<PAGE>   1
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549
                      ------------------------------------

                                    FORM 10-K

                  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000          COMMISSION FILE NO. 2-28596

                        NATIONWIDE LIFE INSURANCE COMPANY
             (Exact name of registrant as specified in its charter)


                       OHIO                                31-4156830
(State or other jurisdiction of incorporation          (I.R.S. Employer
              or organization)                         Identification No.)

                              ONE NATIONWIDE PLAZA
                              COLUMBUS, OHIO 43215
                                 (614) 249-7111
                   (Address, including zip code, and telephone
             number, including area code, of Registrant's principal
                               executive offices)


           Securities registered pursuant to Section 12(b) of the Act:

                                      NONE

           Securities registered pursuant to Section 12(g) of the Act:

                                      NONE

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
  the preceding 12 months (or for such shorter period that the registrant was
     required to file such reports) and (2) has been subject to the filing
                  requirements for at least the past 90 days.

                                  YES  X   NO
                                      ---     ---

  All voting stock was held by affiliates of the Registrant on March 20, 2001.


COMMON STOCK (par value $1 per share) - 3,814,779 shares issued and outstanding
as of March 20, 2001 (Title of Class)


  THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION I(1)(a)
     AND (b) OF FORM 10-K AND IS THEREFORE FILING THIS FORM WITH THE REDUCED
                               DISCLOSURE FORMAT.


<PAGE>   2


                                     PART I

ITEM 1        BUSINESS

              ORGANIZATION

              Nationwide Life Insurance Company (NLIC, or collectively with its
              subsidiaries, the Company) was incorporated in 1929 and is an Ohio
              stock legal reserve life insurance company. NLIC offers a variety
              of forms of individual annuities, private and public sector
              pension plans and life insurance on a participating and a
              non-participating basis.

              Prior to January 27, 1997, NLIC was wholly owned by Nationwide
              Corporation (Nationwide Corp.). On that date, Nationwide Corp.
              contributed the outstanding shares of NLIC's common stock to
              Nationwide Financial Services, Inc. (NFS), a holding company
              formed by Nationwide Corp. in November 1996 for NLIC and other
              companies within the Nationwide group of companies that offer or
              distribute long-term savings and retirement products. On March 6,
              1997, NFS completed an initial public offering of its Class A
              common stock.

              During 1996 and 1997, Nationwide Corp. and NFS completed certain
              transactions in anticipation of the initial public offering that
              focused the business of NFS on long-term savings and retirement
              products. On September 24, 1996, NLIC declared a dividend payable
              to Nationwide Corp. on January 1, 1997 consisting of the
              outstanding shares of common stock of certain subsidiaries that do
              not offer or distribute long-term savings and retirement products.
              In addition, during 1996, NLIC entered into two reinsurance
              agreements whereby all of NLIC's accident and health and group
              life insurance business was ceded to two affiliates effective
              January 1, 1996. Additionally, NLIC paid $900.0 million of
              dividends, $50.0 million to Nationwide Corp. on December 31, 1996
              and $850.0 million to NFS, which then made an equivalent dividend
              to Nationwide Corp., on February 24, 1997.

              NFS contributed $836.8 million to the capital of NLIC during March
              1997.

              Wholly owned subsidiaries of NLIC as of December 31, 2000 include
              Nationwide Life and Annuity Insurance Company (NLAIC), Nationwide
              Advisory Services, Inc. (NAS) and Nationwide Investment Services
              Corporation (NISC).

              The Company is a member of the Nationwide group of companies
              (Nationwide), which consists of Nationwide Mutual Insurance
              Company (NMIC) and all of its subsidiaries and affiliates.

              NLAIC offers universal life insurance, variable universal life
              insurance, corporate-owned life insurance and individual annuity
              contracts on a non-participating basis. NAS and NISC are
              registered broker/dealers.

              The Company is a leading provider of long-term savings and
              retirement products in the United States (U.S.). The Company
              develops and sells a diverse range of products including
              individual annuities, private and public sector pension plans, and
              life insurance. By developing and offering a wide variety of
              products, the Company believes that it has positioned itself to
              compete effectively in various stock market and interest rate
              environments. The Company markets its products through a broad
              spectrum of distribution channels, including independent
              broker/dealers, brokerage firms, pension plan administrators, life
              insurance specialists, financial institutions, Nationwide agents
              and Nationwide Retirement Solutions.

                                       2
<PAGE>   3

              The Company is one of the leaders in the development and sale of
              variable annuities. As of December 31, 2000, the Company was the
              third largest writer of individual variable annuity contracts in
              the U.S., according to The Variable Annuity Research & Data
              Service.

              The Company has grown substantially in recent years as a result of
              its long-term investment in developing the distribution channels
              necessary to reach its target customers and the products required
              to meet the demands of these customers. The Company believes its
              growth has been further enhanced by favorable demographic trends,
              the growing tendency of Americans to supplement traditional
              sources of retirement income with self-directed investments, such
              as products offered by the Company, and the performance of the
              financial markets, particularly the U.S. stock markets, in recent
              years.

              BUSINESS SEGMENTS

              The Company has redefined its business segments in order to align
              this disclosure with the way management currently views its core
              operations. This updated view better reflects the different
              economics of the Company's various businesses and also aligns well
              with the Company's current market focus. As a result, the Company
              now reports three product segments: Individual Annuity,
              Institutional Products and Life Insurance. In addition, the
              Company reports corporate revenues and expenses, investments and
              related investment income supporting capital not specifically
              allocated to its product segments and revenues and expenses of
              its broker/dealer subsidiaries in a Corporate segment.

              The Individual Annuity segment, which accounted for $281.7 million
              (40%) of the Company's operating income before federal income tax
              expense for 2000, consists of both variable and fixed annuity
              contracts. Individual annuity contracts provide the customer with
              tax-deferred accumulation of savings and flexible payout options
              including lump sum, systematic withdrawal or a stream of payments
              for life. In addition, variable annuity contracts provide the
              customer with access to a wide range of investment options and
              asset protection in the event of an untimely death, while fixed
              annuity contracts generate a return for the customer at a
              specified interest rate fixed for a prescribed period. The
              Company's individual annuity products consist of single premium
              deferred annuities, flexible premium deferred annuities and single
              premium immediate annuities.

              The Institutional Products segment, which accounted for $230.7
              million (33%) of the Company's operating income before federal
              income tax expense for 2000, is comprised of the Company's group
              and payroll deduction business, both public and private sectors,
              and medium-term note program. The public sector includes the 457
              business in the form of fixed and variable annuities. The private
              sector includes the 401(k) business generated through fixed and
              variable annuities.

              The Life Insurance segment, which accounted for $152.9 million
              (22%) of the Company's operating income before federal income tax
              expense for 2000, is composed of a wide range of insurance
              products including universal life insurance, corporate-owned life
              insurance (COLI) and bank-owned life insurance (BOLI), which
              provide a death benefit and also allow the customer to build cash
              value on a tax-advantaged basis.

              The Corporate segment accounted for $37.1 million (5%) of the
              Company's operating income (which excludes net realized gains and
              losses on investments) before federal income tax expense for 2000.

              Additional information related to the Company's business segments
              is included in note 15 to the consolidated financial statements
              and Financial Statement Schedule III.


                                       3
<PAGE>   4


              RATINGS

              Ratings with respect to claims-paying ability and financial
              strength have become an increasingly important factor in
              establishing the competitive position of insurance companies.
              Ratings are important to maintaining public confidence in the
              Company and its ability to market its annuity and life insurance
              products. Rating organizations continually review the financial
              performance and condition of insurers, including the Company. Any
              lowering of the Company's ratings could have a material adverse
              effect on the Company's ability to market its products and could
              increase the surrender of the Company's annuity products. Both of
              these consequences could, depending upon the extent thereof, have
              a material adverse effect on the Company's liquidity and, under
              certain circumstances, net income. NLIC is rated "A+" (Superior)
              by A.M. Best Company, Inc. and its claims-paying ability/financial
              strength is rated "Aa3" (Excellent) by Moody's Investors Service,
              Inc. (Moody's), "AA" (Very Strong) by Standard & Poor's, a
              Division of The McGraw-Hill Companies, Inc. (S&P), and "AA+" (Very
              Strong) by Fitch.

              The foregoing ratings reflect each rating agency's opinion of
              NLIC's financial strength, operating performance and ability to
              meet its obligations to policyholders and are not evaluations
              directed toward the protection of investors. Such factors are of
              concern to policyholders, agents and intermediaries.

              The Company's financial strength is also reflected in the ratings
              of commercial paper. The commercial paper is rated "A-1+" by S&P
              and "P-1" by Moody's.

              COMPETITION

              The Company competes with a large number of other insurers as well
              as non-insurance financial services companies, such as banks,
              broker/dealers and mutual funds, some of whom have greater
              financial resources, offer alternative products and, with respect
              to other insurers, have higher ratings than the Company. The
              Company believes that competition in the Company's lines of
              business is based on price, product features, commission
              structure, perceived financial strength, claims-paying ratings,
              service and name recognition.

              On November 12, 1999, the Gramm-Leach-Bliley Act (the Act), was
              signed into law. The Act modernizes the regulatory framework for
              financial services in the U.S. and allows banks, securities firms
              and insurance companies to affiliate more directly than they have
              been permitted to do in the past. While the Act facilitates these
              affiliations, to date no significant competitors of the Company
              have acquired, or been acquired by, a banking entity under
              authority of the Act. Nevertheless, it is not possible to
              anticipate whether such affiliations might occur in the future.

              REGULATION

              NLIC and NLAIC, as with other insurance companies, are subject to
              extensive regulation and supervision in the jurisdictions in which
              they do business. Such regulations limit the amount of dividends
              and other payments that can be paid by insurance companies without
              prior approval and impose restrictions on the amount and type of
              investments insurance companies may hold. These regulations also
              affect many other aspects of insurance companies businesses,
              including licensing of insurers and their products and agents,
              risk-based capital requirements and the type and amount of
              required asset valuation reserve accounts. These regulations are
              primarily intended to protect policyholders rather than
              shareholders. The Company cannot predict the effect that any
              proposed or future legislation may have on the financial condition
              or results of operations of the Company.

              Insurance companies are required to file detailed annual and
              quarterly financial statements with state insurance regulators in
              each of the states in which they do business, and their business
              and accounts are subject to examination by such agencies at any
              time. In addition, insurance regulators periodically examine an
              insurer's financial condition, adherence to statutory accounting
              practices and compliance with insurance department rules and
              regulations. Applicable state insurance laws, rather than federal
              bankruptcy laws, apply to the liquidation or the restructuring of
              insurance companies.

                                       4
<PAGE>   5


              As part of their routine regulatory oversight process, state
              insurance departments conduct detailed examinations periodically
              (generally once every three to four years) of the books, records
              and accounts of insurance companies domiciled in their states.
              Such examinations are generally conducted in cooperation with the
              departments of two or three other states under guidelines
              promulgated by the National Association of Insurance Commissioners
              (NAIC). The most recently completed examination of the Company's
              insurance subsidiaries was conducted by the Ohio and Delaware
              insurance departments for the four-year period ended December 31,
              1996. The final reports of these examinations did not result in
              any significant issues or adjustments.

              The payment of dividends by NLIC is subject to restrictions set
              forth in the insurance laws and regulations of Ohio, its
              domiciliary state. The Ohio insurance laws require Ohio-domiciled
              life insurance companies to seek prior regulatory approval to pay
              a dividend or distribution of cash or other property if the fair
              market value thereof, together with that of other dividends or
              distributions made in the preceding 12 months, exceeds the greater
              of (i) 10% of statutory-basis policyholders' surplus as of the
              prior December 31 or (ii) the statutory-basis net income of the
              insurer for the 12-month period ending as of the prior December
              31. The Ohio insurance laws also require insurers to seek prior
              regulatory approval for any dividend paid from other than earned
              surplus. Earned surplus is defined under the Ohio insurance laws
              as the amount equal to the Company's unassigned funds as set forth
              in its most recent statutory financial statements, including net
              unrealized capital gains and losses or revaluation of assets.
              Additionally, following any dividend, an insurer's policyholder
              surplus must be reasonable in relation to the insurer's
              outstanding liabilities and adequate for its financial needs. The
              payment of dividends by NLIC may also be subject to restrictions
              set forth in the insurance laws of New York that limit the amount
              of statutory profits on NLIC's participating policies (measured
              before dividends to policyholders) that can inure to the benefit
              of the Company and its stockholders. The Company currently does
              not expect such regulatory requirements to impair its ability to
              pay operating expenses and dividends in the future.

              EMPLOYEES

              As of December 31, 2000, the Company had approximately 4,100
              employees. None of the employees of the Company are covered by a
              collective bargaining agreement and the Company believes that its
              employee relations are satisfactory.

ITEM 2        PROPERTIES

              Pursuant to an arrangement between NMIC and certain of its
              subsidiaries, during 2000 the Company leased on average
              approximately 734,000 square feet of office space primarily in the
              four building home office complex in Columbus, Ohio. The Company
              believes that its present facilities are adequate for the
              anticipated needs of the Company.

ITEM 3        LEGAL PROCEEDINGS

              The Company is a party to litigation and arbitration proceedings
              in the ordinary course of its business, none of which is expected
              to have a material adverse effect on the Company.

              In recent years, life insurance companies have been named as
              defendants in lawsuits, including class action lawsuits relating
              to life insurance and annuity pricing and sales practices. A
              number of these lawsuits have resulted in substantial jury awards
              or settlements.

              As was previously disclosed in the Company's Form 10-Q for the
              quarterly period ended March 31, 2000, the Robert Young and David
              D. Distad v. Nationwide Life Insurance Company et al lawsuit was
              dismissed by the court with prejudice on February 9, 2000.

                                       5
<PAGE>   6



              On October 29, 1998, the Company was named in a lawsuit filed in
              Ohio state court related to the sale of deferred annuity products
              for use as investments in tax-deferred contributory retirement
              plans (Mercedes Castillo v. Nationwide Financial Services, Inc.,
              Nationwide Life Insurance Company and Nationwide Life and Annuity
              Insurance Company). On May 3, 1999, the complaint was amended to,
              among other things, add Marcus Shore as a second plaintiff. The
              amended complaint is brought as a class action on behalf of all
              persons who purchased individual deferred annuity contracts or
              participated in group annuity contracts sold by the Company and
              the other named Company affiliates which were used to fund certain
              tax-deferred retirement plans. The amended complaint seeks
              unspecified compensatory and punitive damages. No class has been
              certified. On June 11, 1999, the Company and the other named
              defendants filed a motion to dismiss the amended complaint. On
              March 8, 2000, the court denied the motion to dismiss the amended
              complaint filed by the Company and other named defendants. The
              Company intends to defend this lawsuit vigorously.

              There can be no assurance that any litigation relating to pricing
              or sales practices will not have a material adverse effect on the
              Company in the future.

ITEM 4        SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

              Omitted due to reduced disclosure format.

                                     PART II

ITEM 5        MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER
              MATTERS

              There is no established public trading market for the NLIC's
              shares of common stock. All of the 3,814,779 shares of NLIC's
              common stock issued and outstanding are owned by NFS.

              NLIC declared $50.0 million and $61.0 million in dividends to NFS
              during 2000 and 1999, respectively. In addition, NLIC sought and
              obtained prior regulatory approval from the Ohio Department of
              Insurance to return $120.0 million and $175.0 million of capital
              to NFS during 2000 and 1999, respectively.

              NLIC currently does not have a formal dividend policy.

              Reference is made to note 11 of the consolidated financial
              statements for information regarding dividend restrictions.

ITEM 6        SELECTED CONSOLIDATED FINANCIAL DATA

              Omitted due to reduced disclosure format.

ITEM 7        MANAGEMENT'S NARRATIVE ANALYSIS OF THE RESULTS OF OPERATIONS

              INTRODUCTION

              Management's narrative analysis of the results of operations of
              NLIC and subsidiaries for the three years ended December 31, 2000
              follows. This discussion should be read in conjunction with the
              consolidated financial statements and related notes included
              elsewhere in this report.


                                       6
<PAGE>   7


              Management's discussion and analysis contains certain
              forward-looking statements within the meaning of the Private
              Securities Litigation Reform Act of 1995 with respect to the
              results of operations and businesses of the Company. These
              forward-looking statements involve certain risks and
              uncertainties. Factors that may cause actual results to differ
              materially from those contemplated or projected, forecast,
              estimated or budgeted in such forward looking statements include,
              among others, the following possibilities: (i) the potential
              impact on the Company's reported net income that could result from
              the adoption of certain accounting standards issued by the
              Financial Accounting Standards Board; (ii) tax law changes
              impacting the tax treatment of life insurance and investment
              products; (iii) heightened competition, including specifically the
              intensification of price competition, the entry of new competitors
              and the development of new products by new and existing
              competitors; (iv) adverse state and federal legislation and
              regulation, including limitations on premium levels, increases in
              minimum capital and reserves, and other financial viability
              requirements; (v) failure to expand distribution channels in order
              to obtain new customers or failure to retain existing customers;
              (vi) inability to carry out marketing and sales plans, including,
              among others, development of new products and/or changes to
              certain existing products and acceptance of the new and/or revised
              products in the market; (vii) changes in interest rates and the
              capital markets causing a reduction of investment income and/or
              asset fees, reduction in the value of the Company's investment
              portfolio or a reduction in the demand for the Company's products;
              (viii) general economic and business conditions which are less
              favorable than expected; (ix) unanticipated changes in industry
              trends and ratings assigned by nationally recognized rating
              organizations; and (x) inaccuracies in assumptions regarding
              future persistency, mortality, morbidity and interest rates used
              in calculating reserve amounts.

              RESULTS OF OPERATIONS

              In addition to net income, the Company reports net operating
              income, which excludes net realized investment gains and losses.
              Net operating income is commonly used in the insurance industry as
              a measure of on-going earnings performance.

              The following table reconciles the Company's reported net income
              to net operating income for each of the last three years.

<TABLE>
<CAPTION>
              (in millions)                                                   2000            1999            1998
              ----------------------------------------------------------------------------------------------------------
<S>                                                                         <C>             <C>             <C>
              Net income                                                    $ 475.3         $ 405.1         $ 366.7
              Net realized losses (gains) on investments, net of tax           12.6             7.6           (18.5)
              ----------------------------------------------------------------------------------------------------------
                Net operating income                                        $ 487.9         $ 412.7         $ 348.2
              ==========================================================================================================
</TABLE>

              Revenues

              Total operating revenues, which exclude net realized gains and
              losses on investments, increased to $3.00 billion in 2000 compared
              to $2.70 billion for 1999 and $2.45 billion for 1998. The growth
              in operating revenues over the past two years has primarily been
              driven by increases in policy charges and net investment income.

              Policy charges include asset fees, which are primarily earned from
              separate account assets generated from sales of individual and
              group variable annuities and investment life insurance products;
              cost of insurance charges earned on universal life insurance
              products; administration fees, which include fees charged per
              contract on a variety of the Company's products and premium loads
              on universal life insurance products; and surrender fees, which
              are charged as a percentage of premiums withdrawn during a
              specified period of annuity and certain life insurance contracts.

              Policy charges for each of the last three years were as follows:

<TABLE>
<CAPTION>
              (in millions)                                                    2000           1999            1998
              ----------------------------------------------------------------------------------------------------------

<S>                                                                         <C>               <C>             <C>
              Asset fees                                                    $    714.6        $ 616.5         $ 494.7
              Cost of insurance charges                                          156.5          117.0            88.8
              Administrative fees                                                134.2          102.4            73.8
              Surrender fees                                                      86.1           59.6            41.6
              ----------------------------------------------------------------------------------------------------------
                Total policy charges                                        $  1,091.4        $ 895.5         $ 698.9
              ==========================================================================================================
</TABLE>


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<PAGE>   8

              The growth in asset fees reflects increases in total average
              separate account assets of $11.99 billion (21%) in 2000 and $13.26
              billion (30%) in 1999. Net flows into variable annuity and
              investment life insurance products as well as market appreciation,
              as measured on a daily average basis, in each of the last three
              years have resulted in the increase in average separate account
              balances.

              Cost of insurance charges are assessed on the net amount at risk
              on universal life insurance policies. The net amount at risk is
              equal to a policy's death benefit minus the related policyholder
              account value. The amount charged is based on the insured's age
              and other underwriting factors. The increase in cost of insurance
              charges is due primarily to growth in the net amount at risk
              related to individual investment life insurance reflecting
              expanded distribution and increased acceptance by producers and
              consumers. The net amount at risk related to individual investment
              life insurance grew to $24.69 billion at the end of 2000 compared
              to $19.76 billion and $14.95 billion at the end of 1999 and 1998,
              respectively.

              The growth in administrative fees is attributable to a significant
              increase in premiums on individual investment life policies and
              certain corporate-owned life policies where the company collects a
              premium load. The substantial majority of the increase in
              surrender charges over the past two years is attributable to
              policyholder withdrawals in the Individual Annuity segment, and is
              driven by an overall increase in individual variable annuity
              policy reserves and a heightened competitive environment in the
              individual annuity marketplace.

