OHIO | 6311 | 31-4156830 |
(State or other jurisdiction of incorporation or organization) | (Primary Standard Industrial Classification Code Number) | (I.R.S. Employer Identification Number) |
of registrant's principal executive offices)
Senior Vice President and Secretary
One Nationwide Plaza
Columbus, Ohio 43215
Telephone: (614) 249-7111
MSCI EAFE | Nasdaq-100 Index® | Russell 2000 Index® | S&P 400® Index | S&P 500® Index |
For information on how to contact Nationwide, see Contacting the Service Center. |
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Annuitant - The person upon whose life any life-contingent annuity payments depend and the person whose death triggers payment of the Death Benefit. The Annuitant is also the person to whom annuity payments are made during Annuitization. |
Annuitization - The period during which annuity payments are received by the Annuitant. |
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. |
Buffer - The maximum percentage of loss that Nationwide will absorb when calculating the percentage of gain or loss for an Index Strategy on a Strategy Term End Date. The percentage of gain or loss on the Strategy Term End Date is referred to as the Term End Index Strategy Earnings Percentage. Negative Index Performance beyond the Buffer results in a negative Term End Index Strategy Earnings Percentage which will reduce the value of the Index Strategy. The full protection of the Buffer only applies to amounts held until the end of the Strategy Term. |
Business Day - Each day 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). |
Cap Rate - For Index Strategies with Cap Rates, the maximum positive percentage of gain that may be applied when calculating the percentage of gain or loss for an Index Strategy on a Strategy Term End Date. The percentage of gain or loss on the Strategy Term End Date is referred to as the Term End Index Strategy Earnings Percentage. An Index Strategy’s Cap Rate is declared prior to each Strategy Term and may be different each Strategy Term. |
Cap+ Rate - For Index Strategies with Cap+ Rates, the declared percentage of Index Performance that determines when a Participation Rate is applied when calculating the percentage of gain or loss for an Index Strategy on a Strategy Term End Date. The percentage of gain or loss on the Strategy Term End Date is referred to as the Term End Index Strategy Earnings Percentage. For Index Strategies with Cap+ Rates, all Index Performance up to the Cap+ Rate is applied, and then any Index Performance in excess of the Cap+ Rate is applied based upon a Participation Rate, which may be greater or less than, or equal to, 100%. Both the Cap+ Rate and Participation Rate are declared prior to each Strategy Term and may be different each Strategy Term. |
Charitable Remainder Trust - A trust meeting the requirements of Section 664 of the Code. |
Co-Annuitants - The persons designated by the Contract Owner to receive the benefit associated with the Spousal Protection Feature. If there is a Co-Annuitant, references to Co-Annuitants will apply to both the Annuitant and Co- Annuitant, and references to a Co-Annuitant will apply to either of them, unless the context requires otherwise. |
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 the Beneficiary if the Beneficiary is not living when the Annuitant dies. |
Contingent Deferred Sales Charge (CDSC) - A charge that may be assessed if a partial withdrawal or full surrender is taken during the first six Contract Years. |
Contract - The Nationwide Defender Annuity Contract, the individual single purchase payment deferred annuity contract with index-linked strategies described in this prospectus. |
Contract Anniversary - Beginning with the Date of Issue, each recurring twelve month anniversary of the Date of Issue while the Contract remains in force. |
Contract Owner - The person who owns all rights under the Contract prior to the Annuitization Date, along with any Joint Owner. As the context requires, "you" refers to a potential or existing Contract Owner. |
Contract Value - The sum of the Fixed Strategy Value and Index Strategy Values for each of the Index Strategies. |
Contract Year - The twelve month period starting on the Date of Issue and each Contract Anniversary. |
Crediting Factors - The different values that are used to calculate the gain or loss for the Strategies. For the Fixed Strategy, the Crediting Factors are the Fixed Strategy Rate and Strategy Term. For Index Strategies with Cap Rates, the Crediting Factors are the Index, Strategy Term, Buffer, Participation Rate, and Cap Rate. For Index Strategies with Cap+ Rates, the Crediting Factors are the Index, Strategy Term, Buffer, Participation Rate, and Cap+ Rate. See each Crediting Factor’s definition in this "Defined Terms" section for a description of each Crediting Factor. |
Daily Index Strategy Earnings Percentage (Daily ISE Percentage) - A percentage used to calculate Index Strategy Earnings on any day during a Strategy Term other than the Strategy Term End Date. The full benefit of any gains in an Index Strategy only applies to amounts held until the end of a Strategy Term. The Daily ISE Percentage does not apply to the Fixed Strategy. |
Date of Issue - The date the Purchase Payment is applied to the Contract. |
Death Benefit - The benefit payable upon the death of the Annuitant (or Co-Annuitant, if applicable) provided such death occurs before the Annuitization Date while the Contract is in force and there is no Contingent Annuitant. |
Fixed Strategy - An investment option under the Contract offering guaranteed interest rates funded by the General Account of Nationwide. |
Fixed Strategy Rate - The annualized interest rate credited daily to amounts allocated to the Fixed Strategy during a Strategy Term. |
Fixed Strategy Value - The value of the Fixed Strategy calculated at the end of each Business Day. The Fixed Strategy Value is equal to the amount allocated to the Fixed Strategy plus any interest credited. |
Free Withdrawal - Any portion of the Free Withdrawal Amount that is withdrawn from the Contract. |
Free Withdrawal Amount - While the CDSC and MVA are in effect, the amount that the Contract Owner can withdraw from the Contract each Contract Year without incurring a CDSC or an MVA. It is described in the "Waiver or Reduction of the CDSC or MVA" section. |
General Account - All assets of Nationwide other than those of the Separate Account or in other separate accounts of Nationwide. |
Home Office - Nationwide's main office located in Columbus, Ohio. |
Index - The third party market index associated with an Index Strategy. |
Index Performance - The change in an Index Value, expressed as a percentage, between the first day of a Strategy Term (or another date for a substitute Index) and a specific future day during that Strategy Term. The Index Performance may be positive, negative, or equal to zero. |
Index Value - On a Business Day, the closing value of the Index as provided to Nationwide by the Index provider. If for any reason, the closing value of an Index on a Business Day is not provided to Nationwide by the Index provider, the Index Value on that Business Day will be the most recent closing value provided to Nationwide by the Index provider on a previous Business Day. On a day other than a Business Day, the Index Value for an Index will be the closing value of the Index for the previous Business Day. |
Index Strategy - An investment option under the Contract that is linked to the performance of an index. |
Index Strategy Basis - A value used to calculate the Index Strategy Value and the Index Strategy Earnings. On the first day of a Strategy Term, the Index Strategy Basis equals the amount allocated to the Index Strategy. During a Strategy Term the Index Strategy Basis is adjusted for withdrawals (including applicable CDSC and MVA), applicable premium taxes, fees, transfers out due to a Performance Lock, and the application of any applicable Term End ISE Percentage. |
Index Strategy Earnings - The amount applied to the Index Strategy Basis to determine an Index Strategy’s Index Strategy Value. Index Strategy Earnings are represented as a dollar amount and can be positive, negative, or equal to zero. On the Strategy Term End Date, the Index Strategy Earnings are equal to the Term End ISE Percentage multiplied by the Index Strategy Basis. On any other day during a Strategy Term, Index Strategy Earnings are equal to the Daily ISE Percentage multiplied by the Index Strategy Basis. Index Strategy Earnings before the end of a Strategy Term are an estimated present value of what the Index Strategy Earnings will be at the end of the Strategy Term. |
Index Strategy Value - The value of an Index Strategy calculated at the end of each Business Day. The Index Strategy Value is equal to the Index Strategy Basis plus Index Strategy Earnings (which may be positive, negative, or equal to zero). The Index Strategy Value is the amount used when processing a withdrawal or full surrender, a Death Benefit payment, a transfer among Strategies, Performance Lock, the calculation of any applicable charge or fee, or an annuitization request. |
Individual Retirement Account - An account that qualifies for favorable tax treatment under Section 408(a) of the Code but does not include Roth IRAs. |
Individual Retirement Annuity (IRA) - An annuity which qualifies for favorable tax treatment under Section 408(b) of the Code but does not include Roth IRAs or Simple IRAs. |
Investment-Only Contract - A Contract purchased by a qualified pension, profit-sharing, or stock bonus plan as defined by Section 401(a) of the Code. |
Joint Owner - The person 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. |
Market Value Adjustment (MVA) - An adjustment that may be applied if a partial withdrawal or full surrender is taken during the first six Contract Years. |
Nationwide - Nationwide Life Insurance Company. As the context requires, "we," "us," and "our" refer to Nationwide. |
Non-Qualified Contract - A Contract which does not qualify for favorable tax treatment as a Qualified Plan, IRA, Roth IRAs, SEP IRA, or Simple IRA. |
Participation Rate - A percentage that represents the proportion of the Index Performance used in the calculation of the Term End ISE Percentage. An Index Strategy’s Participation Rate is declared prior to each Strategy Term and may be different each Strategy Term. Participation Rates only apply when the Index Performance is positive. |
Performance Lock - A feature that allows the Contract Owner to transfer Index Strategy Value to the Fixed Strategy on a date other than a Strategy Term End Date. Nationwide assesses a Performance Lock Fee for Performance Locks. |
Purchase Payment - Money paid into the Contract by the Contract Owner. |
Qualified Plan - A retirement plan that receives favorable tax treatment under Section 401 of the Code, including Investment-Only Contracts. In this prospectus, all provisions applicable to Qualified Plans also apply to Investment- Only Contracts unless specifically stated otherwise. |
Quarterversary - Beginning with the Date of Issue, each recurring quarterly date during which the Contract remains in force. |
Remaining Free Withdrawal Amount - The amount that the Contract Owner can withdraw from the Contract during the remainder of that Contract Year without incurring a CDSC or an MVA, based on the Free Withdrawals already taken that Contract Year. |
Roth IRA - An annuity contract which qualifies for favorable tax treatment under Section 408A of the Code. |
Separate Account - The Index-Linked Annuity Separate Account. |
Service Center - The department of Nationwide responsible for receiving all service and transaction requests relating to the Contract. For service and transaction requests submitted other than by telephone (including fax requests), the Service Center is Nationwide’s mail and document processing facility. For service and transaction requests communicated by telephone, the Service Center is Nationwide’s operations processing facility. Information on how to contact the Service Center may be found under Contacting the Service Center. |
Simple IRA - An annuity contract which qualifies for favorable tax treatment under Section 408(p) of the Code. |
Simplified Employee Pension IRA (SEP IRA) - An annuity contract which qualifies for favorable tax treatment under Section 408(k) of the Code. |
Strategies - Investment options under the Contract. Unless otherwise specified, the term Strategies refers to the Fixed Strategy and Index Strategies collectively. |
Strategy Term - For the Fixed Strategy, the initial Strategy Term begins on the Date of Issue and ends on the first Contract Anniversary, and each subsequent Strategy Term begins on each Contract Anniversary and ends on the following Contract Anniversary. For an Index Strategy, the Strategy Term is the total maturity time of the Index Strategy, expressed in years. |
Strategy Term End Date - The last day of a Strategy Term. A Strategy Term End Date is the same calendar day as the Date of Issue. |
Surrender Value - The amount available upon full surrender of the Contract. It is equal to the Contract Value less any applicable CDSC and premium taxes, plus any applicable MVA. |
Term End Index Strategy Earnings Percentage (Term End ISE Percentage) - A percentage used to calculate Index Strategy Earnings on the Strategy Term End Date. How the Term End ISE Percentage is calculated depends on whether the Index Strategy is an Index Strategy with Cap Rate or an Index Strategy with Cap+ Rate. See, "Term End Index Strategy Earnings Percentage" for a description of how the Term End ISE Percentage is calculated for each type of Index Strategy. |
Total of all Index Strategy Values on a Quarterversary | X | 1.10% |
4 |
Total of all Index Strategy Values on a Quarterversary | X | 0.15% |
4 |
Locked-in Index Strategy Value | X | 0.10% | X | Number of years remaining in the Strategy Term (partial years are rounded up to the next full year) |
Number of Completed Contract Years | CDSC Percentage |
0 | 8% |
1 | 8% |
2 | 7% |
3 | 6% |
4 | 5% |
5 | 4% |
6+ | 0% |
1 Year Strategy Term Options |
Cap Rate |
Russell 2000 Index® 1 Year with Cap Rate & 10% Buffer |
Nasdaq-100 Index® 1 Year with Cap Rate & 10% Buffer |
MSCI EAFE Index 1 Year with Cap Rate & 10% Buffer |
S&P 400® Index 1 Year with Cap Rate & 10% Buffer |
S&P 500® Index 1 Year with Cap Rate & 10% Buffer |
S&P 500® Index 1 Year with Cap Rate & 20% Buffer |
3 Year Strategy Term Options |
Cap Rate |
Russell 2000 Index® 3 Year with Cap Rate & 10% Buffer |
S&P 500® Index 3 Year with Cap Rate & 10% Buffer |
S&P 500® Index 3 Year with Cap Rate & 20% Buffer |
6 Year Strategy Term Options |
Cap Rate |
Russell 2000 Index® 6 Year with Cap Rate & 10% Buffer |
S&P 500® Index 6 Year with Cap Rate & 10% Buffer |
S&P 500® Index 6 Year with Cap Rate & 20% Buffer |
Total of all Index Strategy Values on a Quarterversary | 1.10% | |
X | ||
4 | ||
Number of Completed Contract Years | CDSC Percentage |
0 | 8% |
1 | 8% |
2 | 7% |
3 | 6% |
4 | 5% |
5 | 4% |
6+ | 0% |
Index Strategy Value subject to Performance Lock Request | X | 0.10% | X | Number of years remaining in the Strategy Term (partial years are rounded up to the next full year) |
Total of all Index Strategy Values on a Quarterversary | 0.15% | |
X | ||
4 | ||
Participation Rate = 100%
Cap Rate = 20%
Buffer = 10%
Step 2: Compare Step 1 value to Cap Rate (10% is less than 20% Cap Rate)
Term End ISE Percentage = 10%
Participation Rate = 100%
Cap Rate = 20%
Buffer = 10%
Step 2: Compare Step 1 value to Cap Rate (30% is greater than 20% Cap Rate)
Term End ISE Percentage = 20%
Participation Rate = 100%
Cap Rate = 20%
Buffer = 10%
Note: The Participation Rate does not apply when Index Performance is negative.
Term End ISE Percentage = -5%
Participation Rate = 100%
Cap Rate = 20%
Buffer = 10%
Note: The Participation Rate does not apply when Index Performance is negative.
Term End ISE Percentage = 0%
Participation Rate = 125%
Cap Rate = no Cap Rate declared
Buffer = 10%
Note: No comparison to Cap Rate since no Cap Rate was declared.
Term End ISE Percentage = 12.5%
Participation Rate = 125%
Cap Rate = no Cap Rate declared
Buffer = 10%
Note: The Participation Rate does not apply when Index Performance is negative.
Term End ISE Percentage = -10%
Participation Rate = 50% (Only applies to Index Performance above the Cap+ Rate)
Cap+ Rate= 10%
Buffer = 10%
Note: Since Index Performance is less than Cap+ Rate the Participation Rate does not apply.
Term End ISE Percentage = 5%
Participation Rate = 50%
Cap+ Rate = 10%
Buffer = 10%
Step 2: multiply the Index Performance in excess of the Cap+ Rate by the Participation Rate = 5% (10% x 50%)
Step 3: add Step 2 value to the Cap+ Rate = 15% (5% + 10%)
Term End ISE Percentage = 15%
Participation Rate = 50%
Cap+ Rate= 10%
Buffer = 10%
Note: The Participation Rate does not apply when Index Performance is negative.
Term End ISE Percentage = -10%
Participation Rate = 50%
Cap+ Rate= 10%
Buffer = 10%
Note: The Participation Rate does not apply when Index Performance is negative.
Term End ISE Percentage = 0%
Nasdaq-100 Index® 1 Year with Cap Rate & 10% Buffer
MSCI EAFE Index 1 Year with Cap Rate & 10% Buffer
S&P 400® Index 1 Year with Cap Rate & 10% Buffer
S&P 500® Index 1 Year with Cap Rate & 10% Buffer
S&P 500® Index 1 Year with Cap Rate & 20% Buffer
S&P 500® Index 3 Year with Cap Rate & 10% Buffer
S&P 500® Index 3 Year with Cap Rate & 20% Buffer
S&P 500® Index 6 Year with Cap Rate & 10% Buffer
S&P 500® Index 6 Year with Cap Rate & 20% Buffer
Index Strategy Value subject to Performance Lock Request | X | 0.10% | X | Number of years remaining in the Strategy Term (partial years are rounded up to the next full year) |
Total partial withdrawal, fee, and/or premium tax deducted from Index Strategy Value on a specific date | X | Index Strategy Basis on the date of the transaction |
Index Strategy Value on the date of the transaction |
State | State Law Variations |
California | • The Death Benefit does not change to Surrender Value upon assignment or a change in ownership of the Contract. • The CDSC and MVA waiver under the Increase in Remaining Free Withdrawal Amount after a Long-Term Care and Terminal Illness or Injury (CDSC And MVA Waiver) section is not available. |
Connecticut | • The Death Benefit does not change to Surrender Value upon assignment or a change in ownership of the Contract. • Under the Long-Term Care Event subsection of the Increase in Remaining Free Withdrawal Amount after a Long-Term Care and Terminal Illness or Injury (CDSC And MVA Waiver) section, an LTC Event must be after the second Contract Anniversary. |
Florida | • Purchase Payments for any other annuity contract issued by Nationwide to the Contract Owner, Annuitant, or Contingent Annuitant will not be considered for purposes of determining whether the Purchase Payment under this Contract exceeds $1,000,000. • The Annuity Commencement Date must be at least one year after the Date of Issue. • The Death Benefit does not change to Surrender Value upon assignment or a change in ownership of the Contract. |
Hawaii | • Joint Owners are not limited to spouses. |
Illinois | • The Contract will not be contested. • Misstatements made as to the sex of the Contract Owner, Joint Owner, Annuitant, Co- Annuitant, Contingent Annuitant, Beneficiary or Contingent Beneficiary are excluded from the Misstatements of Age or Sex section. |
Massachusetts | • The CDSC and MVA waiver under the Increase in Remaining Free Withdrawal Amount After a Long-Term Care or Terminal Illness or Injury Event (CDSC and MVA Waiver) section is not available. |
Montana | • Misstatements made as to the sex of the Contract Owner, Joint Owner, Annuitant, Co- Annuitant, Contingent Annuitant, Beneficiary or Contingent Beneficiary are excluded from the Misstatements of Age or Sex section. |
New Jersey | • The Contract Owner, Joint Owner, Beneficiary and Contingent Beneficiary are excluded from the Misstatements of Age or Sex section. • Under the Purchase Payment section, purchase payments for any other annuity contract issued by Nationwide with the same Contract Owner or Annuitant does not apply to Nationwide’s reservation of right to refuse any Purchase Ppayment in excess of $1,000,000 under this Contract. |
Pennsylvania | • Joint Owners are not limited to spouses. • The CDSC and MVA waiver under the Increase in Remaining Free Withdrawal Amount After a Long-Term Care or Terminal Illness or Injury Event (CDSC and MVA Waiver) section is not available. |
Texas | • Under the Terminal Illness or Injury Event subsection of the Increase in Remaining Free Withdrawal Amount after a Long-Term Care and Terminal Illness or Injury (CDSC And MVA Waiver) section, a TI Event can occur at any time after the Date of Issue. • Under the Purchase Payment section, purchase payments for any other annuity contract issued by Nationwide with the same Contract Owner or Annuitant does not apply to Nationwide’s reservation of right to refuse any Purchase Ppayment in excess of $1,000,000 under this Contract. |
Washington | • A CDSC and MVA waiver for a "Terminal Illness or Injury Event" is not available under The Increase in Remaining Free Withdrawal Amount After a Long-Term Care or Terminal Illness or Injury Event (CDSC and MVA Waiver) section. |
1-Year Cap | 1-Year Cap+ | 3-Year Cap (no Cap Rate declared for the Strategy Term) | 6-Year Cap (no Cap Rate declared for the Strategy Term) | |
Strategy Term Start Date | ||||
Strategy Term | 1 | 1 | 3 | 6 |
Participation Rate | 100% | 60% | 115% | 130% |
Cap/Cap+ Rate | 23% | 15% | N/A | N/A |
Buffer | 10% | 10% | 10% | 20% |
Index Performance | 0% | 0% | 0% | 0% |
Risk-free Rate | 3.0% | 3.0% | 3.5% | 3.5% |
Dividend Yield | 1.5% | 1.5% | 1.5% | 1.5% |
Volatility - AMC | 23% | 23% | 20% | 20% |
Volatility - OMC | 17% | 20% | N/A | N/A |
Volatility - OMP | 26% | 26% | 22% | 25% |
Strategy Basisi | $1,000 | $1,000 | $1,000 | $1,000 |
Strategy Value | $1,000 | $1,000 | $1,000 | $1,000 |
AMC | 9.690% | 9.690% | 15.675% | 22.236% |
OMC | 1.186% | 3.385% | 0% | 0% |
OMP | 5.042% | 5.042% | 7.328% | 8.352% |
Proxy Fair Valueii (B) | 3.462% | 3.294% | 10.698% | 20.555% |
Unless Otherwise Noted, Examples Use the Following Time Input | ||||
Years Elapsed since Strategy Term start (t) | 0.5 | 0.5 | 0.5 | 0.5 |
Years Remaining in Strategy Term | 0.5 | 0.5 | 2.5 | 5.5 |
Index Performance of -25%, other inputs unchanged | ||||
Index Performance | -25% | -25% | -25% | -25% |
AMC | 0.240% | 0.240% | 3.322% | 8.256% |
1-Year Cap | 1-Year Cap+ | 3-Year Cap (no Cap Rate declared for the Strategy Term) | 6-Year Cap (no Cap Rate declared for the Strategy Term) | |
OMC | 0.000% | 0.005% | 0% | 0% |
OMP | 15.595% | 15.595% | 16.621% | 14.194% |
Proxy Fair Value (A) | -15.356% | -15.358% | -12.801% | -3.461% |
Daily ISE Percentageiii (A – B + t/T x B) | -17.087% | -17.005% | -21.716% | -22.303% |
Index Strategy Earnings | -$170.87 | -$170.05 | -$217.16 | -$223.03 |
Strategy Value | $829.13 | $829.95 | $782.84 | $776.97 |
The Strategy Values in the next row show what the Strategy Values would be at the end of the Strategy Term when calculated with the Term End ISE Percentage, assuming all assumptions in the example above did not change until the end of the Strategy Term. Not all of the assumptions above are used in the Term End ISE Percentage calculation. See the Index Strategy Earnings section of the prospectus for details on the Term End ISE Percentage calculation. | ||||
Strategy Value at the end of the Strategy Term | $850.00 | $850.00 | $850.00 | $950.00 |
Index Performance of -5%, other inputs unchanged | ||||
Index Performance | -5% | -5% | -5% | -5% |
AMC | 4.356% | 4.356% | 11.399% | 18.283% |
OMC | 0.086% | 0.666% | 0% | 0% |
OMP | 4.262% | 4.262% | 8.063% | 8.966% |
Proxy Fair Value | 0.008% | -0.172% | 5.045% | 14.802% |
Daily ISE Percentage | -1.723% | -1.819% | -3.870% | -4.041% |
Index Strategy Earnings | -$17.23 | -$18.19 | -$38.70 | -$40.41 |
Strategy Value | $982.77 | $981.81 | $961.30 | $959.59 |
The Strategy Values in the next row show what the Strategy Values would be at the end of the Strategy Term when calculated with the Term End ISE Percentage, assuming all assumptions in the example above did not change until the end of the Strategy Term. Not all of the assumptions above are used in the Term End ISE Percentage calculation. See the Index Strategy Earnings section of the prospectus for details on the Term End ISE Percentage calculation. | ||||
Strategy Value at the end of the Strategy Term | $1,000.00 | $1,000.00 | $1,000.00 | $1,000.00 |
Index Performance of 0%, other inputs unchanged | ||||
Index Performance | 0% | 0% | 0% | 0% |
AMC | 6.779% | 6.779% | 14.249% | 21.317% |
OMC | 0.265% | 1.406% | 0% | 0% |
OMP | 2.842% | 2.842% | 6.650% | 8.007% |
Proxy Fair Value | 3.672% | 3.374% | 9.736% | 19.705% |
Daily ISE Percentage | 1.941% | 1.727% | 0.821% | 0.863% |
Index Strategy Earnings | $19.41 | $17.27 | $8.21 | $8.63 |
Strategy Value | $1,019.41 | $1,017.27 | $1,008.21 | $1,008.63 |
1-Year Cap | 1-Year Cap+ | 3-Year Cap (no Cap Rate declared for the Strategy Term) | 6-Year Cap (no Cap Rate declared for the Strategy Term) | |
The Strategy Values in the next row show what the Strategy Values would be at the end of the Strategy Term when calculated with the Term End ISE Percentage, assuming all assumptions in the example above did not change until the end of the Strategy Term. Not all of the assumptions above are used in the Term End ISE Percentage calculation. See the Index Strategy Earnings section of the prospectus for details on the Term End ISE Percentage calculation. | ||||
Strategy Value at the end of the Strategy Term | $1,000.00 | $1,000.00 | $1,000.00 | $1,000.00 |
Index Performance of 0%, Time Remaining=0.25 years | ||||
Time in years Elapsed since Strategy Term start (t) | 0.75 | 0.75 | 2.75 | 5.75 |
Time Remaining in Strategy Term | 0.25 | 0.25 | 0.25 | 0.25 |
Index Performance | 0% | 0% | 0% | 0% |
AMC | 4.745% | 4.745% | 4.210% | 4.210% |
OMC | 0.026% | 0.426% | 0% | 0% |
OMP | 1.375% | 1.375% | 0.860% | 0.149% |
Proxy Fair Value (A) | 3.344% | 3.200% | 3.982% | 5.325% |
Daily ISE Percentage (A - B + t/T x B) | 2.478% | 2.376% | 3.091% | 4.468% |
Index Strategy Earnings | $24.78 | $23.76 | $30.91 | $44.68 |
Strategy Value | $1,024.78 | $1,023.76 | $1,030.91 | $1,044.68 |
The Strategy Values in the next row show what the Strategy Values would be at the end of the Strategy Term when calculated with the Term End ISE Percentage, assuming all assumptions in the example above did not change until the end of the Strategy Term. Not all of the assumptions above are used in the Term End ISE Percentage calculation. See the Index Strategy Earnings section of the prospectus for details on the Term End ISE Percentage calculation. | ||||
Strategy Value at the end of the Strategy Term | $1,000.00 | $1,000.00 | $1,000.00 | $1,000.00 |
Index Performance of +25%, other inputs unchanged | ||||
Index Performance | 25% | 25% | 25% | 25% |
AMC | 26.173% | 26.173% | 32.238% | 38.803% |
OMC | 7.428% | 13.399% | 0% | 0% |
OMP | 0.256% | 0.256% | 2.430% | 4.613% |
Proxy Fair Value (A) | 18.489% | 20.557% | 34.644% | 45.831% |
Daily ISE Percentage (A – B + t/T x B) | 16.758% | 18.910% | 25.729% | 26.988% |
