<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, 1999          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                       (I.R.S. Employer
    incorporation or organization)                      Identification No.)

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


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

                                      NONE

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

                                      NONE

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

                                    YES X  NO
                                       ---   ---

  All voting stock was held by affiliates of the Registrant on March 20, 2000.


COMMON STOCK (par value $1 per share) - 3,814,779 shares issued and outstanding
(Title of Class)                        as of March 20, 2000

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




<PAGE>   2
                                     PART I

ITEM 1        BUSINESS

              ORGANIZATION

              Nationwide Life Insurance Company (NLIC) was incorporated in 1929
              and is an Ohio stock legal reserve life insurance company. NLIC
              offers a variety of forms of variable annuities, fixed annuities
              and life insurance on a participating and a non-participating
              basis.

              Prior to January 27, 1997, NLIC was wholly owned by Nationwide
              Corporation (Nationwide Corp.). On that date, Nationwide Corp.
              contributed the outstanding shares of NLIC's common stock to
              Nationwide Financial Services, Inc. (NFS), a holding company
              formed by Nationwide Corp. in November 1996 for NLIC and other
              companies within the Nationwide group of companies that offer or
              distribute long-term savings and retirement products. On March 11,
              1997, NFS completed an initial public offering of its Class A
              common stock.

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

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

              Wholly owned subsidiaries of NLIC as of December 31, 1998 include
              Nationwide Life and Annuity Insurance Company (NLAIC), Nationwide
              Advisory Services, Inc. (NAS) and Nationwide Investment Services
              Corporation (NISC). NLIC and its subsidiaries are collectively
              referred to as "the Company."

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

              NLAIC offers universal life insurance, variable universal life
              insurance, corporate-owned life insurance and individual annuity
              contracts on a non-participating basis. NAS is a registered
              broker-dealer providing investment management and administration
              services. NISC is a registered broker-dealer doing business solely
              in the deferred compensation market.

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





                                        2
<PAGE>   3

              The Company is one of the leaders in the development and sale of
              variable annuities. As of December 31, 1999, the Company was the
              fifth largest writer of individual variable annuity contracts in
              the United States (U.S.) based on assets, according to The
              Variable Annuity Research & Data Service.

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

              BUSINESS SEGMENTS

              The Company has three product segments: Variable Annuities, Fixed
              Annuities and Life Insurance. In addition, the Company reports
              corporate revenues and expenses, investments and related
              investment income supporting capital not specifically allocated to
              its product segments, revenues and expenses of its investment
              advisor subsidiary and revenues and expenses related to group
              annuity contracts sold to Nationwide employee benefits plans in a
              Corporate and Other segment.

              The Variable Annuities segment, which accounted for $290.3 million
              (or 47%) of the Company's operating income before federal income
              tax expense for 1999, consists of annuity contracts that provide
              the customer with access to a wide range of investment options,
              tax-deferred accumulation of savings, asset protection in the
              event of an untimely death, and flexible payout options including
              a lump sum, systematic withdrawal or a stream of payments for
              life.

              The Fixed Annuities segment, which accounted for $177.2 million
              (or 29%) of the Company's operating income before federal income
              tax expense for 1999, consists of annuity contracts that generate
              a return for the customer at a specified interest rate, fixed for
              a prescribed period, tax-deferred accumulation of savings and
              flexible payout options including a lump sum, systematic
              withdrawal or a stream of payments for life. Such contracts
              consist of single premium deferred annuities, flexible premium
              deferred annuities and single premium immediate annuities. The
              Fixed Annuities segment also includes the fixed option under the
              Company's variable annuity contracts, which accounted for 72% of
              the Company's fixed annuity sales in 1999 and 71% of the Company's
              fixed annuity policy reserves as of December 31, 1999. During
              1999, the average crediting rates on contracts (including the
              fixed option under the Company's variable annuity contracts) in
              the Fixed Annuities segment was 5.59%. Approximately 87% of the
              Company's crediting rates on its fixed annuity contracts are
              guaranteed for a period not exceeding 15 months.

              The Life Insurance segment, which accounted for $120.8 million (or
              20%) of the Company's operating income before federal income tax
              expense for 1999, is composed of a wide range of variable
              universal life insurance, whole life insurance, universal life
              insurance, term life insurance and corporate-owned life insurance
              products that provide a death benefit and may also allow the
              customer to build cash value on a tax-deferred basis.

              The Corporate and Other segment accounted for $29.8 million (or
              4%) of the Company's operating income (which excludes realized
              gains and losses on investments) before federal income tax expense
              for 1999.

              Additional information related to the Company's business segments
              is included in note 14 to the consolidated financial statements
              and Financial Statement Schedule III.





                                        3
<PAGE>   4
              RATINGS

              Ratings with respect to claims-paying ability and financial
              strength have become an increasingly important factor in
              establishing the competitive position of insurance companies.
              Ratings are important to maintaining public confidence in the
              Company and its ability to market its annuity and life insurance
              products. Rating organizations continually review the financial
              performance and condition of insurers, including the Company. Any
              lowering of the Company's ratings could have a material adverse
              effect on the Company's ability to market its products and could
              increase the surrender of the Company's annuity products. Both of
              these consequences could, depending upon the extent thereof, have
              a material adverse effect on the Company's liquidity and, under
              certain circumstances, net income. NLIC is rated "A+" (Superior)
              by A.M. Best Company, Inc. and its claims-paying ability/financial
              strength is rated "Aa2" (Excellent) by Moody's Investor Services,
              Inc., "AA+" (Excellent) by Standard & Poor's Corporation and "AA+"
              (Excellent) by Duff & Phelps Credit Rating Co.

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

              COMPETITION

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

              On November 12, 1999, the Gramm-Leach-Bliley Act (the Act), was
              signed into law. The Act modernizes the regulatory framework for
              financial services in the United States and allows bank,
              securities firms and insurance companies to affiliate more
              directly than they have been permitted to do in the past. At this
              time it is not possible to predict the effect the Act will have on
              the financial services industry and the Company.

              REGULATION

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

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





                                       4
<PAGE>   5
              As part of their routine regulatory oversight process, state
              insurance departments conduct detailed examinations periodically
              (generally once every three to four years) of the books, records
              and accounts of insurance companies domiciled in their states.
              Such examinations are generally conducted in cooperation with the
              departments of two or three other states under guidelines
              promulgated by the National Association of Insurance Commissioners
              (NAIC). The most recently completed examination of the Company's
              insurance subsidiaries was conducted by the Ohio and Delaware
              insurance departments for the four-year period ended December 31,
              1996. The final reports of these examinations did not result in
              any significant issues or adjustments.

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

              EMPLOYEES

              As of December 31, 1999, the Company had approximately 3,900
              employees. None of the employees of the Company are covered by a
              collective bargaining agreement and the Company believes that its
              employee relations are satisfactory.


ITEM 2        PROPERTIES

              The Company's principal executive offices are located in Columbus,
              Ohio. The Company leases its home office complex, consisting of
              approximately 523,000 square feet, from NMIC and its subsidiaries
              at One Nationwide Plaza, Two Nationwide Plaza and Three Nationwide
              Plaza, Columbus, Ohio. The Company believes that its present
              facilities are adequate for the anticipated needs of the Company.

ITEM 3        LEGAL PROCEEDINGS

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

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




                                       5
<PAGE>   6
              In November 1997, two plaintiffs, one who was the owner of a
              variable life insurance contract and the other who was the owner
              of a variable annuity contract, commenced a lawsuit in a federal
              court in Texas against Nationwide Life and the American Century
              group of defendants (Robert Young and David D. Distad v.
              Nationwide Life Insurance Company et al.). In this lawsuit,
              plaintiffs sought to represent a class of variable life insurance
              contract owners and variable annuity contract owners whom they
              claim were allegedly misled when purchasing these variable
              contracts into believing that the performance of their underlying
              mutual fund option managed by American Century, whose shares may
              only be purchased by insurance companies, would track the
              performance of a mutual fund, also managed by American Century,
              whose shares are publicly traded. The amended complaint seeks
              unspecified compensatory and punitive damages. On April 27, 1998,
              the District Court denied, in part, and granted, in part, motions
              to dismiss the complaint filed by NLIC and American Century. The
              remaining claims against NLIC allege securities fraud, common law
              fraud, civil conspiracy, and breach of contract. The District
              Court, on December 2, 1998, issued an order denying plaintiffs'
              motion for class certification and the appeals court declined to
              review the order denying class certification upon interlocutory
              appeal. On June 11, 1999, the District Court denied the
              plaintiffs' motion to amend their complaint and reconsider class
              certification. In January 2000 NLIC and American Century settled
              this lawsuit now limited to the claims of the two named
              plaintiffs. On February 9, 2000 the court dismissed this lawsuit
              with prejudice.

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

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

ITEM 4        SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

              Omitted due to reduced disclosure format.





                                       6
<PAGE>   7
                                     PART II

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

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

              NLIC declared $236.0 million in dividends to NFS during 1999. NLIC
              paid cash dividends of $100.0 million to NFS during 1998 and no
              cash dividends were paid during 1997.

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

              NLIC currently does not have a formal dividend policy.

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

ITEM 6        SELECTED CONSOLIDATED FINANCIAL DATA

              Omitted due to reduced disclosure format.






                                       7
<PAGE>   8
ITEM 7        MANAGEMENT'S NARRATIVE ANALYSIS OF THE RESULTS OF OPERATIONS

              INTRODUCTION

              Management's narrative analysis of the results of operations of
              NLIC and subsidiaries for the three years ended December 31, 1999
              follows. This discussion should be read in conjunction with the
              consolidated financial statements and related notes included
              elsewhere in this report.

              Management's discussion and analysis contains certain
              forward-looking statements within the meaning of the Private
              Securities Litigation Reform Act of 1995 with respect to the
              results of operations and businesses of the Company. These
              forward-looking statements involve certain risks and
              uncertainties. Factors that may cause actual results to differ
              materially from those contemplated or projected, forecast,
              estimated or budgeted in such forward looking statements include,
              among others, the following possibilities: (i) the potential
              impact on the Company's reported net income that could result from
              the adoption of certain accounting standards issued by the FASB;
              (ii) tax law changes impacting the tax treatment of life insurance
              and investment products; (iii) heightened competition, including
              specifically the intensification of price competition, the entry
              of new competitors and the development of new products by new and
              existing competitors; (iv) adverse state and federal legislation
              and regulation, including limitations on premium levels, increases
              in minimum capital and reserves, and other financial viability
              requirements; (v) failure to expand distribution channels in order
              to obtain new customers or failure to retain existing customers;
              (vi) inability to carry out marketing and sales plans, including,
              among others, changes to certain products and acceptance of the
              revised products in the market; (vii) changes in interest rates
              and the capital markets causing a reduction of investment income
              or asset fees, reduction in the value of the Company's investment
              portfolio or a reduction in the demand for the Company's products;
              (viii) general economic and business conditions which are less
              favorable than expected; (ix) unanticipated changes in industry
              trends and ratings assigned by nationally recognized statistical
              rating organizations or A.M. Best Company, Inc.; and (x)
              inaccuracies in assumptions regarding future persistency,
              mortality, morbidity and interest rates used in calculating
              reserve amounts and (xi) failure of the Company or its significant
              business partners and vendors to identify and correct all non-Year
              2000 compliant systems or to develop and execute adequate
              contingency plans.

              RESULTS OF OPERATIONS

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

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

                    (in millions)                                                  1999            1998             1997
                                                                                  ------          ------           ------
<S>                                                                             <C>             <C>              <C>
                    Net income                                                    $405.1          $366.7           $279.7
                    Realized losses (gains) on investments, net of tax               7.6           (18.5)            (7.9)
                                                                                  ------          ------           ------
                      Net operating income                                        $412.7          $348.2           $271.8
                                                                                  ======          ======           ======
</TABLE>





                                       8
<PAGE>   9
              Revenues

              Total revenues for 1999, excluding realized gains and losses on
              investments, increased to $2.70 billion compared to $2.45 billion
              for 1998 and $2.21 billion for 1997. The growth in revenues over
              the past two years has primarily been driven by increases in
              policy charges and net investment income.

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

                    (in millions)                         1999            1998            1997
                                                         ------          ------          ------
<S>                                                    <C>             <C>             <C>
                    Asset fees                         $  616.5        $  494.7        $  384.8
                    Cost of insurance charges             117.0            88.8            68.5
                    Administrative fees                   102.4            73.8            59.5
                    Surrender fees                         59.6            41.6            32.4
                                                       --------        --------        --------
                      Total policy charges             $  895.5        $  698.9        $  545.2
                                                       ========        ========        ========
</TABLE>

              The growth in asset fees reflects increases in total separate
              account assets of $16.20 billion, or 32%, in 1999 and $13.2
              billion, or 35%, in 1998. Record variable annuity sales and strong
              equity market performance in each of the last three years have
              resulted in separate account balances increasing 149% from $26.93
              billion at the beginning of 1997 to $67.14 billion at the end of
              1999.

              Cost of insurance charges are assessed as a percentage of the net
              amount at risk on universal life insurance policies. The net
              amount at risk is equal to a policy's death benefit minus the
              related policyholder account value. The increase in cost of
              insurance charges is due primarily to growth in the net amount at
              risk related to individual variable universal life insurance
              reflecting expanded distribution and increased customer demand for
              variable life products. The net amount at risk related to
              individual variable universal life insurance grew to $19.76
              billion at the end of 1999 compared to $14.95 billion and $10.44
              billion at the end of 1998 and 1997, respectively.

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

              Net investment income includes the gross investment income earned
              on investments supporting fixed annuities and certain life
              insurance products as well as the yield on the Company's general
              account invested assets which are not allocated to product
              segments. Net investment income grew from $1.41 billion and $1.48
              billion in 1997 and 1998, respectively, to $1.52 billion in 1999
              primarily due to increased invested assets to support growth in
              fixed annuity and life insurance policy reserves. Fixed annuity
              policy reserves, which include the fixed option of the Company's
              variable annuity products, increased $704.7 million in 1998 and
              $1.69 billion in 1999 and were $16.59 billion as of year end 1999.
              The growth in life insurance reserves was led by corporate-owned
              life insurance products, where fixed reserves increased $596.7
              million in 1998 and $180.0 million in 1999. The increase in net
              investment income due to growth in invested assets was partially
              offset by declining investment yields in 1999 and 1998 due to
              lower market interest rates.

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




                                       9
<PAGE>   10
              Benefits and Expenses

              Interest credited to policyholder account balances totaled $1.10
              billion in 1999 compared to $1.07 billion in 1998 and $1.02
              billion in 1997 and principally relates to fixed annuity and
              investment life insurance products. The growth in interest
              credited reflects the increase in policy reserves previously
              discussed partially offset by reduced average crediting rates. The
              average crediting rate on fixed annuity policy reserves was 5.59%
              in 1999 compared to 5.95% and 6.12% in 1998 and 1997,
              respectively.

              Amortization of deferred policy acquisition costs (DAC) increased
              $58.1 million in 1999 and $47.3 million in 1998 principally due to
              the Variable Annuities segment, which accounted for $38.9 million
              and $36.1 million of the increases as a result of growth in the
              number of policies and related policy reserves in each of the last
              two years.

              Operating expenses were $463.4 million in 1999, a 10% increase
              from 1998 operating expenses of $419.7 million. Operating expenses
              were $384.9 million in 1997. The increase reflects the growth in
              the number of annuity and life insurance contracts in force,
              particularly related to variable annuities and variable universal
              life insurance, and the related increase in administrative
              processing costs.

