<PAGE>   1
                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                              Washington, D.C. 20549      
                        --------------------------------
                                   FORM 10-K

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

For the fiscal year ended December 31, 1995          Commission File No. 2-28596

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


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

    ONE NATIONWIDE PLAZA, COLUMBUS, OHIO                            43215
  (Address of principal executive offices)                        (Zip Code)

Registrant's telephone number, including area code:  (614) 249-7111

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

                                      NONE

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

                                      NONE
                                (Title of Class)

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 February 29, 1996.

          COMMON STOCK - 3,814,779 shares issued and outstanding as
                            of December 31, 1995
          ----------------------------------------------------------
                               (Title of Class)



<PAGE>   2



                                     PART I

ITEM 1.       Business.
-------       ---------
              (a)   Nationwide Life Insurance Company (the Company) was
                    incorporated in 1929 and is an Ohio stock legal reserve
                    life insurance company. The Company offers a variety of
                    forms of ordinary life, universal life, variable universal
                    life, term and endowment, group life, individual and group
                    annuities, and individual and group accident and health
                    coverage on a participating and a non-participating basis.
                    On December 30, 1993, the Company became a wholly owned
                    subsidiary of Nationwide Corporation when Nationwide Mutual
                    Insurance Company and Nationwide Mutual Fire Insurance
                    Company sold their shares of the Company to Nationwide
                    Corporation for newly issued shares of Nationwide
                    Corporation. Nationwide Corporation is owned by Nationwide
                    Mutual Insurance Company and Nationwide Mutual Fire
                    Insurance Company.

                    On April 7, 1988, the Company obtained ownership of the
                    stock of Nationwide Life and Annuity Insurance Company
                    (formerly Financial Horizons Life Insurance Company) from
                    Nationwide Mutual Insurance Company as part of a capital
                    contribution. Nationwide Life and Annuity Insurance Company
                    currently offers universal life, variable universal life
                    and individual annuity contracts on a non-participating
                    basis.  On December 31, 1993, Nationwide Corporation
                    contributed all of the outstanding capital shares of West
                    Coast Life Insurance Company, National Casualty Company and
                    Nationwide Financial Services, Inc. to the Company. West
                    Coast Life Insurance Company currently offers individual
                    life, group life, individual annuity and group accident and
                    health coverage on a participating and a non-participating
                    basis.  National Casualty Company underwrites individual
                    and group accident and health insurance as well as various
                    property and casualty coverages. Nationwide Financial
                    Services, Inc., a non-insurance industry subsidiary, is a
                    registered broker-dealer providing investment management
                    and administration services. On December 31, 1994, the
                    Company purchased all of the outstanding shares of
                    Employers Life Insurance Company of Wausau. Employers Life
                    Insurance Company of Wausau primarily offers group annuity
                    contracts and, through its wholly owned subsidiary Wausau
                    Preferred Health Insurance Company, group accident and
                    health insurance and group life insurance coverages. On
                    March 1, 1995, Nationwide Corporation contributed all of
                    the outstanding shares of Farmland Life Insurance Company
                    to the Company. Effective June 30, 1995, the Company merged
                    the operations of Farmland Life Insurance Company into West
                    Coast Life Insurance Company.

              (b)   The Company and its subsidiaries operate in the long-term
                    savings, life insurance and accident and health insurance
                    lines of business in the life insurance and property and
                    casualty insurance industries. Long-term savings operations
                    include both qualified and non-qualified annuity contracts
                    issued to both individuals and groups. Life insurance
                    operations include whole life, universal life, variable
                    universal life and endowment and term life insurance issued
                    to individuals and groups. Accident and health operations
                    also provide coverage to individuals and groups. Corporate
                    primarily includes investments, and the related investment
                    income, which are not specifically allocated to one of the
                    three operating segments.

                    During 1995, the Company and its subsidiaries changed their
                    reporting segments to better reflect the way the businesses
                    are managed. Operating segment data is presented in note 16
                    to the consolidated financial statements and Schedule III.


                                      2
<PAGE>   3


              (c)(1)(i)    Nationwide  Life  Insurance  Company is licensed to
                           do business in all 50 states as well as the District
                           of Columbia, Puerto Rico and the Virgin Islands.

                           The Company distributes its long-term savings
                           products through Nationwide Insurance Enterprise
                           career agents, brokers, financial institutions,
                           pension plan administrators and the following
                           affiliated sales companies; Public Employees Benefit
                           Services Corporation, Nationwide Financial
                           Institution Distributors Agency, Inc. (formerly
                           Financial Horizons Distributors Agency, Inc.) and
                           NEA Valuebuilder Investor Services, Inc. Life
                           insurance policies are sold through Nationwide
                           Insurance Enterprise career agents, brokers and
                           financial institutions. Accident and health
                           insurance policies are sold through Nationwide
                           Insurance Enterprise career agents, brokers and
                           third party administrators.

              (c)(1)(ii)   Not applicable.

              (c)(1)(iii)  Not applicable.

              (c)(1)(iv)   The Company, in common with other insurance
                           companies, is subject to regulation and supervision
                           by the regulatory authorities of the states in which
                           it is licensed to do business. A license from the
                           state insurance department is a prerequisite to the
                           issuance of insurance contracts in that state. In
                           general, all states have statutory administrative
                           powers. Such regulation relates to, among other
                           things, licensing of insurers and their agents, the
                           approval of policy forms, the methods of computing
                           reserves, the form and content of financial
                           statements, the amount of policyholders' and
                           stockholder's dividends, and the type and
                           distribution of investments permitted.

              (c)(1)(v)    Not applicable.

              (c)(1)(vi)   Not applicable.

              (c)(1)(vii)  Not applicable.

              (c)(1)(viii) Not applicable.

              (c)(1)(ix)   Not applicable.

              (c)(1)(x)    The Company operates in the highly competitive life
                           insurance industry. There are approximately 2,000
                           stock, mutual and other types of insurers in the
                           life insurance business in the United States, and a
                           large number of them compete with the Company in the
                           sale of insurance policies. In addition to
                           competition from other life insurers, the Company
                           faces competition from other financial services
                           providers such as banks, mutual fund houses and
                           brokerage firms.

                           According to A.M. Best Company's statistical study
                           released in the December 19, 1995 edition of
                           BestWeek (an insurance industry trade publication),
                           Nationwide Life Insurance Company ranked 14th among
                           all life insurance companies in the United States
                           and Canada based on reported statutory admitted
                           assets as of September 30, 1995.


                                      3
<PAGE>   4


              (c)(1)(xi)   Not applicable.

              (c)(1)(xii)  Not applicable.

              (c)(1)(xiii) As is customary in insurance company groups,
                           employees are shared with other insurance companies
                           in the group. The Company shares approximately 835
                           employees with Nationwide Mutual Insurance Company
                           and Nationwide Mutual Fire Insurance Company. The
                           Company does have 2,831 direct salaried employees.

              (d)   Substantially all of the Company's premiums, operating
                    profits and assets are attributable to the United States of
                    America, its territories and possessions. Approximately
                    .004% of premiums are attributable to non-domestic
                    geographic areas.

ITEM 2.       Properties.
-------       -----------
              The Company leases all space used in conducting its operations.
              The Company shares home office space and other facilities with
              affiliates in a building owned by Nationwide Mutual Insurance
              Company. The Company also leases various other branch offices.
              The terms of these leases are not material to the consolidated
              financial statements.

ITEM 3.       Legal Proceedings.
-------       ------------------
              There are no material pending legal proceedings, other than
              ordinary routine litigation incidental to the business, to which
              the Company and its subsidiaries are a party, or of which any of
              its property is the subject.

ITEM 4.       Submission of Matters to a Vote of Security Holders.
-------       ----------------------------------------------------
              None.


                                      4
<PAGE>   5


                                    PART II

ITEM 5.       Market for Registrant's Common Equity and Related Shareholder
-------       -------------------------------------------------------------
              Matters.
              --------
              (a)   There is no established public trading market for the
                    Company's capital shares.

              (b)   As of December 31, 1995,  none of the 3,814,779  shares
                    issued and  outstanding  was held by public  shareholders.
                    Nationwide  Corporation is the sole shareholder the
                    Company.

              (c)   The Company paid dividends of $7,450,000 to Nationwide
                    Corporation during 1995.  The Company made no dividend 
                    payments during 1994.

                    Reference is made to Item 7 and note 12 to the consolidated
                    financial statements herein for information regarding 
                    dividend restrictions.

ITEM 6.       Selected Financial Data.
-------       ------------------------

<TABLE>
<CAPTION>
                             SELECTED FINANCIAL DATA
                                 (000's omitted)

                                         1995             1994              1993              1992              1991       
                                  ---------------   ---------------- ----------------- ---------------- -----------------
<S>                                 <C>                <C>               <C>               <C>              <C>
Total revenues                      $  2,576,107        2,046,200         2,034,526         1,933,318        1,799,042
Benefits and claims                    1,656,287        1,279,763         1,236,906         1,319,735        1,262,317
Income tax expense                       107,254           89,504           106,758            33,742           36,595
Cumulative effect of changes
   in accounting principles                -0-              -0-               5,365             -0-              -0-
Net income                               212,478          183,726           211,508            96,817           73,732
Total assets                         $40,614,111       31,112,133        25,406,361        20,954,338       17,426,046
</TABLE>


ITEM 7.       Management's Discussion and Analysis of Financial Condition and
-------       ---------------------------------------------------------------
              Results of Operations.
              ----------------------
              Consolidated Results of Operations

              For purposes of this discussion, Nationwide Life Insurance
              Company and its wholly owned insurance subsidiaries, Nationwide
              Life and Annuity Insurance Company, West Coast Life Insurance
              Company, Employers Life Insurance Company of Wausau and National
              Casualty Company, are referred to as "the Company."

<TABLE>
<CAPTION>
                                                                                     Years Ended December 31,             
                                                                       ---------------------------------------------------
                    (000's omitted)                                          1995              1994             1993      
                    --------------------------------------------------------------------- ---------------- ---------------
                    <S>                                                    <C>                 <C>              <C>
                    Revenues                                                $2,576,107         2,046,200        2,034,526
                    Benefits, claims and policyholder dividends              1,704,361         1,325,824        1,290,095
                    Operating costs and expenses                               552,014           447,146          431,530 
                                                                       ------------------ ---------------- ---------------
                    Operating earnings                                     $   319,732           273,230          312,901 
                                                                       ================== ================ ===============
                    Net income                                             $   212,478           183,726          211,508 
                                                                       ================== ================ ===============
</TABLE>

                                      5
<PAGE>   6


              For purposes of this discussion, operating earnings refers to
              income before Federal income tax expense and cumulative effect of
              changes in accounting principles. During 1993, the Company
              adopted Statements of Financial Accounting Standards (SFAS) No.
              106 - Employers' Accounting for Postretirement Benefits Other
              Than Pensions, and SFAS No. 109 - Accounting for Income Taxes.
              The impact of adopting these accounting standards was a $5.4
              million after-tax benefit in 1993.

              Also during 1993, the Company sold substantially all of its
              equity securities to Nationwide Mutual Insurance Company, the
              majority owner of Nationwide Life Insurance Company's parent,
              Nationwide Corporation. The Company realized a $123 million gain
              ($80 million after tax) on the transaction.

              For a discussion of Federal income tax expense, see note 7 to the
              consolidated financial statements.

              During 1995, the Company's reportable segments have been changed
              to better reflect the way the businesses are managed. Prior year
              segment results have been restated to reflect these changes. The
              following is a discussion of each segment's operating
              performance.

              Long-Term Savings
              -----------------
<TABLE>
<CAPTION>
                                                                                     Years Ended December 31,             
                                                                       ---------------------------------------------------
                    (000's omitted)                                          1995              1994             1993      
                    --------------------------------------------       ------------------ ---------------- ---------------
                    <S>                                                  <C>                  <C>              <C>
                    Revenues                                              $  1,406,241         1,125,013        1,048,045
                    Benefits, claims and policyholder dividends              1,009,858           806,768          800,694
                    Operating costs and expenses                               266,908           222,715          199,385 
                                                                       ------------------ ---------------- ---------------
                    Operating earnings                                   $     129,475            95,530           47,966 
                                                                       ================== ================ ===============

                    Total premiums and deposits (1)                       $  6,644,791         5,280,795        3,921,919 
                                                                       ================== ================ ===============

                    Assets under management (2)                            $33,325,510        25,299,930       20,221,388 
                                                                       ================== ================ ===============

<FN>
                       (1) Under SFAS No. 97 - Accounting and Reporting by
                           Insurance Enterprises for Certain Long-Duration
                           Contracts and for Realized Gains and Losses from the
                           Sales of Investments, certain deposits are not
                           recorded as revenues.
                       (2) Excludes unrealized gains and losses under SFAS No.
                           115 - Accounting for Certain Investments in Debt and
                           Equity Securities.
</TABLE>

              The long-term savings segment includes both qualified and
              non-qualified annuity contracts issued to individuals and groups.
              Products are sold through Nationwide Insurance Enterprise career
              agents, brokers, financial institutions, pension plan
              administrators and three affiliated sales companies as described
              in note 13 to the consolidated financial statements.

              Operating earnings in 1995 increased 36% to $129 million,
              primarily due to a 32% increase in assets under management.
              Growth in assets under management is attributable to the
              continued growth in premiums and deposits received by the
              Company. In addition, the strong performance of both the stock
              and bond markets during 1995 had a significant impact on the
              growth of assets held in separate accounts, which are reported at
              fair value. Assets fees assessed against policyholder account
              balances increased 44% over 1994.  During 1995, interest margins,
              the difference between what the Company earns on its general
              account investments and what policyholders are credited, remained
              comparable to 1994. Total operating expenses increased 20% in
              1995 due to the increased volume of business.

                                      6
<PAGE>   7


              Operating earnings for 1994 were up 99% over 1993. The increase
              is primarily attributable to growth in assets under management.
              During 1994, asset fees and interest margins increased 42% and
              18%, respectively, from 1993. Management's efforts to control
              expenses resulted in operating costs and expenses increasing 12%
              despite greater growth in assets under management and premiums
              and deposits.

              Outlook: Management anticipates continued growth in the long-term
              savings segment, although growth may be at a slower pace than the
              past three years. Increased competition from a variety of
              financial services providers could impact the segment's growth
              and profitability. In addition, annuities are interest sensitive
              and changes in interest rates could impact future sales as well
              as the retention and profitability of in-force contracts.
              Fluctuations in the bond and stock markets can also impact future
              sales and profitability in the long-term savings segment.

              Life Insurance
              --------------
<TABLE>
<CAPTION>
                                                                                     Years Ended December 31,             
                                                                       ---------------------------------------------------
                    (000's omitted)                                          1995              1994             1993      
                    ----------------------------------------------     ------------------ ---------------- ---------------
                    <S>                                                 <C>                   <C>              <C>
                    Revenues                                             $     502,885           452,795          432,343
                    Benefits, claims and policyholder dividends                311,130           282,748          271,244
                    Operating costs and expenses                               128,586           123,928          124,716 
                                                                       ------------------ ---------------- ---------------
                    Operating earnings                                  $       63,169            46,119           36,383 
                                                                       ================== ================ ===============

                    Total premiums and deposits (1)                      $     470,926           418,437          361,494 
                                                                       ================== ================ ===============

                    Life insurance in-force                                $52,355,567        47,082,394       39,597,855 
                                                                       ================== ================ ===============

<FN>
                       (1) Under SFAS 97, certain premiums and deposits are not
                           recorded as revenues.
</TABLE>

              The life insurance segment includes whole life, universal life,
              variable universal life and endowment and term life insurance
              issued to individuals and groups. Life insurance is sold by
              Nationwide Insurance Enterprise career agents, brokers and
              financial institutions.

              Operating earnings in 1995 were $63 million, up 37% from 1994 due
              to an increase in life insurance in-force and offset by minimal
              increases in operating expenses. At the end of 1995, life
              insurance in-force was $52.4 billion, an increase of $5.3 billion
              from 1994. Total premiums and deposits in 1995 were $471 million,
              a $52 million increase over 1994. A significant portion of this
              increase is attributable to sales of variable universal life
              policies. The minimal increase in expenses (4%) during 1995
              reflects the Company's commitment to increasing operating
              efficiencies.

              Operating earnings in 1994 were $46 million, an increase of 27%
              from 1993. An increase in life insurance in-force combined with a
              decrease in operating expenses accounted for the increase. Of the
              $7.4 billion increase in life insurance in-force, $3.1 billion is
              attributable to Employers Life Insurance Company of Wausau, which
              Nationwide Life Insurance Company acquired effective December 31,
              1994.

              Outlook: Although life insurance is a more mature business
              segment than long-term savings, management anticipates growth in
              the life insurance segment, particularly with the variable
              universal life products. Increasing operating efficiencies and
              controlling expenses will continue to be a focus.


                                      7
<PAGE>   8


              Accident and Health Insurance
              -----------------------------
<TABLE>
<CAPTION>
                                                                                     Years Ended December 31,              
                                                                        ---------------------------------------------------
                      (000's omitted)                                         1995             1994             1993       
                      ------------------------------------------------- ----------------- ---------------- ----------------
                      <S>                                                     <C>                <C>              <C>
                      Revenues                                                 $532,383          345,545          339,764
                      Benefits, claims and policyholder dividends               383,373          236,308          218,157
                      Operating costs and expenses                              161,531           96,016          106,566  
                                                                        ----------------- ---------------- ----------------
                      Operating (loss) earnings                               $ (12,521)          13,221           15,041  
                                                                        ================= ================ ================
</TABLE>

              The accident and health insurance segment sells policies to both
              individuals and groups. Individual policies include major
              medical, disability income and medicare supplement. Group
              policies include major medical, dental and disability income.
              Accident and health insurance policies are sold by Nationwide
              Insurance Enterprise career agents, brokers and third party
              administrators.

