnosed by a physician (who is not a party to the Contract nor an immediate family member of a party to the Contract) as having a Terminal Illness or Injury beginning after the Date of Issue. If there is a Joint Owner, the Terminal Illness or Injury of the Contract Owner or Joint Owner may qualify as a TI Event.
A “Terminal Illness or Injury” is defined as an illness or injury diagnosed after the Date of Issue by a physician that is expected to result in death within 12 months of diagnosis.
DEATH BENEFIT AND SUCCESSION RIGHTS
Death of Contract Owner who is not the Annuitant
If the deceased Contract Owner (or Joint Owner) is not an Annuitant, and the deceased Contract Owner (or Joint Owner) dies before the Annuitization Date while the Contract is in force, no Death Benefit is payable. Under such circumstances, contractual rights under the Contract will succeed as follows:
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Death of Contract Owner who is the Annuitant
If the deceased Contract Owner (or Joint Owner) is an Annuitant, and the deceased Contract Owner (or Joint Owner) dies before the Annuitization Date while the Contract is in force, the Death Benefit may or may not become payable depending on whether there is a Contingent Annuitant.
If there is Contingent Annuitant, the Contingent Annuitant takes the place of the deceased Annuitant under the Contract and no Death Benefit is payable. There will no longer be a Contingent Annuitant under the Contract.
If there is no Contingent Annuitant, the Death Benefit becomes payable. Rights to the Death Benefit will be as follows:
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Death of Annuitant who is not the Contract Owner
If the deceased Annuitant is not the Contract Owner (or Joint Owner), and the deceased Annuitant dies before the Annuitization Date while the Contract is in force, the Death Benefit may or may not become payable depending on whether there is a Contingent Annuitant.
If there is a Contingent Annuitant, the Contingent Annuitant takes the place of the deceased Annuitant under the Contract and no Death Benefit is payable. The Contract otherwise continues without interruption and there will no longer be a Contingent Annuitant under the Contract.
If there is no Contingent Annuitant, the Death Benefit becomes payable. Rights to the Death Benefit will be as follows:
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After the Annuitization Date, under no circumstances will the Death Benefit become payable. All payments under the Contract depend on the annuity payment option selected.
When the Death Benefit becomes payable, we will not pay the Death Benefit until we receive in writing at our Solutions Center each of the following:
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Proper proof of death includes:
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The methods of distribution depend on the person (or people) to whom the Death Benefit will be paid. Under all circumstances, the method of distribution selected must comply with any applicable requirements under the Code.
The following applies to the payment of the Death Benefit:
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If the Contract has more than one Beneficiary entitled to the Death Benefit, the Contract Value will continue to be allocated to the applicable Strategies until the first Beneficiary provides Nationwide with all the information necessary to pay that Beneficiary’s portion of the Death Benefit. At the time the first Beneficiary’s proceeds are paid, the remaining portion(s) of the Death Benefit that is allocated to the Strategies will be reallocated to the Transition Account until instructions are received from the remaining Beneficiary(ies).
If any Beneficiary entitled to receive the Death Benefit elects to continue the Contract as the new owner or becomes a beneficial owner of the Contract, the Beneficiary’s entire portion of the Death Benefit will be automatically reallocated to the default option identified in the Contract. This reallocation to the default option will occur on the date the Beneficiary’s election is received in good order. The default option’s Strategy Term will begin on the date the Beneficiary’s portion of the Death Benefit is reallocated to the default option. The Crediting Factors applicable to the default option will be the new business Crediting Factors in effect on the date the Beneficiary’s portion of the Death Benefit is reallocated to the default option. Thereafter, any partial withdrawal or full surrender is treated as a Preferred Withdrawal.
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The Transition Account is a short-term liquid investment account. We establish interest rates for all amounts in the Transition Account on a monthly basis, but we do not guarantee any specific minimum rate. The Transition Account is not designed for long-term investing. The Contract Owner cannot elect to allocate Contract Value to the Transition Account. Withdrawals from the Transition Account are not subject to any CDSCs or MVAs. The value in the Transition Account will equal the amount of the Death Benefit transferred into the Transition Account plus any interest credited to the Transition Account minus any amounts withdrawn from the Transition Account.
CALCULATION OF THE DEATH BENEFIT
Except as provided below, the Death Benefit will equal the Contract Accumulation Value as of the date the Death Benefit becomes payable. The Strategy Value for each Strategy is adjusted to equal its Strategy Accumulation Value on that date, and as a result, the Contract Value is adjusted to equal the Contract Accumulation Value on that date. The Contract Accumulation Value may be less than, greater than, or equal to your Contract Value.
If the Contract Owner is changed, or if the Contract is assigned, prior to the Death Benefit becoming payable, the Death Benefit will equal the Surrender Value rather than the Contract Accumulation Value, except in any of the following circumstances:
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Taxes may be deducted from the Death Benefit in all circumstances.
Annuity Commencement Date
The Annuity Commencement Date is the date on which annuity payments are scheduled to begin. Generally, the Contract Owner designates the Annuity Commencement Date at the time of application. If no Annuity Commencement Date is designated at the time of application, Nationwide will establish the Annuity Commencement Date as the date the Annuitant reaches age 90. The Contract Owner may initiate a change to the Annuity Commencement Date at any time. Additionally, Nationwide will notify the Contract Owner approximately 90 days before the impending Annuity Commencement Date of the opportunity to change the Annuity Commencement Date or annuitize the contract.
Any request to change the Annuity Commencement Date must meet the following requirements:
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Generally, Nationwide will not initiate annuitization until specifically directed to do so. However, for Non-Qualified Contracts only, Nationwide will automatically initiate annuitization within 45 days after the Annuity Commencement Date (whether default or otherwise), unless (1) Nationwide has had direct contact with the Contract Owner (indicating that the contract is not abandoned); or (2) the Contract Owner has taken some type of action which is inconsistent with the desire to annuitize.
Annuitization
Annuitization is the period during which annuity payments are received. Annuitization is irrevocable once annuity payments have begun. Upon Annuitization Date, the Annuitant must elect an annuity payment option.
Annuity purchase rates are used to determine the amount of the annuity payments based upon the annuity payment option elected. Actual purchase rates used to determine annuity payments will be those in effect on the Annuitization Date. Annuity benefits at the time of their commencement will not be less than those that would be provided by the application of the Surrender Value to purchase a single premium immediate annuity contract at purchase rates offered by Nationwide at the time to the same class of annuitants.
Fixed Annuity Payments
Fixed annuity payments provide for level annuity payments. Premium taxes are deducted prior to determining fixed annuity payments. The fixed annuity payments will remain level unless the annuity payment option provides otherwise.
Frequency and Amount of Payments
Annuity payments are based on the annuity payment option elected.
If the net amount to be annuitized is less than $2,000, Nationwide reserves the right to pay this amount in a lump sum instead of periodic annuity payments.
Nationwide reserves the right to change the frequency of payments if the amount of any payment becomes less than $100. The payment frequency will be changed to an interval that will result in payments of at least $100. Nationwide will send annuity payments no later than 10 Business Days after each annuity payment date.
Annuity Payment Options
The Annuitant must elect an annuity payment option before the Annuitization Date. If the Annuitant does not elect an annuity payment option, the fixed single life annuity with 240 monthly payments guaranteed annuity payment option will be assumed as the automatic form of payment upon annuitization. Once elected or assumed, the annuity payment option may not be changed.
Not all of the annuity payment options may be available in all states. Additionally, the annuity payment options available may be limited based on the Annuitant’s age (and the joint annuitant’s age, if applicable) or requirements under the Code.
Nationwide reserves the right to refuse any purchase payment that would result in the cumulative total for all contracts issued by Nationwide on the life of any one Annuitant or owned by any one Contract Owner to exceed $1,000,000. If a Contract Owner does not submit purchase payments in excess of $1,000,000, or if Nationwide has refused to accept purchase payments in excess of $1,000,000, the references in this provision to purchase payments in excess of $1,000,000 will not apply. If the Contract Owner is permitted to submit purchase payments in excess of $1,000,000, additional restrictions apply, as follows.
Annuity Payment Options for Contracts with Total Purchase Payments and/or Surrender Value Annuitized Less Than or Equal to $2,000,000
If, at the Annuitization Date, the total of the purchase payment made to the contract and/or the Surrender Value annuitized is less than or equal to $2,000,000, the annuity payment options available are:
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Each of the annuity payment options is discussed more thoroughly below.
Single Life
The single life annuity payment option provides for annuity payments to be paid during the lifetime of the Annuitant. This option is not available if the Annuitant is 86 or older on the Annuitization Date.
Payments will cease with the last payment before the Annuitant’s death. For example, if the Annuitant dies before the second annuity payment date, the Annuitant will receive only one payment. The Annuitant will only receive two annuity payments if he or she dies before the third payment date, and so on. No death benefit will be paid.
No withdrawals other than the scheduled annuity payments are permitted.
Joint and Survivor
The joint and survivor annuity payment option provides for annuity payments to continue during the joint lifetimes of the Annuitant and joint annuitant. After the death of either the Annuitant or joint annuitant, payments will continue for the life of the survivor. This option is not available if the Annuitant or joint annuitant is 86 or older on the Annuitization Date.
Payments will cease with the last payment due prior to the death of the last survivor of the Annuitant and joint annuitant. As is the case of the single life annuity payment option, there is no guaranteed number of payments. Therefore, it is possible that if the Annuitant dies before the second annuity payment date, the Annuitant will receive only one annuity payment. No death benefit will be paid.
No withdrawals other than the scheduled annuity payments are permitted.
Single Life with a 10 or 20 Year Term Certain
The single life with a 10 or 20 year term certain annuity payment option provides that monthly annuity payments will be paid during the Annuitant’s lifetime or for the term selected, whichever is longer. The term may be either 10 or 20 years.
If the Annuitant dies before the end of the 10 or 20 year term, payments will be paid to the beneficiary for the remainder of the term.
No withdrawals other than the scheduled annuity payments are permitted.
Any Other Option
Annuity payment options not set forth in this provision may be available. Any annuity payment option not set forth in this provision must be approved by Nationwide.
Annuity Payment Options for Contracts with Total Purchase Payments and/or Surrender Value Annuitized Greater Than $2,000,000
If, at the Annuitization Date, the total of the purchase payment made to the contract and/or the Surrender Value to be annuitized is greater than $2,000,000, Nationwide may limit the annuity payment option to the longer of:
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Annuitization of Amounts Greater than $5,000,000
Additionally, Nationwide may limit the amount that may be annuitized on a single life to $5,000,000. If the total amount to be annuitized is greater than $5,000,000 under this contract and/or for all Nationwide issued annuity contracts with the same Annuitant, the Contract Owner must:
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CONTRACT TYPES AND FEDERAL TAX CONSIDERATIONS
Types of Contracts
The contracts described in this prospectus are classified according to the tax treatment to which they are subject under the Code. Following is a general description of the various contract types. Eligibility requirements, tax benefits (if any), limitations, and other features of the contracts will differ depending on contract type.
Non-Qualified Contracts
A Non-Qualified Contract is a contract that does not qualify for certain tax benefits under the Code, such as deductibility of purchase payments, and which is not an IRA, Roth IRA, SEP IRA, or Simple IRA.
Upon the death of the owner of a Non-Qualified Contract, mandatory distribution requirements are imposed to ensure distribution of the entire balance in the contract within a required period.
Non-Qualified Contracts that are owned by natural persons allow the deferral of taxation on the income earned in the contract until it is distributed or deemed to be distributed. Non-Qualified Contracts that are owned by non-natural persons, such as trusts, corporations, and partnerships are generally subject to current income tax on the income earned inside the contract, unless the non-natural person owns the contract as an agent of a natural person.
Charitable Remainder Trusts
Charitable Remainder Trusts are trusts that meet the requirements of Section 664 of the Code. Non-Qualified Contracts that are issued to Charitable Remainder Trusts will differ from other Non-Qualified Contracts in three respects:
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While these provisions are intended to facilitate a Charitable Remainder Trust’s ownership of this contract, the rules governing Charitable Remainder Trusts are numerous and complex. A Charitable Remainder Trust that is considering purchasing this contract should seek the advice of a qualified tax and/or financial advisor prior to purchasing the contract. An annuity that has a Charitable Remainder Trust endorsement is not a Charitable Remainder Trust; the endorsement is merely to facilitate ownership of the contract by a Charitable Remainder Trust.
Individual Retirement Annuities (IRAs)
IRAs are contracts that satisfy the provisions of Section 408(b) of the Code, including the following requirements:
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Depending on the circumstance of the owner, all or a portion of the contributions made to the account may be deducted for federal income tax purposes.
IRAs may receive rollover contributions from other individual retirement accounts, other individual retirement annuities, tax sheltered annuities, certain 457 governmental plans, and qualified retirement plans (including 401(k) plans).