              Federal income tax expense was $201.4 million representing an
              effective tax rate of 33.2% for 1999. Federal income tax expense
              in 1998 and 1997 was $190.4 million and $150.2 million,
              respectively, representing effective rates of 34.2% and 34.9%.

              Year 2000

              The Company developed and implemented a plan to address issues
              related to the Year 2000. The problem relates to many existing
              computer systems using only two digits to identify a year in a
              date field. These systems were designed and developed without
              considering the impact of the change in the century. If not
              corrected, many computer systems could fail or create erroneous
              results when processing information dated after December 31, 1999.
              Like many organizations, the Company was required to renovate or
              replace many computer systems so that the systems would function
              properly after December 31, 1999.

              The Company completed an inventory and assessment of all computer
              systems. The Company renovated or replaced all applications that
              were not compliant. Testing of all systems included running each
              application in a Year 2000 environment was completed as planned
              during 1998. For applications being replaced, the Company had all
              replacement systems in place and functioning as planned by
              year-end 1998.

              The Company completed an inventory and assessment of all vendor
              products and tested and certified each as Year 2000 compliant. Any
              vendor products that could not be certified as Year 2000 compliant
              were replaced or eliminated in 1998.

              The Company's facilities in Columbus, Ohio were inventoried,
              assessed and tested as being Year 2000 compliant. Mission critical
              systems supporting the Company's infrastructure such as
              telecommunications, voice and networks were renovated and brought
              into compliance as planned during the second quarter of 1999.

              The Company also addressed issues associated with the exchange of
              electronic data with external organizations. The Company completed
              an inventory and assessment of all business partners utilizing
              electronic interfaces with the Company and processes were put in
              place to allow the Company to accept data regardless of the
              format. Contingency plans were completed that allow the Company to
              continue to send or receive data in the event of failures related
              to electronic transmissions.

              In addition to resolving internal Year 2000 readiness issues, the
              Company conducted a due diligence effort with external
              organizations, including mutual fund organizations, financial
              institutions and wholesale producers. This involved communication
              and follow-up with critical business partners to determine if they
              will be in a position to continue doing business in the Year 2000
              and beyond. All of our critical business partners have reported
              that they are compliant.

                                       10
<PAGE>   11
              As part of its risk management strategy, the Company identified
              risk scenarios including the identification of external risk
              factors that could cause business interruptions from Year 2000
              related events. These risk scenarios included increased customer
              service volume, increased producer service volume, utility
              failures, technology failures and disruptions in business
              operations, finance and cash flow. The Company completed its
              mitigation and contingency plans to address these risks that
              would, except for complete utility failure, permit uninterrupted
              service to customers and producers.

              Operating expenses in 1998 and 1997 include approximately $44.7
              million and $45.4 million, respectively, for technology projects,
              including costs related to Year 2000. Year 2000 activities totaled
              $6.4 million during 1999. The cost associated with the completion
              of Year 2000 renovation and replacement efforts will not result in
              a reduction in operating expenses. Rather, personnel and resources
              that were allocated to the Year 2000 issues have been reassigned
              to other technology-related projects.

              Recently Issued Accounting Standards

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

              Sales Information

              Sales, as measured by statutory premiums and deposits, by
              distribution channel for each of the last three years are
              summarized as follows:
<TABLE>
<CAPTION>

                     (in millions)                                           1999             1998             1997
                                                                           --------         --------         --------
<S>                                                                       <C>              <C>              <C>
                       Independent broker/dealers                         $ 5,441.6        $ 5,004.2        $ 4,976.6
                       National and regional brokerage firms (1)              919.3            615.3             --
                       Financial institutions                               2,436.7          2,108.3          1,681.9
                       Pension plan administrators                          1,169.7          1,015.8            916.7
                       Nationwide Retirement Solutions
                        sales representatives                               2,549.0          2,470.1          1,937.0
                       Nationwide agents                                      965.6            959.7            630.2
                       Life insurance specialists                             420.0             91.1             --
                                                                          ---------        ---------        ---------
                     Total core premiums and deposits                      13,901.9         12,264.5         10,142.4
                                                                          ---------        ---------        ---------

                       Bank-owned life insurance (BOLI)                       123.2            554.6            194.7
                       Institutional products                                 577.2               --               --
                       Nationwide employee
                        and agent benefit plans                               334.1            323.3            174.9
                                                                          ---------        ---------        ---------
                     Total sales                                          $14,936.4        $13,142.4        $10,512.0
                                                                          =========        =========        =========

</TABLE>

                     (1) Prior to 1998, national and regional brokerage firms
                         sales were included in independent broker/dealer sales.

              The 1998 and 1997 statutory premiums and deposits have been
              restated to conform to the 1999 presentation which better reflects
              multi-product sales across all distribution channels.

              Total core premiums and deposits represent amounts that are
              recurring and are the sales figures management uses to set and
              evaluate the Company's sales goals. Sales of institutional
              products represent sales of funding agreements that secure notes
              issued to foreign investors through a third party trust under the
              Company's $2 billion medium-term note program. The program was
              launched in July 1999 as a means to expand spread based product
              offerings. The Company excludes institutional products and BOLI
              sales as well as deposits into Nationwide employee and agent
              benefit plans from its targeted sales comparisons. Although
              funding agreements and BOLI contribute to asset and earnings
              growth they do not produce steady production flow that lends
              itself to meaningful comparisons. The Company achieved annual core
              sales growth of 13%, 21%, and 19% in 1999, 1998 and 1997,
              respectively.





                                       11
<PAGE>   12
              The Company sells its products through a broad distribution
              network. Unaffiliated entities that sell the Company's products to
              their own customer base include independent broker/dealers,
              national and regional brokerage firms, pension plan
              administrators, life insurance specialists and financial
              institutions. Representatives of the Company or its affiliates who
              market products directly to a customer base identified by the
              Company include Nationwide Retirement Solutions sales
              representatives and Nationwide agents.

              The competitive environment for individual annuity sales through
              the independent broker/dealer channel has become very challenging;
              however, total sales through this channel (including retirement
              plans and life insurance) were up 9% in 1999 reflecting the
              strength of the Company's multiple product strategy. Sales through
              financial institutions grew 16% during 1999 and 25% during 1998
              driven mainly by proprietary individual annuity products sales.

              The increase in sales through life insurance specialists reflects
              $409.2 million of corporate owned life insurance (COLI) sales in
              1999 compared to $91.1 million in 1998. NFS entered the COLI
              market in 1998 and has quickly become a market leader through a
              focus on mid-sized cases.

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

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

              Core statutory premiums and deposits by product for each of the
              last three years are as follows:
<TABLE>
<CAPTION>

                 (in millions)                                       1999             1998             1997
                                                                   --------         --------         --------

<S>                                                               <C>              <C>              <C>
                 Best of America(R) products                      $ 4,665.3        $ 4,661.1        $ 4,267.3
                 Private label annuities                            1,280.3          1,093.3            981.9
                 The NEA Valuebuilder annuities                       168.5            172.6            134.8
                 Other                                                880.8            727.2            307.8
                                                                  ---------        ---------        ---------
                   Total individual annuities                       6,994.9          6,654.2          5,691.8
                                                                  ---------        ---------        ---------
                 Best of America(R) group pension series            3,537.6          2,760.0          2,221.1
                 IRC Section 457 annuities                          2,190.4          2,155.3          1,716.5
                 Other                                                 83.1             41.8             44.3
                                                                  ---------        ---------        ---------
                   Total group annuities                            5,811.1          4,957.1          3,981.9
                                                                  ---------        ---------        ---------
                 Traditional/Universal life insurance                 260.8            246.1            248.3
                 Best of America(R) variable life series              425.9            316.0            220.4
                 Corporate owned life insurance                       409.2             91.1               --
                                                                  ---------        ---------        ---------
                   Total life insurance                             1,095.9            653.2            468.7
                                                                  ---------        ---------        ---------
                   Total core premiums and deposits               $13,901.9        $12,264.5        $10,142.4
                                                                  =========        =========        =========
</TABLE>

              BUSINESS SEGMENTS

              The Company has three product segments: Variable Annuities, Fixed
              Annuities and Life Insurance. In addition, the Company reports
              certain other revenues and expenses in a Corporate and Other
              segment. All information set forth below relating to the Company's
              Variable Annuities segment excludes the fixed option under the
              Company's variable annuity contracts. Such information is included
              in the Company's Fixed Annuities segment.




                                       12
<PAGE>   13
              The following table summarizes operating income before federal
              income tax expense for the Company's business segments for each of
              the last three years.

                 (in millions)             1999     1998     1997
                                          ------   ------   ------

                   Variable Annuities     $290.3   $218.4   $150.9
                   Fixed Annuities         177.2    175.3    169.5
                   Life Insurance          120.8     88.8     66.7
                   Corporate and Other      29.8     46.2     31.7
                                          ------   ------   ------
                                          $618.1   $528.7   $418.8
                                          ======   ======   ======

              Variable Annuities

              The Variable Annuities segment consists of annuity contracts that
              provide the customer with access to a wide range of investment
              options, tax-deferred accumulation of savings, asset protection in
              the event of an untimely death, and flexible payout options
              including a lump sum, systematic withdrawal or a stream of
              payments for life. The Company's variable annuity products consist
              almost entirely of flexible premium deferred variable annuity
              contracts.

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

              (in millions)                               1999        1998        1997
                                                       ---------   ---------   ---------

<S>                                                    <C>         <C>         <C>
              INCOME STATEMENT DATA
              Revenues                                 $   626.7   $   501.6   $   387.1
              Benefits and expenses                        336.4       283.2       236.2
                                                       ---------   ---------   ---------
              Operating income before
              federal income tax expense               $   290.3   $   218.4   $   150.9
                                                       =========   =========   =========

              OTHER DATA
              Statutory premiums and deposits (1)      $ 9,916.0   $ 9,543.3   $ 7,535.8
              Policy reserves as of year end           $61,197.2   $46,420.8   $34,486.7
              Pre-tax operating income to average
              policy reserves                               0.55%       0.54%       0.51%
</TABLE>

              ----------
              (1) Statutory data have been derived from the Annual Statements of
                  the Company's life insurance subsidiaries, as filed with
                  insurance regulatory authorities and prepared in accordance
                  with statutory accounting practices.

              Pre-tax operating earnings reached a record $290.3 million in
              1999, up 33% compared to 1998. Improved Variable Annuity segment
              results are primarily due to growth in asset fees partially offset
              by increased DAC amortization.

              Asset fees were $596.6 million in 1999 up 25% from $479.1 million
              in 1998 and totaled $370.2 million in 1997. Asset fees are charged
              as a percentage of policy reserves which have increased
              substantially in the past three years as a result of strong net
              cash flows and through market appreciation on investments
              underlying reserves. Variable annuity policy reserves grew $14.78
              billion during 1999 reaching $61.20 billion as of year end 1999
              compared to growth in 1998 of $11.93 billion and year end 1998
              reserves of $46.42 billion. During 1997, policy reserves increased
              $10.21 billion.




                                       13
<PAGE>   14
              Sales in 1999 of $9.92 billion offset by withdrawals and
              surrenders totaling $6.52 billion generated net cash flows of
              $3.40 billion. Although 1999 net cash flows are down from the
              $5.28 billion and $4.85 billion achieved in 1998 and 1999,
              respectively, the Company has shown the ability to consistently
              generate substantial positive cash flows and increase its base of
              asset fee generating reserves in a very competitive environment.
              The increase in withdrawal and surrender activity is attributable
              to an increase in competition in the individual variable annuity
              market which has increased transfers to competitor's products and
              the overall aging of the Company's book of individual annuity
              business. The Company will introduce new products, new product
              features and new retention strategies during 2000 in an effort to
              decrease the rate of surrenders.

              Although the equity markets have been more volatile in recent
              years, equity market conditions over each of the past three years
              have contributed significantly to the growth in variable annuity
              policy reserves. Variable annuity policy reserves reflect market
              appreciation of $10.55 billion, $6.80 billion and $5.21 billion in
              1999, 1998 and 1997, respectively.

              Amortization of DAC increased 31% to $162.8 million in 1999
              compared to $123.9 million and $87.8 million in 1998 and 1997,
              respectively. The growth in DAC amortization is consistent with
              the overall growth in the variable annuity business.

              Efficiencies achieved through improved operating scale have
              enabled the Company to improve operating margins to 55 basis
              points of average policy reserves, up from 54 basis points in 1998
              and 51 basis points n 1997.

              Fixed Annuities

              The Fixed Annuities segment consists of annuity contracts that
              generate a return for the customer at a specified interest rate
              fixed for a prescribed period, tax-deferred accumulation of
              savings and flexible payout options including a lump sum,
              systematic withdrawal or a stream of payments for life. Such
              contracts consist of single premium deferred annuities, flexible
              premium deferred annuities and single premium immediate annuities.
              The Fixed Annuities segment includes the fixed option under the
              Company's variable annuity contracts.

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

              (in millions)                                                    1999              1998              1997
                                                                             --------          --------          --------

<S>                                                                         <C>               <C>               <C>
              INCOME STATEMENT DATA
              Revenues:
                Net investment income                                       $ 1,134.5         $ 1,116.6         $ 1,098.2
                Other                                                            43.4              35.7              43.2
                                                                            ---------         ---------         ---------
                                                                              1,117.9           1,152.3           1,141.4
                                                                            ---------         ---------         ---------
              Benefits and expenses:
                Interest credited to policyholder account balances              837.5             828.6             823.4
                Other benefits and expenses                                     163.2             148.4             148.5
                                                                            ---------         ---------         ---------
                                                                              1,000.7             977.0             971.9
                                                                            ---------         ---------         ---------
              Operating income before federal income tax expense            $   177.2         $   175.3         $   169.5
                                                                            =========         =========         =========

              OTHER DATA
              Statutory premiums and deposits (1)                           $ 3,467.2         $ 2,068.0         $ 2,137.9
              Policy reserves as of year end                                $16,591.9         $14,898.9         $14,194.2
              Pre-tax operating income to average policy reserves                1.14%             1.21%             1.22%
</TABLE>

              ----------
              (1) Statutory data have been derived from the Annual Statements of
                  the Company's life insurance subsidiaries, as filed with
                  insurance regulatory authorities and prepared in accordance
                  with statutory accounting practices.




                                       14
<PAGE>   15


              Fixed Annuities segment results reflect an increase in interest
              spread income attributable to growth in fixed annuity policy
              reserves offset by narrower interest margins during 1999. Interest
              spread is the differential between net investment income and
              interest credited to policyholder account balances. Interest
              spreads vary depending on crediting rates offered by competitors,
              performance of the investment portfolio, including the rate of
              prepayments, changes in market interest rates and other factors.
              The following table depicts the interest margins on general
              account policy reserves in the Fixed Annuities segment for each of
              the last three years.

                                              1999        1998        1997
                                              ----        ----        ----

                 Net investment income        7.57%       8.02%       8.16%
                 Interest credited            5.59        5.95        6.12
                                              ----        ----        ----
                                              1.98%       2.07%       2.04%
                                              ====        ====        ====

              During 1998 and the first half of 1999 the Company experienced an
              increase in mortgage loan and bond prepayment fees and such income
              accounted for approximately 9 basis points of the interest spread
              in 1999 compared to 16 basis points and 8 basis points in 1998 and
              1997, respectively. The recent increases in interest rates have
              slowed prepayment activity and the Company expects interest
              spreads to remain at 190 to 195 basis points, excluding the impact
              of mortgage loan and bond prepayment income.