Index Strategy Earnings | $167.58 | $189.10 | $257.29 | $269.88 |
Strategy Value | $1,167.58 | $1,189.10 | $1,257.29 | $1,269.88 |
The Strategy Values in the next row show what the Strategy Values would be at the end of the Strategy Term when calculated with the Term End ISE Percentage, assuming all assumptions in the example above did not change until the end of the Strategy Term. Not all of the assumptions above are used in the Term End ISE Percentage calculation. See the Index Strategy Earnings section of the prospectus for details on the Term End ISE Percentage calculation. |
1-Year Cap | 1-Year Cap+ | 3-Year Cap (no Cap Rate declared for the Strategy Term) | 6-Year Cap (no Cap Rate declared for the Strategy Term) | |
Strategy Value at the end of the Strategy Term | $1,230.00 | $1,210.00 | $1,287.50 | $1,325.00 |
Index Performance of -5%, Risk-free Rate down 0.50%, other inputs unchanged | ||||
Index Performance | -5% | -5% | -5% | -5% |
Risk-free Rate | 2.50% | 2.50% | 3.00% | 3.00% |
AMC | 4.270% | 4.270% | 10.922% | 17.293% |
OMC | 0.081% | 0.642% | 0% | 0% |
OMP | 4.350% | 4.350% | 8.524% | 9.746% |
Proxy Fair Value (A) | -0.161% | -0.337% | 4.036% | 12.735% |
Daily ISE Percentage (A – B + t/T x B) | -1.892% | -1.984% | -4.879% | -6.107% |
Index Strategy Earnings | -$18.92 | -$19.84 | -$48.79 | -$61.07 |
Strategy Value | $981.08 | $980.16 | $951.21 | $938.93 |
The Strategy Values in the next row show what the Strategy Values would be at the end of the Strategy Term when calculated with the Term End ISE Percentage, assuming all assumptions in the example above did not change until the end of the Strategy Term. Not all of the assumptions above are used in the Term End ISE Percentage calculation. See the Index Strategy Earnings section of the prospectus for details on the Term End ISE Percentage calculation. | ||||
Strategy Value at the end of the Strategy Term | $1,000.00 | $1,000.00 | $1,000.00 | $1,000.00 |
Index Performance of 0%, dividend up 2%, volatility down 4%, other inputs unchanged | ||||
Index Performance | 0% | 0% | 0% | 0% |
Dividend Yield | 3.5% | 3.5% | 3.5% | 3.5% |
Volatility - AMC | 19% | 19% | 16% | 16% |
Volatility - OMC | 13% | 16% | N/A | N/A |
Volatility - OMP | 22% | 22% | 18% | 21% |
AMC | 5.153% | 5.153% | 9.236% | 12.317% |
OMC | 0.039% | 0.595% | 0% | 0% |
OMP | 2.209% | 2.209% | 5.939% | 7.637% |
Proxy Fair Value (A) | 2.904% | 2.705% | 4.682% | 8.374% |
Daily ISE Percentage (A – B + t/T x B) | 1.173% | 1.058% | -4.233% | -10.468% |
Index Strategy Earnings | $11.73 | $10.58 | -$42.33 | -$104.68 |
Strategy Value | $1,011.73 | $1,010.58 | $957.67 | $895.32 |
The Strategy Values in the next row show what the Strategy Values would be at the end of the Strategy Term when calculated with the Term End ISE Percentage, assuming all assumptions in the example above did not change until the end of the Strategy Term. Not all of the assumptions above are used in the Term End ISE Percentage calculation. See the Index Strategy Earnings section of the prospectus for details on the Term End ISE Percentage calculation. | ||||
Strategy Value at the end of the Strategy Term | $1,000.00 | $1,000.00 | $1,000.00 | $1,000.00 |
December 31, | |||
(in millions) | 2023 | 2022 | 2021 |
Total revenues | $888 | $876 | $877 |
Pre-tax operating earnings (losses) | $68 | $110 | $(24 ) |
December 31, | |||
(in millions) | 2023 | 2022 | 2021 |
Total revenues | $9,549 | $7,733 | $8,513 |
Pre-tax operating earnings | $171 | $194 | $603 |
December 31, | |||
(in millions) | 2023 | 2022 | 2021 |
Total revenues | $5,172 | $6,148 | $5,648 |
Pre-tax operating earnings | $139 | $170 | $169 |
December 31, | |||
(in millions) | 2023 | 2022 | 2021 |
Total revenues | $4,586 | $4,143 | $2,312 |
Pre-tax operating earnings | $1,081 | $360 | $737 |
December 31, | |||
(in millions) | 2023 | 2022 | Change |
Revenues | |||
Premiums and annuity considerations | $14,670 | $14,535 | 1% |
Net investment income | 3,136 | 2,019 | 55% |
Other revenues | 2,389 | 2,346 | 2% |
Total revenues | $20,195 | $18,900 | 7% |
Benefits and expenses | |||
Benefits to policyholders and beneficiaries | $17,416 | $15,963 | 9% |
Increase in reserves for future policy benefits and claims | 3,747 | 2,525 | 48% |
Net transfers from separate accounts | (3,742 ) | (1,635 ) | (129% ) |
Commissions | 766 | 810 | (5% ) |
December 31, | |||
(in millions) | 2023 | 2022 | Change |
Reserve adjustment on reinsurance assumed | (153 ) | (161 ) | 5% |
Other expenses | 702 | 564 | 24% |
Total benefits and expenses | $18,736 | $18,066 | 4% |
Income before federal income tax expense and net realized capital (losses) gains on investments | $1,459 | $834 | 75% |
Federal income tax expense | 108 | 100 | 8% |
Income before net realized capital (losses) gains on investments | $1,351 | $734 | 84% |
Net realized capital (losses) gains on investments, net of tax and transfers to the interest maintenance reserve | (402 ) | 240 | (268% ) |
Net income | $949 | $974 | (3% ) |
December 31, | |||
(in millions) | 2022 | 2021 | Change |
Revenues | |||
Premiums and annuity considerations | $14,535 | $12,664 | 15% |
Net investment income | 2,019 | 2,231 | (10% ) |
Other revenues | 2,346 | 2,455 | (4% ) |
Total revenues | $18,900 | $17,350 | 9% |
Benefits and expenses | |||
Benefits to policyholders and beneficiaries | $15,963 | $16,884 | (5% ) |
Increase in reserves for future policy benefits and claims | 2,525 | 807 | 213% |
Net transfers from separate accounts | (1,635 ) | (3,002 ) | 46% |
Commissions | 810 | 858 | (6% ) |
Reserve adjustment on reinsurance assumed | (161 ) | (151 ) | (7% ) |
Other expenses | 564 | 469 | 20% |
Total benefits and expenses | $18,066 | $15,865 | 14% |
Income before federal income tax expense (benefit) and net realized capital gains (losses) on investments | $834 | $1,485 | (44% ) |
December 31, | |||
(in millions) | 2022 | 2021 | Change |
Federal income tax expense (benefit) | 100 | (9 ) | 1211% |
Income before net realized capital gains (losses) on investments | $734 | $1,494 | (51% ) |
Net realized capital gains (losses) on investments, net of tax and transfers to the interest maintenance reserve | 240 | (683 ) | 135% |
Net income | $974 | $811 | 20% |
December 31, | |||
(in millions) | 2023 | 2022 | Change |
Results of Operations | |||
Revenues | |||
Premiums and annuity considerations | $412 | $415 | (1% ) |
Net investment income | 276 | 261 | 6% |
Other revenues | 200 | 200 | 0% |
Total revenues | $888 | $876 | 1% |
Benefits and expenses | |||
Benefits to policyholders and beneficiaries | $673 | $659 | 2% |
Increase in reserves for future policy benefits and claims | 59 | 45 | 31% |
Net transfers from separate accounts | (64 ) | (98 ) | 35% |
Commissions | 25 | 26 | (4% ) |
Other expenses | 127 | 134 | (5% ) |
Total benefits and expenses | $820 | $766 | 7% |
Pre-tax operating earnings | $68 | $110 | (38% ) |
December 31, | |||
(in millions) | 2022 | 2021 | Change |
Results of Operations | |||
Revenues | |||
Premiums and annuity considerations | $415 | $425 | (2% ) |
Net investment income | 261 | 254 | 3% |
Other revenues | 200 | 198 | 1% |
Total revenues | $876 | $877 | (0% ) |
Benefits and expenses | |||
Benefits to policyholders and beneficiaries | $659 | $748 | (12% ) |
Increase in reserves for future policy benefits and claims | 45 | 86 | (48% ) |
Net transfers from separate accounts | (98 ) | (97 ) | (1% ) |
Commissions | 26 | 27 | (4% ) |
Other expenses | 134 | 137 | (2% ) |
Total benefits and expenses | $766 | $901 | (15% ) |
Pre-tax operating earnings (losses) | $110 | $(24 ) | 558% |
December 31, | |||
(in millions) | 2023 | 2022 | Change |
Results of Operations | |||
Revenues | |||
Premiums and annuity considerations | $7,368 | $5,758 | 28% |
Net investment income | 613 | 346 | 77% |
Other revenues | 1,568 | 1,629 | (4% ) |
Total revenues | $9,549 | $7,733 | 23% |
Benefits and expenses | |||
Benefits to policyholders and beneficiaries | $8,867 | $7,978 | 11% |
December 31, | |||
(in millions) | 2023 | 2022 | Change |
Increase in reserves for future policy benefits and claims | 4,210 | 2,347 | 79% |
Net transfers from separate accounts | (4,246 ) | (3,307 ) | (28% ) |
Commissions | 542 | 546 | (1% ) |
Reserve adjustment on reinsurance assumed | (153 ) | (161 ) | 5% |
Other expenses | 158 | 136 | 16% |
Total benefits and expenses | $9,378 | $7,539 | 24% |
Pre-tax operating earnings | $171 | $194 | (12% ) |
December 31, | |||
(in millions) | 2022 | 2021 | Change |
Results of Operations | |||
Revenues | |||
Premiums and annuity considerations | $5,758 | $6,512 | (12% ) |
Net investment income | 346 | 337 | 3% |
Other revenues | 1,629 | 1,664 | (2% ) |
Total revenues | $7,733 | $8,513 | (9% ) |
Benefits and expenses | |||
Benefits to policyholders and beneficiaries | $7,978 | $8,698 | (8% ) |
Increase in reserves for future policy benefits and claims | 2,347 | 84 | 2694% |
Net transfers from separate accounts | (3,307 ) | (1,391 ) | (138% ) |
Commissions | 546 | 629 | (13% ) |
Reserve adjustment on reinsurance assumed | (161 ) | (151 ) | (7% ) |
Other expenses | 136 | 41 | 232% |
Total benefits and expenses | $7,539 | $7,910 | (5% ) |
Pre-tax operating earnings | $194 | $603 | (68% ) |
December 31, | |||
(in millions) | 2023 | 2022 | Change |
Results of Operations | |||
Revenues | |||
Premiums and annuity considerations | $4,150 | $5,097 | (19% ) |
Net investment income | 835 | 860 | 3% |
Other revenues | 187 | 191 | (2% ) |
Total revenues | $5,172 | $6,148 | (16% ) |
Benefits and expenses | |||
Benefits to policyholders and beneficiaries | $6,990 | $6,662 | 5% |
Decrease in reserves for future policy benefits and claims | (1,469 ) | (622 ) | (136% ) |
Net transfers from separate accounts | (791 ) | (320 ) | (147% ) |
Commissions | 89 | 138 | (36% ) |
Other expenses | 214 | 120 | 78% |
Total benefits and expenses | $5,033 | $5,978 | (16% ) |
Pre-tax operating earnings | $139 | $170 | (18% ) |
December 31, | |||
(in millions) | 2022 | 2021 | Change |
Results of Operations | |||
Revenues | |||
Premiums and annuity considerations | $5,097 | $4,551 | 12% |
Net investment income | 860 | 861 | 0% |
Other revenues | 191 | 236 | (19% ) |
Total revenues | $6,148 | $5,648 | 9% |
Benefits and expenses | |||
Benefits to policyholders and beneficiaries | $6,662 | $6,780 | (2% ) |
(Decrease) increase in reserves for future policy benefits and claims | (622 ) | 89 | (799% ) |
Net transfers from separate accounts | (320 ) | (1,616 ) | 80% |
Commissions | 138 | 104 | 33% |
Other expenses | 120 | 122 | (2% ) |
Total benefits and expenses | $5,978 | $5,479 | 9% |
Pre-tax operating earnings | $170 | $169 | 1% |
December 31, | |||
(in millions) | 2023 | 2022 | Change |
Results of Operations | |||
Revenues | |||
Premiums and annuity considerations | $2,740 | $3,265 | (16% ) |
Net investment income | 1,412 | 552 | 156% |
Other revenues | 434 | 326 | 33% |
Total revenues | $4,586 | $4,143 | 11% |
Benefits and expenses | |||
Benefits to policyholders and beneficiaries | $886 | $664 | 33% |
Increase in reserves for future policy benefits and claims | 947 | 755 | 25% |
Net transfers to separate accounts | 1,359 | 2,090 | (35% ) |
Commissions | 110 | 100 | 10% |
December 31, | |||
(in millions) | 2023 | 2022 | Change |
Other expenses | 203 | 174 | 17% |
Total benefits and expenses | $3,505 | $3,783 | (7% ) |
Pre-tax operating earnings | $1,081 | $360 | 200% |
December 31, | |||
(in millions) | 2022 | 2021 | Change |
Results of Operations | |||
Revenues | |||
Premiums and annuity considerations | $3,265 | $1,176 | 178% |
Net investment income | 552 | 779 | (29% ) |
Other revenues | 326 | 357 | (9% ) |
Total revenues | $4,143 | $2,312 | 79% |
Benefits and expenses | |||
Benefits to policyholders and beneficiaries | $664 | $658 | 1% |
Increase in reserves for future policy benefits and claims | 755 | 548 | 38% |
Net transfers to separate accounts | 2,090 | 102 | 1949% |
Commissions | 100 | 98 | 2% |
Other expenses | 174 | 169 | 3% |
Total benefits and expenses | $3,783 | $1,575 | 140% |
Pre-tax operating earnings | $360 | $737 | (51% ) |
December 31, 2023 | December 31, 2022 | |||
(in millions) | Carrying value | % of total | Carrying value | % of total |
Invested assets: | ||||
Bonds | $43,867 | 71% | $40,208 | 71% |
Stocks | 3,714 | 6% | 3,700 | 6% |
Mortgage loans, net of allowance | 9,144 | 15% | 8,363 | 15% |
Policy loans | 969 | 2% | 933 | 2% |
Derivative assets | 113 | 0% | 143 | 0% |
Cash, cash equivalents and short-term investments | 1,555 | 2% | 1,621 | 3% |
Securities lending collateral assets | 359 | 1% | 232 | 0% |
Other invested assets | 2,198 | 3% | 1,848 | 3% |
Total invested assets | $61,919 | 100% | $57,048 | 100% |
(in millions) | December 31, 2023 | December 31, 2022 | ||||
NAIC designation | Carrying value | Fair value | % of total statement value | Carrying value | Fair value | % of total statement value |
1 | $23,341 | $22,064 | 53% | $21,073 | $19,210 | 53% |
2 | 18,621 | 17,583 | 43% | 17,241 | 15,489 | 43% |
3 | 1,191 | 1,126 | 3% | 1,291 | 1,146 | 3% |
4 | 563 | 547 | 1% | 512 | 471 | 1% |
5 | 138 | 132 | 0% | 78 | 75 | 0% |
6 | 13 | 22 | 0% | 13 | 19 | 0% |
$43,867 | $41,474 | 100% | $40,208 | $36,410 | 100% |
(in millions) | December 31, 2023 | December 31, 2022 | ||||
NAIC designation | Statement Value | Fair Value | % of total statement value | Statement Value | Fair Value | % of total statement value |
1 | $7,695 | $7,440 | 97% | $6,410 | $6,022 | 96% |
2 | 125 | 118 | 2% | 173 | 160 | 2% |
(in millions) | December 31, 2023 | December 31, 2022 | ||||
NAIC designation | Statement Value | Fair Value | % of total statement value | Statement Value | Fair Value | % of total statement value |
3 | 49 | 42 | 1% | 64 | 53 | 1% |
4 | 38 | 33 | 0% | 46 | 41 | 1% |
5 | 15 | 16 | 0% | 9 | 11 | 0% |
6 | 2 | 9 | 0% | - | 7 | 0% |
$7,924 | $7,658 | 100% | $6,702 | $6,294 | 100% |
December 31, | ||
(in millions) | 2023 | 2022 |
Alternative investments: | ||
Private equity and debt funds | $1,153 | $797 |
Real estate partnerships | 879 | 730 |
Tax credit funds | 90 | 117 |
Investment in Eagle | 69 | 53 |
Total alternative investments | $2,191 | $1,697 |
Derivatives collateral and receivables | 7 | 151 |
Total other invested assets | $2,198 | $1,848 |
Life Insurance1 | Annuities2 | Retirement Solutions3 | Corporate Solutions and Other | |||||
(in millions) | Account value | Weighted average crediting rate | Account value | Weighted average crediting rate | Account value | Weighted average crediting rate | Account value | Weighted average crediting rate |
December 31, 2023 | ||||||||
Minimum guaranteed crediting rate of 3.51% or greater | $527 | 4.00% | $- | -% | $- | -% | $1 | 4.00% |
Minimum guaranteed crediting rate of 3.01% to 3.50% | $- | -% | $184 | 3.47% | $3,248 | 3.47% | $- | -% |
Minimum guaranteed crediting rate of 2.01% to 3.00% | $592 | 3.09% | $1,167 | 2.81% | $2,902 | 2.39% | $2,256 | 3.09% |
Minimum guaranteed crediting rate of 0.01% to 2.00% | $127 | 2.27% | $390 | 1.39% | $12,673 | 2.54% | $2,574 | 3.11% |
No minimum guaranteed crediting rate4 | $- | -% | $2,344 | -% | $1,520 | 2.21% | $- | -% |
December 31, 2022 | ||||||||
Minimum guaranteed crediting rate of 3.51% or greater | $554 | 4.00% | $- | -% | $- | -% | $- | -% |
Minimum guaranteed crediting rate of 3.01% to 3.50% | $- | -% | $207 | 3.63% | $2,433 | 3.45% | $- | -% |
Minimum guaranteed crediting rate of 2.01% to 3.00% | $598 | 3.06% | $1,364 | 2.98% | $2,307 | 2.65% | $2,260 | 3.02% |
Minimum guaranteed crediting rate of 0.01% to 2.00% | $100 | 2.26% | $515 | 1.34% | $15,530 | 2.49% | $2,015 | 3.02% |
No minimum guaranteed crediting rate4 | $- | -% | $1,417 | 0.01% | $1,538 | 2.12% | $- | -% |
Name | Age | Date Service Began |
John L. Carter | 61 | February 2013 |
Timothy G. Frommeyer | 59 | January 2009 |
Steven A. Ginnan | 56 | June 2018 |
Eric S. Henderson | 61 | March 2012 |
Holly R. Snyder | 56 | October 2021 |
Kirt A. Walker | 60 | November 2009 |
Name | Age | Position with NLIC |
John L. Carter | 61 | President and Chief Operating Officer |
Vinita Clements | 59 | Executive Vice President-Chief Human Resources Officer |
James R. Fowler | 52 | Executive Vice President-Chief Technology Officer |
Timothy G. Frommeyer | 59 | Executive Vice President-Chief Financial Officer |
Mark S. Howard | 60 | Executive Vice President-Chief Legal Officer |
Ramon Jones | 54 | Executive Vice President-Chief Marketing Officer |
Michael W. Mahaffey | 51 | Executive Vice President-Chief Customer, Strategy and Innovation Officer |
Amy T. Shore | 60 | Executive Vice President-Chief Transformation Officer |
Tina Ambrozy | 53 | Senior Vice President-NF Strategic Customer Solutions |
Ann S. Bair | 61 | Senior Vice President-Marketing Management-Financial Services |
James D. Benson | 58 | Senior Vice President-Corporate Controller and Chief Accounting Officer |
Joel L. Coleman | 58 | Senior Vice President-Chief Investment Officer |
Rae Ann Dankovic | 56 | Senior Vice President-Chief Compliance Officer |
Steven A. Ginnan | 56 | Senior Vice President-Chief Financial Officer-Nationwide Financial |
Rona Guymon | 49 | Senior Vice President-Annuity Distribution |
Craig A. Hawley | 55 | Senior Vice President-Retirement Solutions Sales |
Eric S. Henderson | 61 | Senior Vice President-Nationwide Annuity |
Kevin T. Jestice | 43 | Senior Vice President-Investment Management Group |
David LaPaul | 58 | Senior Vice President and Treasurer |
Juan J. Perez | 43 | Senior Vice President-Corporate Solutions |
Denise L. Skingle | 53 | Senior Vice President-Finance & Strategy Legal and Corporate Secretary |
Holly R. Snyder | 56 | Senior Vice President-Nationwide Life |
Eric Stevenson | 60 | Senior Vice President-Retirement Solutions |
WHAT WE DO | WHAT WE DON’T DO |
Pay for Performance. A significant percentage of total compensation is pay-at-risk that is connected to performance. | No guaranteed annual salary increases. Annual salary increases are based on evaluations of individual performance and market data. |
Independent Compensation Consultant. The NMIC Human Resources Committee retains an independent consultant to avoid conflicts of interest with the business and management. Other consulting services provided to management are subject to approval by the NMIC Human Resources Committee. | No Incentive for Short-term Results to the Detriment of Long-term Goals and Results. NEOs’ pay mix is heavily weighted toward long-term incentives. |
Generally, Target Pay at the Median of Market Comparator Groups. We aim to target compensation at the median of companies comparable to us in size. We review the peer group annually to ensure alignment of the industry, companies with whom we compete for talent, business complexity, and company size based on revenue. | No Excessive Perquisites. We provide limited perquisites and personal benefits. |
WHAT WE DO | WHAT WE DON’T DO |
Maximum Payout Caps for Broad-based Annual and Long- term Incentive Plans. The maximum payment prior to the exercise of discretion is two times the target amount. | No Excessive Severance Benefits. Severance benefits for the CEO are limited to two times base salary and annual incentives; and for Named Executive Officers other than the CEO, severance benefits are limited to one times base salary and annual incentive. |
Clawback of Incentive Compensation. Incentive compensation is subject to clawback if a material financial accounting restatement occurs or if we must materially adjust the results of a metric used for funding incentive compensation plans. Additional events that would trigger the clawback policy include detrimental conduct and solicitation of employees. | No Above Market Target Pay Philosophy. We generally do not aim to position target compensation for our Named Executive Officers above market median. |
Meaningful Stretch Goals. We establish clear and measurable performance goals at the beginning of performance cycles. | No Plans That Encourage Excessive Risk Taking. Risk mitigation is included in sales, broad-based annual, and long- term plan design, and a risk assessment and mitigation plan is reviewed annually. |
Compensation Element | Description | Purpose |
Base Salary | Cash compensation that is a fixed element of total compensation. | • attract and retain top-caliber executive talent • recognize executive officers' skills, competencies, experience, and job responsibilities |
Annual Incentives | Cash payments awarded after the completion of a one-year performance period. | • reward executives for achieving annual performance goals |
Long-term Incentives | Cash awards based on performance over multiple years and subject to forfeiture. | • reward executives for sustained long-term performance • retain and motivate executives to ensure business stability and success • recognize the achievement of performance objectives that drive long-term success, financial stability, and create value for our customers • align the interests of executives with long-term value of our members |
Compensation Element | Description | Purpose |
Executive Benefits and Perquisites | Includes pension plans, deferred compensation plans, and limited personal perquisites. | • attract and retain top-caliber executive talent • provide income after retirement and enable saving of income for retirement |
Public Company Peer Group Proxy Data | Priority | Number of Companies | Revenue (Median) | Assets (Median) |
Insurance/Financial Services Peer Group1 | Primary Reference Point | 19 | $ 34.8 billion | $ 304.7 billion |
Public Company Peer Group Proxy Data | Priority | Number of Companies | Revenue (Median) | Assets (Median) |
General Industry Peer Group2 (includes the 50 companies closest to Nationwide in the Fortune rankings that publicly disclose executive compensation) | Supplemental Reference Point | 50 | $47.4 billion | N/A |
Nationwide | $ 29.8 billion | $ 295.7 billion |
Executive | Base Salary (percentage of target total compensation) | Target Annual Incentive Percent of Base Salary (percentage of target total compensation) | Target Annual Incentive | Target Long-Term Incentive for 2023-2025 Performance Period (percentage of target total compensation) | Target Total Direct Compensation | Percentage of Target Total Compensation Attributed to Target Incentives |
Carter, John L. | 512,996 | 175% | 897,743 | 1,911,786 | 3,322,524 | 85% |
(15% ) | (27% ) | (58% ) | ||||
Ginnan, Steven A. | 301,668 | 80% | 241,334 | 353,998 | 896,999 | 66% |
(34% ) | (27% ) | (39% ) | ||||
Walker, Kirt A. | 413,986 | 250% | 1,034,965 | 3,441,765 | 4,890,716 | 92% |
(8% ) | (21% ) | (70% ) |
Executive | Base Salary (percentage of target total compensation) | Target Annual Incentive Percent of Base Salary (percentage of target total compensation) | Target Annual Incentive | Target Long-Term Incentive for 2023-2025 Performance Period (percentage of target total compensation) | Target Total Direct Compensation | Percentage of Target Total Compensation Attributed to Target Incentives |
Henderson, Eric S. | 400,567 | 100% | 400,567 | 475,921 | 1,277,054 | 69% |
(31% ) | (31% ) | (37% ) | ||||
Frommeyer, Timothy G. | 240,295 | 160% | 384,473 | 844,281 | 1,469,049 | 84% |
(16% ) | (26% ) | (57% ) |
Metric | Definition |
Enterprise Metric | |
Consolidated Net Operating Income (CNOI) | Consolidated Net Operating Income "CNOI" measures our profitability from continuing operations. CNOI excludes the impact of realized gains and losses on sales of investments and hedging instruments, certain hedged items, credit losses, discontinued operations, and extraordinary items, net of tax. |
P&C Business Unit Metrics | |
P&C Adjusted General Operating Expenses | Excludes Incentives, Defense & Adjusting, Commissions, Premium Tax, Fees and all other. |
P&C Premium Growth | The increase or decrease in the current performance year-ending business unit premium over the prior performance year-ending business unit premium, as a percentage. |
P&C Non-Weather Loss Ratio | Net incurred losses from non-weather perils, excluding contingent suits, divided by earned insurance premiums in the current year. Incurred losses only reflect losses from the current year and prior year development from the previous year. |
P&C JD Powers/CEM Customer Metric | Performance results are calculated by averaging the quartile rankings of each product line. |
NF Business Unit Metrics | |
NF Return on Capital (adjusted for excess capital) | NF net operating income for the year, excluding interest income on excess capital and adding back debt expense, divided by the total NF GAAP equity plus long-term debt at the beginning of the year, excluding excess capital. |
Metric | Definition |
NF Adjusted General Operating Expenses | Excludes sales incentives, management incentives, premium and other taxes, licenses and fees, and contingent suits. |
NF Sales Growth | NF sales primarily include individual and group annuity considerations, as well as life and specialty insurance premiums calculated in accordance with statutory accounting practices. In addition, NF sales includes deposits on administration-only and group trust products within our retirement solutions segment, as well as sales associated with our institutional fund business and securities-backed lending program. |
NF Asset Retention | Percentage of assets retained in NF’s key businesses year-over-year. This is calculated in each of the business segments. NF’s retention rate is then calculated using a segment weighting based on revenue. |
NF JD Power/Market Metrics | Performance results are calculated by averaging the quartile rankings of each product line. |
NW Pet Business Unit Metrics | |
Pet Trade Combined Ratio (TCR) | Sum of the calendar year loss ratio, statutory expense ratio, and dividend ratio where applicable. |
Pet New Writings | New customers / policies that are brought to Nationwide. |
Pet Retention % | Portion of the portfolio that has renewed and been retained. |
NF Annuity Sales Metrics | |
NF Annuity: VA | All variable annuity sales with living benefits. |
NF Annuity: RILA | Registered Indexed-Linked Annuity sales (Nationwide Defined Protection Annuity and Nationwide Defender Annuity). |
NF Annuity: FIA | All Fixed Index Annuity sales. |
NF Annuity: FBB | All non-living benefit sales sold through Advisory or Fee Based Brokerage and JP Morgan Multi-Asset Choice product for annuities sales. |
NF Annuity: SPIA/Trad Fix | All single-premium immediate annuity (SPIA) and traditional fixed annuity sales. |
Corporate Staff Metrics | |
Corporate Staff Expense | Includes Finance, HR, Legal, Marketing Staff, Customer, CRE, Aviation, and IT Run. Excludes Brand, IT Build, Foundation/ Charitable Contributions, Management incentives. |
CEO Non-Financial Metrics | |
People | Continue to develop a world class organization, talent, and culture. |
Strategy | Enabling the execution of strategy with accountability. |
Governance | Building an accountable and transparent organization. |
Metric ($ in millions) | Mr. Walker (Weight) | Messrs. Carter, Ginnan, Frommeyer (Weight) | Mr. Henderson (Weight) | Threshold (0.50) | Target (1.00) | Maximum (2.00) | 2023 Incentive Performance Results | Metric Performance Score |
Enterprise Metric | ||||||||
Enterprise Consolidated Net Operating Income | 26.00 | 30.00 | 18.00 | $780 | $1,560 | $2,184 | $1,162 | 0.74 |