              The accident and health insurance segment reported an operating
              loss of $13 million in 1995 compared to operating earnings of $13
              million in 1994. The loss is attributable to higher claims costs
              on group business and operating expenses. The 1995 results
              include Employers Life Insurance Company of Wausau. Employers
              Life Insurance Company of Wausau reported 1995 accident and
              health insurance revenues of $198 million, including $151 million
              of premiums assumed from Employers Insurance of Wausau A Mutual
              Company, an affiliate.

              Operating  earnings for 1994 of $13 million were down from $15
              million in 1993,  primarily due to higher claims costs which were
              partially  offset by a decrease in operating expenses.

              Outlook: Management does not anticipate significant growth in
              group accident and health insurance premiums and could
              potentially experience a decline. Individual accident and health
              insurance premiums will likely decrease due to declining sales of
              major medical policies. Management is evaluating the
              profitability of the group business and will increase premiums,
              when appropriate, for cases with adverse claims experience. In
              addition, management is evaluating the policyholder service
              functions at Nationwide Life Insurance Company and Employers Life
              Insurance Company of Wausau and will combine functions where
              appropriate to increase efficiencies and reduce costs.

              Corporate
              ---------
<TABLE>
<CAPTION>
                                                                                     Years Ended December 31,             
                                                                       ---------------------------------------------------
                    (000's omitted)                                          1995              1994             1993      
                    -------------------------------------------------- ------------------ ---------------- ---------------
                    <S>                                                    <C>                   <C>              <C>
                    Revenues                                                  $134,598           122,847          214,374 
                                                                       ================== ================ ===============

                    Operating earnings                                        $139,609           118,360          213,511 
                                                                       ================== ================ ===============

                    Realized gains (losses) on investments
                         included in revenues above                        $       836           (16,384)         113,673 
                                                                       ================== ================ ===============
</TABLE>

              Corporate primarily includes investments, and the related
              investment income, which are not specifically allocated to one of
              the three operating segments. In addition, realized gains and
              losses on all general account investments are reported as a
              component of the Corporate segment.


                                      8
<PAGE>   9


              Operating  earnings for 1995 were $140 million,  up from $118
              million in 1994.  The increase is primarily due to realized
              losses on  investments of $16 million in 1994 compared to
              realized gains of $1 million in 1995.

              Operating  earnings in 1994 of $118 million were down from $214
              million in 1993  primarily due to $114 million of realized  gains
              on investments in 1993 compared to $16 million of realized losses
              in 1994.

              The realized gains in 1993 are principally related to the sale of
              substantially all equity securities to Nationwide Mutual
              Insurance Company. In 1994, the corporate segment benefited from
              the earnings on a $200 million capital contribution Nationwide
              Life Insurance Company received in February, 1994.

              General Account Investments
              ---------------------------
              Fixed Maturity Securities: The Company does not invest in
              lower-quality, higher-risk fixed maturity securities.
              Non-investment grade securities, all of which are the result of
              down grading since the time of purchase by the Company, were 2.4%
              of total fixed maturity securities as of December 31, 1995.

              Private placement fixed maturity securities provide certain
              advantages over public issues and are purchased when possible. As
              of December 31, 1995, private placement fixed maturity securities
              were 30% of total fixed maturity securities. While private
              placement securities are less liquid than public issues, they
              generally offer higher yields, better call provisions, greater
              takeover protection, enhanced protective covenants and the
              potential of specific collateral.

              Collateralized mortgage obligations comprise 29% of fixed
              maturity securities as of December 31, 1995. Of the total
              collateralized mortgage obligation portfolio as of December 31,
              1995, 98.7% was invested in sequential pay, planned amortization
              and targeted amortization classes.

              Mortgage Loans on Real Estate: The Company's mortgage loans on
              real estate portfolio consists of first mortgages on existing
              income-producing properties. The Company does not make second
              mortgages, construction loans, participating or convertible
              mortgages and land development loans.

              Realized losses on mortgage loans on real estate were $7.3
              million, $20.5 million, and $28.2 million for 1995, 1994 and
              1993, respectively. As of December 31, 1995, mortgage loans on
              real estate considered impaired under SFAS No. 114 - Accounting
              by Creditors for Impairment of a Loan (as amended by SFAS No. 118
              - Accounting by Creditors for Impairment of a Loan - Income
              Recognition and Disclosure) were $45 million. Total valuation
              allowances on mortgage loans on real estate were $50.7 million,
              or 1.0% of the portfolio, as of December 31, 1995, compared to
              $47.9 million, or 1.1% of the portfolio, as of December 31, 1994.
              See note 9 to the consolidated financial statements for
              disclosures of concentrations of risk by geographic area and
              borrower.

              The Company does not invest in swaps, forwards, futures, option   
              contracts or other financial instruments with similar     
              characteristics.


                                      9
<PAGE>   10


              Capital Resources and Liquidity
              -------------------------------
              Capital Resources:  Total consolidated  shareholder's  equity
              increased to $2,669 million as of December 31, 1995 from $1,908
              million as of December 31, 1994 ($1,651 million as of December
              31, 1993).

              During 1994, the Company adopted SFAS No. 115 - Accounting for
              Certain Investments in Debt and Equity Securities, which resulted
              in certain debt securities being recorded at fair value with
              unrealized gains or losses, net of certain adjustments to
              deferred policy acquisition costs and deferred Federal income
              taxes, reported as a component of consolidated shareholder's
              equity. As permitted by the Financial Accounting Standards
              Board's (FASB) Special Report - A Guide to Implementation of
              Statement 115 on Accounting for Certain Investments in Debt and
              Equity Securities, issued in November 1995, the Company
              transferred all of its fixed maturity securities previously
              classified as held-to-maturity to available-for-sale. The
              transfer resulted in a gross unrealized gain of $172 million.
              While classifying all fixed maturity securities as
              available-for-sale will result in greater fluctuations in total
              consolidated shareholder's equity, such classification does allow
              the Company maximum flexibility for asset and liability
              management. See notes 2(b), 3 and 5 to the consolidated financial
              statements for additional disclosures regarding SFAS No. 115.

              Excluding unrealized investment gains and losses, consolidated
              shareholder's equity increased $256 million (13%) to $2,284
              million as of December 31, 1995, from $2,028 million as of
              December 31, 1994 ($1,644 million as of December 31, 1993).

              The increases in consolidated shareholder's equity are
              attributable to the Company's consolidated net income and capital
              contributions from Nationwide Corporation. On March 1, 1995,
              Nationwide Corporation contributed all of the outstanding shares
              of Farmland Life Insurance Company to the Company, which then
              merged Farmland Life Insurance Company into West Coast Life
              Insurance Company effective June 30, 1995. The contribution
              resulted in a direct increase to consolidated shareholder's
              equity of $47 million. In addition, during 1994 and 1993, the
              Company received capital contributions of $200 million and $111
              million, respectively, from Nationwide Corporation to support the
              Company's growth in operations.

              The Company does not currently have a formal dividend policy.
              During 1995 and 1993, the Company paid dividends of $7.5 million
              and $17.8 million, respectively, to Nationwide Corporation. There
              were no dividend payments in 1994. Management of the Company has
              not determined if there will be any dividend payments in 1996.

              Effective December 31, 1994, the Company purchased all of the
              outstanding shares of Employers Life Insurance Company of Wausau
              from Wausau Service Corporation for $155 million. Wausau Service
              Corporation is a wholly-owned subsidiary of Employers Insurance
              of Wausau A Mutual Company, which is affiliated with Nationwide
              Mutual Insurance Company. Nationwide Life Insurance Company
              transferred fixed maturity securities and cash with a fair value
              of $155 million to Wausau Service Corporation, which resulted in
              a realized loss of $19.2 million on the disposition of the
              securities. The purchase price approximated both the historical
              cost basis and fair value of net assets of Employers Life
              Insurance Company of Wausau.

              With the contribution of Farmland Life Insurance Company and the
              purchase of Employers Life Insurance Company of Wausau, all life
              insurance companies of the Nationwide Insurance Enterprise are
              subsidiaries of Nationwide Life Insurance Company.


                                      10
<PAGE>   11


              Each insurance company's state of domicile imposes minimum
              risk-based capital requirements that were developed by the
              National Association of Insurance Commissioners (NAIC).
              Risk-based capital evaluates the adequacy of an insurer's
              statutory capital and surplus in relation to the risks inherent
              in the insurer's business related to asset quality, asset and
              liability matching, mortality and morbidity and other business
              factors. Regulatory compliance is determined based on a ratio of
              a company's regulatory total adjusted capital, as defined by the
              NAIC, to its authorized control level risk-based capital, as
              defined by the NAIC. Companies with a ratio below 200% (or below
              250% with negative trends) are required to take corrective action
              steps. As of December 31, 1995, Nationwide Life Insurance
              Company's risk-based capital ratio was 750%. All insurance
              subsidiaries of Nationwide Life Insurance Company exceed the
              minimum risk-based capital requirements.

              Liquidity: The Company's operations have historically provided
              substantial positive cash flow. The significant growth in
              premiums and deposits and the resulting increase in investments
              have provided the Company with sufficient cash resources to meet
              all current obligations for policyholder benefits, withdrawals,
              surrenders, policy loans and operating expenses.

              As a member of the Nationwide Insurance Enterprise, the Company
              also has access to available capital infusions and borrowings
              from affiliates in the event of extreme unexpected withdrawals.
              The Company also participates in intercompany repurchase
              agreements with affiliates to satisfy short-term cash needs.
              Transactions under the agreements were not material in 1995 and
              1994.

              In addition, Nationwide Life Insurance Company has $120 million
              of confirmed but unused bank lines of credit which support a $100
              million commercial paper borrowing authorization. During 1993,
              the Company temporarily increased available bank lines of credit
              to $365 million and borrowed $125 million. In addition, $175
              million of short-term securities were issued as repurchase
              agreements. All amounts were repaid in 1993, with interest
              expense totaling $1.6 million.

              The Company purchases investments with durations to match the
              expected durations of the liabilities they support. To the extent
              liabilities become due more quickly than anticipated, the Company
              may need to borrow funds or sell investments prior to maturity
              and potentially recognize a gain or loss.

              To mitigate the risks that actual withdrawals may exceed
              anticipated amounts or that rising interest rates may cause a
              decline in the value of the Company's fixed maturity investments,
              the Company imposes market value adjustments or surrender charges
              on the majority of its products and offers products where the
              investment risk is transferred to the contract holder. As of
              December 31, 1995, 9% of the Company's annuity contracts were
              subject to withdrawal without a surrender charge or market value
              adjustment. In addition, liabilities related to separate
              accounts, where the investment risk is transferred to the
              policyholder, comprise 50% of policyholder-related liabilities as
              of December 31, 1995, compared to 42% as of December 31, 1994.

              As described in note 12 to the consolidated financial statements,
              Nationwide Life Insurance Company's insurance subsidiaries are
              limited by law in the amount of dividends they can pay. That
              condition poses no liquidity concerns due to Nationwide Life
              Insurance Company's significant cash flow from operations and
              extensive holdings of liquid investments.


                                      11
<PAGE>   12


              Effects of accounting standards to be adopted
              ---------------------------------------------
              The FASB issued SFAS No. 121 - Accounting for the Impairment of
              Long-Lived Assets and for Long-Lived Assets to be Disposed Of.
              This statement requires impairment losses be recorded on
              long-lived assets used in operations when indicators of
              impairment are present and the undiscounted cash flows estimated
              to be generated by those assets are less than the assets'
              carrying amount. The statement also addresses the accounting for
              long-lived assets that are expected to be disposed of. The
              Company will adopt this statement in 1996 and the impact on the
              consolidated financial statements is not expected to be material.

ITEM 8.       Consolidated Financial Statements and Supplementary Data.
              ---------------------------------------------------------
              The consolidated financial statements of Nationwide Life
              Insurance Company and subsidiaries are submitted in a separate
              section of this report which is indexed in Item 14.

              Semi-annual and annual reports are sent to contract owners of the 
              variable contracts issued through registered Separate Accounts of
              the Company.

ITEM 9.       Changes in and Disagreements with Accountants on Accounting and
-------       ---------------------------------------------------------------
              Financial Disclosure.
              ---------------------

              Not applicable.


                                      12
<PAGE>   13


                                    PART III

ITEM 10.      Directors and Executive Officers of the Registrant.
--------      ---------------------------------------------------
              (a)   Identification of Directors

<TABLE>
<CAPTION>
                                                                 Term
                                                               Expires
                                                  Director      Annual
             Name                          Age      Since      Meeting    Business Experience                             
             ------------------------------------------------ ----------- ------------------------------------------------
             <S>                                                 <C>      <C>
             Lewis J. Alphin                47      1993         1997     Farm Owner and Operator (1)

             Willard J. Engel               56      1994         1997     General Manager, Lyon County Cooperative Oil
                                                                          Company (1)

             Fred C. Finney *               49      1992         1998     Farm Owner and Operator (1)

             Peter F. Frenzer               61      1991         1996     Executive Vice President - Nationwide
                                                                          Insurance Companies (1); President and Chief
                                                                          Operating Officer, Nationwide Life Insurance
                                                                          Company and Nationwide Life and Annuity
                                                                          Insurance Company (2), (4)

             Charles L. Fuellgraf, Jr. *    64      1969         1996     Chief Executive Officer, Fuellgraf Electric
                                                                          Company, Electrical Construction and
                                                                          Engineering Services (1)

             Henry S. Holloway *            63      1986         1998     Farm Owner and Operator (1)

             D. Richard McFerson            58      1988         1996     President and Chief Executive Officer,
                                                                          Nationwide Mutual Insurance Company,
                                                                          Nationwide Mutual Fire Insurance Company ,
                                                                          Nationwide General Insurance Company and
                                                                          Nationwide Property and Casualty Insurance
                                                                          Company (12/92 to present); President and
                                                                          Chief Executive Officer - Nationwide Insurance
                                                                          Enterprise, Nationwide Life Insurance Company
                                                                          and Nationwide Life and Annuity Insurance
                                                                          Company (12/93 to present) (3)

             David O. Miller *              57      1985         1997     President, Owen Potato Farm, Inc.; Partner,
                                                                          M&M Enterprises (1)

             C. Ray Noecker                 49      1994         1997     Farm Owner and Operator (1)

             James F. Patterson             53      1989         1998     President, Patterson Farms, Inc.; Vice
                                                                          President, Pattersons, Inc. (1)
</TABLE>


                                      13
<PAGE>   14



<TABLE>
<CAPTION>
                                                                 Term
                                                               Expires
                                                  Director      Annual
             Name                          Age      Since      Meeting    Business Experience                             
             ------------------------------------------------ ----------- ------------------------------------------------
             <S>                              <C>   <C>          <C>      <C>
             Robert H. Rickel *             66      1984         1996     Rancher (1), (4)

             Arden L. Shisler               54      1984         1996     President and Chief Executive Officer, K&B
                                                                          Transport, Inc. (1)

             Robert L. Stewart              59      1989         1998     Farm owner and operator; Owner, Sunnydale
                                                                          Mining (1)

             Nancy C. Thomas *              61      1986         1998     Farm Owner and Operator (1)

             Harold W. Weihl                63      1990         1996     Farm Owner and Operator (1)
</TABLE>


<TABLE>
<CAPTION>
                                                 Term Begins  Term
             Nominees                      Age                 Expires    Business Experience                             
             ------------------------------------------------ ----------- ------------------------------------------------
             <S>                            <C>     <C>          <C>      <C>
             Keith W. Eckel                 49      1996         1999     Partner, Fred W. Eckel Sons (1), (5)

             Joseph J. Gasper               52      1996         1997     Executive Vice President - Property/ Casualty
                                                                          Operations (5), (6)
<FN>
                               

                     *     Served as a member of the Salary and Compensation
                           Committee during 1995.

                    (1)    Principal occupation for the last five years.

                    (2)    Held this position since April, 1991.

                    (3)    President and Chief Operating Officer, Nationwide
                           Mutual, Nationwide Mutual Fire, Nationwide General,
                           Nationwide Property and Casualty Insurance Companies
                           (04/91 to 12/92); President and General Manager
                           (04/88 to 04/91); Chief Executive Officer,
                           Nationwide Life and Nationwide Life and Annuity
                           Insurance Companies (12/92 to 12/93).

                    (4)    The following directors will retire at the April 4,
                           1996 annual meeting: Peter F. Frenzer and Robert H.
                           Rickel.

                    (5)    Mr. Eckel and Mr. Gasper have been nominated to
                           become directors at the 1996 annual meeting.