              The Company is able to mitigate the effects of changes in
              investment yields by periodically resetting the rates credited on
              fixed annuity contracts. As of December 31, 1999, $7.28 billion,
              or 44% of fixed annuity policy reserves, were in contracts where
              the guaranteed interest rate is reestablished each quarter. Fixed
              annuity policy reserves of $5.89 billion are in contracts that
              adjust the crediting rate on an annual basis with portions
              resetting in each calendar quarter. The Company also has $1.39
              billion of fixed annuity policy reserves that call for the
              crediting rate to be reset annually on each January 1 and $1.45
              billion of fixed annuity policy reserves are in payout status
              where the Company has guaranteed periodic, typically monthly,
              payments. The remaining $574.5 million of fixed annuity policy
              reserves relate to funding agreements issued in conjunction with
              the Company's medium-term note program where the crediting rate is
              fixed for the term of the contract.

              Fixed annuity policy reserves increased to $16.59 billion as of
              year-end compared to $14.90 billion a year ago and $14.19 billion
              as of the end of 1997. The 1999 growth reflects increased sales
              levels as well as the acquisition of ELOW.

              Fixed annuity sales during 1999 were $3.47 billion compared to
              1998 sales of $2.07 billion. Sales in 1997 were $2.14 billion.
              Sales in 1999 include $577.2 million of funding agreements issued
              in conjunction with the Company's medium-term note program. Most
              of the Company's fixed annuity sales are premiums allocated to the
              fixed option of variable annuity contracts. Fixed annuity sales
              for 1999 include $2.49 billion in premiums allocated to the fixed
              option under a variable annuity contract, compared to $1.68
              billion in 1998 and $1.67 billion in 1997. The increase in 1999
              was driven by the Company's dollar cost averaging (DCA) program
              that offers customers a first year bonus interest rate and
              transfers the account balance systematically to variable options
              over a six or twelve month period.

              Life Insurance

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






                                       15
<PAGE>   16
              The following table summarizes certain selected financial data for
              the Company's Life Insurance segment for the years indicated.
<TABLE>
<CAPTION>

              (in millions)                                                 1999            1998            1997
                                                                          --------        --------        --------

<S>                                                                       <C>             <C>             <C>
              INCOME STATEMENT DATA
              Revenues                                                    $  646.1        $  544.1        $  468.3
              Benefits and expenses                                          525.3           455.3           401.6
                                                                          --------        --------        --------
              Operating income before federal income tax expense          $  120.8        $   88.8        $   66.7
                                                                          ========        ========        ========

              OTHER DATA
              Statutory premiums (1):
                Variable universal life insurance                         $  426.0        $  315.9        $  220.3
                Corporate-owned life insurance                            $  532.3        $  645.8        $  194.7
                Traditional and universal life insurance                  $  260.8        $  246.1        $  248.4
              Policy reserves as of year end:
                Variable universal life insurance                         $1,832.3        $1,270.1        $  895.6
                Corporate-owned life insurance                            $1,498.6        $  903.6        $  221.9
                Traditional and universal life insurance                  $2,582.9        $2,439.7        $2,369.5
</TABLE>

              --------
              (1) Statutory data have been derived from the Annual Statements
                  of the Company's life insurance subsidiaries, as filed with
                  insurance regulatory authorities and prepared in accordance
                  with statutory accounting practices.

              Life Insurance segment earnings in 1999 increased 36% to $120.8
              million, up from $88.8 million a year ago and $66.7 million in
              1997. Continued strong sales and reserve growth from both
              individual and corporate owned investment life insurance products
              contributed to the sharp earnings increases.

              Driven primarily by increased policy charges, revenues from
              investment life products increased to $226.5 million in 1999
              compared to $145.4 million in 1998 and $69.8 million 1997. The
              revenue growth reflects significantly increased policy reserve
              levels as individual investment life reserves increased 44% in
              1999 to $1.83 billion compared to $1.27 billion a year ago and
              $895.6 million at the end of 1997. Corporate owned investment life
              reserves, which include both BOLI and corporate-owned (COLI)
              products reached $1.50 billion, up from $903.6 million and $221.9
              million at the end of 1998 and 1997, respectively.

              Pre-tax earnings from investment life products reached $53.4
              million 1999 compared to $29.6 million a year ago and $14.7
              million in 1997. The strong revenue growth discussed previously
              more than offset increased operating expenses and slightly
              elevated mortality experience, which continues to remain within
              pricing assumptions.

              Traditional and universal life pre-tax earnings jumped 14% to
              $67.4 million in 1999 compared to $59.2 million in 1998 and were
              $52.0 million in 1997. The 1998 results reflect additional
              expenses related to the installation of a new policy
              administration system.

              Total life insurance premiums and deposits for 1999 were $1.22
              billion compared to $1.21 billion during 1998 and $663.4 million
              in 1997. Excluding BOLI sales of $123.2 million in 1999 and $554.7
              million in 1998, life insurance sales increased 68% in 1999 and
              39% in 1998. Sales in 1999 include record levels of production for
              individual variable life insurance and COLI, reflecting the
              Company's efforts to sell variable life through multiple channels
              and growing consumer and producer demand.









                                       16
<PAGE>   17


              Corporate and Other

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

<TABLE>
<CAPTION>
                             (in millions)              1999      1998      1997
                                                       ------    ------    ------
               <S>                                     <C>       <C>       <C>
               INCOME STATEMENT DATA
               Revenues                                $252.5    $249.3    $209.5
               Benefits and expenses                    222.7     203.1     177.8
                                                       ------    ------    ------
               Operating income before
               federal income tax expense (1)          $ 29.8    $ 46.2    $ 31.7
                                                       ======    ======    ======
</TABLE>
              ------------
              (1) Excludes realized gains (losses) on investments.

              Revenues in the Corporate and Other segment consist of net
              investment income on invested assets not allocated to the three
              product segments, investment management fees and other revenues
              earned from Nationwide mutual funds and net investment income and
              policy charges from group annuity contracts issued to Nationwide
              employee and agent benefit plans. During 1999, the Company
              assigned its investment advisory and related agreements associated
              with Nationwide mutual funds to an affiliate.

              In addition to the operating revenues previously presented, the
              Company also reports realized gains and losses on investments in
              the Corporate and Other segment. The Company realized net
              investment (losses) gains of $(11.6) million, $28.4 million and
              $11.1 million during 1999, 1998 and 1997, respectively.

ITEM 7A       QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

              MARKET RISK SENSITIVE FINANCIAL INSTRUMENTS

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

              INTEREST RATE RISK

              Fluctuations in interest rates can potentially impact the
              Company's earnings and cash flows, and the fair value of its
              assets and liabilities. Generally, in a declining interest rate
              environment, the Company may be required to reinvest the proceeds
              from matured and prepaid investments at rates lower than the
              overall yield of the portfolio, which could reduce interest spread
              income. In addition, minimum guaranteed crediting rates (typically
              3% or 3.5%) on certain annuity contracts could result in a
              reduction of the Company's interest spread income in the event of
              a significant and prolonged decline in interest rates from market
              rates at the end of 1999. The average crediting rate of annuity
              products during 1999 was 5.59%, well in excess of the guaranteed
              rates. The Company mitigates this risk by investing in assets with
              maturities and durations that match the expected characteristics
              of the liabilities and by investing in mortgage backed securities
              with limited prepayment exposure.





                                       17
<PAGE>   18
              Conversely, a rising interest rate environment could result in a
              reduction of interest spread income or an increase in policyholder
              surrenders. Investments supporting annuity liabilities generally
              have a weighted average maturity of seven years when purchased and
              therefore, the change in yield of the portfolio will lag changes
              in market interest rates. This lag is increased if the rate of
              prepayments of mortgage-backed securities slows. To the extent the
              Company sets renewal rates based on current market rates, this
              will result in reduced interest spreads. Alternatively, if the
              Company sets renewal crediting rates while attempting to maintain
              a desired spread from the portfolio yield, the rates offered by
              the Company may be less than new money rates offered by
              competitors. This difference could result in an increase in
              surrender activity by policyholders. If the Company could not fund
              the surrenders with its cash flow from operations, the Company may
              be required to sell investments, which likely would have declined
              in value due to the increase in interest rates. The Company
              mitigates this risk by offering products that assess surrender
              charges or market value adjustments at the time of surrender, by
              investing in assets with maturities and durations that match the
              expected characteristics of the liabilities, and by investing in
              mortgage backed securities with limited prepayment exposure.

              ASSET/LIABILITY MANAGEMENT STRATEGIES TO MANAGE INTEREST RATE RISK

              The Company employs an asset/liability management approach
              tailored to the specific requirements of each of its products. The
              Company's general account investments are primarily managed in a
              number of pools that are segregated by weighted average maturity
              of the assets acquired by the pools. For fixed maturity securities
              and mortgages, the weighted average maturity is based on
              repayments which are scheduled to occur under the terms of the
              asset. For mortgage backed securities, repayments are determined
              using the current rate of repayment of the underlying mortgages
              and the terms of the securities. Each product line has an
              investment strategy based on its specific characteristics. The
              strategy establishes asset duration, quality and other guidelines.
              The Company determines the amount of new investments needed for
              each line to arrive at the amount of new investments needed for
              each pool by month. The investments acquired for each pool are
              shared on a proportional basis by each of the lines requesting
              investments in the pool based on their actual investment needs.

              For all business having future benefits which cannot be changed at
              the option of the policyholder, the underlying assets are managed
              in a separate pool. The duration of assets and liabilities in this
              pool are kept as close together as possible. For assets, the
              repayment cash flows, plus anticipated coupon payments, are used
              in calculating asset duration. Future benefits and expenses are
              used for liabilities. On December 31, 1999, the average duration
              of assets in this pool was 7.09 years and the average duration of
              the liabilities was 7.41 years. Policy reserves on this business
              were $1.5 billion as of December 31, 1999.

              Because the timing of the payment of future benefits on the
              majority of the Company's business can be changed by the
              policyholder, the Company employs cash flow testing techniques in
              its asset/liability management process. In addition, each year the
              Company's annuity and insurance business is analyzed to determine
              the adequacy of the reserves supporting such business. This
              analysis is accomplished by projecting the anticipated cash flows
              from such business and the assets required to support such
              business under a number of possible future interest rate
              scenarios. The first seven of these scenarios are required by
              state insurance regulation. Projections are also made using 14
              additional scenarios which involve more extreme fluctuations in
              future interest rates. Finally, to get a statistical analysis of
              possible results and to minimize any bias in the 21 predetermined
              scenarios, additional projections are made using 50 randomly
              generated interest rate scenarios. For the Company's 1999 cash
              flow testing process, interest rates for 90-day treasury bills
              ranged from 0.73% to 11.98% under the 21 predetermined scenarios
              and 1.44% to 18.53% under the 50 random scenarios. Interest rates
              for longer maturity treasury securities had comparable ranges. The
              values produced by each projection are used to determine future
              gains or losses from the Company's annuity and insurance business,
              which, in turn, are used to quantify the adequacy of the Company's
              reserves over the entire projection period. The results of the
              Company's cash flow testing indicated that the Company's reserves
              were adequate as of December 31, 1999.





                                       18
<PAGE>   19


              CHARACTERISTICS OF INTEREST RATE SENSITIVE FINANCIAL INSTRUMENTS

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

<TABLE>
<CAPTION>

(in millions)                            2000       2001        2002        2003         2004    Thereafter       Total   Fair Value
------------------------------------------------------------------------------------------------------------------------------------
<S>                                   <C>         <C>         <C>         <C>         <C>         <C>          <C>        <C>
ASSETS
Fixed maturity securities:
   Corporate bonds:
     Principal                        $1,088.8    $1,669.0    $1,674.3    $1,047.6    $  971.6    $3,100.3     $ 9,551.6  $ 9,536.5
     Average interest rate                 7.5%        7.4%        7.1%        7.1%        7.2%        7.9%
   Mortgage and other asset-
     backed securities:
     Principal                        $  997.2    $  920.5    $  761.0    $  551.8    $  448.8    $1,606.6     $ 5,285.9  $ 5,196.9
     Average interest rate                 7.3%        7.3%        7.3%        7.3%        7.3%        7.4%
   Other fixed maturity securities:
     Principal                        $   76.4    $   70.3    $  107.7    $   34.0    $   43.9    $  207.5     $   539.8  $   560.6
     Average interest rate                 6.4%        6.0%        7.0%        7.8%        6.5%        8.3%
Mortgage loans on real estate:
     Principal                        $  292.8    $  270.9    $  369.9    $  391.2    $  483.2    $4,024.5     $ 5,832.5  $ 5,745.5
     Average interest rate                 9.0%        8.3%        8.6%        7.8%        7.7%        7.8%

LIABILITIES
Deferred fixed annuities:
     Principal                        $2,076.0    $1,646.0    $1,448.0    $1,286.0    $1,149.0    $9,626.8     $17,231.8  $16,674.6
     Average credited rate                 5.5%        5.4%        5.4%        5.4%        5.4%        5.5%
Immediate annuities:
     Principal                        $   27.0    $   24.0    $   21.0    $   19.0    $   17.0    $  123.0     $   231.0  $   237.8
     Average credited rate                 7.2%        7.2%        7.2%        7.3%        7.3%        7.3%

DERIVATIVE FINANCIAL INSTRUMENTS
Interest rate swaps:
      Pay fixed/receive variable
        Notional value                       -           -    $   15.0    $   16.0    $   90.8    $  240.9     $   362.7  $     4.8
        Weighted average pay rate            -           -         2.7%        6.6%        6.8%        6.9%
        Weighted average receive rate        -           -         7.5%        6.1%        6.1%        6.2%
      Pay variable/receive fixed
        Notional value                       -           -           -           -    $  320.4    $  285.3     $   605.7  $   (25.3)
        Weighted average pay rate            -           -           -           -         6.4%        6.5%
        Weighted average receive rate        -           -           -           -         3.0%        5.4%
Interest rate futures:
      Short positions
        Contract amount/notional      $  323.6    $  256.0    $  168.0    $   22.0    $    9.0    $    3.0     $   781.6  $     1.3
        Weighted average settlement
           price                      $   94.4    $   93.4    $   93.2    $   93.0    $   92.8    $   92.6

</TABLE>





                                       19
<PAGE>   20


              The following table provides information about the Company's
              financial instruments as of December 31, 1998 that are sensitive
              to changes in interest rates.

<TABLE>
<CAPTION>

(in millions)                             1999        2000        2001       2002       2003     Thereafter     Total     Fair Value
------------------------------------------------------------------------------------------------------------------------------------
<S>                                     <C>         <C>         <C>        <C>        <C>        <C>          <C>         <C>
ASSETS
Fixed maturity securities:
   Corporate bonds:
     Principal                          $1,092.7    $1,049.2    $1,667.6   $1,386.3   $  882.7   $2,864.0     $ 8,942.5   $ 9,364.2
     Average interest rate                   8.0%        7.5%        7.3%       7.2%       7.0%       7.6%
   Mortgage and other asset-
     backed securities:
     Principal                          $  905.3    $  964.3    $  870.7   $  588.9   $  367.3   $  718.3     $ 4,414.8   $ 4,499.4
     Average interest rate                   7.3%        7.4%        7.2%       7.4%       7.4%       7.0%
   Other fixed maturity securities:
     Principal                          $    7.8    $   72.0    $   54.6   $  103.3   $   60.6   $   65.7     $   364.0   $   381.5
     Average interest rate                   8.5%        6.4%        7.0%       6.6%       6.9%       6.8%
Mortgage loans on real estate:
     Principal                          $  185.9    $  373.9    $  313.1   $  339.5   $  408.8   $3,749.6     $ 5,372.4   $ 5,527.6
     Average interest rate                   9.2%        9.3%        7.0%       8.5%       7.6%       7.1%

LIABILITIES
Deferred fixed annuities:
     Principal                          $1,639.6    $1,548.3    $1,733.7   $1,232.5   $1,169.6   $8,270.7     $15,594.4   $15,282.0
     Average credited rate                   5.2%        4.8%        4.5%       4.3%       4.1%       4.1%
Immediate annuities:
     Principal                          $   20.6    $   20.7    $   22.3   $   25.2   $   29.9   $   53.1     $   171.8   $   201.6
     Average credited rate                   7.3%        7.3%        7.3%       7.3%       7.4%       7.4%

</TABLE>

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

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

              Other Fixed Maturity Securities and Mortgage Loans on Real Estate:
              The maturity year is determined based on the maturity date of the
              security or loan.