When the owner of an IRA attains the age of 701⁄2, the Code requires that certain minimum distributions be made. In addition, upon the death of the owner of an IRA, mandatory distribution requirements are imposed by the Code to ensure distribution of the entire contract value within the required statutory period. Due to recent changes in Treasury Regulations, the amount used to compute the mandatory distributions may exceed the contract value.
Failure to make the mandatory distributions can result in an additional penalty tax of 50% of the excess of the amount required to be distributed over the amount that was actually distributed.
For further details regarding IRAs, refer to the disclosure statement provided when the IRA was established and the annuity contract’s IRA endorsement.
As used herein, the term _individual retirement plans_ shall refer to both individual retirement annuities and individual retirement accounts that are described in Section 408 of the Code.
One-Rollover-Per-Year Limitation
A contract owner can receive a distribution from an IRA and roll it into another IRA within 60 days from the date of the distribution and not have the amount of the distribution included in taxable income. Only one rollover per year from a contract owner’s IRA is allowed. The one year period begins on the date the contract owner receives the IRA distribution, and not on the date the IRA was rolled over. The Internal Revenue Service (IRS) has interpreted this one-rollover-per-year limitation as applying separately to each IRA a contract owner owns.
However, on March 20, 2014, the IRS issued Announcement 2014-15 in which it decided to follow the Tax Court’s interpretation of the one rollover per year rule in the Bobrow case. In Bobrow, the Tax Court interpreted the one-rollover-per-year limitation as applying in the aggregate to all the IRAs that a taxpayer owns. This means that a contract owner cannot make an IRA rollover distribution if, within the previous one year period, an IRA rollover distribution was taken from any other IRAs owned. Also, rollovers between an individual’s Roth IRAs would prevent a separate rollover within the 1-year period between the individual’s traditional IRAs, and vice versa. The IRS began applying this new interpretation to any IRA rollover distribution that occurs on or after January 1, 2015.
Direct transfers IRA funds between IRA trustees are not subject to the one rollover per year limitation because such transfers are not considered rollover distributions. Also, a rollover from a traditional IRA to a Roth IRA (a conversion) is not subject to the one roll over per year limitation, and such a rollover is disregarded in applying the one rollover per year limitation to other rollovers.
Roth IRAs
Roth IRA contracts are contracts that satisfy the provisions of Section 408A of the Code, including the following requirements:
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A Roth IRA can receive a rollover from an individual retirement plan or another eligible retirement plan; however, the amount rolled over from the individual retirement plan or other eligible retirement plan to the Roth IRA is required to be included in the owner’s federal gross income at the time of the rollover, and will be subject to federal income tax. However, a rollover or conversion of an amount from an IRA or eligible retirement plan after December 31, 2017 cannot be recharacterized back to an IRA.
For further details regarding Roth IRAs, please refer to the disclosure statement provided when the Roth IRA was established and the annuity contract’s IRA endorsement.
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Simplified Employee Pension IRAs (SEP IRA)
A SEP IRA is a written plan established by an employer for the benefit of employees which permits the employer to make contributions to an IRA established for the benefit of each employee.
An employee may make deductible contributions to a SEP IRA subject to the same restrictions and limitations as an IRA. In addition, the employer may make contributions to the SEP IRA, subject to dollar and percentage limitations imposed by both the Code and the written plan.
A SEP IRA plan must satisfy:
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In addition, the plan cannot restrict withdrawals of non-elective contributions, and must restrict withdrawals of elective contributions before March 15th of the following year.
When the owner of a SEP IRA attains the age of 701⁄2, the Code requires that certain minimum distributions be made. Due to recent changes in Treasury Regulations, the amount used to compute the minimum distributions may exceed the contract value. In addition, upon the death of the owner of a SEP IRA, mandatory distribution requirements are imposed by the Code to ensure distribution of the entire contract value within the required statutory period.
Simple IRAs
A Simple IRA is an Individual Retirement Annuity that is funded exclusively by a qualified salary reduction arrangement and satisfies:
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The funds contributed to a Simple IRA cannot be commingled with funds in other individual retirement plans or SEP IRAs.
A Simple IRA cannot receive rollover distributions except from another Simple IRA.
When the owner of a Simple IRA attains the age of 701⁄2, the Code requires that certain minimum distributions be made. Due to recent changes in Treasury Regulations, the amount used to compute the minimum distributions may exceed the contract value. In addition, upon the death of the owner of a Simple IRA, mandatory distribution requirements are imposed by the Code to ensure distribution of the entire contract value within the required statutory period.
Investment Only (Qualified Plans)
Contracts that are owned by Qualified Plans are not intended to confer tax benefits on the beneficiaries of the plan; they are used as investment vehicles for the plan. The income tax consequences to the beneficiary of a Qualified Plan are controlled by the operation of the plan, not by operation of the assets in which the plan invests.
Beneficiaries of Qualified Plans should contact their employer and/or trustee of the plan to obtain and review the plan, trust, summary plan description and other documents for the tax and other consequences of being a participant in a Qualified Plan.
Federal Tax Considerations
The tax consequences of purchasing a contract described in this prospectus will depend on:
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SeeSynopsis of the Contracts for a brief description of the various types of contracts and the different purposes for which the contracts may be purchased.
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Existing tax rules are subject to change, and may affect individuals differently depending on their situation. Nationwide does not guarantee the tax status of any contracts or any transactions involving the contracts.
If the contract is purchased as an investment of certain retirement plans (such as qualified retirement plans, IRAs, and custodial accounts as described in Sections 401, 408(a), and 403(b)(7) of the Internal Revenue Code), the tax advantages enjoyed by the contract owner and/or annuitant may relate to participation in the plan rather than ownership of the annuity contract. Such plans are permitted to purchase investments other than annuities and retain tax-deferred status.
The following is a brief summary of some of the federal income tax considerations related to the contracts. In addition to the federal income tax, distributions from annuity contracts may be subject to state and local income taxes. The tax rules across all states and localities are not uniform and therefore will not be discussed in this prospectus. Tax rules that may apply to contracts issued in U.S. territories such as Puerto Rico and Guam are also not discussed. Nothing in this prospectus should be considered to be tax advice. Contract owners and prospective contract owners should consult a financial consultant, tax advisor or legal counsel to discuss the taxation and use of the contracts.
The Internal Revenue Code sets forth different income tax rules for the following types of annuity contracts:
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IRAs, SEP IRAs and Simple IRAs
Distributions from IRAs, SEP IRAs and Simple IRAs are generally taxed when received. If any portion of the amount contributed to the IRA was nondeductible for federal income tax purposes, then a portion of each distribution is excludable from income.
If distributions of income from an IRA are made prior to the date that the owner attains the age of 591⁄2 years, the income is subject to both the regular income tax and an additional penalty tax of 10%. (For Simple IRAs, the 10% penalty is increased to 25% if the distribution is made during the two year period beginning on the date that the individual first participated in the Simple IRA.) The 10% penalty tax can be avoided if the distribution is:
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If the contract owner dies before the contract is completely distributed, the balance will be included in the contract owner’s gross estate for estate tax purposes.
One-Rollover-Per-Year-Limitation
A contract owner can receive a distribution from an IRA and roll it into another IRA within 60 days from the date of the IRA distribution and not have the amount of the distribution included in your taxable income. Only one rollover per year from a contract owner’s IRA is allowed. The one year period begins on the date the contract owner receives the IRA distribution and not on the date that it was rolled over. The IRS has interpreted this one rollover per year limitation as applying separately to each IRA that a contract owner owns.
However, on March 20, 2014, the IRS issued Announcement 2014-15 in which it decided to follow the Tax Court’s interpretation of the one rollover per year rule in the Bobrow case. In Bobrow, the Tax Court interpreted the one rollover per year limitation as applying in the aggregate to all the IRAs that a taxpayer owns. This means that a contract owner cannot make an IRA rollover distribution from his or her IRA if within the previous one year period he or she has made an IRA rollover distribution from any other IRA that the he owns. Also, rollovers between an individual’s Roth IRAs would prevent a separate rollover within the 1-year period between the individual’s traditional IRAs, and vice versa. The IRS began applying this new interpretation to any IRA rollover distribution that occurs on or after January 1, 2015.
Direct transfers IRA funds between IRA trustees are not subject to the one rollover per year limitation because such transfers are not considered rollover distributions and are therefore not subject to the one rollover per year limitation. Also, a rollover from a traditional IRA to a Roth IRA (a conversion) is not subject to the one-rollover-per-year limitation, and such a rollover is disregarded in applying the one-rollover-per year limitation to other rollovers.
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Roth IRAs
Distributions of earnings from Roth IRAs are taxable or non-taxable depending upon whether they are “qualified distributions” or “nonqualified distributions.” A “qualified distribution” is one that is made after the Roth IRA has satisfied the five-year rule and meets one of the following requirements:
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The five year rule is satisfied if a five-taxable year period has passed. The five taxable-year period begins with the first taxable year in which a contribution is made to any Roth IRA established for the owner.
A qualified distribution is not included in gross income for federal income tax purposes.
A non-qualified distribution is not includable in gross income to the extent that the distribution, when added to all previous distributions, does not exceed the total amount of contributions made to the Roth IRA. Any non-qualified distribution in excess of the total contributions is includable in the contract owner’s gross income in the year that is distributed to the contract owner.
Special rules apply for Roth IRAs that have proceeds received from an IRA prior to January 1, 1999 if the owner elected the special four-year income averaging provisions that were in effect for 1998.
If non-qualified distributions of income from a Roth IRA are made prior to the date that the owner attains the age of 591⁄2 years, the income is subject to both the regular income tax and an additional penalty tax of 10%. The penalty tax can be avoided if the distribution is:
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If the contract owner dies before the contract is completely distributed, the balance will be included in the contract owner’s gross estate for tax purposes.
Non-Qualified Contracts - Natural Persons as Contract Owners
Generally, the income earned inside a Non-Qualified Annuity Contract that is owned by a natural person is not taxable until it is distributed from the contract.
Distributions before the Annuitization Date are taxable to the contract owner to the extent that the cash value of the contract exceeds the contract owner’s investment at the time of the distribution. In general, the investment in the contract is equal to the purchase payments made with after-tax dollars, reduced by any nontaxable distributions. Distributions, for this purpose, include partial surrenders, any portion of the contract that is assigned or pledged; or any portion of the contract that is transferred by gift. For these purposes, a transfer by gift may occur upon annuitization if the contract owner and the annuitant are not the same individual.
With respect to annuity distributions on or after the Annuitization Date, a portion of each annuity payment is excludable from taxable income. The amount excludable is based on the ratio between the contract owner’s investment in the contract and the expected return on the contract. Once the entire investment in the contract is recovered, all distributions are fully includable in income. The maximum amount excludable from income is the investment in the contract. If the annuitant dies before the entire investment in the contract has been excluded from income, and as a result of the annuitant’s death no more payments are due under the contract, then the unrecovered investment in the contract may be deducted on his or her final tax return.
Commencing after December 31, 2010, the Internal Revenue Code provides that if only a portion of a nonqualified annuity contract is annuitized for either (a) a period of 10 years or greater, or (b) for the life or lives of one or more persons, then the portion of the contract that has been annuitized would be treated as if it were a separate annuity contract. This means that an Annuitization Date can be established for a portion of the annuity contract (rather than requiring the entire contract to be annuitized at once) and the above description of the taxation of annuity distributions after the Annuitization Date would apply to the portion of the contract that has been annuitized. The investment in the contract is required to be allocated pro rata between the portion of the contract that is annuitized and the portion that is not. All other benefits under the contract (e.g., death benefit) would also be reduced pro rata. For example, if 1/3 of the cash value of the contract were to be annuitized, the death benefit would also be reduced by 1/3.
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In determining the taxable amount of a distribution that is made prior to the annuitization date, all annuity contracts issued after October 21, 1988 by the same company to the same contract owner during the same calendar year will be treated as one annuity contract.
A special rule applies to distributions from contracts that have investments that were made prior to August 14, 1982. For those contracts, distributions that are made prior to the Annuitization Date are treated first as the nontaxable recovery of the investment in the contract as of that date. A distribution in excess of the amount of the investment in the contract as of August 14, 1982, will be treated as taxable income.
The Internal Revenue Code imposes a penalty tax if a distribution is made before the contract owner reaches age 591⁄2. The amount of the penalty is 10% of the portion of any distribution that is includable in gross income. The penalty tax does not apply if the distribution is:
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If the contract owner dies before the contract is completely distributed, the balance will be included in the contract owner’s gross estate for estate tax purposes.
Non-Qualified Contracts - Non-Natural Persons as Contract Owners
The previous discussion related to the taxation of Non-Qualified Contracts owned by individuals. Different rules (the so-called “non-natural persons” rules) apply if the contract owner is not a natural person.
