<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

<TABLE>
<S>                                                                        <C>
 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997                               COMMISSION FILE NO. 2-28596
</TABLE>

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


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

                              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, 1998.


   COMMON STOCK - 3,814,779 SHARES ISSUED AND OUTSTANDING AS OF MARCH 20, 1998
         (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) was incorporated in 1929
              and is an Ohio stock legal reserve life insurance company. NLIC
              offers a variety of forms of variable annuities, fixed annuities
              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 Insurance Enterprise that offer or
              distribute long-term savings and retirement products. On March 11,
              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. These subsidiaries, Employers Life Insurance
              Company of Wausau (ELICW), National Casualty Company (NCC) and
              West Coast Life Insurance Company (WCLIC), through December 31,
              1996, and all accident and health and group life insurance
              business have been accounted for as discontinued operations.
              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, 1997 include
              Nationwide Life and Annuity Insurance Company (NLAIC), Nationwide
              Advisory Services, Inc. (NAS), Nationwide Investment Services
              Corporation (NISC) and NWE, Inc. (NWE). NLIC and its subsidiaries
              are collectively referred to as "the Company."

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

              NLAIC offers universal life insurance, variable universal life
              insurance and individual annuity contracts on a non-participating
              basis. NAS is a registered broker-dealer providing investment
              management and administration services. NISC, contributed by
              Nationwide Corp. on April 5, 1996, is a registered broker-dealer
              doing business solely in the deferred compensation market. NWE was
              formed by NLIC to hold special investments.

              The Company is a leading provider of long-term savings and
              retirement products. The Company offers variable annuities, fixed
              annuities and life insurance as well as mutual funds and pension
              products and administrative services. 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 wholesale and retail distribution
              channels, including financial planners, pension plan
              administrators, securities firms, banks and Nationwide Insurance
              Enterprise insurance agents.



                                       2
<PAGE>   3

              The Company is one of the leaders in the development and sale of
              variable annuities. For the year ended December 31, 1997, the
              Company was the third largest writer of individual variable
              annuity contracts in the United States (U.S.) based on sales,
              according to The Variable Annuity Research & Data Service. Its
              principal annuity series, The BEST of AMERICA, allows the customer
              to choose from up to 39 investment options, including mutual funds
              managed by premier mutual fund managers.

              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 three product segments: Variable Annuities, Fixed
              Annuities 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, revenues and expenses of its investment
              advisor subsidiary (other than the portion allocated to the
              Variable Annuities and Life Insurance segments) and revenues and
              expenses related to group annuity contracts sold to Nationwide
              Insurance Enterprise employee benefits plans in a Corporate and
              Other segment.

              The Variable Annuities segment, which accounted for $150.9 million
              (or 36%) of the Company's operating income before federal income
              tax expense for 1997, consists of annuity contracts that provide
              the customer with the opportunity to invest in mutual funds
              managed by independent investment managers and the Company, with
              investment returns accumulating on a tax-deferred basis.

              The Fixed Annuities segment, which accounted for $169.5 million
              (or 40%) of the Company's operating income before federal income
              tax expense for 1997, consists of annuity contracts that generate
              a return for the customer at a specified interest rate, fixed for
              a prescribed period, with returns accumulating on a tax-deferred
              basis. Such contracts consist of single premium deferred
              annuities, flexible premium deferred annuities and single premium
              immediate annuities. The Fixed Annuities segment also includes the
              fixed option under the Company's variable annuity contracts, which
              accounted for 78% of the Company's fixed annuity sales in 1997 and
              73% of the Company's fixed annuity policy reserves as of December
              31, 1997. During 1997, the average crediting rates on contracts
              (including the fixed option under the Company's variable annuity
              contracts) in the Fixed Annuities segment was 6.12%. Substantially
              all of the Company's crediting rates on its fixed annuity
              contracts are guaranteed for a period not exceeding 15 months.

              The Life Insurance segment, which accounted for $70.9 million (or
              17%) of the Company's operating income before federal income tax
              expense for 1997, is composed of a wide range of variable
              universal life insurance, whole life insurance, universal life
              insurance, term life insurance and corporate-owned life insurance
              products that provide a death benefit and may also allow the
              customer to build cash value on a tax-deferred basis.

              The Corporate and Other segment accounted for $27.5 million (or
              7%) of the Company's operating income (which excludes realized
              gains and losses on investments) before federal income tax
              expense for 1997.

              Additional information related to the Company's business segments
              is included in Note 14 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 is
              rated "Aa2" (Excellent) by Moody's Investor Services, Inc. and
              "AA+" (Excellent) by Standard & Poor's Corporation.

              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.

              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. National banks, with their
              preexisting customer bases for financial services products, may
              pose increasing competition in the future to insurers who sell
              annuities, including the Company, as a result of the U.S. Supreme
              Court's 1994 decision in NationsBank of North Carolina v. Variable
              Annuity Life Insurance Company, which permits national banks to
              sell annuity products of life insurance companies in certain
              circumstances.

              Several proposals to repeal or modify the Glass-Steagall Act of
              1933, as amended, and the Bank Holding Company Act of 1956, as
              amended, have been made by members of Congress and the Clinton
              Administration. Currently, the Bank Holding Company Act restricts
              banks from being affiliated with insurance companies. None of
              these proposals has yet been enacted, and it is not possible to
              predict whether any of these proposals will be enacted, or, if
              enacted, their potential effect on the Company.

              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 can not 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 insurance subsidiaries are currently under examination
              by the Ohio and Delaware insurance departments for the four-year
              period ended December 31, 1996. While final reports of these
              examinations have not yet been issued, management does not expect
              such reports to raise 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. As a
              result of the $850.0 million dividend paid on February 24, 1997,
              any dividend paid by NLIC during the 12-month period immediately
              following the dividend would be an extraordinary dividend under
              Ohio insurance laws. Accordingly, no such dividend could be paid
              without prior regulatory approval. 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, 1997, the Company had approximately 3,250
              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
------        ----------

              The Company's principal executive offices are located in Columbus,
              Ohio. The Company leases its home office complex, consisting of
              approximately 430,000 square feet, from NMIC and its subsidiaries
              at One Nationwide Plaza, Two Nationwide Plaza and Three Nationwide
              Plaza, 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 pricing and sales practices. A number of these
              lawsuits have resulted in substantial jury awards or settlements.