                    (6)    Executive Vice President - Property/Casualty
                           Operations (04/95 to present); Senior Vice President
                           - Property/Casualty Operations (09/93 to 04/95);
                           Senior Vice President - Agency Operations (08/92 to
                           09/93); Vice President - Agency Operations (02/89 to
                           08/92), Nationwide Insurance Companies.
</TABLE>
                                      14

<PAGE>   15


              (b)   Identification of Executive Officers

<TABLE>
<CAPTION>
                                                    Held
                                                  Position
             Name                          Age      Since     Position                                                   
             ------------------------------------------------ -----------------------------------------------------------
             <S>                            <C>     <C>       <C>
             Peter F. Frenzer               61      1991      President and Chief Operating Officer

             Gordon E. McCutchan            60      1994      Executive Vice President - Law and Corporate Services and
                                                              Secretary

             D. Richard McFerson            58      1993      President and Chief Executive Officer - Nationwide
                                                              Insurance Enterprise (12/93 to present); Chief Executive
                                                              Officer prior to 12/93

             Galen R. Barnes                48      1989      Senior Vice President

             James E. Brock                 48      1990      Senior Vice President - Investment Product Operations

             Richard D. Crabtree            54      1995      Executive Vice President - Property/Casualty Operations

             Thomas L. Crumrine             53      1995      Senior Vice President - Claims

             W. Sidney Druen                53      1994      Senior Vice President and General Counsel and Assistant
                                                              Secretary

             Mark E. Fiebrink               44      1993      Senior Vice President - Chief Actuary - Property and
                                                              Casualty

             Harvey S. Galloway, Jr.        61      1993      Senior Vice President and Chief Actuary - Life, Health
                                                              and Annuities

             Joseph J. Gasper               52      1995      Executive Vice President - Property/Casualty Operations

             Richard A. Karas               53      1993      Senior Vice President - Sales - Financial Services

             Robert A. Oakley               49      1995      Executive Vice President - Chief Financial Officer

             Carl J. Santillo               46      1993      Senior Vice President - Life and Health Operations

             Susan A. Wolken                45      1995      Senior Vice President - Human Resources

             Robert J. Woodward, Jr.        54      1995      Executive Vice President - Chief Investment Officer

             Mark A. Folk                   47      1993      Vice President and Treasurer
</TABLE>


                                      15
<PAGE>   16


                    The above listed officers hold office until the date of the
                    next regular annual meeting of the Board of Directors and
                    until their respective successors are elected or appointed
                    and qualified; however, any officer may be removed from
                    office with or without cause by vote of two-thirds of the
                    entire Board of Directors.

                    Peter F. Frenzer,  President and Chief Operating Officer,
                    has elected early retirement effective April 6, 1996, the
                    date of the next regular annual meeting.  Joseph J. Gasper
                    has been selected to succeed Mr. Frenzer.

                    Each of the executive officers listed above serves in the
                    capacities listed* for the following Nationwide Insurance
                    Enterprise companies; Nationwide Mutual Insurance Company,
                    Nationwide Mutual Fire Insurance Company, Nationwide
                    General Insurance Company, Nationwide Property and Casualty
                    Insurance Company, Nationwide Life Insurance Company and
                    Nationwide Life and Annuity Insurance Company.

                           * Mr. Frenzer serves as President of Nationwide
                             Corporation and Nationwide Life and Annuity
                             Insurance Company and as Executive Vice President
                             of Nationwide Mutual Insurance Company, Nationwide
                             Mutual Fire Insurance Company, Nationwide General
                             Insurance Company and Nationwide Property and
                             Casualty Insurance Company.

                    Each of the executive officers listed above also serve in   
                    various capacities as executive officers in numerous
                    other affiliated companies.

              (c)   Not applicable.

              (d)   Not applicable.

              (e)   In addition to the business experience of each of the
                    directors given in (a) above, Messrs. Frenzer,  Fuellgraf,
                    McFerson,  Rickel, Weihl and Mrs.  Thomas are trustees of
                    Nationwide  Investing  Foundation,  a registered
                    investment  company.  Mr.  Frenzer and Mr.  McFerson are
                    also trustees of Financial Horizons Investment Trust,
                    Nationwide Investing Foundation II and Nationwide Separate
                    Account Trust, registered investment companies.

                    Each of the executive  officers listed in (b) above,  with
                    the exception of Mr.  Fiebrink,  Mr. Santillo and Mr. Folk,
                    has been associated with the registrant for the past five
                    years.  Previous to their present  assignments,  the
                    following  officers  served the registrant in this
                    capacity:  Mr.  Barnes, Vice President; Mr. Brock, Vice
                    President;  Mr. Crabtree,  Senior Vice President; Mr.
                    Crumrine, Vice President; Mr. Druen, Vice President -
                    Deputy General Counsel and Assistant  Secretary;  Mr.
                    Fiebrink,  Senior Vice President,  Employers  Insurance of
                    Wausau A Mutual Company and Wausau Service Corporation;
                    Mr. Folk, Partner - KPMG Peat Marwick LLP; Mr. Frenzer,
                    Executive Vice President; Mr. Galloway, Senior Vice
                    President - Chief Actuary; Mr. Gasper, Senior Vice
                    President; Mr. Karas, Vice President;  Mr. McCutchan,
                    Executive Vice President and General Counsel and Secretary;
                    Mr. Oakley,  Senior Vice President - Chief  Financial
                    Officer;  Mr.  Santillo,  Executive Vice President,
                    Employers  Insurance of Wausau A Mutual Company and Wausau
                    Service Corporation; Ms. Wolken, Vice President; and Mr.
                    Woodward, Senior Vice President - Fixed Income Investments.

              (f)   Not applicable.

              (g)   Not applicable.

                                      16
<PAGE>   17


ITEM 11.      Executive Compensation.

              The following information is given with respect to the Chief
              Executive Officer and each of the four most highly compensated
              executive officers of the Company as of December 31, 1995.

<TABLE>
<CAPTION>
                                                   Summary Compensation Table (1)                                      
               --------------------------------------------------------------------------------------------------------
                                                                                                       Long-term
                                                                Annual compensation                 compensation (2)   
                                                   --------------------------------------------------------------------
                        (a)                (b)          (c)            (d)             (e)                 (h)
             Name and                                                              Other annual           LTIP
             principal position            Year        Salary         Bonus        compensation          payouts       
             --------------------------- --------- --------------- ------------- ----------------- --------------------
             <S>                           <C>         <C>             <C>            <C>                 <C>
             D. R. McFerson                1995        $122,072         79,914         5,692               87,566
             Chief Executive               1994         127,568        111,671         5,575                    -
             Officer                       1993         113,991         55,852         5,422               19,102

             P. F. Frenzer                 1995         381,630        244,916        15,762              191,673
             President and Chief           1994         370,726        237,575        17,733                    -
             Operating Officer             1993         381,571        165,419        10,820               62,386

             R. J. Woodward, Jr.           1995         174,717         92,461         6,758               54,917
             Senior Vice                   1994         172,172        101,540         9,146                    -
             President                     1993         144,951         68,358         7,233                    -

             R. A. Karas                   1995         121,625         62,798         7,839               19,224
             Senior Vice                   1994         167,308         86,456         9,678                    -
             President                     1993         146,538         79,122        11,407                    -

             C. J. Santillo                1995         127,601         11,981        17,347               68,547
             Senior Vice                   1994         237,400         14,707        23,650                    -
             President                     1993         160,731              -         4,638                    -
</TABLE>

                    (1)    The listed executive officers and other executive
                           officers of the Company not listed also serve as
                           executive officers or otherwise serve one or more of
                           Nationwide Mutual Insurance Company, Nationwide
                           Mutual Fire Insurance Company, Nationwide General
                           Insurance Company, Nationwide Property and Casualty
                           Insurance Company, Nationwide Indemnity Company,
                           Nationwide Corporation, Scottsdale Indemnity
                           Company, and Nationwide Life and Annuity Insurance
                           Company, which together with the Company make up the
                           Nationwide Group of Insurance Companies.  The
                           amounts shown above relate only to the Company.

                    (2)    Certain executive officers of the Company
                           participate in a long term sustained performance
                           incentive plan.  The plan provides the opportunity
                           for participants to earn an award for achieving
                           predetermined goals during a four-year performance
                           period. The performance measures include:
                           profitability goals, growth in selected product
                           lines and geographic areas and strategic goals in
                           key competitive aspects of the business operations.
                           The performance periods overlap, such that awards
                           are determined every two years, with the most recent
                           performance period ending December 31, 1994. Payout
                           of awards occurs in the year immediately following
                           the end of a performance period. The award may range
                           from 0% to 20% of the sum of the base salaries for
                           the final two calendar years of the performance
                           period.

                                      17
<PAGE>   18


              Included in the Summary Compensation Table shown above are
              contributions made to the Company's Employee Incentive Savings
              Plan. Pursuant to the Plan, the Company contributes on behalf of
              all eligible employees. Company contributions are included in
              column (e). Employee contributions are included in column (c).
              Since contributions under the Plan may be invested in a fixed
              income security fund, a common stock fund, a guaranteed interest
              fund, a short-term interest fund or shares of Nationwide
              Investing Foundation (Nationwide Growth Fund), it is not possible
              to estimate the annual benefits therefrom upon retirement.

              The Company participates in the Nationwide Insurance Companies'
              management incentive plans. These plans provide for incentive
              compensation based upon achieving or exceeding operating gain
              objectives and upon the achievement and betterment of planned
              expense levels and/or ratios. Additional incentive compensation
              is paid, subject to achievement of the operating gain objective,
              for achievement of premium and/or revenue objectives. Incentive
              penalties are assessed for exceeding planned expense levels
              and/or ratios. Directors do not participate in the plan. Payments
              under the plan are included in the Summary Compensation Table as
              LTIP payouts.

              Nationwide Life Insurance Company, together with other affiliated
              companies, participates in the Nationwide Insurance Enterprise
              Retirement Plan. This pension plan was formed, effective December
              31, 1995, as the Nationwide Insurance Companies' and Affiliates'
              1976 Restated Retirement Plan was merged with the Farmland Mutual
              Insurance Company Employees' Retirement Plan and the Wausau
              Insurance Companies Pension Plan. This pension plan is a defined
              benefit plan designed to qualify under applicable provisions of
              the Internal Revenue Code. Reference is made to note 10 to the
              consolidated financial statements herein for additional
              information regarding the pension plan. The following table
              represents annual benefits payable in the event of retirement on
              or after age 65.

<TABLE>
<CAPTION>
                                                 Pension Plan Table (1)                               
                    ----------------------------------------------------------------------------------
                   Average of Last
                     Three Years'                           Years of Service                          
                                    ------------------------------------------------------------------
                     Compensation        15           20           25           30            35       
                  -------------------------------------------------------------------------------------
                       <S>              <C>          <C>          <C>          <C>          <C>
                       $125,000          30,869       41,158       51,448       61,737       72,027
                        150,000          42,084       56,112       70,140       84,168       98,196
                        175,000          49,584       66,112       82,640       99,168      115,696
                        200,000          57,084       76,112       95,140      114,168      133,196
                        225,000          65,584       86,112      107,640      129,168      150,696
                        250,000          72,084       96,112      120,140      144,268      168,196
                        300,000          87,084      116,112      145,140      174,168      203,196
                        400,000         117,084      156,112      195,140      234,168      273,196
                        450,000         132,084      176,112      220,140      364,168      308,196
                        500,000         147,084      196,112      245,140      294,168      343,196
</TABLE>

                    (1)    The amounts shown are based on compensation amounts
                           as reported on the W-2 form for that year adjusted
                           to exclude severance pay, reimbursement of
                           relocation expenses and the value of a company car
                           and to include pre-tax employee contributions to any
                           savings plan, any group insurance plan or any
                           medical and dependent care reimbursement plans
                           established by the employer and workers compensation
                           or state disability income. Such amount for named
                           executive officers are included in columns (c), (d)
                           and (e) of the Summary Compensation Table.

                                      18
<PAGE>   19


                    (2)    As of December 31, 1995,  the named  individuals
                           had the following  respective  years of service
                           under the pension plan: D. R.  McFerson, 15 years;
                           P. F. Frenzer, 22 years; R. J. Woodward, Jr., 31
                           years; R. A. Karas, 32 years; C. J. Santillo, 2
                           years.

                    (3)    The amounts shown represent annual benefits upon
                           retirement at age 65 for the years of service
                           indicated for retirement in 1995. Amounts for
                           retirement after 1995 will differ due to changes in
                           social security covered compensation, as well as
                           changes in the plan's benefit formula for service
                           earned after December 31, 1995.

              Each director of the registrant also serves as a director on the
              boards of various other Nationwide Insurance Enterprise
              companies.  Compensation for services as a director consists of a
              base annual rate for each director plus varying amounts for
              fringe benefits and reimbursement of out-of-pocket expenses.
              Directors who are also officers are excluded from this
              arrangement. The following table represents total compensation
              payments made to the directors, who are not also officers, from
              the registrant during 1995.

<TABLE>
<CAPTION>
                           Director                               Compensation    
                           -----------------------------        ------------------
                           <S>                                         <C>
                           Lewis J. Alphin                             $10,678
                           Willard J. Engel                             10,729
                           Fred C. Finney                               11,929
                           Charles L. Fuellgraf, Jr.                    11,097
                           Henry S. Holloway                            12,969
                           David O. Miller                              15,296
                           C. Ray Noecker                               11,730
                           James F. Patterson                            9,092
                           Robert H. Rickel                             13,691
                           Arden L. Shisler                             11,578
                           Robert L. Stewart                            14,224
                           Nancy C. Thomas                              10,975
                           Harold W. Weihl                              11,116
</TABLE>


ITEM 12.      Security Ownership of Certain Beneficial Owners and Management.
--------      ---------------------------------------------------------------
              Security Ownership of Certain Beneficial Owners as of December
              31, 1995.

<TABLE>
<CAPTION>
                    Title of           Name and Address            Amount and Nature of        Percent
                     Class           of Beneficial Owner           Beneficial Ownership        of Class   
                  ------------- ------------------------------- ---------------------------- -------------
                  <S>              <C>                           <C>         <C>                 <C>
                  Common           Nationwide Corporation        3,814,779   Shares of           100%
                  Stock            One Nationwide Plaza                      record and
                                   Columbus, Ohio 43216                      beneficially*

<FN>
                    * Sole voting and investment power
</TABLE>


                                      19
<PAGE>   20


ITEM 13.      Certain Relationships and Related Transactions.
--------      -----------------------------------------------
              In 1995, the Company and its subsidiaries paid to the law firm of
              Druen, Rath & Dietrich approximately $1,860,000 for legal
              services rendered to the Company. W. Sidney Druen, Senior Vice
              President and General Counsel and Assistant Secretary; Joseph P.
              Rath, Vice President - Associate General Counsel; and Thomas W.
              Dietrich, Vice President - Associate General Counsel, are all
              partners in that firm, and all members of the firm are employees
              of Nationwide Mutual Insurance Company.

              The Company leases space in a building owned by Nationwide Mutual
              Insurance Company. Nationwide Mutual Insurance Company acts as
              disbursing agent for many of the expenses incurred by the
              Company.  Nationwide Mutual Insurance Company also provides some
              operational and administrative functions at cost, such as sales,
              advertising, personnel and general management services. For the
              year 1995, reimbursements by the Company for its funds disbursed
              by Nationwide Mutual Insurance Company and the costs of services
              provided approximated $305,316,000.

              For the year 1995, the Company received approximately $678,000 of
              expense reimbursements from Nationwide Corporation for providing
              administrative services.

              The Company participates in a common employee benefit program
              with Nationwide Mutual Insurance Company and its subsidiaries.
              Included in this program are accident and health insurance,
              disability income and life insurance benefits and a retirement
              plan. The retirement plan is funded in the Company's Separate
              Accounts and its general account, earning a guaranteed rate of
              return.  Contributions to the retirement plan by the
              participating companies approximated $53,866,000 in 1995.

              The Company also participates in a life and health care defined
              benefit plan for qualifying retirees with Nationwide Mutual
              Insurance Company and its subsidiaries. The plan is funded in
              amounts determined at the discretion of management. Contributions
              to the plan by the participating companies are primarily invested
              in group annuity contracts of the Company and approximated
              $10,309,000 in 1995.

              Reference is made to note 13 to the consolidated financial        
              statements herein for additional information regarding
              transactions with affiliates.



                                     20
<PAGE>   21


                                    PART IV
                                    -------
ITEM 14.      Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
--------      -----------------------------------------------------------------
              (a) (1) Consolidated Financial Statements:

                           Independent Auditors' Report

                           Consolidated Balance Sheets, December 31, 1995 and
                            1994

                           Consolidated Statements of Income, years ended
                            December 31, 1995, 1994 and 1993

                           Consolidated Statements of Shareholder's Equity,
                            years ended December 31, 1995, 1994 and 1993

                           Consolidated Statements of Cash Flows, years ended
                            December 31, 1995, 1994 and 1993

                           Notes to Consolidated Financial Statements

                  (2) Financial Statement Schedules:

                           Schedule I     Summary of Investments - Other Than
                                           Investments in Related Parties, 
                                           December 31, 1995

                           Schedule III   Supplementary Insurance Information,
                                           December 31, 1995, 1994 and 1993

                           Schedule IV    Reinsurance, years ended December 31,
                                           1995, 1994 and 1993

                           Schedule V     Valuation and Qualifying Accounts,
                                           years ended December 31, 1995, 1994
                                           and 1993
 
                           All other schedules to the consolidated financial
                           statements referenced by Article 7 of Regulation S-X
                           are not required under the related instructions or
                           are inapplicable and therefore have been omitted.