Generally, contracts owned by corporations, partnerships, trusts, and similar entities are not treated as annuity contracts under the Internal Revenue Code. Therefore, income earned under a Non-Qualified Contract that is owned by a non-natural person is taxed as ordinary income during the taxable year that it is earned. Taxation is not deferred, even if the income is not distributed out of the contract. The income is taxable as ordinary income, not capital gain.
The non-natural persons rules do not apply to all entity-owned contracts. For purposes of the rule that annuity contracts that are owned by non-natural persons are not treated as annuity contracts for tax purposes, a contract that is owned by a non-natural person as an agent of an individual is treated as owned by the individual. This would cause the contract to be treated as an annuity under the Internal Revenue Code, allowing tax deferral. However, this exception does not apply when the non-natural person is an employer that holds the contract under a non-qualified deferred compensation arrangement for one or more employees.
The non-natural persons rules also do not apply to contracts that are:
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If the annuitant, who is the individual treated as owning the contract, dies before the contract is completely distributed, the balance may be included in the annuitant’s gross estate for estate tax purposes, depending on the obligations that the non-natural owner may have owed to the annuitant.
Exchanges
As a general rule, federal income tax law treats exchanges of propertycollateralized mortgage obligations) in the same manner as a saleNationwide invests its general account assets. Nationwide takes into account the various maturity durations of the property. However, pursuant to Section 1035 of the Internal Revenue Code, an annuity contract may be exchanged tax-free for another annuity contract, provided that the obligee (the person to whom the annuity obligation is owed) is the same for both contracts. If the exchange includes the receipt of other property, such as cash, in addition to another annuity contract special rules may cause a portion of the transaction to be taxable to the extent of the value of the other property.
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In June, 2011 the IRS issued Rev. Proc. 2011-38, which addresses the income tax consequences of the direct transfer of a portion of the cash value of an annuity contract in exchange for the issuance of a second annuity contract. Rev. Proc. 2011-38 modifiedGTOs (1, 3, 5, 7 and superseded prior guidance that was contained in Rev. Proc. 2008-24. A direct transfer that satisfies the revenue procedure will be treated as a tax-free exchange under Section 1035 of the Code if, for a period of at least 180 from the date of the direct transfer, there are no distributions or surrenders from either annuity contract involved in the exchange. In addition, the 180 day period will be deemed to have been satisfied with respect to amounts received as an annuity for a period of 10 years or more, or as an annuity for the life of one or more persons. The taxation of distributions (other than distributions described in the immediately preceding sentence) received from either contract within the 180 day period will be determined using general tax principles to determine the substance of those payments. For example, they could be treated as taxable “boot” in an otherwise tax-free exchange, or as a distribution from the new contract. Rev. Proc. 2011-38 also removed numerous exceptions to the 180 waiting period that Rev. Proc. 2008-11 provided for its 12 month waiting period. Please discuss any tax consequences concerning any contemplated or completed transactions with a professional tax advisor. See, also,Non-Qualified Contracts - Natural Persons as Contract Owners, above.
Additional Medicare Tax
Effective January 1, 2013, Section 1411 of the Internal Revenue Code imposes a surtax of 3.8% on certain net investment income received by individualsyears) and certain trusts and estates. The surtax is imposed on the lesser of (a) net investment income or (b) the excess of the modified adjusted gross income over a threshold amount. For individuals, the threshold amount is $250,000 (married filing jointly); $125,000 (married filing separately); or $200,000 (single, head of household with qualifying person, or qualifying widow(er) with dependent child). The threshold for an estate or trust that is subject to the surtax is generally equal to the dollar amount at which the highest tax bracket under Internal Revenue Code Section 1(e) begins for the taxable year. For 2017, that amount is $12,500.
Modified adjusted gross income is equal to gross income with several modifications. Consult with a qualified tax advisor regarding how to determine modified adjusted gross income for purposes of determining the applicability of the surtax.
Net investment income includes, but is not limited to, interest, dividends, capital gains, rent and royalty income, and income from nonqualified annuities. It may include taxable distributions from, and gain from the sale or surrenders of, life insurance contracts. Net investment income does not include, among other things, distributions from certain qualified plans (such as IRAs, Roth IRAs, and plans described in Internal Revenue Code Sections 401(a), 401(k), 403(a), 403(b) or 457(b)); however, such distributions, to the extent that they are includible in income for federal income tax purposes, are includible in modified adjusted gross income.
Same-Sex Marriages, Domestic Partnership and Other Similar Relationships
The Treasury issued final regulations that address what relationships are considered a marriage for federal tax purposes. The final regulations definition of marriage reflects the United States Supreme Court holdings inWindsor andObergefell, as well as Rev. Proc. 2017-13.
The final regulations define the terms “spouse”, “husband”, “wife”, and “husband and wife” to be gender neutral so that such terms can apply equally to same sex couples and opposite sex couples. The regulations adopt the “place of celebration” rule to determine marital status for federal tax purposes. A marriage of two individuals is recognized for federal tax purposes if the marriage is recognized by a state, possession, or territory of the US in which the marriage was entered into, regardless of the couples place of domicile. Also a marriage entered into in a foreign jurisdiction will be recognized for federal tax purposes if that marriage would be recognized in at least one state, possession, or territory of the US.
Finally, the regulations adopts Rev. Proc. 2013-17 holding that relationships entered into as civil unions, or registered domestic partnerships that is not denominated as marriages under state law are not marriages for federal tax purposes. Therefore, the favorable income-tax deferral options afforded by federal tax law to a married spouse under Code Sections 72 and 401(a)(9) are not available to individuals who have entered into these formal relationships.
Withholding
Pre-death distributions from the contracts are subject to federal income tax. Nationwide will withhold the tax from the distributions unless the contract owner requests otherwise. Under some circumstances, the Code will not permit contract owners to waive withholding. Such circumstances include:
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If a contract owner is prohibited from waiving withholding, as described above, the distribution will be subject withholding rates established by Section 3405 of the Internal Revenue Code and is applied against the amount of income that is distributed.
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Non-Resident Aliens
Generally, a pre-death distribution from a contract to a non-resident alien is subject to federal income tax at a rate of 30% of the amount of income that is distributed. Nationwide is required to withhold this amount and send it to the Internal Revenue Service. Some distributions to non-resident aliens may be subject to a lower (or no) tax if a treaty applies. In order to obtain the benefits of such a treaty, the non-resident alien must:
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If the non-resident alien does not meet the above conditions, Nationwide will withhold 30% of income from the distribution.
Another exemption from the 30% withholding is available if the non-resident alien provides Nationwide with sufficient evidence that:
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Note that for the preceding exemption, the distributions would be subject to the same withholding rules that are applicable to payments to United States persons.
This prospectus does not address any tax matters that may arise by reason of application of the laws of a non-resident alien’s country of citizenship and/or country of residence. Purchasers and prospective purchasers should consult a financial consultant, tax advisor or legal counsel to discuss the applicability of laws of those jurisdictions to the purchase or ownership of a contract.
FATCA
Under Sections 1471 through 1474 of the Internal Revenue Code (commonly referred to as FATCA), distributions from a Contract to a foreign financial institution or to a nonfinancial foreign entity, each as described by FATCA, may be subject to United States tax withholding at a flat rate equal to 30% of the taxable amount of the distribution, irrespective of the status of any beneficial owner of the Contract or of the distribution. Nationwide may require you to provide certain information or documentation (e.g., Form W-9 or Form W-8BEN) to determine its withholdinganticipated cash-flow requirements under FATCA.
Federal Estate, Gift, and Generation Skipping Transfer Taxes
The following transfers may be considered a gift for federal gift tax purposes:
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Upon the contract owner’s death, the value of the contract may subject to estate taxes, even if all or a portion of the value is also subject to federal income taxes.
Section 2612 of the Internal Revenue Code may require Nationwide to determine whether a death benefit or other distribution is a “direct skip” and the amount of the resulting generation skipping transfer tax, if any. A direct skip is when property is transferred to, or a death benefit or other distribution is made to:
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If the contract owner is not an individual, then for this purpose only, “contract owner” refers to any person:
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If a transfer is a direct skip, Nationwide will deduct the amount of the transfer tax from the death benefit, distribution or other payment, and remit it directly to the Internal Revenue Service.
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Charge for Tax
making investments. Nationwide is not requiredobligated to maintain a capital gain reserve liability on Non-Qualified Contracts. If tax laws change requiring a reserve, Nationwide may implement and adjust a tax charge.
Tax Changes
The foregoing tax information is based on Nationwide’s understanding of federal tax laws. It is NOT intended as tax advice. All information is subject to change without notice. You should consult with your personal tax and/or financial advisor for more information.
In 2001, the Economic Growth and Tax Relief Reconciliation Act (“EGTRRA”) was enacted. EGTRRA made numerous changes to the Internal Revenue Code, including the following:
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In 2006, the Pension Protection Act of 2006 made permanent the EGTRRA provisions noted above that increase the amounts that may be contributed to various retirement plans and that expanded the portability of various retirement plans. However, all of the other changes resulting from EGTRRA were scheduled to “sunset,” or become ineffective, after December 31, 2010 unless they are extended by additional legislation. The American Taxpayer Relief Act (ATRA) was enacted on January 1, 2013 and made permanent the lower federal income tax rates established under EGTRRA, except for individuals with taxable income above $400,000 ($450,000 for married couples) whose tax rate will revert to the pre-EGTRRA tax rate of 39.6%. ATRA also permanently provides for a maximum federal estate tax rate of 40% with an annually inflation-adjusted $5 million exclusion for estates of persons dying after December 31, 2012. Consult a qualified tax or financial advisor for further information relating to these and other tax issues.
State Taxation
The tax rules across the various states and localities are not uniform and therefore are not discussed in this prospectus. Tax rules that may apply to contracts issued in U.S. territories such as Puerto Rico and Guam are also not discussed. Contract owners and prospective contract owners should consult a financial consultant, tax advisor or legal counsel to discuss the taxation and use of the contracts.
The Internal Revenue Code requires that certain distributions be made from the contracts issued in conjunction with this prospectus. Following is an overview of the required distribution rules applicable to each type of contract. Please consult a qualified tax or financial advisor for more specific required distribution information.
Required Distributions - General Information
In general, a beneficiary is an individual or other entity that the contract owner designates to receive death proceeds upon the contract owner’s death. The distribution rules in the Internal Revenue Code make a distinction between “beneficiary” and “designated beneficiary” when determining the life expectancy that may be used for payments that are made from IRAs, SEP IRAs, Simple IRAs, and Roth IRAs after the death of the annuitant, or that are made from Non-Qualified Contracts after the death of the contract owner. A designated beneficiary is a natural person who is designated by the contract owner as the beneficiary under the contract. Non-natural beneficiaries (e.g. charities or certain trusts) are not designated beneficiaries for the purpose of required distributions and the life expectancy of such a beneficiary is zero.
Life expectancies and joint life expectancies will be determinedinvest GTO allocations in accordance with any particular investment objective, but will generally adhere to Nationwide's overall investment philosophy. The Specified Interest Rates declared by Nationwide for the relevant guidance provided by the Internal Revenue Service and the Treasury Department, including butvarious GTOs will not limited to Treasury Regulation 1.72-9 and Treasury Regulation 1.401(a)(9)-9.
Required distributions paid upon the death of the contract owner are paidnecessarily correspond to the beneficiary or beneficiaries stipulated by the contract owner. How quickly the distributions must be made may be determined with respect to the life expectancies of the beneficiaries. For Non-Qualified Contracts, the beneficiaries used in the determination of the
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distribution period are those in effect on the date of the contract owner’s death. For contracts other than Non-Qualified Contracts, the beneficiaries used in the determination of the distribution period do not have to be determined until September 30th of the year following the contract owner’s death. If there is more than one beneficiary, the life expectancy of the beneficiary with the shortest life expectancy is used to determine the distribution period. Any beneficiary that is not a designated beneficiary has a life expectancy of zero.
Required Distributions for Non-Qualified Contracts
Internal Revenue Code Section 72(s) requires Nationwide to make certain distributions when a contract owner dies. The following distributions will be made in accordance with the following requirements:
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In the event that the contract owner is not a natural person (e.g., a trust or corporation), for purposes of these distribution provisions:
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These distribution provisions do not apply to any contract exempt from Section 72(s) of the Internal Revenue Code by reason of Section 72(s)(5) or any other law or rule.
Required Distributions for IRAs, SEP IRAs, Simple IRAs, and Roth IRAs
Distributions from an IRA, SEP IRA or Simple IRA must begin no later than April 1 of the calendar year following the calendar year in which the contract owner reaches age 701⁄2. Distributions may be paid in a lump sum or in substantially equal payments over:
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For IRAs, SEP IRAs, and Simple IRAs, required distributions do not have to be withdrawn from this contract if they are being withdrawn from another IRA, SEP IRA, or Simple IRA of the contract owner.