                                       5
<PAGE>   6

              In October 1996, a policyholder of NLIC filed a complaint in
              Alabama state court against NLIC and an agent of NLIC (Wayne M.
              King v. Nationwide Life Insurance Company and Danny Nix) related
              to the sale of a whole life policy on a "vanishing premium" basis
              and seeking unspecified compensatory and punitive damages. The
              King case was dismissed with prejudice on June 25, 1997 pursuant
              to an agreement between the parties.

              In February 1997, NLIC was named as a defendant in a lawsuit filed
              in New York Supreme Court also related to the sale of whole life
              policies on a "vanishing premium" basis (John H. Snyder v.
              Nationwide Mutual Insurance Company, Nationwide Mutual Insurance
              Co. and Nationwide Life Insurance Co.). The plaintiff in such
              lawsuit seeks to represent a national class of NLIC policyholders
              and claims unspecified compensatory and punitive damages. This
              lawsuit has not been certified as a class action. On April 22,
              1997, a motion to dismiss the Snyder complaint in its entirety was
              filed by the defendants, and the plaintiff has opposed such
              motion.

              In November 1997, two plaintiffs, one who was the owner of a
              variable life insurance contract and the other who was the owner
              of a variable annuity contract, commenced action against NLIC and
              the American Century group of defendants (Robert Young and David
              Distad v. Nationwide Life Insurance Company et al.). In this
              action, plaintiffs seek to represent a class of variable life
              insurance contract owners and variable annuity contract owners
              whom they claim were allegedly misled when purchasing these
              variable contracts into believing that some portion of their
              premiums were invested in a publicly traded mutual fund when,
              in fact, the premium monies were invested in a mutual fund whose
              shares may only be purchased by insurance companies. The complaint
              seeks unspecified compensatory, treble and punitive damages. In
              January 1998, both NLIC and American Century filed motions to
              dismiss the entire complaint. Plaintiffs' counsel opposed these
              motions and the federal court in Texas will hear arguments on the
              motions to dismiss on April 1, 1998. This lawsuit is in an early
              stage and has not been certified as a class action. NLIC intends
              to defend this case vigorously.

              There can be no assurance that any litigation relating to pricing
              and 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 paid no cash dividends during 1997 and $50.0 million to
              Nationwide Corp. during 1996.

              On January 1, 1997, NLIC paid a dividend valued at $485.7 million
              to Nationwide Corp. consisting of the outstanding shares of common
              stock of ELICW, NCC and WCLIC. Also, on February 24, 1997, NLIC
              paid a dividend to NFS, and NFS paid an equivalent dividend to
              Nationwide Corp., consisting of securities having an aggregate
              fair value of $850.0 million. The dividend payments were approved
              by the Department of Insurance of the State of Ohio.

              NLIC currently does not have a formal dividend policy. Management
              of NLIC currently does not anticipate making dividend payments
              during 1998.

              Reference is made to note 10 of the consolidated financial
              statements for information regarding dividend restrictions.


                                       6
<PAGE>   7

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, 1997
              follows. This discussion should be read in conjunction with the
              consolidated financial statements and related notes included
              elsewhere in this report.

              Management's narrative analysis contains forward-looking
              statements that are intended to enhance the reader's ability to
              assess the future financial performance of the Company. These
              forward-looking statements are not based on historical information
              and are being made pursuant to the safe harbor provisions of the
              Private Securities Litigation Reform Act of 1995. Forward-looking
              statements include, but are not limited to, statements which
              represent the Company's beliefs concerning future levels of sales
              and redemptions of the Company's products, investment yields and
              interest spread, or the earnings or profitability of the Company's
              activities. Because these statements are subject to numerous
              assumptions, risks, and uncertainties, actual results could be
              materially different. The following factors, among others, may
              have such an impact: changes in economic conditions; movements in
              interest rates and the stock markets; competitive pressures on
              product pricing and services; success and timing of business
              strategies; and the nature and extent of legislation and
              regulatory actions and reforms. Readers are directed to consider
              these and the other risks and uncertainties described in more
              detail elsewhere in documents filed by the Company with the
              Securities and Exchange Commission. The Company undertakes no
              obligation to update or revise any forward-looking information,
              whether as a result of new information, future events, or
              otherwise.

              RESULTS OF OPERATIONS

              In addition to net income, the Company reports net operating
              income, which excludes realized investment gains and losses and
              results of discontinued operations. 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 of dollars)                             1997        1996        1995
                                                                    -------     -------     -------

<S>                                                                 <C>         <C>         <C>
                 Net income                                         $ 279.7     $ 215.9     $ 212.5
                 Realized gains on investments, net of tax             (7.9)       (1.0)       (0.1)
                 Income from discontinued operations, net of tax          -       (11.3)      (24.7)
                                                                    =======     =======     =======
                   Net operating income                             $ 271.8     $ 203.6     $ 187.7
                                                                    =======     =======     =======
</TABLE>

              Revenues

              Total revenues for 1997, excluding realized gains and losses on
              investments, increased to $2.21 billion compared to $1.99 billion
              for 1996 and $1.80 billion for 1995. Increases in policy charges
              and net investment income accounted for most of the growth.



                                       7
<PAGE>   8

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

<TABLE>
<CAPTION>
                 (in millions of dollars)        1997       1996       1995
                                              -------    -------    -------

<S>                                           <C>        <C>        <C>
                 Asset fees                   $ 384.8    $ 275.5    $ 184.8
                 Administrative fees             59.5       50.1       40.7
                 Surrender fees                  32.4       22.1       17.3
                 Cost of insurance charges       68.5       53.2       43.8
                                              -------    -------    -------
                   Total policy charges       $ 545.2    $ 400.9    $ 286.6
                                              =======    =======    =======
</TABLE>

              The growth in asset fees reflects increases in total separate
              account assets of 40% in 1997 and 45% in 1996. As of year end,
              total separate account assets were $37.72 billion.