                  (3) Exhibit Index:

                           Exhibit 3 (i)  Articles of Incorporation of 
                                            Nationwide Life Insurance Company 
                                            Incorporated by reference to 
                                            Exhibit A to Form S-1 File 
                                            Number 33-58997, filed May 2, 1995

                          Exhibit 3 (ii)  Code of Regulations of Nationwide 
                                            Life Insurance Company Incorporated 
                                            by reference to Exhibit B to 
                                            Form S-1 File Number 33-58997, 
                                            filed May 2, 1995
                                
                           Exhibit 21     Subsidiaries of the Registrant

                           Exhibit 27     Financial Data Schedule

                           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.

              (b)     There have been no reports filed on Form 8-K during the
                      year ended December 31, 1995 by the registrant.

                                      21
<PAGE>   22





               NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
             (a wholly owned subsidiary of Nationwide Corporation)

                  --------------------------------------------

                       Consolidated Financial Statements

                        December 31, 1995, 1994 and 1993

                           For Inclusion in Form 10-K
                     To Securities and Exchange Commission




                                     22

<PAGE>   23


                          INDEPENDENT AUDITORS' REPORT
                          ----------------------------


The Board of Directors
Nationwide Life Insurance Company:

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

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

Participating insurance and the related surplus are discussed in note 12. The
Company and its counsel are of the opinion that the ultimate ownership of the
participating surplus in excess of the contemplated equitable policyholder
dividends belongs to the shareholder. The accompanying consolidated financial
statements are presented on such basis.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Nationwide Life
Insurance Company and subsidiaries as of December 31, 1995 and 1994, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1995, in conformity with generally
accepted accounting principles. Also in our opinion, the related financial
statement schedules, when considered in relation to the basic consolidated
financial statements taken as a whole, present fairly, in all material
respects, the information set forth therein.

In 1994, the Company adopted the provisions of the Financial Accounting
Standards Board's Statement of Financial Accounting Standards (SFAS) No. 115,
Accounting for Certain Investments in Debt and Equity Securities.

In 1993, the Company adopted the provisions of SFAS No. 109,  Accounting for
Income Taxes and SFAS No. 106,  Employers'  Accounting for Postretirement
Benefits Other Than Pensions.



                                                   KPMG Peat Marwick LLP



Columbus, Ohio
February 26, 1996


                                     23
<PAGE>   24
               NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
             (a wholly owned subsidiary of Nationwide Corporation)

                          Consolidated Balance Sheets
                           December 31, 1995 and 1994

                                (000's omitted)

<TABLE>
<CAPTION>
                                        ASSETS                                                1995               1994
                                        ------                                          -----------------   ----------------   
<S>                                                                                             <C>               <C>         
Investments (notes 5, 8 and 9): 
  Securities available-for-sale, at fair value:
     Fixed maturities (cost $13,438,630 in 1995; $8,318,865 in 1994)                       $ 14,167,377        8,045,906
     Equity securities (cost $27,362 in 1995; $18,372 in 1994)                                   33,718           24,713
   Fixed maturities held-to-maturity, at amortized cost (fair value $3,602,310 in 1994)           -            3,688,787
   Mortgage loans on real estate                                                              4,786,599        4,222,284
   Real estate                                                                                  239,089          252,681
   Policy loans                                                                                 370,908          340,491
   Other long-term investments                                                                   67,280           63,914
   Short-term investments (note 13)                                                              45,732          131,643
                                                                                            -----------      -----------
                                                                                             19,710,703       16,770,419
                                                                                            -----------      -----------

Cash                                                                                             10,485            7,436
Accrued investment income                                                                       239,881          220,540
Deferred policy acquisition costs                                                             1,094,195        1,064,159
Deferred Federal income tax                                                                        --             36,515
Other assets                                                                                    795,169          790,603
Assets held in Separate Accounts (note 8)                                                    18,763,678       12,222,461
                                                                                            -----------      -----------
                                                                                            $40,614,111       31,112,133
                                                                                            ===========      ===========

                         LIABILITIES AND SHAREHOLDER'S EQUITY
                         ------------------------------------

Future policy benefits and claims (notes 6 and 8)                                            18,200,128       16,321,461
Policyholders' dividend accumulations                                                           353,554          338,058
Other policyholder funds                                                                         71,155           72,770
Accrued Federal income tax (note 7):

   Current                                                                                       34,064           13,126
   Deferred                                                                                     238,877                -  
                                                                                            -----------      -----------
                                                                                                272,941           13,126
                                                                                            -----------      -----------
Other liabilities                                                                               284,143          235,778
Liabilities related to Separate Accounts (note 8)                                            18,763,678       12,222,461
                                                                                            -----------      -----------
                                                                                             37,945,599       29,203,654
                                                                                            -----------      -----------
Shareholder's equity (notes 3, 4, 5, 7, 12 and 13):
   Capital shares, $1 par value.  Authorized 5,000 shares, issued and
     outstanding 3,815 shares                                                                    3,815             3,815
   Additional paid-in capital                                                                   673,782          622,753
   Retained earnings                                                                          1,606,607        1,401,579
   Unrealized gains (losses) on securities available-for-sale, net                              384,308         (119,668)
                                                                                            -----------      -----------
                                                                                              2,668,512        1,908,479
                                                                                            -----------      -----------
Commitments and contingencies (notes 9 and 15)

                                                                                            $40,614,111       31,112,133
                                                                                            ===========      ===========


See accompanying notes to consolidated financial statements.
</TABLE>
                                      24
<PAGE>   25

               NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
             (a wholly owned subsidiary of Nationwide Corporation)

                       Consolidated Statements of Income

                  Years ended December 31, 1995, 1994 and 1993
                                (000's omitted)

<TABLE>
<CAPTION>
                                                                                      1995            1994            1993     
                                                                                 ---------------  --------------  -------------
<S>                                                                                    <C>          <C>           <C>
Revenues (note 16):

   Traditional life insurance premiums                                                 $  274,957      209,538       215,715
   Accident and health insurance premiums                                                 509,658      324,524       312,655
   Universal life and investment product policy charges                                   307,676      239,021       188,057
   Net investment income (note 5)                                                       1,482,980    1,289,501     1,204,426
   Realized gains (losses) on investments  (notes 5 and 13)                                   836      (16,384)      113,673
                                                                                       ----------   ----------    ----------
                                                                                        2,576,107    2,046,200     2,034,526
                                                                                       ----------   ----------    ----------
Benefits and expenses:

   Benefits and claims                                                                  1,656,287    1,279,763     1,236,906
   Provision for policyholders' dividends on participating policies (note 12)              48,074       46,061        53,189
   Amortization of deferred policy acquisition costs                                       93,044       94,744       102,134
   Other operating costs and expenses                                                     458,970      352,402       329,396
                                                                                       ----------   ----------    ----------
                                                                                        2,256,375    1,772,970     1,721,625
                                                                                       ----------   ----------    ----------
      Income before Federal income tax expense and cumulative effect of
        changes in accounting principles                                                 319,732      273,230       312,901
                                                                                       ----------   ----------    ----------

Federal income tax expense (note 7):

   Current                                                                                103,464       79,847        75,124
   Deferred                                                                                 3,790        9,657        31,634
                                                                                       ----------   ----------    ----------
                                                                                          107,254       89,504       106,758
                                                                                       ----------   ----------    ----------

      Income before cumulative effect of changes in accounting principles                 212,478      183,726       206,143

Cumulative effect of changes in accounting principles, net (note 3)                            --           --         5,365
                                                                                       ----------   ----------    ----------

      Net income                                                                       $  212,478      183,726       211,508
                                                                                       ==========   ==========    ==========




See accompanying notes to consolidated financial statements.
</TABLE>

                                      25
<PAGE>   26

               NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
             (a wholly owned subsidiary of Nationwide Corporation)

                Consolidated Statements of Shareholder's Equity

                  Years ended December 31, 1995, 1994 and 1993
                                (000's omitted)

<TABLE>
<CAPTION>
                                                                                             Unrealized
                                                                                           gains (losses)
                                                             Additional                    on securities        Total
                                                 Capital      paid-in        Retained      available-for-   shareholder's
                                                  shares      capital        earnings        sale, net          equity
                                                -----------   -----------   ----------- ----------------- ---------------
<S>                                              <C>          <C>          <C>             <C>             <C>
1993:

   Balance, beginning of year                     $   3,815      311,753    1,024,150          90,524       1,430,242
   Capital contributions                                 --      111,000           --              --         111,000
   Dividends paid to shareholder                         --           --      (17,805)             --         (17,805)
   Net income                                            --           --      211,508              --         211,508
   Unrealized losses on equity securities, net           --           --           --         (83,777)        (83,777)
                                                 ----------   ----------    ----------     ----------      ----------
   Balance, end of year                          $    3,815      422,753    1,217,853           6,747       1,651,168
                                                 ==========   ==========    =========      ==========      ==========

1994:

   Balance, beginning of year                         3,815      422,753    1,217,853           6,747       1,651,168
   Capital contribution                                  --      200,000           --              --         200,000
   Net income                                            --           --      183,726              --         183,726
   Adjustment for change in accounting for
      certain investments in debt and equity
      securities, net (note 3)                           --           --           --         216,915         216,915
   Unrealized losses on securities available-
      for-sale, net                                      --           --           --        (343,330)       (343,330)
                                                 ----------   ----------   ----------      ----------      ---------- 
   Balance, end of year                          $    3,815      622,753    1,401,579        (119,668)      1,908,479
                                                 ==========   ==========   ==========      ==========      ========== 
 
1995:

   Balance, beginning of year                         3,815      622,753    1,401,579        (119,668)      1,908,479
   Capital contribution (note 13)                        --       51,029           --          (4,111)         46,918
   Dividends paid to shareholder                         --           --       (7,450)             --          (7,450)
   Net income                                            --           --      212,478              --         212,478
   Unrealized gains on securities available-
       for-sale, net                                     --           --           --         508,087         508,087
                                                 ----------   ----------   ----------      ----------      ----------
   Balance, end of year                          $    3,815      673,782    1,606,607         384,308       2,668,512
                                                 ==========   ==========   ==========      ==========      ========== 
                                                


See accompanying notes to consolidated financial statements.
</TABLE>
                                      26
<PAGE>   27

               NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
             (a wholly owned subsidiary of Nationwide Corporation)

                     Consolidated Statements of Cash Flows

                  Years ended December 31, 1995, 1994 and 1993
                                (000's omitted)

<TABLE>
<CAPTION>
                                                                                     1995            1994            1993      
                                                                               --------------    ------------     -----------
<S>                                                                           <C>             <C>             <C>
  Cash flows from operating activities:

   Net income                                                                    $   212,478        183,726        211,508
   Adjustments to reconcile net income to net cash provided by operating
      activities:

         Capitalization of deferred policy acquisition costs                        (349,456)      (264,434)      (191,994)
         Amortization of deferred policy acquisition costs                            93,044         94,744        102,134
         Amortization and depreciation                                                10,319          6,207         11,156
         Realized losses (gains) on invested assets, net                                 717         15,949       (113,648)
         Deferred Federal income tax expense (benefit)                                 4,023         (2,166)        (6,006)
         Increase in accrued investment income                                       (19,341)       (29,654)        (4,218)
         Increase in other assets                                                     (3,227)      (112,566)      (549,277)
         Increase in policy liabilities                                              198,200      1,038,641        509,370
         Increase in policyholders' dividend accumulations                            15,496         15,372         17,316
         Increase in accrued Federal income tax payable                               20,938            832         16,838
         Increase in other liabilities                                                48,365         17,826         26,958
         Other, net                                                                  (20,556)       (19,303)       (11,745)
                                                                                 -----------    -----------    ------------
            Net cash provided by operating activities                                211,000        945,174         18,392
                                                                                 -----------    -----------    -----------

Cash flows from investing activities:

   Proceeds from maturity of securities available-for-sale                           706,442        579,067             --
   Proceeds from sale of securities available-for-sale                               131,420        247,876         247,502
   Proceeds from maturity of fixed maturities held-to-maturity                       633,173        516,003       1,192,093
   Proceeds from sale of fixed maturities                                                 --             --          33,959
   Proceeds from repayments of mortgage loans on real estate                         215,134        220,744         146,047
   Proceeds from sale of real estate                                                  48,477         46,713          23,587
   Proceeds from repayments of policy loans and sale of other invested assets         79,620        134,998          59,643
   Cost of securities available-for-sale acquired                                 (2,232,047)    (2,569,672)        (12,550)
   Cost of fixed maturities held-to-maturity acquired                               (669,449)      (675,835)     (2,016,831)
   Cost of mortgage loans on real estate acquired                                   (821,078)      (627,025)       (475,336)
   Cost of real estate acquired                                                      (10,970)       (15,962)         (8,827)
   Policy loans issued and other invested assets acquired                            (92,904)      (118,012)        (76,491)
                                                                                 -----------    -----------    ------------
            Net cash used in investing activities                                 (2,012,182)    (2,261,105)      (887,204)
                                                                                 -----------    -----------    -----------

Cash flows from financing activities:

   Proceeds from capital contributions                                                46,918        200,000        111,000
   Dividends paid to shareholder                                                      (7,450)            --        (17,805)
   Increase in universal life and investment product account balances              3,202,135      3,640,958      2,249,740
   Decrease in universal life and investment product account balances             (1,523,283)    (2,449,580)    (1,458,504)
                                                                                 -----------    -----------    -----------
            Net cash provided by financing activities                              1,718,320      1,391,378        884,431
                                                                                 -----------    -----------    -----------

Net (decrease) increase in cash and cash equivalents                                 (82,862)        75,447         15,619

Cash and cash equivalents, beginning of year                                         139,079         63,632         48,013
                                                                                 -----------    -----------    -----------
Cash and cash equivalents, end of year                                           $    56,217        139,079         63,632
                                                                                 ===========    ===========    ===========


See accompanying notes to consolidated financial statements.
</TABLE>

                                      27
<PAGE>   28

              NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
            (a wholly owned subsidiary of Nationwide Corporation)
                                      
                 Notes to Consolidated Financial Statements

                       December 31, 1995, 1994 and 1993

                               (000's omitted)


(1)   ORGANIZATION AND DESCRIPTION OF BUSINESS

      Nationwide Life Insurance Company (NLIC) is a wholly owned subsidiary of
      Nationwide Corporation (Corp.). Wholly-owned subsidiaries of NLIC include
      Nationwide Life and Annuity Insurance Company (NLAIC) (formerly known as
      Financial Horizons Life Insurance Company), West Coast Life Insurance
      Company (WCLIC), Employers Life Insurance Company of Wausau and
      subsidiaries (ELICW), National Casualty Company (NCC) and Nationwide
      Financial Services, Inc. (NFS).  NLIC and its subsidiaries are
      collectively referred to as "the Company."
                        
      NLIC, NLAIC, WCLIC and ELICW are life and accident and health insurers
      and NCC is a property and casualty insurer. The Company is licensed in
      all 50 states, the District of Columbia, the Virgin Islands and Puerto
      Rico. The Company offers a full range of life insurance, health insurance
      and annuity products through exclusive agents, brokers and other
      distribution channels and is subject to competition from other insurers
      throughout the United States. The Company is subject to regulation by the
      Insurance Departments of states in which it is licensed, and undergoes
      periodic examinations by those departments.
        
      The following is a description of the most significant risks  facing      
      life and health insurers and how the Company mitigates those risks:
        
         LEGAL/REGULATORY RISK is the risk that changes in the legal or
         regulatory environment in which an insurer operates will create
         additional expenses not anticipated by the insurer in pricing its
         products. That is, regulatory initiatives designed to reduce insurer
         profits, new legal theories or insurance company insolvencies through
         guaranty fund assessments may create costs for the insurer beyond
         those currently recorded in the consolidated financial statements. The
         Company mitigates this risk by offering a wide range of products and
         by operating throughout the United States, thus reducing its exposure
         to any single product or jurisdiction, and also by employing
         underwriting practices which identify and minimize the adverse impact
         of this risk.
        
         CREDIT RISK is the risk that issuers of securities owned by the
         Company or mortgagors on mortgage loans on real estate owned by the
         Company will default or that other parties, including reinsurers,
         which owe the Company money, will not pay. The Company minimizes this
         risk by adhering to a conservative investment strategy, by maintaining
         sound reinsurance and credit and collection policies and by
         providing for any amounts deemed uncollectible.
        
         INTEREST RATE RISK is the risk that interest rates will change and
         cause a decrease in the value of an insurer's investments. This change
         in rates may cause certain interest-sensitive products to become
         uncompetitive or may cause disintermediation. The Company mitigates
         this risk by charging fees for non-conformance with certain policy
         provisions, by offering products that transfer this risk to the
         purchaser, and/or by attempting to match the maturity schedule of its
         assets with the expected payouts of its liabilities. To the extent
         that liabilities come due more quickly than assets mature, an insurer
         would have to borrow funds or sell assets prior to maturity and
         potentially recognize a gain or loss.
        
(2)   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      The significant accounting policies followed by the Company that
      materially affect financial reporting are summarized below. The
      accompanying consolidated financial statements have been prepared in
      accordance with generally accepted accounting principles (GAAP) which
      differ from statutory accounting practices prescribed or permitted by
      regulatory authorities. See note 4.