If the contract owner’s entire interest in an IRA, SEP IRA, or Simple IRA will be distributed in equal or substantially equal payments over a period described in (a) or (b) above, the payments must begin on or before the required beginning date. The required beginning date is April 1 of the calendar year following the calendar year in which the contract owner reaches age 701⁄2. The rules for Roth IRAs do not require distributions to begin during the contract owner’s lifetime, therefore, the required beginning date is not applicable to Roth IRAs.
Due to recent changes in Treasury Regulations, the amount used to compute the minimum distribution requirement may exceed the Contract Value.
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If the contract owner dies before the required beginning date (in the case of an IRA, SEP IRA, or Simple IRA) or before the entire Contract Value is distributed (in the case of Roth IRAs), any remaining interest in the contract must be distributed by December 31 of the fifth year following the contract owner’s death or over a period not exceeding the applicable distribution period, which is determined as follows:
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If the contract owner dies on or after the required beginning date, the interest in the IRA, SEP IRA, or Simple IRA must be distributed over a period not exceeding the applicable distribution period, which is determined as follows:
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If distribution requirements are not met, a penalty tax of 50% is levied on the difference between the amount that should have been distributed for that year and the amount that actually was distributed for that year.
For IRAs, SEP IRAs, and Simple IRAs, all or a portion of each distribution will be included in the recipient’s gross income and taxed at ordinary income tax rates. The portion of a distribution that is taxable is based on the ratio between the amount by which non-deductible purchase payments exceed prior non-taxable distributions and total account balances at the time of the distribution. The owner of an IRA, SEP IRA, or Simple IRA must annually report the amount of non-deductible purchase payments, the amount of any distribution, the amount by which non-deductible purchase payments for all years exceed non taxable distributions for all years, and the total balance of all IRAs, SEP IRAs, or Simple IRAs.
Distributions from Roth IRAs may be either taxable or nontaxable, depending upon whether they are “qualified distributions” or “non-qualified distributions.”
CONTACTING THE SOLUTIONS CENTER
All inquiries, paperwork, information requests, service requests, and transaction requests should be made to the Solutions Center:
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Nationwide will use reasonable procedures to confirm that instructions are genuine and will not be liable for following instructions that it reasonably determined to be genuine. Nationwide may record telephone requests. Telephone and computer systems may not always be available. Any telephone system or computer can experience outages or slowdowns for a variety of reasons. The outages or slowdowns could prevent or delay processing. Although Nationwide has taken precautions to support heavy use, it is still possible to incur an outage or delay. To avoid technical difficulties, submit transaction requests by mail.
We may be required to provide information about your Contract to government regulators. If mandated under applicable law, Nationwide may be required to reject a Purchase Payment and to refuse to process transaction requests under the Contract until instructed otherwise by the appropriate regulator.
DISTRIBUTION
Nationwide Investment Services Corporation (“NISC”), acts as the national distributor of the contracts sold through this prospectus. NISC is registered as a broker-dealer under the Securities Exchange Act of 1934 (“1934 Act”), and is a member of the Financial Industry Regulatory Authority (“FINRA”). NISC’s address is One Nationwide Plaza, Columbus, Ohio 43215. In Michigan only, NISC refers to Nationwide Investment Svcs. Corporation. NISC is a wholly owned subsidiary of Nationwide.
Contracts sold through this prospectus can be purchased through registered representatives, appointed by Nationwide, of FINRA broker-dealer firms. Nationwide pays broker-dealers compensation for promoting, marketing and selling the contracts it sponsors. In turn, the broker-dealers pay a portion of the compensation to their registered representatives, under their own arrangements.
Nationwide does not expect the compensation paid to such broker-dealers (including NISC) to exceed 8% of Purchase Payments (on a present value basis) for sales of the contracts described in this prospectus.
ABOUT NATIONWIDE
Nationwide is a stock life insurance company organized under Ohio law in March 1929, with its home office at One Nationwide Plaza, Columbus, Ohio 43215. Nationwide is a provider of life insurance, annuities and retirement products. It is admitted to do business in all states, the District of Columbia, Guam, the U.S. Virgin Islands, and Puerto Rico.
Nationwide is a member of the Nationwide group of companies. Nationwide Mutual Insurance Company and Nationwide Mutual Fire Insurance Company (the “Companies”) are the ultimate controlling persons of the Nationwide group of companies. The Companies were organized under Ohio law in December of 1925 and 1933 respectively. The Companies engage in a general insurance and reinsurance business, except life insurance.
To request additional information about Nationwide, contact the Solutions Center.
See “Nationwide Life Insurance Company and Subsidiaries” for additional information.
Nationwide may use the proceeds from this offering for any legitimate corporate purpose.
GENERAL ACCOUNT AND SEPARATE ACCOUNTS
The assets in our general account are chargeable with claims by any of our contract owners and creditors, and are subject to the liabilities arising from any of our businesses. Our general account assets do not include the assets in the Index-Linked Annuity Separate Account, an insulated separate account where we hold assets to support future Strategy Earnings. Our general account assets also do not include the assets in any other insulated Nationwide separate accounts.
We exercise sole discretion over the investment of our general account assets, and we bear the associated investment risk. You will not share in the investment experience of our general account assets. We invest our general account assets in accordance with state insurance law.
The Index-Linked Annuity Separate Account is a non-unitized separate account and is not registered with the U.S. Securities and Exchange Commission under the Investment Company Act of 1940. We own and control the assets in the Index-Linked Annuity Separate Account and you do not have any interest in or claim to the assets in the Index-Linked Annuity Separate Account. Unlike some variable annuities that utilize separate accounts, you do not share in the investment performance of the assets innon-unitized separate account.
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We may invest the assetsDistribution (Marketing) of the Index-Linked Annuity Separate Account in any asset permittedGTOs
EXEMPTION FROM PERIODIC REPORTING
Nationwide is relying on the exemption provided by Rule 12h-7 under the 1934 Act. In reliance on that exemption, Nationwide does not file periodic reports that would be otherwise required under the 1934 Act.
STATEMENTS TO CONTRACT OWNERS
Prior to the Annuitization Date, statements will be sent to the Contract Owner’s last known address. You should promptly notify the Solutions Center of any address change.
We will mail the following statements to you:
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You can receive information from Nationwide faster and reduce the amount of mail they receive by signing up for Nationwide’s eDelivery program. Nationwide will notify you by email when important documents (statements, prospectuses and other documents) are ready for you to view, print, or download from Nationwide’s secure server. To choose this option, go to nationwide.com/login.
You should review statements carefully. All errors or corrections must be reported to Nationwide immediately to assure proper crediting to the Contract. Unless Nationwide is notified within 30 days of receipt of the statement, Nationwide will assume statements are correct.
MISTATEMENTS OF AGE OR SEX
If the age or sex of the Contract Owner, Joint Owner, Annuitant, Contingent Annuitant, Beneficiary or Contingent Beneficiary is misstated, all payments and benefits under the Contract will be adjusted. Payments and benefits will be based on the correct age or sex. Proof of age of any of these individuals may be required at any time, in a form satisfactory to Nationwide. When the age or sex of any individual named in the application, including any supplemental applications, has been misstated, the dollar amount of any overpayment will be deducted from the next payment or payments due under the Contract.
The dollar amount of any underpayment made by Nationwide as a result of an age or sex misstatement will be paid in full with the next payment due under the Contract. The dollar amount of any overpayment made by Nationwide as a result of an age or sex misstatement will reduce the next payment due under the Contract, and will continue to reduce subsequent payments under the Contract, until all of the overpayment is recouped. Any adjustment for overpayment or underpayment will include interest charged or credited, as applicable, at the rate required by law, but not exceeding 6%.
EXPERTS
To be filed by a subsequent Pre-Effective Amendment.
LEGAL OPINION
variable contracts.
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LEGAL PROCEEDINGS
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION
basis of accounting other than U.S. generally accepted accounting principles. Accordingly, the KPMG LLP audit report states that the financial statements are not presented fairly in accordance with U.S. generally accepted accounting principles and further states that those statements are presented fairly, in all material respects, in accordance with statutory accounting practices prescribed or permitted by the Ohio Department of Insurance.
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APPENDIX A: ADDITIONAL INDEX DISCLOSURES
S&P 500 INDEX
The “S&P 500”
[ | ] | 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 |
* | Assumes no variable annuity contract contingent deferred sales charges are applicable. In jurisdictions where the .0025 is not permitted in the denominator, the Surrender Value is $12,374.52. |
a | = | The CMT rate published on Friday, and placed in effect by Nationwide for allocations made to the GTO on the following Wednesday through Tuesday. |
b | = | The CMT rate published on Friday, and placed in effect by Nationwide for withdrawals, transfers or other distributions giving rise to a Market Value Adjustment on the following Wednesday through Tuesday. |
d | = | The number of days remaining in the Guaranteed Term. |
[ | ] | 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 |
* | Assumes no variable annuity contract contingent deferred sales charges are applicable. In jurisdictions where the .0025 is not permitted in the denominator, the Surrender Value is $11,771.69. |
a | = | The CMT rate published on Friday, and placed in effect by Nationwide for allocations made to the GTO on the following Wednesday through Tuesday. |
b | = | The CMT rate published on Friday, and placed in effect by Nationwide for withdrawals, transfers or other distributions giving rise to a Market Value Adjustment on the following Wednesday through Tuesday. |
d | = | The number of days remaining in the Guaranteed Term. |
[ | ] | 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 |
* | Assumes no variable annuity contract contingent deferred sales charges are applicable. In jurisdictions where the .0025 is not permitted in the denominator, the Surrender Value is $12,374.52. |
a | = | The interest rate swap published two days before the date the allocation to the GTO was made. If no interest rate swap is available for this date, then the most recent available rate prior to that date will be used. |
b | = | The interest rate swap published two days before the date of withdrawal, transfer or other distribution giving rise to a Market Value Adjustment. If no interest rate swap is available for this date, then the most recent available rate prior to that date will be used. |
d | = | The number of days remaining in the Guaranteed Term. |
[ | ] | 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 |
* | Assumes no variable annuity contract contingent deferred sales charges are applicable. In jurisdictions where the .0025 is not permitted in the denominator, the Surrender Value is $11,771.69. |
a | = | The interest rate swap published two days before the date the allocation to the GTO was made. If no interest rate swap is available for this date, then the most recent available rate prior to that date will be used. |
b | = | The interest rate swap published two days before the date of the withdrawal, transfer or other distribution giving rise to a Market Value Adjustment. If no interest rate swap is available for this date, then the most recent available rate prior to that date will be used. |
d | = | The number of days remaining in the Guaranteed Term. |
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, | ||||||
(in millions) | 2019 | 2018 | 2017 | |||
Total revenues | $883 | $895 | $911 | |||
Pre-tax operating earnings | $10 | $28 | $32 |
December 31, | ||||||
(in millions) | 2019 | 2018 | 2017 | |||
Total revenues | $6,010 | $5,656 | $6,183 | |||
Pre-tax operating earnings | $434 | $375 | $379 |
December 31, | ||||||
(in millions) | 2019 | 2018 | 2017 | |||
Total revenues | $5,470 | $5,181 | $5,336 | |||
Pre-tax operating earnings | $128 | $118 | $118 |
December 31, | ||||||
(in millions) | 2019 | 2018 | 2017 | |||
Total revenues | $2,089 | $2,263 | $2,372 | |||
Pre-tax operating earnings | $461 | $489 | $456 |
S&P DOW JONES INDICES DOES NOT GUARANTEE THE ADEQUACY, ACCURACY, TIMELINESS AND/OR THE COMPLETENESS OF THE S&P 500 OR ANY DATA RELATED THERETO OR ANY COMMUNICATION, INCLUDING BUT NOT LIMITED TO, ORAL OR WRITTEN COMMUNICATION (INCLUDING ELECTRONIC COMMUNICATIONS) WITH RESPECT THERETO. S&P DOW JONES INDICES SHALL NOT BE SUBJECT TO ANY DAMAGES OR LIABILITY FOR ANY ERRORS, OMISSIONS, OR DELAYS THEREIN. S&P DOW JONES INDICES MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES, OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE OR AS TO RESULTS TO BE OBTAINED BY NATIONWIDE, OWNERS OF THE CONTRACT, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE S&P 500 OR WITH RESPECT TO ANY DATA RELATED THERETO. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT WHATSOEVER SHALL S&P DOW JONES INDICES BE LIABLE FOR ANY INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE, OR CONSEQUENTIAL DAMAGES INCLUDING BUT NOT LIMITED TO, LOSS OF PROFITS, TRADING LOSSES, LOST TIME OR GOODWILL, EVEN IF THEY HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, WHETHER IN CONTRACT, TORT, STRICT LIABILITY, OR OTHERWISE. THERE ARE NO THIRD PARTY BENEFICIARIES OF ANY AGREEMENTS OR ARRANGEMENTS BETWEEN S&P DOW JONES INDICES AND NATIONWIDE, OTHER THAN THE LICENSORS OF S&P DOW JONES INDICES.