              Net investment income includes the gross investment income earned
              on investments supporting fixed annuities and certain life
              insurance products as well as the yield on the Company's general
              account invested assets which are not allocated to product
              segments. Net investment income grew from $1.29 billion and $1.36
              billion in 1995 and 1996, respectively, to $1.41 billion in 1997
              primarily due to increased invested assets to support growth in
              fixed annuity policy reserves. Fixed annuity policy reserves,
              which include the fixed option of the Company's variable annuity
              products, increased $727.8 million in 1996 and $682.4 million in
              1997 and were $14.19 billion as of year end 1997. The increase in
              net investment income due to growth in invested assets was
              partially offset by declining investment yields in 1997 and 1996
              due to lower market interest rates.

              Realized gains and losses on investments are not considered by the
              Company to be recurring components of earnings and are reported in
              the Corporate and Other segment. The Company makes decisions
              concerning the sale of invested assets based on a variety of
              market, business, tax and other factors. Net realized gains on
              investments were $11.1 million in 1997 compared to realized losses
              of $0.3 million and $1.7 million in 1996 and 1995, respectively.
              Realized gains in 1997 include $14.4 million recognized when
              securities of $850.0 million were paid to NFS, which subsequently
              paid to Nationwide Corp., as a dividend on February 24, 1997 as a
              part of certain transactions that were completed in anticipation
              of NFS' initial public offering. Also, during 1997, the Company
              recorded a realized loss of $16.2 million related to the sale of a
              single corporate bond investment that had deteriorated due to the
              credit quality of the issuer.

              Benefits and Expenses

              Interest credited to policyholder account balances totaled $1.02
              billion in 1997 compared to $982.3 million in 1996 and $950.3
              million in 1995 and principally relates to fixed annuity products.
              The growth in interest credited reflects the increase in fixed
              annuity policy reserves previously discussed partially offset by
              reduced average crediting rates. The average crediting rate on
              fixed annuity policy reserves was 6.12% in 1997 compared to 6.30%
              and 6.58% in 1996 and 1995, respectively.

              Amortization of deferred policy acquisition costs (DAC) increased
              to $167.2 million in 1997 compared to $133.4 million in 1996 and
              $82.7 million in 1995. The increase is principally related to
              increased business in the Variable Annuities segment.

              Operating expenses were $384.9 million in 1997, a 12% increase
              from 1996 operating expenses of $342.4 million. Operating expenses
              were $273.0 million in 1995. The increase reflects the growth in
              the number of annuity and life insurance contracts in-force and
              the related increase in administrative processing costs. Increased
              operating expenses in 1997 also reflect the cost of certain
              technology initiatives.


                                       8
<PAGE>   9

              The Company has developed a plan to address issues related to the
              Year 2000. The problem relates to many existing computer programs
              using only two digits to identify a year in the date field. These
              programs were designed and developed without considering the
              impact of the upcoming change in the century. If not corrected,
              many computer applications could fail or create erroneous results
              by or at the Year 2000. The Company has been evaluating its
              exposure to the Year 2000 issue through a review of all of its
              operating systems as well as dependencies on the systems of others
              since 1996. The Company expects all system changes and
              replacements needed to achieve Year 2000 compliance to be
              completed by the end of 1998. Compliance testing will be completed
              in the first quarter of 1999. The Company charges to expense all
              costs associated with these system changes as the costs are
              incurred.

              Operating expenses in 1997 include approximately $45 million on
              technology projects, which includes costs related to Year 2000 and
              the development of a new policy administration system for
              traditional life insurance products and other system enhancements.
              The Company anticipates spending a comparable amount in 1998 on
              technology projects, including Year 2000 initiatives.

              Federal income tax expense was $150.2 million representing an
              effective tax rate of 34.9% for 1997. Federal income tax expense
              in 1996 and 1995 was $110.9 million and $99.8 million,
              respectively, representing effective rates of 35.2% and 34.7%.

              Discontinued Operations

              Discontinued operations include the results of (i) the three NLIC
              subsidiaries whose outstanding common stock, on September 24,
              1996, was declared as a dividend payable to Nationwide Corp. on
              January 1, 1997 and (ii) NLIC's accident and health and group life
              insurance business which was ceded to affiliates effective January
              1, 1996. The Company entered into these transactions in 1996 in
              order to focus its business on long-term savings and retirement
              products. The transactions are described in note 15 of the
              consolidated financial statements. The Company did not recognize
              any gain or loss on the disposal of these subsidiaries or
              discontinuance of the accident and health and group life insurance
              business. Income from discontinued operations was $11.3 million in
              1996 and $24.7 million in 1995. There was no income from
              discontinued operations in 1997.

              Statutory Premiums and Deposits

              The Company sells its products through a broad distribution
              network comprised of wholesale and retail distribution channels.
              Wholesale distributors are unaffiliated entities that sell the
              Company's products to their own customer base and include
              investment broker/dealers, pension plan administrators and
              financial institutions. The Company has access to over 1,000
              broker/dealers and over 30,000 registered representatives who sell
              individual and group variable annuities, fixed annuities and
              variable life insurance in all 50 states and the District of
              Columbia. Over 250 regional pension plan administrators market the
              Company's group variable and fixed annuities to employers
              sponsoring employee retirement programs. The Company currently has
              relationships with over 180 banks selling individual variable and
              fixed annuities (under the Company's brand name and on a
              private-label basis), variable universal life insurance and group
              pension products.

              Retail distributors are representatives of the Company who market
              products directly to a customer base identified by the Company and
              include representatives of affiliated sales companies and
              Nationwide Insurance Enterprise insurance agents. The Company
              markets products on a retail basis to state and local governments
              and to teachers through affiliated sales companies. Approximately
              4,300 licensed Nationwide Insurance Enterprise insurance agents
              sell life insurance and individual annuities primarily targeting
              holders of personal automobile and homeowners' insurance policies
              issued by the Nationwide Insurance Enterprise.