              Deferred Fixed Annuities: The maturity year is based on the
              expected date of policyholder withdrawal, taking into account
              actual experience, current interest rates, and contract terms.
              Included are group annuity contracts ($9.70 billion) which are
              generally subject to market value adjustment upon surrender and
              may also be subject to surrender charges. Of the total group
              annuity liabilities, $7.28 billion was in contracts where the
              crediting rate is reset quarterly. For the remaining $2.42 billion
              of group annuity reserves, the crediting rate is reset annually on
              January 1. Also included are $5.89 billion of individual annuity
              liabilities where the crediting rate is reset annually, with
              portions resetting in each calendar quarter. Such individual
              annuity contracts are also subject to surrender charges calculated
              as a percentage of the lesser of deposits made or the amount
              surrendered and assessed at declining rates during the first seven
              years after a deposit is made. The average crediting rate is
              calculated as the difference between the projected yield of the
              assets backing the liabilities and a targeted interest spread.
              However, for certain individual annuities the credited rate is
              also adjusted to partially reflect current new money rates.

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




                                       20
<PAGE>   21


              EQUITY MARKET RISK

              Asset fees calculated as a percentage of the separate account
              assets are a significant source of revenue to the Company. At
              December 31, 1999, 88% of separate account assets were invested in
              equity mutual funds. Gains and losses in the equity markets will
              result in corresponding increases and decreases in the Company's
              separate account assets and the reported asset fee revenue. In
              addition, a decrease in separate account assets may decrease the
              Company's expectations of future profit margins which may require
              the Company to accelerate the amortization of deferred policy
              acquisition costs.

ITEM 8        CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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

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


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

              None.






                                       21
<PAGE>   22


                                    PART III

ITEM 10       DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

              Omitted due to reduced disclosure format.


ITEM 11       EXECUTIVE COMPENSATION

              Omitted due to reduced disclosure format.


ITEM 12       SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

              Omitted due to reduced disclosure format.


ITEM 13       CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

              Omitted due to reduced disclosure format.


                                     PART IV

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

<TABLE>
<CAPTION>
                                                                                                               Page
                                                                                                              -------
<S>                                                                                                           <C>
              CONSOLIDATED FINANCIAL STATEMENTS:
                Independent Auditors' Report                                                                    F-1
                Consolidated Balance Sheets as of December 31, 1999 and 1998                                    F-2
                Consolidated Statements of Income for the years ended
                December 31, 1999, 1998 and 1997                                                                F-3
                Consolidated Statements of Shareholder's Equity for the years
                  ended December 31, 1999, 1998 and 1997                                                        F-4
                Consolidated Statements of Cash Flows for the years ended
                  December 31, 1999, 1998 and 1997                                                              F-5
                Notes to Consolidated Financial Statements                                                      F-6

              FINANCIAL STATEMENT SCHEDULES:
                Schedule I     Consolidated Summary of Investments - Other Than
                                 Investments in Related Parties as of December 31, 1999                        F-27
                Schedule III   Supplementary Insurance Information as of December 31,
                                 1999, 1998 and 1997 and for each of the years then ended                      F-28
                Schedule IV    Reinsurance as of December 31, 1999, 1998 and 1997 and for
                                 each of the years then ended                                                  F-29
                Schedule V     Valuation and Qualifying Accounts for the years ended
                                 December 31, 1999, 1998 and 1997                                              F-30

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

              EXHIBIT INDEX                                                                                      25

</TABLE>




                                       22
<PAGE>   23


                                   SIGNATURES


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



                                  NATIONWIDE LIFE INSURANCE COMPANY (Registrant)



                                        By /s/ Dimon R. McFerson
                                           -------------------------------------
                                           Dimon R. McFerson, Chairman and
                                           Chief Executive Officer - Nationwide


Date:  March 1, 2000





                                       23
<PAGE>   24


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

<TABLE>
<CAPTION>


<S>                                            <C>              <C>                                           <C>
/s/ Dimon R. McFerson                          March 1, 2000    /s/ Joseph J. Gasper                          March 1, 2000
--------------------------------------------- ----------------- -------------------------------------------  -----------------
Dimon R. McFerson, Chairman and Chief               Date        Joseph J. Gasper, President and Chief              Date
Executive Officer - Nationwide and Director                     Operating Officer and Director



/s/ Lewis J. Alphin                            March 1, 2000    /s/ A.I. Bell                                 March 1, 2000
--------------------------------------------- ----------------- -------------------------------------------  -----------------
Lewis J. Alphin, Director                           Date        A.I. Bell, Director                                Date



/s/ Kenneth D. Davis                           March 1, 2000    /s/ Keith W. Eckel                            March 1, 2000
--------------------------------------------- ----------------- -------------------------------------------  -----------------
Kenneth D. Davis, Director                          Date        Keith W. Eckel, Director                           Date



/s/ Willard J. Engel                           March 1, 2000    /s/ Fred C. Finney                            March 1, 2000
--------------------------------------------- ----------------- -------------------------------------------  -----------------
Willard J. Engel, Director                          Date        Fred C. Finney, Director                           Date



/s/ David O. Miller                            March 1, 2000    /s/ Yvonne L. Montgomery                      March 1, 2000
--------------------------------------------- ----------------- -------------------------------------------  -----------------
David O. Miller, Director                           Date        Yvonne L. Montgomery, Director                     Date



/s/ Ralph M. Paige                             March 1, 2000    /s/ James F. Patterson                        March 1, 2000
--------------------------------------------- ----------------- -------------------------------------------  -----------------
Ralph M. Paige, Director                            Date        James F. Patterson, Director                       Date



/s/ Arden L. Shisler                           March 1, 2000    /s/ Robert L. Stewart                         March 1, 2000
--------------------------------------------- ----------------- -------------------------------------------  -----------------
Arden L. Shisler, Director                          Date        Robert L. Stewart, Director                        Date



/s/ Nancy C. Thomas                            March 1, 2000    /s/ Robert A. Oakley                          March 1, 2000
--------------------------------------------- ----------------- -------------------------------------------  -----------------
Nancy C. Thomas, Director                           Date        Robert A. Oakley, Executive Vice                   Date
                                                                President - Chief Financial Officer



/s/ Mark R. Thresher                           March 1, 2000
--------------------------------------------- -----------------
Mark R. Thresher, Senior Vice President -           Date
Finance - Nationwide Financial
 (Chief Accounting Officer)
</TABLE>






                                       24
<PAGE>   25


                                  EXHIBIT INDEX
<TABLE>
<CAPTION>

 Exhibit
----------

<S>          <C>
   3.1       Amended Articles of Incorporation of Nationwide Life Insurance
             Company, dated March 14, 1986 (previously filed as Exhibit 3.1 to
             Form 10-K, Commission File Number 2-28596, filed March 31,1998, and
             incorporated herein by reference)
   3.2       Form of Amended and Restated Code of Regulations of Nationwide Life
             Insurance Company (previously filed as Exhibit 3 to Form 10-K,
             Commission File Number 2-28596, filed March 28, 1997, and
             incorporated herein by reference)
  10.1       Form of Tax Sharing Agreement among Nationwide Mutual Insurance
             Company, Nationwide Corporation and any corporation that may
             hereafter be a subsidiary of Nationwide Corporation (previously
             filed as Exhibit 10.1 to Form 10-K, Commission File Number 2-28596,
             filed March 28, 1997, and incorporated herein by reference)
  10.1.1     First Amendment to the Tax Sharing Agreement among Nationwide
             Mutual Insurance Company, Nationwide Corporation and any
             corporation that may hereafter be a subsidiary of Nationwide
             Corporation (previously filed as Exhibit 10.2.1 to Form 10-K,
             Commission File Number 1-12785, filed March 31, 1998, and
             incorporated herein by reference)
  10.2       Form of First Amendment to Cost Sharing Agreement among parties
             named therein (previously filed as Exhibit 10.2 to Form 10-K,
             Commission File Number 2-28596, filed March 28, 1997, and
             incorporated herein by reference)
  10.3       Modified Coinsurance Agreement between Nationwide Life Insurance
             Company and Nationwide Mutual Insurance Company (previously filed
             as Exhibit 10.3 to Form 10-K, Commission File Number 2-28596, filed
             March 28, 1997, and incorporated herein by reference)
  10.4       Modified Coinsurance Agreement between Employers Life Insurance
             Company of Wausau and Nationwide Life Insurance Company (previously
             filed as Exhibit 10.4 to Form 10-K, Commission File Number 2-28596,
             filed March 28, 1997, and incorporated herein by reference)
  10.5       Credit Facility, dated August 12, 1996, among Nationwide Life
             Insurance Company, Nationwide Mutual Insurance Company, the banks
             named therein and Morgan Guaranty Trust Company of New York, the
             administrative agent (previously filed as Exhibit 10.5 to Form
             10-K, Commission File Number 2-28596, filed March 28, 1997, and
             incorporated herein by reference)
  10.5.1     Amendment dated as of September 8, 1997 to the Credit Agreement
             dated as of August 12, 1996 among Nationwide Mutual Insurance
             Company, Nationwide Life Insurance Company, the banks party thereto
             and Morgan Guaranty Trust Company of New York, as administrative
             agent (previously filed as Exhibit 10(a) to Form 10-Q for the
             quarterly period ended September 30, 1997, Commission File Number
             1-12785, filed November 13, 1997, and incorporated herein by
             reference)
  10.6       Form of Lease Agreement between Nationwide Life Insurance Company
             and Nationwide Mutual Insurance Company (previously filed as
             Exhibit 10.6 to Form 10-K, Commission File Number 2-28596, filed
             March 28, 1997, and incorporated herein by reference)
  10.7       General Description of Nationwide Insurance Executive Incentive
             Plan (previously filed as Exhibit 10.7 to Form 10-K, Commission
             File Number 2-28596, filed March 28, 1997, and incorporated herein
             by reference)
  10.8       General Description of Nationwide Insurance Management Incentive
             Plan (previously filed as Exhibit 10.8 to Form 10-K, Commission
             File Number 2-28596, filed March 28, 1997, and incorporated herein
             by reference)
  10.9       Nationwide Insurance Excess Benefit Plan effective as of December
             31, 1996 (previously filed as Exhibit 10.9 to Form 10-K, Commission
             File Number 2-28596, filed March 28, 1997, and incorporated herein
             by reference)
  10.10      Nationwide Insurance Supplemental Retirement Plan effective as of
             December 31, 1996 (previously filed as Exhibit 10.10 to Form 10-K,
             Commission File Number 2-28596, filed March 28, 1997, and
             incorporated herein by reference)

</TABLE>




                                       25
<PAGE>   26
<TABLE>


<S>          <C>                                                                          <C>
  10.11      Nationwide Salaried Employees Severance Pay Plan (previously filed
             as Exhibit 10.11 to Form 10-K, Commission File Number 2-28596,
             filed March 28, 1997, and incorporated herein by reference)
  10.12      Nationwide Insurance Supplemental Defined Contribution Plan
             effective as of January 1, 1996 (previously filed as Exhibit 10.12
             to Form 10-K, Commission File Number 2-28596, filed March 28, 1997,
             and incorporated herein by reference)
  10.13      General Description of Nationwide Insurance Individual Deferred
             Compensation Program previously filed as Exhibit 10.13 to Form
             10-K, Commission File Number 2-28596, filed March 28, 1997, and
             incorporated herein by reference)
  10.14      General Description of Nationwide Mutual Insurance Company
             Directors Deferred Compensation Program (previously filed as
             Exhibit 10.14 to Form 10-K, Commission File Number 2-28596, filed
             March 28, 1997, and incorporated herein by reference)
  10.15      Deferred Compensation Agreement, dated as of September 3, 1979,
             between Nationwide Mutual Insurance Company and D. Richard McFerson
             (previously filed as Exhibit 10.15 to Form 10-K, Commission File
             Number 2-28596, filed March 28, 1997, and incorporated herein by
             reference)
  10.16      Investment Agency Agreement between Nationwide Cash Management
             Company and National Financial Services, Inc. and certain
             subsidiaries of Nationwide Financial Services, Inc. (filed as
             Exhibit 10.19 to Form 10-K, Commission File Number 1-12785, filed
             March 29, 2000, and incorporated herein by reference)
  10.17      Master Repurchase Agreement between Nationwide Life Insurance
             Company, Nationwide Life and Annuity Insurance Company, and
             Nationwide Mutual Insurance Company and certain of its subsidiaries
             and affiliates (filed as Exhibit 10.20 to Form 10-K, Commission
             File Number 1-12785, filed March 29, 2000, and incorporated herein
             by reference)
  27         Financial Data Schedule (electronic filing only)
</TABLE>

------
         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.

                                       26
<PAGE>   27

                          INDEPENDENT AUDITORS' REPORT



The Board of Directors
Nationwide Life Insurance Company:

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

We conducted our audits in accordance with 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.

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, 1999 and 1998, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1999, 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.





                                                                        KPMG LLP



Columbus, Ohio
January 28, 2000






                                      F-1
<PAGE>   28


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

                           Consolidated Balance Sheets

                     (in millions, except per share amounts)

<TABLE>
<CAPTION>

                                                                                  December 31,
                                                                         -----------------------------
                                     Assets                                1999                1998
                                     ------                              ---------           ---------
<S>                                                                      <C>                 <C>
Investments:
  Securities available-for-sale, at fair value:
    Fixed maturity securities                                            $15,294.0           $14,245.1
    Equity securities                                                         92.9               127.2
  Mortgage loans on real estate, net                                       5,786.3             5,328.4
  Real estate, net                                                           254.8               243.6
  Policy loans                                                               519.6               464.3
  Other long-term investments                                                 73.8                44.0
  Short-term investments                                                     416.0               289.1
                                                                         ---------           ---------
                                                                          22,437.4            20,741.7
                                                                         ---------           ---------

Cash                                                                           4.8                 3.4
Accrued investment income                                                    238.6               218.7
Deferred policy acquisition costs                                          2,554.1             2,022.2
Other assets                                                                 305.9               420.3
Assets held in separate accounts                                          67,135.1            50,935.8
                                                                         ---------           ---------
                                                                         $92,675.9           $74,342.1
                                                                         =========           =========

                         Liabilities and Shareholder's Equity
                         ------------------------------------

Future policy benefits and claims                                        $21,861.6           $19,767.1
Other liabilities                                                            914.2               866.1
Liabilities related to separate accounts                                  67,135.1            50,935.8
                                                                         ---------           ---------
                                                                          89,910.9            71,569.0
                                                                         ---------           ---------

Commitments and contingencies (notes 8 and 13)

Shareholder's equity:
  Common stock, $1 par value.  Authorized 5.0 million shares;
    3.8 million shares issued and outstanding                                  3.8                 3.8
  Additional paid-in capital                                                 766.1               914.7
  Retained earnings                                                        2,011.0             1,579.0
  Accumulated other comprehensive income                                     (15.9)              275.6
                                                                         ---------           ---------
                                                                           2,765.0             2,773.1
                                                                         ---------           ---------
                                                                         $92,675.9           $74,342.1
                                                                         =========           =========
</TABLE>

See accompanying notes to consolidated financial statements.