NF Business Unit Metrics | ||||||||
NF Return on Capital | 7.29 | 8.57 | 12.00 | 4.7% | 7.9% | 9.0% | 12.6% | 2.00 |
Metric ($ in millions) | Mr. Walker (Weight) | Messrs. Carter, Ginnan, Frommeyer (Weight) | Mr. Henderson (Weight) | Threshold (0.50) | Target (1.00) | Maximum (2.00) | 2023 Incentive Performance Results | Metric Performance Score |
NF Expense: Adjusted General Operating Expenses | 3.64 | 4.29 | 6.00 | $1,456 | $1,414 | $1,371 | $1,410 | 1.10 |
NF Sales Growth | 8.20 | 9.64 | 13.50 | $33,250 | $35,000 | $36,750 | $40,006 | 2.00 |
NF Customer: Asset Retention | 3.64 | 4.29 | 6.00 | 90.22% | 92.72% | 93.72% | 92.46% | 0.95 |
NF Customer: NF JD Power/Market Metrics1 | 2.73 | 3.21 | 4.50 | N/A | N/A | 1st quartile | 2nd quartile | 1.33 |
P&C Business Unit Metrics | ||||||||
Expense: P&C Adjusted General Operating Expenses | 3.04 | 3.57 | 0.00 | $3,112 | $3,021 | $2,930 | $2,966 | 1.61 |
P&C Written Premium Growth | 3.04 | 3.57 | 0.00 | -5.01% | -2.51% | -0.51% | -2.77% | 0.95 |
P&C Non-Weather Loss Ratio | 12.14 | 14.29 | 0.00 | 51.01% | 49.01% | 48.01% | 52.39% | 0.00 |
P&C Customer: JD Power/CEM Customer Metric1 | 3.04 | 3.57 | 0.00 | N/A | N/A | 1st quartile | 3rd quartile | 0.67 |
Nationwide Pet Business Unit Metrics | ||||||||
Pet Trade Combined Ratio (TCR) | 2.13 | 2.50 | 0.00 | 100.0% | 98.5% | 97.0% | 106.1% | 0.00 |
Pet New Writings | 1.21 | 1.43 | 0.00 | 450,000 | 468,700 | 543,594 | 395,892 | 0.00 |
Pet Retention % | 0.91 | 1.07 | 0.00 | 77.7% | 79.2% | 80.7% | 77.0% | 0.00 |
NF Annuity Sales Metrics | ||||||||
NF Annuity: VA | 0.00 | 0.00 | 10.00 | $2,336.9 | $3,115.8 | $3.894.8 | $2,652.6 | 0.70 |
NF Annuity: RILA | 0.00 | 0.00 | 8.00 | $900.0 | $1,200.0 | $1,500.0 | $979.8 | 0.63 |
NF Annuity: FIA | 0.00 | 0.00 | 14.00 | $3,075.0 | $4,100.0 | $5,125.0 | $5,958.3 | 2.00 |
NF Annuity: FBB | 0.00 | 0.00 | 4.00 | $750.0 | $1,000.0 | $1,250.0 | $1,096.0 | 1.38 |
NF Annuity: SPIA/Trad Fix | 0.00 | 0.00 | 4.00 | $1,563.2 | $2,084.2 | $2,605.3 | $4,006.3 | 2.00 |
Corporate Staff Metric | ||||||||
Corporate Staff Expense | 9.00 | 10.00 | 0.00 | $1,722 | $1,672 | $1,622 | $1,652 | 1.40 |
CEO Non-Financial Metrics | ||||||||
People, Strategy and Governance | 15.00 | 0.00 | 0.00 | Qualitative and quantitative non-financial metrics2 | 1.74 |
Executive | Target | Annual Incentive Payment vs. Target | Payment | Summary of Rationale |
John L. Carter1 | 897,743 | 118% of Target | $1,063,780 | Performance compared to the PIP enterprise scorecard objectives |
Steven A. Ginnan1 | 241,334 | 114% of Target | $276,226 | Performance compared to the PIP enterprise scorecard objectives |
Kirt A. Walker2 | 1,034,965 | 109% of Target | $1,123,454 | Performance compared to the PIP enterprise scorecard objectives and non-financial objectives |
Eric S. Henderson3 | 400,567 | 136% of Target | $546,373 | Performance compared to PIP enterprise and NF business unit; and SIP annuity scorecard objectives |
Timothy G. Frommeyer1 | 384,473 | 101% of Target | $386,395 | Performance compared to the PIP enterprise scorecard objectives |
Executive | 2021-2023 LTPP Target | 2021-2023 LTPP Payment vs. Target | 2021-2023 LTPP Payment1 |
John L. Carter | $1,306,387 | 188% of Target | $2,529,687 |
Steven A. Ginnan | $215,477 | 188% of Target | $417,249 |
Kirt A. Walker | $2,889,784 | 188% of Target | $5,595,778 |
Eric S. Henderson | $436,261 | 188% of Target | $844,775 |
Timothy G. Frommeyer | $519,557 | 188% of Target | $1,006,071 |
Benefit | Mr. Walker | Messrs. Carter, Ginnan, Henderson and Frommeyer |
Severance benefits | • 2 x salary | • 1 x salary |
Annual bonus for the year of termination | • 2 x actual bonus | • 1 x actual bonus |
Outstanding LTPP performance cycles | • Actual payout in accordance with plan vesting provisions | • Actual payout in accordance with plan vesting provisions |
Lump sum and gross-up for continuation of health care benefits | • 24 months | • 12 months |
Retirement benefits | • Bridge to early retirement if terminated within 3 years of age 55 • Lump sum for company contribution to 401(k) and Supplemental 401(k) for 24 months | • Bridge to early retirement if terminated within 3 years of age 55 • Lump sum for company contribution to 401(k) and Supplemental 401(k) for 12 months |
Restrictive clauses | • Non-compete for 2 years • Non-solicitation for 2 years • Confidentiality | • Non-compete for 1 year • Non-solicitation for 1 year • Confidentiality |
Name and principal position | Year | Salary | Bonus | Non-Equity Incentive Plan Compensation1 | Change in Pension Value and Non- qualified Deferred Compensation Earnings9 | All Other Compensation | Total |
John L. Carter President and Chief Operating Officer | 2023 | 510,055 | 0 | 2,488,999 | 939,766 | 46,805 4 | 3,985,625 |
2022 | 422,254 | 0 | 1,970,433 | 0 3 | 32,479 | 2,425,166 | |
2021 | 392,396 | 19,520 | 826,441 | 365,421 | 64,634 | 1,668,412 | |
Steven A. Ginnan Chief Financial Officer - Nationwide Financial | 2023 | 299,300 | 0 | 343,678 | 313,815 | 12,831 5 | 969,624 |
2022 | 240,724 | 0 | 346,181 | 0 3 | 8,026 | 594,931 | |
2021 | 218,448 | 0 | 151,625 | 0 3 | 16,680 | 386,753 | |
Kirt A. Walker NMIC Chief Executive Officer | 2023 | 410,240 | 0 | 3,885,678 | 1,584,447 | 75,830 6 | 5,956,195 |
2022 | 348,789 | 0 | 3,094,766 | 246,180 | 53,514 | 3,743,249 | |
2021 | 191,001 | 0 | 1,168,597 | 415,283 | 26,427 | 1,801,308 | |
Eric S. Henderson SVP - Nationwide Annuity | 2023 | 398,615 | 0 | 891,518 | 379,805 | 21,650 7 | 1,691,588 |
2022 | 401,569 | 0 | 977,424 | 0 3 | 24,455 | 1,403,448 | |
2021 | 377,468 | 0 | 490,053 | 9,127 | 30,869 | 907,517 | |
Timothy G. Frommeyer Executive Vice President | 2023 | 236,549 | 0 | 822,681 | 520,666 | 18,333 8 | 1,598,299 |
2022 | 193,034 | 0 | 696,769 | 0 3 | 26,655 | 916,458 | |
2021 | 103,494 | 0 | 192,899 | 0 3 | 13,758 | 310,151 |
Executive | 2024 PIP Payment | 2024 LTPP Payment | 2024 Incentive Payments |
Mr. Carter | $897,743 | $2,529,687 | $3,427,430 |
Mr. Ginnan | $241,334 | $417,249 | $658,583 |
Mr. Walker | $1,034,965 | $5,595,778 | $6,630,743 |
Mr. Henderson | $400,567 | $844,775 | $1,245,342 |
Mr. Frommeyer | $384,473 | $1,006,071 | $1,390,544 |
Estimated Future Payouts Under Non-equity Incentive Plan Awards | ||||
Name | Grant date | Threshold | Target | Maximum |
John L. Carter | 2/7/2023 1,2 | $448,872 | $897,743 | $1,795,486 |
2/7/2023 3 | $0 | $1,911,786 | $3,823,572 | |
Steven A. Ginnan | 2/7/2023 1,2 | $120,667 | $241,334 | $482,668 |
2/7/2023 3 | $0 | $353,998 | $707,996 | |
Kirt A. Walker | 2/7/2023 1,2 | $517,483 | $1,034,965 | $2,069,930 |
2/7/2023 3 | $0 | $3,441,765 | $6,883,530 | |
Eric S. Henderson | 2/7/2023 1,2 | $200,284 | $400,567 | $801,134 |
2/7/2023 3 | $0 | $475,921 | $951,842 | |
Timothy G. Frommeyer | 2/7/2023 1,2 | $192,237 | $384,473 | $768,946 |
2/7/2023 3 | $0 | $844,281 | $1,688,562 |
Name | Plan Name | Number of Years Credited Service | Present Value of Accumulated Benefit1 | Payments During Last Fiscal Year2 |
John L. Carter | Nationwide Retirement Plan | 17.2 | $213,068 | $– |
Nationwide Supplemental Retirement Plan | 17.2 | $3,280,730 | $– | |
Steven A. Ginnan | Nationwide Retirement Plan | 24.3/7.0 | $553,933 | $– |
Nationwide Supplemental Retirement Plan | 25.0 | $1,056,182 | $– | |
Kirt A. Walker | Nationwide Retirement Plan | 18.0/7.0 | $339,107 | $– |
Nationwide Supplemental Retirement Plan | 25.0 | $5,095,006 | $– | |
Eric S. Henderson | Nationwide Retirement Plan | 29.8/7.0 | $1,402,940 | $– |
Nationwide Supplemental Retirement Plan | 28.8 | $3,600,189 | $– | |
Timothy G. Frommeyer | Nationwide Retirement Plan | 29.3/7.0 | $458,638 | $– |
Nationwide Supplemental Retirement Plan | 28.3 | $1,838,482 | $– |
Name | Executive Contributions in Last Fiscal Year1 | Registrant Contributions in Last Fiscal Year2 | Aggregate Earnings in Last Fiscal Year3 | Aggregate Withdrawals/ Distributions4 | Aggregate Balance at Last Fiscal Year End5 |
John L. Carter | $494,837 | $61,734 | $140,913 | $0 | $1,810,982 |
Steven A. Ginnan | $0 | $17,419 | $11,547 | $0 | $98,807 |
Kirt A. Walker | $0 | $73,167 | $120,504 | $44,030 | $1,016,574 |
Eric S. Henderson | $0 | $32,509 | $8,619 | $0 | $248,582 |
Timothy G. Frommeyer | $0 | $12,335 | $27,043 | $0 | $193,641 |
Benefits and Payments upon Termination | Voluntary Termination | Termination Without Cause | For Cause Termination | Death or Disability | Retirement |
Annual incentives: | |||||
Annual incentive1 | $1,063,780 | $– | $– | $1,063,780 | $1,063,780 |
Long-term incentives: | |||||
LTPP 21-23 award2 | $2,529,687 | $2,529,687 | $– | $2,529,687 | $2,529,687 |
LTPP 22-24 award3 | $1,805,044 | $1,805,044 | $– | $1,805,044 | $1,805,044 |
LTPP 23-25 award3 | $872,984 | $872,984 | $– | $872,984 | $872,984 |
Life insurance proceeds | $– | $– | $– | $1,911,786 | $– |
Cash severance4 | $– | $968,042 | $– | $– | $– |
Total compensation | $6,271,496 | $6,175,758 | $– | $8,183,282 | $6,271,496 |
Benefits and Payments upon Termination | Voluntary Termination | Termination Without Cause | For Cause Termination | Death or Disability | Retirement |
Annual-term incentives: | |||||
Annual incentive1 | $276,226 | $– | $– | $276,226 | $276,226 |
Long-term incentives: | |||||
LTPP 21-23 award2 | $417,249 | $417,249 | $– | $417,249 | $417,249 |
LTPP 22-24 award3 | $237,794 | $237,794 | $– | $237,794 | $237,794 |
LTPP 23-25 award3 | $161,647 | $161,647 | $– | $161,647 | $161,647 |
Life insurance proceeds | $– | $– | $– | $507,294 | $– |
Cash Severance4 | $– | $289,338 | $– | $– | $– |
Total compensation | $1,092,916 | $1,106,028 | $– | $1,600,210 | $1,092,916 |
Benefits and Payments upon Termination | Voluntary Termination | Termination Without Cause | For Cause Termination | Death or Disability | Retirement |
Annual-term incentives: | |||||
Annual incentive1 | $2,158,419 | $– | $– | $2,158,419 | $2,158,419 |
Long-term incentives: | |||||
LTPP 21-23 award2 | $5,595,778 | $5,595,778 | $– | $5,595,778 | $5,595,778 |
LTPP 22-24 award3 | $3,392,850 | $3,392,850 | $– | $3,392,850 | $3,392,850 |
LTPP 23-25 award3 | $1,571,623 | $1,571,623 | $– | $1,571,623 | $1,571,623 |
Life insurance proceeds | $– | $– | $– | $974,085 | $– |
Cash Severance4 | $– | $2,216,999 | $– | $– | $– |
Total compensation | $12,718,670 | $12,777,249 | $– | $13,692,754 | $12,718,670 |
Benefits and Payments upon Termination | Voluntary Termination | Termination Without Cause | For Cause Termination | Death or Disability | Retirement |
Annual-term incentives: | |||||
Annual incentive1 | $546,373 | $– | $– | $546,373 | $546,373 |
Long-term incentives: | |||||
LTPP 21-23 award2 | $844,775 | $844,775 | $– | $844,775 | $844,775 |
LTPP 22-24 award3 | $490,198 | $490,198 | $– | $490,198 | $490,198 |
LTPP 23-25 award3 | $217,321 | $217,321 | $– | $217,321 | $217,321 |
Life insurance proceeds | $– | $– | $– | $2,379,604 | $– |
Cash Severance4 | $– | $886,732 | $– | $– | $– |
Total compensation | $2,098,668 | $2,439,027 | $– | $4,478,272 | $2,098,668 |
Benefits and Payments upon Termination | Voluntary Termination | Termination Without Cause | For Cause Termination | Death or Disability | Retirement |
Annual incentives: | |||||
Annual incentive1 | $386,395 | $– | $– | $386,395 | $386,395 |
Long-term incentives: | |||||
LTPP 21-23 award2 | $1,006,071 | $1,006,071 | $– | $1,006,071 | $1,006,071 |
LTPP 22-24 award3 | $735,823 | $735,823 | $– | $735,823 | $735,823 |
LTPP 23-25 award3 | $385,526 | $385,526 | $– | $385,526 | $385,526 |
Life insurance proceeds | $– | $– | $– | $129,889 | $– |
Cash severance4 | $– | $455,108 | $– | $– | $– |
Total compensation | $2,513,815 | $2,582,529 | $– | $2,643,705 | $2,513,815 |
Name | Fees Earned or Paid in Cash | Stock Awards | All Other Compensation | Total |
John L. Carter1 | $0 | $0 | $0 | $0 |
Timothy G. Frommeyer1 | $0 | $0 | $0 | $0 |
Steven A. Ginnan1 | $0 | $0 | $0 | $0 |
Eric S. Henderson1 | $0 | $0 | $0 | $0 |
Holly R. Snyder1,2 | $0 | $0 | $0 | $0 |
Kirt A. Walker1 | $0 | $0 | $0 | $0 |
Name and address of beneficial owner | Amount and nature of beneficial ownership | Percent of class |
Nationwide Financial Services, Inc. 1 Nationwide Plaza Columbus, Ohio 43215 | 3,814,779 shares | 100 % |
NATIONWIDE LIFE INSURANCE COMPANY
FOR THE YEAR ENDED DECEMBER 31, 2023
TABLE OF CONTENTS
Page | ||||
F-1 | ||||
Statutory Statements of Admitted Assets, Liabilities, Capital and Surplus | F-4 | |||
F-5 | ||||
F-6 | ||||
F-7 | ||||
F-8 | ||||
Schedule I – Summary of Investments – Other Than Investments in Related Parties | F-47 | |||
F-48 | ||||
F-49 | ||||
F-50 |
Audit Committee of the Board of Directors
Nationwide Life Insurance Company:
Opinions
We have audited the financial statements of Nationwide Life Insurance Company (the Company), which comprise the statutory statements of admitted assets, liabilities, capital and surplus as of December 31, 2023 and 2022, and the related statutory statements of operations, changes in capital and surplus, and cash flow for each of the years in the three-year period ended December 31, 2023, and the related notes to the statutory financial statements.
Unmodified Opinion on Statutory Basis of Accounting
In our opinion, the accompanying financial statements present fairly, in all material respects, the admitted assets, liabilities, capital and surplus of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flow for each of the years in the three-year period ended December 31, 2023, in accordance with accounting practices prescribed or permitted by the Ohio Department of Insurance (Department) described in Note 2.
Adverse Opinion on U.S. Generally Accepted Accounting Principles
In our opinion, because of the significance of the matter discussed in the Basis for Adverse Opinion on U.S. Generally Accepted Accounting Principles section of our report, the statutory financial statements do not present fairly, in accordance with U.S. generally accepted accounting principles, the financial position of the Company as of December 31, 2023 and 2022, or the results of its operations or its cash flows for each of the years in the three-year period ended December 31, 2023.
Basis for Opinions
We conducted our audits in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Company and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.
Basis for Adverse Opinion on U.S. Generally Accepted Accounting Principles
As described in Note 2 to the financial statements, the financial statements are prepared by the Company using accounting practices prescribed or permitted by the Department, which is a basis of accounting other than U.S. generally accepted accounting principles. Accordingly, the financial statements are not intended to be presented in accordance with U.S. generally accepted accounting principles. The effects on the financial statements of the variances between the statutory accounting practices and U.S. generally accepted accounting principles are also described in Note 2.
Emphasis of Matter
As discussed in Note 2 to the financial statements, the Company’s subsidiary received permission from the Department in 2023 to account for an excess of loss reinsurance recoverable as an admitted asset. Under prescribed statutory accounting practices, the excess of loss reinsurance recoverable would not be an admitted asset. As of December 31, 2023, that permitted accounting practice increased statutory surplus over what it would have been had that prescribed accounting practice been followed. Our opinions are not modified with respect to this matter.
Responsibilities of Management for the Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting practices prescribed or permitted by the Department. Management is also responsible for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for one year after the date that the financial statements are issued.
Auditors’ Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.
In performing an audit in accordance with GAAS, we:
• | Exercise professional judgment and maintain professional skepticism throughout the audit. |
• | Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. |
• | Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. Accordingly, no such opinion is expressed. |
• | Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements. |
• | Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for a reasonable period of time. |
F-2
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control related matters that we identified during the audit.
Supplementary Information
Our audits were conducted for the purpose of forming an opinion on the financial statements as a whole. The supplementary information included in the Schedule I Summary of Investments - Other Than Investments in Related Parties, Schedule III Supplementary Insurance Information, Schedule IV Reinsurance, and Schedule V Valuation and Qualifying Accounts is presented for purposes of additional analysis and is not a required part of the financial statements but is supplementary information required by the Securities and Exchange Commission’s Regulation S-X. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audits of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with GAAS. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole.
/s/ KPMG LLP
Columbus, Ohio
March 20, 2024
F-3
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Statutory Statements of Admitted Assets, Liabilities, Capital and Surplus
December 31, | ||||||||
(in millions, except share amounts) | 2023 | 2022 | ||||||
Admitted assets | ||||||||
Invested assets | ||||||||
Bonds | $ | 43,867 | $ | 40,208 | ||||
Stocks | 3,714 | 3,700 | ||||||
Mortgage loans, net of allowance | 9,144 | 8,363 | ||||||
Policy loans | 969 | 933 | ||||||
Derivative assets | 113 | 143 | ||||||
Cash, cash equivalents and short-term investments | 1,555 | 1,621 | ||||||
Securities lending collateral assets | 359 | 232 | ||||||
Other invested assets | 2,198 | 1,848 | ||||||
Total invested assets | $ | 61,919 | $ | 57,048 | ||||
Accrued investment income | 965 | 585 | ||||||
Deferred federal income tax assets, net | 632 | 589 | ||||||
Other assets | 404 | 378 | ||||||
Separate account assets | 113,270 | 102,808 | ||||||
Total admitted assets | $ | 177,190 | $ | 161,408 | ||||
Liabilities, capital and surplus | ||||||||
Liabilities | ||||||||
Future policy benefits and claims | $ | 49,373 | $ | 45,482 | ||||
Policyholders’ dividend accumulation | 380 | 398 | ||||||
Asset valuation reserve | 841 | 707 | ||||||
Payable for securities | 512 | 323 | ||||||
Securities lending payable | 359 | 232 | ||||||
Funds held under coinsurance | 1,323 | 1,608 | ||||||
Other liabilities | 1,447 | 1,253 | ||||||
Accrued transfers from separate accounts | (1,548 | ) | (1,598 | ) | ||||
Separate account liabilities | 113,270 | 102,808 | ||||||
Total liabilities | $ | 165,957 | $ | 151,213 | ||||
Capital and surplus | ||||||||
Capital shares ($1 par value; authorized - 5,000,000 shares,issued and outstanding - 3,814,779 shares) | $ | 4 | $ | 4 | ||||
Surplus notes | 1,100 | 1,100 | ||||||
Special surplus funds | 93 | - | ||||||
Additional paid-in capital | 2,443 | 2,308 | ||||||
Unassigned surplus | 7,593 | 6,783 | ||||||
Total capital and surplus | $ | 11,233 | $ | 10,195 | ||||
Total liabilities, capital and surplus | $ | 177,190 | $ | 161,408 |
See accompanying notes to statutory financial statements.
F-4
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Statutory Statements of Operations
Years ended December 31, | ||||||||||||
(in millions) | 2023 | 2022 | 2021 | |||||||||
Revenues | ||||||||||||
Premiums and annuity considerations | $ | 14,670 | $ | 14,535 | $ | 12,664 | ||||||
Net investment income | 3,136 | 2,019 | 2,231 | |||||||||
Other revenues | 2,389 | 2,346 | 2,455 | |||||||||
Total revenues | $ | 20,195 | $ | 18,900 | $ | 17,350 | ||||||
Benefits and expenses | ||||||||||||
Benefits to policyholders and beneficiaries | $ | 17,416 | $ | 15,963 | $ | 16,884 | ||||||
Increase in reserves for future policy benefits and claims | 3,747 | 2,525 | 807 | |||||||||
Net transfers from separate accounts | (3,742 | ) | (1,635 | ) | (3,002 | ) | ||||||
Commissions | 766 | 810 | 858 | |||||||||
Reserve adjustment on reinsurance assumed | (153 | ) | (161 | ) | (151 | ) | ||||||
Other expenses | 702 | 564 | 469 | |||||||||
Total benefits and expenses | $ | 18,736 | $ | 18,066 | $ | 15,865 | ||||||
Income before federal income tax expense (benefit) and net realized capital (losses) gains on investments | $ | 1,459 | $ | 834 | $ | 1,485 | ||||||
Federal income tax expense (benefit) | 108 | 100 | (9 | ) | ||||||||
Income before net realized capital (losses) gains on investments | $ | 1,351 | $ | 734 | $ | 1,494 | ||||||
Net realized capital (losses) gains on investments, net of federal income tax (benefit) expense of $(4), $3 and $59 in 2023, 2022 and 2021, respectively, and excluding $(30), $(103) and $15 of net realized capital (losses) gains transferred to the interest maintenance reserve in 2023, 2022 and 2021, respectively | (402 | ) | 240 | (683 | ) | |||||||
Net income | $ | 949 | $ | 974 | $ | 811 |
See accompanying notes to statutory financial statements.
F-5
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Statutory Statements of Changes in Capital and Surplus
(in millions) | Capital shares | Surplus notes | Special surplus funds | Additional paid-in capital | Unassigned surplus | Capital and surplus | ||||||||||||||||||
Balance as of December 31, 2020 | $ | 4 | $ | 1,100 | $ | - | $ | 1,998 | $ | 6,003 | $ | 9,105 | ||||||||||||
Change in reserve on account of change in valuation basis | - | - | - | - | 2 | 2 | ||||||||||||||||||
Cumulative effect of change in accounting principle | - | - | - | - | 6 | 6 | ||||||||||||||||||
Balance as of January 1, 2021 | $ | 4 | $ | 1,100 | $ | - | $ | 1,998 | $ | 6,011 | $ | 9,113 | ||||||||||||
Net income | - | - | - | - | 811 | 811 | ||||||||||||||||||
Change in asset valuation reserve | - | - | - | - | (144 | ) | (144 | ) | ||||||||||||||||
Change in deferred income taxes | - | - | - | - | 50 | 50 | ||||||||||||||||||
Change in net unrealized capital gains and losses, net of tax expense of $30 | - | - | - | - | (142 | ) | (142 | ) | ||||||||||||||||
Change in nonadmitted assets | - | - | - | - | (47 | ) | (47 | ) | ||||||||||||||||
Dividends paid to Nationwide Financial Services, Inc. | - | - | - | - | (550 | ) | (550 | ) | ||||||||||||||||
Balance as of December 31, 2021 | $ | 4 | $ | 1,100 | $ | - | $ | 1,998 | $ | 5,989 | $ | 9,091 | ||||||||||||
Correction of error (see Note 2) | - | - | - | - | (39 | ) | (39 | ) | ||||||||||||||||
Balance as of January 1, 2022 | $ | 4 | $ | 1,100 | $ | - | $ | 1,998 | $ | 5,950 | $ | 9,052 | ||||||||||||
Net income | - | - | - | - | 974 | 974 | ||||||||||||||||||
Change in asset valuation reserve | - | - | - | - | (97 | ) | (97 | ) | ||||||||||||||||
Change in deferred income taxes | - | - | - | - | 28 | 28 | ||||||||||||||||||
Change in net unrealized capital gains and losses, net of tax expense of $37 | - | - | - | - | (40 | ) | (40 | ) | ||||||||||||||||
Change in nonadmitted assets | - | - | - | - | (33 | ) | (33 | ) | ||||||||||||||||
Capital contributions from Nationwide Financial Services, Inc. | - | - | - | 310 | - | 310 | ||||||||||||||||||
Other, net | - | - | - | - | 1 | 1 | ||||||||||||||||||
Balance as of December 31, 2022 | $ | 4 | $ | 1,100 | $ | - | $ | 2,308 | $ | 6,783 | $ | 10,195 | ||||||||||||
Net income | - | - | - | - | 949 | 949 | ||||||||||||||||||
Change in asset valuation reserve | - | - | - | - | (103 | ) | (103 | ) | ||||||||||||||||
Change in deferred income taxes | - | - | - | - | 132 | 132 | ||||||||||||||||||
Change in net unrealized capital gains and losses, net of tax benefit of $37 | - | - | - | - | (77 | ) | (77 | ) | ||||||||||||||||
Change in nonadmitted assets, including admitted disallowed interest maintenance reserve | - | - | 93 | - | (126 | ) | (33 | ) | ||||||||||||||||
Capital contributions from Nationwide Financial Services, Inc. | - | - | - | 135 | - | 135 | ||||||||||||||||||
Other, net | - | - | - | - | 35 | 35 | ||||||||||||||||||
Balance as of December 31, 2023 | $ | 4 | $ | 1,100 | $ | 93 | $ | 2,443 | $ | 7,593 | $ | 11,233 |
See accompanying notes to statutory financial statements.
F-6
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Statutory Statements of Cash Flow
Years ended December 31, | ||||||||||||
(in millions) | 2023 | 2022 | 2021 | |||||||||
Cash flows from operating activities: | ||||||||||||
Premiums collected, net of reinsurance | $ | 14,675 | $ | 14,545 | $ | 12,661 | ||||||
Net investment income | 2,775 | 2,064 | 2,404 | |||||||||
Other revenue | 2,021 | 3,178 | 2,367 | |||||||||
Policy benefits and claims paid | (17,567 | ) | (15,962 | ) | (16,735 | ) | ||||||
Commissions, operating expenses and taxes, other than federal income tax paid | (1,268 | ) | (1,275 | ) | (1,122 | ) | ||||||
Net transfers from separate accounts | 3,792 | 1,658 | 2,871 | |||||||||
Policyholders’ dividends paid | (28 | ) | (30 | ) | (36 | ) | ||||||
Federal income taxes recovered (paid) | 98 | (261 | ) | 121 | ||||||||
Net cash provided by operating activities | $ | 4,498 | $ | 3,917 | $ | 2,531 | ||||||
Cash flows from investing activities: | ||||||||||||
Proceeds from investments sold, matured or repaid: | ||||||||||||
Bonds | $ | 2,594 | $ | 3,444 | $ | 6,953 | ||||||
Stocks | 46 | 19 | 127 | |||||||||
Mortgage loans | 635 | 1,139 | 1,053 | |||||||||
Derivative assets | - | 431 | - | |||||||||
Other invested assets and other | 467 | 641 | 279 | |||||||||
Total investment proceeds | $ | 3,742 | $ | 5,674 | $ | 8,412 | ||||||
Cost of investments acquired: | ||||||||||||
Bonds | $ | (6,256 | ) | $ | (6,024 | ) | $ | (7,744 | ) | |||
Stocks | (35 | ) | (901 | ) | (538 | ) | ||||||
Mortgage loans | (1,370 | ) | (1,305 | ) | (1,441 | ) | ||||||
Derivative assets | (556 | ) | - | (589 | ) | |||||||
Other invested assets and other | (766 | ) | (1,057 | ) | (594 | ) | ||||||
Total investments acquired | $ | (8,983 | ) | $ | (9,287 | ) | $ | (10,906 | ) | |||
Net increase in policy loans | (37 | ) | (19 | ) | (25 | ) | ||||||
Net cash used in investing activities | $ | (5,278 | ) | $ | (3,632 | ) | $ | (2,519 | ) | |||
Cash flows from financing activities and miscellaneous sources: | ||||||||||||
Capital contributions from Nationwide Financial Services, Inc. | $ | 135 | $ | 310 | $ | - | ||||||
Dividend paid to Nationwide Financials Services, Inc. | - | - | (550 | ) | ||||||||
Net change in deposits on deposit-type contract funds and other insurance liabilities | 270 | 391 | 517 | |||||||||
Other cash provided (used) | 309 | (1 | ) | 196 | ||||||||
Net cash provided by financing activities and miscellaneous | $ | 714 | $ | 700 | $ | 163 | ||||||
Net (decrease) increase in cash, cash equivalents and short-term investments | $ | (66 | ) | $ | 985 | $ | 175 | |||||
Cash, cash equivalents and short-term investments at beginning of year | 1,621 | 636 | 461 | |||||||||
Cash, cash equivalents and short-term investments at end of year | $ | 1,555 | $ | 1,621 | $ | 636 | ||||||
Supplemental disclosure of non-cash activities: | ||||||||||||
Exchange of bond investments | $ | 385 | $ | 349 | $ | 277 | ||||||
Intercompany transfer of securities from merger | $ | 203 | $ | - | $ | - |
See accompanying notes to statutory financial statements.