              Net investment income includes the investment income earned on
              investments supporting fixed annuities and certain life insurance
              products as well as the yield on the Company's general account
              invested assets which are not allocated to product segments, net
              of related investment expenses. General account assets supporting
              insurance products are closely correlated to the underlying
              reserves on these products. Net investment income grew from $1.48
              billion and $1.52 billion in 1998 and 1999, respectively, to $1.65
              billion in 2000 primarily due to increased invested assets to
              support growth in individual fixed annuity, institutional products
              and life insurance policy reserves. General account reserves
              supporting these products grew by $322.0 million and $2.09 billion
              in 2000 and 1999, respectively, and were $22.18 billion at
              December 31, 2000. The change in net investment income was also
              impacted by average yields on investments, which increased by 24
              basis points in 2000 and declined by 24 basis points in 1999
              following market interest rate trends.

              Realized gains and losses on investments are not considered by the
              Company to be recurring components of earnings. The Company makes
              decisions concerning the sale of invested assets based on a
              variety of market, business, tax and other factors.

              Other income includes fees earned by the Company's broker/dealers
              and in 1999 and 1998, fees for investment management services, as
              well as commissions and other income for marketing, distribution
              and administration services.

              Benefits and Expenses

              Interest credited to policyholder account balances totaled $1.18
              billion in 2000 compared to $1.10 billion in 1999 and $1.07
              billion in 1998 and principally relates to fixed annuities, both
              individual and institutional, and investment life insurance
              products. The growth in interest credited reflects the increase in
              policy reserves previously discussed and an overall increase in
              average crediting rates during 2000. The average crediting rate on
              fixed annuity policy reserves in the Individual Annuity and
              Institutional Products segments was 5.64% and 5.98% in 2000
              compared to 5.72% and 5.72% in 1999 and 5.89% and 6.16% in 1998,
              respectively.

              Amortization of deferred policy acquisition costs (DAC) increased
              $79.5 million in 2000 and $58.1 million in 1999 principally due to
              the Individual Annuity segment as a result of growth in the number
              of policies in-force in each of the last two years coupled with
              increased surrender activity during 2000. Amortization of DAC
              increased in the Life Insurance segment as a result of growth in
              policies in-force.

              Operating expenses were $478.9 million in 2000, a 3% increase from
              1999 operating expenses of $463.4 million. Operating expenses were
              $419.7 million in 1998. The increase reflects the growth in the
              number of annuity and life insurance contracts in-force and the
              related increase in administrative processing costs. 1999 and 1998
              also include costs associated with investment management
              activities which were assigned to an affiliate in mid-1999.

                                       8
<PAGE>   9

              Federal income tax expense was $207.7 million representing an
              effective tax rate of 30.4% for 2000. Federal income tax expense
              in 1999 and 1998 was $201.4 million and $190.4 million,
              respectively, representing effective rates of 33.2% and 34.2%. An
              increase in tax exempt income and investment tax credits resulted
              in the decrease in effective rates.

              Recently Issued Accounting Pronouncements

              See note 2(j) to the consolidated financial statements for a
              discussion of recently issued accounting pronouncements.

              Sales Information

              Sales are comprised of annuities, pension plans and life insurance
              products sold to a wide variety of customer bases. The 1999 and
              1998 sales information has been restated to conform to the 2000
              presentation, which better reflects multi-product sales across all
              distribution channels.

              Sales are stated net of internal replacements, which in the
              Company's opinion provides a more meaningful disclosure of sales.
              In addition, sales exclude: funding agreements issued to secure
              notes issued to foreign investors through an unrelated third party
              trust under the Company's $2 billion medium-term note program;
              bank-owned life insurance (BOLI); large case pension plan
              acquisitions; and deposits into Nationwide employee and agent
              benefit plans. Although these products contribute to asset and
              earnings growth, they do not produce steady production flow that
              lends itself to meaningful comparisons and are therefore excluded
              from sales.

              The Company sells its products through a broad distribution
              network. Unaffiliated entities that sell the Company's products to
              their own customer base include independent broker/dealers,
              brokerage firms, financial institutions, pension plan
              administrators, life insurance specialists and Nationwide agents.
              Representatives of the Company who market products directly to a
              customer base identified by the Company include Nationwide
              Retirement Solutions.

              Sales by distribution channel for each of the last three years are
              summarized as follows:

<TABLE>
<CAPTION>
              (in millions)                                                   2000            1999            1998
              ==========================================================================================================
<S>                                                                        <C>             <C>             <C>
              Independent broker/dealers                                   $ 5,933.4       $ 5,097.8       $ 4,841.8
              Brokerage firms                                                1,183.8           900.2           601.3
              Financial institutions                                         2,868.0         2,431.2         2,005.5
              Pension plan administrators                                    1,044.2         1,165.7         1,015.8
              Nationwide Retirement Solutions                                2,328.6         2,470.3         2,445.9
              Nationwide agents                                                815.8           787.9           731.8
              Life insurance specialists                                       711.4           420.0            91.1
              ----------------------------------------------------------------------------------------------------------
</TABLE>

              The competitive environment for individual annuity sales through
              the independent broker/dealer channel has become very challenging;
              however, total sales through this channel (including retirement
              plans and life insurance) were up 16% in 2000 reflecting the
              strength of the Company's multiple product strategy, appointment
              of new distributors, introduction of new products and features and
              a broad distribution network. Sales through financial institutions
              grew 18% during 2000 and 21% during 1999 driven mainly by the
              appointment of new distributors in the bank channel and increased
              fixed annuity sales.

              The increase in sales through life insurance specialists reflects
              $711.4 million of COLI sales in 2000 compared to $409.2 million in
              1999. NLIC entered the COLI market in 1998 and has quickly become
              a market leader through a focus on mid-sized cases.

              The Company's flagship products are marketed under The BEST of
              AMERICA(R) brand, and include individual and group variable
              annuities and variable life insurance. The BEST of AMERICA
              products allow customers to choose from investment options managed
              by premier mutual fund managers. The Company has also developed
              private label variable and fixed annuity products in conjunction
              with other financial services providers which allow those
              providers to sell products to their own customer bases under their
              own brand name.

                                       9
<PAGE>   10

              The Company also markets group deferred compensation retirement
              plans to employees of state and local governments for use under
              Internal Revenue Code (IRC) Section 457. The Company utilizes its
              sponsorship by the National Association of Counties and The United
              States Conference of Mayors when marketing IRC Section 457
              products.

              Sales by product and segment for each of the last three years are
              as follows:

<TABLE>
<CAPTION>
              (in millions)                                                   2000            1999            1998
              ==========================================================================================================

<S>                                                                        <C>             <C>             <C>
              The BEST of AMERICA products                                 $ 5,475.4       $ 4,639.2       $ 4,656.1
              Private label annuities                                          998.7           947.8           778.1
              Other                                                             90.9           382.5           332.9
              ----------------------------------------------------------------------------------------------------------
                 Total individual variable annuity sales                     6,565.0         5,969.5         5,767.1
              ----------------------------------------------------------------------------------------------------------

              Deferred fixed annuities                                         534.8           332.5           315.2
              Immediate fixed annuities                                        127.7            64.2            52.9
              ----------------------------------------------------------------------------------------------------------
                 Total individual fixed annuity sales                          662.5           396.7           368.1
              ----------------------------------------------------------------------------------------------------------
                   Total individual annuity sales                          $ 7,227.5       $ 6,366.2       $ 6,135.2
              ==========================================================================================================

              The BEST of AMERICA products                                 $ 3,931.4       $ 3,537.7       $ 2,760.0
              Other                                                             47.3            83.1            41.8
              ----------------------------------------------------------------------------------------------------------
                 Total private sector pension plan sales                     3,978.7         3,620.8         2,801.8
              ----------------------------------------------------------------------------------------------------------

              IRC Section 457 annuities                                      2,148.8         2,190.3         2,143.0
              ----------------------------------------------------------------------------------------------------------
                 Total public sector pension plan sales                      2,148.8         2,190.3         2,143.0
              ----------------------------------------------------------------------------------------------------------
                   Total institutional products sales                      $ 6,127.5       $ 5,811.1       $ 4,944.8
              ==========================================================================================================

              The BEST of AMERICA variable life series                    $    573.4      $    425.9      $    316.0
              Corporate-owned life insurance                                   711.4           409.2            91.1
              Traditional/Universal life insurance                             245.4           260.8           246.1
              ----------------------------------------------------------------------------------------------------------
                 Total life insurance sales                                $ 1,530.2       $ 1,095.9      $    653.2
              ==========================================================================================================
</TABLE>

              BUSINESS SEGMENTS

              The Company has redefined its business segments in order to align
              this disclosure with the way management currently views its core
              operations. This updated view better reflects the different
              economics of the Company's various businesses and also aligns well
              with the current market focus. The Company has three product
              segments: Individual Annuity, Institutional Products and Life
              Insurance. In addition, the Company reports certain other revenues
              and expenses in a Corporate segment. All 1999 and 1998 amounts
              have been restated to reflect the new business segments.

              The following table summarizes operating income before federal
              income tax expense for the Company's business segments for each of
              the last three years.

<TABLE>
<CAPTION>
              (in millions)                                                   2000            1999            1998
              ==========================================================================================================
<S>                                                                           <C>             <C>             <C>
              Individual Annuity                                              $ 281.7         $ 259.2         $ 231.5
              Institutional Products                                            230.7           217.8           180.4
              Life Insurance                                                    152.9           120.8            88.8
              Corporate                                                          37.1            20.3            28.0
              ----------------------------------------------------------------------------------------------------------
                Operating income before federal income tax expense           $  702.4         $ 618.1         $ 528.7
              ==========================================================================================================
</TABLE>



                                       10
<PAGE>   11

              Individual Annuity

              The Individual Annuity segment consists of both variable and fixed
              annuity contracts. Individual annuity contracts provide the
              customer with tax-deferred accumulation of savings and flexible
              payout options including lump sum, systematic withdrawal or a
              stream of payments for life. In addition, variable annuity
              contracts provide the customer with access to a wide range of
              investment options and asset protection in the event of an
              untimely death, while fixed annuity contracts generate a return
              for the customer at a specified interest rate fixed for a
              prescribed period. The Company's individual annuity products
              consist of single premium deferred annuities, flexible premium
              deferred annuities and single premium immediate annuities.

              The following table summarizes certain selected financial data for
              the Company's Individual Annuity segment for the years indicated.

<TABLE>
<CAPTION>
              (in millions)                                                   2000            1999            1998
              ==========================================================================================================
<S>                                                                      <C>             <C>             <C>
              INCOME STATEMENT DATA
              Revenues:
                Policy charges                                           $     573.2     $     484.6     $     389.5
                Net investment income                                          483.2           458.9           431.7
                Premiums on immediate annuities                                 52.7            26.8            23.1
              ----------------------------------------------------------------------------------------------------------
                                                                             1,109.1           970.3           844.3
              ----------------------------------------------------------------------------------------------------------
              Benefits and expenses:
                Interest credited to policyholder account balances             396.4           384.9           357.9
                Amortization of DAC                                            238.7           170.9           129.2
                Other benefits                                                  54.0            23.8            22.5
                Other operating expenses                                       138.3           131.5           103.2
              ----------------------------------------------------------------------------------------------------------
                                                                               827.4           711.1           612.8
              ----------------------------------------------------------------------------------------------------------
                 Operating income before federal income tax expense      $     281.7     $     259.2     $     231.5
              ==========================================================================================================

              OTHER DATA
              Sales:
                Individual variable annuities                             $   6,565.0     $   5,969.5    $   5,767.1
                Individual fixed annuities                                      662.5           396.7          368.1
              ----------------------------------------------------------------------------------------------------------
                 Total individual annuity sales                           $   7,227.5     $   6,366.2    $   6,135.2
              ==========================================================================================================

              Average account balances:
                Separate account                                           $ 37,934.0      $ 31,929.2    $  25,563.9
                General account                                               6,942.9         6,712.5        6,072.8
              ----------------------------------------------------------------------------------------------------------
                 Total average account balances                            $ 44,876.9      $ 38,641.7    $  31,636.7
              ==========================================================================================================

              Account balances as of year end:
                Individual variable annuities                              $ 39,621.9      $ 40,274.7    $  32,029.2
                Individual fixed annuities                                    3,941.8         3,722.2        3,280.9
              ----------------------------------------------------------------------------------------------------------
                 Total account balances                                    $ 43,563.7      $ 43,996.9    $  35,310.1
              ==========================================================================================================

              Return on average equity                                          20.4%           19.7%          20.2%
              Pre-tax operating income to average account balances              0.63%           0.67%          0.73%
              ----------------------------------------------------------------------------------------------------------
</TABLE>

              Pre-tax operating earnings reached $281.7 million in 2000, up 9%
              compared to 1999 earnings of $259.2 million, which were up 12%
              from 1998. Improved segment results are primarily due to growth in
              asset fees partially offset by increased DAC amortization.

              Asset fees were $478.5 million in 2000 up 15% from $415.0 million
              in 1999 and totaled $337.8 million in 1998. Asset fees are
              calculated daily and charged as a percentage of separate account
              reserves. Average separate account assets have increased
              substantially in the past three years as a result of net market
              appreciation and net flows of $675.2 million, $1.28 billion and
              $3.08 billion in 2000, 1999 and 1998, respectively. While separate
              account assets reflect market depreciation in 2000, there was
              substantial market appreciation in the first half of the year,
              which contributed to the growth in average separate account
              assets.

                                       11
<PAGE>   12

              Amortization of DAC increased 40% to $238.7 million in 2000
              compared to $170.9 million and $129.2 million in 1999 and 1998,
              respectively. The growth in DAC amortization is consistent with
              the overall growth in the individual annuity business and the
              increase in surrender activity.

              The following table depicts the interest spread on average general
              account reserves in the Individual Annuity segment for each of the
              last three years.

<TABLE>
<CAPTION>
                                                                              2000            1999            1998
              ==========================================================================================================
<S>                                                                             <C>             <C>             <C>
              Net investment income                                             7.88%           7.58%           7.77%
              Interest credited                                                 5.64            5.72            5.89
              ----------------------------------------------------------------------------------------------------------
                Interest spread                                                 2.24%           1.86%           1.88%
              ==========================================================================================================
</TABLE>

              During 1998 and 1999 the Company experienced an increase in
              mortgage loan and bond prepayment fees and such income accounted
              for approximately 4 basis points of the interest spread in 2000
              compared to 7 basis points and 11 basis points in 1999 and 1998,
              respectively. Increases in interest rates in early 2000 generated
              higher net investment income and slowed prepayment activity.

              The Company is able to mitigate the effects of changes in
              investment yields by periodically resetting the rates credited on
              fixed features of individual annuity contracts. As of December 31,
              2000, individual fixed annuity policy reserves and fixed option of
              variable annuity reserves of $2.42 billion and $2.50 billion,
              respectively, are in contracts that adjust the crediting rate
              periodically with portions resetting in each calendar quarter. The
              Company also has $398.7 million of fixed option of variable
              annuity policy reserves related to private label annuities that
              call for the crediting rate to be reset annually on each January 1
              and $1.52 billion of individual fixed annuity policy reserves that
              are in payout status where the Company has guaranteed periodic,
              typically monthly, payments.

              Led by variable product deposits of $8.20 billion and withdrawals
              and surrenders of $5.98 billion, Individual Annuity segment
              deposits in 2000 of $8.87 billion offset by withdrawals and
              surrenders totaling $6.47 billion generated net flows of $2.40
              billion compared to the $2.83 billion and $3.63 billion achieved
              in 1999 and 1998, respectively. Despite the competitive nature of
              the individual annuity market, the Company has demonstrated the
              ability to generate positive net flows by leveraging its broad
              distribution network and innovative product development resources.
              The Company successfully introduced new products, features and
              retention strategies during 2000.

              Changes in the Company's products, including the introduction of
              new products with reduced policy charges have slightly decreased
              the ratio of asset fees to average separate account assets within
              the segment. This ratio was 1.26% in 2000 compared to 1.29% and
              1.30% in 1999 and 1998, respectively.

              The decrease in pre-tax operating income to average assets in 2000
              and 1999 is primarily driven by the mix of products, which is
              demonstrated by average separate account assets accounting for
              84.4%, 82.6% and 80.8% of total average account balances in 2000,
              1999 and 1998, respectively. Higher sales of trail commission
              individual variable annuities and increased amortization of policy
              acquisition costs are also impacting margins.

              Individual Annuity sales, which exclude internal replacements,
              during 2000 were $7.23 billion compared to sales of $6.37 billion
              in 1999 and $6.14 billion in 1998. Sales growth in 2000 was driven
              by The BEST of AMERICA variable annuities and reflects the
              successful introduction of the Extra Value rider, which accounted
              for $2.65 billion of sales. In addition, sales of deferred fixed
              annuities increased 61% to $534.8 million driven by additional
              bank distribution.

              Institutional Products

              The Institutional Products segment is comprised of the Company's
              group pension and payroll deduction business, both public and
              private sectors, and medium-term note program. The public sector
              includes the 457 business in the form of fixed and variable
              annuities. The private sector includes the 401(k) business
              generated through fixed and variable annuities. The sales figures
              do not include business generated through the Company's
              medium-term note program, large case pension plan acquisitions and
              Nationwide employee and agent benefit plans, however the income
              statement data does reflect this business.

                                       12
<PAGE>   13

              The following table summarizes certain selected financial data for
              the Company's Institutional Products segment for the years
              indicated.

<TABLE>
<CAPTION>
              (in millions)                                                   2000            1999            1998
              ==========================================================================================================
<S>                                                                       <C>            <C>              <C>
              INCOME STATEMENT DATA
              Revenues:
                Asset fees                                                  $  220.2        $  190.3        $  149.0
                Net investment income                                          827.4           771.2           784.7
                Other                                                           31.4            21.6            18.8
              ----------------------------------------------------------------------------------------------------------
                                                                             1,079.0           983.1           952.5
              ----------------------------------------------------------------------------------------------------------
              Benefits and expenses:
                Interest credited to policyholder account balances             628.8           580.9           595.7
                Other benefits and expenses                                    219.5           184.4           176.4
              ----------------------------------------------------------------------------------------------------------
                                                                               848.3           765.3           772.1
              ----------------------------------------------------------------------------------------------------------
                 Operating income before federal income tax expense         $  230.7        $  217.8        $  180.4
              ==========================================================================================================

              OTHER DATA
              Sales:
                Private sector pension plans                                $3,978.7        $3,620.8        $2,801.8
                Public sector pension plans                                  2,148.8         2,190.3         2,143.0
              ----------------------------------------------------------------------------------------------------------
                  Total institutional products sales                        $6,127.5        $5,811.1        $4,944.8
              ==========================================================================================================

              Average account balances:
                Separate account                                            $27,806.7       $22,350.3      $16,995.4
                General account                                              10,521.2        10,147.7        9,667.4
              ----------------------------------------------------------------------------------------------------------
                  Total average account balances                            $38,327.9       $32,498.0      $26,662.8
              ==========================================================================================================

              Account balances as of year end:
                Private sector pension plans                                $18,001.4       $19,246.2      $14,568.8
                Public sector pension plans                                  17,294.5        18,949.2       15,801.4
                Medium-term notes                                             1,627.7           574.5            -
              ----------------------------------------------------------------------------------------------------------
                  Total account balances                                    $36,923.6       $38,769.9      $30,370.2
              ==========================================================================================================

              Return on average equity                                           24.2%           24.5%          22.0%
              Pre-tax operating income to average account balances               0.59%           0.65%          0.66%
              ----------------------------------------------------------------------------------------------------------
</TABLE>

              Institutional Products segment earnings growth in 2000 and 1999
              was driven by higher asset fees from 24% and 32% increases in
              average separate account assets in 2000 and 1999, respectively.
              Net investment income increased $56.2 million in 2000 to $827.4
              million, following a decline in 1999 of $13.5 million to $771.2
              million. The change in net investment income was driven by higher
              average general account assets in each year and an increase in
              average investment yields in 2000 and a decrease in average
              investment yields in 1999. The increase in interest credited in
              2000 is primarily the result of a 4% increase in average general
              account reserves and an increase in the average crediting rate of
              26 basis points. The decrease in interest credited in 1999 is
              primarily the result of a 44 basis point decrease in the average
              interest-crediting rate reflecting lower market rates, offset by a
              5% increase in average general account reserves. Higher operating
              expenses in 2000 reflect the significant technology investments
              made as part of the new business model in the public sector
              business.


                                       13
<PAGE>   14

              The following table depicts the interest spread on average general
              account reserves in the Institutional Products segment for each of
              the last three years.

<TABLE>
<CAPTION>
                                                                              2000            1999            1998
              ==========================================================================================================
<S>                                                                             <C>             <C>             <C>
              Net investment income                                             7.86%           7.60%           8.12%
              Interest credited                                                 5.98            5.72            6.16
              ----------------------------------------------------------------------------------------------------------
                  Interest spread                                               1.88%           1.88%           1.96%
              ==========================================================================================================
</TABLE>

              During 1998 and 1999 the Company experienced an increase in
              mortgage loan and bond prepayment fees and such income accounted
              for approximately 4 basis points of the interest spread in 2000
              compared to 8 basis points and 22 basis points in 1999 and 1998,
              respectively. Increases in interest rates in early 2000 generated
              higher net investment income and slowed prepayment activity.