J.P. MORGAN MOZAIC II INDEX
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The J.P. Morgan Index has been designed and is compiled, calculated, maintained and sponsored by J.P. Morgan without regard to the Licensee, the Product or any Contract Owner. The ability of the Licensee to make use of the J.P. Morgan Indexunrealized loss position. Investment losses, however, may be terminated on short notice and it is the responsibility of the Licensee to provide for the consequences of that in the design of the Product. J.P. Morgan does not accept any legal obligation to take the needs of any person who may invest in a Product into account in designing, compiling, calculating, maintaining or sponsoring the J.P. Morgan Index or in any decision to cease doing so.
J.P. Morgan does not give any representation, warranty or undertaking, of any type (whether express or implied, statutory or otherwise) in relation to the J.P. Morgan Index, as to condition, satisfactory quality, performance or fitness for purpose or as to the results to be achieved by an investment in the Product or any data included in or omissions from the J.P. Morgan Index, or the use of the J.P. Morgan Index in connection with the Product or the veracity, currency, completeness or accuracy of the information on which the J.P. Morgan Index is based (and without limitation, J.P. Morgan accepts no liability to any Contract Owner for any errors or omissions in that information or the results of any interruption to it and J.P. Morgan shall be under no obligation to advise any person of any such error, omission or interruption). To the extent any such representation, warranty or undertaking could be deemed to have been given by J.P. Morgan, it is excluded saverealized to the extent that such exclusion is prohibitedliquidity needs require the disposition of bonds and stocks in unfavorable interest rate, liquidity or credit spread environments.
The J.P. Morgan Index is the exclusive property of J.P. Morgan. J.P. Morgan is under no obligation to continue compiling, calculating, maintaining or sponsoring the J.P. Morgan Indexresidential and may delegate or transfer to a third party some or all of its functions in relation to the J.P. Morgan Index.
J.P. Morgan may independently issue or sponsor other indices or products that are similar to and may compete with the J.P. Morgan Index and the Product. J.P. Morgan may also transact in assets referencedcommercial mortgage sector could cause declines in the J.P. Morgan Index (orvalue of that portion of the Company’s investment portfolios.
No actual investment which allowed trackingequity method of accounting in the performance of the Index was possible before December 2016. Any hypothetical “back-tested” information provided is illustrative only and derived from proprietary models designed with the benefit of hindsight based on certain data (which may or may not correspond with the data that someone else would use to back-test the Indices) and assumptions and estimates (not all ofCompany’s statutory financial statements, which may be specified hereinsignificantly different than the values at which the investments may ultimately be realized.
• | 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. |
• | 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. |
Each of the above paragraphs is severable. If the contents of any such paragraph is held to be or becomes invalid or unenforceable in any respect in any jurisdiction, it shall have no effect in that respect, but without prejudice to the remainder of this notice.
MSCI EAFE INDEX
The product referred to herein is not sponsored, endorsed, or promoted by MSCI, and MSCI bears no liability with respect to any such product or any index on which such product is based. The Contract contains a more detailed description of the limited relationship MSCI has with Nationwide and any related funds.
THIS PRODUCT IS NOT SPONSORED, ENDORSED, SOLD OR PROMOTED BY MSCI INC.(“MSCI”), ANY OF ITS AFFILIATES, ANY OF ITS INFORMATION PROVIDERS OR ANY OTHER THIRD PARTY INVOLVED IN, OR RELATED TO, COMPILING, COMPUTING OR CREATING ANY MSCI INDEX (COLLECTIVELY, THE“MSCI PARTIES”). THE MSCI INDEXES ARE THE EXCLUSIVE PROPERTY OF MSCI. MSCI AND THE MSCI INDEX
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NAMES ARE SERVICE MARK(S) OF MSCI OR ITS AFFILIATES AND HAVE BEEN LICENSED FOR USE FOR CERTAIN PURPOSES BY NATIONWIDE. NONE OF THE MSCI PARTIES MAKES ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, TO THE ISSUER OR OWNERS OF THIS PRODUCT OR ANY OTHER PERSON OR ENTITY REGARDING THE ADVISABILITY OF INVESTING IN PRODUCTS GENERALLY OR IN THIS PRODUCT PARTICULARLY OR THE ABILITY OF ANY MSCI INDEX TO TRACK CORRESPONDING STOCK MARKET PERFORMANCE. MSCI OR ITS AFFILIATES ARE THE LICENSORS OF CERTAIN TRADEMARKS, SERVICE MARKS AND TRADE NAMES AND OF THE MSCI INDEXES WHICH ARE DETERMINED, COMPOSED AND CALCULATED BY MSCI WITHOUT REGARD TO THIS PRODUCT OR THE ISSUER OR OWNERS OF THIS PRODUCT OR ANY OTHER PERSON OR ENTITY. NONE OF THE MSCI PARTIES HAS ANY OBLIGATION TO TAKE THE NEEDS OF THE ISSUER OR OWNERS OF THIS PRODUCT OR ANY OTHER PERSON OR ENTITY INTO CONSIDERATION IN DETERMINING, COMPOSING OR CALCULATING THE MSCI INDEXES. NONE OF THE MSCI PARTIES IS RESPONSIBLE FOR OR HAS PARTICIPATED IN THE DETERMINATION OF THE TIMING OF, PRICES AT, OR QUANTITIES OF THIS PRODUCT TO BE ISSUED OR IN THE DETERMINATION OR CALCULATION OF THE EQUATION BY OR THE CONSIDERATION INTO WHICH THIS PRODUCT IS REDEEMABLE. FURTHER, NONE OF THE MSCI PARTIES HAS ANY OBLIGATION OR LIABILITY TO THE ISSUER OR OWNERS OF THIS PRODUCT OR ANY OTHER PERSON OR ENTITY IN CONNECTION WITH THE ADMINISTRATION, MARKETING OR OFFERING OF THIS FUND.
ALTHOUGH MSCI SHALL OBTAIN INFORMATION FOR INCLUSION IN OR FOR USE IN THE CALCULATION OF THE MSCI INDEXES FROM SOURCES THAT MSCI CONSIDERS RELIABLE, NONE OF THE MSCI PARTIES WARRANTS OR GUARANTEES THE ORIGINALITY, ACCURACY AND/OR THE COMPLETENESS OF ANY MSCI INDEX OR ANY DATA INCLUDED THEREIN. NONE OF THE MSCI PARTIES MAKES ANY WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY THE ISSUER OF THE PRODUCT, OWNERS OF THE FUND, OR ANY OTHER PERSON OR ENTITY, FROM THE USE OF ANY MSCI INDEX OR ANY DATA INCLUDED THEREIN. NONE OF THE MSCI PARTIES SHALL HAVE ANY LIABILITY FOR ANY ERRORS, OMISSIONS OR INTERRUPTIONS OF OR IN CONNECTION WITH ANY MSCI INDEX OR ANY DATA INCLUDED THEREIN. FURTHER, NONE OF THE MSCI PARTIES MAKES ANY EXPRESS OR IMPLIED WARRANTIES OF ANY KIND, AND THE MSCI PARTIES HEREBY EXPRESSLY DISCLAIM ALL WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, WITH RESPECT TO EACH MSCI INDEX AND ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL ANY OF THE MSCI PARTIES HAVE ANY LIABILITY FOR ANY DIRECT, INDIRECT, SPECIAL, PUNITIVE, CONSEQUENTIAL OR ANY OTHER DAMAGES (INCLUDING LOST PROFITS) EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
NYSE® ZEBRA EDGE® INDEX
The mark NYSE® is a registered trademark of NYSE Group, Inc., Intercontinental Exchange Inc. or their affiliates and is being utilized by ICE Data Indices, LLC under license and agreement. The marks Zebra® and Zebra Edge® are registered trademarks of Zebra Capital Management, LLC, may not be used without prior authorization from Zebra Capital Management, LLC, and are being utilized by ICE Data Indices, LLC under license and agreement.
ICE Data Indices, LLC owns all intellectual and other property rights to the NYSE® Zebra Edge® Index (the “Index”), including the composition and the calculation of the Index, excluding the methodology and formula for the Index. Zebra Capital Management, LLC owns all intellectual and other property rights to the methodology and formula for the Index, which are being used by ICE Data Indices, LLC under license from Zebra Capital Management, LLC (together with its subsidiaries and affiliates, “Zebra”).
The Index has been licensed by ICE Data Indices, LLC (together with its subsidiaries and affiliates, “IDI”) to UBS AG and sub-licensed by UBS AG (together with its subsidiaries and affiliates, “UBS”) to Nationwide Life Insurance Company (“Nationwide”). Neither Nationwide nor the Contract (the “Product”) is sponsored, operated, endorsed, recommended, sold or promoted by Zebra, IDI or UBS. Neither Zebra, IDI nor UBS makes any representation or gives any warranty, express or implied, regarding the advisability or possible benefits of purchasing the Product or any other financial product. Clients should undertake their own due diligence and seek appropriate professional advice before purchasing any financial product, including the Product.
The Index and other information disseminated by IDI are for informational purposes only, are provided on an “as is” basis, and are not intended for trading purposes. Neither Zebra nor IDI makes any warranty, express or implied, as to, without limitation, (i) the correctness, accuracy, reliabilityCommission or other characteristics of the Index, (ii) the results to be obtained by any person or entity from the use of the Index for any purpose, or (iii) relating to the use of the Index and other information covered by the Product, including, but not limited to, express or implied warranties of merchantability, fitness for a particular purpose or use, title or non-infringement. IDI does not warrant that the Index will be uninterrupted and is under no obligation to continue compiling, calculating, maintaining or sponsoring the Index.
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The Index (including the methodology(ies) and formula(s) therefor) has been designed and is compiled, calculated, maintained and sponsored without regard to any financial products that reference the Index (including the Product), any licensee, sub-licensor or sub-licensee of the Index, any client or any other person. Zebra, IDI and UBS may independently issue and/or sponsor other indices and products that are similar to and/or may compete with the Index and the Product. Zebra, IDI and UBS may also transact in assets referenced in the Index (or in financial instruments such as derivatives that reference those assets), including those whichstandard-setting bodies could have a positive or negative effectmaterial adverse impact on the valueCompany’s financial condition or results of operations.
None of Zebra, IDI or UBS shall bear any responsibility or liability, whether for negligence or otherwise, with respect to (i) any inaccuracies, omissions, mistakes or errors in the methodology(ies) and formula(s) for, or computation of, the Index (and shall not be obligated to advise any person of and/or to correct any such inaccuracies, omissions, mistakes or errors), (ii) the use of and/or reference to the Index by Zebra, IDI, UBS or any other person in connection with any financial product or otherwise, or (iii) any economic or other loss which may be directly or indirectly sustained by any client or other person dealing with any such financial product or otherwise. Any client or other person dealing with such financial products does so, therefore, in full knowledge of this disclaimer and can place no reliance whatsoever on Zebra, IDI or UBS nor bring claims, actions or legal proceedings in any manner whatsoever against any of them.
Bloomberg Barclays U.S. Corporate Index
BLOOMBERG® is a trademark and service mark of Bloomberg Finance L.P. BARCLAYS® is a trademark and service mark of Barclays Bank Plc, used under license. Bloomberg Finance L.P.NAIC and its affiliates, including Bloomberg Index Services Limited (“BISL”) (collectively, “Bloomberg”),task forces and committees, as well as by state insurance departments, in an effort to address emerging issues and otherwise improve or Bloomberg’s licensors own all proprietary rightsalter financial reporting. Calculations made in the “Bloomberg Barclays U.S. Corporate Index.”
Neither Barclays Bank PLC, Barclays Capital Inc., nor any affiliate (collectively “Barclays”) nor Bloomberg is the issuer or producer of Nationwide Defined ProtectionSM Annuity and neither Bloomberg nor Barclays has any responsibilities, obligations or duties to purchasers in Nationwide Defined ProtectionSM Annuity. The Bloomberg Barclays U.S. Corporate Index is licensed for use by Nationwide Life Insurance Company (“Nationwide”) as the Issuer of Nationwide Defined ProtectionSM Annuity. The only relationship of Bloomberg and Barclaysaccordance with the Issuer in respect of Bloomberg Barclays U.S. Corporate Index is the licensing of the Bloomberg Barclays U.S. Corporate Index, which is determined, composed and calculated by BISL, or any successor thereto, without regard to the Issuer of Nationwide Defined ProtectionSM Annuity or the owners of Nationwide Defined ProtectionSM Annuity.