F-7
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2023, 2022 and 2021 Statutory Financial Statements
(1) | Nature of Operations |
Nationwide Life Insurance Company (“NLIC” or “the Company”) is an Ohio domiciled stock life insurance company. The Company is a member of the Nationwide group of companies (“Nationwide”), which is comprised of Nationwide Mutual Insurance Company (“NMIC”) and all of its subsidiaries and affiliates.
All of the outstanding shares of NLIC’s common stock are owned by Nationwide Financial Services, Inc. (“NFS”), a holding company formed by Nationwide Corporation, a wholly-owned subsidiary of NMIC.
The Company is a leading provider of long-term savings and retirement products in the United States of America (“U.S.”). The Company develops and sells a wide range of products and services, which include life insurance, fixed and variable individual annuities, private and public sector group retirement plans, investment advisory services, pension risk transfer (“PRT”) contracts and other investment products. The Company is licensed to conduct business in all fifty states, the District of Columbia, Guam, Puerto Rico and the U.S. Virgin Islands.
The Company sells its products through a diverse distribution network. Unaffiliated entities that sell, recommend or direct the purchase of the Company’s products to their own customer bases include independent broker-dealers, financial institutions, wirehouses and regional firms, pension plan administrators, life insurance agencies, life insurance specialists and registered investment advisors. Affiliates that market products directly to a customer base include Nationwide Retirement Solutions, Inc., Nationwide Securities, LLC and Nationwide Financial General Agency, Inc. The Company believes its broad range of competitive products, strong distributor relationships and diverse distribution network position it to compete effectively under various economic conditions.
Wholly-owned subsidiaries of NLIC as of December 31, 2023 include Nationwide Life and Annuity Insurance Company (“NLAIC”) and its wholly-owned subsidiaries, Olentangy Reinsurance, LLC (“Olentangy”) and Nationwide SBL, LLC (“NWSBL”), Jefferson National Life Insurance Company (“JNL”) and its wholly-owned subsidiary, Jefferson National Life Insurance Company of New York (“JNLNY”), Eagle Captive Reinsurance, LLC (“Eagle”), Nationwide Investment Services Corporation (“NISC”) and Nationwide Investment Advisors, LLC (“NIA”). NLAIC primarily offers individual annuity contracts including fixed annuity contracts, group annuity contracts including PRT contracts, universal life insurance, variable universal life insurance, term life insurance and corporate-owned life insurance on a non-participating basis. Olentangy is a dormant Vermont domiciled special purpose financial insurance company and nonadmitted subsidiary. NWSBL is an Ohio limited liability company and offers a securities-based lending product and is a nonadmitted subsidiary. JNL and JNLNY primarily offer individual deferred fixed and variable annuity products. Eagle is an Ohio domiciled special purpose financial captive insurance company. NISC is a registered broker-dealer. NIA is a registered investment advisor and nonadmitted subsidiary.
The Company is subject to regulation by the insurance departments of states in which it is domiciled and/or transacts business and undergoes periodic examinations by those departments.
As of December 31, 2023 and 2022, the Company did not have a significant concentration of financial instruments in a single investee, industry or geographic region. Also, the Company did not have a concentration of business transactions with a particular customer, lender, distribution source, market or geographic region in which a single event could cause a severe impact to the Company’s financial position after considering insurance risk that has been transferred to external reinsurers.
(2) | Summary of Significant Accounting Policies |
Use of Estimates
The preparation of the statutory financial statements requires the Company to make estimates and assumptions that affect the amounts reported in the statutory financial statements and accompanying notes. Significant estimates include certain investment and derivative valuations and future policy benefits and claims. Actual results could differ significantly from those estimates.
Basis of Presentation
Effective October 1, 2023, Jefferson National Financial Corporation (“JNFC”), a holding company and wholly-owned subsidiary of the Company, completed a merger agreement with the Company. Pursuant to the merger agreement, which was deemed a statutory merger, the operations of JNFC were merged with and into the Company, with the Company continuing as the surviving corporation. Concurrently, JNL, a wholly-owned subsidiary of JNFC prior to the merger, became a wholly-owned subsidiary of the Company. There was not a material impact on the Company’s surplus as a result of the merger.
F-8
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2023, 2022 and 2021 Statutory Financial Statements
Effective January 1, 2022, Harleysville Life Insurance Company (“HLIC”), an Ohio domiciled stock life insurance company and subsidiary of NMIC that offered universal and traditional life insurance, disability income insurance and fixed annuity contracts on a non-participating basis, completed a merger agreement with NLAIC. Pursuant to the merger agreement, which was deemed a statutory merger, the operations of HLIC were merged with and into NLAIC, with NLAIC continuing as the surviving entity. All shares of HLIC were cancelled and the outstanding surplus balance was merged into NLAIC’s additional paid-in capital and unassigned surplus. There was not a material impact on the Company’s surplus as a result of the merger.
The statutory financial statements of the Company are presented on the basis of accounting practices prescribed or permitted by the Ohio Department of Insurance (“the Department”). Prescribed statutory accounting practices are those practices incorporated directly or by reference in state laws, regulations and general administrative rules applicable to all insurance enterprises domiciled in a particular state. Permitted statutory accounting practices include practices not prescribed by the domiciliary state but allowed by the domiciliary state regulatory authority.
NLIC and NLAIC have elected to apply a prescribed practice promulgated under Ohio Administrative Code Section 3901-1-67 (“OAC 3901-1-67”) to its derivative instruments hedging indexed products and indexed annuity reserve liabilities in order to better align the measurement of indexed product reserves and the derivatives that hedge them. Under OAC 3901-1-67, derivative instruments are carried at amortized cost with the initial hedge cost amortized over the term and asset payoffs realized at the end of the term being reported through net investment income, rather than the derivative instruments being carried at fair value with asset payoffs realized over the term through net realized capital gains and losses. Additionally, the cash surrender value reserves for indexed annuity products only reflect index interest credits at the end of the crediting term as compared to partial index interest credits accumulating throughout the crediting term in increase in reserves for future policy benefits and claims.
Eagle applies one prescribed practice with multiple applications as provided under the State of Ohio’s captive law, which values assumed guaranteed minimum death benefits (“GMDB”) and guaranteed lifetime withdrawal benefits (“GLWB”) risks on variable annuity contracts from NLIC and GLWB risks on fixed indexed annuity contracts from NLIC and NLAIC using an alternative reserving basis from the Statutory Accounting Principles detailed within the National Association of Insurance Commissioners (“NAIC”) Accounting Practices and Procedures manual (“NAIC SAP”) pursuant to Ohio Revised Code Chapter 3964 and approved by the Department.
Effective October 1, 2023, Eagle was granted a permitted practice from the Department, allowing Eagle to carry a reinsurance recoverable asset under an excess of loss reinsurance agreement with a third-party reinsurer as an admitted asset.
Prior to October 1, 2023, Olentangy was granted a permitted practice from the State of Vermont allowing Olentangy to carry the assets placed into a trust account by Union Hamilton Reinsurance Ltd. on its statutory statements of admitted assets, liabilities and surplus at net admitted asset value for certain universal life and term life insurance policies. Effective October 1, 2023, Olentangy terminated this permitted practice due to NLAIC’s recapture of the reinsurance agreements.
F-9
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2023, 2022 and 2021 Statutory Financial Statements
If the prescribed or permitted practices were not applied, the Company’s risk-based capital would continue to be above regulatory action levels. A reconciliation of the Company’s net income between NAIC SAP and prescribed and permitted practices is shown below:
(in millions) | SSAP # | F/S Page | State of domicile | 2023 | December 31, 2022 | 2021 | ||||||||||||||||||
Net Income | ||||||||||||||||||||||||
Statutory Net Income | OH | $ | 949 | $ | 974 | $ | 811 | |||||||||||||||||
State Prescribed Practice: | ||||||||||||||||||||||||
OAC 3901-1-67: | ||||||||||||||||||||||||
Derivative instruments | 86 | 4 | OH | 110 | (43 | ) | 9 | |||||||||||||||||
Reserves for indexed annuities | 51 | 4 | OH | (75 | ) | 15 | (20 | ) | ||||||||||||||||
Tax impact | 101 | 4 | OH | (7 | ) | 6 | 3 | |||||||||||||||||
NAIC SAP | $ | 977 | $ | 952 | $ | 803 |
A reconciliation of the Company’s capital and surplus between NAIC SAP and prescribed and permitted practices is shown below:
F/S | State of | As of December 31, | ||||||||||||||||||
(in millions) | SSAP # | Page | domicile | 2023 | 2022 | |||||||||||||||
Surplus | ||||||||||||||||||||
Statutory Capital and Surplus | OH | $ | 11,233 | $ | 10,195 | |||||||||||||||
State Prescribed Practice: | ||||||||||||||||||||
OAC 3901-1-67: | ||||||||||||||||||||
Derivative instruments | 86 | 2,4 | OH | 84 | (30 | ) | ||||||||||||||
Reserves for indexed annuities | 51 | 3,4 | OH | (82 | ) | (7 | ) | |||||||||||||
Tax impact | 101 | 2,4 | OH | - | 8 | |||||||||||||||
Subsidiary Valuation - NLAIC | 51,86,101 | 2 | OH | 89 | (232 | ) | ||||||||||||||
Subsidiary valuation - Eagle | 51 | 2 | OH | (228 | ) | 118 | ||||||||||||||
State Permitted Practice: | ||||||||||||||||||||
Subsidiary valuation - Eagle | 61R | 2 | OH | (853 | ) | - | ||||||||||||||
Subsidiary valuation - Olentangy | 20 | 2 | VT | - | (67 | ) | ||||||||||||||
NAIC SAP | $ | 10,243 | $ | 9,985 |
Statutory accounting practices vary in some respects from U.S. generally accepted accounting principles (“GAAP”), including the following practices:
Financial Statements
● | Statutory financial statements are prepared using language and groupings substantially the same as the annual statements of the Company filed with the NAIC and state regulatory authorities; |
● | assets must be included in the statutory statements of admitted assets, liabilities, capital and surplus at net admitted asset value and nonadmitted assets are excluded through a charge to capital and surplus; |
● | an asset valuation reserve (“AVR”) is established in accordance with the NAIC Annual Statement Instructions for Life and Accident and Health Insurance Companies and is reported as a liability, and changes in the AVR are reported directly in capital and surplus; |
● | an interest maintenance reserve (“IMR”) is established in accordance with the NAIC Annual Statement Instructions for Life and Accident and Health Insurance Companies and is reported as a liability or other asset, and the amortization of the IMR is reported as revenue; |
● | the expense allowance associated with statutory reserving practices for investment contracts held in the separate accounts is reported in the general account as a negative liability; |
● | accounting for contingencies requires recording a liability at the midpoint of a range of estimated possible outcomes when no better estimate in the range exists; |
● | surplus notes are accounted for as a component of capital and surplus; |
F-10
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2023, 2022 and 2021 Statutory Financial Statements
● | costs related to successful policy acquisitions are charged to operations in the year incurred; |
● | negative cash balances are reported as negative assets; |
● | certain income and expense items are charged or credited directly to capital and surplus; |
● | amounts on deposit in internal qualified cash pools are reported as cash equivalents; |
● | the statutory statements of cash flow are presented on the basis prescribed by the NAIC; and |
● | the statutory financial statements do not include accumulated other comprehensive income. |
Future Policy Benefits and Claims
● | Deposits to universal life contracts, investment contracts and limited payment contracts are included in revenue; and |
● | future policy benefit reserves are based on statutory requirements. |
Reinsurance Ceded
● | Certain assets and liabilities are reported net of ceded reinsurance balances; and |
● | provision is made for amounts receivable and outstanding for more than 90 days through a charge to capital and surplus. |
Investments
● | Investments in bonds are generally stated at amortized cost, except those with an NAIC designation of “6”, which are stated at the lower of amortized cost or fair value; |
● | investments in preferred stocks are generally stated at amortized cost, except those with an NAIC designation of “4” through “6”, which are stated at the lower of amortized cost or fair value; |
● | other-than-temporary impairments on bonds, excluding loan-backed and structured securities, are measured based on fair value and are not reversible; |
● | the proportional amortized cost method is utilized to determine the liquidation value of Low-Income Housing Tax Credit Funds (“Tax Credit Funds”); |
● | admitted subsidiary, controlled and affiliated entities are not consolidated; rather, those investments are generally carried at audited statutory capital and surplus or GAAP equity, as appropriate, and are recorded as an equity investment in stocks or other invested assets; |
● | equity in earnings of subsidiary companies is recognized directly in capital and surplus as net unrealized capital gains or losses, while dividends from unconsolidated companies are recorded in operations as net investment income; |
● | undistributed earnings and valuation adjustments from investments in joint ventures, partnerships and limited liability companies are recognized directly in capital and surplus as net unrealized capital gains or losses; and |
● | gains on sales of investments between affiliated companies representing economic transactions are deferred at the parent level until the related assets are paid down or an external sale occurs. |
Separate Accounts
● | Assets and liabilities of guaranteed separate accounts are reported as separate account assets and separate account liabilities, respectively. |
Derivative Instruments
● | Derivatives used in effective hedging transactions are valued in a manner consistent with the hedged asset or liability; |
● | with the exception of derivatives applying the prescribed practice under OAC 3901-1-67, unrealized gains and losses on derivatives that are not considered to be effective hedges are charged to capital and surplus; |
● | interest earned on derivatives is charged to net investment income; and |
● | embedded derivatives are not separated from the host contract and accounted for separately as a derivative instrument. |
F-11
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2023, 2022 and 2021 Statutory Financial Statements
Goodwill
● | Goodwill is limited to 10% of the prior reporting period’s adjusted statutory surplus, with any goodwill in excess of this limitation nonadmitted through a charge to surplus; and |
● | goodwill is amortized and charged to surplus. |
Federal Income Taxes
● | Changes in deferred federal income taxes are recognized directly in capital and surplus with limitations on the amount of deferred tax assets that can be reflected as an admitted asset (15% of capital and surplus); and |
● | uncertain tax positions are subject to a “more likely than not” standard for federal and foreign income tax loss contingencies only. |
Nonadmitted Assets
● | In addition to the nonadmitted assets described above, certain other assets are nonadmitted and charged directly to capital and surplus. These include prepaid assets, certain software and other receivables outstanding for more than 90 days. |
The financial information included herein is prepared and presented in accordance with SAP prescribed or permitted by the Department. Certain differences exist between SAP and GAAP, which are presumed to be material.
Revenues and Benefits
Life insurance premiums are recognized as revenue over the premium paying period of the related policies when due. Annuity considerations are recognized as revenue when received. Health insurance premiums are earned ratably over the terms of the related insurance and reinsurance contracts or policies. Policy benefits and claims that are expensed include interest credited to policy account balances, benefits and claims incurred in the period in excess of related policy reserves and other changes in future policy benefits.
Future Policy Benefits and Claims
Future policy benefits for traditional products are based on statutory mortality and interest requirements without consideration of withdrawals. The principal statutory mortality tables and interest assumptions used on policies in force are the 1958 Commissioner’s Standard Ordinary (“CSO”) table at interest rates of 2.5%, 3.0%, 3.5%, 4.0% and 4.5%, the 1941 CSO table at an interest rate of 2.5%, the 1980 CSO table at interest rates of 4.0%, 4.5%, 5.0% and 5.5%, the 2001 CSO table at an interest rate of 4.0% and 3.5% and the 2017 CSO table at an interest rate of 3.5% and 4.5%. The Company has applied principle-based reserving to all new individual life business. For business subject to principle-based reserving, additional reserves may be held where the deterministic and/or stochastic reserves are in excess of net premium reserves, as defined by Valuation Manual 20, Requirements for Principle-Based Reserves for Life Products (“VM-20”).
Future policy benefits for universal life and variable universal life contracts have been calculated based on participants’ contributions plus interest credited on any funds in the fixed account less applicable contract charges. These policies have been adjusted for possible future surrender charges in accordance with the Commissioner’s Reserve Valuation Method (“CRVM”). For business subject to principle-based reserving, the Company has calculated reserves under VM-20.
Future policy benefits for annuity products have been established based on contract term, interest rates and various contract provisions. Individual deferred annuity contracts issued in 1990 and after have been adjusted for possible future surrender charges in accordance with the Commissioner’s Annuity Reserve Valuation Method (“CARVM”).
Future policy benefits for PRT contracts have been established in accordance with the CRVM. Statutory reserves for PRT business written during or after 2020 are calculated as the present value of future benefit payments, using the prescribed 1994 Group Annuity Mortality (“GAM”) table along with the AA projection mortality improvement scale and prescribed valuation rates as specified in Chapter 22 of the Valuation Manual. For the PRT business written before 2020, the statutory reserves are calculated using prescribed GAM tables and valuation interest rates that vary by issue year, as specified in the Standard Valuation Law.
The Company calculated its reserves for variable annuities using a stochastic reserve, which is floored at the cash surrender value, per Valuation Manual 21, Requirements for Principle-Based Reserves for Variable Annuities.
The aggregate reserves for individual accident and health policies consist of active life reserves, disabled life reserves and unearned premium reserves. The active life reserves for disability income are reserved for on the net level basis, at a 3.0% interest rate, using either the 1964 Commissioner’s Disability Table (for policies issued prior to 1982) or the 1985 Commissioner’s Individual Disability Table A (for policies issued after 1981). The active life reserves for major medical insurance (both scheduled and unscheduled benefits) are based on the benefit ratio method for policies issued after 1981.
F-12
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2023, 2022 and 2021 Statutory Financial Statements
The active life reserves for accident and health policies are reserved for on the net level basis, at a 3.0% interest rate, using either the 1956 Inter-Company Hospital-Surgical tables, the 1974 Medical Expense tables or the 1959 Accidental Death Benefits table.
The disabled life reserves for accident and health policies are calculated using the 1985 Commissioner’s Individual Disability Table A at a 3.0% interest rate. Unearned premium reserves are based on the actual gross premiums and actual days.
The aggregate reserves for group accident and health and franchise accident and health policies consist of disabled life reserves and unearned premium reserves. Reserves for benefits payable on disabled life claims are based on the 2012 Group Long-Term Disability Valuation Table, at varying interest rates of 2.75% - 6.0%, for group policies and the 1987 Commissioner’s Group Disability Table, at varying interest rates of 2.75% - 10.25%, for franchise policies.
Future policy benefits and claims for group long-term disability policies are the present value (discounted between 2.75% and 6.00%) of amounts not yet due on reported claims and an estimate of amounts to be paid on incurred but unreported claims. Future policy benefits and claims on other group health policies are not discounted.
The Company issues fixed and floating rate funding agreements to the Federal Home Loan Bank of Cincinnati (“FHLB”). The liabilities for such funding agreements are treated as annuities under Ohio law for life insurance companies and recorded in future policy benefits and claims. Refer to Note 9 for additional details.
Separate Accounts
Separate account assets represent contractholders’ funds that have been legally segregated into accounts with specific investment objectives. Separate account assets are primarily recorded at fair value, with the value of separate account liabilities set to equal the fair value of separate account assets. Separate account assets are primarily comprised of public, privately-registered and non-registered mutual funds, whose fair value is primarily based on the funds’ net asset value. Other separate account assets are recorded at fair value based on the methodology that is applicable to the underlying assets. In limited circumstances, other separate account assets are recorded at book value when the policyholder does not participate in the underlying portfolio experience.
Separate account liabilities, in conjunction with accrued transfers from separate accounts, represent contractholders’ funds adjusted for possible future surrender charges in accordance with the CARVM and the CRVM, respectively. The difference between full account value and CARVM/CRVM is reflected in accrued transfers to/from separate accounts, as prescribed by the NAIC, in the statutory statements of admitted assets, liabilities, capital and surplus. The annual change in the difference between full account value and CARVM/CRVM and its applicable federal income tax is reflected in the statutory statements of operations as part of the net transfers to/from separate accounts and federal income tax, respectively.
Retained Assets
The Company does not retain beneficiary assets. During a death benefit claim, the death benefit settlement method is payment to the beneficiary in the form of a check or electronic funds transfer.
Investments
Bonds and stocks of unaffiliated companies. Bonds are generally stated at amortized cost, except those with an NAIC designation of “6”, which are stated at the lower of amortized cost or fair value. Preferred stocks are generally stated at amortized cost, except those with an NAIC designation of “4” through “6”, which are stated at the lower of amortized cost or fair value. Common stocks are stated at fair value. Changes in the fair value of bonds and stocks stated at fair value are charged to capital and surplus.
Loan-backed and structured securities, which are included in bonds in the statutory financial statements, are stated in a manner consistent with the bond guidelines, but with additional consideration given to the special valuation rules implemented by the NAIC applicable to residential mortgage-backed securities that are not backed by U.S. government agencies, commercial mortgage-backed securities and certain other structured securities. Under these guidelines, an initial and adjusted NAIC designation is determined for each security. The initial NAIC designation, which takes into consideration the security’s amortized cost relative to an NAIC-prescribed valuation matrix, is used to determine the reporting basis (i.e., amortized cost or lower of amortized cost or fair value).
Interest income is recognized when earned, while dividends are recognized when declared. The Company nonadmits investment income due and accrued when amounts are over 90 days past due.
For investments in loan-backed and structured securities, the Company recognizes income and amortizes discounts and premiums using the effective-yield method based on prepayment assumptions, generally obtained using a model provided by a third-party vendor, and the estimated economic life of the securities. When actual prepayments differ significantly from estimated prepayments, the effective-yield is recalculated to reflect actual payments to date and anticipated future payments. Any resulting adjustment is included in net investment income in the period the estimates are revised. All other investment income is recorded using the effective-yield method without anticipating the impact of prepayments.
F-13
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2023, 2022 and 2021 Statutory Financial Statements
Purchases and sales of bonds and stocks are recorded on the trade date, with the exception of private placement bonds, which are recorded on the funding date. Realized gains and losses are determined on a specific identification method on the trade date.
Independent pricing services are most often utilized, and compared to pricing from additional sources when available, to determine the fair value of bonds and stocks for which market quotations or quotations on comparable securities or models are used. For these bonds and stocks, the Company obtains the pricing services’ methodologies and classifies the investments accordingly in the fair value hierarchy.
Corporate pricing matrices are used in valuing certain bonds. The corporate pricing matrices were developed using publicly and privately available spreads segmented by various weighted average lives and credit quality ratings. Certain private placement bonds have adjusted spreads to capture the impacts of liquidity premium based on industry sector. The weighted average life and credit quality rating of a particular bond to be priced using those matrices are important inputs into the model and are used to determine a corresponding spread that is added to the appropriate industry sector or U.S. Treasury yield to create an estimated market yield for that bond. The estimated market yield and other relevant factors are then used to estimate the fair value of the particular bond.
Non-binding broker quotes are also utilized to determine the fair value of certain bonds when deemed appropriate or when valuations are not available from independent pricing services or corporate pricing matrices. These bonds are classified with the lowest priority in the fair value hierarchy as only one broker quote is ordinarily obtained, the investment is not traded on an exchange, the pricing is not available to other entities and/or the transaction volume in the same or similar investments has decreased. Inputs used in the development of prices are not provided to the Company by the brokers, as the brokers often do not provide the necessary transparency into their quotes and methodologies. At least annually, the Company performs reviews and tests to ensure that quotes are a reasonable estimate of the investment’s fair value. Price movements of broker quotes are subject to validation and require approval from the Company’s management. Management uses its knowledge of the investment and current market conditions to determine if the price is indicative of the investment’s fair value.
For all bonds, the Company considers its ability and intent to hold the security for a period of time sufficient to allow for the anticipated recovery in value, the expected recovery of principal and interest and the extent to which the fair value has been less than amortized cost. If the decline in fair value to below amortized cost is determined to be other-than-temporary, a realized loss is recorded equal to the difference between the amortized cost of the investment and its fair value.
The Company periodically reviews loan-backed and structured securities in an unrealized loss position by comparing the present value of cash flows, including estimated prepayments, expected to be collected from the security to the amortized cost basis of the security. If the present value of cash flows expected to be collected, discounted at the security’s effective interest rate, is less than the amortized cost basis of the security, the impairment is considered other-than-temporary and a realized loss is recorded.
All other bonds in an unrealized loss position are periodically reviewed to determine if a decline in fair value to below amortized cost is other-than-temporary. Factors considered during this review include timing and amount of expected cash flows, ability of the issuer to meet its obligations, financial condition and future prospects of the issuer, amount and quality of any underlying collateral and current economic and industry conditions that may impact an issuer.
Stocks may experience other-than-temporary impairment based on the prospects for full recovery in value in a reasonable period of time and the Company’s ability and intent to hold the stock to recovery. If a stock is determined to be other-than-temporarily impaired, a realized loss is recorded equal to the difference between the cost basis of the investment and its fair value.
Investments in subsidiaries. The investment in the Company’s wholly-owned insurance subsidiaries, NLAIC, JNL and Eagle, are carried using the equity method of accounting applicable to U.S. insurance subsidiary, controlled and affiliated (“SCA”) entities. This requires the investment to be recorded based on the value of its underlying audited statutory surplus. Furthermore, the equity method of accounting would be discontinued if the investment is reduced to zero, unless the Company has guaranteed obligations of the subsidiary or otherwise committed to provide further financial support. The Company’s investment in NISC and NIA, wholly-owned non-insurance subsidiaries, are carried using the equity method of accounting applicable to U.S. non-insurance subsidiary, controlled and affiliated entities. This requires the investment to be recorded based on its underlying audited GAAP equity. Investments in NLAIC, JNL and NISC are included in stocks, and the investment in Eagle is included in other invested assets on the statutory statements of admitted assets, liabilities, capital and surplus.
Mortgage loans, net of allowance. The Company holds commercial mortgage loans that are collateralized by properties throughout the U.S. Mortgage loans are held at unpaid principal balance adjusted for premiums and discounts, less a valuation allowance. The Company also holds commercial mortgage loans of these property types that are under development. Mortgage loans under development are collateralized by the borrower’s common stock.
F-14
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2023, 2022 and 2021 Statutory Financial Statements
As part of the underwriting process, specific guidelines are followed to ensure the initial quality of a new mortgage loan. Third-party appraisals are obtained to support loaned amounts as the loans are collateral dependent or guaranteed.
The collectability and value of a mortgage loan is based on the ability of the borrower to repay and/or the value of the underlying collateral. Many of the Company’s mortgage loans are structured with balloon payment maturities, exposing the Company to risks associated with the borrowers’ ability to make the balloon payment or refinance the property. Loans are considered delinquent when contractual payments are 90 days past due.
Mortgage loans require a loan-specific reserve when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. When management determines that a loan requires a loan-specific reserve, a provision for loss is established equal to the difference between the carrying value and the fair value of the collateral less costs to sell. Loan-specific reserve charges are recorded in net unrealized capital gains and losses. In the event a loan-specific reserve charge is reversed, the recovery is also recorded in net unrealized capital gains and losses. If the mortgage loan is determined to be other-than-temporarily impaired, a realized loss is recorded equal to the difference between the cost basis of the loan and the fair value of the collateral less estimated costs to obtain and sell. Any previously recorded loan-specific reserve is reversed.
Management evaluates the credit quality of individual mortgage loans and the portfolio as a whole through a number of loan quality measurements, including, but not limited to, loan-to-value (“LTV”) and debt service coverage (“DSC”) ratios. The LTV ratio is calculated as a ratio of the amortized cost of a loan to the estimated value of the underlying collateral. DSC is the amount of cash flow generated by the underlying collateral of the mortgage loan available to meet periodic interest and principal payments of the loan. These loan quality measurements contribute to management’s assessment of relative credit risk in the mortgage loan portfolio. Based on underwriting criteria and ongoing assessment of the properties’ performance, management believes the amounts, net of valuation allowance, are collectible. This process identifies the risk profile and potential for loss individually and in the aggregate for the commercial mortgage loan portfolios. These factors are updated and evaluated at least annually. Due to the nature of the collateral underlying mortgage loans under development, these loans are not evaluated using the LTV and DSC ratios described above and instead are evaluated using other qualitative metrics.