              The Company is able to mitigate the effects of changes in
              investment yields by periodically resetting the rates credited on
              fixed features sold through group annuity contracts. Fixed annuity
              policy reserves in the Institutional Products segment as of
              December 31, 2000, included $7.03 billion in contracts where the
              guaranteed interest rate is reestablished each quarter and $545.9
              million in contracts that adjust the crediting rate periodically
              with portions resetting in each calendar quarter. In this segment,
              the Company also has $809.4 million of fixed option of variable
              annuity policy reserves that call for the crediting rate to be
              reset annually on January 1. The remaining $1.63 billion of fixed
              annuity policy reserves relate to funding agreements issued in
              conjunction with the Company's medium-term note program where the
              crediting rate is either fixed for the term of the contract or
              variable, based on an underlying index.

              Institutional Products segment deposits in 2000 of $6.33 billion
              offset by participant withdrawals and surrenders totaling $5.59
              billion generated net flows from participant activity of $738.9
              million. Net flows in 2000 are down from the $1.55 billion and
              $2.00 billion achieved in 1999 and 1998, respectively. Net case
              (terminations) acquisitions were ($1.32) billion in 2000, $810.8
              million in 1999 and none in 1998. The increase in net terminations
              in 2000 reflects the increasingly competitive environment
              particularly in the public sector market.

              Changes in the Company's products, including the introduction of
              new institutional products with reduced policy charges, and the
              mix of business have slightly decreased the ratio of asset fees to
              average separate account assets within the segment. This ratio was
              0.79% in 2000 compared to 0.83% and 0.86% in 1999 and 1998,
              respectively.

              The Company has recently experienced decreases in pre-tax
              operating income to average account balances, which reached 0.59%
              in 2000, compared to 0.65% in 1999 and to 0.66% in 1998. The
              decreases were primarily driven by a change in the mix of
              products, including new products with reduced policy charges and
              the growth in separate account products.

              Institutional Products sales during 2000 reached $6.13 billion
              compared to sales of $5.81 billion in 1999 and $4.94 billion in
              1998. The growth in each year is primarily attributable to private
              sector plans. The independent broker/dealer, brokerage firms and
              financial institutions channels all reported sales growth in
              excess of 10 percent each year.

              Life Insurance

              The Life Insurance segment consists of insurance products,
              including universal life insurance, COLI and BOLI products, which
              provide a death benefit and also allow the customer to build cash
              value on a tax-advantaged basis.



                                       14
<PAGE>   15

              The following table summarizes certain selected financial data for
              the Company's Life Insurance segment for the years indicated.

<TABLE>
<CAPTION>
              (in millions)                                                   2000            1999            1998
              ==========================================================================================================
<S>                                                                       <C>             <C>              <C>
              INCOME STATEMENT DATA
              Revenues:
                Total policy charges                                      $    266.6      $    199.0       $   141.6
                Other                                                          476.5           447.1           402.5
              ----------------------------------------------------------------------------------------------------------
                                                                               743.1           646.1           544.1
              ----------------------------------------------------------------------------------------------------------
              Benefits                                                         389.3           359.5           308.3
              Operating expenses                                               200.9           165.8           147.0
              ----------------------------------------------------------------------------------------------------------
                                                                               590.2           525.3           455.3
              ----------------------------------------------------------------------------------------------------------
                 Operating income before federal income tax expense       $    152.9      $    120.8       $    88.8
              ==========================================================================================================

              OTHER DATA
              Sales:
                The BEST of AMERICA variable life series                  $    573.4      $    425.9       $   316.0
                Corporate-owned life insurance                                 711.4           409.2            91.1
                Traditional/Universal life insurance                           245.4           260.8           246.1
              ----------------------------------------------------------------------------------------------------------
                  Total life insurance sales                              $  1,530.2      $  1,095.9       $   653.2
              ==========================================================================================================

              Policy reserves as of year end:
                Individual investment life insurance                      $  2,092.0      $  1,832.3       $ 1,270.1
                Corporate investment life insurance                          2,552.3         1,498.6           903.6
                Traditional life insurance                                   1,813.0         1,787.0         1,689.4
                Universal life insurance                                       768.2           795.9           750.3
              ----------------------------------------------------------------------------------------------------------
                  Total policy reserves                                   $  7,225.5      $  5,913.8       $ 4,613.4
              ==========================================================================================================

              Return on average equity                                          11.5%           11.0%            8.9%
              ----------------------------------------------------------------------------------------------------------
</TABLE>

              Life Insurance segment earnings in 2000 increased 27% to $152.9
              million, up from $120.8 million a year ago and $88.8 million in
              1998. Continued strong sales and reserve growth from both
              individual and corporate investment life insurance products
              contributed to the sharp earnings increases.

              Driven primarily by increased policy charges, revenues from
              investment life products increased to $322.4 million in 2000
              compared to $226.5 million in 1999 and $145.4 million in 1998. The
              revenue growth reflects significantly increased policy reserve
              levels as individual investment life reserves increased 14% in
              2000 to $2.09 billion compared to $1.83 billion a year ago and
              $1.27 billion at the end of 1998. Corporate investment life
              reserves, which include both COLI and BOLI products, reached $2.55
              billion, up from $1.50 billion and $903.6 million at the end of
              1999 and 1998, respectively.

              Pre-tax earnings from investment life products reached $85.3
              million in 2000 compared to $53.4 million a year ago and $29.6
              million in 1998. The strong revenue growth discussed previously
              more than offset increased operating expenses associated with the
              growth in business.

              Traditional/Universal life pre-tax earnings slightly increased to
              $67.6 million in 2000 compared to $67.4 million in 1999 and were
              $59.2 million in 1998. The 1998 results reflect additional
              expenses related to the installation of a new policy
              administration system.

              Total life insurance sales, excluding all BOLI and Nationwide
              employee and agent benefit plan sales increased 40% to $1.53
              billion in 2000 compared to $1.10 billion during 1999 and $653.2
              million in 1998. Sales in 2000 include record levels of production
              for individual investment life insurance and COLI, reflecting the
              Company's efforts to sell through multiple channels and growing
              producer and consumer acceptance of these product offerings.



                                       15
<PAGE>   16

              Corporate

              The Corporate segment includes net investment income not allocated
              to the three product segments, unallocated expenses and interest
              expense on short-term borrowings. 1999 and 1998 results also
              include investment management activities associated with
              Nationwide mutual funds. During 1999, these investment management
              activities were assigned to an affiliate. In addition to these
              operating revenues and expenses, the Company also reports net
              realized gains and losses on investments in the Corporate segment.

              The following table summarizes certain selected financial data for
              the Company's Corporate segment for the years indicated.

<TABLE>
<CAPTION>
              (in millions)                                                     2000            1999            1998
              ==========================================================================================================
<S>                                                                            <C>             <C>             <C>
              INCOME STATEMENT DATA
              Operating revenues                                               $  72.1         $ 103.7         $ 106.4
              Operating expenses                                                  35.0            83.4            78.4
              ----------------------------------------------------------------------------------------------------------
                Operating income before federal income tax expense (1)         $  37.1         $  20.3         $  28.0
              ==========================================================================================================
</TABLE>

              ----------
              (1) Excludes net realized gains (losses) on investments.

              In addition to the operating revenues presented in the table
              above, the Company also reports net realized gains and losses on
              investments in the Corporate segment. The Company realized net
              investment (losses) gains of ($19.4) million, ($11.6) million and
              $28.4 million during 2000, 1999 and 1998, respectively. During
              2000 the Company recognized a total of $19.4 million of realized
              losses on three fixed maturity security holdings.

ITEM 7A       QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

              MARKET RISK SENSITIVE FINANCIAL INSTRUMENTS

              The Company is subject to potential fluctuations in earnings and
              the fair value of certain of its assets and liabilities, as well
              as variations in expected cash flows due to changes in market
              interest rates and equity prices. The following discussion focuses
              on specific exposures the Company has to interest rate and equity
              price risk and describes strategies used to manage these risks.
              The discussion is limited to financial instruments subject to
              market risks and is not intended to be a complete discussion of
              all of the risks the Company is exposed to.

              Interest Rate Risk

              Fluctuations in interest rates can potentially impact the
              Company's earnings, cash flows and the fair value of its assets
              and liabilities. Generally, in a declining interest rate
              environment, the Company may be required to reinvest the proceeds
              from matured and prepaid investments at rates lower than the
              overall yield of the portfolio, which could reduce interest spread
              income. In addition, minimum guaranteed crediting rates (typically
              3.0% or 3.5%) on certain annuity contracts could result in a
              reduction of the Company's interest spread income in the event of
              a significant and prolonged decline in interest rates from market
              rates at the end of 2000. The average crediting rate of fixed
              annuity products during 2000 was 5.64% and 5.98% for the
              Individual Annuity and Institutional Products segments,
              respectively, well in excess of the guaranteed rates. The Company
              mitigates this risk by investing in assets with maturities and
              durations that match the expected characteristics of the
              liabilities and by investing in mortgage- and asset-backed
              securities with limited prepayment exposure.


                                       16
<PAGE>   17

              Conversely, a rising interest rate environment could result in a
              reduction of interest spread income or an increase in policyholder
              surrenders. Existing general account investments supporting
              annuity liabilities have a weighted average maturity of
              approximately 4.5 years as of December 31, 2000 and therefore, the
              change in yield of the portfolio will lag changes in market
              interest rates. This lag is increased if the rate of prepayments
              of securities slows. To the extent the Company sets renewal rates
              based on current market rates, this will result in reduced
              interest spreads. Alternatively, if the Company sets renewal
              crediting rates while attempting to maintain a desired spread from
              the portfolio yield, the rates offered by the Company may be less
              than new money rates offered by competitors. This difference could
              result in an increase in surrender activity by policyholders. If
              the Company could not fund the surrenders with its cash flow from
              operations, the Company may be required to sell investments, which
              likely would have declined in value due to the increase in
              interest rates. The Company mitigates this risk by offering
              products that assess surrender charges or market value adjustments
              at the time of surrender, by investing in assets with maturities
              and durations that match the expected characteristics of the
              liabilities, and by investing in mortgage- and asset-backed
              securities with limited prepayment exposure.

              Asset/Liability Management Strategies to Manage Interest Rate Risk

              The Company employs an asset/liability management approach
              tailored to the specific requirements of each of its products.
              Each product line has an investment strategy based on its specific
              characteristics. The strategy establishes asset maturity and
              duration, quality and other guidelines. For fixed maturity
              securities and mortgages, the weighted average maturity is based
              on repayments, which are scheduled to occur under the terms of the
              asset. For mortgage- and asset-backed securities, repayments are
              determined using the current rate of repayment of the underlying
              mortgages or assets and the terms of the securities.

              For individual immediate annuities having future benefits which
              cannot be changed at the option of the policyholder, the
              underlying assets are managed in a separate pool. The duration of
              assets and liabilities in this pool are kept as close together as
              possible. For assets, the repayment cash flows, plus anticipated
              coupon payments, are used in calculating asset duration. Future
              benefits and expenses are used for liabilities. As of December 31,
              2000, the average duration of assets in this pool was 7.40 years
              and the average duration of the liabilities was 7.51 years.
              Individual immediate annuity policy reserves on this business were
              $1.52 billion as of December 31, 2000.

              Because the timing of the payment of future benefits on the
              majority of the Company's business can be changed by the
              policyholder, the Company employs cash flow testing techniques in
              its asset/liability management process. In addition, each year the
              Company's annuity and insurance business is analyzed to determine
              the adequacy of the reserves supporting such business. This
              analysis is accomplished by projecting the anticipated cash flows
              from such business and the assets required to support such
              business under a number of possible future interest rate
              scenarios. The first seven of these scenarios are required by
              state insurance regulation. Projections are also made using 11
              additional scenarios, which involve more extreme fluctuations in
              future interest rates and equity markets. Finally, to get a
              statistical analysis of possible results and to minimize any bias
              in the 18 predetermined scenarios, additional projections are made
              using 50 randomly generated interest rate scenarios. For the
              Company's 2000 cash flow testing process, interest rates for
              90-day treasury bills ranged from 1.02% to 12.99% under the 18
              predetermined scenarios and 0.39% to 28.48% under the 50 random
              scenarios. Interest rates for longer maturity treasury securities
              had comparable ranges. The values produced by each projection are
              used to determine future gains or losses from the Company's
              annuity and insurance business, which, in turn, are used to
              quantify the adequacy of the Company's reserves over the entire
              projection period. The results of the Company's cash flow testing
              indicated that the Company's reserves were adequate as of December
              31, 2000.

              Characteristics of Interest Rate Sensitive Financial Instruments

              The following table provides information about the Company's
              financial instruments as of December 31, 2000 that are sensitive
              to changes in interest rates. Insurance contracts that subject the
              Company to significant mortality risk, including life insurance
              contracts and life-contingent immediate annuities, do not meet the
              definition of a financial instrument and are not included in the
              table.


                                       17
<PAGE>   18

<TABLE>
<CAPTION>
                                                                                                                              1999
                                                                                            There-                 Fair       Fair
(in millions)                        2001       2002        2003       2004       2005      after      Total       Value      Value
------------------------------------------------------------------------------------------------------------------------------------
<S>                               <C>       <C>          <C>         <C>        <C>         <C>      <C>        <C>        <C>
ASSETS
Fixed maturity securities:
 Corporate bonds:
   Principal                      $ 1,578.1 $   1,565.5  $ 1,169.1 $ 1,018.9 $ 1,313.1 $   3,388.1 $  10,032.8 $   9,858.2 $ 9,536.5
   Average interest rate               7.4%        7.4%       7.2%      7.4%      7.6%        8.2%        7.7%
 Mortgage and other asset-
   backed securities:
   Principal                      $ 1,193.7 $     991.3 $    725.7 $   555.5 $   431.1 $   1,295.5 $   5,192.8 $   5,169.7 $ 5,196.9
   Average interest rate               7.3%        7.4%       7.5%      7.6%      7.8%        7.8%        7.6%
 Other fixed maturity  securities:
   Principal                      $    56.0 $       8.8 $     26.1 $    49.0 $    12.3 $     346.4 $     498.6 $     415.1 $   560.6
   Average interest rate               7.0%       10.9%       8.3%      7.9%      7.6%        8.0%        7.9%
Mortgage loans on real estate:
   Principal                      $   253.6 $     393.8 $    487.5 $   488.2 $   776.9 $   3,812.4 $   6,212.4 $   6,327.8 $ 5,745.5
   Average interest rate               8.7%        8.6%       8.1%      7.9%      8.2%        7.9%        8.0%

LIABILITIES
Deferred fixed annuities:
   Principal                      $ 2,239.0 $   1,495.0 $  1,282.0 $ 1,105.0 $   964.0 $   9,404.9 $  16,430.3 $  15,697.8 $16,197.4
   Average credited rate               5.8%        5.8%       5.9%      6.0%      6.1%        6.2%        6.1%
Immediate annuities:
   Principal                      $    45.0 $      41.0 $     35.0 $    32.0 $    28.0 $     204.0 $     385.0 $     282.0 $   237.8
   Average credited rate               7.2%        7.2%       7.2%      7.2%      7.3%        7.3%        7.3%
Short-term borrowings
   Principal                      $   120.0 $        -- $       -- $      -- $      -- $        -- $     120.0 $     118.7 $      --
   Average interest rate               6.5%          --         --        --        --          --        6.5%

DERIVATIVE FINANCIAL INSTRUMENTS
Interest rate swaps:
  Pay fixed/receive variable
    Notional value                $   -     $      30.0 $     62.5 $   133.9 $  290.6 $     417.8 $     934.8 $     (21.3)$      4.8
    Weighted average pay rate         -            4.1%       6.7%      6.8%     6.4%        6.9%        6.6%
    Weighted average receive rate     -            7.8%       6.6%      6.7%     7.0%        6.8%        6.9%
  Pay variable/receive fixed
    Notional value                $   -     $       5.0 $     28.1 $   343.4 $  394.2 $     293.5 $   1,064.2 $     (32.1)$   (25.3)
    Weighted average pay rate         -            6.8%       6.9%      7.0%     7.1%        7.0%        7.1%
    Weighted average receive rate     -            7.0%       4.0%      3.1%     2.6%        5.4%        3.6%
  Pay variable/receive variable
    Notional value                $   -      $   -      $    375.9 $     9.0 $  316.0 $      30.0 $     730.9 $       5.2 $       -
    Weighted average pay rate         -          -            6.9%      6.9%     6.8%        7.2%        6.9%
    Weighted average receive rate     -          -            4.0%      6.8%     5.0%        7.4%        4.6%
Interest rate futures:
  Long positions
    Contract amount/notional      $    36.0  $     34.0 $      6.0 $     4.0 $    1.0 $       -   $      81.0 $       0.3 $       -
    Weighted average settlement
    price                         $    92.8  $     92.8 $     92.5 $    92.3 $   92.3 $       -   $      92.8
  Short positions
    Contract amount/notional      $ 1,685.8  $  1,349.0 $    922.0 $   696.0 $  403.0 $     523.0 $   5,578.8 $     (16.3)$      1.3
    Weighted average settlement
    price                         $    93.5  $     93.0 $     93.0 $    92.9 $   92.8 $      92.6 $      93.0
</TABLE>

              Additional information about the characteristics of the financial
              instruments and assumptions underlying the data presented in the
              table above are as follows:

              Mortgage- and asset-backed securities (MBSs and ABSs): The
              maturity year is determined based on the terms of the securities
              and the current rate of prepayment of the underlying pools of
              mortgages or assets. The Company limits its exposure to
              prepayments by purchasing less volatile types of MBSs and ABSs.

              Other fixed maturity securities and mortgage loans on real estate:
              The maturity year is determined based on the maturity date of the
              security or loan.


                                       18
<PAGE>   19

              Deferred fixed annuities: The maturity year is based on the
              expected date of policyholder withdrawal, taking into account
              actual experience, current interest rates, and contract terms.
              Included are group annuity contracts representing $8.39 billion of
              general account liabilities as of December 31, 2000, which are
              generally subject to market value adjustment upon surrender and
              which may also be subject to surrender charges. Of the total group
              annuity liabilities, $7.03 billion were in contracts where the
              crediting rate is reset quarterly, $545.9 million were in
              contracts that adjust the crediting rate on an annual basis with
              portions resetting in each calendar quarter and $809.4 million
              were in contracts where the crediting rate is reset annually on
              January 1. Fixed annuity policy reserves of $1.63 billion relate
              to funding agreements issued in conjunction with the Company's
              medium-term note program where the crediting rate is either fixed
              for the term of the contract or variable, based on an underlying
              index. Also included in deferred fixed annuities are certain
              individual annuity contracts, which are also subject to surrender
              charges calculated as a percentage of the lesser of deposits made
              or the amount surrendered and assessed at declining rates during
              the first seven years after a deposit is made. At December 31,
              2000, individual annuity general account liabilities totaling
              $4.92 billion were in contracts where the crediting rate is reset
              periodically, with portions resetting in each calendar quarter and
              $398.7 million that reset annually on January 1. The average
              crediting rate is calculated as the difference between the
              projected yield of the assets backing the liabilities and a
              targeted interest spread. However, for certain individual
              annuities the credited rate is also adjusted to partially reflect
              current new money rates.

              Immediate annuities: Included are non-life contingent contracts in
              payout status where the Company has guaranteed periodic, typically
              monthly, payments. The maturity year is based on the terms of the
              contract.

              Short-term borrowings: The maturity year is the stated maturity
              date of the obligation.

              Derivative financial instruments: The maturity year is based on
              the terms of the related contracts. Interest rate swaps include
              cross-currency swaps that eliminate all foreign currency exposure
              the Company has with existing assets and liabilities. Underlying
              details by currency have therefore been omitted. Variable swap
              rates and settlement prices reflect those in effect at December
              31, 2000.

              Equity Market Risk

              Asset fees calculated as a percentage of the separate account
              assets are a significant source of revenue to the Company. At
              December 31, 2000, 88% of separate account assets were invested in
              equity mutual funds. Gains and losses in the equity markets will
              result in corresponding increases and decreases in the Company's
              separate account assets and the reported asset fee revenue. In
              addition, a decrease in separate account assets may decrease the
              Company's expectations of future profit margins, which may require
              the Company to accelerate the amortization of deferred policy
              acquisition costs.

              INFLATION

              The rate of inflation did not have a material effect on the
              revenues or operating results of the Company during 2000, 1999 or
              1998.

ITEM 8        CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

              The consolidated financial statements of Nationwide Life Insurance
              Company and Subsidiaries are included in a separate section of
              this report which is indexed in Item 14 - Exhibits, Financial
              Statement Schedules, and Reports on Form 8-K.

              Semi-annual and annual reports are sent to contract owners of the
              variable annuity and life insurance contracts issued through
              registered separate accounts of the Company.