                                      F-2
<PAGE>   29


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

                        Consolidated Statements of Income

                                  (in millions)

<TABLE>
<CAPTION>

                                                                            Years ended December 31,
                                                                ---------------------------------------------
                                                                  1999               1998              1997
                                                                --------           --------          --------

<S>                                                             <C>                <C>               <C>
Revenues:
  Policy charges                                                $  895.5           $  698.9          $  545.2
  Life insurance premiums                                          220.8              200.0             205.4
  Net investment income                                          1,520.8            1,481.6           1,409.2
  Realized (losses) gains on investments                           (11.6)              28.4              11.1
  Other                                                             66.1               66.8              46.5
                                                                --------           --------          --------
                                                                 2,691.6            2,475.7           2,217.4
                                                                --------           --------          --------
Benefits and expenses:
  Interest credited to policyholder account balances             1,096.3            1,069.0           1,016.6
  Other benefits and claims                                        210.4              175.8             178.2
  Policyholder dividends on participating policies                  42.4               39.6              40.6
  Amortization of deferred policy acquisition costs                272.6              214.5             167.2
  Other operating expenses                                         463.4              419.7             384.9
                                                                --------           --------          --------
                                                                 2,085.1            1,918.6           1,787.5
                                                                --------           --------          --------

    Income before federal income tax expense                       606.5              557.1             429.9

Federal income tax expense                                         201.4              190.4             150.2
                                                                --------           --------          --------

    Net income                                                  $  405.1           $  366.7          $  279.7
                                                                ========           ========          ========

</TABLE>

See accompanying notes to consolidated financial statements.



                                      F-3
<PAGE>   30

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

                 Consolidated Statements of Shareholder's Equity

                  Years ended December 31, 1999, 1998 and 1997
                                  (in millions)

<TABLE>
<CAPTION>

                                                                                                  Accumulated
                                                                Additional                           other              Total
                                                  Common         paid-in           Retained       comprehensive      shareholder's
                                                  stock          capital           earnings          income             equity
                                                 --------        --------         ----------         --------         ----------
<S>                                              <C>             <C>              <C>                <C>              <C>
December 31, 1996                                  $  3.8        $  527.9           $1,432.6           $173.6           $2,137.9

Comprehensive income:
    Net income                                         --              --              279.7               --              279.7
    Net unrealized gains on securities
      available-for-sale arising during
      the year                                         --              --                 --             73.5               73.5
                                                                                                                        --------
  Total comprehensive income                                                                                               353.2
                                                                                                                        --------
Capital contribution                                   --           836.8                 --               --              836.8
                                                                                                                        --------
Dividend to shareholder                                --          (450.0)            (400.0)              --             (850.0)
                                                   ------        --------           --------           ------           --------
December 31, 1997                                     3.8           914.7            1,312.3            247.1            2,477.9

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

Comprehensive income:
    Net income                                         --              --              405.1               --              405.1
    Net unrealized losses on securities
      available-for-sale arising during
      the year                                         --              --                 --           (315.0)            (315.0)
                                                                                                                        --------
  Total comprehensive income                                                                                                90.1
                                                                                                                        --------
Capital contribution                                   --            26.4               87.9             23.5              137.8
                                                                                                                        --------
Dividends to shareholder                               --          (175.0)             (61.0)              --             (236.0)
                                                   ------        --------           --------           ------           --------
December 31, 1999                                  $  3.8        $  766.1           $2,011.0           $(15.9)          $2,765.0
                                                   ======        ========           ========           ======           ========

</TABLE>

See accompanying notes to consolidated financial statements.



                                      F-4
<PAGE>   31


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

                      Consolidated Statements of Cash Flows

                                  (in millions)

<TABLE>
<CAPTION>

                                                                                              Years ended December 31,
                                                                                       -------------------------------------
                                                                                         1999          1998          1997
                                                                                       ---------     ---------     ---------
<S>                                                                                   <C>            <C>           <C>
Cash flows from operating activities:
  Net income                                                                          $    405.1     $   366.7     $   279.7
  Adjustments to reconcile net income to net cash provided by operating
    activities:
      Interest credited to policyholder account balances                                 1,096.3       1,069.0       1,016.6
      Capitalization of deferred policy acquisition costs                                 (637.0)       (584.2)       (487.9)
      Amortization of deferred policy acquisition costs                                    272.6         214.5         167.2
      Amortization and depreciation                                                          2.4          (8.5)         (2.0)
      Realized (gains) losses on invested assets, net                                       11.6         (28.4)        (11.1)
      Increase in accrued investment income                                                 (7.9)         (8.2)         (0.3)
      Decrease (increase) in other assets                                                  122.9          16.4         (12.7)
      Decrease in policy liabilities                                                       (20.9)         (8.3)        (23.1)
      Increase (decrease) in other liabilities                                             149.7         (34.8)        230.6
      Other, net                                                                            (8.6)        (11.3)        (10.9)
                                                                                       ---------     ---------     ---------
        Net cash provided by operating activities                                        1,386.2         982.9       1,146.1
                                                                                       ---------     ---------     ---------

Cash flows from investing activities:
  Proceeds from maturity of securities available-for-sale                                2,307.9       1,557.0         993.4
  Proceeds from sale of securities available-for-sale                                      513.1         610.5         574.5
  Proceeds from repayments of mortgage loans on real estate                                696.7         678.2         437.3
  Proceeds from sale of real estate                                                          5.7         103.8          34.8
  Proceeds from repayments of policy loans and sale of other invested assets                40.9          23.6          22.7
  Cost of securities available-for-sale acquired                                        (3,724.9)     (3,182.8)     (2,828.1)
  Cost of mortgage loans on real estate acquired                                          (971.4)       (829.1)       (752.2)
  Cost of real estate acquired                                                             (14.2)         (0.8)        (24.9)
  Short-term investments, net                                                              (27.5)         69.3        (354.8)
  Other, net                                                                              (110.9)        (88.4)        (62.5)
                                                                                       ---------     ---------     ---------
        Net cash used in investing activities                                           (1,284.6)     (1,058.7)     (1,959.8)
                                                                                       ---------     ---------     ---------

Cash flows from financing activities:
  Proceeds from capital contributions                                                         --            --         836.8
  Cash dividends paid                                                                     (188.5)       (100.0)           --
  Increase in investment product and universal life insurance
    product account balances                                                             3,799.4       2,682.1       2,488.5
  Decrease in investment product and universal life insurance
    product account balances                                                            (3,711.1)     (2,678.5)     (2,379.8)
                                                                                       ---------     ---------     ---------
        Net cash used in financing activities                                             (100.2)        (96.4)        945.5
                                                                                       ---------     ---------     ---------
Net increase (decrease) in cash                                                              1.4        (172.2)        131.8

Cash, beginning of year                                                                      3.4         175.6          43.8
                                                                                       ---------     ---------     ---------
Cash, end of year                                                                      $     4.8     $     3.4     $   175.6
                                                                                       =========     =========     =========

</TABLE>

See accompanying notes to consolidated financial statements.



                                      F-5
<PAGE>   32


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

                   Notes to Consolidated Financial Statements

                        December 31, 1999, 1998 and 1997


(1)      Organization and Description of Business

         Nationwide Life Insurance Company (NLIC) is a leading provider of
         long-term savings and retirement products in the United States and is a
         wholly owned subsidiary of Nationwide Financial Services, Inc. (NFS).
         The Company develops and sells a diverse range of products including
         variable annuities, fixed annuities and life insurance as well as
         investment management and administrative services. NLIC markets its
         products through a broad network of distribution channels, including
         independent broker/dealers, national and regional brokerage firms,
         financial institutions, pension plan administrators, life insurance
         specialists, Nationwide Retirement Solutions sales representatives, and
         Nationwide agents.

         Wholly owned subsidiaries of NLIC include Nationwide Life and Annuity
         Insurance Company (NLAIC), Nationwide Advisory Services, Inc., and
         Nationwide Investment Services Corporation. NLIC and its subsidiaries
         are collectively referred to as "the Company."


(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, which differ
         from statutory accounting practices prescribed or permitted by
         regulatory authorities. Annual Statements for NLIC and NLAIC, filed
         with the Department of Insurance of the State of Ohio (the Department),
         are prepared on the basis of accounting practices prescribed or
         permitted by the Department. Prescribed statutory accounting practices
         include a variety of publications of the National Association of
         Insurance Commissioners (NAIC), as well as state laws, regulations and
         general administrative rules. Permitted statutory accounting practices
         encompass all accounting practices not so prescribed. The Company has
         no material permitted statutory accounting practices.

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

         The most significant estimates include those used in determining
         deferred policy acquisition costs, valuation allowances for mortgage
         loans on real estate and real estate investments 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 consolidated financial statements include the accounts of NLIC
              and its wholly owned subsidiaries. All significant intercompany
              balances and transactions have been eliminated.




                                      F-6
<PAGE>   33


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

              Notes to Consolidated Financial Statements, Continued


         (b)  Valuation of Investments and Related Gains and Losses

              The Company is required to classify its fixed maturity securities
              and equity securities as either held-to-maturity,
              available-for-sale or trading. 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 accumulated other comprehensive income in
              shareholder's equity. The adjustment to deferred policy
              acquisition costs represents the change in amortization of
              deferred policy acquisition costs that would have been required as
              a charge or credit to operations had such unrealized amounts been
              realized. The Company has no fixed maturity securities classified
              as held-to-maturity or trading as of December 31, 1999 or 1998.

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

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

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

         (c)  Revenues and Benefits

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

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





                                      F-7
<PAGE>   34

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

              Notes to Consolidated Financial Statements, Continued


         (d)  Deferred Policy Acquisition Costs

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

         (e)  Separate Accounts

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

         (f)  Future Policy Benefits

              Future policy benefits for investment products in the accumulation
              phase, universal life insurance and variable universal life
              insurance policies have been calculated based on participants'
              contributions plus interest credited less applicable contract
              charges. The average interest rate credited on investment product
              policy reserves was 5.6%, 6.0% and 6.1% for the years ended
              December 31, 1999, 1998 and 1997, respectively.

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




                                      F-8
<PAGE>   35

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

              Notes to Consolidated Financial Statements, Continued


         (g)  Participating Business

              Participating business represents approximately 29% in 1999 (40%
              in 1998 and 50% in 1997) of the Company's life insurance in force,
              69% in 1999 (74% in 1998 and 77% in 1997) of the number of life
              insurance policies in force, and 13% in 1999 (14% in 1998 and 27%
              in 1997) of life insurance statutory premiums. The provision for
              policyholder dividends is based on current dividend scales and is
              included in "Future policy benefits and claims" in the
              accompanying consolidated balance sheets.

         (h)  Federal Income Tax

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

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

         (i)  Reinsurance Ceded

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

         (j)  Recently Issued Accounting Pronouncements

              In March 1998, The American Institute of Certified Public
              Accountant's Accounting Standards Executive Committee issued
              Statement of Position (SOP) 98-1, "Accounting for the Costs of
              Computer Software Developed or Obtained for Internal Use." The
              SOP, which has been adopted prospectively as of January 1, 1999,
              requires the capitalization of certain costs incurred in
              connection with developing or obtaining internal use software.
              Prior to the adoption of SOP 98-1, the Company expensed internal
              use software related costs as incurred. The effect of adopting the
              SOP was to increase net income for 1999 by $8.3 million.

              In June 1998, the Financial Accounting Standards Board (FASB)
              issued Statement No. 133, "Accounting for Derivative Instruments
              and Hedging Activities" (FAS 133). FAS 133 establishes accounting
              and reporting standards for derivative instruments and for hedging
              activities. Contracts that contain embedded derivatives, such as
              certain investment and insurance contracts, are also addressed by
              the Statement. FAS 133 requires that an entity recognize all
              derivatives as either assets or liabilities in the statement of
              financial position and measure those instruments at fair value. In
              July 1999 the FASB issued Statement No. 137 which delayed the
              effective date of FAS 133 to fiscal years beginning after June 15,
              2000. The Company plans to adopt this Statement in first quarter
              2001 and is currently evaluating the impact on results of
              operations and financial condition.

         (k)  Reclassification

              Certain items in the 1998 and 1997 consolidated financial
              statements have been reclassified to conform to the 1999
              presentation.





                                      F-9
<PAGE>   36


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

              Notes to Consolidated Financial Statements, Continued


(3)      Investments

         The amortized cost, gross unrealized gains and losses and estimated
         fair value of securities available-for-sale as of December 31, 1999 and
         1998 were:
<TABLE>
<CAPTION>

                                                                                     Gross        Gross
                                                                     Amortized    unrealized    unrealized      Estimated
             (in millions)                                             cost          gains        losses        fair value
                                                                     ---------       ------       -------        ---------
<S>                                                                  <C>             <C>          <C>            <C>
             December 31, 1999:
               Fixed maturity securities:
                 U.S. Treasury securities and obligations of U.S.
                   government corporations and agencies              $   428.4       $ 23.4       $  (2.4)       $   449.4
                 Obligations of states and political subdivisions          0.8           --            --              0.8
                 Debt securities issued by foreign governments           110.6          0.6          (0.8)           110.4
                 Corporate securities                                 11,414.7        118.9        (218.6)        11,315.0
                 Mortgage-backed securities                            3,422.8         25.8         (30.2)         3,418.4
                                                                     ---------       ------       -------        ---------
                     Total fixed maturity securities                  15,377.3        168.7        (252.0)        15,294.0
               Equity securities                                          84.9         12.4          (4.4)            92.9
                                                                     ---------       ------       -------        ---------
                                                                     $15,462.2       $181.1       $(256.4)       $15,386.9
                                                                     =========       ======       =======        =========

             December 31, 1998:
               Fixed maturity securities:
                 U.S. Treasury securities and obligations of U.S.
                   government corporations and agencies              $   255.9       $ 13.0       $    --        $   268.9
                 Obligations of states and political subdivisions          1.6           --            --              1.6
                 Debt securities issued by foreign governments           106.5          4.5            --            111.0
                 Corporate securities                                  9,899.6        423.2         (18.7)        10,304.1
                 Mortgage-backed securities                            3,457.7        104.2          (2.4)         3,559.5
                                                                     ---------       ------       -------        ---------
                     Total fixed maturity securities                  13,721.3        544.9         (21.1)        14,245.1
               Equity securities                                         110.4         18.3          (1.5)           127.2
                                                                     ---------       ------       -------        ---------
                                                                     $13,831.7       $563.2       $ (22.6)       $14,372.3
                                                                     =========       ======       =======        =========
</TABLE>

         The amortized cost and estimated fair value of fixed maturity
         securities available-for-sale as of December 31, 1999, by expected
         maturity, are shown below. Expected maturities will differ from
         contractual maturities because borrowers may have the right to call or
         prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>

                                                                                    Amortized        Estimated
             (in millions)                                                            cost          fair value
                                                                                    ---------        ---------
<S>                                                                                 <C>              <C>
             Fixed maturity securities available for sale:
               Due in one year or less                                              $   847.0        $   847.0
               Due after one year through five years                                  5,240.5          5,205.7
               Due after five years through ten years                                 5,046.9          5,005.2
               Due after ten years                                                    4,242.9          4,236.1
                                                                                    ---------        ---------
                                                                                    $15,377.3        $15,294.0
                                                                                    =========        =========

</TABLE>




                                      F-10
<PAGE>   37

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

              Notes to Consolidated Financial Statements, Continued



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

             (in millions)                                                           1999         1998
                                                                                    ------       -------
<S>                                                                                 <C>          <C>
             Gross unrealized (losses) gains                                        $(75.3)      $ 540.6
             Adjustment to deferred policy acquisition costs                          50.9        (116.6)
             Deferred federal income tax                                               8.5        (148.4)
                                                                                    ------       -------
                                                                                    $(15.9)      $ 275.6
                                                                                    ======       =======
</TABLE>

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

             (in millions)                                                   1999          1998          1997
                                                                            -------        -----        ------

<S>                                                                         <C>            <C>          <C>
             Securities available-for-sale:
               Fixed maturity securities                                    $(607.1)       $52.6        $137.5
               Equity securities                                               (8.8)         4.2          (2.7)
                                                                            -------        -----        ------
                                                                            $(615.9)       $56.8        $134.8
                                                                            =======        =====        ======
</TABLE>

         Proceeds from the sale of securities available-for-sale during 1999,
         1998 and 1997 were $513.1 million, $610.5 million and $574.5 million,
         respectively. During 1999, gross gains of $10.4 million ($9.0 million
         and $9.9 million in 1998 and 1997, respectively) and gross losses of
         $28.0 million ($7.6 million and $18.0 million in 1998 and 1997,
         respectively) were realized on those sales. In addition, gross gains of
         $15.1 million and gross losses of $0.7 million were realized in 1997
         when the Company paid a dividend to NFS, which then made an equivalent
         dividend to Nationwide Corp., consisting of securities having an
         aggregate fair value of $850.0 million.