Interest income on performing mortgage loans is recognized in net investment income over the life of the loan using the effective-yield method. Loans in default or in the process of foreclosure are placed on non-accrual status. Interest received on non-accrual status mortgage loans is included in net investment income in the period received. Loans are restored to accrual status when the principal and interest is current and it is determined the future principal and interest payments are probable or the loan is modified.
Policy loans. Policy loans, which are collateralized by the related insurance policy, are held at the outstanding principal balance and do not exceed the net cash surrender value of the policy. As such, no valuation allowance for policy loans is required.
Cash and cash equivalents. Cash and cash equivalents include highly liquid investments with original maturities of less than three months and amounts on deposit in internal qualified cash pools. The Company and various affiliates maintain agreements with Nationwide Cash Management Company (“NCMC”), an affiliate, under which NCMC acts as a common agent in handling the purchase and sale of short-term securities for the respective accounts of the participants in the internal qualified cash pool.
Short-term investments. Short-term investments consist of government agency discount notes with maturities of twelve months or less at acquisition. Short-term investments also include outstanding promissory notes with initial maturity dates of one-year or less with certain affiliates. The Company carries short-term investments at amortized cost, which approximates fair value.
Securities Lending. The Company has entered into securities lending agreements with a custodial bank whereby eligible securities are loaned to third parties, primarily major brokerage firms. These transactions are used to generate additional income in the securities portfolio. The Company is entitled to receive from the borrower any payments of interest and dividends received on loaned securities during the loan term. The agreements require a minimum of 102% of the fair value of the loaned securities to be held as collateral. Cash collateral is invested by the custodial bank in investment-grade securities, which are included in the total invested assets of the Company. Periodically, the Company may receive non-cash collateral, which would be recorded off-balance sheet. The Company recognizes loaned securities in bonds. A securities lending payable is recorded for the amount of cash collateral received. If the fair value of the collateral received (cash and/or securities) is less than the fair value of the securities loaned, the shortfall is nonadmitted. Net income received from securities lending activities is included in net investment income. Because the borrower or the Company may terminate a securities lending transaction at any time, if loans are terminated in advance of the reinvested collateral asset maturities, the Company would repay its securities lending obligations from operating cash flows or the proceeds of sales from its investment portfolio, which includes significant liquid securities.
F-15
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2023, 2022 and 2021 Statutory Financial Statements
Other invested assets. Other invested assets consist primarily of alternative investments in private equity funds, private debt funds, tax credit funds, real estate partnerships, limited liability companies, joint ventures and the investment in Eagle. Except for investments in certain tax credit funds, these investments are recorded using the equity method of accounting. Changes in carrying value as a result of the equity method are reflected as net unrealized capital gains and losses as a direct adjustment to capital and surplus. Gains and losses are generally recognized through income at the time of disposal or when operating distributions are received. Partnership interests in tax credit funds are held at amortized cost with amortization charged to net investment income over the period in which the tax benefits, primarily credits, are earned. Tax credits are recorded as an offset to tax expense in the period utilized.
The Company sold $3.1 billion, $2.9 billion and $2.6 billion in Tax Credit Funds to unrelated third parties with outstanding guarantees as of December 31, 2023, 2022 and 2021, respectively. The Company guarantees after-tax benefits to the third-party investors through periods ending in 2041. These guarantees are in effect for periods of approximately 15 years each. The Tax Credit Funds provide a stream of tax benefits to the investors that will generate a yield and return of capital. If the tax benefits are not sufficient to provide these cumulative after-tax yields, the Company must fund any shortfall. The maximum amount of undiscounted future payments that the Company could be required to pay the investors under the terms of the guarantees is $1.8 billion, but the Company does not anticipate making any material payments related to the guarantees. The Company’s risks are mitigated in the following ways: (1) the Company has the right to buyout the equity related to the guarantee under certain circumstances, (2) the Company may replace underperforming properties to mitigate exposure to guarantee payments, (3) the Company oversees the asset management of the deals and (4) changes in tax laws are explicitly excluded from the Company’s guarantees of after-tax benefits.
Derivative Instruments
The Company uses derivative instruments to manage exposures and mitigate risks primarily associated with interest rates, equity markets and foreign currency. These derivative instruments primarily include interest rate swaps, cross-currency swaps, futures and options.
Derivative instruments used in hedging transactions considered to be effective hedges are reported in a manner consistent with the hedged items. With the exception of derivatives applying the prescribed practice under OAC 3901-1-67, derivative instruments used in hedging transactions that do not meet or no longer meet the criteria of an effective hedge are accounted for at fair value with changes in fair value recorded in capital and surplus as unrealized gains or losses.
The fair value of derivative instruments is determined using various valuation techniques relying predominantly on observable market inputs and internal models. These inputs include interest rate swap curves, credit spreads, interest rates, counterparty credit risk, equity volatility and equity index levels.
The Company’s derivative transaction counterparties are generally financial institutions. To reduce the credit risk associated with open contracts, the Company enters into master netting agreements which permit the closeout and netting of transactions with the same counterparty upon the occurrence of certain events. In addition, the Company attempts to reduce credit risk by obtaining collateral from counterparties. The determination of the need for and the levels of collateral vary based on an assessment of the credit risk of the counterparty. The Company accepts collateral in the forms of cash and marketable securities. Non-cash collateral received is recorded off-balance sheet.
Cash flows and payment accruals on derivatives are recorded in net investment income.
Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources while unobservable inputs reflect the Company’s view of market assumptions in the absence of observable market information. The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. In determining fair value, the Company uses various methods, including market, income and cost approaches.
The Company categorizes its financial instruments into a three-level hierarchy based on the priority of the inputs to the valuation technique. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure fair value fall within different levels of the hierarchy, the category level is based on the lowest priority level input that is significant to the fair value measurement of the instrument in its entirety.
The Company categorizes assets and liabilities held at fair value in the statutory statements of admitted assets, liabilities, capital and surplus as follows:
Level 1. Unadjusted quoted prices accessible in active markets for identical assets or liabilities at the measurement date and mutual funds where the value per share (unit) is determined and published daily and is the basis for current transactions.
F-16
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2023, 2022 and 2021 Statutory Financial Statements
Level 2. Unadjusted quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active or inputs (other than quoted prices) that are observable or that are derived principally from or corroborated by observable market data through correlation or other means. Primary inputs to this valuation technique may include comparative trades, bid/asks, interest rate movements, U.S. Treasury rates, London Interbank Offered Rate (“LIBOR”), Secured Overnight Financing Rate (“SOFR”), prime rates, cash flows, maturity dates, call ability, estimated prepayments and/or underlying collateral values.
Level 3. Prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. Inputs reflect management’s best estimates of the assumptions market participants would use at the measurement date in pricing the asset or liability. Consideration is given to the risk inherent in both the method of valuation and the valuation inputs. Primary inputs to this valuation technique include broker quotes and comparative trades.
The Company reviews its fair value hierarchy classifications for assets and liabilities quarterly. Changes in the observability of significant valuation inputs identified during these reviews may trigger reclassifications. Reclassifications are reported as transfers at the beginning of the reporting period in which the change occurs.
Asset Valuation Reserve
The Company maintains an AVR as prescribed by the NAIC for the purpose of offsetting potential credit related investment losses on each invested asset category, excluding cash, policy loans and income receivable. The AVR contains a separate component for each category of invested assets. The change in AVR is charged or credited directly to capital and surplus.
Interest Maintenance Reserve
The Company records an IMR as prescribed by the NAIC, which represents the net deferral for interest-related gains or losses arising from the sale of certain investments, such as bonds, mortgage loans and loan-backed and structured securities sold. The IMR is applied as follows:
● | for bonds, the designation from the NAIC Capital Markets and Investments Analysis Office must not have changed more than one designation between the beginning of the holding period and the date of sale; |
● | the bond must never have been classified as a default security; |
● | for mortgage loans, during the prior two years, they must not have had interest more than 90 days past due, been in the process of foreclosure or in the course of voluntary conveyance, nor had restructured terms; and |
● | for loan-backed and structured securities, all interest-related other-than-temporary impairments and interest-related realized gains or losses on sales of the securities. |
The realized gains or losses, net of related federal income tax, from the applicable bonds and mortgage loans sold, have been removed from the net realized gain or loss amounts and established as the IMR. The IMR is amortized into income such that the amount of each capital gain or loss amortized in a given year is based on the excess of the amount of income which would have been reported that year, if the asset had not been disposed of over the amount of income which would have been reported had the asset been repurchased at its sale price. In the event the unamortized IMR liability balance is negative, the balance is reclassified as an asset and evaluated for admittance under INT 23-01, Net Negative (Disallowed) Interest Maintenance Reserve (“INT 23-01”). The Company utilizes the grouped method for amortization. Under the grouped method, the IMR is amortized into income over the remaining period to expected maturity based on the groupings of the individual securities into five-year bands. Refer to Recently Adopted Accounting Standards for additional discussion of IMR.
Goodwill
For companies whose operations are primarily insurance related, goodwill is the excess of the cost to acquire a company over the Company’s share of the statutory book value of the acquired entity. Goodwill is recorded in stocks in the statutory statements of admitted assets, liabilities and surplus. Goodwill is amortized on a straight-line basis over the period of economic benefit, not to exceed ten years, with a corresponding charge to surplus. Goodwill was immaterial as of December 31, 2023 and 2022.
F-17
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2023, 2022 and 2021 Statutory Financial Statements
Federal Income Taxes
The Company utilizes the asset and liability method of accounting for income taxes. Under this method, deferred tax assets, net of any nonadmitted portion and statutory valuation allowance, and deferred tax liabilities, are recognized for the expected future tax consequences attributable to differences between the statutory financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income or loss in the years in which those temporary differences are expected to be recovered or settled. The change in deferred taxes is charged directly to surplus, with the impact of taxes on unrealized capital gains or losses and nonadmitted assets reported separately in the statutory statements of changes in capital and surplus.
The Company provides for federal income taxes based on amounts the Company believes it ultimately will owe. Inherent in the provision for federal income taxes are estimates regarding the deductibility of certain items and the realization of certain tax credits. In the event the ultimate deductibility of certain items or the realization of certain tax credits differs from estimates, the Company may be required to change the provision for federal income taxes recorded in the statutory financial statements, which could be significant.
Tax reserves are reviewed regularly and are adjusted as events occur that the Company believes impact its liability for additional taxes, such as lapsing of applicable statutes of limitations, conclusion of tax audits or substantial agreement with taxing authorities on the deductibility/nondeductibility of uncertain items, additional exposure based on current calculations, identification of new issues, release of administrative guidance or rendering of a court decision affecting a particular tax issue. The Company believes its tax reserves reasonably provide for potential assessments that may result from Internal Revenue Service (“IRS”) examinations and other tax-related matters for all open tax years.
The Company is included in the NMIC consolidated federal income tax return.
Reinsurance Ceded
The Company cedes insurance to other companies in order to limit potential losses and to diversify its exposures. Such agreements do not relieve the Company of its primary obligation to the policyholder in the event the reinsurer is unable to meet the obligations it has assumed. Reinsurance premiums ceded and reinsurance recoveries on benefits and claims incurred are deducted from the respective income and expense accounts. Assets and liabilities related to reinsurance ceded are reported in the statutory statements of admitted assets, liabilities, capital and surplus on a net basis within the related future policy benefits and claims of the Company.
Participating Business
Participating business, which refers to policies that participate in profits through policyholder dividends, represented approximately 3% and 4% of the Company’s life insurance in force in 2023 and 2022, respectively, and 48% and 49% of the number of life insurance policies in force in 2023 and 2022, respectively. The provision for policyholder dividends was based on the respective year’s dividend scales, as approved by the Board of Directors. Policyholder dividends are recognized when declared. No additional income was allocated to participating policyholders during 2023 and 2022.
Accounting Changes and Corrections of Errors
Effective January 1, 2021, the Company elected to apply OAC 3901-1-67 to its derivative instruments hedging indexed products and indexed annuity reserve liabilities. As a result of the Company’s election to apply OAC 3901-1-67 as of January 1, 2021, the Company’s admitted assets decreased $3 million, total liabilities decreased $2 million and capital and surplus decreased $1 million, which included a $3 million reduction to unassigned surplus from the cumulative effect of the change in accounting principle.
During 2022, the Company identified and corrected an error in annuity product allocation drivers for general operating expenses between the Company and NLAIC that resulted in an understatement of the Company’s general insurance expenses for the years ended December 31, 2021, 2020 and 2019. The error resulted in an overstatement of net income of $22 million, an overstatement of total surplus of $45 million, an overstatement of total assets of $13 million and an understatement of total liabilities of $32 million as of and for the year ended December 31, 2021. In accordance with SSAP No. 3, Accounting Changes and Corrections of Errors (“SSAP No. 3”), the total prior period correction was recorded as a decrease to total surplus of $45 million, a decrease to total assets of $13 million and an increase to total liabilities of $32 million as of January 1, 2022. Additionally, the Company’s subsidiary, NLAIC, identified and corrected errors as of January 1, 2022 that increased the Company’s investment in NLAIC and total surplus by $6 million. The net decrease to the Company’s total surplus of $39 million in 2022 as a result of these corrections is reported as a negative adjustment to unassigned surplus.
F-18
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2023, 2022 and 2021 Statutory Financial Statements
Recently Adopted Accounting Standards
Effective December 31, 2023, the Company adopted INT 23-04, Life Reinsurance Liquidation Questions, that clarifies accounting and reporting considerations of SSAP No. 5R, Liabilities, Contingencies and Impairments of Assets (“SSAP No. 5R”), as it relates to the liquidation of Scottish Re U.S. (“SRUS”). On July 18, 2023, SRUS was declared insolvent and ordered liquidated by the Court of Chancery of the State of Delaware (“Court”), resulting in termination of the reinsurance agreements between the Company and SRUS effective September 30, 2023, and the recapture of the ceded liabilities. The Company has accrued adequate provisions as of December 31, 2023, in accordance with SSAP No. 5R related to SRUS reinsurance recoverables and assets held in a trust that secure the annuity reinsurance recoverables. The Company will continue to work with the SRUS liquidator and the Court to resolve when the Company will be able to access the trust assets. As of December 31, 2023, assets held in trust and reinsurance recoverables related to SRUS are immaterial.
Effective September 30, 2023, the Company adopted INT 23-01, a short-term solution related to the accounting treatment of an insurer’s negative IMR balance. INT 23-01 allows an insurer with an authorized control level risk-based capital greater than 300%, after an adjustment to total adjusted capital, to admit negative IMR up to 10% of its general account capital and surplus, subject to certain restrictions and reporting obligations. There is no admitted disallowed IMR in the separate accounts. Fixed income investments generating IMR losses comply with the Company’s investment policies. There are no deviations from the investment policies and sales were not compelled by liquidity pressures. The Company has not allocated gains or losses to IMR from derivatives that were reported at fair value prior to the termination of the derivative. As of December 31, 2023, the Company has $93 million of admitted disallowed IMR in capital and surplus in the general account.
Effective January 1, 2021, the Company adopted revisions to SSAP No. 32R, Preferred Stock (“SSAP No. 32R”). The adopted revisions updated the definition for redeemable and perpetual preferred stock and furthermore, updated the valuation classification for perpetual preferred stock to fair value. Previously, perpetual preferred stock could have been valued at amortized cost or fair value based on the rating of the security. Per SSAP No. 32R, any valuation classification changes from amortized cost to fair value are to be recognized in statutory surplus. Going forward, changes to fair value will be recognized as a change in net unrealized capital gains and losses in statutory surplus. As a result of this change, the Company recorded an increase to statutory capital and surplus of $9 million as of January 1, 2021.
Subsequent Events
The Company evaluated subsequent events through March 20, 2024, the date the statutory financial statements were issued.
F-19
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2023, 2022 and 2021 Statutory Financial Statements
(3) | Analysis of Actuarial Reserves and Deposit Liabilities by Withdrawal Characteristics |
The following table summarizes the analysis of individual annuities actuarial reserves by withdrawal characteristics, as of the dates indicated:
(in millions) | General account1 | Separate account with guarantees | Separate account non- guaranteed | Total | % of Total | |||||||||||||||
December 31, 2023 | ||||||||||||||||||||
Subject to discretionary withdrawal: | ||||||||||||||||||||
With market value adjustment | $ | 4,389 | $ | 64 | $ | - | $ | 4,453 | 6 | % | ||||||||||
At book value less current surrender charge of 5% or more | 2,210 | - | - | 2,210 | 3 | % | ||||||||||||||
At fair value | 10 | - | 61,993 | 62,003 | 83 | % | ||||||||||||||
Total with market value adjustment or at fair value | $ | 6,609 | $ | 64 | $ | 61,993 | $ | 68,666 | 92 | % | ||||||||||
At book value without adjustment (minimal or no charge or adjustment) | 3,532 | - | 6 | 3,538 | 5 | % | ||||||||||||||
Not subject to discretionary withdrawal | 2,342 | - | 62 | 2,404 | 3 | % | ||||||||||||||
Total, gross | $ | 12,483 | $ | 64 | $ | 62,061 | $ | 74,608 | 100 | % | ||||||||||
Less: Reinsurance ceded | (98 | ) | - | - | (98 | ) | ||||||||||||||
Total, net | $ | 12,385 | $ | 64 | $ | 62,061 | $ | 74,510 | ||||||||||||
Amount included in ‘Subject to discretionary withdrawal at book value less current surrender charge of 5% or more’ that will move to ‘Subject to discretionary withdrawal at book value without adjustment (minimal or no charge or adjustment)’ | $ | 78 | $ | - | $ | - | $ | 78 | ||||||||||||
December 31, 2022 | ||||||||||||||||||||
Subject to discretionary withdrawal: | ||||||||||||||||||||
With market value adjustment | $ | 2,279 | $ | 90 | $ | - | $ | 2,369 | 4 | % | ||||||||||
At book value less current surrender charge of 5% or more | 675 | - | - | 675 | 1 | % | ||||||||||||||
At fair value | 11 | - | 57,823 | 57,834 | 87 | % | ||||||||||||||
Total with market value adjustment or at fair value | $ | 2,965 | $ | 90 | $ | 57,823 | $ | 60,878 | 92 | % | ||||||||||
At book value without adjustment (minimal or no charge or adjustment) | 3,365 | - | 6 | 3,371 | 5 | % | ||||||||||||||
Not subject to discretionary withdrawal | 2,009 | - | 56 | 2,065 | 3 | % | ||||||||||||||
Total, gross | $ | 8,339 | $ | 90 | $ | 57,885 | $ | 66,314 | 100 | % | ||||||||||
Less: Reinsurance ceded | (110 | ) | - | - | (110 | ) | ||||||||||||||
Total, net | $ | 8,229 | $ | 90 | $ | 57,885 | $ | 66,204 | ||||||||||||
Amount included in ‘Subject to discretionary withdrawal at book value less current surrender charge of 5% or more’ that will move to ‘Subject to discretionary withdrawal at book value without adjustment (minimal or no charge or adjustment)’ | $ | 65 | $ | - | $ | - | $ | 65 |
1 | Includes reserves applying the prescribed practice under OAC 3901-1-67, as disclosed in Note 2. |
F-20
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2023, 2022 and 2021 Statutory Financial Statements
The following table summarizes the analysis of group annuities actuarial reserves by withdrawal characteristics, as of the dates indicated:
(in millions) | General account1 | Separate account with guarantees | Separate account non- guaranteed | Total | % of Total | |||||||||||||||
December 31, 2023 | ||||||||||||||||||||
Subject to discretionary withdrawal: | ||||||||||||||||||||
With market value adjustment | $ | 17,300 | $ | 1,857 | $ | - | $ | 19,157 | 45 | % | ||||||||||
At book value less current surrender charge of 5% or more | 2 | - | - | 2 | 0 | % | ||||||||||||||
At fair value | - | - | 17,922 | 17,922 | 43 | % | ||||||||||||||
Total with market value adjustment or at fair value | $ | 17,302 | $ | 1,857 | $ | 17,922 | $ | 37,081 | 88 | % | ||||||||||
At book value without adjustment (minimal or no charge or adjustment) | 3,867 | - | - | 3,867 | 9 | % | ||||||||||||||
Not subject to discretionary withdrawal | 1,237 | 102 | - | 1,339 | 3 | % | ||||||||||||||
Total, gross | $ | 22,406 | $ | 1,959 | $ | 17,922 | $ | 42,287 | 100 | % | ||||||||||
Less: Reinsurance ceded | (29 | ) | - | - | (29 | ) | ||||||||||||||
Total, net | $ | 22,377 | $ | 1,959 | $ | 17,922 | $ | 42,258 | ||||||||||||
Amount included in ‘Subject to discretionary withdrawal at book value less current surrender charge of 5% or more’ that will move to ‘Subject to discretionary withdrawal at book value without adjustment (minimal or no charge or adjustment)’ | $ | 2 | $ | - | $ | - | $ | 2 | ||||||||||||
December 31, 2022 | ||||||||||||||||||||
Subject to discretionary withdrawal: | ||||||||||||||||||||
With market value adjustment | $ | 18,397 | $ | 2,069 | $ | - | $ | 20,466 | 49 | % | ||||||||||
At book value less current surrender charge of 5% or more | 6 | - | - | 6 | 0 | % | ||||||||||||||
At fair value | - | - | 15,701 | 15,701 | 38 | % | ||||||||||||||
Total with market value adjustment or at fair value | $ | 18,403 | $ | 2,069 | $ | 15,701 | $ | 36,173 | 87 | % | ||||||||||
At book value without adjustment (minimal or no charge or adjustment) | 4,211 | - | - | 4,211 | 10 | % | ||||||||||||||
Not subject to discretionary withdrawal | 1,051 | 103 | - | 1,154 | 3 | % | ||||||||||||||
Total, gross | $ | 23,665 | $ | 2,172 | $ | 15,701 | $ | 41,538 | 100 | % | ||||||||||
Less: Reinsurance ceded | (53 | ) | - | - | (53 | ) | ||||||||||||||
Total, net | $ | 23,612 | $ | 2,172 | $ | 15,701 | $ | 41,485 | ||||||||||||
Amount included in ‘Subject to discretionary withdrawal at book value less current surrender charge of 5% or more’ that will move to ‘Subject to discretionary withdrawal at book value without adjustment (minimal or no charge or adjustment)’ | $ | 6 | $ | - | $ | - | $ | 6 |
1 | Includes reserves applying the prescribed practice under OAC 3901-1-67, as disclosed in Note 2. |
F-21
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2023, 2022 and 2021 Statutory Financial Statements
The following table summarizes the analysis of deposit-type contracts and other liabilities without life or disability contingencies by withdrawal characteristics, as of the dates indicated:
(in millions) | General account | Separate account non- guaranteed | Total | % of Total | ||||||||||||
December 31, 2023 | ||||||||||||||||
Subject to discretionary withdrawal: | ||||||||||||||||
With market value adjustment | $ | 1 | $ | - | $ | 1 | 0 | % | ||||||||
Total with market value adjustment or at fair value | $ | 1 | $ | - | $ | 1 | 0 | % | ||||||||
At book value without adjustment (minimal or no charge or adjustment) | 781 | 2 | 783 | 17 | % | |||||||||||
Not subject to discretionary withdrawal | 3,677 | 17 | 3,694 | 83 | % | |||||||||||
Total, gross | $ | 4,459 | $ | 19 | $ | 4,478 | 100 | % | ||||||||
Less: Reinsurance ceded | - | - | - | |||||||||||||
Total, net | $ | 4,459 | $ | 19 | $ | 4,478 | ||||||||||
December 31, 2022 | ||||||||||||||||
Subject to discretionary withdrawal: | ||||||||||||||||
With market value adjustment | $ | 1 | $ | - | $ | 1 | 0 | % | ||||||||
Total with market value adjustment or at fair value | $ | 1 | $ | - | $ | 1 | 0 | % | ||||||||
At book value without adjustment (minimal or no charge or adjustment) | 666 | 2 | 668 | 16 | % | |||||||||||
Not subject to discretionary withdrawal | 3,522 | 14 | 3,536 | 84 | % | |||||||||||
Total, gross | $ | 4,189 | $ | 16 | $ | 4,205 | 100 | % | ||||||||
Less: Reinsurance ceded | - | - | - | |||||||||||||
Total, net | $ | 4,189 | $ | 16 | $ | 4,205 |
The following table is a reconciliation of total annuity actuarial reserves and deposit fund liabilities, as of the dates indicated:
December 31, | ||||||||
(in millions) | 2023 | 2022 | ||||||
Life, accident and health annual statement: | ||||||||
Annuities, net (excluding supplemental contracts with life contingencies) | $ | 34,748 | $ | 31,827 | ||||
Supplemental contracts with life contingencies, net | 14 | 14 | ||||||
Deposit-type contracts | 4,459 | 4,189 | ||||||
Subtotal | $ | 39,221 | $ | 36,030 | ||||
Separate accounts annual statement: | ||||||||
Annuities, net (excluding supplemental contracts with life contingencies) | $ | 82,006 | $ | 75,848 | ||||
Other contract deposit funds | 19 | 16 | ||||||
Subtotal | $ | 82,025 | $ | 75,864 | ||||
Total annuity actuarial reserves and deposit fund liabilities, net | $ | 121,246 | $ | 111,894 |
F-22
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2023, 2022 and 2021 Statutory Financial Statements
The following table summarizes the analysis of life actuarial reserves by withdrawal characteristics, as of the dates indicated:
General account | Separate account - nonguaranteed | |||||||||||||||||||||||
(in millions) | Account value | Cash value | Reserve | Account value | Cash value | Reserve | ||||||||||||||||||
December 31, 2023 | ||||||||||||||||||||||||
Subject to discretionary withdrawal, surrender values or policy loans: | ||||||||||||||||||||||||
Term policies with cash value | $ | - | $ | 10 | $ | 10 | $ | - | $ | - | $ | - | ||||||||||||
Universal life | 2,616 | 2,629 | 2,790 | - | - | - | ||||||||||||||||||
Universal life with secondary guarantees | 453 | 390 | 1,032 | - | - | - | ||||||||||||||||||
Indexed universal life with secondary guarantees | 341 | 265 | 367 | - | - | - | ||||||||||||||||||
Other permanent cash value life insurance | - | 1,919 | 2,398 | - | - | - | ||||||||||||||||||
Variable life | 3,435 | 3,483 | 3,603 | 29,611 | 29,607 | 29,607 | ||||||||||||||||||
Subtotal | $ | 6,845 | $ | 8,696 | $ | 10,200 | $ | 29,611 | $ | 29,607 | $ | 29,607 | ||||||||||||
Not subject to discretionary withdrawal or no cash value: | ||||||||||||||||||||||||
Term policies without cash value | - | - | 181 | - | - | - | ||||||||||||||||||
Accidental death benefits | - | - | 1 | - | - | - | ||||||||||||||||||
Disability - active lives | - | - | 17 | - | - | - | ||||||||||||||||||
Disability - disabled lives | - | - | 59 | - | - | - | ||||||||||||||||||
Miscellaneous reserves | - | - | 32 | - | - | - | ||||||||||||||||||
Total, gross | $ | 6,845 | $ | 8,696 | $ | 10,490 | $ | 29,611 | $ | 29,607 | $ | 29,607 | ||||||||||||
Less: reinsurance ceded | (8 | ) | (8 | ) | (151 | ) | - | - | - | |||||||||||||||
Total, net | $ | 6,837 | $ | 8,688 | $ | 10,339 | $ | 29,611 | $ | 29,607 | $ | 29,607 |
F-23
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2023, 2022 and 2021 Statutory Financial Statements
General account | Separate account - nonguaranteed | |||||||||||||||||||||||
(in millions) | Account value | Cash value | Reserve | Account value | Cash value | Reserve | ||||||||||||||||||
December 31, 2022 | ||||||||||||||||||||||||
Subject to discretionary withdrawal, surrender values or policy loans: | ||||||||||||||||||||||||
Term policies with cash value | $ | - | $ | 11 | $ | 11 | $ | - | $ | - | $ | - | ||||||||||||
Universal life | 2,626 | 1,982 | 2,802 | - | - | - | ||||||||||||||||||
Universal life with secondary guarantees | 426 | 353 | 929 | - | - | - | ||||||||||||||||||
Indexed universal life with secondary guarantees | 283 | 210 | 304 | - | - | - | ||||||||||||||||||
Other permanent cash value life insurance | - | 1,979 | 2,473 | - | - | - | ||||||||||||||||||
Variable life | 2,850 | 2,898 | 3,010 | 25,626 | 25,621 | 25,260 | ||||||||||||||||||
Subtotal | $ | 6,185 | $ | 7,433 | $ | 9,529 | $ | 25,626 | $ | 25,621 | $ | 25,260 | ||||||||||||
Not subject to discretionary withdrawal or no cash value: | ||||||||||||||||||||||||
Term policies without cash value | - | - | 206 | - | - | - | ||||||||||||||||||
Accidental death benefits | - | - | 1 | - | - | - | ||||||||||||||||||
Disability - active lives | - | - | 15 | - | - | - | ||||||||||||||||||
Disability - disabled lives | - | - | 59 | - | - | - | ||||||||||||||||||
Miscellaneous reserves | - | - | 31 | - | - | - | ||||||||||||||||||
Total, gross | $ | 6,185 | $ | 7,433 | $ | 9,841 | $ | 25,626 | $ | 25,621 | $ | 25,260 | ||||||||||||
Less: reinsurance ceded | (9 | ) | (9 | ) | (178 | ) | - | - | - | |||||||||||||||
Total, net | $ | 6,176 | $ | 7,424 | $ | 9,663 | $ | 25,626 | $ | 25,621 | $ | 25,260 |
The following table is a reconciliation of life actuarial reserves, as of the dates indicated:
December 31, | ||||||||
(in millions) | 2023 | 2022 | ||||||
Life, accident and health annual statement: | ||||||||
Life Insurance, net | $ | 10,241 | $ | 9,569 | ||||
Accidental death benefits, net | 1 | 1 | ||||||
Disability - active lives, net | 17 | 14 | ||||||
Disability - disabled lives, net | 53 | 52 | ||||||
Miscellaneous reserves, net | 27 | 27 | ||||||
Subtotal | $ | 10,339 | $ | 9,663 | ||||
Separate accounts annual statement: | ||||||||
Life insurance1 | $ | 29,909 | $ | 25,570 | ||||
Subtotal | $ | 29,909 | $ | 25,570 | ||||
Total life actuarial reserves, net | $ | 40,248 | $ | 35,233 |
1 | Life insurance account value, cash value and reserve include separate accounts with guarantees of $302 million and $310 million for universal life as of December 31, 2023 and 2022, respectively. |
The total direct premium written by managing general agents and third-party administrators was $451 million, $415 million and $444 million as of December 31, 2023, 2022 and 2021, respectively.