                                      28
<PAGE>   29

              NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
            (a wholly owned subsidiary of Nationwide Corporation)
                                      
            Notes to Consolidated Financial Statements, Continued

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

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

(a) CONSOLIDATION POLICY

    The December 31, 1995 consolidated financial statements include the
    accounts of NLIC and its wholly owned subsidiaries NLAIC, WCLIC, ELICW, NCC
    and NFS. The December 31, 1994 and 1993 consolidated financial statements
    include the accounts of NLIC, NLAIC, WCLIC, NCC and NFS. The December 31,
    1994 consolidated balance sheet also includes the accounts of ELICW, which
    was acquired by NLIC effective December 31, 1994. See Note 13. All
    significant intercompany balances and transactions have been eliminated.

(b) VALUATION OF INVESTMENTS AND RELATED GAINS AND LOSSES

    The Company is required to classify its fixed maturity securities and
    equity securities as either held-to-maturity, available-for-sale or
    trading.  Fixed maturity securities are classified as held-to-maturity when
    the Company has the positive intent and ability to hold the securities to
    maturity and are stated at amortized cost. Fixed maturity securities not
    classified as held-to-maturity and all equity securities are classified as
    available-for-sale and are stated at fair value, with the unrealized gains
    and losses, net of adjustments to deferred policy acquisition costs and
    deferred Federal income tax, reported as a separate component of
    shareholder's equity. The adjustment to deferred policy acquisition costs
    represents the change in amortization of deferred policy acquisition costs
    that would have been required as a charge or credit to operations had such
    unrealized amounts been realized. The Company has no fixed maturity
    securities classified as held-to-maturity or trading as of          
    December 31, 1995.

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

    Real estate is carried at cost less accumulated depreciation and valuation
    allowances. Other long-term investments are carried on the equity basis,    
    adjusted for valuation allowances.

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

    In March, 1995, the Financial Accounting Standards Board (FASB) issued
    STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 121 - ACCOUNTING FOR THE
    IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF
    (SFAS 121). SFAS 121 requires impairment losses to be recorded on
    long-lived assets used in operations when indicators of impairment are
    present and the undiscounted cash flows estimated to be generated by those
    assets are less than the assets' carrying amount. SFAS 121 also addresses
    the accounting for long-lived assets that are expected to be disposed of.
    The statement is effective for fiscal years beginning after December 15,
    1995 and earlier application is permitted. Previously issued consolidated
    financial statements shall not be restated. The Company will adopt SFAS 121 
    in 1996 and the impact on the consolidated financial statements is not
    expected to be material. 

                                      29
<PAGE>   30

              NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
            (a wholly owned subsidiary of Nationwide Corporation)
                                      
            Notes to Consolidated Financial Statements, Continued

(c) REVENUES AND BENEFITS

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

    UNIVERSAL LIFE AND INVESTMENT PRODUCTS: Universal life products include
    universal life, variable universal life and other interest-sensitive life
    insurance policies. Investment products consist primarily of individual and
    group deferred annuities, annuities without life contingencies and
    guaranteed investment contracts. Revenues for universal life and investment
    products consist of asset fees, cost of insurance, policy administration
    and surrender charges that have been earned and assessed against policy
    account balances during the period. Policy benefits and claims that are
    charged to expense include benefits and claims incurred in the period in
    excess of related policy account balances and interest credited to policy
    account balances.

    ACCIDENT AND HEALTH INSURANCE: Accident and health insurance premiums
    are recognized as revenue over the terms of the policies. Policy claims are
    charged to expense in the period that the claims are incurred.

(d) DEFERRED POLICY ACQUISITION COSTS

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

(e) SEPARATE ACCOUNTS

    Separate Account assets and liabilities represent contractholders'
    funds which have been segregated into accounts with specific investment
    objectives. The investment income and gains or losses of these accounts
    accrue directly to the contractholders. The activity of the Separate
    Accounts is not reflected in the consolidated statements of income and cash
    flows except for the fees the Company receives for administrative services
    and risks assumed.

(f) FUTURE POLICY BENEFITS

    Future policy benefits for traditional life and individual health
    insurance policies have been calculated using a net level premium method
    based on estimates of mortality, morbidity, investment yields and
    withdrawals which were used or which were being experienced at the time the
    policies were issued, rather than the assumptions prescribed by state
    regulatory authorities. See note 6.

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

                                      30
<PAGE>   31
                                      
              NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
            (a wholly owned subsidiary of Nationwide Corporation)
                                      
            Notes to Consolidated Financial Statements, Continued

    Future policy benefits and claims for collectively renewable long-term
    disability policies (primarily discounted at 5.2%) and group long-term
    disability policies (primarily discounted at 5.5%) are the present value of
    amounts not yet due on reported claims and an estimate of amounts to be
    paid on incurred but unreported claims. The impact of reserve discounting
    is not material. Future policy benefits and claims on other                 
    group health insurance policies are not discounted.
        
(g) PARTICIPATING BUSINESS

    Participating business represents approximately 45% (45% in 1994 and
    48% in 1993) of the Company's ordinary life insurance in force, 72% (72% in
    1994 and 1993) of the number of policies in force, and 39% (41% in 1994 and
    45% in 1993) of life insurance premiums. The provision for policyholder
    dividends is based on current dividend scales. Future dividends are
    provided for ratably in future policy benefits based on dividend scales in
    effect at the time the policies were issued. Dividend scales are approved
    by the Board of Directors.

    Income attributable to participating policies in excess of policyholder
    dividends is accounted for as belonging to the shareholder. See note 12.

(h) FEDERAL INCOME TAX

    NLIC, NLAIC, WCLIC and NCC file a consolidated Federal income tax
    return with Nationwide Mutual Insurance Company (NMIC), the majority
    shareholder of Corp. Through 1994, ELICW filed a consolidated Federal
    income tax return with Employers Insurance of Wausau A Mutual Company.
    Beginning in 1995, ELICW files a separate Federal income tax return.

    In 1993, the Company adopted STATEMENT OF FINANCIAL ACCOUNTING
    STANDARDS NO. 109 - ACCOUNTING FOR INCOME TAXES, which required a change
    from the deferred method of accounting for income tax of APB Opinion 11 to
    the asset and liability method of accounting for income tax. Under the
    asset and liability method, deferred tax assets and liabilities are
    recognized for the future tax consequences attributable to differences
    between the financial statement carrying amounts of existing assets and
    liabilities and their respective tax bases and operating loss and tax
    credit carryforwards. Deferred tax assets and liabilities are measured
    using enacted tax rates expected to apply to taxable income in the years in
    which those temporary differences are expected to be recovered or settled.
    Under this method, the effect on deferred tax assets and liabilities of a
    change in tax rates is recognized in income in the period that includes the
    enactment date. Valuation allowances are established when necessary to
    reduce the deferred tax assets to the amounts expected to be realized.

    The Company has reported the cumulative effect of the change in method
    of accounting for income tax in the 1993 consolidated statement of income.
    See note 3.

(i) REINSURANCE CEDED

    Reinsurance premiums ceded and reinsurance recoveries on benefits and
    claims incurred are deducted from the respective income and expense
    accounts. Assets and liabilities related to reinsurance ceded are reported
    on a gross basis.

(j) CASH EQUIVALENTS

    For purposes of the consolidated statements of cash flows, the Company
    considers all short-term investments with original maturities of three
    months or less to be cash equivalents.

                                      31
<PAGE>   32
                                      
              NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
            (a wholly owned subsidiary of Nationwide Corporation)
                                      
            Notes to Consolidated Financial Statements, Continued

         (k) RECLASSIFICATION

             Certain items in the 1994 and 1993 consolidated financial
             statements have been reclassified to conform to the 1995
             presentation.

(3)      CHANGES IN ACCOUNTING PRINCIPLES

         Effective January 1, 1994, the Company changed its method of
         accounting for certain investments in debt and equity securities in
         connection with the issuance of STATEMENT OF FINANCIAL ACCOUNTING
         STANDARDS NO. 115 - ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND
         EQUITY SECURITIES. As of January 1, 1994, the Company classified fixed
         maturity securities with amortized cost and fair value of $6,593,844
         and $7,024,736, respectively, as available-for-sale and recorded the
         securities at fair value. Previously, these securities were recorded
         at amortized cost. The effect as of January 1, 1994 has been recorded  
         as a direct credit to shareholder's equity as follows:

<TABLE>
<CAPTION>
           <S>                                                                  <C>
           Excess of fair value over amortized cost of fixed maturity
             securities available-for-sale                                      $ 430,892
           Adjustment to deferred policy acquisition costs                        (97,177) 
           Deferred Federal income tax                                           (116,800) 
                                                                                ---------  
                                                                                $ 216,915 
                                                                                =========  

         During 1993, the Company adopted accounting principles in connection
         with the issuance of two accounting standards by the FASB. The effect
         as of January 1, 1993, the date of adoption, has been recognized in
         the 1993 consolidated statement of income as the cumulative effect of
         changes in accounting principles, as follows:

           Asset/liability method of recognizing income tax (note 2(h))         $ 26,344 
           Accrual method of recognizing postretirement benefits other  
             than pensions (net of tax benefit of $11,296) (note 11)             (20,979)  
                                                                                --------   
                                                                                $  5,365 
                                                                                ======== 
 </TABLE>

(4)      BASIS OF PRESENTATION

         The consolidated financial statements have been prepared in accordance
         with GAAP. Annual Statements for NLIC and NLAIC, WCLIC, ELICW and NCC,
         filed with the Department of Insurance of the State of Ohio (the
         Department), California Department of Insurance, Wisconsin Insurance
         Department and Michigan Bureau of Insurance, respectively, are prepared
         on the basis of accounting practices prescribed or permitted by such
         regulatory authorities. Prescribed statutory accounting practices
         include a variety of publications of the National Association of
         Insurance Commissioners (NAIC), as well as state laws, regulations and
         general administrative rules. Permitted statutory accounting practices
         encompass all accounting practices not so prescribed. The Company has  
         no material permitted statutory accounting practices.

         The statutory capital shares and surplus of NLIC as reported to
         regulatory authorities as of December 31, 1995, 1994 and 1993 was
         $1,363,031, $1,262,861 and $992,631, respectively. The statutory net
         income of NLIC as reported to regulatory authorities for the years
         ended December 31, 1995, 1994 and 1993 was $86,529, $76,532 and
         $185,943, respectively.                  

                                      32
<PAGE>   33

               NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
             (a wholly owned subsidiary of Nationwide Corporation)

             Notes to Consolidated Financial Statements, Continued

(5)      INVESTMENTS

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

<TABLE>
<CAPTION>
                                                                 1995             1994            1993
                                                            -------------     ------------    ------------     
<S>                                                           <C>             <C>             <C>
   Gross investment income:
    Securities available-for-sale:
     Fixed maturities                                         $  772,589         674,346              --
     Equity securities                                             1,436             550           7,230
    Fixed maturities held-to-maturity                            232,692         193,009         800,255
    Mortgage loans on real estate                                410,965         376,783         364,810
    Real estate                                                   39,222          40,280          39,684
    Short-term investments                                        12,249           6,990           5,080
    Other                                                         61,701          42,831          33,832
                                                              ----------      ----------      ----------
          Total investment income                              1,530,854       1,334,789       1,250,891
   Less investment expenses                                       47,874          45,288          46,465
                                                              ----------      ----------      ----------
          Net investment income                               $1,482,980       1,289,501       1,204,426
                                                              ==========      ==========      ==========
</TABLE>

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

<TABLE>
<CAPTION>
                                                                 1995             1994           1993      
                                                           ---------------   -------------  --------------
<S>                                                           <C>               <C>              <C>
    Securities available-for-sale:     
     Fixed maturities                                         $  6,792            (7,120)              --
     Equity securities                                           3,435             1,427          129,728
    Fixed maturities                                                --                --           20,225
    Mortgage loans on real estate                               (7,312)          (20,462)         (28,241)
    Real estate and other                                       (2,079)            9,771           (8,039)
                                                              --------          --------         --------
                                                              $    836           (16,384)         113,673
                                                              ========          ========         ========
</TABLE>


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

<TABLE>
<CAPTION>
                                                                                1995             1994     
                                                                            ---------------   -------------
<S>                                                                           <C>              <C>
    Gross unrealized gains (losses)                                           $ 735,103         (266,618)
    Adjustment to deferred policy acquisition costs                            (143,851)          82,525
    Deferred Federal income tax                                                (206,944)          64,425
                                                                              ---------        ---------
                                                                              $ 384,308         (119,668)
                                                                              =========        ========= 
</TABLE>

         An analysis of the change in gross unrealized gains (losses) on 
         securities available-for-sale and fixed maturities held-to-maturity
         follows for the years ended December 31:

<TABLE>
<CAPTION>
                                                                 1995             1994            1993     
                                                            ---------------   -------------   -------------
<S>                                                           <C>            <C>            <C>
    Securities available-for-sale:
     Fixed maturities                                         $ 1,001,706       (703,851)           --
     Equity securities                                                 15         (1,990)      (128,837)
    Fixed maturities held-to-maturity                              86,477       (421,427)       223,392
                                                              -----------    -----------    -----------
                                                              $ 1,088,198     (1,127,268)        94,555
                                                              ===========    ===========    ===========
</TABLE>
                                      33
<PAGE>   34
                                                                 
              NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
            (a wholly owned subsidiary of Nationwide Corporation)
                                                                 
            Notes to Consolidated Financial Statements, Continued

The amortized cost and estimated fair value of securities available-for-sale 
were as follows as of December 31, 1995:

<TABLE>
<CAPTION>
                                                                            Gross         Gross
                                                           Amortized     unrealized     unrealized     Estimated
                                                              cost          gains         losses       fair value
                                                         --------------  ------------ ------------- ---------------
<S>                                                        <C>               <C>           <C>           <C>
 Fixed maturities:

  U.S. Treasury securities and obligations of U.S.
    government corporations and agencies                   $   438,109        36,714            (53)       474,770
  Obligations of states and political subdivisions               9,742         1,252             (1)        10,993
  Debt securities issued by foreign governments                162,442         9,641            (66)       172,017
  Corporate securities                                       8,902,494       524,796        (30,561)     9,396,729
  Mortgage-backed securities                                 3,925,843       196,645         (9,620)     4,112,868
                                                             ---------   -----------    -----------    -----------
      Total fixed maturities                                13,438,630       769,048        (40,301)    14,167,377
 Equity securities                                              27,362         6,441            (85)        33,718
                                                            ----------   -----------    -----------    -----------
                                                           $13,465,992       775,489        (40,386)    14,201,095
                                                           ===========   ===========    ============   ===========
</TABLE>


The amortized cost and estimated fair value of securities available-for-sale 
and fixed maturities held-to-maturity were as follows as of December 31, 1994:

<TABLE>
<CAPTION>
                                                                            Gross         Gross
                                                           Amortized     unrealized     unrealized     Estimated
                                                              cost          gains         losses       fair value
                                                         -------------  ------------- ------------- ---------------
<S>                                                           <C>            <C>           <C>         <C>
SECURITIES AVAILABLE-FOR-SALE 
 Fixed maturities:
  U.S. Treasury securities and obligations of U.S.
      government corporations and agencies                    $  393,156        1,794       (18,941)      376,009
  Obligations of states and political subdivisions                 2,202           55           (21)        2,236
  Debt securities issued by foreign governments                  177,910          872        (9,205)      169,577
  Corporate securities                                         4,201,738       50,405      (128,698)    4,123,445
  Mortgage-backed securities                                   3,543,859       18,125      (187,345)    3,374,639
                                                              ----------    ----------    ----------    ---------
        Total fixed maturities                                 8,318,865       71,251      (344,210)    8,045,906
 Equity securities                                                18,372        6,637          (296)       24,713
                                                              ----------    ----------    ----------    ---------
                                                              $8,337,237       77,888      (344,506)    8,070,619
                                                              ==========    =========     ==========    =========

FIXED MATURITY SECURITIES HELD-TO-MATURITY
  Obligations of states and political subdivisions           $   11,613           92           (255)       11,450
  Debt securities issued by foreign governments                  16,131          111            (39)       16,203
  Corporate securities                                        3,661,043       34,180       (120,566)    3,574,657
                                                              ----------    ----------    ----------    ---------
                                                             $3,688,787       34,383       (120,860)    3,602,310
                                                              ==========    ==========    ==========    =========
</TABLE>




                                      34
<PAGE>   35
                                       
              NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
             (a wholly owned subsidiary of Nationwide Corporation)
                                       
             Notes to Consolidated Financial Statements, Continued

The amortized cost and estimated fair value of fixed maturity securities
available-for-sale as of December 31, 1995, by contractual maturity, are shown
below. Expected maturities will differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or without call
or prepayment penalties.

<TABLE>
<CAPTION>
                                                    Amortized          Estimated
                                                      cost            fair value
                                                    -----------       ------------
                                                       
<S>                                                 <C>             <C>
FIXED MATURITY SECURITIES AVAILABLE-FOR-SALE
--------------------------------------------
Due in one year or less                             $   641,490         647,639
Due after one year through five years                 5,365,703       5,623,126
Due after five years through ten years                2,477,457       2,609,262
Due after ten years                                   1,028,137       1,174,482
                                                    -----------     -----------
                                                      9,512,787      10,054,509
Mortgage-backed securities                            3,925,843       4,112,868
                                                    -----------     -----------
                                                    $13,438,630      14,167,377
                                                    ===========     ===========
</TABLE>

Proceeds from the sale of securities available-for-sale during 1995 and 1994
were $131,420 and $247,876, respectively, while proceeds from sales of
investments in fixed maturity securities during 1993 were $33,959. Gross gains
of $7,197 ($3,406 in 1994 and $2,413 in 1993) and gross losses of $2,309
($21,866 in 1994 and $39 in 1993) were realized on those sales.