         The Company had $15.6 million of real estate investments at December
         31, 1999 that were non-income producing the preceding twelve months.
         During 1998 the Company had investments of $42.4 million that were
         non-income producing, which consisted of $32.7 million of securities
         available-for-sale and $9.7 million of real estate.

         Real estate is presented at cost less accumulated depreciation of $24.8
         million as of December 31, 1999 ($21.5 million as of December 31, 1998)
         and valuation allowances of $5.5 million as of December 31, 1999 ($5.4
         million as of December 31, 1998).

         The recorded investment of mortgage loans on real estate considered to
         be impaired was $3.7 million as of both December 31, 1999 and 1998. No
         valuation allowance has been recorded for these loans as of December
         31, 1999 or 1998. During 1999, the average recorded investment in
         impaired mortgage loans on real estate was approximately $3.7 million
         ($9.1 million in 1998) and there was no interest income recognized on
         those loans. Interest income recognized on impaired loans was $0.3
         million in 1998 which is equal to interest income recognized using a
         cash-basis method of income recognition.




                                      F-11
<PAGE>   38
               NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
                         (a wholly owned subsidiary of
                      Nationwide Financial Services, Inc.)

              Notes to Consolidated Financial Statements, Continued



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

             (in millions)                                             1999     1998     1997
                                                                       -----    -----    -----

<S>                                                                    <C>      <C>      <C>
             Allowance, beginning of year                              $42.4    $42.5    $51.0
               Additions (reductions) charged to operations              0.7     (0.1)    (1.2)
               Direct write-downs charged against the allowance           --       --     (7.3)
               Allowance on acquired mortgage loans                      1.3       --       --
                                                                       -----    -----    -----
             Allowance, end of year                                    $44.4    $42.4    $42.5
                                                                       =====    =====    =====
</TABLE>

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

             (in millions)                                                  1999       1998       1997
                                                                          --------   --------   --------

<S>                                                                       <C>        <C>        <C>
             Gross investment income:
               Securities available-for-sale:
                 Fixed maturity securities                                $1,031.3   $  982.5   $  911.6
                 Equity securities                                             2.5        0.8        0.8
               Mortgage loans on real estate                                 460.4      458.9      457.7
               Real estate                                                    28.8       40.4       42.9
               Short-term investments                                         18.6       17.8       22.7
               Other                                                          26.5       30.7       21.0
                                                                          --------   --------   --------
                   Total investment income                                 1,568.1    1,531.1    1,456.7
             Less investment expenses                                         47.3       49.5       47.5
                                                                          --------   --------   --------
                   Net investment income                                  $1,520.8   $1,481.6   $1,409.2
                                                                          ========   ========   ========
</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>

             (in millions)                                                 1999     1998    1997
                                                                          -------   -----   -----

<S>                                                                       <C>      <C>     <C>
             Securities available-for-sale:
               Fixed maturity securities                                  $(25.0)  $(0.7)  $ 3.6
               Equity securities                                             7.4     2.1     2.7
             Mortgage loans on real estate                                  (0.6)    3.9     1.6
             Real estate and other                                           6.6    23.1     3.2
                                                                          ------   -----   -----
                                                                          $(11.6)  $28.4   $11.1
                                                                          ======   =====   =====
</TABLE>

         Fixed maturity securities with an amortized cost of $9.1 million as of
         December 31, 1999 and $6.5 million as of December 31, 1998 were on
         deposit with various regulatory agencies as required by law.

(4)      Derivative Financial Instruments

         The Company uses derivative financial instruments, principally interest
         rate swaps, interest rate futures contracts and foreign currency swaps,
         to manage market risk exposures associated with changes in interest
         rates and foreign currency exchange rates. Provided they meet specific
         criteria, interest rate swaps and futures are considered hedges and are
         accounted for under the accrual method and deferral method,
         respectively. The Company has no significant derivative positions that
         are not considered hedges.




                                      F-12
<PAGE>   39


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

              Notes to Consolidated Financial Statements, Continued



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

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

         Foreign currency swaps are used to convert cash flows from specific
         policy liabilities and investments denominated in foreign currencies
         into U.S. dollars at specified exchange rates. Gains and losses on
         foreign currency swaps are recorded in earnings based on the related
         spot foreign exchange rate at the end of the reporting period. Gains
         and losses on these contracts offset those recorded as a result of
         translating the hedged foreign currency denominated liabilities and
         investments to U.S. dollars.

         The following table summarizes the notional amount of derivative
         financial instruments classified as hedges outstanding as of December
         31, 1999. Prior to 1999 the Company's activities in derivatives were
         not significant.
<TABLE>
<CAPTION>

                                                                               (in millions)
                                                                               -------------
<S>                                                                               <C>
            Interest rate swaps
               Pay fixed/receive variable rate swaps hedging investments          $362.7
               Pay variable/receive fixed rate swaps hedging investments          $ 28.5
               Other contracts hedging investments                                $ 19.1
               Pay variable/receive fixed rate swaps hedging liabilities          $577.2

            Foreign currency swaps
               Hedging foreign currency denominated investments                   $ 14.8
               Hedging foreign currency denominated liabilities                   $577.2

            Interest rate futures contracts                                       $781.6

</TABLE>






                                      F-13
<PAGE>   40


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

              Notes to Consolidated Financial Statements, Continued



(5)      Federal Income Tax

         The tax effects of temporary differences that give rise to significant
         components of the net deferred tax liability as of December 31, 1999
         and 1998 are as follows:
<TABLE>
<CAPTION>

             (in millions)                                                   1999            1998
                                                                             ----            ----
<S>                                                                         <C>             <C>
             Deferred tax assets:
               Fixed maturity securities                                    $  5.3          $   --
               Future policy benefits                                        149.5           207.7
               Liabilities in separate accounts                              373.6           319.9
               Mortgage loans on real estate and real estate                  18.5            17.5
               Other assets and other liabilities                             51.1            58.9
                                                                             -----          ------
                 Total gross deferred tax assets                             598.0           604.0
                 Less valuation allowance                                     (7.0)           (7.0)
                                                                             -----          ------
                 Net deferred tax assets                                     591.0           597.0
                                                                             -----          ------

             Deferred tax liabilities:
               Deferred policy acquisition costs                             724.4           568.7
               Fixed maturity securities                                        --           212.2
               Deferred tax on realized investment gains                      34.7            34.8
               Equity securities and other long-term investments              10.8             9.6
               Other                                                          26.5            21.6
                                                                            ------          ------
                 Total gross deferred tax liabilities                        796.4           846.9
                                                                            ------          ------
                 Net deferred tax liability                                 $205.4          $249.9
                                                                            ======          ======
</TABLE>

         In assessing the realizability of deferred tax assets, management
         considers whether it is more likely than not that some portion of the
         total gross deferred tax assets will not be realized. Nearly all future
         deductible amounts can be offset by future taxable amounts or recovery
         of federal income tax paid within the statutory carryback period. There
         has been no change in the valuation allowance for the years ended
         December 31, 1999, 1998 and 1997.

         The Company's current federal income tax liability was $104.7 million
         and $72.8 million as of December 31, 1999 and 1998, respectively.

         Federal income tax expense for the years ended December 31 was as
         follows:

           (in millions)                    1999      1998      1997
                                           ------    ------    ------

           Currently payable               $ 53.6    $186.1    $121.7
           Deferred tax expense             147.8       4.3      28.5
                                           ------    ------    ------
                                           $201.4    $190.4    $150.2
                                           ======    ======    ======





                                      F-14
<PAGE>   41

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

              Notes to Consolidated Financial Statements, Continued



         Total federal income tax expense for the years ended December 31, 1999,
         1998 and 1997 differs from the amount computed by applying the U.S.
         federal income tax rate to income before tax as follows:
<TABLE>
<CAPTION>

                                                             1999                     1998                     1997
                                                       ----------------         ----------------         ----------------
         (in millions)                                 Amount       %           Amount        %          Amount        %
                                                       ------      ----         ------      ----         ------      ----

<S>                                                    <C>         <C>          <C>         <C>          <C>         <C>
         Computed (expected) tax expense               $212.3      35.0         $195.0      35.0         $150.5      35.0
         Tax exempt interest and dividends
           received deduction                            (7.3)     (1.2)          (4.9)     (0.9)            --        --
         Income tax credits                              (4.3)     (0.7)            --        --             --        --
         Other, net                                       0.7       0.1            0.3       0.1           (0.3)     (0.1)
                                                       ------      ----         ------      ----         ------      ----
             Total (effective rate of each year)       $201.4      33.2         $190.4      34.2         $150.2      34.9
                                                       ======      ====         ======      ====         ======      ====
</TABLE>

         Total federal income tax paid was $29.8 million, $173.4 million and
         $91.8 million during the years ended December 31, 1999, 1998 and 1997,
         respectively.

(6)      Comprehensive Income

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

             (in millions)                                                 1999       1998       1997
                                                                          -------    ------     ------
<S>                                                                       <C>        <C>        <C>
             Unrealized gains (losses) on securities available-for-sale
                arising during the period:
                Gross                                                     $(665.3)   $ 58.2     $141.1
                Adjustment to deferred policy acquisition costs             167.5     (12.9)     (21.8)
                Related federal income tax (expense) benefit                171.4     (15.9)     (41.7)
                                                                          -------    ------     ------
                   Net                                                     (326.4)     29.4       77.6
                                                                          -------    ------     ------

             Reclassification adjustment for net (gains) losses on
                securities available-for-sale realized during the
                period:
                Gross                                                        17.6      (1.4)      (6.3)
                Related federal income tax expense (benefit)                 (6.2)      0.5        2.2
                                                                          -------    ------     ------
                   Net                                                       11.4      (0.9)      (4.1)
                                                                          -------    ------     ------
             Total Other Comprehensive Income                             $(315.0)   $ 28.5     $ 73.5
                                                                          =======    ======     ======
</TABLE>

(7)      Fair Value of Financial Instruments

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





                                      F-15
<PAGE>   42


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

              Notes to Consolidated Financial Statements, Continued



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

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

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

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

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

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

              Policy loans, short-term investments and cash: The carrying amount
              reported in the consolidated balance sheets for these instruments
              approximates their fair value.

              Separate account assets and liabilities: The fair value of assets
              held in separate accounts is based on quoted market prices. The
              fair value of liabilities related to separate accounts is the
              amount payable on demand, which is net of certain surrender
              charges.

              Investment contracts: The fair value for the Company's liabilities
              under investment type contracts is 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.





                                      F-16
<PAGE>   43


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

              Notes to Consolidated Financial Statements, Continued



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

              Commitments to extend credit: Commitments to extend credit have
              nominal fair value because of the short-term nature of such
              commitments. See note 8.

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

              Interest rate and foreign currency swaps: The fair value for
              interest rate and foreign currency swaps are calculated with
              pricing models using current rate assumptions.

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

                                                                         1999                              1998
                                                                ------------------------         -------------------------
                                                                Carrying       Estimated         Carrying       Estimated
               (in millions)                                     amount        fair value         amount        fair value
                                                                ---------      ---------         ---------      ----------
<S>                                                             <C>            <C>               <C>             <C>
               Assets:
                 Investments:
                   Securities available-for-sale:
                     Fixed maturity securities                  $15,294.0      $15,294.0         $14,245.1       $14,245.1
                     Equity securities                               92.9           92.9             128.5           128.5
                   Mortgage loans on real estate, net             5,786.3        5,745.5           5,328.4         5,527.6
                   Policy loans                                     519.6          519.6             464.3           464.3
                   Short-term investments                           416.0          416.0             289.1           289.1
                 Cash                                                 4.8            4.8               3.4             3.4
                 Assets held in separate accounts                67,135.1       67,135.1          50,935.8        50,935.8

               Liabilities:
                 Investment contracts                           (16,977.7)     (16,428.6)        (15,468.7)      (15,158.6)
                 Policy reserves on life insurance contracts     (4,883.9)      (4,607.9)         (3,914.0)       (3,768.9)
                 Liabilities related to separate accounts       (67,135.1)     (66,318.7)        (50,935.8)      (49,926.5)

               Derivative financial instruments:
                 Interest rate swaps hedging assets                   4.3            4.3               -               -
                 Interest rate swaps hedging liabilities              -            (24.2)              -               -
                 Foreign currency swaps                             (11.8)         (11.8)              -               -
                 Futures contracts                                    1.3            1.3              (1.3)           (1.3)
</TABLE>

(8)      Risk Disclosures

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

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

                                      F-17
<PAGE>   44

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

              Notes to Consolidated Financial Statements, Continued


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

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

         Financial Instruments with Off-Balance-Sheet Risk: The Company is a
         party to financial instruments with off-balance-sheet risk in the
         normal course of business through management of its investment
         portfolio. These financial instruments include commitments to extend
         credit in the form of loans and derivative financial instruments. These
         instruments involve, to varying degrees, elements of credit risk in
         excess of amounts recognized on the consolidated balance sheets.

         Commitments to fund fixed rate mortgage loans on real estate are
         agreements to lend to a borrower, and are subject to conditions
         established in the contract. Commitments generally have fixed
         expiration dates or other termination clauses and may require payment
         of a deposit. Commitments extended by the Company are based on
         management's case-by-case credit evaluation of the borrower and the
         borrower's loan collateral. The underlying mortgage property represents
         the collateral if the commitment is funded. The Company's policy for
         new mortgage loans on real estate is to lend no more than 75% of
         collateral value. Should the commitment be funded, the Company's
         exposure to credit loss in the event of nonperformance by the borrower
         is represented by the contractual amounts of these commitments less the
         net realizable value of the collateral. The contractual amounts also
         represent the cash requirements for all unfunded commitments.
         Commitments on mortgage loans on real estate of $216.2 million
         extending into 2000 were outstanding as of December 31, 1999. The
         Company also had $28.0 million of commitments to purchase fixed
         maturity securities outstanding as of December 31, 1999.

         Notional amounts of derivative financial instruments, primarily
         interest rate swaps, interest rate futures contracts and foreign
         currency swaps, significantly exceed the credit risk associated with
         these instruments and represent contractual balances on which
         calculations of amounts to be exchanged are based. Credit exposure is
         limited to the sum of the aggregate fair value of positions that have
         become favorable to NLIC, including accrued interest receivable due
         from counterparties. Potential credit losses are minimized through
         careful evaluation of counterparty credit standing, selection of
         counterparties from a limited group of high quality institutions,
         collateral agreements and other contract provisions. At December 31,
         1999, NLIC's credit risk from these derivative financial instruments
         was $6.1 million.