F-24
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2023, 2022 and 2021 Statutory Financial Statements
(4) | Separate Accounts |
The Company’s separate account statement includes assets legally insulated from the general account as of the dates indicated, attributed to the following product lines:
December 31, 2023 | December 31, 2022 | |||||||||||||||
(in millions) | Separate account assets legally insulated | Separate account assets (not legally insulated) | Separate account assets legally insulated | Separate account assets (not legally insulated) | ||||||||||||
Product / Transaction: | ||||||||||||||||
Individual annuities | $ | 67,634 | $ | - | $ | 63,282 | $ | - | ||||||||
Group annuities | 15,453 | - | 13,743 | - | ||||||||||||
Life insurance | 30,082 | - | 25,688 | - | ||||||||||||
Pension risk transfer group annuities | 101 | - | 95 | - | ||||||||||||
Total | $ | 113,270 | $ | - | $ | 102,808 | $ | - |
The following table summarizes amounts paid towards separate account guarantees by the general account and related risk charges paid by the separate account for the years ended:
(in millions) | Total paid toward separate account guarantees | Risk charges paid to general account | ||||||
2023 | $ | 78 | $ | 780 | ||||
2022 | $ | 79 | $ | 722 | ||||
2021 | $ | 12 | $ | 674 | ||||
2020 | $ | 26 | $ | 631 | ||||
2019 | $ | 58 | $ | 612 |
The Company does not engage in securities lending transactions within its separate accounts.
Most separate accounts held by the Company relate to individual and group variable annuity and variable universal life insurance contracts of a non-guaranteed return nature. The net investment experience of the separate accounts is credited directly to the contract holder and can be positive or negative. The individual variable annuity contracts generally provide an incidental death benefit of the greater of account value or premium paid (net of prior withdrawals). However, many individual variable annuity contracts also provide death benefits equal to (i) the most recent fifth-year anniversary account value, (ii) the highest account value on any previous anniversary, (iii) premiums paid increased 5% or certain combinations of these, all adjusted for prior withdrawals. The death benefit and cash value under the variable universal life policies may vary with the investment performance of the underlying investments in the separate accounts. The assets and liabilities of these separate accounts are carried at fair value and are non-guaranteed.
Certain other separate accounts offered by the Company contain groups of variable universal life policies wherein the assets supporting account values on the underlying policies reside in Private Placement Separate Accounts. They provide a quarterly interest rate based on a crediting formula that reflects the market value to book value ratio of the investments, investment portfolio yield and a specified duration.
Certain other separate accounts relate to a guaranteed term option, which provides a guaranteed interest rate that is paid over certain maturity durations ranging from three to ten years, so long as certain conditions are met. If amounts allocated to the guaranteed term option are distributed prior to the maturity period, a market value adjustment can be assessed. The assets and liabilities of these separate accounts are carried at fair value.
The Company has a separate account that holds group annuity contracts offered through the Company’s PRT business, wherein the Company provides guaranteed benefit payments to annuitants. The Company issues PRT business out of both the general and separate accounts, and within both, the assets and liabilities of this business are carried at amortized cost. The PRT separate account business has been included as a nonindexed guarantee less than or equal to 4%.
Another separate account offered by the Company contains a group of universal life policies wherein the assets supporting the account values on the underlying policies reside in a Private Placement Separate Account. It provides an annual interest rate guarantee, subject to a minimum guarantee of 3%. The interest rate declared each year reflects the anticipated investment experience of the account. The business has been included as a nonindexed guarantee less than or equal to 4%.
F-25
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2023, 2022 and 2021 Statutory Financial Statements
The following tables summarize the separate account reserves of the Company, as of the dates indicated:
(in millions) | Nonindexed guarantee less than or equal to 4% | Nonindexed guarantee more than 4% | Nonguaranteed separate accounts | Total | ||||||||||||
December 31, 2023 | ||||||||||||||||
Premiums, considerations or deposits | $ | 88 | $ | - | $ | 6,181 | $ | 6,269 | ||||||||
Reserves | ||||||||||||||||
For accounts with assets at: | ||||||||||||||||
Fair value | $ | 1,781 | $ | 143 | $ | 109,609 | $ | 111,533 | ||||||||
Amortized cost | 401 | - | - | 401 | ||||||||||||
Total reserves1 | $ | 2,182 | $ | 143 | $ | 109,609 | $ | 111,934 | ||||||||
By withdrawal characteristics: | ||||||||||||||||
With market value adjustment | $ | 1,779 | $ | 143 | $ | - | $ | 1,922 | ||||||||
At fair value | - | - | 109,522 | 109,522 | ||||||||||||
At book value without market value adjustment and with current surrender charge less than 5% | 304 | - | 6 | 310 | ||||||||||||
Subtotal | $ | 2,083 | $ | 143 | $ | 109,528 | $ | 111,754 | ||||||||
Not subject to discretionary withdrawal | 99 | - | 81 | 180 | ||||||||||||
Total reserves1 | $ | 2,182 | $ | 143 | $ | 109,609 | $ | 111,934 |
1 | The total reserves balance does not equal the liabilities related to separate accounts of $113.3 billion in the statutory statements of admitted assets, liabilities, capital and surplus by $1.3 billion, due to an adjustment for CARVM/CRVM reserves and other liabilities that have not been allocated to the categories outlined above. |
(in millions) | Nonindexed guarantee less than or equal to 4% | Nonindexed guarantee more than 4% | Nonguaranteed separate accounts | Total | ||||||||||||
December 31, 2022 | ||||||||||||||||
Premiums, considerations or deposits | $ | 174 | $ | - | $ | 7,583 | $ | 7,757 | ||||||||
Reserves | ||||||||||||||||
For accounts with assets at: | ||||||||||||||||
Fair value | $ | 2,016 | $ | 145 | $ | 98,862 | $ | 101,023 | ||||||||
Amortized cost | 411 | - | - | 411 | ||||||||||||
Total reserves1 | $ | 2,427 | $ | 145 | $ | 98,862 | $ | 101,434 | ||||||||
By withdrawal characteristics: | ||||||||||||||||
With market value adjustment | $ | 2,117 | $ | 145 | $ | - | $ | 2,262 | ||||||||
At fair value | - | - | 98,784 | 98,784 | ||||||||||||
At book value without market value adjustment and with current surrender charge less than 5% | 310 | - | 8 | 318 | ||||||||||||
Subtotal | $ | 2,427 | $ | 145 | $ | 98,792 | $ | 101,364 | ||||||||
Not subject to discretionary withdrawal | - | - | 70 | 70 | ||||||||||||
Total reserves1 | $ | 2,427 | $ | 145 | $ | 98,862 | $ | 101,434 |
1 | The total reserves balance does not equal the liabilities related to separate accounts of $102.8 billion in the statutory statements of admitted assets, liabilities, capital and surplus by $1.4 billion, due to an adjustment for CARVM/CRVM reserves and other liabilities that have not been allocated to the categories outlined above. |
F-26
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2023, 2022 and 2021 Statutory Financial Statements
The following table is a reconciliation of net transfers from separate accounts, as of the dates indicated:
December 31, | ||||||||||||
(in millions) | 2023 | 2022 | 2021 | |||||||||
Net transfers as reported in the statutory statements of operations of the separate accounts: | ||||||||||||
Transfers to separate accounts | $ | 6,268 | $ | 7,757 | $ | 8,309 | ||||||
Transfers from separate accounts | (9,446 | ) | (8,860 | ) | (10,860 | ) | ||||||
Net transfers from separate accounts | $ | (3,178 | ) | $ | (1,103 | ) | $ | (2,551 | ) | |||
Reconciling adjustments: | ||||||||||||
Exchange accounts offsetting in the general account | (889 | ) | (606 | ) | (552 | ) | ||||||
Fees not included in general account transfers | 41 | 47 | 68 | |||||||||
Other miscellaneous adjustments not included in the general account balance | 284 | 27 | 33 | |||||||||
Net transfers as reported in the statutory statements of operations | $ | (3,742 | ) | $ | (1,635 | ) | $ | (3,002 | ) |
F-27
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2023, 2022 and 2021 Statutory Financial Statements
(5) | Investments |
Bonds and Stocks
The following table summarizes the carrying value, the excess of fair value over carrying value, the excess of carrying value over fair value and the fair value of bonds and stocks, as of the dates indicated:
(in millions) | Carrying value | Fair value in excess of carrying value | Carrying value in excess of fair value | Fair value | ||||||||||||
December 31, 2023 | ||||||||||||||||
Bonds: | ||||||||||||||||
U.S. Government | $ | 173 | $ | 3 | $ | - | $ | 176 | ||||||||
States, territories and possessions | 609 | 10 | 44 | 575 | ||||||||||||
Political subdivisions | 371 | 11 | 21 | 361 | ||||||||||||
Special revenues | 2,994 | 57 | 248 | 2,803 | ||||||||||||
Industrial and miscellaneous | 31,796 | 311 | 2,206 | 29,901 | ||||||||||||
Loan-backed and structured securities | 7,924 | 38 | 304 | 7,658 | ||||||||||||
Total bonds | $ | 43,867 | $ | 430 | $ | 2,823 | $ | 41,474 | ||||||||
Common stocks unaffiliated | $ | 231 | $ | - | $ | - | $ | 231 | ||||||||
Preferred stocks unaffiliated | 47 | - | 1 | 46 | ||||||||||||
Total unaffiliated stocks1 | $ | 278 | $ | - | $ | 1 | $ | 277 | ||||||||
Total bonds and unaffiliated stocks1 | $ | 44,145 | $ | 430 | $ | 2,824 | $ | 41,751 | ||||||||
December 31, 2022 | ||||||||||||||||
Bonds: | ||||||||||||||||
U.S. Government | $ | 1 | $ | - | $ | - | $ | 1 | ||||||||
States, territories and possessions | 561 | 7 | 55 | 513 | ||||||||||||
Political subdivisions | 380 | 9 | 28 | 361 | ||||||||||||
Special revenues | 3,035 | 36 | 362 | 2,709 | ||||||||||||
Industrial and miscellaneous | 29,529 | 118 | 3,115 | 26,532 | ||||||||||||
Loan-backed and structured securities | 6,702 | 30 | 438 | 6,294 | ||||||||||||
Total bonds | $ | 40,208 | $ | 200 | $ | 3,998 | $ | 36,410 | ||||||||
Common stocks unaffiliated | $ | 239 | $ | - | $ | - | $ | 239 | ||||||||
Preferred stocks unaffiliated | 30 | 1 | - | 31 | ||||||||||||
Total unaffiliated stocks1 | $ | 269 | $ | 1 | $ | - | $ | 270 | ||||||||
Total bonds and unaffiliated stocks1 | $ | 40,477 | $ | 201 | $ | 3,998 | $ | 36,680 |
1 | Excludes affiliated common stocks with a carrying value of $3.4 billion as of December 31, 2023 and 2022, respectively. Affiliated common stocks include investment in NLAIC and JNL of $3.2 billion and $203 million as of December 31, 2023, respectively. Affiliated common stocks include investment in NLAIC and JNFC of $3.2 billion and $186 million as of December 31, 2022, respectively. |
The carrying value of bonds on deposit with various states as required by law or special escrow agreement was immaterial as of December 31, 2023 and 2022.
F-28
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2023, 2022 and 2021 Statutory Financial Statements
The following table summarizes the carrying value and fair value of bonds, by contractual maturity, as of December 31, 2023. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without early redemption penalties:
(in millions) | Carrying value | Fair value | ||||||
Bonds: | ||||||||
Due in one year or less | $ | 1,325 | $ | 1,312 | ||||
Due after one year through five years | 10,189 | 9,936 | ||||||
Due after five years through ten years | 10,242 | 9,646 | ||||||
Due after ten years | 14,187 | 12,922 | ||||||
Total bonds excluding loan-backed and structured securities | $ | 35,943 | $ | 33,816 | ||||
Loan-backed and structured securities | 7,924 | 7,658 | ||||||
Total bonds | $ | 43,867 | $ | 41,474 |
The following table summarizes the fair value and unrealized losses on bonds and stocks (amount by which cost or amortized cost exceeds fair value), for which other-than-temporary declines in value have not been recognized, based on the amount of time each type of bond or stock has been in an unrealized loss position, as of the dates indicated:
Less than or equal to one year | More than one year | Total | ||||||||||||||||||||||
(in millions) | Fair value | Unrealized losses | Fair value | Unrealized losses | Fair value | Unrealized losses | ||||||||||||||||||
December 31, 2023 | ||||||||||||||||||||||||
Bonds: | ||||||||||||||||||||||||
U.S. Government | $ | 79 | $ | - | $ | 1 | $ | - | $ | 80 | $ | - | ||||||||||||
States, territories and possessions | 30 | - | 373 | 44 | 403 | 44 | ||||||||||||||||||
Political subdivisions | 51 | - | 148 | 21 | 199 | 21 | ||||||||||||||||||
Special revenues | 45 | 1 | 1,934 | 247 | 1,979 | 248 | ||||||||||||||||||
Industrial and miscellaneous | 1,093 | 43 | 21,615 | 2,266 | 22,708 | 2,309 | ||||||||||||||||||
Loan-backed and structured securities | 485 | 2 | 4,671 | 303 | 5,156 | 305 | ||||||||||||||||||
Total bonds | $ | 1,783 | $ | 46 | $ | 28,742 | $ | 2,881 | $ | 30,525 | $ | 2,927 | ||||||||||||
Common stocks unaffiliated | $ | - | $ | - | $ | 37 | $ | 5 | $ | 37 | $ | 5 | ||||||||||||
Preferred stocks unaffiliated | 3 | - | 6 | - | 9 | - | ||||||||||||||||||
Total unaffiliated stocks | $ | 3 | $ | - | $ | 43 | $ | 5 | $ | 46 | $ | 5 | ||||||||||||
Total bonds and unaffiliated stocks | $ | 1,786 | $ | 46 | $ | 28,785 | $ | 2,886 | $ | 30,571 | $ | 2,932 | ||||||||||||
December 31, 2022 | ||||||||||||||||||||||||
Bonds: | ||||||||||||||||||||||||
U.S. Government | $ | 1 | $ | - | $ | - | $ | - | $ | 1 | $ | - | ||||||||||||
States, territories and possessions | 352 | 49 | 23 | 6 | 375 | 55 | ||||||||||||||||||
Political subdivisions | 157 | 27 | - | - | 157 | 27 | ||||||||||||||||||
Special revenues | 1,935 | 332 | 55 | 22 | 1,990 | 354 | ||||||||||||||||||
Industrial and miscellaneous | 21,261 | 2,526 | 2,604 | 739 | 23,865 | 3,265 | ||||||||||||||||||
Loan-backed and structured securities | 3,800 | 263 | 2,079 | 177 | 5,879 | 440 | ||||||||||||||||||
Total bonds | $ | 27,506 | $ | 3,197 | $ | 4,761 | $ | 944 | $ | 32,267 | $ | 4,141 | ||||||||||||
Common stocks unaffiliated | $ | 45 | $ | 11 | $ | 19 | $ | 6 | $ | 64 | $ | 17 | ||||||||||||
Preferred stocks unaffiliated | 20 | 2 | 3 | 1 | 23 | 3 | ||||||||||||||||||
Total unaffiliated stocks | $ | 65 | $ | 13 | $ | 22 | $ | 7 | $ | 87 | $ | 20 | ||||||||||||
Total bonds and unaffiliated stocks | $ | 27,571 | $ | 3,210 | $ | 4,783 | $ | 951 | $ | 32,354 | $ | 4,161 |
As of December 31, 2023, management evaluated securities in an unrealized loss position for impairment. As of the reporting date, the Company has the intent and ability to hold these securities until the fair value recovers, which may be at maturity, and therefore, does not consider the securities to be other-than-temporarily impaired.
There was no intent to sell loan-backed and structured securities that have been identified as having other-than-temporary impairments for the years ended December 31, 2023 and 2022.
F-29
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2023, 2022 and 2021 Statutory Financial Statements
Mortgage Loans, Net of Allowance
The following table summarizes the amortized cost of mortgage loans and the related valuation allowances by type of credit loss, as of the dates indicated:
December 31, | ||||||||
(in millions) | 2023 | 2022 | ||||||
Total amortized cost | $ | 9,146 | $ | 8,401 | ||||
Valuation allowance: | ||||||||
Non-specific reserves2 | $ | - | $ | 37 | ||||
Specific reserves | 2 | 1 | ||||||
Total valuation allowance1 | $ | 2 | $ | 38 | ||||
Mortgage loans, net of allowance | $ | 9,144 | $ | 8,363 |
1 | For the years ended December 31, 2023, 2022 and 2021, changes in the valuation allowance were immaterial and due to current period provisions. |
2 | Effective January 1, 2023, the Company changed its method for reserving for mortgage loans by removing the need for a non-specific reserve. In the Company’s judgment, the change in reserving approach appropriately reflects the credit risk inherent for mortgage loans held. The impact of the change was recorded as a reversal of the non-specific reserves, resulting in an increase to unassigned surplus of $4 million and recorded through ‘Other, net’ activity within the statutory statements of changes in capital and surplus. There was no impact on net income. |
As of December 31, 2023 and 2022, the Company’s mortgage loans classified as delinquent and/or in non-accrual status were immaterial in relation to the total mortgage loan portfolio.
The following table summarizes the LTV ratio and DSC ratio of the mortgage loan portfolio as of the dates indicated:
LTV ratio | DSC ratio | |||||||||||||||||||||||||
(in millions) | Less than 90% | 90% or greater | Total | Greater than 1.00 | Less than or equal to 1.00 | Total | ||||||||||||||||||||
December 31, 2023 | ||||||||||||||||||||||||||
Apartment | $ | 3,831 | $ | 22 | $ | 3,853 | $ | 3,823 | $ | 29 | $ | 3,852 | ||||||||||||||
Industrial | 1,842 | - | 1,842 | 1,842 | - | 1,842 | ||||||||||||||||||||
Office | 1,057 | 71 | 1,128 | 1,126 | 3 | 1,129 | ||||||||||||||||||||
Retail | 1,888 | 8 | 1,896 | 1,887 | 9 | 1,896 | ||||||||||||||||||||
Other | 256 | - | 256 | 216 | 40 | 256 | ||||||||||||||||||||
Total1 | $ | 8,874 | $ | 101 | $ | 8,975 | $ | 8,894 | $ | 81 | $ | 8,975 | ||||||||||||||
Weighted average DSC ratio | 2.20 | 1.33 | 2.19 | n/a | n/a | n/a | ||||||||||||||||||||
Weighted average LTV ratio | n/a | n/a | n/a | 56 | % | 71 | % | 57% | ||||||||||||||||||
December 31, 2022 | ||||||||||||||||||||||||||
Apartment | $ | 3,651 | $ | 22 | $ | 3,673 | $ | 3,632 | $ | 41 | $ | 3,673 | ||||||||||||||
Industrial | 1,437 | - | 1,437 | 1,437 | - | 1,437 | ||||||||||||||||||||
Office | 1,223 | 3 | 1,226 | 1,214 | 12 | 1,226 | ||||||||||||||||||||
Retail | 1,815 | 8 | 1,823 | 1,794 | 29 | 1,823 | ||||||||||||||||||||
Other | 225 | - | 225 | 217 | 8 | 225 | ||||||||||||||||||||
Total1 | $ | 8,351 | $ | 33 | $ | 8,384 | $ | 8,294 | $ | 90 | $ | 8,384 | ||||||||||||||
Weighted average DSC ratio | 2.20 | 0.82 | 2.19 | n/a | n/a | n/a | ||||||||||||||||||||
Weighted average LTV ratio | n/a | n/a | n/a | 57 | % | 81 | % | 57% |
1 | Excludes $171 million and $17 million of commercial mortgage loans that were under development as of December 31, 2023 and 2022, respectively. |
As of December 31, 2023 and 2022, the Company has a diversified mortgage loan portfolio with no more than 23% in a geographic region in the U.S. and no more than 1% with any one borrower. The maximum and minimum lending rates for mortgage loans originated or acquired during 2023 were 9.2% and 4.8%, respectively, and for those originated or acquired during 2022 were 11.0% and 2.9%, respectively. As of December 31, 2023 and 2022, the maximum LTV ratio of any one loan at the time of loan origination was 78% and 80%, respectively. As of December 31, 2023 and 2022, the Company did not hold mortgage loans with interest 90 days or more past due. Additionally, there were no taxes, assessments or any amounts advanced and not included in the mortgage loan portfolio.
F-30
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2023, 2022 and 2021 Statutory Financial Statements
Securities Lending
The fair value of loaned securities was $922 million and $611 million as of December 31, 2023 and 2022, respectively. The Company held $359 million and $232 million of cash collateral on securities lending as of December 31, 2023 and 2022, respectively. The carrying value and fair value of reinvested collateral assets were $359 million and $232 million and had a contractual maturity of under 30 days as of December 31, 2023 and 2022, respectively. The fair value of bonds acquired with reinvested collateral assets was $366 million and $236 million as of December 31, 2023 and 2022, respectively. There are no securities lending transactions that extend beyond one year as of the reporting date. The Company received $584 million and $394 million of non-cash collateral on securities lending as of December 31, 2023 and 2022, respectively.
Net Investment Income
The following table summarizes net investment income by investment type, for the years ended:
December 31, | ||||||||||||
(in millions) | 2023 | 2022 | 2021 | |||||||||
Bonds | $ | 1,917 | $ | 1,511 | $ | 1,417 | ||||||
Mortgage loans | 357 | 334 | 358 | |||||||||
Other invested assets | 868 | 196 | 499 | |||||||||
Policy loans | 43 | 42 | 43 | |||||||||
Derivative instruments1 | 24 | 19 | 31 | |||||||||
Other | 62 | 44 | 12 | |||||||||
Gross investment income | $ | 3,271 | $ | 2,146 | $ | 2,360 | ||||||
Investment expenses | (135 | ) | (127 | ) | (129) | |||||||
Net investment income | $ | 3,136 | $ | 2,019 | $ | 2,231 |
1 | Includes net investment income applying the prescribed practice under OAC 3901-1-67, as disclosed in Note 2. |
The amount of investment income due and accrued that was nonadmitted as of December 31, 2023 and 2022 was immaterial. Investment income due and accrued as of December 31, 2023 and 2022 that was admitted was $965 million and $585 million, respectively.
Net Realized Capital Gains and Losses
The following table summarizes net realized capital gains and losses for the years ended:
December 31, | ||||||||||||
(in millions) | 2023 | 2022 | 2021 | |||||||||
Gross gains on sales | $ | 31 | $ | 31 | $ | 106 | ||||||
Gross losses on sales | (68 | ) | (149 | ) | (32 | ) | ||||||
Net realized (losses) gains on sales | $ | (37 | ) | $ | (118 | ) | $ | 74 | ||||
Net realized derivative (losses) gains | (378 | ) | 284 | (679 | ) | |||||||
Other-than-temporary impairments | (21 | ) | (26 | ) | (4 | ) | ||||||
Total net realized (losses) gains | $ | (436 | ) | $140 | $ | (609 | ) | |||||
Tax (benefit) expense on net (losses) gains | (4 | ) | 3 | 59 | ||||||||
Net realized capital (losses) gains, net of tax | $ | (432 | ) | $137 | $ | (668 | ) | |||||
Less: Realized (losses) gains transferred to the IMR | (30 | ) | (103 | ) | 15 | |||||||
Net realized capital (losses) gains, net of tax and transfers to the IMR | $ | (402 | ) | $ | 240 | $ | (683 | ) |
For the year ended December 31, 2023, gross realized gains and gross realized losses on sales of bonds were $25 million and $64 million, respectively. For the year ended December 31, 2022, gross realized gains and gross realized losses on sales of bonds were $7 million and $145 million, respectively. For the year ended December 31, 2021, gross realized gains and gross realized losses on sales of bonds were $80 million and $31 million, respectively.
The Company did not enter into any material repurchase transactions that would be considered wash sales during the years ended December 31, 2023, 2022 and 2021.
F-31
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2023, 2022 and 2021 Statutory Financial Statements
Investment Commitments
The Company had unfunded commitments related to its investment in limited partnerships and limited liability companies totaling $1.0 billion and $894 million as of December 31, 2023 and 2022, respectively. As of December 31, 2023 and 2022, there were $99 million and $207 million of commitments to purchase private placement bonds, respectively. There were $490 million and $291 million of outstanding commitments to fund mortgage loans as of December 31, 2023 and 2022, respectively.
(6) | Derivative Instruments |
The Company is exposed to certain risks related to its ongoing business operations which are managed using derivative instruments.
Interest rate risk management. In the normal course of business, the Company enters into transactions that expose it to interest rate risk arising from mismatches between assets and liabilities. The Company may use interest rate swaps and futures to reduce or alter interest rate exposure.
Interest rate contracts are used by the Company in association with fixed and variable rate investments to achieve cash flow streams that support certain financial obligations of the Company and to produce desired investment returns. As such, interest rate contracts are generally used to convert fixed rate cash flow streams to variable rate cash flow streams or vice versa.
Equity market risk management. The Company issues a variety of insurance products that expose it to equity risks. To mitigate these risks, the Company enters into a variety of derivatives including futures and options.
Indexed crediting risk management. The Company issues a variety of insurance and annuity products with indexed crediting features that expose the Company to risks related to the performance of an underlying index. To mitigate these risks, the Company enters into a variety of derivatives including index options, total return swaps and futures. The underlying indices can have exposure to equites, commodities and fixed income securities.
Other risk management. As part of its regular investing activities, the Company may purchase foreign currency denominated investments. These investments and the associated income expose the Company to volatility associated with movements in foreign exchange rates. As foreign exchange rates change, the increase or decrease in the cash flows of the derivative instrument are intended to mitigate the changes in the functional-currency equivalent cash flows of the hedged item. To mitigate this risk, the Company uses cross-currency swaps.
Credit risk associated with derivatives transactions. The Company periodically evaluates the risks within the derivative portfolios due to credit exposure. When evaluating this risk, the Company considers several factors which include, but are not limited to, the counterparty credit risk associated with derivative receivables, the Company’s own credit as it relates to derivative payables, the collateral thresholds associated with each counterparty and changes in relevant market data in order to gain insight into the probability of default by the counterparty. The Company also considers the impact credit exposure could have on the effectiveness of the Company’s hedging relationships. As of December 31, 2023 and 2022, the impact of the exposure to credit risk on the fair value measurement of derivatives and the effectiveness of the Company’s hedging relationships was immaterial.