During 1995, the Company transferred fixed maturity securities classified as
held-to-maturity with amortized cost of $27,929 to available-for-sale
securities due to evidence of a significant deterioration in the issuer's
creditworthiness.  The transfer of those fixed maturity securities resulted in
a gross unrealized loss of $4,285.

As permitted by the FASB's Special Report, A GUIDE TO IMPLEMENTATION OF
STATEMENT 115 ON ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND EQUITY
SECURITIES, issued in November, 1995, the Company transferred all of its fixed
maturity securities previously classified as held-to-maturity to
available-for-sale. As of December 14, 1995, the date of transfer, the fixed
maturity securities had amortized cost of $3,705,644, resulting in a gross
unrealized gain of $171,531.

Investments that were non-income producing for the twelve month period
preceding December 31, 1995 amounted to $28,958 ($11,513 for 1994) and
consisted of $8,228 (none in 1994) in fixed maturity securities, $14,740
($11,111 in 1994) in real estate and $5,990 ($402 in 1994) in other long-term
investments.

Real estate is presented at cost less accumulated depreciation of $30,931 in
1995 ($29,275 in 1994) and valuation allowances of $26,250 in 1995 ($27,330 in
1994).

Other long-term investments are presented net of valuation allowances of $457
as of December 31, 1995. There were no such valuation allowances as of December
31, 1994.

As of December 31, 1995, the recorded investment of mortgage loans on real
estate considered to be impaired (under STATEMENT OF FINANCIAL ACCOUNTING
STANDARDS NO. 114, ACCOUNTING BY CREDITORS FOR IMPAIRMENT OF A LOAN as amended
by STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 118, ACCOUNTING BY CREDITORS
FOR IMPAIRMENT OF A LOAN - INCOME RECOGNITION AND DISCLOSURE) was $44,995,
which includes $23,975 of impaired mortgage loans on real estate for which the
related valuation allowance was $5,276 and $21,020 of impaired mortgage loans
on real estate for which there was no valuation allowance. During 1995, the
average recorded investment in impaired mortgage loans on real estate was
approximately $22,621 and interest income recognized on those loans was $416,
which is equal to interest income recognized using a cash-basis method of
income recognition.
                                      35
<PAGE>   36
                                      
              NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
            (a wholly owned subsidiary of Nationwide Corporation)
                                      
            Notes to Consolidated Financial Statements, Continued

    Activity in the valuation allowance account for mortgage loans on real 
    estate is summarized for the year ended December 31, 1995:

<TABLE>
<CAPTION>
                                                                1995
                                                              --------
    <S>                                                        <C>
    Allowance, beginning year                               $ 47,892
         Additions charged to operations                       7,653
         Direct write-downs charged against the allowance     (4,850)
                                                            -------- 
    Allowance, end of year                                  $ 50,695
                                                            ========
</TABLE>

    Foresclosures of mortgage loans on real estate were $37,187 in 1994 and
    mortgage loans on real estate in process of foreclosure or in-substance
    foreclosed as of December 31, 1994 totaled $19,878, which approximated fair
    value.

    Fixed maturity securities with an amortized cost of $13,982 and $11,137 as
    of December 31, 1995 and 1994, respectively, were on deposit with various
    regulatory agencies as required by law.



(6) FUTURE POLICY BENEFITS AND CLAIMS

    The liability for future policy benefits for investment contracts represents
    approximately 82% and 81% of the total liability for future policy benefits 
    as of December 31, 1995 and 1994, respectively. The average interest rate 
    credited on investment product policies was approximately 6.5%, 6.5% and 
    7.0% for the years ended December 31, 1995, 1994 and 1993, respectively.

    The liability for future policy benefits for traditional life insurance and
    individual health insurance policies has been established based upon the
    following assumptions:

       INTEREST RATES:  Interest rates vary as follows:
       
<TABLE>
<CAPTION>

                                                                                                   Health
          Year of issue                         Life Insurance                                    insurance
          --------------      ------------------------------------------------------------     ---------------                     
           <S>                <C>                                                                 <C>        
           1995               7.6%, not graded - permanent contracts with loan provisions         4.5%
                              7.7%, not graded - all other contracts
           1984-1994          6.0% to 10.5%, not graded                                           5.0% to 6.0%
           1966-1983          6.0% to 8.1%, graded over 20 years to 4.0% to 6.6%                  3.5% to 6.0%
           1965 and prior     generally lower than post 1965 issues                               3.5% to 4.0%
</TABLE>



    WITHDRAWALS:  Rates, which vary by issue age, type of coverage  and 
    policy duration, are based on Company experience.

    MORTALITY:  Mortality and morbidity rates are based on published tables,
    modified for the Company's actual experience.



                                      36
<PAGE>   37

              NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
             (a wholly owned subsidiary of Nationwide Corporation)

             Notes to Consolidated Financial Statements, Continued

    Activity in the liability for unpaid claims and claim adjustment expenses is
    summarized for the years ended December 31:

<TABLE>
<CAPTION>
                                                                      1995           1994            1993      
                                                                     ----------    ----------    ---------
      <S>                                                             <C>            <C>         <C>
      Balance, beginning of year                                      $ 637,998      592,180      760,209 
         Less reinsurance recoverables                                  438,761      430,720      547,683 
                                                                      ---------    ---------    --------- 
               Net balance, beginning of year                           199,237      161,460      212,526 
                                                                      ---------    ---------    --------- 
      Incurred related to:         
         Current year                                                   425,907      273,299      309,721 
         Prior years                                                    (17,203)     (26,156)     (26,248)
                                                                      ---------    ---------    --------- 
            Total incurred                                              408,704      247,143      283,473 
                                                                      ---------    ---------    --------- 
      Paid related to:      
         Current year                                                   290,605      175,700      208,978 
         Prior years                                                    111,353       73,889      125,561 
                                                                      ---------    ---------    --------- 
            Total paid                                                  401,958      249,589      334,539 
                                                                      ---------    ---------    --------- 
      Unpaid claims of acquired companies                                 2,542       40,223         --   
                                                                      ---------    ---------    --------- 
               Net balance, end of year                                 208,525      199,237      161,460 
         Plus reinsurance recoverables                                  491,321      438,761      430,720 
                                                                      ---------    ---------    --------- 
      Balance, end of year                                            $ 699,846      637,998      592,180 
                                                                      =========    =========    ========= 
</TABLE>

    Reinsurance recoverables include amounts from affiliates, as discussed in 
    note 13, of $477,912, $430,936, $430,278 and $534,983 as of December 31, 
    1995, 1994, 1993 and 1992, respectively.

    The provision for claims and claim adjustment expenses for prior years
    decreased in each of the three years ended December 31, 1995 due to
    lower-than-anticipated costs to settle accident and health insurance claims.


(7) FEDERAL INCOME TAX

    The tax effects of temporary  differences that give rise to significant 
    components of the net deferred tax asset (liability) as of December 31, 
    1995 and 1994 are as follows:

<TABLE>
<CAPTION>
                                                                                       1995            1994
                                                                                     --------       --------           
      <S>                                                                           <C>            <C>  
      Deferred tax assets:
       Future policy benefits                                                       $ 179,916      124,044
       Fixed maturity securities available-for-sale                                      --         95,536
       Liabilities in Separate Accounts                                               129,120       94,783
       Mortgage loans on real estate and real estate                                   26,062       25,632
       Other policyholder funds                                                         7,752        7,137
       Other assets and other liabilities                                              47,215       57,528
                                                                                    ---------    ---------
         Total gross deferred tax assets                                              390,065      404,660
                                                                                    ---------    ---------
      Deferred tax liabilities:   
       Deferred policy acquisition costs                                              312,616      317,224
       Fixed maturity securities available-for-sale                                   266,184         --  
       Equity securities available-for-sale and other            
          long-term investments                                                         3,431        3,620
       Other                                                                           46,711       47,301
                                                                                    ---------    ---------
         Total gross deferred tax liabilities                                         628,942      368,145
                                                                                    ---------    ---------
                                                                                    $(238,877)      36,515
                                                                                    =========    =========
</TABLE>


                                      37

<PAGE>   38
                                      
              NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
            (a wholly owned subsidiary of Nationwide Corporation)
                                      
            Notes to Consolidated Financial Statements, Continued

     The Company has determined that valuation allowances are not necessary as
     of December 31, 1995, 1994 and 1993 based on its analysis of future 
     deductible amounts. In assessing the realizability of deferred tax assets, 
     management considers whether it is more likely than not that some portion
     of the total gross deferred tax assets will not be realized. All future 
     deductible amounts can be offset by future taxable amounts or recovery of
     Federal income tax paid within the statutory carryback period. In 
     addition, for future deductible amounts for securities available-for-sale, 
     affiliates of the Company which are included in the same consolidated 
     Federal income tax return hold investments that could be sold for capital 
     gains that could offset capital losses realized by the Company should 
     securities available-for-sale be sold at a loss.

<TABLE>
     Total Federal income tax expense for the years ended December 31, 1995, 
     1994 and 1993 differs from the amount computed by applying the U.S. 
     Federal income tax rate to income before tax as follows:
                                                                                                           
<CAPTION>
                                                                 1995                      1994                    1993       
                                                         ----------------------   ----------------------   ----------------------
                                                                Amount     %            Amount     %            Amount      %
                                                         ---------------  -----   --------------  ------   -------------  -------
      <S>                                                    <C>          <C>        <C>          <C>       <C>          <C>
      Computed (expected) tax expense                        $ 111,906    35.0       $  95,631    35.0      $ 109,515     35.0 
      Tax exempt interest and dividends                                                                                    
         received deduction                                       (137)   (0.1)           (194)   (0.1)        (2,322)    (0.7)
      Current year increase in U.S. Federal                                                                                
         income tax rate                                            --      --              --      --          1,704      0.5 
      Other, net                                                (4,515)   (1.4)         (5,933)   (2.1)        (2,139)    (0.7)
                                                             ---------    ----       ---------    ----      ---------     ----
            Total (effective rate of each year)              $ 107,254    33.5       $  89,504    32.8      $ 106,758     34.1 
                                                             =========    ====       =========    ====      =========     ====

</TABLE>




     Total Federal income tax paid was $75,309, $87,576 and $58,286 during the 
     years ended December 31, 1995, 1994 and 1993, respectively.

     Prior to 1984, the Life Insurance Company Income Tax Act of 1959 as 
     amended by the Deficit Reduction Act of 1984 (DRA), permitted the deferral 
     from taxation of a portion of statutory income under certain       
     circumstances. In these situations, the deferred income was accumulated in
     the  Policyholders' Surplus Account (PSA).  Management considers the
     likelihood  of distributions from the PSA to be remote; therefore, no
     Federal income  tax has been provided for such distributions in the
     consolidated financial  statements. The DRA eliminated any additional
     deferrals to the PSA. Any  distributions from the PSA, however, will
     continue to be taxable at the  then current tax rate. The balance of the
     PSA was approximately $35,344 as  of December 31, 1995.

(8)  DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

     STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 107 - DISCLOSURES ABOUT 
     FAIR VALUE OF FINANCIAL INSTRUMENTS (SFAS 107) requires disclosure of fair 
     value information about existing on and off-balance sheet financial 
     instruments. SFAS 107 defines the fair value of a financial instrument as 
     the amount at which the financial instrument could be exchanged in a 
     current transaction between willing parties. In cases where quoted market 
     prices are not available, fair value is based on estimates using present 
     value or other valuation techniques.

     These techniques are significantly affected by the assumptions used, 
     including the discount rate and estimates of future cash flows. Although 
     fair value estimates are calculated using assumptions that management 
     believes are appropriate, changes in assumptions could cause these         
     estimates to vary materially. In that regard, the derived fair value 
     estimates cannot be substantiated by comparison to independent markets 
     and,in many cases, could not be realized in the immediate settlement of
     the instruments. SFAS 107 excludes certain assets and liabilities from its 
     disclosure requirements. Accordingly, the aggregate fair value amounts 
     presented do not represent the underlying value of the Company.
                                    


                                      38
<PAGE>   39
                                      
              NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
            (a wholly owned subsidiary of Nationwide Corporation)
                                      
            Notes to Consolidated Financial Statements, Continued

       Although insurance contracts, other than policies such as annuities
       that are classified as investment contracts, are specifically exempted
       from SFAS 107 disclosures, estimated fair value of policy reserves on
       life insurance contracts are provided to make the fair value disclosures
       more meaningful.

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

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

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

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


         SEPARATE ACCOUNT ASSETS AND LIABILITIES: The fair value of
         assets held in Separate Accounts is based on quoted market prices. The
         fair value of liabilities related to Separate Accounts is the
         amount payable on demand.

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

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

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

         POLICYHOLDERS' DIVIDEND ACCUMULATIONS AND OTHER POLICYHOLDER FUNDS:
         The carrying amount reported in the consolidated balance sheets for
         these instruments approximates their fair value. 

                                      39
<PAGE>   40

               NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
             (a wholly owned subsidiary of Nationwide Corporation)

             Notes to Consolidated Financial Statements, Continued

    Carrying amount and estimated fair value of financial instruments
    subject to SFAS 107 and policy reserves on life insurance contracts were
    as follow as of December 31, 1995 and 1994:

<TABLE>
<CAPTION>
                                                      
                                                     1995                          1994
                                           --------------------------   -------------------------
                                             Carrying      Estimated      Carrying     Estimated
                                              amount       fair value      amount      fair value
                                           -----------    -----------   -----------   -----------
<S>                                        <C>            <C>           <C>           <C>
ASSETS
------
Investments:
   Securities available-for-sale:
      Fixed maturities                     $14,167,377    14,167,377     8,045,906     8,045,906
      Equity securities                         33,718        33,718        24,713        24,713
   Fixed maturities held-to-maturity              --            --       3,688,787     3,602,310
   Mortgage loans on real estate             4,786,599     5,169,805     4,222,284     4,173,284
   Policy loans                                370,908       370,908       340,491       340,491
   Short-term investments                       45,732        45,732       131,643       131,643
Cash                                            10,485        10,485         7,436         7,436
Assets held in Separate Accounts            18,763,678    18,763,678    12,222,461    12,222,461

LIABILITIES
-----------
Investment contracts                        13,561,943    13,221,724    12,189,894    11,657,556
Policy reserves on life insurance contacts   3,695,814     3,659,074     3,170,085     2,934,384
Policyholders' dividend accumulations          353,554       353,554       338,058       338,058
Other policyholder funds                        71,155        71,155        72,770        72,770
Liabilities related to Separate Accounts    18,763,678    18,224,933    12,222,461    11,807,331
</TABLE>



(9) ADDITIONAL FINANCIAL INSTRUMENTS DISCLOSURES
    -------------------------------------------- 

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

    Commitments to fund fixed rate mortgage loans on real estate are agreements
    to lend to a borrower, and are subject to conditions established in the
    contract.   Commitments generally have fixed expiration dates or other
    termination clauses and may require payment of a deposit. Commitments
    extended by the Company are based on management's case-by-case credit
    evaluation of the borrower and the borrower's loan collateral. The
    underlying mortgage property represents the collateral if the commitment is
    funded. The Company's policy for new mortgage loans on real estate is to
    lend no more than 80% of collateral value. Should the commitment be funded,
    the Company's exposure to credit loss in the event of nonperformance by the
    borrower is represented by the contractual amounts of these commitments less
    the net realizable value of the collateral. The contractual amounts also
    represent the cash requirements for all unfunded commitments. Commitments on
    mortgage loans on real estate of $361,974 extending into 1996 were
    outstanding as of December 31, 1995.

    SIGNIFICANT CONCENTRATIONS OF CREDIT RISK: The Company grants mainly
    commercial  mortgage loans on real estate to customers throughout the United
    States. The Company has a diversified portfolio with no more than 20% (22%
    in 1994) in any geographic area and no more than 2% (2% in 1994) with any
    one borrower.