ITEM 9        CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
              FINANCIAL DISCLOSURES

              None.


                                       19
<PAGE>   20

                                    PART III


ITEM 10       DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

              Omitted due to reduced disclosure format.

ITEM 11       EXECUTIVE COMPENSATION

              Omitted due to reduced disclosure format.

ITEM 12       SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

              Omitted due to reduced disclosure format.

ITEM 13       CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

              Omitted due to reduced disclosure format.

                                     PART IV

ITEM 14       EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

<TABLE>
<CAPTION>
                                                                                                                     Page
                                                                                                                    --------
<S>                                                                                                                  <C>
              CONSOLIDATED FINANCIAL STATEMENTS:
                Independent Auditors' Report                                                                           F-1
                Consolidated Balance Sheets as of December 31, 2000 and 1999                                           F-2
                Consolidated Statements of Income for the years ended December 31, 2000, 1999 and 1998                 F-3
                Consolidated Statements of Shareholder's Equity for the years
                ended December 31, 2000, 1999 and 1998                                                                 F-4
                Consolidated Statements of Cash Flows for the years ended December 31, 2000, 1999
                  and 1998                                                                                             F-5
                Notes to Consolidated Financial Statements                                                             F-6

              FINANCIAL STATEMENT SCHEDULES:

                Schedule I     Consolidated Summary of Investments - Other Than Investments in
                                 Related Parties as of December 31, 2000                                              F-27
                Schedule III   Supplementary Insurance Information as of December 31, 2000, 1999 and
                                 1998 and for each of the years then ended                                            F-28
                Schedule IV    Reinsurance as of December 31, 2000, 1999 and 1998 and for each of the
                                 years then ended                                                                     F-29
                Schedule V     Valuation and Qualifying Accounts for the years ended December 31,
                                 2000, 1999 and 1998                                                                  F-30

                  All other schedules are omitted because they are not applicable or not required, or because the required
                  information has been included in the audited consolidated financial statements or notes thereto

              EXHIBIT INDEX                                                                                             23
</TABLE>


                                       20
<PAGE>   21

                                   SIGNATURES


Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.



                                 NATIONWIDE LIFE INSURANCE COMPANY (Registrant)



                                                       By /s/ W. G. Jurgensen
                                                          -------------------
                                      W. G. Jurgensen, Chief Executive Officer -
                                      Nationwide Life Insurance Company

Date:  February 27, 2001


                                       21
<PAGE>   22

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.



<TABLE>
<S>                                           <C>                 <C>                                            <C>
/s/ David O. Miller                            February 7, 2001    /s/ W. G. Jurgensen                            February 27, 2001
--------------------------------------------- -------------------- --------------------------------------------- ------------------
David O. Miller, Chairman of the Board               Date          W. G.  Jurgensen,  Chief  Executive  Officer         Date
                                                                   and Director



/s/ Joseph J. Gasper                           February 27, 2001   /s/ Lewis J. Alphin                            February 27, 2001
--------------------------------------------- -------------------- --------------------------------------------- ------------------
Joseph J. Gasper, President, Chief                   Date          Lewis J. Alphin, Director                            Date
Operating Officer and Director



/s/ A.I. Bell                                  February 27, 2001   /s/ Nancy C. Breit                             February 27, 2001
--------------------------------------------- -------------------- --------------------------------------------- ------------------
A.I. Bell, Director                                  Date          Nancy C. Breit, Director                             Date



/s/ Kenneth D. Davis                           February 27, 2001   /s/ Keith W. Eckel                             February 27, 2001
--------------------------------------------- -------------------- --------------------------------------------- ------------------
Kenneth D. Davis, Director                           Date          Keith W. Eckel, Director                             Date



/s/ Willard J. Engel                           February 27, 2001   /s/ Fred C. Finney                             February 27, 2001
--------------------------------------------- -------------------- --------------------------------------------- ------------------
Willard J. Engel, Director                           Date          Fred C. Finney, Director                             Date



/s/ Yvonne M. Curl                             February 27, 2001   /s/ Ralph M. Paige                             February 27, 2001
--------------------------------------------- -------------------- --------------------------------------------- ------------------
Yvonne M. Curl, Director                             Date          Ralph M. Paige, Director                             Date



/s/ James F. Patterson                         February 27, 2001   /s/ Arden L. Shisler                           February 27, 2001
--------------------------------------------- -------------------- --------------------------------------------- ------------------
James F. Patterson, Director                         Date          Arden L. Shisler, Director                           Date



/s/ Robert L. Stewart                          February 27, 2001   /s/ Robert A. Oakley                           February 27, 2001
--------------------------------------------- -------------------- --------------------------------------------- ------------------
Robert L. Stewart, Director                          Date          Robert A. Oakley, Executive Vice                     Date
                                                                   President - Chief Financial Officer



/s/ Mark R. Thresher                           February 27, 2001
--------------------------------------------- --------------------
Mark R. Thresher, Senior Vice President -            Date
Finance - Nationwide Financial
 (Chief Accounting Officer)
</TABLE>
                                       22

<PAGE>   23
<TABLE>
<CAPTION>
                                  EXHIBIT INDEX

Exhibit
----------
<S>       <C>
   3.1      Amended Articles of Incorporation of Nationwide Life Insurance
              Company, dated March 14, 1986 (previously filed as Exhibit 3.1 to
              Form 10-K, Commission File Number 2-28596, filed March 31,1998,
              and incorporated herein by reference)
   3.2      Form of Amended and Restated Code of Regulations of Nationwide Life
              Insurance Company (previously filed as Exhibit 3.2 to Form 10-Q,
              Commission File Number 2-28596, filed August 14, 2000, and
              incorporated herein by reference)
  10.1      Form of Tax Sharing Agreement among Nationwide Mutual Insurance
              Company, Nationwide Corporation and any corporation that may
              hereafter be a subsidiary of Nationwide Corporation (previously
              filed as Exhibit 10.1 to Form 10-K, Commission File Number
              2-28596, filed March 28, 1997, and incorporated herein by
              reference)
  10.1.1    First Amendment to the Tax Sharing Agreement among Nationwide Mutual
              Insurance Company, Nationwide Corporation and any corporation that
              may hereafter be a subsidiary of Nationwide Corporation
              (previously filed as Exhibit 10.2.1 to Form 10-K, Commission File
              Number 1-12785, filed March 31, 1998, and incorporated herein by
              reference)
  10.1.2    Second Amendment to the Tax Sharing Agreement among Nationwide
              Mutual Insurance Company and any corporation that may hereafter be
              a subsidiary of Nationwide Mutual Insurance Company (filed as
              Exhibit 10.2.2 to Form 10-K, Commission File Number 1-12785, filed
              March 29, 2001, and incorporated herein by reference)
  10.1.3    Third Amendment to the Tax Sharing Agreement among Nationwide Mutual
              Insurance Company and any corporation that may hereafter be a
              subsidiary of Nationwide Mutual Insurance Company (filed as
              Exhibit 10.2.3 to Form 10-K, Commission File Number 1-12785, filed
              March 29, 2001, and incorporated herein by reference)
  10.2      Form of First Amendment to Cost Sharing Agreement among parties
              named therein (previously filed as Exhibit 10.2 to Form 10-K,
              Commission File Number 2-28596, filed March 28, 1997, and
              incorporated herein by reference)
  10.3      Modified Coinsurance Agreement between Nationwide Life Insurance
              Company and Nationwide Mutual Insurance Company (previously filed
              as Exhibit 10.3 to Form 10-K, Commission File Number 2-28596,
              filed March 28, 1997, and incorporated herein by reference)
  10.4      Five Year Credit Agreement, dated May 25, 2000, among Nationwide
              Financial Services, Inc., Nationwide Life Insurance Company,
              Nationwide Mutual Insurance Company, the banks named therein and
              Bank One, NA, as agent (filed as Exhibit 10.5 to Form 10-K,
              Commission File Number 1-12785, filed March 29, 2001, and
              incorporated herein by reference)
  10.4.1    Amendment dated as of September 29, 2000 to the Five Year Credit
              Agreement dated as of May 25, 2000 among Nationwide Financial
              Services, Inc., Nationwide Life Insurance Company, Nationwide
              Mutual Insurance Company, the banks party thereto and Bank One,
              NA, as agent (filed as Exhibit 10.5.1 to Form 10-K, Commission
              File Number 1-12785, filed March 29, 2001, and incorporated herein
              by reference)
  10.5     364-Day Credit Agreement, dated May 25, 2000, among Nationwide
              Financial Services, Inc., Nationwide Life Insurance Company,
              Nationwide Mutual Insurance Company, the banks named therein and
              Bank One, NA, as agent (filed as Exhibit 10.6 to Form 10-K,
              Commission File Number 1-12785, filed March 29, 2001, and
              incorporated herein by reference)
  10.5.1    Amendment dated as of September 29, 2000 to the 364-Day Credit
              Agreement dated as of May 25, 2000 among Nationwide Financial
              Services, Inc., Nationwide Life Insurance Company, Nationwide
              Mutual Insurance Company, the banks party thereto and Bank One,
              NA, as agent (filed as Exhibit 10.6.1 to Form 10-K, Commission
              File Number 1-12785, filed March 29, 2001, and incorporated herein
              by reference)
  10.6      Form of Lease Agreement between Nationwide Life Insurance Company
              and Nationwide Mutual Insurance Company (previously filed as
              Exhibit 10.6 to Form 10-K, Commission File Number 2-28596, filed
              March 28, 1997, and incorporated herein by reference)
  10.7      General Description of Nationwide Performance Incentive Plan (filed
              as Exhibit 10.9 to Form 10-K, Commission File Number 1-12785,
              filed March 29, 2001, and incorporated herein by reference)
  10.8      Form of Nationwide Office of Investment Incentive Plan (filed as
              Exhibit 10.10 to Form 10-K, Commission File Number 1-12785, filed
              March 29, 2001, and incorporated herein by reference)
  10.9      Nationwide Insurance Excess Benefit Plan effective as of December
              31, 1996 (previously filed as Exhibit 10.9 to Form 10-K,
              Commission File Number 2-28596, filed March 28, 1997, and
              incorporated herein by reference)
  10.10     Nationwide Insurance Supplemental Retirement Plan effective as of
              December 31, 1996 (previously filed as Exhibit 10.10 to Form 10-K,
              Commission File Number 2-28596, filed March 28, 1997, and
              incorporated herein by reference)
</TABLE>


                                       23
<PAGE>   24

 Exhibit
----------

  10.11     Nationwide Salaried Employees Severance Pay Plan (previously filed
              as Exhibit 10.11 to Form 10-K, Commission File Number 2-28596,
              filed March 28, 1997, and incorporated herein by reference)
  10.12     Nationwide Insurance Supplemental Defined Contribution Plan
              effective as of January 1, 1996 (previously filed as Exhibit 10.12
              to Form 10-K, Commission File Number 2-28596, filed March 28,
              1997, and incorporated herein by reference)
  10.13     General Description of Nationwide Insurance Individual Deferred
              Compensation Program previously filed as Exhibit 10.13 to Form
              10-K, Commission File Number 2-28596, filed March 28, 1997, and
              incorporated herein by reference)
  10.14     General Description of Nationwide Mutual Insurance Company
              Directors Deferred Compensation Program (previously filed as
              Exhibit 10.14 to Form 10-K, Commission File Number 2-28596, filed
              March 28, 1997, and incorporated herein by reference)
  10.15     Deferred Compensation Agreement, dated as of September 3, 1979,
              between Nationwide Mutual Insurance Company and D. Richard
              McFerson (previously filed as Exhibit 10.15 to Form 10-K,
              Commission File Number 2-28596, filed March 28, 1997, and
              incorporated herein by reference)
  10.16     Investment Agency Agreement between Nationwide Cash Management
              Company and Nationwide Financial Services, Inc. and certain
              subsidiaries of Nationwide Financial Services, Inc. (previously
              filed as Exhibit 10.19 to Form 10-K, Commission File Number
              1-12785, filed March 29, 2000, and incorporated herein by
              reference)
  10.17     Master Repurchase Agreement between Nationwide Life Insurance
              Company, Nationwide Life and Annuity Insurance Company, and
              Nationwide Mutual Insurance Company and certain of its
              subsidiaries and affiliates (previously filed as Exhibit 10.20 to
              Form 10-K, Commission File Number 1-12785, filed March 29, 2000,
              and incorporated herein by reference)
  10.18     Form of Employment Agreement, dated January 1, 2000, between
              Nationwide Mutual Insurance Company and John Cook (previously
              filed as Exhibit 10.24 to Form 10-Q, Commission File Number
              1-12785, filed August 14, 2000, and incorporated herein by
              reference)
  10.19     Form of Employment Agreement, dated January 1, 2000, between
              Nationwide Mutual Insurance Company and Patricia Hatler
              (previously filed as Exhibit 10.25 to Form 10-Q, Commission File
              Number 1-12785, filed August 14, 2000, and incorporated herein by
              reference)
  10.20     Form of Employment Agreement, dated January 1, 2000, between
              Nationwide Mutual Insurance Company and Richard Headley
              (previously filed as Exhibit 10.26 to Form 10-Q, Commission File
              Number 1-12785, filed August 14, 2000, and incorporated herein by
              reference)
  10.21     Form of Employment Agreement, dated January 1, 2000, between
              Nationwide Mutual Insurance Company and Donna James (previously
              filed as Exhibit 10.27 to Form 10-Q, Commission File Number
              1-12785, filed August 14, 2000, and incorporated herein by
              reference)
  10.22     Form of Employment Agreement, dated January 1, 2000, between
              Nationwide Mutual Insurance Company and Greg Lashutka (previously
              filed as Exhibit 10.28 to Form 10-Q, Commission File Number
              1-12785, filed August 14, 2000, and incorporated herein by
              reference)
  10.23     Form of Employment Agreement, dated January 1, 2000, between
              Nationwide Mutual Insurance Company and Robert Oakley (previously
              filed as Exhibit 10.29 to Form 10-Q, Commission File Number
              1-12785, filed August 14, 2000, and incorporated herein by
              reference)
  10.24     Form of Employment Agreement, dated January 1, 2000, between
              Nationwide Mutual Insurance Company and Robert Woodward
              (previously filed as Exhibit 10.30 to Form 10-Q, Commission File
              Number 1-12785, filed August 14, 2000, and incorporated herein by
              reference)
  10.25     Form of Employment Agreement, dated August 11, 2000, between
              Nationwide Mutual Insurance Company and Michael Helfer (previously
              filed as Exhibit 10.31 to Form 10-Q, Commission File Number
              1-12785, filed August 14, 2000, and incorporated herein by
              reference)
  10.26     Form of Employment Agreement, dated May 26, 2000, between
              Nationwide Mutual Insurance Company and W.G. Jurgensen (previously
              filed as Exhibit 10.32 to Form 10-Q, Commission File Number
              1-12785, filed November 13, 2000, and incorporated herein by
              reference)
  10.27     Form of Employment Agreement, dated July 1, 2000, between
              Nationwide Financial Services, Inc. and Joseph Gasper (previously
              filed as Exhibit 10.33 to Form 10-Q, Commission File Number
              1-12785, filed November 13, 2000, and incorporated herein by
              reference)
  10.28     Form of Retention Agreement, dated July 1, 2000, between
              Nationwide Financial Services, Inc. and Joseph Gasper (previously
              filed as Exhibit 10.34 to Form 10-Q, Commission File Number
              1-12785, filed November 13, 2000, and incorporated herein by
              reference)


                                       24
<PAGE>   25

 Exhibit
----------

  27       Financial Data Schedule (electronic filing only)

------
All other exhibits referenced by Item 601 of Regulation S-K are not required
under the related instructions or are inapplicable and therefore have been
omitted.






                                       25


<PAGE>   26


                          INDEPENDENT AUDITORS' REPORT



The Board of Directors
Nationwide Life Insurance Company:

We have audited the consolidated financial statements of Nationwide Life
Insurance Company and subsidiaries as listed in the accompanying index. In
connection with our audits of the consolidated financial statements, we also
have audited the financial statement schedules as listed in the accompanying
index. These consolidated financial statements and financial statement schedules
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements and financial
statement schedules based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Nationwide Life
Insurance Company and subsidiaries as of December 31, 2000 and 1999, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 2000, in conformity with accounting
principles generally accepted in the United States of America. Also in our
opinion, the related financial statement schedules, when considered in relation
to the basic consolidated financial statements taken as a whole, present fairly,
in all material respects, the information set forth therein.





KPMG LLP


Columbus, Ohio
January 26, 2001



                                      F-1
<PAGE>   27


               NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
       (a wholly owned subsidiary of Nationwide Financial Services, Inc.)

                           Consolidated Balance Sheets

                     (in millions, except per share amounts)


<TABLE>
<CAPTION>
                                                                                                   December 31,
                                                                                        ------------------------------------
                                                                                              2000               1999
============================================================================================================================
<S>                                                                                        <C>                 <C>
                                        ASSETS
Investments:
  Securities available-for-sale, at fair value:
    Fixed maturity securities                                                              $ 15,443.0          $ 15,294.0
    Equity securities                                                                           109.0                92.9
  Mortgage loans on real estate, net                                                          6,168.3             5,786.3
  Real estate, net                                                                              310.7               254.8
  Policy loans                                                                                  562.6               519.6
  Other long-term investments                                                                   101.8                73.8
  Short-term investments                                                                        442.6               416.0
----------------------------------------------------------------------------------------------------------------------------
                                                                                             23,138.0            22,437.4
----------------------------------------------------------------------------------------------------------------------------

Cash                                                                                             18.4                 4.8
Accrued investment income                                                                       251.4               238.6
Deferred policy acquisition costs                                                             2,865.6             2,554.1
Other assets                                                                                    396.7               305.9
Assets held in separate accounts                                                             65,897.2            67,135.1
----------------------------------------------------------------------------------------------------------------------------
                                                                                           $ 92,567.3          $ 92,675.9
============================================================================================================================

                         LIABILITIES AND SHAREHOLDER'S EQUITY
Future policy benefits and claims                                                          $ 22,183.6          $ 21,861.6
Short-term borrowings                                                                           118.7                 -
Other liabilities                                                                             1,164.9               914.2
Liabilities related to separate accounts                                                     65,897.2            67,135.1
----------------------------------------------------------------------------------------------------------------------------
                                                                                             89,364.4            89,910.9
----------------------------------------------------------------------------------------------------------------------------

Commitments and contingencies (notes 9 and 14)

Shareholder's equity:
  Common stock, $1 par value.  Authorized 5.0 million shares;
    3.8 million shares issued and outstanding                                                     3.8                 3.8
  Additional paid-in capital                                                                    646.1               766.1
  Retained earnings                                                                           2,436.3             2,011.0
  Accumulated other comprehensive income (loss)                                                 116.7               (15.9)
----------------------------------------------------------------------------------------------------------------------------
                                                                                              3,202.9             2,765.0
----------------------------------------------------------------------------------------------------------------------------
                                                                                           $ 92,567.3          $ 92,675.9
============================================================================================================================
</TABLE>


See accompanying notes to consolidated financial statements.


                                      F-2
<PAGE>   28


               NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
       (a wholly owned subsidiary of Nationwide Financial Services, Inc.)

                        Consolidated Statements of Income

                                  (in millions)


<TABLE>
<CAPTION>
                                                                                        Years ended December 31,
                                                                              ---------------------------------------------
                                                                                  2000            1999           1998
===========================================================================================================================
<S>                                                                            <C>             <C>            <C>
Revenues:
  Policy charges                                                               $ 1,091.4       $   895.5      $   698.9
  Life insurance premiums                                                          240.0           220.8          200.0
  Net investment income                                                          1,654.9         1,520.8        1,481.6
  Realized (losses) gains on investments                                           (19.4)          (11.6)          28.4
  Other                                                                             17.0            66.1           66.8
---------------------------------------------------------------------------------------------------------------------------
                                                                                 2,983.9         2,691.6        2,475.7
---------------------------------------------------------------------------------------------------------------------------

Benefits and expenses:
  Interest credited to policyholder account balances                             1,182.4         1,096.3        1,069.0
  Other benefits and claims                                                        241.6           210.4          175.8
  Policyholder dividends on participating policies                                  44.5            42.4           39.6
  Amortization of deferred policy acquisition costs                                352.1           272.6          214.5
  Interest expense on short-term borrowings                                          1.3             -              -
  Other operating expenses                                                         479.0           463.4          419.7
---------------------------------------------------------------------------------------------------------------------------
                                                                                 2,300.9         2,085.1        1,918.6
---------------------------------------------------------------------------------------------------------------------------

    Income before federal income tax expense                                       683.0           606.5          557.1
Federal income tax expense                                                         207.7           201.4          190.4
---------------------------------------------------------------------------------------------------------------------------

    Net income                                                                 $   475.3       $   405.1      $   366.7
===========================================================================================================================
</TABLE>

See accompanying notes to consolidated financial statements.


                                      F-3
<PAGE>   29


               NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
       (a wholly owned subsidiary of Nationwide Financial Services, Inc.)