Additionally, Nationwide may for itself execute transaction(s) with Barclays in or relating to Bloomberg Barclays U.S. Corporate Index in connection with Nationwide Defined ProtectionSM Annuity. Purchasers acquire Nationwide Defined ProtectionSM Annuity from Nationwide and purchasers neither acquire any interest in Bloomberg Barclays U.S. Corporate Index nor enter into any relationship of any kind whatsoever with Bloomberg or Barclays upon making a purchase in Nationwide Defined ProtectionSM Annuity. Nationwide Defined ProtectionSM Annuity is not sponsored, endorsed, sold or promoted by Bloomberg or Barclays. Neither Bloomberg nor Barclays makes any representation or warranty, express or implied, regarding the advisability of the purchase of Nationwide Defined ProtectionSM Annuity or the advisability of purchasing securities generally orSAP also govern the ability of the Bloomberg Barclays U.S. Corporate IndexCompany’s insurance entities to track correspondingpay dividends to their respective parent companies. The NAIC is working to reform state regulation in various areas, including comprehensive reforms relating to life insurance reserves and the accounting for such reserves. The Company cannot predict whether or relative market performance. Neither Bloomberg nor Barclays has passed onin what form reforms will be enacted and, if so, whether the legalityenacted reforms will positively or suitabilitynegatively affect the Company’s insurance entities.
The licensing agreement between Bloomberga trust account by Union Hamilton Reinsurance Ltd. and Barclays is solely for the benefit of Bloomberg and Barclays and notheld for the benefit of the ownersceding insurer, under a reinsurance agreement that increased NLAIC’s valuation of Nationwide Defined ProtectionSM Annuity, investorsOlentangy by $67 million as of December 31, 2019 and 2018. Eagle applies prescribed practices from the State of Ohio that allow an alternative reserve basis on assumed obligations, with respect to specified GMDB and GLWB contract riders provided under substantially all of the variable annuity contracts issued and to be issued by NLIC, and effective December 31, 2019, an alternative reserve basis on assumed obligations with respect to specified GLWB contract riders provided under certain fixed indexed annuity contracts issued and to be issued by NLAIC. The prescribed practice related to NLIC guaranteed risks decreased NLIC’s valuation of this subsidiary by $411 million and $183 million as of December 31, 2019 and 2018, respectively. The prescribed practice related to NLAIC guaranteed risks increased NLIC’s valuation of this subsidiary by $226 million as of December 31, 2019.
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NEITHER BLOOMBERG NOR BARCLAYS SHALL HAVE ANY LIABILITY TO THE ISSUER, INVESTORS OR OTHER THIRD PARTIES FOR THE QUALITY, ACCURACY AND/OR COMPLETENESS OF THE BLOOMBERG BARCLAYS U.S. CORPORATE INDEX OR ANY DATA INCLUDED THEREIN OR FOR INTERRUPTIONS IN THE DELIVERY OF THE BLOOMBERG BARCLAYS U.S. CORPORATE INDEX. NEITHER BLOOMBERG NOR BARCLAYS MAKES ANY WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY THE ISSUER, THE INVESTORS OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE BLOOMBERG BARCLAYS U.S. CORPORATE INDEX OR ANY DATA INCLUDED THEREIN. NEITHER BLOOMBERG NOR BARCLAYS MAKES ANY EXPRESS OR IMPLIED WARRANTIES, AND EACH HEREBY EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE BLOOMBERG BARCLAYS U.S. CORPORATE INDEX OR ANY DATA INCLUDED THEREIN. BLOOMBERG RESERVES THE RIGHT TO CHANGE THE METHODS OF CALCULATION OR PUBLICATION, OR TO CEASE THE CALCULATION OR PUBLICATION OF THE BLOOMBERG BARCLAYS U.S. CORPORATE INDEX, AND NEITHER BLOOMBERG NOR BARCLAYS SHALL BE LIABLE FOR ANY MISCALCULATION OF OR ANY INCORRECT, DELAYED OR INTERRUPTED PUBLICATION WITH RESPECT TO ANY OF THE BLOOMBERG BARCLAYS U.S. CORPORATE INDEX. NEITHER BLOOMBERG NOR BARCLAYS SHALL BE LIABLE FOR ANY DAMAGES, INCLUDING, WITHOUT LIMITATION, ANY SPECIAL, INDIRECT OR CONSEQUENTIAL DAMAGES, OR ANY LOST PROFITS, EVEN IF ADVISED OF THE POSSIBILITY OF SUCH, RESULTING FROM THE USE OF THE BLOOMBERG BARCLAYS U.S. CORPORATE INDEX OR ANY DATA INCLUDED THEREIN OR WITH RESPECT TO NATIONWIDE DEFINED PROTECTIONSM ANNUITY.
Noneany potential regulatory changes resulting from such proposals.
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APPENDIX B: MODIFIED STRATEGY VALUE FORMULA AND EXAMPLES
MODIFIED STRATEGY VALUE FORMULA AND EXAMPLES
The Modified Strategy Value is the maximum Gross Withdrawal that may be taken from a Strategy as of a given date during a Strategy Term. On a Strategy Term End Date, the Modified Strategy Value is equal to your Strategy Value plus any Term Strategy Earnings. On any day other than the Strategy Term End Date, the Modified Strategy Value is equal to your Strategy Value plus any Interim Strategy Earnings that would be applied if you withdrew your entire Strategy Value. The maximum Gross Withdrawal from a Strategy would be subject to any applicable CDSC and MVA.
Each day during a Strategy Term, we calculate the Modified Strategy Valuereport, for a Strategy usingfurther discussion of RBC.
Modified Strategy Value = LesserCompany.
A = Strategy Accumulation Value;
B = C + D, where:
C = Thethe tax advantages of purchasing and owning annuity and life insurance products, such as disallowing a portion of the Remaining Preferred Withdrawal Amount attributableincome tax interest deduction for many businesses that own life insurance, and could impose a "financial crisis responsibility fee" on certain insurance companies. In addition, Congress has considered proposals to further limit contributions to retirement plans and accelerate the distributions from such plans after the death of the participant. If these proposals or other
D = E x (F - G), but never less than 0, where:
E = 1 + NSEP
F = Strategy Value
G = C / (1 + SEP)
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APPENDIX C: NON-PREFERRED STRATEGY EARNINGS PERCENTAGE
The following isCompany’s businesses. In addition, the Non-Preferred Strategy Earnings Percentage (NSEP) formula that we useadoption of "principles-based" approaches for statutory reserves may lead to calculate Interim Strategy Earnings for Non-Preferred Withdrawals:
NSEP = Greater of A or B, where:
A = C x D, where:
C = Adjusted Index Performance
D = 1 if C is less than 0, or (ET / ST) if C is greater than or equal to zero
ET = Elapsed Term(i.e., the number of calendar days elapsed in the Strategy Term divided by 365)
ST = Strategy Term(in whole years, e.g., 1, 2, 3)
B = E – F x (ST – ET), where:
E = Protection Level – 100%
F = Non-Preferred Withdrawal Adjustment Percentage
ST = Strategy Term in years(in whole years,e.g., 1, 2, 3)
ET = Elapsed Term(i.e., the number of calendar days elapsed in the Strategy Term divided by 365)
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APPENDIX D: WITHDRAWAL EXAMPLES
A contract owner makes a Purchase Payment of $100,000 and allocates it all to a single Strategy. On the date of the Purchase Payment the Strategy Value is $100,000. The Strategy has the following Crediting Factors:
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EVENT 1: PREFERRED AND NON-PREFERRED WITHDRAWAL WITH POSITIVE INTERIM STRATEGY EARNINGS
Assume the contract owner takes a Gross Withdrawal of $14,000 after 219 days have elapsed since the start of the Strategy Term. Assume the following values apply on the date of the withdrawal:
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The table below illustrates the calculation of the SEP and NSEP on that date.
SEP and NSEP
Step One | Step Two | Step Three | Step Four | Step Five | Step Six | Step Seven | Step Eight | |||||||
Elapsed Term | Adjusted Index Performance (AIP) | Downside for SEP | Downside for NSEP | Elapsed Term / Term | Factor to use in NSEP | Strategy Earnings Percentage (SEP) | Non-Preferred Strategy Earnings Percentage (NSEP) | |||||||
0.60 | 25.00% | -10.00% | -14.80% | 0.20 | 0.20 | 25.00% | 5.00% |
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The table below illustrates the calculation of Interim Strategy Earnings appliedsignificant changes to the Strategyway tax reserves are determined and thus reduce future tax deductions.
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Strategy Earnings
Step One | Step Two | Step Three | Step Four | Step Five | ||||
Dollar Amount of Preferred Withdrawal | Interim Strategy Withdrawal | Dollar Amount of Non-Preferred | Interim Strategy Non-Preferred
| Total Interim Strategy Earnings | ||||
$7,000 | $1,400 | $7,000 | $333 | $1,733 |
where:
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The table below illustrates the calculationTax Cuts and Jobs Act. Changes primarily in asset, insurance and interest rate risk factors increased capital and decreased RBC ratios of the Contract ValueCompany’s insurance entities. RBC ratios after the withdrawal.
Contract Value
Contract Value before Withdrawal | Gross Withdrawal | Total Strategy Earnings | Contract Value after Withdrawal | |||
$100,000 | $14,000 | $1,733 | $87,733 |
where:
Contract Value after Withdrawal: $87,733 = $100,000 - $14,000 + $1,733
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adjustment remained well above required minimums.
Cash Withdrawal
Step One | Step Two | Step Three | Step Four | Step Five | ||||
Gross Withdrawal | CDSC Base/MVA Base | CDSC | MVA | Cash Withdrawal | ||||
$14,000 | $7,000 | $420 | $228 | $13,808 |
where:
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EVENT 2: PREFERRED AND NON-PREFERRED WITHDRAWAL WITH NEGATIVE INTERIM STRATEGY EARNINGS
Assumeability of companies within the contract owner takesaffected industry sectors to pay the interest or principal on their securities, or how the value of any underlying collateral might be affected.
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The table below illustrates the calculation of the SEP and NSEP ontheir obligations, may have or obtain pricing or other competitive advantages. Competitors that date.
SEP and NSEP
Step One | Step Two | Step Three | Step Four | Step Five | Step Six | Step Seven | Step Eight | |||||||
Elapsed Term | Adjusted Index Performance (AIP) | Downside for SEP | Downside for NSEP | Elapsed Term / Term | Factor to use in NSEP | Strategy Earnings Percentage (SEP) | Non-Preferred Strategy Earnings Percentage (NSEP) | |||||||
1.096 | -25.10% | -10.00% | -13.81% | 0.365 | 1.00 | -10.00% | -13.81% |
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The table below illustrates the calculation of Interim Strategy Earnings appliedare not subject to the Strategysame regulatory framework may also have a pricing advantage as a result of lower capital requirements.
Strategy Earnings
Step One | Step Two | Step Three | Step Four | Step Five | ||||
Dollar Amount of Preferred Withdrawal | Interim Strategy Withdrawal | Dollar Amount of Non-Preferred | Interim Strategy Non-Preferred | Total Interim Strategy Earnings | ||||
$6,141 | -$682 | $7,859 | -$1,259 | -$1,941 |
where:
Year ended or as of December 31, | ||||||||||
(in millions) | 2019 | 2018 | 2017 | 2016 | 2015 | |||||
Statutory Statements of Operations Data | ||||||||||
Total revenues | $14,452 | $13,995 | $14,802 | $14,213 | $15,149 | |||||
Total benefits and expenses | $13,419 | $12,985 | $13,817 | $13,245 | $14,420 | |||||
Net income | $629 | $711 | $1,039 | $751 | $167 | |||||
Statutory Statements of Admitted Assets, Liabilities, Capital and Surplus Data | ||||||||||
Total invested assets | $48,044 | $45,020 | $42,507 | $41,115 | $38,520 | |||||
Total admitted assets | $155,133 | $139,341 | $145,670 | $133,345 | $126,861 | |||||
Total liabilities | $146,311 | $132,496 | $139,721 | $128,137 | $122,294 | |||||
Total capital and surplus | $8,822 | $6,845 | $5,949 | $5,208 | $4,567 |
(a) |
(b) | actual claims losses exceeding reserves for claims; |
(c) |
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(d) | the degree to which the Company chooses not to hedge risks, or the potential ineffectiveness or insufficiency of |
(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, 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, 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 |
(i) | |
(j) | failure to maintain or expand distribution channels; |
(k) |
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(l) | loss of key vendor relationships or failure of a vendor to protect confidential and proprietary information; |
(m) |
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(n) |
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(o) | |
(p) | fluctuations in RBC levels |
(q) |
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(r) | deviations from assumptions regarding future persistency, mortality and |
(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. |
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Contract Value
Contract Value before Event | Gross Withdrawal | Total Strategy Earnings | Contract Value after Event | |||
$87,733 | $14,000 | -$1,941 | $71,792 |
where:
Contract Value after Event: $71,792 = $87,733 - $14,000 + (-$1,941)
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The table below illustrates the calculationnew information, future events or development, except as required by law. For a more complete description of the Cash Withdrawal receivedvarious risks, uncertainties, and other factors that could affect future results, seeRisk Factors.