                                      40
<PAGE>   41

               NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
             (a wholly owned subsidiary of Nationwide Corporation)

             Notes to Consolidated Financial Statements, Continued

    The summary below depicts loans by remaining principal balance as of
    December 31, 1995 and 1994:

<TABLE>
<CAPTION>
                                                                                              Apartment
                                                            Office    Warehouse     Retail     & other      Total
                                                          ---------   ---------   ---------   ---------   ---------
<S>                                                       <C>         <C>         <C>         <C>         <C>
1995:
 East North Central                                      $ 140,732     110,361     534,814     184,201     970,108
 East South Central                                         23,978      15,653     183,790      84,588     308,009
 Mountain                                                     --        18,940     144,156      48,727     211,823
 Middle Atlantic                                           124,079      72,201     183,562      18,383     398,225
 New England                                                 9,594      39,526     153,644           1     202,765
 Pacific                                                   190,628     239,687     395,914     107,650     933,879
 South Atlantic                                            101,904      74,731     458,355     279,692     914,682
 West North Central                                        134,866      14,205      81,521      37,586     268,178
 West South Central                                         69,143      99,618     194,717     272,323     635,801
                                                          ---------   ---------   ---------   ---------   ---------
                                                          $ 794,924     684,922   2,330,473   1,033,151   4,843,470
                                                          =========   =========   =========   =========            
     Less valuation allowances and unamortized discount                                                      56,871  
                                                                                                          ---------
                Total mortgage loans on real estate, net                                                 $4,786,599     
                                                                                                          =========
</TABLE>



<TABLE>
<CAPTION>
                                                                                              Apartment
                                                            Office    Warehouse     Retail     & other      Total
                                                          ---------   ---------   ---------   ---------   ---------
<S>                                                       <C>         <C>         <C>         <C>         <C>
1994:
 East North Central                                      $ 109,233     103,499     540,686     191,489     944,907
 East South Central                                         24,298      10,803     127,845      76,897     239,843
 Mountain                                                    3,150      13,770     140,358      39,682     196,960
 Middle Atlantic                                            61,299      53,285     140,847      30,111     285,542
 New England                                                10,536      43,282     139,131           4     192,953
 Pacific                                                   195,393     210,930     397,911      68,768     873,002
 South Atlantic                                             87,150      81,576     424,150     210,354     803,230
 West North Central                                        127,760      11,766      80,854       4,738     225,118
 West South Central                                         51,013      84,796     184,923     194,788     515,520
                                                          ---------   ---------   ---------   ---------   ---------
                                                          $ 669,832     613,707   2,176,705     816,831   4,277,075
                                                          =========   =========   =========   =========            
   Less valuation allowances and unamortized discount                                                        54,791
                                                                                                          ---------
        Total mortgage loans on real estate, net                                                         $4,222,284     
                                                                                                          =========
</TABLE>


(10)  PENSION PLAN
      ------------

      The Company is a participant, together with other affiliated companies,
      in a pension plan covering all employees who have completed at least one  
      thousand hours of service within a twelve-month period and who have met
      certain age requirements. Benefits are based upon the highest average
      annual salary of a specified number of consecutive years of the last ten
      years of service. The Company funds pension costs accrued for direct
      employees plus an allocation of pension costs accrued for employees of
      affiliates whose work efforts benefit the Company.

      Effective January 1, 1995, the plan was amended to provide enhanced       
      benefits for participants who met certain eligibility requirements and
      elected early retirement no later than March 15, 1995. The entire cost of
      the enhanced benefit was borne by NMIC and certain of its property and
      casualty insurance company affiliates.


                                      41
<PAGE>   42

               NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
             (a wholly owned subsidiary of Nationwide Corporation)

             Notes to Consolidated Financial Statements, Continued

    Effective December 31, 1995, the Nationwide Insurance Companies and
    Affiliates Retirement Plan was merged with the Farmland Mutual Insurance
    Company Employees' Retirement Plan and the Wausau Insurance Companies
    Pension Plan to form the Nationwide Insurance Enterprise Retirement
    Plan. Immediately prior to the merger, the plans were amended to provide
    consistent benefits for service after January 1, 1996. These amendments had
    no significant impact on the accumulated benefit obligation or projected
    benefit obligation as of December 31, 1995.

    Pension costs charged to operations by the Company during the years ended   
    December 31, 1995, 1994 and 1993 were $14,105, $10,451 and $6,702,
    respectively.

    The Company's net accrued pension expense as of December 31, 1995 and       
    1994 was $1,376 and $1,836, respectively.

    The net periodic pension cost for the Nationwide Insurance Companies and    
    Affiliates Retirement Plan as a whole for the years ended December 31,
    1995, 1994 and 1993 follows:

<TABLE>
<CAPTION>
                                                                 1995          1994          1993
                                                              ---------     ---------     ---------
     <S>                                                      <C>            <C>           <C>
     Service cost (benefits earned during the period)         $  64,524        64,740        47,694
     Interest cost on projected benefit obligation               95,283        73,951        70,543
     Actual return on plan assets                              (249,294)      (21,495)     (105,002)
     Net amortization and deferral                              143,353       (62,150)       20,832
                                                               ---------     ---------     ---------
                                                              $  53,866        55,046        34,067
                                                               =========     =========     =========
</TABLE>
                       
    Basis for measurements, net periodic pension cost:

<TABLE>
<CAPTION>

                                                                    1995          1994          1993               
                                                                 ---------     ---------     ---------             
     <S>                                                           <C>           <C>           <C>                 
     Weighted average discount rate                                7.50%         5.75%         6.75%               
     Rate of increase in future compensation levels                6.25%         4.50%         4.75%               
     Expected long-term rate of return on plan assets              8.75%         7.00%         7.50%               
</TABLE>                                                              
                                                                    
    Information regarding the funded status of the Nationwide Insurance
    Enterprise Retirement Plan as a whole as of December 31, 1995 
    (post-merger) and the Nationwide Insurance Companies and Affiliates 
    Retirement Plan as of December 31, 1995 (pre-merger) and 1994 follows:
        
     <TABLE>                                                                  
     <CAPTION>                                                          
                                                                   Post-merger     Pre-merger                      
                                                                      1995           1995           1994           
                                                                   -----------    -----------    -----------       
     <S>                                                           <C>            <C>            <C>               
          Accumulated benefit obligation:                                                                          
                                                                                                                   
          Vested                                                   $ 1,236,730      1,002,079        914,850       
          Nonvested                                                     26,503          8,998          7,570       
                                                                   -----------    -----------    -----------       
                                                                   $ 1,263,233      1,011,077        922,420       
                                                                   ===========    ===========    ===========       
                                                                                                                   
     Net accrued pension expense:                                                                                  
        Projected benefit obligation for services rendered                                                         
           to date                                                 $ 1,780,616      1,447,522      1,305,547       
        Plan assets at fair value                                    1,738,004      1,508,781      1,241,771       
                                                                   -----------    -----------    -----------       
           Plan assets (less than) in excess of  projected                                                         
              benefit obligation                                       (42,612)        61,259        (63,776)      
        Unrecognized prior service cost                                 42,845         42,850         46,201       
        Unrecognized net (gains) losses                                (63,130)       (86,195)        39,408       
        Unrecognized net obligation (asset) at transition               41,305        (19,841)       (21,994)                     
                                                                   -----------    -----------    -----------       
                                                                   $   (21,592)        (1,927)          (161)      
                                                                   ===========    ===========    ===========       
     </TABLE>                                                           
                                                                        

                                      42
<PAGE>   43

              NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
            (a wholly owned subsidiary of Nationwide Corporation)
                                      
            Notes to Consolidated Financial Statements, Continued

     Basis for measurements, funded status of plan:
                                                                     
      <TABLE>                                                        
      <CAPTION>                                                    
                                                          Post-merger       Pre-merger                                   
                                                             1995             1995              1994                     
                                                        ---------------  ---------------   ---------------               
     <S>                                                    <C>               <C>              <C>                       
     Weighed average discount rate                           6.00%             6.00%            7.50%                     
     Rate of increase in future compensation levels          4.25%             4.25%            6.25%                     
                                                                              
     </TABLE>                                                          
                                                                    
                                                                   
     Assets of the Nationwide Insurance Enterprise Retirement Plan are invested
     in group annuity contracts of NLIC and ELICW. Prior to the merger, the     
     assets of the Nationwide Insurance Companies and Affiliates Retirement 
     Plan were invested in a group annuity contract of NLIC.       
                                                                               
(11) POSTRETIREMENT BENEFITS OTHER THAN PENSIONS                                
     -------------------------------------------                               
                                                                             
     In addition to the defined benefit pension plan, the Company, together
     with other affiliated companies, participates in life and health care 
     defined benefit plans for qualifying retirees. Postretirement life and 
     health care benefits are contributory and generally available to full 
     time employees who have attained age 55 and have accumulated 15 years of 
     service with the Company after reaching age 40.  Postretirement health 
     care benefit contributions are adjusted annually and contain cost-sharing 
     features such as deductibles and coinsurance. In addition, there are caps
     on the Company's portion of the per-participant cost of the postretirement 
     health care benefits. These caps can increase annually, but not more than
     three  percent. The Company's policy is to fund the cost of health care
     benefits in amounts determined at the discretion of management. Plan 
     assets are invested primarily in group annuity contracts of NLIC.       

     Effective January 1, 1993, the Company adopted the provisions of STATEMENT
     OF FINANCIAL ACCOUNTING STANDARDS NO. 106 - EMPLOYERS' ACCOUNTING FOR 
     POSTRETIREMENT BENEFITS OTHER THAN PENSIONS (SFAS 106), which requires the
     accrual method of accounting for postretirement life and health care 
     insurance benefits based on actuarially determined costs to be recognized 
     over the period from the date of hire to the full eligibility date of 
     employees who are expected to qualify for such benefits.            
                                                                      
     The Company elected to immediately recognize its estimated accumulated
     postretirement benefit obligation as of January 1, 1993. Accordingly, a 
     noncash charge of $32,275 ($20,979 net of related income tax benefit) was
     recorded in the 1993 consolidated statement of income as a cumulative 
     effect of a change in accounting principle. See note 3. The adoption of    
     SFAS 106, including the cumulative effect of the change in accounting
     principle, increased the expense for postretirement benefits by $35,277 
     to $36,544 in 1993. Certain affiliated companies elected to amortize their
     initial transition obligation over periods ranging from 10 to 20 years.    
                                                                      
     The Company's accrued postretirement benefit expense as of 
     December 31, 1995 and 1994 was $51,490 and $36,001, respectively, and the
     net periodic postretirement benefit cost (NPPBC) for 1995 and 1994 was 
     $8,269 and $4,627, respectively.                                           
                                                                                
     The amount of NPPBC for the plan as a whole for the years ended 
     December 31, 1995, 1994 and 1993 was as follows:                     
                                                                      
     <TABLE>                                                          
     <CAPTION>                                                          
                                                                                   1995            1994          1993
                                                                                 --------        --------      --------
     <S>                                                                         <C>             <C>           <C>       
     Service cost - benefits attributed to employee service during the year      $  6,235           8,586         7,090  
     Interest cost on accumulated postretirement benefit obligation                14,151          14,011        13,928  
     Actual return on plan assets                                                  (2,657)         (1,622)         --    
     Amortization of unrecognized transition obligation of affiliates               2,966             568           568  
     Net amortization and deferral                                                 (1,619)          1,622          --    
                                                                                 --------        --------      --------  
                                                                                 $ 19,076          23,165        21,586  
                                                                                 ========        ========      ========  
     </TABLE>                                                                  
                                      43



<PAGE>   44

               NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
             (a wholly owned subsidiary of Nationwide Corporation)

             Notes to Consolidated Financial Statements, Continued

       Information regarding the funded status of the plan as a whole as of
       December 31, 1995 and 1994 follows:                         
                                                                      
       <TABLE>                                                  
       <CAPTION>                                          
                                                                                     1995          1994                            
                                                                                   ---------    ---------                          
       <S>                                                                         <C>          <C>                                
       Accrued postretirement benefit expense:                                                                                     
          Retirees                                                                 $  88,680       76,677                          
          Fully eligible, active plan participants                                    28,793       22,013                          
          Other active plan participants                                              90,375       59,089                          
                                                                                   ---------    ---------                          
             Accumulated postretirement benefit obligation (APBO)                    207,848      157,779                          
          Plan assets at fair value                                                   54,325       49,012                          
                                                                                   ---------    ---------                          
             Plan assets less than accumulated postretirement benefit obligation    (153,523)    (108,767)                         
          Unrecognized transition obligation of affiliates                             1,827        6,577                          
          Unrecognized net gains                                                      (1,038)     (41,497)                         
                                                                                   ---------    ---------                          
                                                                                   $(152,734)    (143,687)                         
                                                                                   =========    =========                          
       </TABLE>                                                     
                                                                   
                                                                      
       Actuarial assumptions used for the measurement of the APBO as of    
       December 31, 1995 and 1994 and the NPPBC for 1995, 1994 and 1993 were 
       as follows:                                                    
                                                                       
       <TABLE>                                                     
       <CAPTION>                                                     
                                                          1995          1995          1994          1994          1993             
                                                          APBO         NPPBC          APBO          NPPBC         NPPBC            
                                                       -----------   -----------   ------------  ------------  ------------        
           <S>                                           <C>           <C>           <C>           <C>           <C>               
           Discount rate                                 6.75%            8%            8%            7%            8%             
           Assumed health care cost trend rate:                                                                                    
               Initial rate                                11%           10%           11%           12%           14%             
               Ultimate rate                                6%            6%            6%            6%            6%             
               Uniform declining period                  12 Years      12 Years      12 Years      12 Years      12 Years          
       </TABLE>                                               
                                                                   
       The health care cost trend rate assumption has an effect on the amounts 
       reported. For the plan as a whole, a one percentage point increase in 
       the assumed health care cost trend rate would increase the APBO as of 
       December 31, 1995 by $641 and the NPPBC for the year ended December 31,
       1995 by $107.                                                    
                                                                      
(12)   REGULATORY RISK-BASED CAPITAL, RETAINED EARNINGS AND DIVIDEND 
       RESTRICTIONS                                             
       -------------------------------------------------------------
                                                                          
       Each insurance company's state of domicile imposes minimum risk-based 
       capital requirements that were developed by the NAIC. The formulas for 
       determining the amount of risk-based capital specify various weighting 
       factors that are applied to financial balances or various levels of 
       activity based on the perceived degree of risk. Regulatory compliance 
       is determined by a ratio of the company's regulatory total adjusted 
       capital, as defined by the NAIC, to its authorized control level 
       risk-based capital, as defined by the NAIC. Companies below specific 
       trigger points or ratios are classified within certain levels, each of
       which requires specified corrective action. NLIC and each of its 
       insurance subsidiaries exceed the minimum risk-based capital 
       requirements.                                                            
                                                                    
       In accordance with the requirements of the New York statutes, the 
       Company has agreed with the Superintendent of Insurance of that state 
       that so long as participating policies and contracts are held by 
       residents of New York, no profits on participating policies and 
       contracts in excess of the larger of (a) ten percent of such profits or
       (b) fifty cents per year per thousand dollars of participating life 
       insurance in force, exclusive of group term, as of the year-end shall 
       inure to the benefit of the shareholder. Such New York statutes
       further provide that so long as such agreement is in effect, such 
       excess of profits shall be exhibited as "participating policyholders' 
       surplus" in annual statements filed with the Superintendent and shall 
       be used only for the payment or apportionment of dividends to 
       participating policyholders at least to the extent required by statute 
       or for the purpose of making up any loss on  participating policies.
                                                                       
                                      44
<PAGE>   45

               NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
             (a wholly owned subsidiary of Nationwide Corporation)

             Notes to Consolidated Financial Statements, Continued

      In the opinion of counsel for the Company, the ultimate ownership of the
      entire surplus, however classified, of the Company resides with the
      shareholder, subject to the usual requirements under state laws and
      regulations that certain deposits, reserves and minimum surplus be
      maintained for the protection of the policyholders until all policy
      contracts are discharged.
                
      Based on the opinion of counsel with respect to the ownership of its
      surplus, the Company is of the opinion that the earnings attributable to
      participating policies in excess of the amounts paid as dividends to
      policyholders belong to the shareholder rather than the policyholders,
      and such earnings are so treated by the Company.
                
      The amount of shareholder's equity other than capital shares was
      $2,664,697, $1,904,664 and $1,647,353 as of December 31, 1995, 1994 and
      1993, respectively. The amount thereof not presently available for
      dividends to the shareholder due to the New York restrictions was
      $1,503,241, $929,934 and $954,037 as of December 31, 1995, 1994 and 1993,
      respectively.
                
      Ohio law limits the payment of dividends to shareholders. The maximum
      dividend that may be paid by the Company without prior approval of the
      Director of the Department is limited to the greater of statutory gain
      from operations of the preceding calendar year or 10% of statutory
      shareholder's surplus as of the prior December 31. Therefore, $2,468,687
      of shareholder's equity, as presented in the accompanying consolidated
      financial statements, is so restricted as to dividend payments in 1996.
                
      Each of NLIC's insurance company subsidiaries are limited in their
      payment of dividends by the state insurance department of their
      respective state of domicile. As of December 31, 1995, the maximum amount
      of shareholder's equity available for dividend payment to NLIC in 1996 by
      its insurance company subsidiaries without prior approval are:
                
      <TABLE>
      <S>                                             <C>
      Nationwide Life and Annuity Insurance Company   $10,143
      West Coast Life Insurance Company                13,153
      Employers Life Insurance Company of Wausau       10,132
      National Casualty Company                            --  
                                                      -------
                                                      $33,428
                                                      ======= 
</TABLE>
        

(13)  TRANSACTIONS WITH AFFILIATES
      ----------------------------

      On March 1, 1995, Corp. contributed all of the outstanding shares of
      Farmland Life Insurance Company (Farmland) to NLIC, which then merged
      Farmland into WCLIC effective June 30, 1995. The contribution resulted in
      a direct increase to consolidated shareholder's equity of $46,918. The
      contribution of Farmland has been accounted for in a manner similar to a
      pooling of interests and accordingly, Farmland's results are included in
      the consolidated statements of income beginning January 1, 1995. However,
      prior period consolidated financial statements have not been restated due
      to the impact of Farmland being immaterial.
                