                 Consolidated Statements of Shareholder's Equity

                  Years ended December 31, 2000, 1999 and 1998
                                  (in millions)


<TABLE>
<CAPTION>
                                                                                          Accumulated
                                                           Additional                        other            Total
                                                Common       paid-in       Retained      comprehensive    shareholder's
                                                 stock       capital       earnings      income (loss)        equity
=========================================================================================================================
<S>                                              <C>         <C>          <C>               <C>             <C>
December 31, 1997                                $ 3.8       $ 914.7      $ 1,312.3         $ 247.1         $ 2,477.9

Comprehensive income:
    Net income                                     -             -            366.7             -               366.7
    Net unrealized gains on securities
      available-for-sale arising during
      the year                                     -             -              -              28.5              28.5
                                                                                                          ---------------
  Total comprehensive income                                                                                    395.2
                                                                                                          ---------------
Dividend to shareholder                            -             -           (100.0)            -              (100.0)
-------------------------------------------------------------------------------------------------------------------------
December 31, 1998                                  3.8         914.7        1,579.0           275.6           2,773.1
=========================================================================================================================

Comprehensive income:
    Net income                                     -             -            405.1             -               405.1
    Net unrealized losses on securities
      available-for-sale arising during
      the year                                     -             -              -            (315.0)           (315.0)
                                                                                                          ---------------
  Total comprehensive income                                                                                     90.1
                                                                                                          ---------------
Capital contribution                               -            26.4           87.9            23.5             137.8
Return of capital to shareholder                   -          (175.0)           -               -              (175.0)
Dividends to shareholder                           -             -            (61.0)            -               (61.0)
-------------------------------------------------------------------------------------------------------------------------
December 31, 1999                                  3.8         766.1        2,011.0           (15.9)          2,765.0
=========================================================================================================================

Comprehensive income:
    Net income                                     -             -            475.3             -               475.3
    Net unrealized gains on securities
      available-for-sale arising during
      the year                                     -             -              -             132.6             132.6
                                                                                                          ---------------
  Total comprehensive income                                                                                    607.9
                                                                                                          ---------------
Return of capital to shareholder                   -          (120.0)           -               -              (120.0)
Dividends to shareholder                           -             -           (50.0)             -               (50.0)
-------------------------------------------------------------------------------------------------------------------------
December 31, 2000                                $ 3.8       $ 646.1      $ 2,436.3         $ 116.7         $ 3,202.9
=========================================================================================================================
</TABLE>


See accompanying notes to consolidated financial statements.

                                      F-4
<PAGE>   30


               NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
       (a wholly owned subsidiary of Nationwide Financial Services, Inc.)

                      Consolidated Statements of Cash Flows

                                  (in millions)


<TABLE>
<CAPTION>
                                                                                           Years ended December 31,
                                                                                ----------------------------------------------
                                                                                     2000           1999            1998
==============================================================================================================================
<S>                                                                              <C>            <C>             <C>
Cash flows from operating activities:
  Net income                                                                     $    475.3     $    405.1      $    366.7
  Adjustments to reconcile net income to net cash provided by operating
    activities:
      Interest credited to policyholder account balances                            1,182.4        1,096.3         1,069.0
      Capitalization of deferred policy acquisition costs                            (778.9)        (637.0)         (584.2)
      Amortization of deferred policy acquisition costs                               352.1          272.6           214.5
      Amortization and depreciation                                                   (12.7)           2.4            (8.5)
      Realized losses (gains) on invested assets, net                                  19.4           11.6           (28.4)
      Increase in accrued investment income                                           (12.8)          (7.9)           (8.2)
     (Increase) decrease in other assets                                              (92.0)         122.9            16.4
      Decrease in policy liabilities                                                   (0.3)         (20.9)           (8.3)
      Increase (decrease) in other liabilities                                        229.3          149.7           (34.8)
      Other, net                                                                       22.3           (8.6)          (11.3)
------------------------------------------------------------------------------------------------------------------------------
        Net cash provided by operating activities                                   1,384.1        1,386.2           982.9
------------------------------------------------------------------------------------------------------------------------------

Cash flows from investing activities:
  Proceeds from maturity of securities available-for-sale                           2,988.7        2,307.9         1,557.0
  Proceeds from sale of securities available-for-sale                                 602.0          513.1           610.5
  Proceeds from repayments of mortgage loans on real estate                           911.7          696.7           678.2
  Proceeds from sale of real estate                                                    18.7            5.7           103.8
  Proceeds from repayments of policy loans and sale of other invested assets           79.3           40.9            23.6
  Cost of securities available-for-sale acquired                                   (3,475.5)      (3,724.9)       (3,182.8)
  Cost of mortgage loans on real estate acquired                                   (1,318.0)        (971.4)         (829.1)
  Cost of real estate acquired                                                         (7.1)         (14.2)           (0.8)
  Short-term investments, net                                                         (26.6)         (27.5)           69.3
  Other, net                                                                         (182.3)        (110.9)          (88.4)
------------------------------------------------------------------------------------------------------------------------------
        Net cash used in investing activities                                        (409.1)      (1,284.6)       (1,058.7)
------------------------------------------------------------------------------------------------------------------------------

Cash flows from financing activities:
  Capital returned to shareholder                                                    (120.0)        (175.0)            -
  Net proceeds from issuance of short-term borrowings (commercial paper)              118.7            -               -
  Cash dividends paid                                                                (100.0)         (13.5)         (100.0)
  Increase in investment product and universal life insurance
    product account balances                                                        4,517.0        3,799.4         2,682.1
  Decrease in investment product and universal life insurance
    product account balances                                                       (5,377.1)      (3,711.1)       (2,678.5)
------------------------------------------------------------------------------------------------------------------------------
        Net cash used in financing activities                                        (961.4)        (100.2)          (96.4)
------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash                                                        13.6            1.4          (172.2)

Cash, beginning of year                                                                 4.8            3.4           175.6
------------------------------------------------------------------------------------------------------------------------------
Cash, end of year                                                                $     18.4     $      4.8      $      3.4
==============================================================================================================================
</TABLE>


See accompanying notes to consolidated financial statements.

                                      F-5
<PAGE>   31



               NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
       (a wholly owned subsidiary of Nationwide Financial Services, Inc.)

                   Notes to Consolidated Financial Statements

                        December 31, 2000, 1999 and 1998


(1)      ORGANIZATION AND DESCRIPTION OF BUSINESS

         Nationwide Life Insurance Company (NLIC, or collectively with its
         subsidiaries, the Company) is a leading provider of long-term savings
         and retirement products in the United States and is a wholly owned
         subsidiary of Nationwide Financial Services, Inc. (NFS). The Company
         develops and sells a diverse range of products including individual
         annuities, private and public sector pension plans and other investment
         products sold to institutions and life insurance. NLIC markets its
         products through a broad network of distribution channels, including
         independent broker/dealers, national and regional brokerage firms,
         financial institutions, pension plan administrators, life insurance
         specialists, Nationwide Retirement Solutions and Nationwide agents.

         Wholly owned subsidiaries of NLIC include Nationwide Life and Annuity
         Insurance Company (NLAIC), Nationwide Advisory Services, Inc., and
         Nationwide Investment Services Corporation.


(2)      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         The significant accounting policies followed by the Company that
         materially affect financial reporting are summarized below. The
         accompanying consolidated financial statements have been prepared in
         accordance with accounting principles generally accepted in the United
         States of America which differ from statutory accounting practices
         prescribed or permitted by regulatory authorities. Annual Statements
         for NLIC and NLAIC, filed with the Department of Insurance of the State
         of Ohio (the Department), are prepared on the basis of accounting
         practices prescribed or permitted by the Department. Prescribed
         statutory accounting practices include a variety of publications of the
         National Association of Insurance Commissioners (NAIC), as well as
         state laws, regulations and general administrative rules. Permitted
         statutory accounting practices encompass all accounting practices not
         so prescribed. The Company has no material permitted statutory
         accounting practices.

         In preparing the consolidated financial statements, management is
         required to make estimates and assumptions that affect the reported
         amounts of assets and liabilities and the disclosures of contingent
         assets and liabilities as of the date of the consolidated financial
         statements and the reported amounts of revenues and expenses for the
         reporting period. Actual results could differ significantly from those
         estimates.

         The most significant estimates include those used in determining
         deferred policy acquisition costs, valuation allowances for mortgage
         loans on real estate and real estate investments, the liability for
         future policy benefits and claims and federal income taxes. Although
         some variability is inherent in these estimates, management believes
         the amounts provided are adequate.

         (a)  CONSOLIDATION POLICY

              The consolidated financial statements include the accounts of NLIC
              and its wholly owned subsidiaries. All significant intercompany
              balances and transactions have been eliminated.


                                      F-6
<PAGE>   32


               NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
       (a wholly owned subsidiary of Nationwide Financial Services, Inc.)

              Notes to Consolidated Financial Statements, Continued


         (b)  VALUATION OF INVESTMENTS AND RELATED GAINS AND LOSSES

              The Company is required to classify its fixed maturity securities
              and equity securities as either held-to-maturity,
              available-for-sale or trading. The Company classifies fixed
              maturity and equity securities as available-for-sale.
              Available-for-sale securities are stated at fair value, with the
              unrealized gains and losses, net of adjustments to deferred policy
              acquisition costs and deferred federal income tax, reported as a
              separate component of accumulated other comprehensive income in
              shareholder's equity. The adjustment to deferred policy
              acquisition costs represents the change in amortization of
              deferred policy acquisition costs that would have been required as
              a charge or credit to operations had such unrealized amounts been
              realized.

              Mortgage loans on real estate are carried at the unpaid principal
              balance less valuation allowances. The Company provides valuation
              allowances for impairments of mortgage loans on real estate based
              on a review by portfolio managers. The measurement of impaired
              loans is based on the present value of expected future cash flows
              discounted at the loan's effective interest rate or, as a
              practical expedient, at the fair value of the collateral, if the
              loan is collateral dependent. Loans in foreclosure and loans
              considered to be impaired are placed on non-accrual status.
              Interest received on non-accrual status mortgage loans on real
              estate is included in interest income in the period received.

              Real estate is carried at cost less accumulated depreciation and
              valuation allowances. Other long-term investments are carried on
              the equity basis, adjusted for valuation allowances. Impairment
              losses are recorded on long-lived assets used in operations when
              indicators of impairment are present and the undiscounted cash
              flows estimated to be generated by those assets are less than the
              assets' carrying amount.

              Realized gains and losses on the sale of investments are
              determined on the basis of specific security identification.
              Estimates for valuation allowances and other than temporary
              declines are included in realized gains and losses on investments.

         (c)  REVENUES AND BENEFITS

              INVESTMENT PRODUCTS AND UNIVERSAL LIFE INSURANCE PRODUCTS:
              Investment products consist primarily of individual and group
              variable and fixed deferred annuities. Universal life insurance
              products include universal life insurance, variable universal life
              insurance, corporate-owned life insurance and other
              interest-sensitive life insurance policies. Revenues for
              investment products and universal life insurance products consist
              of net investment income, asset fees, cost of insurance, policy
              administration and surrender charges that have been earned and
              assessed against policy account balances during the period. Policy
              benefits and claims that are charged to expense include interest
              credited to policy account balances and benefits and claims
              incurred in the period in excess of related policy account
              balances.

              TRADITIONAL LIFE INSURANCE PRODUCTS: Traditional life insurance
              products include those products with fixed and guaranteed premiums
              and benefits and consist primarily of whole life insurance,
              limited-payment life insurance, term life insurance and certain
              annuities with life contingencies. Premiums for traditional life
              insurance products are recognized as revenue when due. Benefits
              and expenses are associated with earned premiums so as to result
              in recognition of profits over the life of the contract. This
              association is accomplished by the provision for future policy
              benefits and the deferral and amortization of policy acquisition
              costs.


                                      F-7
<PAGE>   33

               NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
       (a wholly owned subsidiary of Nationwide Financial Services, Inc.)

              Notes to Consolidated Financial Statements, Continued

         (d)  DEFERRED POLICY ACQUISITION COSTS

              The costs of acquiring new business, principally commissions,
              certain expenses of the policy issue and underwriting department
              and certain variable sales expenses have been deferred. For
              investment products and universal life insurance products,
              deferred policy acquisition costs are being amortized with
              interest over the lives of the policies in relation to the present
              value of estimated future gross profits from projected interest
              margins, asset fees, cost of insurance, policy administration and
              surrender charges. For years in which gross profits are negative,
              deferred policy acquisition costs are amortized based on the
              present value of gross revenues. Deferred policy acquisition costs
              are adjusted to reflect the impact of unrealized gains and losses
              on fixed maturity securities available-for-sale as described in
              note 2(b). For traditional life insurance products, these deferred
              policy acquisition costs are predominantly being amortized with
              interest over the premium paying period of the related policies in
              proportion to the ratio of actual annual premium revenue to the
              anticipated total premium revenue. Such anticipated premium
              revenue was estimated using the same assumptions as were used for
              computing liabilities for future policy benefits.

         (e)  SEPARATE ACCOUNTS

              Separate account assets and liabilities represent contractholders'
              funds which have been segregated into accounts with specific
              investment objectives. For all but $1.12 billion and $915.4
              million of separate account assets at December 31, 2000 and 1999,
              respectively, the investment income and gains or losses of these
              accounts accrue directly to the contractholders. The activity of
              the separate accounts is not reflected in the consolidated
              statements of income and cash flows except for the fees the
              Company receives.

         (f)  FUTURE POLICY BENEFITS

              Future policy benefits for investment products in the accumulation
              phase, universal life insurance and variable universal life
              insurance policies have been calculated based on participants'
              contributions plus interest credited less applicable contract
              charges.

              Future policy benefits for traditional life insurance policies
              have been calculated by the net level premium method using
              interest rates varying from 6.0% to 10.5% and estimates of
              mortality, morbidity, investment yields and withdrawals which were
              used or which were being experienced at the time the policies were
              issued.

         (g)  PARTICIPATING BUSINESS

              Participating business represents approximately 21% in 2000 (29%
              in 1999 and 40% in 1998) of the Company's life insurance in force,
              66% in 2000 (69% in 1999 and 74% in 1998) of the number of life
              insurance policies in force, and 8% in 2000 (13% in 1999 and 14%
              in 1998) of life insurance statutory premiums. The provision for
              policyholder dividends is based on current dividend scales and is
              included in "Future policy benefits and claims" in the
              accompanying consolidated balance sheets.

         (h)  FEDERAL INCOME TAX

              The Company files a consolidated federal income tax return with
              Nationwide Mutual Insurance Company (NMIC), the majority
              shareholder of NFS. The members of the consolidated tax return
              group have a tax sharing arrangement which provides, in effect,
              for each member to bear essentially the same federal income tax
              liability as if separate tax returns were filed.



                                      F-8
<PAGE>   34

               NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
       (a wholly owned subsidiary of Nationwide Financial Services, Inc.)

              Notes to Consolidated Financial Statements, Continued


              The Company utilizes the asset and liability method of accounting
              for income tax. Under this method, deferred tax assets and
              liabilities are recognized for the future tax consequences
              attributable to differences between the financial statement
              carrying amounts of existing assets and liabilities and their
              respective tax bases and operating loss and tax credit
              carryforwards. Deferred tax assets and liabilities are measured
              using enacted tax rates expected to apply to taxable income in the
              years in which those temporary differences are expected to be
              recovered or settled. Under this method, the effect on deferred
              tax assets and liabilities of a change in tax rates is recognized
              in income in the period that includes the enactment date.
              Valuation allowances are established when necessary to reduce the
              deferred tax assets to the amounts expected to be realized.

         (i)  REINSURANCE CEDED

              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 on a gross basis.

         (j)  RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

              In June 1998, the Financial Accounting Standards Board (FASB)
              issued Statement of Financial Accounting Standards (SFAS) No. 133,
              Accounting for Derivative Instruments and Hedging Activities (SFAS
              133). SFAS 133, as amended by SFAS 137, Accounting for Derivative
              Instruments and Hedging Activities - Deferral of the Effective
              Date of FASB Statement No. 133 and SFAS 138, Accounting for
              Certain Derivative Instruments and Certain Hedging Activities, is
              effective for the Company as of January 1, 2001.

              SFAS 133 establishes accounting and reporting standards for
              derivative instruments and hedging activities. It requires an
              entity to recognize all derivatives as either assets or
              liabilities on the balance sheet and measure those instruments at
              fair value.

              As of January 1, 2001, the Company had $755.4 million notional
              amount of freestanding derivatives with a market value of ($7.0)
              million. All other derivatives qualified for hedge accounting
              under SFAS 133. Adoption of SFAS 133 will result in the Company
              recording a net transition adjustment loss of $4.8 million (net of
              related income tax of $2.6 million) in net income. In addition, a
              net transition adjustment loss of $3.6 million (net of related
              income tax of $2.0 million) will be recorded in accumulated other
              comprehensive income at January 1, 2001. The adoption of SFAS 133
              will result in the Company derecognizing $17.0 million of deferred
              assets related to hedges, recognizing $10.9 million of additional
              derivative instrument liabilities and $1.3 million of additional
              firm commitment assets, while also decreasing hedged future policy
              benefits by $3.0 million and increasing the carrying amount of
              hedged investments by $10.6 million. Further, the adoption of SFAS
              133 will result in the Company reporting total derivative
              instrument assets and liabilities of $44.8 million and $107.1
              million, respectively.

              Also, the Company expects that the adoption of SFAS 133 will
              increase the volatility of reported earnings and other
              comprehensive income. The amount of volatility will vary with the
              level of derivative and hedging activities and fluctuations in
              market interest rates and foreign currency exchange rates during
              any period.

         (k)  RECLASSIFICATION
              Certain items in the 1999 and 1998 consolidated financial
              statements have been reclassified to conform to the 2000
              presentation.


                                      F-9
<PAGE>   35
               NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
       (a wholly owned subsidiary of Nationwide Financial Services, Inc.)

             Notes to Consolidated Financial Statements, Continued



(3)      INVESTMENTS

         The amortized cost, gross unrealized gains and losses and estimated
         fair value of securities available-for-sale as of December 31, 2000 and
         1999 were:

<TABLE>
<CAPTION>
                                                                                          Gross         Gross
                                                                         Amortized      unrealized    unrealized     Estimated
         (in millions)                                                      cost          gains         losses       fair value
         =========================================================================================================================
<S>                                                                       <C>             <C>           <C>           <C>
         December 31, 2000
         Fixed maturity securities:
             U.S. Treasury securities and obligations of U.S.
               Government corporations and agencies                       $    277.5      $  33.4       $   0.1       $    310.8
             Obligations of states and political subdivisions                    8.6          0.2           -                8.8
             Debt securities issued by foreign governments                      94.1          1.5           0.1             95.5
             Corporate securities                                            9,758.3        235.0         135.1          9,858.2
             Mortgage-backed securities - U.S. Government backed             2,719.1         46.1           3.8          2,761.4
             Asset-backed securities                                         2,388.2         36.3          16.2          2,408.3
         -------------------------------------------------------------------------------------------------------------------------
                 Total fixed maturity securities                            15,245.8        352.5         155.3         15,443.0
           Equity securities                                                   103.5          9.5           4.0            109.0
         -------------------------------------------------------------------------------------------------------------------------
                                                                          $ 15,349.3      $ 362.0       $ 159.3       $ 15,552.0
         =========================================================================================================================

         December 31, 1999
         Fixed maturity securities:
             U.S. Treasury securities and obligations of U.S.
               Government corporations and agencies                     $      428.4     $   23.4     $     2.4     $      449.4
             Obligations of states and political subdivisions                    0.8          -             -                0.8
             Debt securities issued by foreign governments                     110.6          0.6           0.8            110.4
             Corporate securities                                            9,390.4        110.3         179.9          9,320.8
             Mortgage-backed securities - U.S. Government backed             3,423.1         25.8          30.3          3,418.6
             Asset-backed securities                                         2,024.0          8.6          38.6          1,994.0
         -------------------------------------------------------------------------------------------------------------------------
                 Total fixed maturity securities                            15,377.3        168.7         252.0         15,294.0
           Equity securities                                                    84.9         12.4           4.4             92.9
         -------------------------------------------------------------------------------------------------------------------------
                                                                          $ 15,462.2      $ 181.1       $ 256.4       $ 15,386.9
         =========================================================================================================================
</TABLE>

         The amortized cost and estimated fair value of fixed maturity
         securities available-for-sale as of December 31, 2000, by expected
         maturity, are shown below. Expected maturities will differ from
         contractual maturities because borrowers may have the right to call or
         prepay obligations with or without call or prepayment penalties.



                                      F-10
<PAGE>   36
               NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
       (a wholly owned subsidiary of Nationwide Financial Services, Inc.)