F-32
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2023, 2022 and 2021 Statutory Financial Statements
The following table summarizes the fair value, carrying value and related notional amounts of derivative instruments, as of the dates indicated:
(in millions) | Notional amount | Net Carrying Value | Fair value asset | Fair value liability | Average fair value | |||||||||||||||
December 31, 2023 | ||||||||||||||||||||
Interest rate swaps | $ | 2,410 | $ | - | $ | - | $ | - | $ | - | ||||||||||
Options | 137 | 1 | 7 | - | - | |||||||||||||||
Cross currency swaps | 1,621 | 94 | 120 | (22 | ) | 1 | ||||||||||||||
Futures | 2,925 | - | - | - | - | |||||||||||||||
Total derivatives¹ | $ | 7,093 | $ | 95 | $ | 127 | $ | (22 | ) | $ | 1 | |||||||||
December 31, 2022 | ||||||||||||||||||||
Interest rate swaps | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||
Options | 96 | 1 | 2 | - | - | |||||||||||||||
Cross currency swaps | 1,498 | 135 | 174 | (9 | ) | 2 | ||||||||||||||
Futures | 3,316 | - | - | - | - | |||||||||||||||
Total derivatives¹ | $ | 4,910 | $ | 136 | $ | 176 | $ | (9 | ) | $ | 2 |
1 | Fair value balance excludes immaterial accrued interest on derivative assets for December 31, 2023 and 2022. |
The Company received $253 million and $178 million of cash collateral and held $49 million and $20 million of securities off-balance sheet as collateral for derivative assets as of December 31, 2023 and 2022, respectively. Cash and securities pledged for derivative liabilities were immaterial as of December 31, 2023 and 2022. The impact of netting as a result of master netting agreements reduced the fair value of derivative assets and liabilities by $20 million and $8 million as of December 31, 2023 and 2022, respectively. As a result, the Company’s uncollateralized position for derivatives instruments was immaterial in each respective period. In addition, the Company posted initial margin on derivative instruments of $256 million and $236 million as of December 31, 2023 and 2022, respectively.
The following table summarizes net gains and losses on derivatives programs by type of derivative instrument, as of the dates indicated:
Net realized (losses) gains recorded in operations | Unrealized (losses) gains recorded in capital and surplus | |||||||||||||||||||||||
December 31, | December 31, | |||||||||||||||||||||||
(in millions) | 2023 | 2022 | 2021 | 2023 | 2022 | 2021 | ||||||||||||||||||
Cross currency swaps | $ | - | $ | 1 | $ | 1 | $ | (43 | ) | $ | 103 | $ | 69 | |||||||||||
Futures | (378 | ) | 283 | (680 | ) | (173 | ) | 124 | 27 | |||||||||||||||
Total | $ | (378 | ) | $ | 284 | $ | (679 | ) | $ | (216 | ) | $ | 227 | $ | 96 |
F-33
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2023, 2022 and 2021 Statutory Financial Statements
(7) | Fair Value Measurements |
The following table summarizes assets and liabilities held at fair value as of December 31, 2023:
(in millions) | Level 1 | Level 2 | Level 3 | Net Asset Value (NAV) | Total | |||||||||||||||
Assets | ||||||||||||||||||||
Bonds | $ | - | $ | 7 | $ | - | $ | - | $ | 7 | ||||||||||
Common stocks unaffiliated | 67 | 164 | - | - | 231 | |||||||||||||||
Preferred stocks unaffiliated | - | 39 | 7 | - | 46 | |||||||||||||||
Separate account assets | 104,555 | 1,637 | 51 | 6,430 | 112,673 | |||||||||||||||
Assets at fair value | $ | 104,622 | $ | 1,847 | $ | 58 | $ | 6,430 | $ | 112,957 |
The following table presents the rollforward of Level 3 assets and liabilities held at fair value during the year ended December 31, 2023:
(in millions) | Preferred stocks unaffiliated | Separate account assets | Assets at fair value | |||||||||
Balance as of December 31, 2022 | $ | 6 | $ | 55 | $ | 61 | ||||||
Net gains (losses): | ||||||||||||
In surplus | 1 | (1 | ) | - | ||||||||
Purchases | 3 | - | 3 | |||||||||
Sales | (3 | ) | (3 | ) | (6 | ) | ||||||
Balance as of December 31, 2023 | $ | 7 | $ | 51 | $ | 58 |
The following table summarizes assets and liabilities held at fair value as of December 31, 2022:
(in millions) | Level 1 | Level 2 | Level 3 | Net Asset Value (NAV) | Total | |||||||||||||||
Assets | ||||||||||||||||||||
Bonds | $ | - | $ | 11 | $ | - | $ | - | $ | 11 | ||||||||||
Common stocks unaffiliated | 77 | 162 | - | - | 239 | |||||||||||||||
Preferred stocks unaffiliated | - | 25 | 6 | - | 31 | |||||||||||||||
Separate account assets | 97,015 | 1,795 | 55 | 3,552 | 102,417 | |||||||||||||||
Assets at fair value | $ | 97,092 | $ | 1,993 | $ | 61 | $ | 3,552 | $ | 102,698 |
The following table presents the rollforward of Level 3 assets and liabilities held at fair value during the year ended December 31, 2022:
(in millions) | Bonds1 | Preferred stocks unaffiliated | Separate account assets | Assets at fair value | ||||||||||||
Balance as of December 31, 2021 | $ | 1 | $ | 6 | $ | 49 | $ | 56 | ||||||||
Net gains (losses): | ||||||||||||||||
In surplus | - | - | 24 | 24 | ||||||||||||
Purchases | - | 2 | - | 2 | ||||||||||||
Sales | - | (2 | ) | (18 | ) | (20 | ) | |||||||||
Transfers out of Level 3 | (1 | ) | - | - | (1 | ) | ||||||||||
Balance as of December 31, 2022 | $ | - | $ | 6 | $ | 55 | 61 |
1 | Bonds transfer out of Level 3 during the year ended December 31, 2022, result from the application of the lower of amortized cost or fair value rules based on NAIC rating. |
F-34
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2023, 2022 and 2021 Statutory Financial Statements
The following table summarizes the carrying value and fair value of the Company’s assets and liabilities not held at fair value as of the dates indicated. The valuation techniques used to estimate these fair values are described below or in Note 2.
Fair Value | ||||||||||||||||||||
(in millions) | Level 1 | Level 2 | Level 3 | Total fair value | Carrying value | |||||||||||||||
December 31, 2023 | ||||||||||||||||||||
Assets: | ||||||||||||||||||||
Bonds | $ | 175 | $ | 35,293 | $ | 5,999 | $ | 41,467 | $ | 43,860 | ||||||||||
Mortgage loans, net of allowance | - | - | 8,047 | 8,047 | 9,144 | |||||||||||||||
Policy loans | - | - | 969 | 969 | 969 | |||||||||||||||
Derivative assets | - | 120 | 7 | 127 | 113 | |||||||||||||||
Cash, cash equivalents and short-term investments | (52 | ) | 1,607 | - | 1,555 | 1,555 | ||||||||||||||
Securities lending collateral assets | 359 | - | - | 359 | 359 | |||||||||||||||
Separate account assets | 5 | 411 | 157 | 573 | 597 | |||||||||||||||
Total assets | $ | 487 | $ | 37,431 | $ | 15,179 | $ | 53,097 | $ | 56,597 | ||||||||||
Liabilities: | ||||||||||||||||||||
Investment contracts | $ | - | $ | - | $ | 3,265 | $ | 3,265 | $ | 3,242 | ||||||||||
Derivative liabilities | - | 22 | - | 22 | 17 | |||||||||||||||
Total liabilities | $ | - | $ | 22 | $ | 3,265 | $ | 3,287 | $ | 3,259 | ||||||||||
December 31, 2022 | ||||||||||||||||||||
Assets: | ||||||||||||||||||||
Bonds | $ | 1 | $ | 32,048 | $ | 4,350 | $ | 36,399 | $ | 40,197 | ||||||||||
Mortgage loans, net of allowance | - | - | 7,351 | 7,351 | 8,363 | |||||||||||||||
Policy loans | - | - | 933 | 933 | 933 | |||||||||||||||
Derivative assets | - | 174 | 2 | 176 | 143 | |||||||||||||||
Cash, cash equivalents and short-term investments | 613 | 1,008 | - | 1,621 | 1,621 | |||||||||||||||
Securities lending collateral assets | 232 | - | - | 232 | 232 | |||||||||||||||
Separate account assets | 4 | 311 | 41 | 356 | 391 | |||||||||||||||
Total assets | $ | 850 | $ | 33,541 | $ | 12,677 | $ | 47,068 | $ | 51,880 | ||||||||||
Liabilities: | ||||||||||||||||||||
Investment contracts | $ | - | $ | - | $ | 3,158 | $ | 3,158 | $ | 3,148 | ||||||||||
Derivative liabilities | - | 9 | - | 9 | 7 | |||||||||||||||
Total liabilities | $ | - | $ | 9 | $ | 3,158 | $ | 3,167 | $ | 3,155 |
Mortgage loans, net of allowance. The fair values of mortgage loans are primarily estimated using discounted cash flow analyses based on interest rates currently being offered for similar loans to borrowers with similar credit ratings.
Policy loans. The carrying amount reported in the statutory statements of admitted assets, liabilities, capital and surplus approximates fair value as policy loans are fully collateralized by the cash surrender value of underlying insurance policies.
Securities lending collateral assets. These assets are comprised of bonds and short-term investments and the respective fair values are estimated based on the fair value methods described in Note 2.
Investment contracts. For investment contracts without defined maturities, fair value is the amount payable on demand, net of surrender charges. For investment contracts with known or determined maturities, fair value is estimated using discounted cash flow analysis. Interest rates used in this analysis are similar to currently offered contracts with maturities consistent with those remaining for the contracts being valued. The fair value of adjustable-rate contracts approximates their carrying value.
F-35
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2023, 2022 and 2021 Statutory Financial Statements
(8) | Federal Income Taxes |
The following tables summarize the net admitted deferred tax assets, as of the dates indicated:
December 31, 2023 | ||||||||||||
(in millions) | Ordinary | Capital | Total | |||||||||
Total gross deferred tax assets | $ | 953 | $ | 21 | $ | 974 | ||||||
Statutory valuation allowance adjustment | - | - | - | |||||||||
Adjusted gross deferred tax assets | $ | 953 | $ | 21 | $ | 974 | ||||||
Less: Deferred tax assets nonadmitted | (222 | ) | - | (222) | ||||||||
Net admitted deferred tax assets | $ | 731 | $ | 21 | $ | 752 | ||||||
Less: Deferred tax liabilities | (105 | ) | (15 | ) | (120) | |||||||
Net admitted deferred tax assets | $ | 626 | $ | 6 | $ | 632 | ||||||
December 31, 2022 | ||||||||||||
(in millions) | Ordinary | Capital | Total | |||||||||
Total gross deferred tax assets | $ | 820 | $ | 32 | $ | 852 | ||||||
Statutory valuation allowance adjustment | - | - | - | |||||||||
Adjusted gross deferred tax assets | $ | 820 | $ | 32 | $ | 852 | ||||||
Less: Deferred tax assets nonadmitted | (96 | ) | (7 | ) | (103) | |||||||
Net admitted deferred tax assets | $ | 724 | $ | 25 | $ | 749 | ||||||
Less: Deferred tax liabilities | (147 | ) | (13 | ) | (160) | |||||||
Net admitted deferred tax assets | $ | 577 | $ | 12 | $ | 589 |
The following table summarizes components of the change in deferred income taxes reported in capital and surplus before consideration of nonadmitted assets and changes from the prior year, as of the dates indicated:
December 31, | ||||||||||||
(in millions) | 2023 | 2022 | Change | |||||||||
Adjusted gross deferred tax assets | $ | 974 | $ | 852 | $ | 122 | ||||||
Total deferred tax liabilities | (120 | ) | (160 | ) | 40 | |||||||
Net deferred tax assets | $ | 854 | $ | 692 | $ | 162 | ||||||
Less: Tax effect of unrealized gains and losses | 37 | |||||||||||
Less: Tax effect of change in accounting principle | (8 | ) | ||||||||||
Less: Merger adjustment | 1 | |||||||||||
Change in deferred income tax | $ | 132 |
F-36
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2023, 2022 and 2021 Statutory Financial Statements
The following tables summarize components of the admitted deferred tax assets calculation, as of the dates indicated:
December 31, 2023 | ||||||||||||
(in millions) | Ordinary | Capital | Total | |||||||||
Federal income taxes recoverable through loss carryback | $ | - | $ | 3 | $ | 3 | ||||||
Adjusted gross deferred tax assets expected to be realized1 | 623 | 6 | 629 | |||||||||
Adjusted gross deferred tax assets offset against existing gross deferred tax liabilities | 108 | 12 | 120 | |||||||||
Admitted deferred tax assets | $ | 731 | $ | 21 | $ | 752 |
December 31, 2022 | ||||||||||||
(in millions) | Ordinary | Capital | Total | |||||||||
Federal income taxes recoverable through loss carryback | $ | - | $ | 8 | $ | 8 | ||||||
Adjusted gross deferred tax assets expected to be realized1 | 577 | 4 | 581 | |||||||||
Adjusted gross deferred tax assets offset against existing gross deferred tax liabilities | 147 | 13 | 160 | |||||||||
Admitted deferred tax assets | $ | 724 | $ | 25 | $ | 749 |
1 | Note that this amount is calculated as the lesser of the adjusted gross deferred tax assets expected to be realized following the balance sheet date or the adjusted gross deferred tax assets allowed per the limitation threshold. For the years ended December 31, 2023 and 2022, the threshold limitation for adjusted capital and surplus was $1.6 billion and $1.4 billion, respectively. |
The adjusted capital and surplus used to determine the recovery period and adjusted gross deferred tax assets allowed per the limitation threshold was $10.5 billion and $9.5 billion as of December 31, 2023 and 2022, respectively. The ratio percentage used to determine the recovery period and adjusted gross deferred tax assets allowed per the limitation threshold was 1,062% and 1,071% as of December 31, 2023 and 2022, respectively.
The following tables summarize the impact of tax planning strategies, as of the dates indicated:
December 31, 2023 | ||||||||||||
Ordinary | Capital | Total | ||||||||||
Adjusted gross deferred tax assets | 0.00 | % | 0.00 | % | 0.00 | % | ||||||
Net admitted adjusted gross deferred tax assets | 7.19 | % | 0.00 | % | 7.19 | % |
December 31, 2022 | ||||||||||||
Ordinary | Capital | Total | ||||||||||
Adjusted gross deferred tax assets | 0.00 | % | 0.00 | % | 0.00 | % | ||||||
Net admitted adjusted gross deferred tax assets | 25.51 | % | 0.00 | % | 25.51 | % |
The Company’s tax planning strategies included the use of affiliated reinsurance for the years ended December 31, 2023 and 2022.
There are no temporary differences for which deferred tax liabilities are not recognized for the years ended December 31, 2023 and 2022.
F-37
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2023, 2022 and 2021 Statutory Financial Statements
The following table summarizes the tax effects of temporary differences and the change from the prior year, for the years ended:
December 31, | ||||||||||||
(in millions) | 2023 | 2022 | Change | |||||||||
Deferred tax assets | ||||||||||||
Ordinary: | ||||||||||||
Future policy benefits and claims | $ | 231 | $ | 132 | $ | 99 | ||||||
Investments | 110 | 89 | 21 | |||||||||
Deferred acquisition costs | 297 | 260 | 37 | |||||||||
Tax credit carry-forward | 259 | 294 | (35 | ) | ||||||||
Other | 56 | 45 | 11 | |||||||||
Subtotal | $ | 953 | $ | 820 | $ | 133 | ||||||
Nonadmitted | (222 | ) | (96 | ) | (126 | ) | ||||||
Admitted ordinary deferred tax assets | $ | 731 | $ | 724 | $ | 7 | ||||||
Capital: | ||||||||||||
Investments | 21 | 32 | (11 | ) | ||||||||
Subtotal | $ | 21 | $ | 32 | $ | (11 | ) | |||||
Nonadmitted | - | (7 | ) | 7 | ||||||||
Admitted capital deferred tax assets | $ | 21 | $ | 25 | $ | (4 | ) | |||||
Admitted deferred tax assets | $ | 752 | $ | 749 | $ | 3 | ||||||
Deferred tax liabilities | ||||||||||||
Ordinary: | ||||||||||||
Investments | $ | (68 | ) | $ | (100 | ) | $ | 32 | ||||
Future policy benefits and claims | (22 | ) | (32 | ) | 10 | |||||||
Other | (15 | ) | (15 | ) | - | |||||||
Subtotal | $ | (105 | ) | $ | (147 | ) | $ | 42 | ||||
Capital: | ||||||||||||
Investments | (15 | ) | (13 | ) | (2 | ) | ||||||
Subtotal | $ | (15 | ) | $ | (13 | ) | $ | (2 | ) | |||
Deferred tax liabilities | $ | (120 | ) | $ | (160 | ) | $ | 40 | ||||
Net deferred tax assets | $ | 632 | $ | 589 | $ | 43 |
In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion of the total deferred tax assets will not be realized. Valuation allowances are established when necessary to reduce the deferred tax assets to amounts expected to be realized. Based on the Company’s analysis, it is more likely than not that the results of future operations and the implementation of tax planning strategies will generate sufficient taxable income to enable the Company to realize all deferred tax assets. Therefore, no valuation allowances have been established as of December 31, 2023 and 2022.
F-38
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2023, 2022 and 2021 Statutory Financial Statements
The following table summarizes the Company’s income tax incurred and change in deferred income tax. The total income tax and change in deferred income tax differs from the amount obtained by applying the federal statutory rate to income (loss) before tax as follows, for the years ended:
December 31, | ||||||||||||
(in millions) | 2023 | 2022 | 2021 | |||||||||
Current income tax expense | $ | 104 | $ | 103 | $ | 50 | ||||||
Change in deferred income tax (without tax on unrealized gains and losses) | (132 | ) | (28 | ) | (50 | ) | ||||||
Total income tax (benefit) expense reported | $ | (28 | ) | $ | 75 | $ | - | |||||
Income before income and capital gains taxes | $ | 1,053 | $ | 1,077 | $ | 861 | ||||||
Federal statutory tax rate | 21 | % | 21 | % | 21 | % | ||||||
Expected income tax expense at statutory tax rate | $ | 221 | $ | 226 | $ | 181 | ||||||
(Decrease) increase in actual tax reported resulting from: | ||||||||||||
Dividends received deduction | (211 | ) | (80 | ) | (137 | ) | ||||||
Tax credits | (45 | ) | (58 | ) | (47 | ) | ||||||
Other | 7 | (13 | ) | 3 | ||||||||
Total income tax (benefit) expense reported | $ | (28 | ) | $ | 75 | $ | - |
The Company incurred $11 million in federal income tax expense in 2021, which is available for recoupment in the event of future net losses.
The following table summarizes operating loss or tax credit carry-forwards available as of December 31, 2023:
(in millions) | Amount | Origination | Expiration | |||||||||
Operating loss carryforwards | $ | 2 | 2017 | 2032 | ||||||||
Business credits | $ | 32 | 2016 | 2036 | ||||||||
Business credits | $ | 62 | 2017 | 2037 | ||||||||
Business credits | $ | 30 | 2018 | 2038 | ||||||||
Business credits | $ | 27 | 2019 | 2039 | ||||||||
Business credits | $ | 29 | 2020 | 2040 | ||||||||
Business credits | $ | 28 | 2021 | 2041 | ||||||||
Business credits | $ | 27 | 2022 | 2042 | ||||||||
Business credits | $ | 24 | 2023 | 2043 |
F-39
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2023, 2022 and 2021 Statutory Financial Statements
The Company is included in the NMIC consolidated federal income tax return which includes the following entities:
Nationwide Mutual Insurance Company AGMC Reinsurance, Ltd Allied Insurance Company of America Allied Property & Casualty Insurance Company Allied Texas Agency, Inc. AMCO Insurance Company American Marine Underwriters Crestbrook Insurance Company Depositors Insurance Company DVM Insurance Agency, Inc. Eagle Captive Reinsurance, LLC Freedom Specialty Insurance Company Harleysville Insurance Company of New York Harleysville Insurance Company Harleysville Insurance Company of New Jersey Harleysville Lake States Insurance Company Harleysville Preferred Insurance Company Harleysville Worcester Insurance Company Jefferson National Financial Corporation Jefferson National Life Insurance Company Jefferson National Life Insurance Company of New York Lone Star General Agency, Inc. National Casualty Company Nationwide Advantage Mortgage Company Nationwide Affinity Insurance Company of America Nationwide Agent Risk Purchasing Group. Inc. Nationwide Agribusiness Insurance Company Nationwide Assurance Company Nationwide Cash Management Company Nationwide Corporation | Nationwide Financial Assignment Company Nationwide Financial General Agency, Inc. Nationwide Financial Services, Inc. Nationwide General Insurance Company Nationwide Indemnity Company Nationwide Insurance Company of America Nationwide Insurance Company of Florida Nationwide Investment Services Corporation Nationwide Life and Annuity Insurance Company Nationwide Life Insurance Company Nationwide Lloyds Nationwide Property & Casualty Ins. Company Nationwide Retirement Solutions, Inc. Nationwide Sales Solutions, Inc. Nationwide Trust Company, FSB NBS Insurance Agency, Inc. NFS Distributors, Inc. Registered Investment Advisors Services, Inc. Retention Alternatives, Ltd. Retention Alternatives Ltd. In Respect of Cell No. 1 Segregated Account Scottsdale Indemnity Company Scottsdale Insurance Company Scottsdale Surplus Lines Insurance Company Titan Insurance Company Titan Insurance Services, Inc. Veterinary Pet Insurance Company Victoria Fire & Casualty Company Victoria Select Insurance Company VPI Services, Inc. |
The method of allocation of regular tax among the companies is based upon separate return calculations with current benefit for tax losses and credits utilized in the consolidated return. Effective January 1, 2023, the Company revised its tax sharing agreement to address corporate alternative minimum tax (“CAMT”). If the consolidated federal income tax return group is an Applicable Corporation and has a CAMT liability, all members of the group will be treated as Applicable Corporations subject to CAMT. CAMT is paid by affiliates based on the ratio of the subsidiary’s CAMT liability to the total CAMT liabilities of all subsidiaries.
The Company did not have any protective tax deposits under Section 6603 of the Internal Revenue Code as of December 31, 2023 and 2022.
The Company does not have any tax loss contingencies for which it is reasonably possible that the total liability will significantly increase within twelve months of the reporting date.
In August 2022, the Inflation Reduction Act of 2022 (“Act”) was passed by the U.S. Congress and signed into law. The Act includes a new Federal CAMT, effective in 2023, that is based on the adjusted financial statement income (“AFSI”) set forth on the applicable financial statement (“AFS”) of an applicable corporation. A corporation is an applicable corporation if its rolling average pre-tax AFSI over three prior years (starting with 2020-2022) is greater than $1.0 billion. For a group of related entities, the $1.0 billion threshold is determined on a group basis, and the group’s AFS is generally treated as the AFS for all separate taxpayers in the group. Except under limited circumstances, once a corporation is an applicable corporation, it is an applicable corporation in all future years.
An applicable corporation is not automatically subject to a CAMT liability. The corporation’s tentative CAMT liability is equal to 15% of its adjusted AFSI, and CAMT is payable to the extent the tentative CAMT liability exceeds regular corporate income tax. However, any CAMT paid would be indefinitely available as a credit carryover that could reduce future regular tax in excess of CAMT.
F-40
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2023, 2022 and 2021 Statutory Financial Statements
Reporting entities that reasonably expect to be applicable corporations for the current reporting period are considered applicable reporting entities. The Company comprises a controlled group of corporations and has determined that it likely will be an applicable corporation, and therefore an appliable reporting entity, in 2023. In making such determination, the group has made certain interpretations of, and assumptions regarding, the CAMT provisions of the Act. The Company does not consider its CAMT status when evaluating its deferred tax assets under the regular tax system. The U.S. Treasury Department is expected to issue guidance throughout 2024 that may differ from the group’s interpretations and assumptions and that could alter the group’s determination.
The reporting entity has made an accounting policy election to disregard CAMT when evaluating the need for a valuation allowance for its non-CAMT deferred tax assets.
For the years ended December 31, 2023 and 2022, the Act did not impact the Company’s total tax.
(9) | Short-Term Debt and FHLB Funding Agreements |
Short-Term Debt
The Company is a party to a $750 million revolving variable rate credit facility agreement. The Company had no amounts outstanding under the facility as of December 31, 2023 and 2022.
The Company has entered into an agreement with its custodial bank to borrow against the cash collateral that is posted in connection with its securities lending program. The maximum amount available under the agreement is $350 million. The borrowing rate on this program is equal to Effective Federal Funds Rate plus 0.18%. The Company had no amounts outstanding under this agreement as of December 31, 2023 and 2022.
The terms of certain debt instruments contain various restrictive covenants, including, but not limited to, minimum statutory surplus defined in the agreements. The Company was in compliance with all covenants as of December 31, 2023 and 2022.
The amount of interest paid on short-term debt was immaterial in 2023, 2022 and 2021.
FHLB Funding Agreements
The Company is a member of the FHLB. Through its membership, the FHLB established the Company’s capacity for short-term borrowings and cash advances under the funding agreement program at up to 50% of total admitted assets.
The Company’s Board of Directors has authorized the issuance of funding agreements up to $6.0 billion to the FHLB, shared between the Company and NLAIC, in exchange for cash advances, which are collateralized by pledged securities. The Company uses these funds in an investment spread strategy, consistent with its other investment spread operations. As such, the Company applies SSAP No. 52, Deposit-Type Contracts, accounting treatment to these funds, consistent with its other deposit-type contracts. It is not part of the Company’s strategy to utilize these funds for operations, and any funds obtained from the FHLB for use in general operations would be accounted for consistent with SSAP No. 15, Debt and Holding Company Obligations, as borrowed money. FHLB membership requires the Company to purchase and hold a minimum amount of FHLB capital stock plus additional stock based on outstanding advances. The Company has $20 million in membership stock as of December 31, 2023 and 2022. As part of the agreement, the Company purchased and held an additional $144 million and $139 million in activity stock and an immaterial amount in excess stock as of December 31, 2023 and 2022, respectively, which is included in stocks on the statutory statements of admitted assets, liabilities, capital and surplus. The Company’s liability for advances from the FHLB was $3.3 billion and $3.1 billion as of December 31, 2023 and 2022, respectively, which is included in future policy benefits and claims on the statutory statements of admitted assets, liabilities, capital and surplus.
The Company has agreements with the FHLB to provide financing for operations. These agreements, which were renewed in February 2024 and expire January 2025, allow the Company access to borrow up to $1.1 billion. As of December 31, 2023 and 2022, the Company had no amounts outstanding under these agreements.
Bonds and mortgage loans with a carrying value of $5.3 billion (3.0% of total admitted assets) as of December 31, 2023 and $4.6 billion (2.8% of total admitted assets) as of December 31, 2022 were pledged as collateral under FHLB agreements and are included in bonds and mortgage loans on the statutory statements of admitted assets, liabilities, capital and surplus.
F-41
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2023, 2022 and 2021 Statutory Financial Statements
(10) | Surplus Notes |
The following table summarizes the carrying value of surplus notes issued by the Company to NFS, as of the dates indicated:
(in millions) | ||||||||||||||||||||||||||||
Date issued | Interest rate | Par value | Carrying value | Interest and/ or principal paid in current year | Total interest and/or principal paid | Unapproved interest and/or principal | Date of maturity | |||||||||||||||||||||
December 31, 2023 | ||||||||||||||||||||||||||||
12/19/2001 | 7.50 | % | $ | 300 | $ | 300 | $ | 23 | $ | 495 | $ | - | 12/31/2031 | |||||||||||||||
6/27/2002 | 8.15 | % | 300 | 300 | 24 | 521 | - | 6/27/2032 | ||||||||||||||||||||
12/23/2003 | 6.75 | % | 100 | 100 | 7 | 132 | - | 12/23/2033 | ||||||||||||||||||||
12/20/2019 | 4.21 | % | 400 | 400 | 16 | 67 | - | 12/19/2059 | ||||||||||||||||||||
Total | $ | 1,100 | $ | 1,100 | $ | 70 | $ | 1,215 | $ | - | ||||||||||||||||||
December 31, 2022 | ||||||||||||||||||||||||||||
12/19/2001 | 7.50 | % | $ | 300 | $ | 300 | $ | 22 | $ | 472 | $ | - | 12/31/2031 | |||||||||||||||
6/27/2002 | 8.15 | % | 300 | 300 | 24 | 497 | - | 6/27/2032 | ||||||||||||||||||||
12/23/2003 | 6.75 | % | 100 | 100 | 6 | 125 | - | 12/23/2033 | ||||||||||||||||||||
12/20/2019 | 4.21 | % | 400 | 400 | 17 | 51 | - | 12/19/2059 | ||||||||||||||||||||
Total | $ | 1,100 | $ | 1,100 | $ | 69 | $ | 1,145 | $ | - |
The surplus notes were issued in accordance with Section 3901.72 of the Ohio Revised Code. The principal and interest on these surplus notes shall not be a liability or claim against NLIC, or any of its assets, except as provided in Section 3901.72 of the Ohio Revised Code. The Department must approve interest and principal payments before they are paid.
(11) | Reinsurance |
The Company has 100% coinsurance agreements with funds withheld with Eagle to cede specified GMDB and GLWB obligations provided under substantially all of the variable annuity contracts and certain fixed indexed annuity contracts issued and to be issued by NLIC. While the GMDB and GLWB contract riders are ceded by NLIC to Eagle, the base annuity contracts and any non-reinsured risks will be retained by NLIC. Amounts ceded to Eagle during 2023, 2022 and 2021 included premiums of $635 million, $637 million and $607 million, respectively, benefits and claims, net of third-party reinsurance recoveries, of $73 million, $75 million, and $8 million respectively, net investment earnings on funds withheld assets of $55 million, $52 million and $40 million, respectively, and an expense allowance for third-party reinsurance premiums of $1 million, $2 million and $1 million, respectively. As of December 31, 2023 and 2022, the carrying value of the funds withheld assets recorded within funds held under coinsurance was $1.3 billion and $1.6 billion, respectively, which consists of bonds and cash equivalents that had a carrying value of $1.2 billion and $1.5 million, respectively, and mortgage loans that had a carrying value of $73 million and $95 million, respectively. As of December 31, 2023 and 2022, the Company’s reserve credit for guaranteed benefits ceded under the reinsurance agreements was $91 million and $253 million, respectively. Amounts payable to Eagle related to the reinsurance agreements were $377 million and $424 million as of December 31, 2023 and 2022, respectively.