                                       9
<PAGE>   10

              Statutory premiums and deposits by distribution channel for each
              of the last three years are summarized as follows:

<TABLE>
                                                               1997                       1996                       1995
                                                      ----------------------     ----------------------     ----------------------
                 (in millions of dollars)              Amount           %         Amount          %          Amount          %
                                                      ---------     --------     ---------    ---------     ---------    ---------
<S>                                                   <C>             <C>        <C>             <C>        <C>           <C>
                 Wholesale channels:
                   Investment dealers                 $ 3,894.1         37.7%    $ 3,627.8         42.5%    $ 2,835.4         42.8%
                   Pension market                       2,325.0         22.5       1,911.6         22.4       1,573.7         23.8
                   Financial institutions               1,653.2         16.0         947.2         11.1         515.4          7.8
                                                      ---------     --------     ---------    ---------     ---------    ---------
                     Total wholesale channels           7,872.3         76.2       6,486.6         76.0       4,924.5         74.4
                 Retail channels:
                   Public sector and teachers market    1,862.1         18.0       1,528.0         17.9       1,244.9         18.8
                   Nationwide agents                      602.7          5.8         525.5          6.1         446.5          6.8
                                                      ---------     --------     ---------    ---------     ---------    ---------
                     Total retail channels              2,464.8         23.8       2,053.5         24.0       1,691.4         25.6
                                                      ---------     --------     ---------    ---------     ---------    ---------
                 Total external premiums and
                   deposits                            10,337.1        100.0%      8,540.1        100.0%      6,615.9        100.0%
                                                      =========     ========     =========    =========     =========    =========
                 Nationwide Insurance Enterprise
                   employee and agent benefit plans       174.9                      502.5                      182.1
                                                      ---------                  ---------                  ---------
                 Total statutory premiums
                   and deposits                       $10,512.0                  $ 9,042.6                  $ 6,798.0
                                                      =========                  =========                  =========
</TABLE>

              Excluding Nationwide Insurance Enterprise benefit plan sales, the
              Company achieved annual sales growth of 21%, 29%, and 21% in 1997,
              1996 and 1995, respectively. The Company's goal is 20% annual
              growth in external sales and management believes the Company is
              well positioned to achieve that goal in 1998.

              The Company's flagship products are marketed under The BEST of
              AMERICA brand, and include individual and group variable annuities
              and variable life insurance. The BEST of AMERICA products allow
              customers to choose from among 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 individual variable and fixed annuities with
              substantially the same features as the Company's brand name
              products to their own customer bases under their own brand name.

              The Company also markets group deferred compensation retirement
              plans to employees of state and local governments for use under
              Internal Revenue Code (IRC) Section 457. The Company utilizes its
              sponsorship by the National Association of Counties and The United
              States Conference of Mayors when marketing IRC Section 457
              products. In addition, the Company utilizes an exclusive
              arrangement with the National Education Association (NEA) to
              market tax-qualified annuities under IRC 403(b) to NEA members.
              Variable annuities developed for the NEA members are sold under
              the NEA Valuebuilder brand.

              External statutory premiums and deposits by product are as
              follows:

<TABLE>
<CAPTION>

                 (in millions of dollars)              1997          1996          1995
                                                    ----------    ----------    ----------

<S>                                                 <C>           <C>           <C>
                 The BEST of AMERICA products:
                   Individual variable annuities    $  4,269.7    $  3,801.5    $  2,740.6
                   Group variable annuities            2,220.5       1,807.1       1,457.6
                   Variable universal life               220.3         165.4         101.3
                 Private label annuities               1,006.3         625.9         389.7
                 IRC Section 457 annuities             1,715.7       1,425.8       1,191.1
                 The NEA Valuebuilder annuities          145.5         102.2          53.8
                 Other                                   759.1         612.2         681.8
                                                    ----------    ----------    ----------
                                                    $ 10,337.1    $  8,540.1    $  6,615.9
                                                    ==========    ==========    ==========
</TABLE>




                                       10
<PAGE>   11

              BUSINESS SEGMENTS

              The Company has three product segments: Variable Annuities, Fixed
              Annuities and Life Insurance. In addition, the Company reports
              corporate income and expenses, investments and related investment
              income supporting capital not specifically allocated to its
              product segments, revenues and expenses of its investment advisor
              subsidiary (other than the portion allocated to the Variable
              Annuities and Life Insurance segments) and revenues and expenses
              related to group annuity contracts sold to Nationwide Insurance
              Enterprise employee benefit plans in a Corporate and Other
              segment. All information set forth below relating to the Company's
              Variable Annuities segment excludes the fixed option under the
              Company's variable annuity contracts. Such information is included
              in the Company's Fixed Annuities segment.

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

<TABLE>
<CAPTION>
                 (in millions of dollars)          1997          1996          1995
                                             ----------    ----------    ----------

<S>                                          <C>           <C>           <C>
                 Operating income:
                   Variable annuity          $    150.9    $     90.3    $     50.8
                   Fixed annuity                  169.5         135.4         137.0
                   Life insurance                  70.9          67.2          67.6
                   Corporate and other             27.5          22.9          33.9
                                             ----------    ----------    ----------
                                             $    418.8    $    315.8    $    289.3
                                             ==========    ==========    ==========
</TABLE>

              Variable Annuities

              The Variable Annuities segment consists of annuity contracts that
              provide the customer with the opportunity to invest in mutual
              funds managed by independent investment managers and the Company,
              with investment returns accumulating on a tax-deferred basis. The
              Company's variable annuity products consist almost entirely of
              flexible premium deferred variable annuity contracts.