December 31, | ||||||
(in millions) | 2019 | 2018 | Change | |||
Revenues | ||||||
Premiums and annuity considerations | $10,168 | $9,829 | 3% | |||
Net investment income | 1,974 | 1,927 | 2% | |||
Amortization of interest maintenance reserve | (2) | (1) | (100%) | |||
Other revenues | 2,312 | 2,240 | 3% | |||
Total revenues | $14,452 | $13,995 | 3% | |||
Benefits and expenses | ||||||
Benefits to policyholders and beneficiaries | $14,782 | $13,961 | 6% | |||
Increase in reserves for future policy benefits and claims | 1,501 | 736 | 104% | |||
Net transfers from separate accounts | (3,747) | (2,468) | (52%) | |||
Commissions | 674 | 670 | 1% | |||
Dividends to policyholders | 38 | 40 | (5%) | |||
Reserve adjustment on reinsurance assumed | (246) | (352) | 30% | |||
Other expenses | 417 | 398 | 5% | |||
Total benefits and expenses | $13,419 | $12,985 | 3% | |||
Income before federal income tax expense and net realized capital losses on investments | $1,033 | $1,010 | 2% | |||
Federal income tax (benefit) expense | (73) | 64 | (214%) | |||
Income before net realized capital losses on investments | $1,106 | $946 | 17% | |||
Net realized capital losses on investments, net of tax and transfers to the interest maintenance reserve | (477) | (235) | (103%) | |||
Net income | $629 | $711 | (12%) |
Cash Withdrawal
Step One | Step Two | Step Three | Step Four | Step Five | ||||
Gross Withdrawal | CDSC Base/MVA Base | CDSC | MVA | Cash Withdrawal | ||||
$14,000 | $7,859 | $393 | $255 | $13,862 |
where:
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EVENT 3: NON-PREFERRED WITHDRAWAL WITH POSITIVE INTERIM STRATEGY EARNINGS
Assume
December 31, | ||||||
(in millions) | 2018 | 2017 | Change | |||
Revenues | ||||||
Premiums and annuity considerations | $9,829 | $10,403 | (6%) | |||
Net investment income | 1,927 | 1,958 | (2%) | |||
Amortization of interest maintenance reserve | (1) | (2) | 50% | |||
Other revenues | 2,240 | 2,443 | (8%) | |||
Total revenues | $13,995 | $14,802 | (5%) | |||
Benefits and expenses | ||||||
Benefits to policyholders and beneficiaries | $13,961 | $12,879 | 8% | |||
Increase in reserves for future policy benefits and claims | 736 | 1,246 | (41%) | |||
Net transfers from separate accounts | (2,468) | (950) | (160%) | |||
Commissions | 670 | 683 | (2%) | |||
Dividends to policyholders | 40 | 46 | (13%) | |||
Reserve adjustment on reinsurance assumed | (352) | (553) | 36% | |||
Other expenses | 398 | 466 | (15%) | |||
Total benefits and expenses | $12,985 | $13,817 | (6%) | |||
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%) |
December 31, | ||||||
(in millions) | 2019 | 2018 | Change | |||
Results of Operations | ||||||
Revenues | ||||||
Premiums and annuity considerations | $413 | $410 | 1% | |||
Net investment income | 262 | 270 | (3%) | |||
Amortization of interest maintenance reserve | - | 1 | (100%) |
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) | 2018 | 2017 | Change | |||
Results of Operations | ||||||
Revenues | ||||||
Premiums and annuity considerations | $410 | $413 | (1%) | |||
Net investment income | 270 | 279 | (3%) | |||
Amortization of interest maintenance reserve | 1 | 1 | 0% | |||
Other revenues | 214 | 218 | (2%) | |||
Total revenues | $895 | $911 | (2%) | |||
Benefits and expenses | ||||||
Benefits to policyholders and beneficiaries | $713 | $761 | (6%) | |||
Increase (decrease) in reserves for future policy benefits and claims | 4 | (8) | 150% | |||
Net transfers from separate accounts | (71) | (97) | 27% | |||
Commissions | 27 | 26 | 4% | |||
Dividends to policyholders | 40 | 46 | (13%) | |||
Other expenses | 154 | 151 | 2% | |||
Total benefits and expenses | $867 | $879 | (1%) | |||
Pre-tax operating earnings | $28 | $32 | (13%) |
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December 31, | ||||||
(in millions) | 2019 | 2018 | Change | |||
Results of Operations | ||||||
Revenues | ||||||
Premiums and annuity considerations | $4,202 | $3,868 | 9% | |||
Net investment income | 319 | 319 | 0% | |||
Amortization of interest maintenance reserve | 1 | 1 | 0% | |||
Other revenues | 1,488 | 1,468 | 1% | |||
Total revenues | $6,010 | $5,656 | 6% | |||
Benefits and expenses | ||||||
Benefits to policyholders and beneficiaries | $7,993 | $7,980 | 0% | |||
Increase (decrease) in reserves for future policy benefits and claims | 25 | (211) | 112% | |||
Net transfers from separate accounts | (2,695) | (2,618) | (3%) | |||
Commissions | 442 | 434 | 2% | |||
Reserve adjustment on reinsurance assumed | (246) | (352) | 30% | |||
Other expenses | 57 | 48 | 19% | |||
Total benefits and expenses | $5,576 | $5,281 | 6% | |||
Pre-tax operating earnings | $434 | $375 | 16% |
December 31, | ||||||
(in millions) | 2018 | 2017 | Change | |||
Results of Operations | ||||||
Revenues | ||||||
Premiums and annuity considerations | $3,868 | $4,424 | (13%) | |||
Net investment income | 319 | 324 | (2%) | |||
Amortization of interest maintenance reserve | 1 | 1 | 0% | |||
Other revenues | 1,468 | 1,434 | 2% | |||
Total revenues | $5,656 | $6,183 | (9%) | |||
Benefits and expenses | ||||||
Benefits to policyholders and beneficiaries | $7,980 | $7,297 | 9% | |||
Decrease in reserves for future policy benefits and claims | (211) | (311) | 32% | |||
Net transfers from separate accounts | (2,618) | (1,149) | (128%) | |||
Commissions | 434 | 466 | (7%) | |||
Reserve adjustment on reinsurance assumed | (352) | (553) | 36% | |||
Other expenses | 48 | 54 | (11%) |
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December 31, | ||||||
(in millions) | 2018 | 2017 | Change | |||
Total benefits and expenses | $5,281 | $5,804 | (9%) | |||
Pre-tax operating earnings | $375 | $379 | (1%) |
SEP and NSEP
Step One | Step Two | Step Three | Step Four | Step Five | Step Six | Step Seven | Step Eight | |||||||
Elapsed Term | Adjusted Index Performance (AIP) | Downside for SEP | Downside for NSEP | Elapsed Term / Term | Factor to use in NSEP | Strategy Earnings Percentage (SEP) | Non-Preferred Strategy Earnings Percentage (NSEP) | |||||||
1.644 | 10.95% | -10.00% | -12.71% | 0.548 | 0.548 | 10.95% | 6.00% |
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fixed annuity modified coinsurance agreement with NLAIC.
December 31, | ||||||
(in millions) | 2019 | 2018 | Change | |||
Results of Operations | ||||||
Revenues | ||||||
Premiums and annuity considerations | $4,324 | $4,095 | 6% | |||
Net investment income | 824 | 798 | 3% | |||
Amortization of interest maintenance reserve | (4) | (3) | (33%) | |||
Other revenues | 326 | 291 | 12% | |||
Total revenues | $5,470 | $5,181 | 6% | |||
Benefits and expenses | ||||||
Benefits to policyholders and beneficiaries | $5,308 | $4,685 | 13% | |||
Increase in reserves for future policy benefits and claims | 1,135 | 876 | 30% | |||
Net transfers from separate accounts | (1,319) | (725) | (82%) | |||
Commissions | 96 | 95 | 1% | |||
Other expenses | 122 | 132 | (8%) | |||
Total benefits and expenses | $5,342 | $5,063 | 6% | |||
Pre-tax operating earnings | $128 | $118 | 8% |
December 31, | ||||||
(in millions) | 2018 | 2017 | Change | |||
Results of Operations | ||||||
Revenues | ||||||
Premiums and annuity considerations | $4,095 | $3,986 | 3% | |||
Net investment income | 798 | 807 | (1%) | |||
Amortization of interest maintenance reserve | (3) | (2) | (50%) | |||
Other revenues | 291 | 545 | (47%) | |||
Total revenues | $5,181 | $5,336 | (3%) | |||
Benefits and expenses | ||||||
Benefits to policyholders and beneficiaries | $4,685 | $4,237 | 11% | |||
Increase in reserves for future policy benefits and claims | 876 | 1,329 | (34%) | |||
Net transfers from separate accounts | (725) | (595) | (22%) | |||
Commissions | 95 | 96 | (1%) | |||
Other expenses | 132 | 151 | (13%) | |||
Total benefits and expenses | $5,063 | $5,218 | (3%) | |||
Pre-tax operating earnings | $118 | $118 | 0% |
Strategy Earnings
December 31, | ||||||
(in millions) | 2019 | 2018 | Change | |||
Results of Operations | ||||||
Revenues | ||||||
Premiums and annuity considerations | $1,229 | $1,456 | (16%) | |||
Net investment income | 569 | 540 | 5% | |||
Amortization of interest maintenance reserve | 1 | - | 0% | |||
Other revenues | 290 | 267 | 9% | |||
Total revenues | $2,089 | $2,263 | (8%) | |||
Benefits and expenses | ||||||
Benefits to policyholders and beneficiaries | $725 | $583 | 24% | |||
Increase in reserves for future policy benefits and claims | 320 | 67 | 378% | |||
Net transfers to separate accounts | 372 | 946 | (61%) |
Step One | Step Two | Step Three | Step Four | Step Five | ||||
Dollar Amount of Preferred Withdrawal | Interim Strategy Withdrawal | Dollar Amount of Non-Preferred | Interim Strategy Non-Preferred | Total Interim Strategy Earnings | ||||
$0 | $0 | $10,000 | $566 | $566 |
where:
December 31, | ||||||
(in millions) | 2019 | 2018 | Change | |||
Commissions | 106 | 114 | (7%) | |||
Other expenses | 105 | 64 | 64% | |||
Total benefits and expenses | $1,628 | $1,774 | (8%) | |||
Pre-tax operating earnings | $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 | ||||||||||
(in millions) | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | Total | |||||
Future policy benefits and claims1,2,3,4 | $5,137 | 8,336 | 7,422 | 80,877 | 101,772 | |||||
Policyholders dividends accumulation5 | 452 | - | - | - | 452 | |||||
Short-term debt6 | 203 | - | - | - | 203 | |||||
Securities lending payable7 | 133 | 133 | ||||||||
Surplus notes8 | 70 | 141 | 141 | 2,100 | 2,452 | |||||
Total | $5,995 | $8,477 | $7,563 | $82,977 | $105,012 |
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, 2019. Separate account payments are not reflected due to the matched nature of these obligations and because the contract owners bear the investment risk of such deposits. Estimated payment amounts were developed based on the Company’s historical experience and related contractual provisions. Significant assumptions incorporated in the reported amounts include future policy |
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 contractual principal payments and interest based on rates in effect on December 31, 2019. See Note 9 to the audited statutory financial statements, included in the F pages of this report for more details. |
7 | Since the timing of the return is uncertain, these obligations have been reflected in payments due in less than one year. |
8 | See Note 10 to the audited statutory financial statements, included in the F pages of this report, for a discussion of the Company’s surplus notes. |
December 31, 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 | |||||||
(in millions) | Carrying value | % of total | Carrying value | % of total | ||||
Securities lending collateral assets | 132 | 0% | 101 | 0% | ||||
Other invested assets | 958 | 2% | 883 | 2% | ||||
Total invested assets | $48,044 | 100% | $45,020 | 100% |
(in millions) | December 31, 2019 | December 31, 2018 | ||||||||||
NAIC designation | 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% | ||||||
2 | 13,933 | 14,919 | 40% | 13,075 | 12,944 | 40% | ||||||
3 | 1,115 | 1,119 | 3% | 1,085 | 1,013 | 3% | ||||||
4 | 296 | 299 | 1% | 324 | 282 | 1% | ||||||
5 | 199 | 170 | 1% | 82 | 79 | 0% | ||||||
6 | 20 | 43 | 0% | 22 | 47 | 0% | ||||||
$35,124 | $37,735 | 100% | $32,348 | $32,419 | 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% |
December 31, | ||||
(in millions) | 2019 | 2018 | ||
Alternative investments: | ||||
Private equity funds | $267 | $197 | ||
Real estate partnerships | 299 | 215 | ||
Tax credit funds | 192 | 187 | ||
Investment in Eagle | 65 | 60 | ||