              Notes to Consolidated Financial Statements, Continued


<TABLE>
<CAPTION>

                                                                                Amortized            Estimated
         (in millions)                                                             cost             fair value
         ===========================================================================================================
        <S>                                                                     <C>                <C>
         Fixed maturity securities available for sale:
          Due in one year or less                                               $  1,288.7         $  1,287.0
          Due after one year through five years                                    4,577.9            4,572.4
          Due after five years through ten years                                   3,071.3            3,136.6
          Due after ten years                                                      1,200.6            1,277.3
         -----------------------------------------------------------------------------------------------------------
                                                                                  10,138.5           10,273.3
           Mortgage-backed securities                                              2,719.1            2,761.4
           Asset-backed securities                                                 2,388.2            2,408.3
         -----------------------------------------------------------------------------------------------------------
                                                                                $ 15,245.8         $ 15,443.0
         ===========================================================================================================

         The components of unrealized gains (losses) on securities available-for-sale, net, were as follows as of
         each December 31:

<CAPTION>
         (in millions)
                                                                                      2000           1999
         ===========================================================================================================

         <S>                                                                    <C>             <C>
          Gross unrealized gains (losses)                                       $    202.7      $    (75.3)
          Adjustment to deferred policy acquisition costs                            (23.2)           50.9
          Deferred federal income tax                                                (62.8)            8.5
         -----------------------------------------------------------------------------------------------------------
                                                                                $    116.7      $    (15.9)
         ===========================================================================================================

         An analysis of the change in gross unrealized gains (losses) on securities available-for-sale for the years
         ended December 31:

<CAPTION>
         (in millions)                                                      2000            1999             1998
         ===========================================================================================================
<S>                                                                        <C>            <C>               <C>
         Securities available-for-sale:
           Fixed maturity securities                                       $ 280.5        $ (607.1)         $ 52.6
           Equity securities                                                  (2.5)           (8.8)            4.2
         -----------------------------------------------------------------------------------------------------------
                                                                           $ 278.0        $ (615.9)         $ 56.8
         ===========================================================================================================
</TABLE>

         Proceeds from the sale of securities available-for-sale during 2000,
         1999 and 1998 were $602.0 million, $513.1 million and $610.5 million,
         respectively. During 2000, gross gains of $12.1 million ($10.4 million
         and $9.0 million in 1999 and 1998, respectively) and gross losses of
         $25.6 million ($28.0 million and $7.6 million in 1999 and 1998,
         respectively) were realized on those sales.

         The Company had $13.0 million and $15.6 million of real estate
         investments at December 31, 2000 and 1999, respectively, that were
         non-income producing the preceding twelve months.

         Real estate is presented at cost less accumulated depreciation of $25.7
         million as of December 31, 2000 ($24.8 million as of December 31, 1999)
         and valuation allowances of $5.2 million as of December 31, 2000 ($5.5
         million as of December 31, 1999).




                                      F-11
<PAGE>   37
               NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
       (a wholly owned subsidiary of Nationwide Financial Services, Inc.)

              Notes to Consolidated Financial Statements, Continued


         The recorded investment of mortgage loans on real estate considered to
         be impaired was $9.8 million as of December 31, 2000 ($3.7 million as
         of December 31, 1999), which includes $5.3 million (none as of December
         31, 1999) of impaired mortgage loans on real estate for which the
         related valuation allowance was $1.6 million (none as of December 31,
         1999) and $4.5 million ($3.7 million as of December 31, 1999) of
         impaired mortgage loans on real estate for which there was no valuation
         allowance. During 2000, the average recorded investment in impaired
         mortgage loans on real estate was $7.7 million ($3.7 million in 1999)
         and interest income recognized on those loans totaled $0.4 million in
         2000 (none in 1999) which is equal to interest income recognized using
         a cash-basis method of income recognition.

         Activity in the valuation allowance account for mortgage loans on real
         estate is summarized for the years ended December 31:
<TABLE>
<CAPTION>

         (in millions)                                                    2000            1999            1998
         ===========================================================================================================
<S>                                                                     <C>              <C>             <C>
         Allowance, beginning of year                                   $  44.4          $ 42.4          $ 42.5
           Additions (reductions) charged to operations                     4.1             0.7            (0.1)
           Direct write-downs charged against the allowance                (3.2)            --              --
           Allowance on acquired mortgage loans                              --             1.3             --
         -----------------------------------------------------------------------------------------------------------
              Allowance, end of year                                    $  45.3          $ 44.4          $ 42.4
         ===========================================================================================================

         An analysis of investment income by investment type follows for the years ended December 31:
<CAPTION>

         (in millions)                                                    2000            1999            1998
         ===========================================================================================================
<S>                                                                    <C>             <C>            <C>
         Gross investment income:
           Securities available-for-sale:
             Fixed maturity securities                                 $ 1,095.5       $ 1,031.3      $    982.5
             Equity securities                                               2.6             2.5             0.8
           Mortgage loans on real estate                                   494.5           460.4           458.9
           Real estate                                                      32.2            28.8            40.4
           Short-term investments                                           27.0            18.6            17.8
           Other                                                            53.2            26.5            30.7
         -----------------------------------------------------------------------------------------------------------
               Total investment income                                   1,705.0         1,568.1         1,531.1
         Less investment expenses                                           50.1            47.3            49.5
         -----------------------------------------------------------------------------------------------------------
               Net investment income                                   $ 1,654.9       $ 1,520.8       $ 1,481.6
         ===========================================================================================================

         An analysis of realized gains (losses) on investments, net of valuation allowances, by investment type
         follows for the years ended December 31:
<CAPTION>

         (in millions)                                                    2000            1999            1998
         ===========================================================================================================

         Securities available-for-sale:
           Fixed maturity securities                                     $ (18.2)        $ (25.0)        $  (0.7)
           Equity securities                                                 4.7             7.4             2.1
         Mortgage loans on real estate                                      (4.2)           (0.6)            3.9
         Real estate and other                                              (1.7)            6.6            23.1
         -----------------------------------------------------------------------------------------------------------
                                                                         $ (19.4)        $ (11.6)         $ 28.4
         ===========================================================================================================
</TABLE>

         Fixed maturity securities with an amortized cost of $12.8 million and
         $9.1 million were on deposit with various regulatory agencies as
         required by law as of December 31, 2000 and 1999, respectively.

                                      F-12

<PAGE>   38
               NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
       (a wholly owned subsidiary of Nationwide Financial Services, Inc.)

              Notes to Consolidated Financial Statements, Continued


(4)      SHORT-TERM BORROWINGS

         NLIC established a $300 million commercial paper program in October
         2000. Borrowings under the commercial paper program are unsecured and
         are issued for terms of 364 days or less. As of December 31, 2000 the
         Company had $118.7 million of commercial paper outstanding at an
         average effective rate of 6.48%. See also note 13.

(5)      DERIVATIVE FINANCIAL INSTRUMENTS

         The Company uses derivative financial instruments, principally interest
         rate swaps, interest rate futures contracts and foreign currency swaps,
         to manage market risk exposures associated with changes in interest
         rates and foreign currency exchange rates. Provided they meet specific
         criteria, interest rate and foreign currency swaps and futures are
         considered hedges and are accounted for under the accrual method and
         deferral method, respectively. The Company has no significant
         derivative positions that are not considered hedges. See note 2 (j)
         regarding accounting for derivatives under SFAS 133 effective January
         1, 2001.

         Interest rate swaps are primarily used to convert specific investment
         securities and interest bearing policy liabilities from a fixed-rate to
         a floating-rate basis. Amounts receivable or payable under these
         agreements are recognized as an adjustment to net investment income or
         interest credited to policyholder account balances consistent with the
         nature of the hedged item. Currently, changes in fair value of the
         interest rate swap agreements are not recognized on the balance sheet,
         except for interest rate swaps designated as hedges of fixed maturity
         securities available-for-sale and cross currency swaps hedging foreign
         denominated debt instruments, for which changes in fair values are
         reported in accumulated other comprehensive income.

         Interest rate futures contracts are primarily used to hedge the risk of
         adverse interest rate changes related to the Company's mortgage loan
         commitments and anticipated purchases of fixed rate investments. Gains
         and losses are deferred and, at the time of closing, reflected as an
         adjustment to the carrying value of the related mortgage loans or
         investments. The carrying value adjustments are amortized into net
         investment income over the life of the related mortgage loans or
         investments.

         Foreign currency swaps are used to convert cash flows from specific
         policy liabilities and investments denominated in foreign currencies
         into U.S. dollars at specified exchange rates. Amounts receivable or
         payable under these agreements are recognized as an adjustment to net
         investment income or interest credited to policyholder account balances
         consistent with the nature of the hedged item. Gains and losses on
         foreign currency swaps are recorded in earnings based on the related
         spot foreign exchange rate at the end of the reporting period. Gains
         and losses on these contracts offset those recorded as a result of
         translating the hedged foreign currency denominated liabilities and
         investments to U.S. dollars.






                                      F-13











<PAGE>   39
               NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
       (a wholly owned subsidiary of Nationwide Financial Services, Inc.)

              Notes to Consolidated Financial Statements, Continued


         The notional amount of derivative financial instruments outstanding as
         of December 31, 2000 and 1999 were as follows:

<TABLE>
<CAPTION>

         (in millions )                                                                   2000            1999
         ===========================================================================================================
<S>                                                                                    <C>              <C>
          Interest rate swaps
            Pay fixed/receive variable rate swaps hedging investments                  $    934.8       $  362.7
            Pay variable/receive fixed rate swaps hedging investments                        98.8           28.5
            Pay variable/receive variable rate swaps hedging investments                    184.0            9.0
            Other contracts hedging investments                                              20.4           10.1
            Pay variable/receive fixed rate swaps hedging liabilities                       965.3          577.2
            Pay variable/receive variable rate swaps hedging liabilities                    546.9           --

         Foreign currency swaps
             Hedging foreign currency denominated investments                          $     30.5       $   14.8
             Hedging foreign currency denominated liabilities                             1,542.2          577.2

         Interest rate futures contracts                                               $  5,659.8       $  781.6
         -----------------------------------------------------------------------------------------------------------


<CAPTION>

(6)      FEDERAL INCOME TAX

         The tax effects of temporary differences that give rise to significant components of the net deferred tax
         liability as of December 31, 2000 and 1999 were as follows:

         (in millions)                                                                    2000            1999
         ===========================================================================================================

<S>                                                                                    <C>              <C>
         Deferred tax assets:
           Fixed maturity securities                                                   $   --           $    5.3
           Future policy benefits                                                          34.7            149.5
           Liabilities in separate accounts                                               462.7            373.6
           Mortgage loans on real estate and real estate                                   18.8             18.5
           Other assets and other liabilities                                              40.3             51.1
         -----------------------------------------------------------------------------------------------------------
             Total gross deferred tax assets                                              556.5            598.0
           Valuation allowance                                                             (7.0)            (7.0)
         -----------------------------------------------------------------------------------------------------------
             Net deferred tax assets                                                      549.5            591.0
         -----------------------------------------------------------------------------------------------------------

         Deferred tax liabilities:
           Fixed maturity securities                                                       98.8             --
           Equity securities and other long-term investments                                6.4             10.8
           Deferred policy acquisition costs                                              783.7            724.4
           Deferred tax on realized investment gains                                       29.0             34.7
           Other                                                                           38.1             26.5
         -----------------------------------------------------------------------------------------------------------
             Total gross deferred tax liabilities                                         956.0            796.4
         -----------------------------------------------------------------------------------------------------------
             Net deferred tax liability                                                $  406.5         $  205.4
         ===========================================================================================================
</TABLE>

         In assessing the realizability of deferred tax assets, management
         considers whether it is more likely than not that some portion of the
         total gross deferred tax assets will not be realized. Future taxable
         amounts or recovery of federal income tax paid within the statutory
         carryback period can offset nearly all future deductible amounts. The
         valuation allowance was unchanged for the years ended December 31,
         2000, 1999 and 1998.


                                      F-14
<PAGE>   40
               NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
       (a wholly owned subsidiary of Nationwide Financial Services, Inc.)

              Notes to Consolidated Financial Statements, Continued


         The Company's current federal income tax liability was $108.9 million
         and $104.7 million as of December 31, 2000 and 1999, respectively.

         Federal income tax expense for the years ended December 31 was as
         follows:
<TABLE>
<CAPTION>

         (in millions)                                                    2000            1999            1998
         ===========================================================================================================
<S>                                                                     <C>             <C>              <C>
         Currently payable                                              $   78.0        $   53.6         $ 186.1
         Deferred tax expense                                              129.7           147.8             4.3
         -----------------------------------------------------------------------------------------------------------
                                                                         $ 207.7         $ 201.4         $ 190.4
         ===========================================================================================================
</TABLE>

         Total federal income tax expense for the years ended December 31, 2000,
         1999 and 1998 differs from the amount computed by applying the U.S.
         federal income tax rate to income before tax as follows:

<TABLE>
<CAPTION>
                                                           2000                     1999                     1998
                                                   ----------------------   ----------------------   ----------------------
         (in millions)                                Amount        %          Amount        %          Amount        %
         ==================================================================================================================
<S>                                                    <C>         <C>          <C>         <C>          <C>         <C>
         Computed (expected) tax expense               $239.1      35.0         $212.3      35.0         $195.0      35.0
         Tax exempt interest and dividends
           received deduction                           (24.7)     (3.6)          (7.3)     (1.2)          (4.9)     (0.9)
         Income tax credits                              (8.0)     (1.2)          (4.3)     (0.7)           -         -
         Other, net                                       1.3       0.2            0.7       0.1            0.3       0.1
         ------------------------------------------------------------------------------------------------------------------
             Total (effective rate of each year)       $207.7      30.4         $201.4      33.2         $190.4      34.2
         ==================================================================================================================
</TABLE>

         Total federal income tax paid was $74.6 million, $29.8 million and
         $173.4 million during the years ended December 31, 2000, 1999 and 1998,
         respectively.

(7)      COMPREHENSIVE INCOME

         Comprehensive Income includes net income as well as certain items that
         are reported directly within separate components of shareholder's
         equity that bypass net income. Currently, the Company's only component
         of Other Comprehensive Income is unrealized gains (losses) on
         securities available-for-sale. The related before and after federal tax
         amounts for the years ended December 31, 2000, 1999 and 1998 were as
         follows:
<TABLE>
<CAPTION>

         (in millions)                                                    2000            1999            1998
         ===========================================================================================================
<S>                                                                      <C>            <C>               <C>
         Unrealized gains (losses) on securities available-for-sale arising
            during the period:
            Gross                                                        $ 264.5        $ (665.3)         $ 58.2
            Adjustment to deferred policy acquisition costs                (74.0)          167.5           (12.9)
            Related federal income tax (expense) benefit                   (66.7)          171.4           (15.9)
         -----------------------------------------------------------------------------------------------------------
               Net                                                         123.8          (326.4)           29.4
         -----------------------------------------------------------------------------------------------------------

         Reclassification adjustment for net (gains) losses on securities
            available-for-sale realized during the period:
            Gross                                                           13.5            17.6            (1.4)
            Related federal income tax expense (benefit)                    (4.7)           (6.2)            0.5
         -----------------------------------------------------------------------------------------------------------
               Net                                                           8.8            11.4            (0.9)
         -----------------------------------------------------------------------------------------------------------
         Total Other Comprehensive Income (Loss)                         $ 132.6        $ (315.0)         $ 28.5
         ===========================================================================================================
</TABLE>
                                      F-15


<PAGE>   41
               NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
       (a wholly owned subsidiary of Nationwide Financial Services, Inc.)

              Notes to Consolidated Financial Statements, Continued


(8)      FAIR VALUE OF FINANCIAL INSTRUMENTS

         The following disclosures summarize the carrying amount and estimated
         fair value of the Company's financial instruments. Certain assets and
         liabilities are specifically excluded from the disclosure requirements
         of financial instruments. Accordingly, the aggregate fair value amounts
         presented do not represent the underlying value of the Company.

         The fair value of a financial instrument is defined as the amount at
         which the financial instrument could be exchanged in a current
         transaction between willing parties. In cases where quoted market
         prices are not available, fair value is to be based on estimates using
         present value or other valuation techniques. Many of the Company's
         assets and liabilities subject to the disclosure requirements are not
         actively traded, requiring fair values to be estimated by management
         using present value or other valuation techniques. These techniques are
         significantly affected by the assumptions used, including the discount
         rate and estimates of future cash flows. Although fair value estimates
         are calculated using assumptions that management believes are
         appropriate, changes in assumptions could cause these estimates to vary
         materially. In that regard, the derived fair value estimates cannot be
         substantiated by comparison to independent markets and, in many cases,
         could not be realized in the immediate settlement of the instruments.

         Although insurance contracts, other than policies such as annuities
         that are classified as investment contracts, are specifically exempted
         from the disclosure requirements, estimated fair value of policy
         reserves on life insurance contracts is provided to make the fair value
         disclosures more meaningful.

         The tax ramifications of the related unrealized gains and losses can
         have a significant effect on fair value estimates and have not been
         considered in the estimates.

         The Company in estimating its fair value disclosures used the following
         methods and assumptions:

              FIXED MATURITY AND EQUITY SECURITIES: The fair value for fixed
              maturity securities is based on quoted market prices, where
              available. For fixed maturity securities not actively traded, fair
              value is estimated using values obtained from independent pricing
              services or, in the case of private placements, is estimated by
              discounting expected future cash flows using a current market rate
              applicable to the yield, credit quality and maturity of the
              investments. The fair value for equity securities is based on
              quoted market prices. The carrying amount and fair value for fixed
              maturity and equity securities exclude the fair value of
              derivatives contracts designated as hedges of fixed maturity and
              equity securities.

              MORTGAGE LOANS ON REAL ESTATE, NET: The fair value for mortgage
              loans on real estate is estimated using discounted cash flow
              analyses, using interest rates currently being offered for similar
              loans to borrowers with similar credit ratings. Loans with similar
              characteristics are aggregated for purposes of the calculations.
              Fair value for impaired mortgage loans is the estimated fair value
              of the underlying collateral.

              POLICY LOANS, SHORT-TERM INVESTMENTS AND CASH: The carrying amount
              reported in the consolidated balance sheets for these instruments
              approximates their fair value.

              SEPARATE ACCOUNT ASSETS AND LIABILITIES: The fair value of assets
              held in separate accounts is based on quoted market prices. The
              fair value of liabilities related to separate accounts is the
              amount payable on demand, which is net of certain surrender
              charges.

              INVESTMENT CONTRACTS: The fair value for the Company's liabilities
              under investment type contracts is based on one of two methods.
              For investment contracts without defined maturities, fair value is
              the amount payable on demand. For investment contracts with known
              or determined maturities, fair value is estimated using discounted
              cash flow analysis. Interest rates used are similar to currently
              offered contracts with maturities consistent with those remaining
              for the contracts being valued.




                                      F-16
<PAGE>   42
               NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
       (a wholly owned subsidiary of Nationwide Financial Services, Inc.)

              Notes to Consolidated Financial Statements, Continued


              POLICY RESERVES ON LIFE INSURANCE CONTRACTS: Included are
              disclosures for individual life insurance, universal life
              insurance and supplementary contracts with life contingencies for
              which the estimated fair value is the amount payable on demand.
              Also included are disclosures for the Company's limited payment
              policies, which the Company has used discounted cash flow analyses
              similar to those used for investment contracts with known
              maturities to estimate fair value.

              SHORT-TERM BORROWINGS: The carrying amount reported in the
              consolidated balance sheets for these instruments approximates
              their fair value.

              COMMITMENTS TO EXTEND CREDIT: Commitments to extend credit have
              nominal fair value because of the short-term nature of such
              commitments. See note 9.

              FUTURES CONTRACTS: The fair value for futures contracts is
              based on quoted market prices.

              INTEREST RATE AND FOREIGN CURRENCY SWAPS: The fair value for
              interest rate and foreign currency swaps are calculated with
              pricing models using current rate assumptions.

         Carrying amount and estimated fair value of financial instruments
         subject to disclosure requirements and policy reserves on life
         insurance contracts were as follows as of December 31:
<TABLE>
<CAPTION>

                                                                    2000                             1999
                                                       -------------------------------  -------------------------------
                                                          Carrying       Estimated         Carrying       Estimated
         (in millions)                                     amount        fair value         amount        fair value
         ==============================================================================================================
<S>                                                      <C>             <C>              <C>             <C>
         Assets:
           Investments:
             Securities available-for-sale:
               Fixed maturity securities                 $ 15,451.3      $ 15,451.3       $ 15,289.7      $ 15,289.7
               Equity securities                              109.0           109.0             92.9            92.9
             Mortgage loans on real estate, net             6,168.3         6,327.8          5,786.3         5,745.5
             Policy loans                                     562.6           562.6            519.6           519.6
             Short-term investments                           442.6           442.6            416.0           416.0
           Cash                                                18.4            18.4              4.8             4.8
           Assets held in separate accounts                65,897.2        65,897.2         67,135.1        67,135.1

         Liabilities:
           Investment contracts                           (16,815.3)      (15,979.8)       (16,977.7)      (16,428.6)
           Policy reserves on life insurance contracts     (5,368.4)       (5,128.5)        (4,883.9)       (4,607.9)
           Short-term borrowings                             (118.7)         (118.7)             --              --
           Liabilities related to separate accounts       (65,897.2)      (64,237.6)       (67,135.1)      (66,318.7)

         Derivative financial instruments:
           Interest rate swaps hedging assets                  (8.3)           (8.3)             4.3             4.3
           Interest rate swaps hedging liabilities            (26.2)          (32.2)           (11.5)          (24.2)
           Foreign currency swaps                             (24.3)          (30.9)           (11.8)          (11.8)
           Futures contracts                                  (16.0)          (16.0)             1.3             1.3
         --------------------------------------------------------------------------------------------------------------
</TABLE>

(9)      RISK DISCLOSURES

              The following is a description of the most significant risks
              facing life insurers and how the Company mitigates those risks:





                                      F-17
<PAGE>   43
               NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
       (a wholly owned subsidiary of Nationwide Financial Services, Inc.)