         Significant Concentrations of Credit Risk: The Company grants mainly
         commercial mortgage loans on real estate to customers throughout the
         United States. The Company has a diversified portfolio with no more
         than 23% (22% in 1998) in any geographic area and no more than 2% (2%
         in 1998) with any one borrower as of December 31, 1999. As of December
         31, 1999, 39% (42% in 1998) of the remaining principal balance of the
         Company's commercial mortgage loan portfolio financed retail
         properties.




                                      F-18
<PAGE>   45


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

              Notes to Consolidated Financial Statements, Continued



         Reinsurance: The Company has entered into a reinsurance contract to
         cede a portion of its general account individual annuity business to
         The Franklin Life Insurance Company (Franklin). Total recoveries due
         from Franklin were $143.6 million and $187.9 million as of December 31,
         1999 and 1998, respectively. The contract is immaterial to the
         Company's results of operations. The ceding of risk does not discharge
         the original insurer from its primary obligation to the policyholder.
         Under the terms of the contract, Franklin has established a trust as
         collateral for the recoveries. The trust assets are invested in
         investment grade securities, the market value of which must at all
         times be greater than or equal to 102% of the reinsured reserves.

(9)      Pension Plan and Postretirement Benefits Other Than Pensions

         The Company is a participant, together with other affiliated companies,
         in a pension plan covering all employees who have completed at least
         one year of service. 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. Assets of the
         Retirement Plan are invested in group annuity contracts of NLIC.

         Pension cost (benefit) charged to operations by the Company during the
         years ended December 31, 1999, 1998 and 1997 were $(8.3) million, $2.0
         million and $7.5 million, respectively. The Company has recorded a
         prepaid pension asset of $13.3 million and $5.0 million as of December
         31, 1999 and 1998, respectively.

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

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

         The Company's accrued postretirement benefit expense as of December 31,
         1999 and 1998 was $49.6 million and $40.1 million, respectively, and
         the net periodic postretirement benefit cost (NPPBC) for 1999, 1998 and
         1997 was $4.9 million, $4.1 million and $3.0 million, respectively.





                                      F-19
<PAGE>   46


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

              Notes to Consolidated Financial Statements, Continued


         Information regarding the funded status of the pension plan as a whole
         and the postretirement life and health care benefit plan as a whole as
         of December 31, 1999 and 1998 follows:
<TABLE>
<CAPTION>

                                                                         Pension Benefits        Postretirement Benefits
                                                                        ------------------       -----------------------
              (in millions)                                               1999       1998         1999            1998
              --------------------------------------------------------- --------   --------      -------         -------
<S>                                                                     <C>        <C>           <C>             <C>
              Change in benefit obligation:
              Benefit obligation at beginning of year                   $2,185.0   $2,033.8      $ 270.1         $ 237.9
              Service cost                                                  80.0       87.6         14.2             9.8
              Interest cost                                                109.9      123.4         17.6            15.4
              Actuarial (gain) loss                                        (95.0)     123.2        (64.4)           15.6
              Plan settlement in 1999/curtailment in 1998                 (396.1)    (107.2)          --              --
              Benefits paid                                                (72.4)     (75.8)       (11.0)           (8.6)
              Acquired companies                                              --         --         13.3              --
                                                                        --------   --------      -------         -------
              Benefit obligation at end of year                          1,811.4    2,185.0        239.8           270.1
                                                                        --------   --------      -------         -------
              Change in plan assets:
              Fair value of plan assets at beginning of year             2,541.9    2,212.9         77.9            69.2
              Actual return on plan assets                                 161.8      300.7          3.5             5.0
              Employer contribution                                         12.4      104.1         20.9            12.1
              Plan settlement                                             (396.1)        --           --              --
              Benefits paid                                                (72.4)     (75.8)       (11.0)           (8.4)
                                                                        --------   --------      -------         -------
              Fair value of plan assets at end of year                   2,247.6    2,541.9         91.3            77.9
                                                                        --------   --------      -------         -------

              Funded status                                                436.2      356.9       (148.5)         (192.2)
              Unrecognized prior service cost                               28.2       31.5           --              --
              Unrecognized net (gains) losses                             (402.0)    (345.7)       (46.7)           16.0
              Unrecognized net (asset) obligation at transition             (7.7)     (11.0)         1.1             1.3
                                                                        --------   --------      -------         -------
              Prepaid (accrued) benefit cost                            $   54.7   $   31.7      $(194.1)        $(174.9)
                                                                        ========   ========      =======         =======

</TABLE>




                                      F-20
<PAGE>   47


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

              Notes to Consolidated Financial Statements, Continued



         Basis for measurements, funded status of the pension plan and
         postretirement life and health care benefit plan:
<TABLE>
<CAPTION>

                                                                    Pension Benefits        Postretirement Benefits
                                                                    ----------------        -----------------------
                                                                    1999        1998         1999             1998
                                                                    ----        ----        -------          ------

<S>                                                                 <C>         <C>
              Weighted average discount rate                        7.00%       5.50%        7.80%            6.65%
              Rate of increase in future compensation levels        5.25%       3.75%          --               --
              Assumed health care cost trend rate:
                    Initial rate                                      --          --        15.00%           15.00%
                    Ultimate rate                                     --          --         5.50%            8.00%
                    Uniform declining period                          --          --        5 Years         15 Years
</TABLE>

         The net periodic pension cost for the pension plan as a whole for the
         years ended December 31, 1999, 1998 and 1997 follows:
<TABLE>
<CAPTION>

              (in millions)                                                              1999       1998          1997
              --------------------------------------------------------------------------------   -----------   ------------
<S>                                                                                    <C>          <C>          <C>
              Service cost (benefits earned during the period)                         $  80.0      $  87.6      $   77.3
              Interest cost on projected benefit obligation                              109.9        123.4         118.6
              Expected return on plan assets                                            (160.3)      (159.0)       (139.0)
              Recognized gains                                                            (9.1)        (3.8)           --
              Amortization of prior service cost                                           3.2          3.2           3.2
              Amortization of unrecognized transition obligation (asset)                  (1.4)         4.2           4.2
                                                                                       -------      -------      --------
                                                                                       $  22.3      $  55.6      $   64.3
                                                                                       =======      =======      ========
</TABLE>

         Effective December 31, 1998, Wausau Service Corporation (WSC) ended its
         affiliation with Nationwide Insurance and employees of WSC ended
         participation in the plan. A curtailment gain of $67.1 million resulted
         (consisting of a $107.2 million reduction in the projected benefit
         obligation, net of the write-off of the $40.1 million remaining
         unamortized transition obligation related to WSC). During 1999, the
         plan transferred assets to settle its obligation related to WSC
         employees . A settlement gain of $32.9 million was recognized.

         Basis for measurements, net periodic pension cost for the pension plan:
<TABLE>
<CAPTION>

                                                                           1999          1998          1997
                                                                          ------        -----         -----
<S>                                                                       <C>           <C>           <C>
             Weighted average discount rate                               6.08%         6.00%         6.50%
             Rate of increase in future compensation levels               4.33%         4.25%         4.75%
             Expected long-term rate of return on plan assets             7.33%         7.25%         7.25%



</TABLE>


                                      F-21
<PAGE>   48


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

              Notes to Consolidated Financial Statements, Continued



         The amount of NPPBC for the postretirement benefit plan as a whole for
         the years ended December 31, 1999, 1998 and 1997 was as follows:
<TABLE>
<CAPTION>

             (in millions)                                                              1999          1998          1997
                                                                                         -------   -----------   -----------
<S>                                                                                      <C>           <C>          <C>
             Service cost (benefits attributed to employee service during the year)      $14.2         $ 9.8         $ 7.0
             Interest cost on accumulated postretirement benefit obligation               17.6          15.4          14.0
             Actual return on plan assets                                                 (3.5)         (5.0)         (3.6)
             Amortization of unrecognized transition obligation of affiliates              0.6           0.2           0.2
             Net amortization and deferral                                                (1.8)          1.2          (0.5)
                                                                                         -----         -----         -----
                                                                                         $27.1         $21.6         $17.1
                                                                                         =====         =====         =====
</TABLE>

         Actuarial assumptions used for the measurement of the NPPBC for the
         postretirement benefit plan for 1999, 1998 and 1997 were as follows:

<TABLE>
<CAPTION>

                                                               1999      1998       1997
                                                             -------    ------     ------

<S>                                                          <C>        <C>       <C>
               Discount rate                                 6.65%      6.70%      7.25%
               Long term rate of return on plan
                   assets, net of tax                        7.15%      5.83%      5.89%
               Assumed health care cost trend rate:
                   Initial rate                             15.00%     12.00%     11.00%
                   Ultimate rate                             5.50%      6.00%      6.00%
                   Uniform declining period                 5 Years   12 Years   12 Years

</TABLE>

         For the postretirement benefit plan as a whole, a one percentage point
         increase or decrease in the assumed health care cost trend rate would
         have no impact on the APBO as of December 31, 1999 and have no impact
         on the NPPBC for the year ended December 31, 1999.

(10)     Shareholder's Equity, Regulatory Risk-Based Capital, Retained Earnings
         and Dividend Restrictions

         Ohio, NLIC's and NLAIC's state of domicile, imposes minimum risk-based
         capital requirements that were developed by the NAIC. The formulas for
         determining the amount of risk-based capital specify various weighting
         factors that are applied to financial balances or various levels of
         activity based on the perceived degree of risk. Regulatory compliance
         is determined by a ratio of the company's regulatory total adjusted
         capital, as defined by the NAIC, to its authorized control level
         risk-based capital, as defined by the NAIC. Companies below specific
         trigger points or ratios are classified within certain levels, each of
         which requires specified corrective action. NLIC and NLAIC each exceed
         the minimum risk-based capital requirements.

         The statutory capital and surplus of NLIC as of December 31, 1999, 1998
         and 1997 was $1.35 billion, $1.32 billion and $1.13 billion,
         respectively. The statutory net income of NLIC for the years ended
         December 31, 1999, 1998 and 1997 was $276.2 million, $171.0 million and
         $111.7 million, respectively.

         The Company is limited in the amount of shareholder dividends it may
         pay without prior approval by the Department. As of December 31, 1999
         $40.2 million of dividends could be paid by NLIC without prior
         approval.





                                      F-22
<PAGE>   49


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

              Notes to Consolidated Financial Statements, Continued



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

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

(11)     Transactions With Affiliates

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

         The Company has a reinsurance agreement with NMIC whereby all of the
         Company's accident and health business is ceded to NMIC on a modified
         coinsurance basis. The agreement covers individual accident and health
         business for all periods presented and group and franchise accident and
         health business since July 1, 1999. Either party may terminate the
         agreement on January 1 of any year with prior notice. Prior to July 1,
         1999 group and franchise accident and health business and a block of
         group life insurance policies were ceded to ELOW under a modified
         coinsurance agreement. Under a modified coinsurance agreement, invested
         assets are retained by the ceding company and investment earnings are
         paid to the reinsurer. Under the terms of the Company's agreements, the
         investment risk associated with changes in interest rates is borne by
         the reinsurer. Risk of asset default is retained by the Company,
         although a fee is paid to the Company for the retention of such risk.
         The ceding of risk does not discharge the original insurer from its
         primary obligation to the policyholder. The Company believes that the
         terms of the modified coinsurance agreements are consistent in all
         material respects with what the Company could have obtained with
         unaffiliated parties. Revenues ceded to NMIC and ELOW for the years
         ended December 31, 1999, 1998 and 1997 were $193.0 million, $216.9
         million, and $315.3 million, respectively, while benefits, claims and
         expenses ceded were $216.9 million, $259.3 million, and $326.6 million,
         respectively.

         Pursuant to a cost sharing agreement among NMIC and certain of its
         direct and indirect subsidiaries, including the Company, NMIC provides
         certain operational and administrative services, such as sales support,
         advertising, personnel and general management services, to those
         subsidiaries. Expenses covered by such agreement are subject to
         allocation among NMIC and such subsidiaries. Measures used to allocate
         expenses among companies include individual employee estimates of time
         spent, special cost studies, salary expense, commission expense and
         other methods agreed to by the participating companies that are within
         industry guidelines and practices. In addition, beginning in 1999
         Nationwide Services Company, a subsidiary of NMIC, provides computer,
         telephone, mail, employee benefits administration, and other services
         to NMIC and certain of its direct and indirect subsidiaries, including
         the Company, based on specified rates for units of service consumed.
         For the years ended December 31, 1999, 1998 and 1997, the Company made
         payments to NMIC and Nationwide Services Company totaling $124.1
         million, $95.0 million, and $85.8 million, respectively. In addition,
         the Company does not believe that expenses recognized under these
         agreements are materially different than expenses that would have been
         recognized had the Company operated on a stand-alone basis.

         The Company leases office space from NMIC and certain of its
         subsidiaries. For the years ended December 31, 1999, 1998 and 1997, the
         Company made lease payments to NMIC and its subsidiaries of $9.9
         million, $8.0 million and $8.4 million, respectively.





                                      F-23
<PAGE>   50


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

              Notes to Consolidated Financial Statements, Continued


         The Company also participates in intercompany repurchase agreements
         with affiliates whereby the seller will transfer securities to the
         buyer at a stated value. Upon demand or 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 1999 and
         1998 were not material. The Company believes that the terms of the
         repurchase agreements are materially consistent with what the Company
         could have obtained with unaffiliated parties.

         The Company and various affiliates entered into agreements with
         Nationwide Cash Management Company (NCMC), an affiliate, under which
         NCMC acts as a common agent in handling the purchase and sale of
         short-term securities for the respective accounts of the participants.
         Amounts on deposit with NCMC were $411.7 million and $248.4 million as
         of December 31, 1999 and 1998, respectively, and are included in
         short-term investments on the accompanying consolidated balance sheets.

         As part of certain restructuring activities that occurred prior to the
         March 1997 IPO, the Company paid a dividend valued at $485.7 million to
         Nationwide Corp. on January 1, 1997 consisting of the outstanding
         shares of common stock of ELOW, National Casualty Company (NCC) and
         West Coast Life Insurance Company (WCLIC). Also, on February 24, 1997,
         the Company paid a dividend to NFS, and NFS paid an equivalent dividend
         to Nationwide Corp., consisting of securities having an aggregate fair
         value of $850.0 million. The Company recognized a gain of $14.4 million
         on the transfer of securities.

         Certain annuity products are sold through three affiliated companies,
         which are also subsidiaries of NFS. Total commissions and fees paid to
         these affiliates for the three years ended December 31, 1999 were $56.0
         million, $60.0 million and $66.1 million, respectively.

(12)     Bank Lines of Credit

         NFS, NLIC and NMIC are parties to a $600.0 million revolving credit
         facility which provides for a $600.0 million loan over a five year term
         on a fully revolving basis with a group of national financial
         institutions. The credit facility provides for several and not joint
         liability with respect to any amount drawn by any party. NFS, NLIC and
         NMIC pay facility and usage fees to the financial institutions to
         maintain the revolving credit facility. As of December 31, 1999 the
         Company had no amounts outstanding under the agreement.

(13)     Contingencies

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

(14)     Segment Information

         The Company uses differences in products as the basis for defining its
         reportable segments. The Company reports three product segments:
         Variable Annuities, Fixed Annuities and Life Insurance.





                                      F-24
<PAGE>   51
               NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
                         (a wholly owned subsidiary of
                      Nationwide Financial Services, Inc.)