      Effective December 31, 1994, NLIC purchased all of the outstanding shares
      of ELICW from Wausau Service Corporation (WSC) for $155,000. NLIC
      transferred fixed maturity securities and cash with a fair value of
      $155,000 to WSC on December 28, 1994, which resulted in a realized loss
      of $19,239 on the disposition of the securities. The purchase price
      approximated both the historical cost basis and fair value of net assets
      of ELICW. ELICW has and will continue to share home office, other
      facilities, equipment and common management and administrative services
      with WSC.
        
      Certain annuity products are sold through three affiliated companies
      which are also subsidiaries of Corp. Total commissions and fees paid to
      these affiliates for the three years ended December 31, 1995 were
      $57,969, $50,470 and $44,577, respectively.
        


                                      45
<PAGE>   46

               NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
             (a wholly owned subsidiary of Nationwide Corporation)

             Notes to Consolidated Financial Statements, Continued

      The Company shares home office, other facilities, equipment and common
      management and administrative services with affiliates.
        
      The Company participates in intercompany repurchase agreements with
      affiliates whereby the seller will transfer securities to the buyer at a
      stated value. Upon demand or a stated period, the securities will be
      repurchased by the seller at the original sales price plus a price
      differential. Transactions under the agreements during 1995 and
      1994 were not material. 

      During 1993, the Company sold equity securities with a market value
      $194,515 to NMIC, resulting in a realized gain of $122,823. With the
      proceeds, the Company purchased securities with a market value of
      $194,139 and cash of $376 from NMIC.                         

      Intercompany reinsurance contracts exist between NLIC and NMIC, NLIC and
      WCLIC, NLIC and NCC, WCLIC and NMIC and WCLIC and ELICW as of December
      31, 1995. These contracts are immaterial to the consolidated financial
      statements.    

      NCC participates in several 100% quota share reinsurance agreements with
      NMIC and Nationwide Mutual Fire Insurance Company, the minority
      shareholder of Corp. As a result of these agreements, the following
      assets and (liabilities) are included in the consolidated financial
      statements as of December 31, 1995 and 1994 for reinsurance ceded:
        
<TABLE>
<CAPTION>
                                                                            1995          1994      
                                                                        -----------   -----------
<S>                                                                     <C>            <C>
      Reinsurance recoverable                                           $ 590,379       541,289 
      Unearned premium reserves                                          (112,467)     (110,353) 
      Liability for unpaid claims and claim adjustment expense           (477,912)     (430,936)
</TABLE>                                                                

      The ceding of reinsurance does not discharge the original insurer from
      primary liability to its policyholder. The insurer which assumes the
      coverage assumes the related liability and it is the practice of insurers
      to treat insured risks, to the extent of reinsurance ceded, as though
      they were risks for which the original insurer is not liable. Management
      believes the financial strength of NMIC reduces to an acceptable level
      any risk to NCC under these intercompany  reinsurance agreements.        

      ELICW assumes certain accident and health insurance business from
      Employers Insurance of Wausau A Mutual Company, an affiliate. During
      1995, total premiums assumed by ELICW under the reinsurance
      agreement were $150,622.                

      The Company and various affiliates entered into agreements with
      Nationwide Cash Management Company (NCMC) and California Cash Management
      Company (CCMC), both affiliates, under which NCMC and CCMC act as common
      agents in handling the purchase and sale of short-term securities for the
      respective accounts of the participants. Amounts on deposit with NCMC and
      CCMC were $21,644 and $92,531 as of December 31, 1995 and 1994,
      respectively, and are included in short-term investments on the
      accompanying consolidated balance sheets.

(14)  BANK LINES OF CREDIT
      --------------------

      As of December 31, 1995 and 1994, NLIC had $120,000 of confirmed but
      unused bank lines of credit which support a $100,000 commercial paper
      borrowing authorization.
        
(15)  CONTINGENCIES
      -------------

      The Company is a defendant in various lawsuits. In the opinion of
      management, the effects, if any, of such lawsuits are not expected to be
      material to the Company's financial position or results of operations.
        


                                      46
<PAGE>   47

               NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
             (a wholly owned subsidiary of Nationwide Corporation)

             Notes to Consolidated Financial Statements, Continued

(16)  SEGMENT INFORMATION
      -------------------

      The Company operates in the long-term savings, life insurance and
      accident and health insurance lines of business in the life insurance and
      property and casualty insurance industries. Long-term savings operations
      include both qualified and non-qualified annuity contracts issued to both
      individuals and groups. Life insurance operations include whole life,
      universal life, variable universal life and endowment and term life
      insurance issued to individuals and groups. Accident and health insurance
      operations also provide coverage to individuals and groups. Corporate
      primarily includes investments, and the related investment income, which
      are not specifically allocated to one of the three operating segments. In
      addition, realized gains and losses on all general account investments
      are reported as a component of the corporate segment.
        
      During 1995, the Company changed its reporting segments to better reflect
      the way the businesses are managed. Prior periods have been restated to
      reflect these changes.
        
      The following table summarizes the revenues and income (loss) before
      Federal income tax expense and cumulative effect of changes in accounting
      principles for the years ended December 31, 1995, 1994 and 1993 and
      assets as of December 31, 1995, 1994 and 1993, by business segment.
        
      <TABLE>                                                       
      <CAPTION>                                                 
                                                                                      1995           1994           1993      
                                                                                 ------------    ------------   ------------  
      <S>                                                                        <C>               <C>          <C>           
      Revenues:                                                                                                               
           Long-term savings                                                     $  1,406,241       1,125,013      1,048,045  
           Life insurance                                                             502,885         452,795        432,343  
           Accident and health insurance                                              532,383         345,545        339,764  
           Corporate                                                                  134,598         122,847        214,374  
                                                                                 ------------    ------------   ------------  
                                                                                 $  2,576,107       2,046,200      2,034,526  
                                                                                 ============    ============   ============  
                                                                                                                              
      Income (loss) before Federal income tax expense and                                                                     
          cumulative effect of changes in accounting principles:                                                              
           Long-term savings                                                          129,475          95,530         47,966  
           Life insurance                                                              63,169          46,119         36,383  
           Accident and health insurance                                              (12,521)         13,221         15,041  
           Corporate                                                                  139,609         118,360        213,511  
                                                                                 ------------    ------------   ------------  
                                                                                 $    319,732         273,230        312,901  
                                                                                 ============    ============   ============  
      Assets:                                                                                                                 
           Long-term savings                                                       34,634,892      25,815,273     20,695,598  
           Life insurance                                                           3,675,581       3,231,651      2,897,574  
           Accident and health insurance                                              307,643         291,296        297,200  
           Corporate                                                                1,995,995       1,773,913      1,515,989  
                                                                                 ------------    ------------   ------------  
                                                                                 $ 40,614,111      31,112,133     25,406,361  
                                                                                 ============    ============   ============  
                                                                                                                              

</TABLE>

                                      47
<PAGE>   48



                                                                      Schedule I
                                                                     -----------

               NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
       Summary of Investments - Other Than Investments in Related Parties
                               December 31, 1995
                                (000's omitted)

<TABLE>
<CAPTION>
                                                                     ----------------- ---------------  ------------------
                                                                         Column B         Column C           Column D
                                                                     ----------------- ---------------  ---------------
                                                                                                         Amount at which
                                                                                                           shown in the
                                                                                                           consolidated
                                                                           Cost         Market value      balance sheet
                                                                     ----------------- ---------------- -------------------
<S>                                                                  <C>              <C>              <C>
Fixed maturities available-for-sale:                                
   Bonds and notes:                                                 
      U.S. Government and government agencies and authorities          $  3,913,961         4,116,744          4,116,744
      States, municipalities and political subdivisions                       9,742            10,993             10,993
      Foreign governments                                                   162,442           172,016            172,016
      Public utilities                                                    2,053,701         2,146,000          2,146,000
      All other corporate                                                 7,298,784         7,721,624          7,721,624
                                                                     ----------------- ---------------- -------------------
          Total fixed maturities available-for-sale                      13,438,630        14,167,377         14,167,377   
                                                                     ----------------- ---------------- -------------------
Equity securities available-for-sale:
   Common stocks:
      Industrial, miscellaneous and all other                                26,037            32,474             32,474
   Non-redeemable preferred stock                                             1,325             1,244              1,244   
                                                                     ----------------- ---------------- -------------------
          Total equity securities available-for-sale                         27,362            33,718             33,718   
                                                                     ----------------- ---------------- -------------------

Mortgage loans on real estate                                             4,838,432                            4,786,599*
Real estate:
   Investment properties                                                    213,340                              171,739*
   Acquired in satisfaction of debt                                          82,930                               67,350*
Policy loans                                                                370,908                              370,908
Other long-term investments                                                  73,190                               67,280#
Short-term investments                                                       45,732                               45,732   
                                                                     -----------------                  -------------------
          Total investments                                             $19,090,524                           19,710,703   
                                                                     =================                  ===================
</TABLE>


*        Difference from Column B is primarily due to accumulated depreciation
         and valuation allowances due to impairments on real estate and
         valuation allowances due to impairments on mortgage loans on real
         estate. See Item 7, Management's Discussion and Analysis of Financial
         Condition and Results of Operations and note 5 to the consolidated
         financial statements.

#        Difference from Column B is primarily due to operating losses of
         investments in limited partnerships.





See accompanying independent auditors' report.

                                      48

<PAGE>   49
                                      
                                      
                                                                   Schedule III
                                                                   ------------
               NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
                      Supplementary Insurance Information
                        December 31, 1995, 1994 and 1993
                                (000's omitted)

<TABLE>
<CAPTION>
                                   
----------------------------------- -------------- -------------------- ------------------- ------------------ ---------------
             Column A                  Column B          Column C            Column D           Column E          Column F    
----------------------------------- -------------- -------------------- ------------------- ------------------ ---------------
                                       Deferred       Future policy                           Other policy
                                        policy      benefits, losses,                          claims and
             Segment                 acquisition        claims and      Unearned premiums   benefits payable      Premium
                                        costs         loss expenses            (1)                 (2)            revenue
----------------------------------- -------------- -------------------- ------------------- ------------------ ---------------
<S>                                <C>            <C>                  <C>                  <C>                <C>
1995: Long-term savings                $   668,784          14,847,449                                    455               -
      Life insurance                       416,209           2,494,344                                408,990         274,957
      Accident and health                  
       insurance                             9,202             858,335                                 15,264         509,658
      Corporate                                  -                   -                                      -               -  
                                    -------------- ---------------------                    ------------------ ---------------
             Total                      $1,094,195          18,200,128                                424,709         784,615 
                                    ============== =====================                    ================== ===============

1994: Long-term savings                    663,696          13,300,015                                    240               -
      Life insurance                       387,486           2,245,375                                397,174         209,538
      Accident and health              
       insurance                            12,977             776,071                                 13,414         324,524
      Corporate                                  -                   -                                      -               -   
                                    -------------- ---------------------                    ------------------ ---------------
             Total                      $1,064,159          16,321,461                                410,828         534,062 
                                    ============== =====================                    ================== ===============

1993: Long-term savings                    506,243          11,308,024                                  1,262               -
      Life insurance                       291,683           2,047,844                                378,788         215,715
      Accident and health              
       insurance                            14,018             736,387                                 14,595         312,655
      Corporate                                  -                   -                                      -               -    
                                    -------------- ---------------------                    ------------------ ---------------
             Total                     $   811,944          14,092,255                                394,645         528,370 
                                    ============== =====================                    ================== ===============
                                   
----------------------------------- -------------- -------------------- ------------------  -----------------  --------------
             Column A                  Column G          Column H            Column I           Column J          Column K    
----------------------------------- -------------- -------------------- ------------------- ------------------ ---------------
                                         Net                                Amortization           Other
                                      investment    Benefits, claims,       of deferred          operating 
             Segment                    income          losses and            policy              expenses         Premiums
                                         (3)       settlement expenses   acquisition costs          (3)             written
----------------------------------- -------------- -------------------- ------------------- ------------------ ---------------

1995: Long-term savings                 $1,124,207           1,009,632             51,998             210,525
      Life insurance                       202,285             267,123             34,124              94,461
      Accident and health              
       insurance                            22,725             379,532              6,922             153,984         473,513       
      Corporate                            133,763                   -                  -                   - 
                                    -------------- -------------------- ------------------- ------------------
             Total                      $1,482,980           1,656,287             93,044             458,970 
                                    ============== ==================== =================== ==================

1994: Long-term savings                    945,318             807,756             56,236             171,038
      Life insurance                       183,933             237,125             33,394              90,535
      Accident and health                                                                                            
       insurance                           21,020             234,882              5,114              90,829         315,688
      Corporate                            139,230                   -                  -                   - 
                                    -------------- -------------------- ------------------- ------------------
             Total                      $1,289,501           1,279,763             94,744             352,402 
                                    ============== ==================== =================== ==================

1993: Long-term savings                    897,639             800,385             43,291             157,046
      Life insurance                       178,978             227,786             35,220              89,496
      Accident and health                                                                                            
       insurance                            27,108             208,735             23,623              82,854        263,117
      Corporate                            100,701                   -                  -                   - 
                                    -------------- -------------------- ------------------- ------------------
             Total                      $1,204,426           1,236,906            102,134             329,396 
                                    ============== ==================== =================== ==================

<FN>
(1)  Unearned premiums are included in Column C amounts.        (3)  Allocations of net investment income and certain general
(2)  Column E agrees to the sum of the consolidated balance          expenses are based on a number of assumptions and
     sheet captions, "Policyholders' dividend                        estimates, and reported operating results would
     accumulations" and "Other policyholder funds".                  change by segment if different methods were applied.
</TABLE>

See accompanying independent auditors' report.

                                      49
<PAGE>   50


                                                                     Schedule IV
                                                                     -----------
               NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
                                  Reinsurance
                  Years ended December 31, 1995, 1994 and 1993
                                (000's omitted)


<TABLE>
<CAPTION>
                                                                                                              Percentage
                                                        Ceded to         Assumed from                         of amount
                                   Gross amount      other companies   other companies      Net amount      assumed to net 
                                ------------------- ------------------ ----------------- ------------------ ---------------
<S>                    <C>         <C>                    <C>                  <C>            <C>                 <C>
1995:
Life insurance in force              $51,613,116          6,865,011            742,451        45,490,556           1.6%    
                                =================== ================== ================= ================== ===============

Premiums:
   Life insurance                        281,687             12,817              6,087           274,957           2.2%
   Accident and health                   
     insurance                           427,943             73,131            154,846           509,658          30.4%
                                ------------------- ------------------ ----------------- ------------------ ---------------
          Total                    $     709,630             85,948            160,933           784,615          20.5%    
                                =================== ================== ================= ================== ===============
1994:
Life insurance in force              $46,262,595          5,289,259            819,799        41,793,135           2.0%    
                                =================== ================== ================= ================== ===============
Premiums:
   Life insurance                        209,918              7,551              7,171           209,538           3.4%
   Accident and health                   
     insurance                           389,573             69,095              4,046           324,524           1.2%
                                ------------------- ------------------ ----------------- ------------------ ---------------
          Total                    $     599,491             76,646             11,217           534,062           2.1%    
                                =================== ================== ================= ================== ===============

1993:
Life insurance in force              $39,417,116          4,352,071            180,739        35,245,784           0.5%    
                                =================== ================== ================= ================== ===============
Premiums:
   Life insurance                        218,764              6,161              3,112           215,715           1.4%
   Accident and health                   
     insurance                           398,289             88,506              2,872           312,655           0.9%
                                ------------------- ------------------ ----------------- ------------------ ---------------
          Total                    $     617,053             94,667              5,984           528,370           1.1%    
                                =================== ================== ================= ================== ===============
</TABLE>





See accompanying independent auditors' report.

                                      50
<PAGE>   51


                                                                      Schedule V
                                                                      ----------
               NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
                       Valuation and Qualifying Accounts
                  Years ended December 31, 1995, 1994 and 1993
                                (000's omitted)


<TABLE>
<CAPTION>
------------------------------------------------- ---------------- ----------------------------- ------------- -------------
                    Column A                         Column B               Column C               Column D      Column E   
------------------------------------------------- ---------------- ----------------------------- ------------- -------------
                                                    Balance at     Charged to                                   Balance at
                                                   beginning of     costs and      Charged to     Deductions      end of  
Description                                           period        expenses     other accounts      (1)          period  
------------------------------------------------- ---------------------------------------------- ------------- -------------
<S>                                                    <C>             <C>                  <C>       <C>           <C>
1995:
Valuation allowances - fixed maturity securities       $     -         10,153               -         10,153             -
Valuation  allowances  - mortgage  loans on real        
  estate                                                47,892          7,653               -          4,850        50,695
Valuation allowances - real estate                      27,330         (1,080)              -              -        26,250
Valuation allowances - other long-term                
  investments                                                -            457               -              -           457


1994:
Valuation allowances - fixed maturity securities         6,680         (6,680)              -              -             -
Valuation  allowances  - mortgage loans on real         
  estate                                                42,350         21,672               -         16,130        47,892
Valuation allowances - real estate                      31,357         (4,027)              -              -        27,330


1993:
Valuation allowances - fixed maturity securities         5,746            934               -              -         6,680
Valuation  allowances - mortgage loans on real        
  estate                                                31,872         28,241               -         17,763        42,350
Valuation allowances - real estate                      35,471         (4,114)              -              -        31,357
Valuation allowances - other long-term           
  investments                                              700           (700)              -              -             -

<FN>

(1)  Amounts represent direct write-downs charged against the valuation
     allowance.

</TABLE>




See accompanying independent auditors' report.

                                      51