              Notes to Consolidated Financial Statements, Continued


         CREDIT RISK: The risk that issuers of securities owned by the Company
         or mortgagors on mortgage loans on real estate owned by the Company
         will default or that other parties, including reinsurers, which owe the
         Company money, will not pay. The Company minimizes this risk by
         adhering to a conservative investment strategy, by maintaining
         reinsurance and credit and collection policies and by providing for any
         amounts deemed uncollectible.

         INTEREST RATE RISK: The risk that interest rates will change and cause
         a decrease in the value of an insurer's investments. This change in
         rates may cause certain interest-sensitive products to become
         uncompetitive or may cause disintermediation. The Company mitigates
         this risk by charging fees for non-conformance with certain policy
         provisions, by offering products that transfer this risk to the
         purchaser and/or by attempting to match the maturity schedule of its
         assets with the expected payouts of its liabilities. To the extent that
         liabilities come due more quickly than assets mature, an insurer could
         potentially have to borrow funds or sell assets prior to maturity and
         potentially recognize a gain or loss.

         LEGAL/REGULATORY RISK: The risk that changes in the legal or regulatory
         environment in which an insurer operates will result in increased
         competition, reduced demand for a company's products, or create
         additional expenses not anticipated by the insurer in pricing its
         products. The Company mitigates this risk by offering a wide range of
         products and by operating throughout the United States, thus reducing
         its exposure to any single product or jurisdiction and also by
         employing underwriting practices which identify and minimize the
         adverse impact of this risk.

         FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK: The Company is a
         party to financial instruments with off-balance-sheet risk in the
         normal course of business through management of its investment
         portfolio. These financial instruments include commitments to extend
         credit in the form of loans and derivative financial instruments. These
         instruments involve, to varying degrees, elements of credit risk in
         excess of amounts recognized on the consolidated balance sheets.

         Commitments to fund fixed rate mortgage loans on real estate are
         agreements to lend to a borrower, and are subject to conditions
         established in the contract. Commitments generally have fixed
         expiration dates or other termination clauses and may require payment
         of a deposit. Commitments extended by the Company are based on
         management's case-by-case credit evaluation of the borrower and the
         borrower's loan collateral. The underlying mortgage property represents
         the collateral if the commitment is funded. The Company's policy for
         new mortgage loans on real estate is to lend no more than 75% of
         collateral value. Should the commitment be funded, the Company's
         exposure to credit loss in the event of nonperformance by the borrower
         is represented by the contractual amounts of these commitments less the
         net realizable value of the collateral. The contractual amounts also
         represent the cash requirements for all unfunded commitments.
         Commitments on mortgage loans on real estate of $360.6 million
         extending into 2001 were outstanding as of December 31, 2000. The
         Company also had $55.6 million of commitments to purchase fixed
         maturity securities outstanding as of December 31, 2000.

         Notional amounts of derivative financial instruments, primarily
         interest rate swaps, interest rate futures contracts and foreign
         currency swaps, significantly exceed the credit risk associated with
         these instruments and represent contractual balances on which
         calculations of amounts to be exchanged are based. Credit exposure is
         limited to the sum of the aggregate fair value of positions that have
         become favorable to NLIC, including accrued interest receivable due
         from counterparties. Potential credit losses are minimized through
         careful evaluation of counterparty credit standing, selection of
         counterparties from a limited group of high quality institutions,
         collateral agreements and other contract provisions. As of December 31,
         2000, NLIC's credit risk from these derivative financial instruments
         was $44.8 million.

         SIGNIFICANT CONCENTRATIONS OF CREDIT RISK: The Company grants mainly
         commercial mortgage loans on real estate to customers throughout the
         United States. The Company has a diversified portfolio with no more
         than 22% (23% in 1999) in any geographic area and no more than 1% (2%
         in 1999) with any one borrower as of December 31, 2000. As of December
         31, 2000, 36% (39% in 1999) of the remaining principal balance of the
         Company's commercial mortgage loan portfolio financed retail
         properties.




                                      F-18
<PAGE>   44
               NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
       (a wholly owned subsidiary of Nationwide Financial Services, Inc.)

              Notes to Consolidated Financial Statements, Continued


         REINSURANCE: The Company has entered into reinsurance contracts to cede
         a portion of its individual annuity business to The Franklin Life
         Insurance Company (Franklin) and beginning in 2000 with Security
         Benefit Life Insurance Company (SBL). Total recoveries due from
         Franklin were $97.7 million and $143.6 million as of December 31, 2000
         and 1999, respectively, while amounts due from SBL totaled $45.4
         million at December 31, 2000. The contracts are immaterial to the
         Company's results of operations. The ceding of risk does not discharge
         the original insurer from its primary obligation to the policyholder.
         Under the terms of the contract, Franklin and SBL have each established
         a trust as collateral for the recoveries. The trust assets are invested
         in investment grade securities, the market value of which must at all
         times be greater than or equal to 102% and 100% of the reinsured
         reserves for Franklin and SBL, respectively.

(10)     PENSION PLAN AND POSTRETIREMENT BENEFITS OTHER THAN PENSIONS

         The Company is a participant, together with other affiliated companies,
         in a pension plan covering all employees who have completed at least
         one year of service and who have met certain age requirements. Plan
         contributions are invested in a group annuity contract of NLIC.
         Benefits are based upon the highest average annual salary of a
         specified number of consecutive years of the last ten years of service.
         The Company funds pension costs accrued for direct employees plus an
         allocation of pension costs accrued for employees of affiliates whose
         work efforts benefit the Company.

         Pension cost (benefit) charged to operations by the Company during the
         years ended December 31, 2000, 1999 and 1998 were $1.9 million, $(8.3)
         million and $2.0 million, respectively. The Company has recorded a
         prepaid pension asset of $13.6 million and $13.3 million as of December
         31, 2000 and 1999, respectively.

         In addition to the defined benefit pension plan, the Company, together
         with other affiliated companies, participates in life and health care
         defined benefit plans for qualifying retirees. Postretirement life and
         health care benefits are contributory and generally available to full
         time employees who have attained age 55 and have accumulated 15 years
         of service with the Company after reaching age 40. Postretirement
         health care benefit contributions are adjusted annually and contain
         cost-sharing features such as deductibles and coinsurance. In addition,
         there are caps on the Company's portion of the per-participant cost of
         the postretirement health care benefits. These caps can increase
         annually, but not more than three percent. The Company's policy is to
         fund the cost of health care benefits in amounts determined at the
         discretion of management. Plan assets are invested primarily in group
         annuity contracts of NLIC.

         The Company elected to immediately recognize its estimated accumulated
         postretirement benefit obligation (APBO), however, certain affiliated
         companies elected to amortize their initial transition obligation over
         periods ranging from 10 to 20 years.

         The Company's accrued postretirement benefit expense as of December 31,
         2000 and 1999 was $51.0 million and $49.6 million, respectively and the
         net periodic postretirement benefit cost (NPPBC) for 2000, 1999 and
         1998 was $3.8 million, $4.9 million and $4.1 million, respectively.












                                      F-19

<PAGE>   45
               NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
       (a wholly owned subsidiary of Nationwide Financial Services, Inc.)

              Notes to Consolidated Financial Statements, Continued


         Information regarding the funded status of the pension plan as a whole
         and the postretirement life and health care benefit plan as a whole as
         of December 31, 2000 and 1999 follows:
<TABLE>
<CAPTION>

                                                                        Pension Benefits          Postretirement Benefits
                                                                   ----------------------------  ---------------------------
         (in millions)                                                   2000         1999            2000          1999
         ===================================================================================================================
<S>                                                                  <C>           <C>            <C>           <C>
         Change in benefit obligation:
         Benefit obligation at beginning of year                     $ 1,811.4     $ 2,185.0      $    239.8    $    270.1
         Service cost                                                     81.4          80.0            12.2          14.2
         Interest cost                                                   125.3         109.9            18.7          17.6
         Actuarial loss (gain)                                            34.8         (95.0)           16.1         (64.4)
         Plan settlement                                                   --         (396.1)            --           --
         Benefits paid                                                   (71.2)        (72.4)          (10.4)        (11.0)
         Acquired companies                                                --            --              --           13.3
         -------------------------------------------------------------------------------------------------------------------
         Benefit obligation at end of year                             1,981.7       1,811.4           276.4         239.8
         -------------------------------------------------------------------------------------------------------------------

         Change in plan assets:
         Fair value of plan assets at beginning of year                2,247.6       2,541.9            91.3          77.9
         Actual return on plan assets                                    140.9         161.8            12.2           3.5
         Employer contribution                                             --           12.4            26.3          20.9
         Plan curtailment in 2000/settlement in 1999                      19.8        (396.1)            --            --
         Benefits paid                                                   (71.2)        (72.4)          (10.4)        (11.0)
         -------------------------------------------------------------------------------------------------------------------
         Fair value of plan assets at end of year                      2,337.1       2,247.6           119.4          91.3
         -------------------------------------------------------------------------------------------------------------------

         Funded status                                                   355.4         436.2          (157.0)       (148.5)
         Unrecognized prior service cost                                  25.0          28.2             --            --
         Unrecognized net gains                                         (311.7)       (402.0)          (34.1)        (46.7)
         Unrecognized net (asset) obligation at transition                (6.4)         (7.7)            1.0           1.1
         -------------------------------------------------------------------------------------------------------------------
         Prepaid (accrued) benefit cost                              $    62.3     $    54.7      $   (190.1)   $   (194.1)
         ===================================================================================================================
</TABLE>

         Assumptions used in calculating the funded status of the pension plan
         and postretirement life and health care benefit plan were as follows:
<TABLE>
<CAPTION>

                                                                       Pension Benefits          Postretirement Benefits
                                                                  ---------------------------   ---------------------------
                                                                      2000          1999            2000          1999
        ===================================================================================================================

<S>                                                                  <C>           <C>              <C>           <C>
        Weighted average discount rate                               6.75%         7.00%             7.50%         7.80%
        Rate of increase in future compensation levels               5.00%         5.25%              --            --
        Assumed health care cost trend rate:
              Initial rate                                             --            --             15.00%        15.00%
              Ultimate rate                                            --            --              5.50%        5.50%
              Uniform declining period                                 --            --             5 Years       5 Years
        -------------------------------------------------------------------------------------------------------------------
</TABLE>




                                      F-20
<PAGE>   46
               NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
       (a wholly owned subsidiary of Nationwide Financial Services, Inc.)

              Notes to Consolidated Financial Statements, Continued


         The components of net periodic pension cost for the pension plan as a
         whole for the years ended December 31, 2000, 1999 and 1998 were as
         follows:
<TABLE>
<CAPTION>

         (in millions)                                                  2000            1999            1998
         =========================================================================================================

<S>                                                                    <C>              <C>             <C>
         Service cost (benefits earned during the period)              $    81.4        $   80.0        $   87.6
         Interest cost on projected benefit obligation                     125.3           109.9           123.4
         Expected return on plan assets                                   (184.5)         (160.3)         (159.0)
         Recognized gains                                                  (11.8)           (9.1)           (3.8)
         Amortization of prior service cost                                  3.2             3.2             3.2
         Amortization of unrecognized transition obligation (asset)         (1.3)           (1.4)            4.2
         ---------------------------------------------------------------------------------------------------------
                                                                       $    12.3        $   22.3        $   55.6
         =========================================================================================================
</TABLE>

         Effective December 31, 1998, Wausau Service Corporation (WSC) ended its
         affiliation with Nationwide and employees of WSC ended participation in
         the plan resulting in a curtailment gain of $67.1 million. During 1999,
         the Plan transferred assets to settle its obligation related to WSC
         employees, resulting in a gain of $32.9 million. The spin-off of
         liabilities and assets was completed in the year 2000, resulting in an
         adjustment to the curtailment gain of $19.8 million.

         Assumptions used in calculating the net periodic pension cost for the
         pension plan were as follows:
<TABLE>
<CAPTION>

                                                                                    2000          1999          1998
         ================================================================================================================

<S>                                                                                 <C>           <C>           <C>
         Weighted average discount rate                                             7.00%         6.08%         6.00%
         Rate of increase in future compensation levels                             5.25%         4.33%         4.25%
         Expected long-term rate of return on plan assets                           8.25%         7.33%         7.25%
         ----------------------------------------------------------------------------------------------------------------

         The components of NPPBC for the postretirement benefit plan as a whole for the years ended December 31, 2000,
         1999 and 1998 were as follows:

<CAPTION>

         (in millions)                                                              2000          1999          1998
         ================================================================================================================
<S>                                                                                 <C>           <C>          <C>
         Service cost (benefits attributed to employee service during the year)     $ 12.2        $ 14.2       $   9.8
         Interest cost on accumulated postretirement benefit obligation               18.7          17.6          15.4
         Expected return on plan assets                                               (7.9)         (4.8)         (4.4)
         Amortization of unrecognized transition obligation of affiliates              0.6           0.6           0.2
         Net amortization and deferral                                                (1.3)         (0.5)          0.6
         ----------------------------------------------------------------------------------------------------------------
                                                                                    $ 22.3        $ 27.1        $ 21.6
         ================================================================================================================
</TABLE>


         Actuarial assumptions used for the measurement of the NPPBC for the
         postretirement benefit plan for 2000, 1999 and 1998 were as follows:
<TABLE>
<CAPTION>

                                                                                    2000          1999          1998
         ================================================================================================================

<S>                                                                                 <C>           <C>           <C>
         Discount rate                                                              7.80%         6.65%         6.70%
         Long-term rate of return on plan assets, net of tax in 1999 and 1998       8.30%         7.15%         5.83%
         Assumed health care cost trend rate:
            Initial rate                                                           15.00%        15.00%        12.00%
            Ultimate rate                                                           5.50%         5.50%         6.00%
            Uniform declining period                                               5 Years       5 Years      12 Years
         ----------------------------------------------------------------------------------------------------------------
</TABLE>



                                     F-21


<PAGE>   47
               NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
       (a wholly owned subsidiary of Nationwide Financial Services, Inc.)

              Notes to Consolidated Financial Statements, Continued



         Because current plan costs are very close to the employer dollar caps,
         the health care cost trend has an immaterial effect on plan obligations
         for the postretirement benefit plan as a whole. For this reason, the
         effect of a one percentage point increase or decrease in the assumed
         health care cost trend rate on the APBO as of December 31, 2000 and on
         the NPPBC for the year ended December 31, 2000 was not calculated.

(11)     SHAREHOLDER'S EQUITY, REGULATORY RISK-BASED CAPITAL, RETAINED EARNINGS
         AND DIVIDEND RESTRICTIONS

         Ohio, NLIC's and NLAIC's state of domicile, imposes minimum risk-based
         capital requirements that were developed by the NAIC. The formulas for
         determining the amount of risk-based capital 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 the company's regulatory total adjusted
         capital, as defined by the NAIC, to its authorized control level
         risk-based capital, as defined by the NAIC. Companies below specific
         trigger points or ratios are classified within certain levels, each of
         which requires specified corrective action. NLIC and NLAIC each exceed
         the minimum risk-based capital requirements.

         The statutory capital and surplus of NLIC as of December 31, 2000, 1999
         and 1998 was $1.28 billion, $1.35 billion and $1.32 billion,
         respectively. The statutory net income of NLIC for the years ended
         December 31, 2000, 1999 and 1998 was $158.7 million, $276.2 million and
         $171.0 million, respectively.

         The NAIC completed a project to codify statutory accounting principles
         (Codification), which is effective January 1, 2001 for NLIC and its
         insurance company subsidiary. The resulting change to NLIC's January 1,
         2001 surplus was an increase of approximately $80.0 million. The
         significant change for NLIC, as a result of Codification, was the
         recording of deferred taxes, which were not recorded prior to the
         adoption of Codification.

         The Company is limited in the amount of shareholder dividends it may
         pay without prior approval by the Department. As of December 31, 2000
         no dividends could be paid by NLIC without prior approval.

         In addition, the payment of dividends by NLIC may also be subject to
         restrictions set forth in the insurance laws of New York that limit the
         amount of statutory profits on NLIC's participating policies (measured
         before dividends to policyholders) that can inure to the benefit of the
         Company and its shareholders.

         The Company currently does not expect such regulatory requirements to
         impair its ability to pay operating expenses and shareholder dividends
         in the future.

(12)     TRANSACTIONS WITH AFFILIATES

         During second quarter 1999, the Company entered into a modified
         coinsurance arrangement to reinsure the 1999 operating results of an
         affiliated company, Employers Life Insurance Company of Wausau (ELOW)
         retroactive to January 1, 1999. In September 1999, NFS acquired ELOW
         for $120.8 million and immediately merged ELOW into NLIC terminating
         the modified coinsurance arrangement. Because ELOW was an affiliate,
         the Company accounted for the merger similar to poolings-of-interests;
         however, prior period financial statements were not restated due to
         immateriality. The reinsurance and merger combined contributed $1.46
         million to net income in 1999.




                                      F-22
<PAGE>   48
               NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
       (a wholly owned subsidiary of Nationwide Financial Services, Inc.)

              Notes to Consolidated Financial Statements, Continued


         The Company has a reinsurance agreement with NMIC whereby all of the
         Company's accident and health business is ceded to NMIC on a modified
         coinsurance basis. The agreement covers individual accident and health
         business for all periods presented and group and franchise accident and
         health business since July 1, 1999. Either party may terminate the
         agreement on January 1 of any year with prior notice. Prior to July 1,
         1999 group and franchise accident and health business and a block of
         group life insurance policies were ceded to ELOW under a modified
         coinsurance agreement. Under a modified coinsurance agreement, invested
         assets are retained by the ceding company and investment earnings are
         paid to the reinsurer. Under the terms of the Company's agreements, 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 original insurer from its
         primary obligation to the policyholder. The Company believes that the
         terms of the modified coinsurance agreements are consistent in all
         material respects with what the Company could have obtained with
         unaffiliated parties. Revenues ceded to NMIC and ELOW for the years
         ended December 31, 2000, 1999 and 1998 were $170.1 million, $193.0
         million, and $216.9 million, respectively, while benefits, claims and
         expenses ceded were $168.0 million, $197.3 million and $259.3 million,
         respectively.

         Pursuant to a cost sharing agreement among NMIC and certain of its
         direct and indirect subsidiaries, including the Company, NMIC provides
         certain operational and administrative services, such as sales support,
         advertising, personnel and general management services, to those
         subsidiaries. Expenses covered by such agreement are subject to
         allocation among NMIC and such subsidiaries. Measures used to allocate
         expenses among companies include individual employee estimates of time
         spent, special cost studies, salary expense, commission expense and
         other methods agreed to by the participating companies that are within
         industry guidelines and practices. In addition, beginning in 1999
         Nationwide Services Company, a subsidiary of NMIC, provides computer,
         telephone, mail, employee benefits administration, and other services
         to NMIC and certain of its direct and indirect subsidiaries, including
         the Company, based on specified rates for units of service consumed.
         For the years ended December 31, 2000, 1999 and 1998, the Company made
         payments to NMIC and Nationwide Services Company totaling $150.3
         million, $124.1 million, and $95.0 million, respectively. The Company
         does not believe that expenses recognized under these agreements are
         materially different than expenses that would have been recognized had
         the Company operated on a stand-alone basis.

         The Company leases office space from NMIC and certain of its
         subsidiaries. For the years ended December 31, 2000, 1999 and 1998, the
         Company made lease payments to NMIC and its subsidiaries of $14.1
         million, $9.9 million and $8.0 million, respectively.

         The Company also participates in intercompany repurchase agreements
         with affiliates whereby the seller will transfer securities to the
         buyer at a stated value. Upon demand or after a stated period, the
         seller will repurchase the securities at the original sales price plus
         a price differential. Transactions under the agreements during 2000,
         1999 and 1998 were not material. The Company believes that the terms of
         the repurchase agreements are materially consistent with what the
         Company could have obtained with unaffiliated parties.

         The Company and various affiliates entered into 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.
         Amounts on deposit with NCMC were $321.1 million and $411.7 million as
         of December 31, 2000 and 1999, respectively, and are included in
         short-term investments on the accompanying consolidated balance sheets.

         Certain annuity products are sold through affiliated companies, which
         are also subsidiaries of NFS. Total commissions and fees paid to these
         affiliates for the three years ended December 31, 2000 were $65.0
         million, $79.7 million and $74.9 million, respectively.



                                      F-23
<PAGE>   49
               NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
       (a wholly owned subsidiary of Nationwide Financial Services, Inc.)