              Notes to Consolidated Financial Statements, Continued



         The Variable Annuities segment consists of annuity contracts that
         provide the customer with access to a wide range of investment options,
         tax-deferred accumulation of savings, asset protection in the event of
         an untimely death, and flexible payout options including a lump sum,
         systematic withdrawal or a stream of payments for life. The Company's
         variable annuity products consist almost entirely of flexible premium
         deferred variable annuity contracts.

         The Fixed Annuities segment consists of annuity contracts that generate
         a return for the customer at a specified interest rate fixed for a
         prescribed period, tax-deferred accumulation of savings, and flexible
         payout options including a lump sum, systematic withdrawal or a stream
         of payments for life. Such contracts consist of single premium deferred
         annuities, flexible premium deferred annuities and single premium
         immediate annuities. The Fixed Annuities segment includes the fixed
         option under variable annuity contracts.

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

         In addition to the product segments, the Company reports corporate
         revenue and expenses, investments and related investment income
         supporting capital not specifically allocated to its product segments,
         revenues and expenses of its investment advisor subsidiary, revenues
         and expenses related to group annuity contracts sold to Nationwide
         Insurance employee and agent benefit plans and all realized gains and
         losses on investments in a Corporate and Other segment.

         During 1999 the Company revised the allocation of net investment income
         among its Life Insurance and Corporate and Other segments. Also,
         certain amounts previously reported as other income were reclassified
         to operating expense. Amounts reported for prior periods have been
         restated to reflect these changes.

         The following table summarizes the financial results of the Company's
         business segments for the years ended December 31, 1999, 1998 and 1997.
<TABLE>
<CAPTION>

                                                  Variable      Fixed        Life      Corporate
         (in millions)                            Annuities    Annuities   Insurance   and Other      Total
         ------------------------------------     ---------    ---------   ---------   ---------    ---------
<S>                            <C>                <C>          <C>          <C>         <C>         <C>
         1999:
         Net investment income (1)                $   (41.5)   $ 1,134.5    $  253.1    $  174.7    $ 1,520.8
         Other operating revenue                      668.2         43.4       393.0        77.8      1,182.4
                                                  ---------    ---------    --------    --------    ---------
            Total operating revenue (2)               626.7      1,177.9       646.1       252.5      2,703.2
                                                  ---------    ---------    --------    --------    ---------
         Interest credited to policyholder
            account balances                             --        837.5       130.5       128.3      1,096.3
         Amortization of deferred policy
            acquisition costs                         162.8         49.7        60.1          --        272.6
         Other benefits and expenses                  173.6        113.5       334.7        94.4        716.2
                                                  ---------    ---------    --------    --------    ---------
            Total expenses                            336.4      1,000.7       525.3       222.7      2,085.1
                                                  ---------    ---------    --------    --------    ---------
         Operating income before
            federal income tax                        290.3        177.2       120.8        29.8        618.1
         Realized losses on investments                  --           --          --       (11.6)       (11.6)
                                                  ---------    ---------    --------    --------    ---------
         Consolidated income before
            federal tax expense                   $   290.3    $   177.2    $  120.8    $   18.2    $   606.5
                                                  =========    =========    ========    ========    =========
         Assets as of year end                    $62,599.7    $17,134.8    $6,616.7    $6,324.7    $92,675.9
                                                  =========    =========    ========    ========    =========

</TABLE>




                                      F-25
<PAGE>   52


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

              Notes to Consolidated Financial Statements, Continued

<TABLE>
<CAPTION>


                                                    Variable           Fixed            Life         Corporate
         (in millions)                              Annuities         Annuities       Insurance       and Other         Total
         ------------------------------------       ---------         ---------       ---------       ---------       ---------
<S>                                                 <C>               <C>              <C>             <C>             <C>
         1998:
         Net investment income (1)                  $   (31.3)        $ 1,116.6        $  225.6        $  170.7        $ 1,481.6
         Other operating revenue                        532.9              35.7           318.5            78.6            965.7
                                                    ---------         ---------        --------        --------        ---------
            Total operating revenue (2)                 501.6           1,152.3           544.1           249.3          2,447.3
                                                    ---------         ---------        --------        --------        ---------
         Interest credited to policyholder
            account balances                               --             828.6           115.4           125.0          1,069.0
         Amortization of deferred policy
            acquisition costs                           123.9              44.2            46.4              --            214.5
         Other benefits and expenses                    159.3             104.2           293.5            78.1            635.1
                                                    ---------         ---------        --------        --------        ---------
            Total expenses                              283.2             977.0           455.3           203.1          1,918.6
                                                    ---------         ---------        --------        --------        ---------
         Operating income before federal
             income tax                                 218.4             175.3            88.8            46.2            528.7
         Realized gains on investments                     --                --              --            28.4             28.4
                                                    ---------         ---------        --------        --------        ---------
         Consolidated income before
            federal tax expense                     $   218.4         $   175.3        $   88.8        $   74.6        $   557.1
                                                    =========         =========        ========        ========        =========
         Assets as of year end                      $47,668.7         $15,215.7        $5,187.6        $6,270.1        $74,342.1
                                                    =========         =========        ========        ========        =========

         1997:
         Net investment income (1)                  $   (26.8)        $ 1,098.2        $  184.9        $  152.9        $ 1,409.2
         Other operating revenue                        413.9              43.2           283.4            56.6            797.1
                                                    ---------         ---------        --------        --------        ---------
            Total operating revenue (2)                 387.1           1,141.4           468.3           209.5          2,206.3
                                                    ---------         ---------        --------        --------        ---------
         Interest credited to policyholder
            account balances                               --             823.4            78.5           114.7          1,016.6
         Amortization of deferred policy
            acquisition costs                            87.8              39.8            39.6              --            167.2
         Benefits and expenses                          148.4             108.7           283.5            63.1            603.7
                                                    ---------         ---------        --------        --------        ---------
            Total expenses                              236.2             971.9           401.6           177.8          1,787.5
                                                    ---------         ---------        --------        --------        ---------
         Operating income before federal
             income tax                                 150.9             169.5            66.7            31.7            418.8
         Realized gains on investments                     --              --                --            11.1             11.1
                                                    ---------         ---------        --------        --------        ---------
         Consolidated income before
            federal tax expense                     $   150.9         $   169.5        $   66.7        $   42.8        $   429.9
                                                    =========         =========        ========        ========        =========
         Assets as of year end                      $35,278.7         $14,436.3        $3,901.4        $6,174.3        $59,790.7
                                                    =========         =========        ========        ========        =========
</TABLE>

----------
        (1)  The Company's method of allocating net investment income results in
             a charge (negative net investment income) to the Variable Annuities
             segment which is recognized in the Corporate and Other segment. The
             charge relates to non-invested assets which support this segment on
             a statutory basis.
        (2)  Excludes realized gains and losses on investments.

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







                                      F-26
<PAGE>   53


                                                                      SCHEDULE I

               NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

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

                             As of December 31, 1999
<TABLE>
<CAPTION>


-----------------------------------------------------------------------------     ---------  ---------   -------------
                                  Column A                                        Column B   Column C      Column D
-----------------------------------------------------------------------------     ---------  ---------   -------------
                                                                                                          Amount at
                                                                                                          which shown
                                                                                                            in the
                                                                                               Market    consolidated
                             Type of Investment                                     Cost       value     balance sheet
-----------------------------------------------------------------------------     ---------  ---------   -------------
<S>                                                                               <C>        <C>         <C>
Fixed maturity securities available-for-sale:
   Bonds:
      U.S. Government and government agencies and authorities                     $ 3,851.2  $ 3,867.8      $ 3,867.8
      States, municipalities and political subdivisions                                 0.8        0.8            0.8
      Foreign governments                                                             110.6      110.4          110.4
      Public utilities                                                              1,309.4    1,309.5        1,309.5
      All other corporate                                                          10,105.3   10,005.5       10,005.5
                                                                                  ---------  ---------      ---------
          Total fixed maturity securities available-for-sale                       15,377.3   15,294.0       15,294.0
                                                                                  ---------  ---------      ---------

Equity securities available-for-sale:
   Common stocks:
      Industrial, miscellaneous and all other                                          84.9       92.9           92.9
   Non-redeemable preferred stock                                                       --          --             --
                                                                                  ---------  ---------      ---------
          Total equity securities available-for-sale                                   84.9       92.9           92.9
                                                                                  ---------  ---------      ---------

Mortgage loans on real estate, net                                                  5,831.5                   5,786.3(1)
Real estate, net:
   Investment properties                                                              219.3                     224.9(1)
   Acquired in satisfaction of debt                                                    31.6                      29.9(1)
Policy loans                                                                          519.6                     519.6
Other long-term investments                                                            73.5                      73.8(2)
Short-term investments                                                                416.0                     416.0
                                                                                  ---------                 ---------
          Total investments                                                       $22,553.7                 $22,437.4
                                                                                  =========                 =========
</TABLE>

----------
(1)  Difference from Column B is primarily due to valuation allowances due to
     impairments on mortgage loans on real estate and due to accumulated
     depreciation and valuation allowances due to impairments on real estate.
     See note 3 to the consolidated financial statements.
(2)  Difference from Column B is primarily due to operating gains (losses) of
     investments in limited partnerships.



See accompanying independent auditors' report.



                                      F-27
<PAGE>   54


                                                                    SCHEDULE III

               NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

                       SUPPLEMENTARY INSURANCE INFORMATION
                                  (in millions)

   As of December 31, 1999, 1998 and 1997 and for each of the years then ended
<TABLE>
<CAPTION>

------------------------------------- -----------     ----------------         --------       ----------------     --------
              Column A                  Column B          Column C             Column D           Column E         Column F
------------------------------------- -----------     ----------------         --------       ----------------     --------
                                        Deferred        Future policy                           Other policy
                                         policy       benefits, losses,        Unearned          claims and
                                      acquisition        claims and            premiums       benefits payable     Premium
              Segment                    costs          loss expenses            (1)                 (1)           revenue
------------------------------------- -----------     ----------------         --------       ----------------     --------

<S>                                     <C>           <C>                      <C>             <C>                 <C>
1999: Variable Annuities               $1,403.1          $      --                                                  $   --
          Fixed Annuities                 397.2           16,077.3                                                    26.8
          Life Insurance                  702.9            3,519.9                                                   194.0
          Corporate and Other              50.9            2,264.4                                                      --
                                       --------          ---------                                                  ------
             Total                     $2,554.1          $21,861.6                                                  $220.8
                                       ========          =========                                                  ======

1998: Variable Annuities               $1,247.9          $      --                                                  $   --
          Fixed Annuities                 316.7           14,592.3                                                    23.1
          Life Insurance                  574.2            3,173.9                                                   176.9
          Corporate and Other            (116.6)           2,000.9                                                      --
                                       --------          ---------                                                  ------
             Total                     $2,022.2          $19,767.1                                                  $200.0
                                       ========          =========                                                  ======

1997: Variable Annuities               $1,018.4          $      --                                                  $   --
          Fixed Annuities                 277.9           14,103.1                                                    27.3
          Life Insurance                  472.9            2,683.4                                                   178.1
          Corporate and Other            (103.8)           1,916.3                                                      --
                                       --------          ---------                                                  ------
             Total                     $1,665.4          $18,702.8                                                  $205.4
                                       ========          =========                                                  ======
</TABLE>

<TABLE>
<CAPTION>

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

<S>                                   <C>            <C>                    <C>                     <C>            <C>
1999: Variable Annuities                $  (41.5)           $    2.2             $162.8             $176.3
          Fixed Annuities                1,134.5               859.2               49.7               91.8
          Life Insurance                   253.1               317.1               60.1              105.7
          Corporate and Other              174.7               128.2                 --               89.6
                                        --------            --------             ------             ------
             Total                      $1,520.8            $1,306.7             $272.6             $463.4
                                        ========            ========             ======             ======

1998: Variable Annuities                $  (31.3)           $    3.5             $123.9             $155.8
          Fixed Annuities                1,116.6               847.6               44.2               85.2
          Life Insurance                   225.6               268.7               46.4              100.6
          Corporate and Other              170.7               125.0                 --               78.1
                                        --------            --------             ------             ------
             Total                      $1,481.6            $1,244.8             $214.5             $419.7
                                        ========            ========             ======             ======

1997: Variable Annuities                $  (26.8)           $    5.9             $ 87.8             $142.5
          Fixed Annuities                1,098.2               846.7               39.8               85.4
          Life Insurance                   184.9               227.5               39.6               93.9
          Corporate and Other              152.9               114.7                 --               63.1
                                        --------            --------             ------             ------
             Total                      $1,409.2            $1,194.8             $167.2             $384.9
                                        ========            ========             ======             ======
</TABLE>

----------
(1)  Unearned premiums and other policy claims and benefits payable are
     included in Column C amounts.
(2)  Allocations of net investment income and certain operating expenses are
     based on a number of assumptions and estimates, and reported operating
     results would change by segment if different methods were applied.

See accompanying independent auditors' report.



                                      F-28
<PAGE>   55





                                                                     SCHEDULE IV

               NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

                                   REINSURANCE
                                  (in millions)

   As of December 31, 1999, 1998 and 1997 and for each of the years then ended
<TABLE>
<CAPTION>

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

<S>                                               <C>              <C>             <C>             <C>             <C>
1999:
  Life insurance in force                            $84,845.3      $26,296.5         $ 14.9         $58,563.7         0.0%
                                                     =========      =========         ======         =========         ====
  Premiums:
    Life insurance                                   $   242.2      $    22.6         $  1.2         $   220.8         0.6%
    Accident and health insurance                        134.9          142.8            7.9                --          N/A
                                                     ---------      ---------         ------         ---------         ----

        Total                                        $   377.1      $   165.4         $  9.1         $   220.8         4.2%
                                                     =========      =========         ======         =========         ====


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

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


1997:
  Life Insurance in force                            $52,648.4      $13,678.7         $289.7         $39,259.4         0.7%
                                                     =========      =========         ======         =========         ====

  Premiums:
    Life insurance                                   $   235.9      $    32.7         $  2.2         $   205.4         1.1%
    Accident and health insurance                        261.2          272.6           11.4                --          N/A
                                                     ---------      ---------         ------         ---------         ----
        Total                                        $   497.1      $   305.3         $ 13.6         $   205.4         6.6%
                                                     =========      =========         ======         =========         ====
</TABLE>

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






                                      F-29
<PAGE>   56





                                                                      SCHEDULE V

               NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

                        VALUATION AND QUALIFYING ACCOUNTS
                                  (in millions)
                  Years ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>

---------------------------------------------------------- ------------ --------------------------- ------------- -------------
                        Column A                            Column B             Column C             Column D      Column E
---------------------------------------------------------- ------------ --------------------------- ------------- -------------
                                                           Balance at    Charged to     Charged to                  Balance at
                                                            beginning     costs and       other       Deductions      end of
Description                                                 of period     expenses       accounts        (1)          period
---------------------------------------------------------- ------------ ------------- ------------- ------------- -------------

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


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


1997:
  Valuation allowances - fixed maturity securities             $  --        $16.2         $ --          $16.2          $  --
  Valuation allowances - mortgage loans on real estate          51.0         (1.2)          --            7.3           42.5
  Valuation allowances - real estate                            15.2         (4.1)          --             --           11.1
                                                               -----        -----         ----          -----          -----
      Total                                                    $66.2        $10.9         $ --          $23.5          $53.6
                                                               =====        =====         ====          =====          =====

</TABLE>
------------
(1)  Amounts represent direct write-downs charged against the valuation
     allowance.

(2)  Allowance on acquired mortgage loans.

                                      F-30