                                       11
<PAGE>   12

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

<TABLE>
<CAPTION>
                 (in millions of dollars)                                   1997            1996            1995
                                                                        ----------      ----------      ----------

<S>                                                                     <C>             <C>             <C>
                 INCOME STATEMENT DATA (1)
                 Revenues:
                   Asset fees                                           $    370.2      $    261.8      $    172.8
                   Administrative fees                                        21.8            18.1            14.0
                   Surrender fees                                             21.9            13.6            10.0
                                                                        ----------      ----------      ----------
                     Total policy charges                                    413.9           293.5           196.8
                   Net investment income and other (2)                        (9.9)           (8.9)           (7.8)
                                                                        ----------      ----------      ----------
                                                                             404.0           284.6           189.0
                                                                        ----------      ----------      ----------
                 Benefits and expenses:
                   Benefits and claims                                         5.9             4.6             2.9
                   Amortization of DAC                                        87.8            57.4            26.3
                   Other operating expenses                                  159.4           132.3           109.0
                                                                        ----------      ----------      ----------
                                                                             253.1           194.3           138.2
                                                                        ==========      ==========      ==========
                 Operating income before federal income tax expense     $    150.9      $     90.3      $     50.8
                                                                        ==========      ==========      ==========

                 OTHER DATA (1)
                 Statutory premiums and deposits (3)                    $  7,535.8      $  6,500.3      $  4,399.3
                 Withdrawals                                               2,683.3         1,697.4         1,071.6
                 Policy reserves as of year end                         $ 34,486.7      $ 24,278.1      $ 16,761.8
                 Ratio of policy charges to average policy reserves           1.41%           1.43%           1.44%
                 Pre-tax operating income to average policy reserves          0.51%           0.44%           0.37%

               ----------
<FN>
               (1)  Excludes the fixed option under the Company's variable annuity contracts which is reported in
                    the Company's Fixed Annuities segment.
               (2)  The Company's method of allocating net investment income results in a charge (negative net
                    investment income) to this segment which is recognized in the Corporate and Other segment. The
                    charge relates to non-invested assets which support this segment on a statutory basis.
               (3)  Statutory data have been derived from the Annual Statements of NLIC and NLAIC, as filed with
                    insurance regulatory authorities and prepared in accordance with statutory accounting practices.
</FN>
</TABLE>

              Variable annuity segment results reflect a sharp increase in
              policy charge revenues partially offset by increases in
              amortization of DAC and other operating expenses. The increase in
              policy charge revenues is attributable to growth in asset fees.
              Asset fees were $370.2 million in 1997 up 41% from $261.8 million
              in 1996 and totaled $172.8 million in 1995. The increase in assets
              fees reflects substantial growth in policy reserve levels as a
              result of steady premium growth and through market appreciation on
              investments underlying reserves. Variable annuity policy reserves
              grew $10.21 billion during 1997 reaching $34.49 billion as of year
              end 1997 compared to growth in 1996 of $7.52 billion and year end
              1996 reserves of $24.28 billion. Total policy charges as a
              percentage of policy reserves remained relatively stable between
              141 and 144 basis points during the last three years presented,
              reflecting no or minimal changes in the levels of policy charges
              for most variable annuity products.

              The Company has sustained high sales growth over the recent three
              year period through deeper penetration of existing distribution
              channels and the addition of new sales outlets. In addition,
              variable annuity sales reflect growing consumer demand for
              equity-based retirement savings investments, coupled with a robust
              stock market and lower interest rates. Significant increases in
              production through financial institutions, pension plan
              administrators and public sector markets have contributed strongly
              to the growth in variable annuity sales in 1997, when sales
              increased 16% to a record $7.54 billion compared to $6.50 billion
              in 1996. Variable annuity sales in 1996 represented a 48% increase
              over 1995 sales of $4.40 billion.




                                       12
<PAGE>   13

              Favorable equity market conditions over the past three years have
              also contributed significantly to the growth in variable annuity
              policy reserves. Variable annuity policy reserves reflect market
              appreciation of $5.21 billion, $2.72 billion and $2.93 billion in
              1997, 1996 and 1995, respectively.

              The increase in amortization of DAC in 1997 compared to 1996 and
              1995 is due to overall growth in the variable annuity business.

              The growth in operating expenses also reflects the overall growth
              in the variable annuity business. Operating expenses were 54 basis
              points of average variable annuity policy reserves for 1997
              comparing favorably to 64 basis points and 80 basis points for
              1996 and 1995, respectively. The Company has controlled operating
              expense growth by increasing productivity through investments in
              technology and economies of scale.

              Fixed Annuities

              The Fixed Annuities segment consists of annuity contracts that
              generate a return for the customer at a specified interest rate,
              fixed for a prescribed period, with returns accumulating on a
              tax-deferred basis. Such contracts consist of single premium
              deferred annuities, flexible premium deferred annuities and single
              premium immediate annuities. The Fixed Annuities segment includes
              the fixed option under the Company's variable annuity contracts.

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

<TABLE>
<CAPTION>
                 (in millions of dollars)                                     1997           1996           1995
                                                                           ----------     ----------     ----------

<S>                                                                        <C>            <C>            <C>
                 INCOME STATEMENT DATA (1)
                 Revenues:
                   Policy charges                                          $     15.9     $     18.0     $     16.4
                   Life insurance premiums                                       27.3           24.0           32.8
                   Net investment income                                      1,098.2        1,050.6        1,002.8
                                                                           ----------     ----------     ----------
                                                                              1,141.4        1,092.6        1,052.0
                                                                           ----------     ----------     ----------
                 Benefits and expenses:
                   Interest credited to policyholder account balances           823.4          805.0          775.7
                   Other benefits and claims                                     23.3           33.8           29.5
                   Amortization of DAC                                           39.8           38.6           29.5
                   Other operating expenses                                      85.4           79.8           80.3
                                                                           ----------     ----------     ----------
                                                                                971.9          957.2          915.0
                                                                           ==========     ==========     ==========
                 Operating income before federal income tax expense        $    169.5     $    135.4     $    137.0
                                                                           ==========     ==========     ==========