The Company has a reinsurance agreement with NMIC whereby nearly all of the Company’s accident and health business not ceded to unaffiliated reinsurers is ceded to NMIC on a modified coinsurance basis. Either party may terminate the agreement on January 1 of any year with prior notice. Under a modified coinsurance agreement, the ceding company retains invested assets, and investment earnings are paid to the reinsurer. Under the terms of the Company’s agreement, the investment risk associated with changes in interest rates is borne by the reinsurer. Risk of asset default is retained by the Company, although a fee is paid to the Company for the retention of such risk. The ceding of risk does not discharge the Company, as the original insurer, from its primary obligation to the policyholder. Amounts ceded to NMIC include revenues of $307 million, $287 million and $281 million for the years ended December 31, 2023, 2022 and 2021, respectively, while benefits, claims and expenses ceded were $301 million, $267 million and $257 million, respectively.
F-42
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2023, 2022 and 2021 Statutory Financial Statements
The Company has an intercompany reinsurance agreement with NLAIC whereby certain inforce and subsequently issued fixed individual deferred annuity contracts are assumed on a modified coinsurance basis. Under modified coinsurance agreements, the ceding company retains invested assets and investment earnings are paid to the reinsurer. Under terms of the agreement, the Company bears the investment risk associated with changes in interest rates. Risk of asset default remains with NLAIC, and the Company pays a fee to NLAIC for the retention of such risk. The agreement will remain inforce until all contract obligations are settled. The ceding of risk does not discharge the original insurer from its primary obligation to the contractholder. Amounts assumed from NLAIC are included in the Company’s statutory statements of operations for 2023, 2022 and 2021 and include considerations of $46 million, $10 million and $10 million, respectively, net investment income of $31 million, $35 million and $42 million, respectively, and benefits, claims and other expenses of $186 million, $161 million and $147 million, respectively. The reserve adjustment for 2023, 2022 and 2021 of $(153) million, $(161) million and $(151) million, respectively, represents changes in reserves related to this fixed block of business, offset by investment earnings on the underlying assets. Policy reserves under this agreement totaled $737 million and $859 million as of December 31, 2023 and 2022, respectively, and amounts payable related to this agreement were $6 million and $14 million as of December 31, 2023 and 2022, respectively.
The Company has an intercompany reinsurance agreement with NLAIC whereby certain variable universal life insurance, whole life insurance and universal life insurance policies are assumed on a modified coinsurance basis. Total policy reserves under this treaty were $34 million and $33 million as of December 31, 2023 and 2022, respectively. Total premiums assumed under this treaty were $12 million, $12 million and $12 million during 2023, 2022 and 2021, respectively.
The Company has an intercompany reinsurance agreement with NLAIC whereby a certain life insurance contract is assumed on a 100% coinsurance basis. Policy reserves assumed under this agreement totaled $154 million and $156 million as of December 31, 2023 and 2022, respectively.
The Company has entered into reinsurance contracts to cede a portion of its individual annuity and life insurance business to unrelated reinsurers. Total reserve credits taken as of December 31, 2023 and 2022 were $278 million and $345 million, respectively. The ceding of risk does not relieve the Company, as the original insurer, from its primary obligation to the policyholder.
(12) | Transactions with Affiliates |
The Company has entered into significant, recurring transactions and agreements with NMIC, other affiliates and subsidiaries as a part of its ongoing operations. These include, but are not limited to, annuity and life insurance contracts, and agreements related to reinsurance, cost sharing, tax sharing, administrative services, marketing, intercompany loans, intercompany repurchases, cash management services and software licensing. In addition, several benefit plans sponsored by NMIC are available to Nationwide employees, for which the Company has no legal obligations. Measures used to determine the allocation among companies includes individual employee estimates of time spent, special cost studies, the number of full-time employees and other methods agreed to by the participating companies in conformity with NAIC statutory accounting principles. In addition, the Company may underwrite insurance policies for its officers, directors, and/or other personnel providing services to the Company. The Company may offer discounts on certain products that are subject to applicable state insurance laws and approvals.
Affiliate receivables and payables are the result of cost sharing and intercompany service agreements between the Company and its affiliates in which settlement has not yet occurred. Affiliate receivables are presented net of affiliate payables when the Company has the right to offset. The gross amounts due from affiliates were $19 million and $226 million as of December 31, 2023 and 2022, respectively, and are included in other assets in the Company’s statutory statements of admitted assets, liabilities, capital and surplus. The gross amounts due to affiliates were $133 million and $177 million as of December 31, 2023 and 2022, respectively, and are included in other liabilities in the Company’s statutory statements of admitted assets, liabilities, capital and surplus. These arrangements are subject to written agreements which require that intercompany balances be settled within a certain time period, generally 30 to 60 days.
In addition, Nationwide Services Company, LLC (“NSC”), a subsidiary of NMIC, provided data processing, systems development, hardware and software support, telephone, mail and other services to the Company, based on specified rates for units of service consumed pursuant to the enterprise cost sharing agreement. As of January 1, 2022 NSC merged into NNOV8, LLC, a subsidiary of NMIC, and all services going forward were provided by NMIC. For the years ended December 31, 2023 and 2022, the Company was allocated costs from NMIC totaling $245 million and $285 million, respectively. For the year ended December 31, 2021, the Company was allocated costs from NMIC and NSC totaling $288 million.
The Company has issued group annuity and life insurance contracts and performs administrative services for various employee benefit plans sponsored by NMIC or its affiliates. Total account values of these contracts were $3.4 billion and $3.7 billion as of December 31, 2023 and 2022, respectively. Total revenues from these contracts were $125 million, $127 million and $121 million for the years ended December 31, 2023, 2022 and 2021, respectively, and include policy charges, net investment income from investments backing the contracts and administrative fees. Total interest credited to the account balances were $84 million, $87 million and $113 million for the years ended December 31, 2023, 2022 and 2021, respectively.
F-43
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2023, 2022 and 2021 Statutory Financial Statements
The Company receives an annual fee payable from the Tax Credit Funds, for which it is a guarantor and Managing Member, for its services in connection with the oversight of the performance of the Investee Partnerships and the compliance by their managing members and managing agents thereof with the provisions of the various operating level agreements and applicable laws. The amount the Company earned for the years ended December 31, 2023, 2022 and 2021 were immaterial.
Funds of Nationwide Funds Group (“NFG”), a group of Nationwide businesses that develops, sells and services mutual funds, are offered to the Company’s customers as investment options in certain of the Company’s products. As of December 31, 2023 and 2022, customer allocations to NFG funds totaled $63.9 billion and $63.0 billion, respectively. For the years ended December 31, 2023, 2022 and 2021, NFG paid the Company $234 million, $242 million and $265 million, respectively, for the distribution and servicing of these funds.
Amounts on deposit with NCMC for the benefit of the Company were $1.3 billion and $1.0 billion as of December 31, 2023 and 2022, respectively. As of December 31, 2023 and 2022, amounts on deposit with NCMC were comprised of $1.0 billion and $883 million, respectively, of cash equivalents, with remaining amounts in short-term investments.
Certain annuity products are sold through affiliated companies, which are also subsidiaries of NFS. Total commissions and fees paid to these affiliates for the years ended December 31, 2023, 2022 and 2021 was $63 million, $112 million and $74 million, respectively.
The Company provides commercial mortgage loans to subsidiaries of Nationwide Realty Investors, LTD, a subsidiary of NMIC with interest rates ranging from 3.62% to 4.90% and maturity dates ranging from January 2031 to July 2041. As of December 31, 2023 and 2022, the Company had $304 million and $338 million, respectively, outstanding under these arrangements.
The Company also participates in intercompany repurchase agreements with affiliates whereby the seller transfers securities to the buyer at a stated value. Upon demand or after a stated period, the seller repurchases the securities from the buyer at the original sales price plus interest. As of December 31, 2023 and 2022, the Company had no outstanding borrowings from affiliated entities under such agreements. The amounts the Company incurred for interest expense on intercompany repurchase agreements during 2023, 2022 and 2021 were immaterial.
During 2023, the Company received capital contributions of $135 million from NFS. During 2024, the Company received an additional capital contribution of $30 million from NFS. During 2022, the Company received capital contributions of $310 million from NFS.
During 2023, there were no capital contributions paid to NLAIC by the Company. During 2024, the Company has paid capital contributions to NLAIC of $100 million as of the subsequent event date. During 2022 and 2021, the Company paid capital contributions of $800 million and $400 million, respectively, to NLAIC. In addition, the Company contributed $60 million to NLAIC in connection with the January 1, 2022 merger of HLIC.
The Company has a replacement unsecured promissory note and revolving line of credit agreement with JNLNY whereby JNLNY can borrow up to $5 million. No amounts have been drawn on the note as of December 31, 2023 or through the subsequent event date.
Pursuant to financial support agreements, the Company has agreed to provide NLAIC and JNL with the minimum capital and surplus required by each state in which NLAIC and JNL does business. These agreements do not constitute the Company as guarantor of any obligation or indebtedness of NLAIC or JNL or provide any creditor of NLAIC or JNL with recourse to or against any of the assets of the Company.
F-44
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2023, 2022 and 2021 Statutory Financial Statements
Eagle’s surplus position is evaluated quarterly to determine if an additional surplus contribution is required from the Company or if a distribution to the Company can be declared as of each quarter end. During 2023 and 2022, the Company made surplus contributions to Eagle. On September 29, 2023, the Company made a surplus contribution to Eagle of $10 million. On June 30, 2022 and July 19, 2022, the Company made surplus contributions to Eagle of $225 million and $1 million, respectively. During 2023 and 2022 Eagle declared distributions to the Company based on their earned surplus position. On February 9, 2024, the Company received a total distribution of $421 million that was declared on December 29, 2023 and consisted of a return of contributed surplus of $10 million and a dividend of $411 million. The return of contributed surplus receivable was recorded in other invested assets and the dividend receivable was recorded in investment income due and accrued as of December 31, 2023. On August 10, 2023, the Company received a dividend distribution of $205 million that was declared on June 30, 2023. On May 9, 2023, the Company received a dividend distribution of $204 million that was declared on March 31, 2023. On February 10, 2023, the Company received a total distribution of $332 million that was declared on December 30, 2022 and consisted of a return of contributed surplus of $221 million and a dividend of $111 million. The return of contributed surplus receivable was recorded in other invested assets and the dividend receivable was recorded in investment income due and accrued as of December 31, 2022. On November 10, 2022, the Company received a return of contributed surplus distribution of $5 million that was declared on September 30, 2022. On May 10, 2022, the Company received a dividend distribution of $19 million that was declared on March 31, 2022. On February 10, 2022, the Company received a dividend distribution of $168 million that was declared on December 31, 2021.
On December 22, 2021, the Company and NLAIC entered into a short-term loan where NLAIC borrowed $80 million from the Company. NLAIC repaid the short-term loan in full on January 4, 2022.
In March 2022, the Company executed a $850 million unsecured promissory note and revolving line of credit agreement with Nationwide SBL, LLC (“NWSBL”), an affiliate, at an interest rate of 1-month LIBOR plus 1.25% with a maturity date of March 1, 2023. As of December 31, 2022 NWSBL had outstanding borrowings of $168 million. During 2023, additional draws increased the outstanding balance to $198 million when, on March 1, 2023, the outstanding balance was repaid and a replacement agreement was entered into at an interest rate of 1-month SOFR plus 0.9% and a maturity date of February 28, 2024. As of December 31, 2023, NWSBL had outstanding borrowings of $328 million. During 2024, additional draws increased the outstanding balance to $363 million when, on February 28, 2024, the outstanding balance was repaid and a replacement agreement was entered into at an interest rate of 1-month SOFR plus 0.9% and a maturity date of February 27, 2025 with an initial draw of $363 million. Subsequently, additional draws have increased the outstanding balance to $381 million as of the subsequent event date.
During 2022, the Company and NMIC entered into unsecured promissory note agreements. On August 11, 2022, NMIC borrowed $50 million from the Company and subsequently repaid the note in full on August 15, 2022. On September 8, 2022, NMIC borrowed $150 million from the Company and subsequently repaid the note in full on September 15, 2022.
The Company utilizes the look-through approach in valuing its investment in Nationwide Real Estate Investors (NLIC), LLC (“NW REI (NLIC)”), a subsidiary of NMIC, at $251 million and $140 million as of December 31, 2023 and 2022, respectively. NW REI (NLIC)’s financial statements are not audited and the Company has limited the value of its investment in NW REI (NLIC) to the value contained in the audited financial statements of the underlying investments. All liabilities, commitments, contingencies, guarantees or obligations of the NW REI (NLIC), which are required under applicable accounting guidance, are reflected in the Company’s determination of the carrying value of the investment in NW REI (NLIC), if not already recorded in the financial statements of NW REI (NLIC).
(13) | Contingencies |
Legal and Regulatory Matters
The Company is subject to legal and regulatory proceedings in the ordinary course of its business. These include proceedings specific to the Company and proceedings generally applicable to business practices in the industries in which the Company operates. The outcomes of these proceedings cannot be predicted due to their complexity, scope, and many uncertainties. The Company believes, however, that based on currently known information, the ultimate outcome of all pending legal and regulatory proceedings is not likely to have a material adverse effect on the Company’s financial condition.
F-45
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to December 31, 2023, 2022 and 2021 Statutory Financial Statements
The various businesses conducted by the Company are subject to oversight by numerous federal and state regulatory entities, including but not limited to the Securities and Exchange Commission, the Financial Industry Regulatory Authority, the Department of Labor, the IRS, the Office of the Comptroller of the Currency and state insurance authorities. Such regulatory entities may, in the normal course of business, be engaged in general or targeted inquiries, examinations and investigations of the Company and/or its affiliates. With respect to all such scrutiny directed at the Company or its affiliates, the Company is cooperating with regulators.
Guarantees
In accordance with SSAP No. 5R, Liabilities, Contingencies and Impairments of Assets, for all guarantees made to or on behalf of wholly-owned subsidiaries, no initial liability recognition has been made and there is no net financial statement impact related to these guarantees.
The contractual obligations under NLAIC’s single premium deferred annuity (“SPDA”) contracts in force and issued before September 1, 1988 are guaranteed by the Company. Total SPDA contracts affected by this guarantee in force were immaterial as of December 31, 2023 and 2022.
The Company has guaranteed the obligations and liabilities of NISC, including, without limitation, the full and prompt payment of all accounts payable to any party now or in the future. If for any reason NISC fails to satisfy any of its obligations, the Company will cause such obligation, loss or liability to be fully satisfied.
Indemnifications
In the normal course of business, the Company provides standard indemnifications to contractual counterparties. The types of indemnifications typically provided include breaches of representations and warranties, taxes and certain other liabilities, such as third-party lawsuits. The indemnification clauses are often standard contractual terms and are entered into in the normal course of business based on an assessment that the risk of loss would be remote. The terms of the indemnifications vary in duration and nature. In many cases, the maximum obligation is not explicitly stated, and the contingencies triggering the obligation to indemnify have not occurred and are not expected to occur. Consequently, the amount of the obligation under such indemnifications is not determinable. Historically, the Company has not made any material payments pursuant to these obligations.
(14) | Regulatory Risk-Based Capital, Dividend Restrictions and Unassigned Surplus |
The NAIC Risk-Based Capital (“RBC”) model law requires every insurer to calculate its total adjusted capital and RBC requirement to ensure insurer solvency. Regulatory guidelines provide for an insurance commissioner to intervene if the insurer experiences financial difficulty, as evidenced by a company’s total adjusted capital falling below established relationships to required RBC. The model includes components for asset risk, liability risk, interest rate exposure and other factors. The State of Ohio, where the Company is domiciled, imposes minimum RBC requirements that are developed by the NAIC. The formulas in the model for determining the amount of RBC specify various weighting factors that are applied to financial balances or various levels of activity based on the perceived degree of risk. Regulatory compliance is determined by a ratio of total adjusted capital to authorized control level RBC, as defined by the NAIC. Companies below specific trigger points or ratios are classified within certain levels, all of which require specified corrective action. The Company exceeded the minimum RBC requirements for all periods presented.
The State of Ohio insurance laws require insurers to seek prior regulatory approval to pay a dividend or distribution of cash or other property if the fair market value thereof, together with that of other dividends or distributions made in the preceding twelve months, exceeds the greater of (i) 10% of surplus as regards policyholders as of the prior December 31 or (ii) the net income of the insurer as of the prior year. No dividends were paid by the Company to NFS for the years ended December 31, 2023 and 2022. In March 2021, the Company paid an ordinary dividend of $550 million to NFS. The Company’s surplus as regards policyholders as of December 31, 2023, was $11.2 billion and statutory net income for 2023 was $949 million. As of January 1, 2024, the Company has the ability to pay dividends to NFS totaling $1.1 billion without obtaining prior approval.
The State of Ohio insurance laws also require insurers to seek prior regulatory approval for any dividend paid from other than earned capital and surplus. Earned capital and surplus is defined under the State of Ohio insurance laws as the amount equal to the Company’s unassigned funds as set forth in its most recent statutory financial statements, including net unrealized capital gains and losses or revaluation of assets. Additionally, following any dividend, an insurer’s policyholder capital and surplus must be reasonable in relation to the insurer’s outstanding liabilities and adequate for its financial needs. The payment of dividends by the Company may also be subject to restrictions set forth in the insurance laws of the State of New York that limit the amount of statutory profits on the Company’s participating policies (measured before dividends to policyholders) available for the benefit of the Company and its stockholders.
F-46
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Schedule I Summary of Investments – Other Than Investments in Related Parties
As of December 31, 2023:
(in millions) | Column A | Column B | Column C | Column D | ||||||||||
Type of investment | Cost | Fair value | Amount at which is shown in the statutory statements of admitted assets, liabilities, capital and surplus | |||||||||||
Bonds: | ||||||||||||||
U.S. Treasury securities and obligations of U.S. government corporations | $ | 173 | $ | 175 | $ | 173 | ||||||||
U.S. government and agencies | 104 | 105 | 104 | |||||||||||
Obligations of states and political subdivisions | 3,576 | 3,361 | 3,576 | |||||||||||
Foreign governments | 342 | 321 | 342 | |||||||||||
Public utilities | 4,758 | 4,410 | 4,736 | |||||||||||
All other corporate, mortgage-backed and asset-backed securities | 35,011 | 33,102 | 34,936 | |||||||||||
Total fixed maturity securities | $ | 43,964 | $ | 41,474 | $ | 43,867 | ||||||||
Equity securities: | ||||||||||||||
Common Stocks: | ||||||||||||||
Banks, trust and insurance companies | 65 | 67 | 67 | |||||||||||
Industrial, miscellaneous and all other | 164 | 164 | 164 | |||||||||||
Nonredeemable preferred stocks | 42 | 46 | 46 | |||||||||||
Total equity securities1 | $ | 271 | $ | 277 | $ | 277 | ||||||||
Mortgage loans2 | 9,146 | 9,144 | ||||||||||||
Short-term investments | 1,555 | 1,555 | ||||||||||||
Policy loans | 970 | 969 | ||||||||||||
Other long-term investments3 | 2,346 | 2,346 | ||||||||||||
Total invested assets | $ | 58,252 | $ | 58,158 |
1 | Amount does not agree to the statutory statements of admitted assets, liabilities, capital and surplus as investments in related parties of $3.4 billion are excluded. |
2 | Difference from Column B is attributable to valuation allowances on mortgage loans (see Note 5 to the audited statutory financial statements). |
3 | Includes derivatives, securities lending reinvested collateral assets and other invested assets. Amount does not agree to the statutory statements of admitted assets, liabilities, capital and surplus as investments in related parties of $324 million are excluded. |
See accompanying notes to statutory financial statements and report of independent registered public accounting firm.
F-47
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Schedule III Supplementary Insurance Information
As of December 31, 2023, 2022 and 2021 and for each of the years then ended (in millions):
Column A | Column B | Column C | Column D | Column E | Column F | |||||||||||||||
Year: Segment | Deferred policy acquisition costs1 | Future policy benefits, losses, claims and loss expenses | Unearned premiums2 | Other policy claims and | Premium revenue | |||||||||||||||
2023 | ||||||||||||||||||||
Life Insurance | $ | 5,428 | $ | 412 | ||||||||||||||||
Annuities | 15,213 | 7,368 | ||||||||||||||||||
Retirement Solutions | 20,351 | 4,150 | ||||||||||||||||||
Corporate Solutions and Other | 8,381 | 2,740 | ||||||||||||||||||
Total | $ | 49,373 | $ | 14,670 | ||||||||||||||||
2022 | ||||||||||||||||||||
Life Insurance | $ | 5,353 | $ | 415 | ||||||||||||||||
Annuities | 10,635 | 5,758 | ||||||||||||||||||
Retirement Solutions | 21,824 | 5,097 | ||||||||||||||||||
Corporate Solutions and Other | 7,670 | 3,265 | ||||||||||||||||||
Total | $ | 45,482 | $ | 14,535 | ||||||||||||||||
2021 | ||||||||||||||||||||
Life Insurance | $ | 5,306 | $ | 425 | ||||||||||||||||
Annuities | 8,026 | 6,512 | ||||||||||||||||||
Retirement Solutions | 22,446 | 4,551 | ||||||||||||||||||
Corporate Solutions and Other | 6,721 | 1,176 | ||||||||||||||||||
Total | $ | 42,499 | $ | 12,664 | ||||||||||||||||
Column A | Column G | Column H | Column I | Column J | Column K | |||||||||||||||
Year: Segment | Net investment | Benefits, claims, settlement | Amortization of deferred policy acquisition costs1 | Other operating expenses | Premiums written | |||||||||||||||
2023 | ||||||||||||||||||||
Life Insurance | $ | 276 | $ | 757 | $ | 101 | ||||||||||||||
Annuities | 613 | 13,619 | 158 | |||||||||||||||||
Retirement Solutions | 835 | 5,610 | 214 | |||||||||||||||||
Corporate Solutions and Other | 1,412 | 1,943 | 203 | |||||||||||||||||
Total | $ | 3,136 | $ | 21,929 | $ | 676 | ||||||||||||||
2022 | ||||||||||||||||||||
Life Insurance | $ | 261 | $ | 730 | $ | 105 | ||||||||||||||
Annuities | 346 | 10,871 | 136 | |||||||||||||||||
Retirement Solutions | 860 | 6,178 | 120 | |||||||||||||||||
Corporate Solutions and Other | 552 | 1,519 | 174 | |||||||||||||||||
Total | $ | 2,019 | $ | 19,298 | $ | 535 | ||||||||||||||
2021 | ||||||||||||||||||||
Life Insurance | $ | 254 | $ | 311 | $ | 107 | ||||||||||||||
Annuities | 337 | 9,411 | 41 | |||||||||||||||||
Retirement Solutions | 861 | 6,973 | 122 | |||||||||||||||||
Corporate Solutions and Other | 779 | 1,304 | 169 | |||||||||||||||||
Total | $ | 2,231 | $ | 17,999 | $ | 439 |
1 | Deferred policy acquisition costs and amortization of deferred policy acquisition costs are not applicable for statutory basis of accounting. |
2 | Unearned premiums and other policy claims and benefits payable are included in Column C amounts. |
3 | Allocations of net investment income and certain operating expenses are based on numerous assumptions and estimates and reported segment operating results would change if different methods were applied. |
4 | Benefits to policyholders and beneficiaries, increase in reserves for future policy benefits and claims and commissions are included in Column H amounts. |
See accompanying notes to statutory financial statements and report of independent registered public accounting firm.
F-48
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
As of December 31, 2023, 2022 and 2021 and each of the years then ended:
(in millions) | ||||||||||||||||
Column A | Column B | Column C | Column D | Column E | ||||||||||||
Gross amount | Ceded to other companies | Assumed from other companies | Net amount | |||||||||||||
2023 | ||||||||||||||||
Life insurance in force | $ | 147,725 | $ | (26,722 | ) | $ | 579 | $ | 121,582 | |||||||
Premiums: | ||||||||||||||||
Life Insurance | $ | 2,931 | $ | (143 | ) | $ | 12 | $ | 2,800 | |||||||
Accident and health insurance | 457 | (465 | ) | 9 | - | |||||||||||
Total | $ | 3,388 | $ | (608 | ) | $ | 21 | $ | 2,800 | |||||||
2022 | ||||||||||||||||
Life insurance in force | $ | 145,173 | $ | (29,598 | ) | $ | 605 | $ | 116,180 | |||||||
Premiums: | ||||||||||||||||
Life Insurance | $ | 3,473 | $ | (144 | ) | $ | 12 | $ | 3,341 | |||||||
Accident and health insurance | 425 | (424 | ) | - | 1 | |||||||||||
Total | $ | 3,898 | $ | (568 | ) | $ | 12 | $ | 3,342 | |||||||
2021 | ||||||||||||||||
Life insurance in force | $ | 144,115 | $ | (29,120 | ) | $ | 653 | $ | 115,648 | |||||||
Premiums: | ||||||||||||||||
Life Insurance | $ | 1,624 | $ | (140 | ) | $ | 12 | $ | 1,496 | |||||||
Accident and health insurance | 445 | (444 | ) | - | 1 | |||||||||||
Total | $ | 2,069 | $ | (584 | ) | $ | 12 | $ | 1,497 |
See accompanying notes to statutory financial statements and report of independent registered public accounting firm.
F-49
NATIONWIDE LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Schedule V Valuation and Qualifying Accounts
Years ended December 31, 2023, 2022 and 2021:
(in millions) | ||||||||||||||||
Column A | Column B | Column C | Column D | Column E | ||||||||||||
Description | Balance at beginning of period | Charged to costs and expenses | Deductions1 | Balance at end of period | ||||||||||||
2023 | ||||||||||||||||
Valuation allowances - mortgage loans2 | $ | 1 | $ | 1 | $ | - | $ | 2 | ||||||||
2022 | ||||||||||||||||
Valuation allowances - mortgage loans | $ | 43 | $ | (5 | ) | $ | - | $ | 38 | |||||||
2021 | ||||||||||||||||
Valuation allowances - mortgage loans | $ | 48 | $ | (4 | ) | $ | (1 | ) | $ | 43 |
1 | Amounts generally represent recoveries, payoffs and sales. |
2 | Effective January 1, 2023, the Company changed its method for reserving for mortgage loans. Refer to Note 5 for further discussion and the resulting impacts of the change. |
See accompanying notes to statutory financial statements and report of independent registered public accounting firm.
F-50
(1) | Not applicable | |
(2) | ||
(3) | (a) |
(3) | (b) | |
(4) | (a) | |
(4) | (b) | |
(4) | (c) | |
(4) | (d) | |
(4) | (e) | |
(4) | (f) | |
(4) | (g) | |
(4) | (h) | |
(4) | (i) | |
(4) | (j) | |
(5) | ||
(6) | Not applicable | |
(7) | Not applicable | |
(8) | None | |
(9) | Not applicable | |
(10a) | ||
(10b) | ||
(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) | ||
(22) | Not applicable | |
(23) | (i) | |
(23) | (ii) |
(24) | ||
(25) | Not applicable | |
(26) | Not applicable | |
(27) | Not applicable | |
(101.INS) | Not applicable | |
(101.SCH) | Not applicable | |
(101.CAL) | Not applicable | |
(101.DEF) | Not applicable | |
(101.LAB) | Not applicable | |
(101.PRE) | Not applicable | |
(107) |
NATIONWIDE LIFE INSURANCE COMPANY |
(Registrant) |
By: /s/ Benjamin W. Mischnick |
Benjamin W. Mischnick Attorney-in-Fact |
JOHN L. CARTER | |
John L. Carter, President and Chief Operating Officer and Director (Principal Executive Officer) | |
TIMOTHY G. FROMMEYER | |
Timothy G. Frommeyer, Executive Vice President and Director | |
ERIC S. HENDERSON | |
Eric S. Henderson, Senior Vice President-Nationwide Annuity and Director | |
STEVEN A. GINNAN | |
Steven A. Ginnan, Senior Vice President-Chief Financial Officer-Nationwide Financial and Director (Chief Financial Officer) | |
HOLLY R. SNYDER | |
Holly R. Snyder, Senior Vice President-Nationwide Life and Director | |
KIRT A. WALKER | |
Kirt A. Walker, Director | |
JAMES D. BENSON | |
James D. Benson, Senior Vice President-Corporate Controller and Chief Accounting Officer (Principal Accounting Officer) | |
By: /s/ Benjamin W. Mischnick | |
Benjamin W. Mischnick Attorney-in-Fact |