Total alternative investments | $823 | $659 | ||
Derivatives collateral and receivables | 135 | 224 | ||
Total other invested assets | $958 | $883 |
Life Insurance1 | Annuities2 | Corporate Solutions and Other | Workplace Solutions3 | |||||||||||||||
(in millions) | Account value | Weighted average crediting rate | Account value | Weighted average crediting rate | Account value | Weighted average crediting rate | Account value | Weighted average crediting rate | ||||||||||
December 31, 2019 | ||||||||||||||||||
Minimum guaranteed crediting rate of 3.51% or greater | $607 | 4.00 % | $- | - % | $- | - % | $280 | 3.66 % | ||||||||||
Minimum guaranteed crediting rate of 3.01% to 3.50% | $- | - % | $203 | 3.54 % | $- | - % | $13,800 | 3.31 % | ||||||||||
Minimum guaranteed crediting rate of 2.01% to 3.00% | $562 | 3.13 % | $1,459 | 3.01 % | $2,336 | 3.12 % | $2,195 | 2.80 % | ||||||||||
Minimum guaranteed crediting rate of 0.01% to 2.00% | $37 | 2.79 % | $539 | 1.22 % | $919 | 3.25 % | $1,610 | 2.47 % | ||||||||||
No minimum guaranteed crediting rate4 | $- | - % | $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 |
|
|
|
|
|
Steven A. Ginnan |
| 52 | June 2018 | |
Eric S. Henderson | 57 | March 2012 | ||
Mark R. Thresher | 63 | January 2009 | ||
Kirt A. Walker | 56 | December 2009 |
The table
Name | Age | Position with NLIC | ||
Kirt A. Walker | 56 | NMIC Chief Executive Officer1 | ||
Gale V. King | 63 | Executive Vice President-Chief Administrative Officer | ||
Mark R. Thresher | 63 | Executive Vice President | ||
James R. Fowler | 48 | Executive Vice President-Chief Information Officer | ||
Tina Ambrozy | 49 | Senior Vice President-NF Strategic Customer Solutions | ||
Ann S. Bair | 52 | Senior Vice President-Marketing-Financial Services | ||
Pamela A. Biesecker | 58 | Senior Vice President-Head of Taxation | ||
John L. Carter | 56 | President and Chief Operating Officer-Nationwide Financial | ||
Rae Ann Dankovic | 52 | Senior Vice President-Nationwide Financial Services Legal | ||
Timothy G. Frommeyer | 55 | Senior Vice President-Chief Financial Officer | ||
Steven A. Ginnan | 52 | Senior Vice President-Chief Financial Officer-Nationwide Financial | ||
Mia S. Hairston | 51 | Senior Vice President-Nationwide Financial Human Resources | ||
Harry H. Hallowell | 59 | Senior Vice President | ||
Craig A. Hawley | 52 | Senior Vice President-Annuity Distribution | ||
Eric S. Henderson | 57 | Senior Vice President-Nationwide Annuities | ||
David LaPaul | 54 | Senior Vice President and Treasurer | ||
Jennifer B. MacKenzie | 50 | Senior Vice President-Enterprise Brand Marketing | ||
Kevin G. O’Brien | 51 | Senior Vice President-IT Chief Financial Officer, Procurement & BTO | ||
Sandra L. Rich | 59 | Senior Vice President | ||
Michael A. Richardson | 51 | Senior Vice President-Chief Information Officer Nationwide Financial Systems | ||
Denise L. Skingle | 49 | Senior Vice President-Chief Counsel-Emerging Businesses, Governance & Corporate Secretary | ||
Holly R. Snyder | 52 | Senior Vice President-Nationwide Life | ||
Michael S. Spangler | 53 | Senior Vice President-Investment Management Group | ||
Joseph D. Sprague | 59 | Senior Vice President-Nationwide Financial Network | ||
Eric Stevenson | 56 | Senior Vice President-Retirement Plan sales |
Contract Value
Contract Value before Event | Gross Withdrawal | Total Strategy Earnings | Contract Value after Event | |||
$71,792 | $10,000 | $566 | $62,358 |
where:
Contract Value after Event: $62,358 = $71,792 - $10,000 + $566
|
The table below illustratesCost Sharing Agreement, NLIC does not determine or pay any compensation to its executive officers or any other personnel providing services to NLIC. Accordingly, NLIC is not responsible for determining or paying any compensation awarded to, earned by, or paid to its executive officers. NMIC determines and pays the calculationsalaries, bonuses, and awards earned by NLIC’s executive officers. NMIC also determines whether and to what extent NLIC’s executive officers may participate in any employee benefit plans. NLIC does not have any employment agreements or compensation plans with or related to its executive officers and does not provide pension or retirement benefits, perquisites, or other personal benefits to its executive officers. NLIC does not have arrangements to make payments to its executive officers upon their termination or in the event of a change in control of the Cash Withdrawal received bycompany.
Cash Withdrawal
Step One | Step Two | Step Three | Step Four | Step Five | ||||
Gross Withdrawal | CDSC Base/MVA Base | CDSC | MVA | Cash Withdrawal | ||||
$10,000 | $10,000 | $500 | -$150 | $9,350 |
83
where:
of beneficial owner |
|
beneficial ownership |
|
1 Nationwide Plaza Columbus, Ohio 43215 |
|
|
• | ||
• |
|
EVENT 4: PREFERRED AND NON-PREFERRED WITHDRAWAL WITH MINIMAL INDEX PERFORMANCE
|
|
|
|
The table below illustrates the calculation of the SEP and NSEP on that date.
SEP and NSEP
Step One | Step Two | Step Three | Step Four | Step Five | Step Six | Step Seven | Step Eight | |||||||
Elapsed Term | Adjusted Index Performance (AIP) | Downside for SEP | Downside for NSEP | Elapsed Term / Term | Factor to use in NSEP | Strategy Earnings Percentage (SEP) | Non-Preferred Strategy Earnings Percentage (NSEP) | |||||||
2.192 | -0.39% | -10.00% | -11.62% | 0.731 | 1.00 | -0.39% | -0.39% |
|
|
|
|
|
|
|
|
|
The table below illustrates the calculation of Interim Strategy Earnings appliedmatters disclosed by other elected officers is submitted to the Strategy as a result of the withdrawal.
Strategy Earnings
Step One | Step Two | Step Three | Step Four | Step Five | ||||
Dollar Amount of Preferred Withdrawal | Interim Strategy Earnings on the Preferred Withdrawal | Dollar Amount of Non-Preferred | Interim Strategy Non-Preferred | Total Interim Strategy Earnings | ||||
$4,365 | -$17 | $4,365 | -$17 | -$34 |
84
where:
|
|
|
|
|
|
The table below illustrates the calculation of the Contract Value as a result of the withdrawal.
Contract Value
Contract Value before Event | Gross Withdrawal | Total Strategy Earnings | Contract Value after Event | |||
$62,358 | $8,730 | -$34 | $53,594 |
where:
Contract Value after Event: $53,594 = $62,358 - $8,730 + (-$34)
|
The table below illustrates the calculation of the Cash Withdrawal received by the owner as a result of the withdrawal.
Cash Withdrawal
Step One | Step Two | Step Three | Step Four | Step Five | ||||
Gross Withdrawal | CDSC Base/MVA Base | CDSC | MVA | Cash Withdrawal | ||||
$8,730 | $4,365 | $175 | $87 | $8,642 |
where:
|
|
|
|
|
EVENT 5: TERM STRATEGY EARNINGS
At the end of the 3-year Strategy Term, Term Strategy Earnings are calculated and applied to the Strategy and then the contract owner surrenders the contract.
Assume the following values apply to that date:
|
|
|
|
The table below illustrates the calculation of the SEP on that date.
85
SEP
Step One | Step Two | Step Three | Step Four | |||
Elapsed Term | Adjusted Index Performance (AIP) | Downside Protection for SEP | Strategy Earnings Percentage (SEP) | |||
3.00 | 11.88% | -10.00% | 11.88% |
where:
|
|
|
|
|
The table below illustrates the calculation of Interim Strategy Earnings applied to the Strategy as a result of the withdrawal.
Strategy Earnings
Strategy Value | Term Strategy Earnings | |
$53,594 | $6,367 |
Term Strategy Earnings: $6,367 = $53,594 x 11.88%
|
The table below illustrates the calculation of the Contract Value as a result of the withdrawal.
Contract Value
Contract Value before Event | Total Strategy Earnings | Contract Value after Event | ||
$53,594 | $6,367 | $59,961 |
where:
Contract Value after Event: $59,961 = $53,594 + $6,367
|
The table below illustrates the calculation of the Cash Withdrawal received by the owner as a result of the surrender.
Cash Withdrawal
Step One | Step Two | Step Three | Step Four | Step Five | ||||
Gross Withdrawal | CDSC Base/MVA Base | CDSC | MVA | Cash Withdrawal | ||||
$59,961 | $55,764 | $1,673 | $558 | $58,846 |
where:
|
|
|
|
|
86
APPENDIX E: MVA EXAMPLES
|
87
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Information required under Item 11 of Form S-1 will be filed by subsequent Pre-Effective Amendment.
88
Dealer Prospectus Delivery Obligations
All dealers that effect transactions in these securities are required to deliver a prospectus.
89Chief Legal Officer.
Item 13. | Other Expenses of Issuance and Distribution |
Item 14. | Indemnification of Directors and Officers |
• | any threatened, pending or completed civil action, suit or proceeding; |
• | any threatened, pending or completed criminal action, suit or proceeding; |
• | any threatened, pending or completed administrative action or proceeding; |
• | any threatened, pending or completed investigative action or proceeding. |
Item 15. | Recent Sales of Unregistered Securities. |
Item 16. | Exhibits and Financial Statement Schedules |
(A) | Exhibits |
(1) | Not applicable | |
(2) | Articles of Merger of Nationwide Life Insurance Company of America with and into Nationwide Life Insurance Life Insurance Company effective December 31, | |
https://www.sec.gov/Archives/edgar/data/904817/000119090309001829/exhibit6c.htm |
(3) | (a) | Amended Articles of Incorporation Nationwide Life Insurance |
https://www.sec.gov/Archives/edgar/data/205695/000119090308001157/articlesofincorp.htm | ||
(3) | (b) | Nationwide Life Insurance Company Amended and Restated Code of |
https://www.sec.gov/Archives/edgar/data/904817/000119090309001829/exhibit6b.htm |
(4) | |||
(5) | Opinion Regarding Legality | ||
(6) | Not applicable | ||
(7) | Not applicable | ||
(8) | |||
(9) | Not applicable | ||
(10) | (a) | Tax Sharing Agreement dated as of January 2, 2009 between Nationwide Life Insurance Company and any corporation that is or may hereafter become a subsidiary of Nationwide Life Insurance Company | |
https://www.sec.gov/Archives/edgar/data/205695/000119312512134652/d323974dex10.htm | |||
(10) | (b) | Third Amended and Restated Cost Sharing Agreement dated January 1, 2014 by and among Nationwide Mutual Insurance Company, Nationwide Mutual Fire Insurance Company, and their respective direct and indirect subsidiaries and affiliates - Attached hereto. | |
(11) | Not applicable | ||
(12) | Not applicable | ||
(13) | Not applicable | ||
(14) | Not applicable | ||
(15) | Not applicable | ||
(16) | Not applicable | ||
(17) | Not applicable | ||
(18) | Not applicable | ||
(19) | Not applicable | ||
(20) | Not applicable | ||
(21) | Subsidiaries of the Registrant - Attached hereto. | ||
(22) | Not applicable | ||
(23) | (a) | Consent of Independent Registered Public Accounting Firm | |
(23) | (b) | Consent of Counsel – Attached hereto as Exhibit 5. | |
(24) | Power of | ||
(25) | Not applicable | ||
(26) | Not applicable | ||
(27) | Not applicable | ||
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 |
NATIONWIDE LIFE INSURANCE COMPANY |
(Registrant) |
By: /s/ JAMIE RUFF CASTO |
Jamie Ruff Casto Attorney-in-Fact |
JOHN L. CARTER | |
John L. Carter, President and Chief Operating Officer, and Director | |
MARK R. THRESHER | |
Mark R. Thresher, Executive Vice President and Director | |
TIMOTHY G. FROMMEYER | |
Timothy G. Frommeyer, Senior Vice President-Chief Financial Officer and Director | |
ERIC S. HENDERSON | |
Eric S. Henderson, Senior Vice President-Individual Products & Solutions and Director | |
STEVEN A. GINNAN | |
Steven A. Ginnan, Senior Vice President-Chief Financial Officer-Nationwide Financial and Director | |
KIRT A. WALKER | |
Director | |
By /s/ Jamie Ruff Casto | |
Jamie Ruff Casto Attorney-in-Fact |