                 OTHER DATA (1)
                 Statutory premiums and deposits (2)                       $  2,137.9     $  1,600.5     $  1,864.2
                 Withdrawals and benefits                                     1,710.0        1,375.5        1,151.6
                 Policy reserves as of year end                            $ 14,194.2     $ 13,511.8     $ 12,784.0
                 Net interest margin on general account policy reserves          2.04%          1.92%          1.92%
                 Pre-tax operating income to average policy reserves             1.22%          1.03%          1.14%
                 ----------

<FN>
                 (1)   Includes the fixed option under the Company's variable annuity contracts.
                 (2)   Statutory data have been derived from the Annual Statements of NLIC and NLAIC, as filed with
                       insurance regulatory authorities and prepared in accordance with statutory accounting
                       practices.
</FN>
</TABLE>




                                       13
<PAGE>   14

              Fixed annuity segment results reflect an increase in interest
              spread income attributable to growth in fixed annuity policy
              reserves and wider interest margins. Interest spread is the
              differential between net investment income and interest credited
              to policyholder account balances. Interest spreads vary depending
              on crediting rates offered by competitors, performance of the
              investment portfolio, changes in market interest rates and other
              factors. The following table depicts the interest margins on
              general account policy reserves in the Fixed Annuities segment for
              each of the last three years.

<TABLE>
<CAPTION>
                                             1997           1996           1995
                                          ----------     ----------     ----------

<S>                                             <C>            <C>            <C>
                 Net investment income          8.16%          8.22%          8.50%
                 Interest credited              6.12           6.30           6.58
                                          ----------     ----------     ----------
                                                2.04%          1.92%          1.92%
                                          ==========     ==========     ==========
</TABLE>

              The Company expects interest margins to compress during 1998
              reflecting the lower interest rate environment available for new
              invested assets. The Company is able to mitigate the effects of
              lower investment yields by periodically resetting the rates
              credited on fixed annuity contracts. As of December 31, 1997,
              $6.85 billion, or 48% of fixed annuity policy reserves, were in
              contracts where the guaranteed interest rate is reestablished each
              quarter. Fixed annuity policy reserves of $4.88 billion are in
              contracts that adjust the crediting rate on an annual basis with
              portions resetting in each calendar quarter. The Company also has
              $1.40 billion of fixed annuity policy reserves that call for the
              crediting rate to be reset annually on each January 1. The
              remaining $1.06 billion of fixed annuity policy reserves are in
              payout status where the Company has guaranteed periodic, typically
              monthly, payments.

              Fixed annuity policy reserves increased to $14.19 billion as of
              year-end compared to $13.51 billion a year ago and $12.78 billion
              as of the end of 1995. The growth reflects increased fixed annuity
              sales in 1997 through the financial institutions and investment
              dealer channels. Sales for 1997 were up 34% to $2.14 billion
              compared to $1.60 billion in 1996. Sales in 1995 totaled $1.86
              billion. Most of the Company's fixed annuity sales are premiums
              allocated to the guaranteed fixed option of variable annuity
              contracts. Fixed annuity sales for 1997 include $1.67 billion in
              premiums allocated to the fixed option under a variable annuity
              contract, compared to $1.24 billion in 1996. Sales growth in 1997
              reflects the success of proprietary fixed product sales through
              financial institutions, as well as the impact of a 1.00%
              first-year bonus crediting rate offered on The BEST of AMERICA -
              America's Vision product during the second half of 1997.

              The decrease in other benefits and claims reflects a $13.0 million
              charge in 1996 related to reserve strengthening in the immediate
              annuity line due to changes in estimated profitability based on
              revised assumptions for mortality and reinvestment rates.
              Amortization of DAC reflects a reduction in 1996 of $6.0 million
              due to changes in estimates of expected future profits as a result
              of favorable investment spread and persistency experience.

              Life Insurance

              The Life Insurance segment consists of insurance products,
              including variable universal life insurance and corporate-owned
              insurance products, that provide a death benefit and may also
              allow the customer to build cash value on a tax-deferred 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 of dollars)                                   1997          1996          1995
                                                                         ----------    ----------    ----------

<S>                                                                      <C>           <C>           <C>
                 INCOME STATEMENT DATA
                 Revenues:
                   Cost of insurance charges                             $     68.5    $     53.2    $     43.8
                   Other policy charges                                        36.8          33.4          27.5
                                                                         ----------    ----------    ----------
                     Total policy charges                                     105.3          86.6          71.3
                   Life insurance premiums                                    178.1         174.6         166.3
                   Net investment income                                      189.1         174.0         171.3
                   Other                                                        0.6           0.4           0.2
                                                                         ----------    ----------    ----------
                                                                              473.1         435.6         409.1
                                                                         ----------    ----------    ----------
                 Benefits and expenses:
                   Interest credited to policyholder account balances          78.5          70.2          69.0
                   Other benefits and claims                                  149.0         141.2         133.0
                   Policyholder dividends                                      40.6          40.7          39.7
                   Amortization of DAC                                         39.6          37.4          31.0
                   Other operating expenses                                    94.5          78.9          68.8
                                                                         ----------    ----------    ----------
                                                                              402.2         368.4         341.5
                                                                         ==========    ==========    ==========
                 Operating income before federal income tax expense      $     70.9    $     67.2    $     67.6
                                                                         ==========    ==========    ==========

                 OTHER DATA:
                 Statutory premiums (1):
                   Traditional and universal life                        $    248.4    $    253.9    $    248.3
                   Variable universal life                                    220.0         165.4         104.1
                   Corporate-owned life                                       195.0          20.0             -
                 Policy reserves as of year end:
                   Traditional and universal life                           2,369.5       2,295.5       2,213.7
                   Variable universal life                                    892.1         622.6         446.8
                   Corporate-owned life                                       225.4          20.8             -
                 Life insurance in force:
                   Traditional and universal life                          27,495.7      28,107.0      27,616.9
                   Variable universal life                                 11,337.4       8,094.6       4,926.5
                   Corporate-owned life                                  $    426.3    $     73.0   $         -

                 ----------
<FN>
                 (1) Statutory data have been derived from the Annual Statements of NLIC and NLAIC, as filed with
                     insurance regulatory authorities and prepared in accordance with statutory accounting
                     practices.
</FN>
</TABLE>

              Life Insurance segment results reflect revenue growth in the
              variable universal life insurance line driven by a steady increase
              in insurance in-force and policy reserves partially offset by
              higher operating expenses associated with technology-related costs
              in the traditional life insurance lines.