              Notes to Consolidated Financial Statements, Continued


(13)     BANK LINES OF CREDIT

         Also available as a source of funds to the Company is a $1 billion
         revolving credit facility entered into by NFS, NLIC and NMIC. The
         facility is comprised of a five year $700 million agreement and a 364
         day $300 million agreement with a group of national financial
         institutions. The facility provides for several and not joint liability
         with respect to any amount drawn by any party. The facility provides
         covenants, including, but not limited to, requirements that NLIC
         maintain statutory surplus in excess of $935 million. The Company had
         no amounts outstanding under this agreement as of December 31, 2000. Of
         the total facility, $300 million is designated to back NLIC's $300
         million commercial paper program. Therefore, borrowing capacity under
         this facility would be reduced by the amount of any commercial paper
         outstanding.

(14)     CONTINGENCIES

         On October 29, 1998, the Company was named in a lawsuit filed in Ohio
         state court related to the sale of deferred annuity products for use as
         investments in tax-deferred contributory retirement plans (Mercedes
         Castillo v. Nationwide Financial Services, Inc., Nationwide Life
         Insurance Company and Nationwide Life and Annuity Insurance Company).
         On May 3, 1999, the complaint was amended to, among other things, add
         Marcus Shore as a second plaintiff. The amended complaint is brought as
         a class action on behalf of all persons who purchased individual
         deferred annuity contracts or participated in group annuity contracts
         sold by the Company and the other named Company affiliates which were
         used to fund certain tax-deferred retirement plans. The amended
         complaint seeks unspecified compensatory and punitive damages. No class
         has been certified. On June 11, 1999, the Company and the other named
         defendants filed a motion to dismiss the amended complaint. On March 8,
         2000, the court denied the motion to dismiss the amended complaint
         filed by the Company and other named defendants. The Company intends to
         defend this lawsuit vigorously.

(15)     SEGMENT INFORMATION

         The Company has redefined its business segments in order to align this
         disclosure with the way management currently views its core operations.
         This updated view better reflects the different economics of the
         Company's various businesses and also aligns well with the current
         market focus. As a result, the Company now reports three product
         segments: Individual Annuity, Institutional Products and Life
         Insurance. In addition, the Company reports certain other revenues and
         expenses in a Corporate segment. All 1999 and 1998 amounts have been
         restated to reflect the new business segments.

         The Individual Annuity segment consists of both variable and fixed
         annuity contracts. Individual annuity contracts provide the customer
         with tax-deferred accumulation of savings and flexible payout options
         including lump sum, systematic withdrawal or a stream of payments for
         life. In addition, variable annuity contracts provide the customer with
         access to a wide range of investment options and asset protection in
         the event of an untimely death, while fixed annuity contracts generate
         a return for the customer at a specified interest rate fixed for a
         prescribed period. The Company's individual annuity products consist of
         single premium deferred annuities, flexible premium deferred annuities
         and single premium immediate annuities.

         The Institutional Products segment is comprised of the Company's group
         pension and payroll deduction business, both public and private
         sectors, and medium-term note program. The public sector includes the
         457 business in the form of fixed and variable annuities. The private
         sector includes the 401(k) business generated through fixed and
         variable annuities.

         The Life Insurance segment consists of insurance products, including
         universal life insurance, corporate-owned life insurance and bank-owned
         life insurance products, which provide a death benefit and also allow
         the customer to build cash value on a tax-advantaged basis.




                                      F-24
<PAGE>   50
               NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
       (a wholly owned subsidiary of Nationwide Financial Services, Inc.)

              Notes to Consolidated Financial Statements, Continued


         In addition to the product segments, the Company reports a Corporate
         segment. The Corporate segment includes net investment income not
         allocated to the three product segments, certain revenues and expenses
         of the Company's investment advisory and broker/dealer subsidiary,
         unallocated expenses and interest expense on short-term borrowings. In
         addition to these operating revenues and expenses, the Company also
         reports net realized gains and losses on investments in the Corporate
         segment.

         The following table summarizes the financial results of the Company's
         business segments for the years ended December 31, 2000, 1999 and 1998.
<TABLE>
<CAPTION>

                                                          Individual    Institutional      Life
         (in millions)                                      Annuity       Products       Insurance   Corporate     Total
         ===================================================================================================================
<S>                                                       <C>           <C>           <C>          <C>           <C>
         2000:
         Net investment income                            $   483.2     $   827.4     $   289.2    $    55.1     $ 1,654.9
         Other operating revenue                              625.9         251.6         453.9         17.0       1,348.4
         -------------------------------------------------------------------------------------------------------------------
            Total operating revenue(1)                      1,109.1       1,079.0         743.1         72.1       3,003.3
         -------------------------------------------------------------------------------------------------------------------
         Interest credited to policyholder
            account balances                                  396.4         628.8         157.2         --         1,182.4
         Amortization of deferred policy
            acquisition costs                                 238.7          49.2          64.2         --           352.1
         Interest expense on short-term
            borrowings                                         --            --            --            1.3           1.3
         Other benefits and expenses                          192.3         170.3         368.8         33.7         765.1
         -------------------------------------------------------------------------------------------------------------------
            Total expenses                                    827.4         848.3         590.2         35.0       2,300.9
         -------------------------------------------------------------------------------------------------------------------
         Operating income before
            federal income tax                                281.7         230.7         152.9         37.1         702.4
         Realized losses on investments                        --            --            --          (19.4)        (19.4)
         -------------------------------------------------------------------------------------------------------------------
         Income before
            federal income tax                            $   281.7     $   230.7     $   152.9    $    17.7     $   683.0
         ===================================================================================================================

         Assets as of year end                            $45,422.5     $37,217.3     $ 8,103.3    $ 1,824.2     $92,567.3
         -------------------------------------------------------------------------------------------------------------------

         1999:
         Net investment income                            $   458.9     $   771.2     $   253.1    $    37.6     $ 1,520.8
         Other operating revenue                              511.4         211.9         393.0         66.1       1,182.4
         -------------------------------------------------------------------------------------------------------------------
            Total operating revenue(1)                        970.3         983.1         646.1        103.7       2,703.2
         -------------------------------------------------------------------------------------------------------------------
         Interest credited to policyholder
            account balances                                  384.9         580.9         130.5         --         1,096.3
         Amortization of deferred policy
            acquisition costs                                 170.9          41.6          60.1         --           272.6
         Other benefits and expenses                          155.3         142.8         334.7         83.4         716.2
         -------------------------------------------------------------------------------------------------------------------
            Total expenses                                    711.1         765.3         525.3         83.4       2,085.1
         -------------------------------------------------------------------------------------------------------------------
         Operating income before
            federal income tax                                259.2         217.8         120.8         20.3         618.1
         Realized losses on investments                        --            --            --          (11.6)        (11.6)
         -------------------------------------------------------------------------------------------------------------------
         Income before
            federal income tax                            $   259.2     $   217.8     $   120.8    $     8.7     $   606.5
         ===================================================================================================================

         Assets as of year end                            $45,667.8     $39,045.1     $ 6,616.7    $ 1,346.3     $92,675.9
         -------------------------------------------------------------------------------------------------------------------
</TABLE>






                                      F-25
<PAGE>   51
               NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
       (a wholly owned subsidiary of Nationwide Financial Services, Inc.)

              Notes to Consolidated Financial Statements, Continued

<TABLE>
<CAPTION>

                                                            Individual    Institutional     Life
         (in millions)                                        Annuity        Products     Insurance   Corporate     Total
         ===================================================================================================================
<S>                                                         <C>           <C>           <C>          <C>          <C>
         1998:
         Net investment income                              $   431.7     $   784.7     $   225.6    $    39.6    $ 1,481.6
         Other operating revenue                                412.6         167.8         318.5         66.8        965.7
         -------------------------------------------------------------------------------------------------------------------
            Total operating revenue(1)                          844.3         952.5         544.1        106.4      2,447.3
         -------------------------------------------------------------------------------------------------------------------
         Interest credited to policyholder
            account balances                                    357.9         595.7         115.4         --        1,069.0
         Amortization of deferred policy
            acquisition costs                                   129.2          38.9          46.4         --          214.5
         Other benefits and expenses                            125.7         137.5         293.5         78.4        635.1
         -------------------------------------------------------------------------------------------------------------------
            Total expenses                                      612.8         772.1         455.3         78.4      1,918.6
         -------------------------------------------------------------------------------------------------------------------
         Operating income before federal
             income tax                                         231.5         180.4          88.8         28.0        528.7
         Realized gains on investments                           --            --            --           28.4         28.4
         -------------------------------------------------------------------------------------------------------------------
         Income before
            federal income tax                              $   231.5     $   180.4     $    88.8    $    56.4    $   557.1
         ===================================================================================================================

         Assets as of year end                              $36,641.8     $30,618.4     $ 5,187.6    $ 1,894.3    $74,342.1
         -------------------------------------------------------------------------------------------------------------------
</TABLE>
         ----------
         1     Excludes net realized gains and losses on investments.

         The Company has no significant revenue from customers located outside
         of the United States nor does the Company have any significant
         long-lived assets located outside the United States.




                                      F-26
<PAGE>   52





                                                                     SCHEDULE I

               NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

                      CONSOLIDATED SUMMARY OF INVESTMENTS -
                    OTHER THAN INVESTMENTS IN RELATED PARTIES
                                  (in millions)

                             As of December 31, 2000
<TABLE>
<CAPTION>


------------------------------------------------------------------------   -------------  --------------  ---------------
                             Column A                                        Column B       Column C         Column D
------------------------------------------------------------------------   -------------  --------------  ---------------
                                                                                                            Amount at
                                                                                                           which shown
                                                                                                              in the
                                                                                             Market        consolidated
                        Type of Investment                                     Cost           value       balance sheet
------------------------------------------------------------------------   -------------  --------------  ---------------
<S>                                                                           <C>            <C>            <C>
Fixed maturity securities available-for-sale:
   Bonds:
          U.S. Government and government agencies and authorities             $  2,996.6     $  3,072.2     $  3,072.2
          States, municipalities and political subdivisions                          8.6            8.8            8.8
          Foreign governments                                                       94.1           95.5           95.5
          Public utilities                                                       1,186.6        1,195.9        1,195.9
          All other corporate                                                   10,959.9       11,070.6       11,070.6
                                                                              ----------     ----------     ----------
              Total fixed maturity securities available-for-sale                15,245.8       15,443.0       15,443.0
                                                                              ----------     ----------     ----------

    Equity securities available-for-sale:
       Common stocks:
          Industrial, miscellaneous and all other                                  103.5          109.0          109.0
       Non-redeemable preferred stock                                               --             --             --
                                                                              ----------     ----------     ----------
              Total equity securities available-for-sale                           103.5          109.0          109.0
                                                                              ----------     ----------     ----------

    Mortgage loans on real estate, net                                           6,214.4                       6,168.3(1)
    Real estate, net:
       Investment properties                                                       255.0                         270.1(2)
       Acquired in satisfaction of debt                                             42.1                          40.6(2)
    Policy loans                                                                   562.6                         562.6
    Other long-term investments                                                     95.1                         101.8(3)
    Short-term investments                                                         442.6                         442.6
                                                                              ----------                    ----------
              Total investments                                               $ 22,961.1                    $ 23,138.0
                                                                              ==========                    ==========
</TABLE>
----------
(1)  Difference from Column B is primarily due to valuation allowances due to
     impairments on mortgage loans on real estate and due to accumulated
     depreciation and valuation allowances due to impairments on real estate.
     See note 3 to the consolidated financial statements.

(2)  Difference from Column B primarily results from undistributed earnings
     from an unconsolidated real estate subsidiary that is carried on the
     equity method, offset in part by valuation allowances for accumulated
     depreciation and valuation allowances due to impairments on real estate.
     See note 3 to the consolidated financial statements.

(3)  Difference from Column B is primarily due to operating gains and/or losses
     of investments in limited partnerships.



See accompanying independent auditors' report.

                                      F-27

<PAGE>   53





                                                                   SCHEDULE III

               NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

                       SUPPLEMENTARY INSURANCE INFORMATION
                                  (in millions)

   As of December 31, 2000, 1999 and 1998 and for each of the years then ended
<TABLE>
<CAPTION>

---------------------------------- ----------------- -------------------- ------------------- ------------------ ---------------
              Column A                  Column B          Column C             Column D           Column E          Column F
---------------------------------- ----------------- -------------------- ------------------- ------------------ ---------------

                                        Deferred        Future policy
                                         policy       benefits, losses,                         Other policy
                                      acquisition        claims and            Unearned          claims and           Premium
              Segment                    costs          loss expenses         premiums(1)     benefits payable(1)     revenue
---------------------------------- ----------------- -------------------- ------------------- ------------------ ---------------

<S>                                    <C>               <C>                                                      <C>
2000: Individual Annuities             $ 1,711.6         $   7,008.8                                              $     52.7
          Institutional Products           293.7            10,944.0                                                     --
          Life Insurance                   877.8             3,995.6                                                   187.3
          Corporate                        (17.5)              235.2                                                     --
                                     --------------- --------------------                                        ---------------
             Total                     $ 2,865.6         $  22,183.6                                              $    240.0
                                     =============== ====================                                        ===============

1999: Individual Annuities             $ 1,525.1         $   7,337.8                                              $     26.8
          Institutional Products           275.2            10,833.4                                                     --
          Life Insurance                   702.9             3,519.9                                                   194.0
          Corporate                         50.9               170.5                                                     --
                                     --------------- --------------------                                        ---------------
             Total                     $ 2,554.1         $  21,861.6                                              $    220.8
                                     =============== ====================                                        ===============

1998: Individual Annuities             $ 1,316.4         $   6,579.0                                              $     23.1
          Institutional Products           248.2             9,792.8                                                     --
          Life Insurance                   574.2             3,225.5                                                   176.9
          Corporate                       (116.6)              169.8                                                     --
                                     --------------- --------------------                                        ---------------
             Total                     $ 2,022.2         $  19,767.1                                              $    200.0
                                     =============== ====================                                        ===============
<CAPTION>

---------------------------------- ----------------- -------------------- ------------------- ------------------ ---------------
              Column A                  Column G          Column H             Column I           Column J          Column K
---------------------------------- ----------------- -------------------- ------------------- ------------------ ---------------
                                                      Benefits, claims,      Amortization           Other
                                     Net investment      losses and       of deferred policy      operating         Premiums
              Segment                   income(2)    settlement expenses  acquisition costs       expenses(2)       written
---------------------------------------------------- -------------------- ------------------- ------------------ ---------------

<C>                                    <C>               <C>                <C>                 <C>
2000: Individual Annuities             $   483.2         $     450.4        $    238.7          $    138.3
          Institutional Products           827.4               628.8              49.2               170.3
          Life Insurance                   289.2               344.8              64.2               136.7
          Corporate                         55.1                --                 --                 33.7
                                     --------------- -------------------- ------------------- ------------------
             Total                     $ 1,654.9         $   1,424.0           $ 352.1          $    479.0
                                     =============== ==================== =================== ==================

1999: Individual Annuities             $   458.9         $     408.7        $    170.9          $    131.5
          Institutional Products           771.2               580.9              41.6               142.8
          Life Insurance                   253.1               317.1              60.1               105.7
          Corporate                         37.6                --                 --                 83.4
                                     --------------- -------------------- ------------------- ------------------
             Total                     $ 1,520.8         $   1,306.7        $    272.6          $    463.4
                                     =============== ==================== =================== ==================

1998: Individual Annuities             $   431.7         $     380.4        $    129.2          $    103.2
          Institutional Products           784.7               595.7              38.9               137.5
          Life Insurance                   225.6               268.7              46.4               100.6
          Corporate                         39.6                --                 --                 78.4
                                     --------------- -------------------- ------------------- ------------------
             Total                     $ 1,481.6         $   1,244.8        $    214.5          $    419.7
                                     =============== ==================== =================== ==================
</TABLE>

----------
1    Unearned premiums and other policy claims and benefits payable are included
     in Column C amounts.

2    Allocations of net investment income and certain operating expenses are
     based on a number of assumptions and estimates, and reported operating
     results would change by segment if different methods were applied.



See accompanying independent auditors' report.

                                      F-28

<PAGE>   54


                                                                     SCHEDULE IV

               NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

                                   REINSURANCE
                                  (in millions)

   As of December 31, 2000, 1999 and 1998 and for each of the years then ended

<TABLE>
<CAPTION>

-----------------------------------------------   ---------------  --------------  -------------   -------------   ------------
                   Column A                          Column B        Column C        Column D        Column E       Column F
-----------------------------------------------   ---------------  --------------  -------------   -------------   ------------
                                                                                                                   Percentage
                                                                     Ceded to        Assumed                        of amount
                                                      Gross            other        from other         Net           assumed
                                                      amount         companies      companies         amount         to net
                                                  ---------------  --------------  -------------   -------------   ------------

<S>                                                 <C>             <C>             <C>             <C>               <C>
2000:
  Life insurance in force                           $ 95,475.2      $ 31,101.6      $  16.4         $ 64,390.0          0.0%
                                                  ===============  ==============  =============   =============   ============

  Premiums:
    Life insurance                                  $    254.6      $     14.8      $   0.2         $    240.0          0.1%
    Accident and health insurance                        150.8           156.8          6.0              --           N/A
                                                  ---------------  --------------  -------------   -------------   ------------
        Total                                       $    405.4      $    171.6      $   6.2         $    240.0          2.6%
                                                  ===============  ==============  =============   =============   ============


1999:
  Life insurance in force                           $ 84,845.3      $ 26,296.5      $  14.9         $ 58,563.7          0.0%
                                                  ===============  ==============  =============   =============   ============

  Premiums:
    Life insurance                                  $    242.2      $     22.6      $   1.2         $    220.8          0.6%

    Accident and health insurance                        134.9           142.8          7.9               --           N/A
                                                  ---------------  --------------  -------------   -------------   ------------
        Total                                       $    377.1      $    165.4      $   9.1         $    220.8          4.2%
                                                  ===============  ==============  =============   =============   ============


1998:
  Life insurance in force                           $ 63,215.9      $ 17,413.4      $  28.0         $ 45,830.5           0.1%
                                                  ===============  ==============  =============   =============   ============

  Premiums:
    Life insurance                                  $    225.4      $     27.4      $   2.0        $     200.0          1.0%
    Accident and health insurance                        169.7           179.4          9.7               --           N/A
                                                  ---------------  --------------  -------------   -------------   ------------
        Total                                       $    395.1      $    206.8      $  11.7        $     200.0          5.8%
                                                  ===============  ==============  =============   =============   ============
</TABLE>

----------
Note:  The life insurance caption represents principally premiums from
       traditional life insurance and life-contingent immediate annuities and
       excludes deposits on investment products and universal life insurance
       products.







See accompanying independent auditors' report.


                                      F-29
<PAGE>   55


                                                                      SCHEDULE V

               NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

                        VALUATION AND QUALIFYING ACCOUNTS
                                  (in millions)

                  Years ended December 31, 2000, 1999 and 1998

<TABLE>
<CAPTION>

----------------------------------------------------------------------------------------------------  ----------------------------
                        Column A                            Column B             Column C               Column D      Column E
----------------------------------------------------------------------------------------------------  ----------------------------
                                                           Balance at    Charged to     Charged to                   Balance at
                                                            beginning     costs and       other                        end of
Description                                                 of period     expenses       accounts      Deductions(1)   period
-------------------------------------------------------------------------------------- -------------  ----------------------------
<S>                                                        <C>             <C>            <C>            <C>            <C>
2000:
  Valuation allowances - fixed maturity securities           $   --         $  --          $  --           $  --         $   --
  Valuation allowances - mortgage loans on real estate          44.4           4.1            --              3.2           45.3
  Valuation allowances - real estate                             5.5           0.4            --              0.7            5.2
                                                          ---------------------------- -------------  ----------------------------
      Total                                                  $  49.9        $  4.5         $  --           $  3.9        $  50.5
                                                          ============================ =============  ============================


1999:
  Valuation allowances - fixed maturity securities           $   7.5        $  --          $  --           $  7.5        $   --
  Valuation allowances - mortgage loans on real estate          42.4           0.7             1.3(2)         --            44.4
  Valuation allowances - real estate                             5.4           0.9            --              0.8            5.5
                                                          ---------------------------- -------------  ----------------------------
      Total                                                  $  55.3        $  1.6         $   1.3         $  8.3        $  49.9
                                                          ============================ =============  ============================


1998:
  Valuation allowances - fixed maturity securities           $   --           $ 7.5        $  --           $  --         $   7.5
  Valuation allowances - mortgage loans on real estate          42.5          (0.1)           --              --            42.4
  Valuation allowances - real estate                            11.1          (5.7)           --              --             5.4
                                                          ---------------------------- -------------  ----------------------------
      Total                                                  $  53.6        $  1.7         $  --           $  --         $  55.3
                                                          ============================ =============  ============================
</TABLE>

----------
1    Amounts represent direct write-downs charged against the valuation
     allowance.
2    Allowance on acquired mortgage loans.



See accompanying independent auditors' report.


                                      F-30