              Variable universal life insurance policy charges were $57.1
              million in 1997, an increase of $18.5 million, or 48%, compared to
              $38.6 million in 1996. For 1995, variable universal life insurance
              policy charges were $26.7 million. The growth in variable
              universal life policy charges is attributable to the growth in
              insurance in-force and policy reserves, which increased 40% and
              43%, respectively, in 1997. During 1996, variable universal life
              insurance in-force and policy reserves increased 64% and 39%,
              respectively. Growth in insurance in-force and policy reserves is
              due to strong sales from both investment dealers and Nationwide
              Insurance Enterprise insurance agents, combined with high
              persistency. In February, 1998, the Company introduced a new
              variable universal life insurance product called Next Generation,
              which offers an innovative, tiered-pricing structure that
              maximizes cash value. The Company anticipates continued sales
              growth in 1998 for variable universal life insurance as well as
              its recent entry into corporate-owned insurance products.



                                       15
<PAGE>   16

              The growth in operating expenses is due to technology-related
              costs combined with the increase in variable life insurance
              policies in-force. Technology-related expenses in 1997 were $16.5
              million, compared to $3.2 million in 1996. The majority of the
              expenses are for a new policy administration system to support
              traditional life insurance products and for activities to make
              systems Year 2000 compliant.

              Corporate and Other

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

<TABLE>
<CAPTION>
                 (in millions of dollars)                                     1997            1996            1995
                                                                          ------------    ------------    ------------

<S>                                                                       <C>             <C>             <C>
                 INCOME STATEMENT DATA:
                 Revenues:
                   Net investment income                                  $      148.7    $      154.7    $      137.6
                   Other                                                          39.1            25.7            12.7
                                                                          ------------    ------------    ------------
                                                                                 187.8           180.4           150.3
                                                                          ------------    ------------    ------------
                 Benefits and expenses:
                   Interest credited to policy reserves                          114.7           106.1           105.6
                   Other operating expenses                                       45.6            51.4            10.8
                                                                          ------------    ------------    ------------
                                                                                 160.3           157.5           116.4
                                                                          ============    ============    ============
                 Operating income before federal income tax expense(1)    $       27.5    $       22.9    $       33.9
                                                                          ============    ============    ============

                 OTHER DATA:
                 Statutory premiums and deposits (2)                      $      174.9    $      502.6    $      182.1
                 Withdrawals and benefits                                        205.4           140.3           144.4
                 Policy reserves as of year end                                3,791.9         3,302.5         2,644.3
                 Nationwide retail mutual fund assets(3)                  $    2,555.0    $    2,136.2    $    2,113.9
                 ----------
<FN>
                 (1)  Excludes realized gains (losses) on investments and discontinued operations.

                 (2)  Statutory data have been derived from the Annual Statements of NLIC and NLAIC, as filed with
                      insurance regulatory authorities and prepared in accordance with statutory accounting practices.

                 (3)  Excludes mutual funds selected as investment options under the Company's variable annuity and
                      variable universal life insurance contracts and mutual funds selected as investment options under
                      Nationwide Insurance Enterprise employee and agent benefit plans.
</FN>
</TABLE>

              Revenues in the Corporate and Other segment consist of net
              investment income on invested assets not allocated to the three
              product segments, investment management fees and other revenues
              earned from Nationwide mutual funds other than the portion
              allocated to the Variable Annuities and Life Insurance segments
              and net investment income and policy charges from group annuity
              contracts issued to Nationwide Insurance Enterprise employee and
              agent benefit plans.

              In addition to the operating revenues previously presented, the
              Company also reports realized gains and losses on investments in
              the Corporate and Other segment. Net realized gains on investments
              were $11.1 million in 1997 compared to realized losses of $0.3
              million and $1.7 million in 1996 and 1995, respectively. Realized
              gains in 1997 include $14.4 million recognized when securities of
              $850.0 million were paid to NFS, which subsequently paid to
              Nationwide Corp., as a dividend on February 24, 1997 as a part of
              certain transactions that were completed in anticipation of NFS'
              initial public offering. Also, during 1997, the Company recorded a
              realized loss of $16.2 million related to the sale of a single
              corporate bond investment that had deteriorated due to the credit
              quality of the issuer.


                                       16
<PAGE>   17

              PROPOSED LEGISLATION

              The Clinton Administration's 1999 budget proposal contains
              provisions which, if enacted, would eliminate many tax benefits
              currently afforded to annuity products and certain life insurance
              products. These provisions appear to be inconsistent with what the
              Company believes to be the Administration's desire to encourage
              private sector long-term savings.

              Currently, policyholders are permitted to exchange life insurance,
              endowment or annuity contracts for similar contracts without being
              required to pay tax on the accretion of value within the contracts
              being transferred in the exchange. In addition, policyholders who
              hold variable annuity or life insurance contracts are currently
              permitted to transfer funds between various investment options
              offered under such contracts on a tax-free basis. The 1999 budget
              proposal, if enacted in its current form, would make all exchanges
              involving insurance contracts immediately taxable. In addition,
              under the budget proposal each investment option offered under a
              single variable contract would be treated as a separate variable
              contract, and thus transfers of funds between different investment
              options would cause the amounts transferred to be subject to tax,
              to the extent there has been accretion in value. The budget
              proposal would also reduce policyholders' tax basis in annuity and
              life insurance contracts by the mortality and expense charges
              paid, increasing future taxable gains. Most of the tax benefits of
              corporate-owned life insurance products would also be eliminated
              by the budget proposal.

              The Company supports social policy that encourages private sector
              savings, and believes that the provisions contained in the budget
              proposal clearly run counter to that goal. Annuity products are
              specifically designed for long-term and retirement savings and
              play an important role in millions of individuals' financial
              protection plans. However, there can be no assurance as to whether
              legislation will be enacted which would contain provisions with
              possible adverse effects on the Company's ability to sell its
              annuity and life insurance products.


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.


                                       17
<PAGE>   18

                                    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, 1997 and 1996                                            F-2
                Consolidated Statements of Income for the years ended December 31, 1997, 1996 and 1995                  F-3
                Consolidated Statements of Shareholder's Equity for the years ended December 31, 1997,
                  1996 and 1995                                                                                         F-4
                Consolidated Statements of Cash Flows for the  years ended December 31, 1997, 1996
                  and 1995                                                                                              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, 1997                                                F-25
                Schedule III   Supplementary Insurance Information as of December 31, 1997, 1996 and
                                 1995 and for each of the years then ended                                              F-26
                Schedule IV    Reinsurance as of December 31, 1997, 1996 and 1995 and for each of the
                                 years then ended                                                                       F-27
                Schedule V     Valuation and Qualifying Accounts for the years ended December 31,
                                 1997, 1996 and 1995                                                                    F-28

              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                                                                                               21
</TABLE>




                                       18
<PAGE>   19

                                   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.



<TABLE>
<S>                                     <C>
                                         NATIONWIDE LIFE INSURANCE COMPANY (Registrant)



                                                 By   /s/ Dimon R. McFerson
                                                      -------------------------------------------------
                                                      Dimon R. McFerson, Chairman and Chief Executive
                                                      Officer - Nationwide Insurance Enterprise
</TABLE>


Date:  March 4, 1998




                                       19
<PAGE>   20

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 indicated on March 4, 1998.



<TABLE>
<S>                                                           <C>
/s/ Dimon R. McFerson                                         /s/ Joseph J. Gasper
------------------------------------------------------------  ----------------------------------------------------------
Dimon R. McFerson, Chairman and Chief Executive               Joseph J. Gasper, President and Chief Operating
Officer - Nationwide Insurance Enterprise and Director        Officer and Director


/s/ Lewis J. Alphin                                           /s/ Keith W. Eckel
------------------------------------------------------------  ----------------------------------------------------------
Lewis J. Alphin, Director                                     Keith W. Eckel, Director


/s/ Willard J. Engel                                          /s/ Fred C. Finney
------------------------------------------------------------  ----------------------------------------------------------
Willard J. Engel, Director                                    Fred C. Finney, Director


/s/ Charles L. Fuellgraf, Jr.                                 /s/ Henry S. Holloway
------------------------------------------------------------  ----------------------------------------------------------
Charles L. Fuellgraf, Jr., Director                           Henry S. Holloway, Director


/s/ David O. Miller                                           /s/ C. Ray Noecker
------------------------------------------------------------  ----------------------------------------------------------
David O. Miller, Director                                     C. Ray Noecker, Director


/s/ James F. Patterson                                        /s/ Arden L. Shisler
------------------------------------------------------------  ----------------------------------------------------------
James F. Patterson, Director                                  Arden L. Shisler, Director


/s/ Robert L. Stewart                                         /s/ Nancy C. Thomas
------------------------------------------------------------  ----------------------------------------------------------
Robert L. Stewart, Director                                   Nancy C. Thomas, Director


/s/ Harold W. Weihl                                           /s/ Robert A. Oakley
------------------------------------------------------------  ----------------------------------------------------------
Harold W. Weihl, Director                                     Robert A. Oakley, Executive Vice President - Chief
                                                              Financial Officer

/s/ Mark R. Thresher
------------------------------------------------------------
Mark R. Thresher, Vice President - Controller
(Chief Accounting Officer)
</TABLE>





                                       20
<PAGE>   21
                                  EXHIBIT INDEX


 Exhibit                                                                   Page
----------                                                                 ----
   3.1       Amended Articles of Incorporation of Nationwide Life Insurance
             Company, dated March 14, 1986                                   23
   3.2       Form of Amended and Restated Code of Regulations of Nationwide
             Life Insurance Company (previously filed as Exhibit 3 to Form
             10-K, Commission File Number 2-28596, filed March 28, 1997,
             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)
  10.2       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       Modified Coinsurance Agreement between Employers Life Insurance
             Company of Wausau and Nationwide Life Insurance Company (previously
             filed as Exhibit 10.4 to Form 10-K, Commission File Number 2-28596,
             filed March 28, 1997, and incorporated herein by reference)
  10.5       Credit Facility, dated August 12, 1996, among Nationwide Life
             Insurance Company, Nationwide Mutual Insurance Company, the banks
             named therein and Morgan Guaranty Trust Company of New York, the
             administrative agent (previously filed as Exhibit 10.5 to Form
             10-K, Commission File Number 2-28596, filed March 28, 1997, and
             incorporated herein by reference)
  10.5.1     Amendment dated as of September 8, 1997 to the Credit Agreement
             dated as of August 12, 1996 among Nationwide Mutual Insurance
             Company, Nationwide Life Insurance Company, the banks party thereto
             and Morgan Guaranty Trust Company of New York, as administrative
             agent (previously filed as Exhibit 10(a) to Form 10-Q for the
             quarterly period ended September 30, 1997, Commission File Number
             1-12785, filed November 13, 1997, 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 Insurance Enterprise Executive
             Incentive Plan (previously filed as Exhibit 10.7 to Form 10-K,
             Commission File Number 2-28596, filed March 28, 1997, and
             incorporated herein by reference)
  10.8       General Description of Nationwide Insurance Enterprise Management
             Incentive Plan (previously filed as Exhibit 10.8 to Form 10-K,
             Commission File Number 2-28596, filed March 28, 1997, and
             incorporated herein by reference)
  10.9       Nationwide Insurance Enterprise 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 Enterprise 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)

                                       21

<PAGE>   22



  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 Enterprise 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 Enterprise 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)
  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.

                                       22