NATIONWIDE LIFE INSURANCE COMPANY

FOR THE YEAR ENDED DECEMBER 31, 2019

TABLE OF CONTENTS

		Page

Independent Auditors’ Report		F-1

Statutory Statements of Admitted Assets, Liabilities, Capital and Surplus		F-3

Statutory Statements of Operations		F-4

Statutory Statements of Changes in Capital and Surplus		F-5

Statutory Statements of Cash Flow		F-6

Notes to Statutory Financial Statements		F-7

Schedule I – Consolidated Summary of Investments – Other Than Investments in Related Parties		F-46

Schedule III – Supplementary Insurance Information		F-47

Schedule IV – Reinsurance		F-48

Schedule V – Valuation and Qualifying Accounts		F-49

KPMG LLP

Suite 500

191 West Nationwide Blvd. Columbus,

OH 43215-2568

Independent Auditors’ Report

Audit Committee of the Board of Directors Nationwide Life Insurance Company:

We have audited the accompanying financial statements of Nationwide Life Insurance Company

(the Company), which comprise the statutory statements of admitted assets, liabilities, capital and surplus as of December 31, 2019 and 2018, and the related statutory statements of operations, changes in capital and surplus, and cash flow for each of the years in the three-year period ended December 31, 2019, and the related notes to the statutory financial statements (“statutory financial statements”).

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with statutory accounting practices prescribed or permitted by the Ohio Department of Insurance (the Department). Management is also responsible for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

Basis for Adverse Opinion on U.S. Generally Accepted Accounting Principles

As described in Note 2 to the financial statements, the financial statements are prepared by the Company using statutory accounting practices prescribed or permitted by the Department, which is a basis of accounting other than U.S. generally accepted accounting principles. Accordingly, the financial statements are not intended to be presented in accordance with U.S. generally accepted accounting principles.

The effects on the financial statements of the variances between the statutory accounting practices described in Note 2 and U.S. generally accepted accounting principles, although not reasonably determinable, are presumed to be material.

KPMG LLP is a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.

F-1

Adverse Opinion on U.S. Generally Accepted Accounting Principles

In our opinion, because of the significance of the variances between statutory accounting practices and U.S. generally accepted accounting principles discussed in the Basis for Adverse Opinion on U.S. Generally Accepted Accounting Principles paragraph, the financial statements referred to above do not present fairly, in accordance with U.S. generally accepted accounting principles, the financial position of the Company as of December 31, 2019 and 2018, or the results of its operations or its cash flows for each of the years in the three- year period ended December 31, 2019.

Opinion on Statutory Basis of Accounting

In our opinion, the financial statements referred to above present fairly, in all material respects, the admitted assets, liabilities, capital and surplus of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flow for each of the years in the three-year period ended December 31, 2019, in accordance with statutory accounting practices prescribed or permitted by the Department described in Note 2.

Other Matter

Our audits were conducted for the purpose of forming an opinion on the financial statements as a whole. The supplementary information included in Schedule I Consolidated Summary of Investments – Other Than Investments in Related Parties, Schedule III Supplementary Insurance Information, Schedule IV Reinsurance and Schedule V Valuation and Qualifying Accounts is presented for purposes of additional analysis and is not a required part of the financial statements but is supplementary information required by the Securities and Exchange Commission's Regulation S-X. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audits of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole.

Columbus, Ohio

March 20, 2020

F-2

nationwide LIFE Insurance Company

(a wholly owned subsidiary of Nationwide Financial Services, Inc.)

Statutory Statements of Admitted Assets, Liabilities, Capital and Surplus

	December 31,
(in millions, except share amounts)	2019			2018

Admitted assets
Invested assets
Bonds	$	35,124		$	32,348
Stocks		2,622			1,820
Mortgage loans, net of allowance		7,655			7,764
Policy loans		903			905
Derivative assets		94			100
Cash, cash equivalents and short-term investments		556			1,099
Securities lending collateral assets		132			101
Other invested assets		958			883
Total invested assets	$	48,044		$	45,020
Accrued investment income		573			394
Deferred federal income tax assets, net		601			532
Federal income tax receivable		108			129
Other assets		152			392
Separate account assets		105,655			92,874
Total admitted assets	$	155,133		$	139,341

Liabilities, capital and surplus
Liabilities
Future policy benefits and claims	$	39,139		$	38,337
Policyholders dividend accumulation		452			466
Short-term debt		203			365
Asset valuation reserve		479			372
Payable for securities		113			158
Derivative liabilities		23			20
Securities lending payable		132			101
Other liabilities		1,682			1,428
Accrued transfers from separate accounts		(1,567	)		(1,625	)
Separate account liabilities		105,655			92,874
Total liabilities	$	146,311		$	132,496

Capital and surplus
Capital shares ($1 par value; authorized - 5,000,000 shares, issued and outstanding - 3,814,779 shares)	$	4		$	4
Surplus notes		1,100			700
Additional paid-in capital		1,998			1,398
Unassigned surplus		5,720			4,743
Total capital and surplus	$	8,822		$	6,845
Total liabilities, capital and surplus	$	155,133		$	139,341

See accompanying notes to statutory financial statements.

F-3

nationwide LIFE Insurance Company

(a wholly owned subsidiary of Nationwide Financial Services, Inc.)

Statutory Statements of Operations

	Year ended December 31,
(in millions)	2019			2018			2017

Revenues
Premiums and annuity considerations	$	10,168		$	9,829		$	10,403
Net investment income		1,974			1,927			1,958
Amortization of interest maintenance reserve		(2	)		(1	)		(2	)
Other revenues		2,312			2,240			2,443
Total revenues	$	14,452		$	13,995		$	14,802

Benefits and expenses
Benefits to policyholders and beneficiaries	$	14,782		$	13,961		$	12,879
Increase in reserves for future policy benefits and claims		1,501			736			1,246
Net transfers from separate accounts		(3,747	)		(2,468	)		(950	)
Commissions		674			670			683
Dividends to policyholders		38			40			46
Reserve adjustment on reinsurance assumed		(246	)		(352	)		(553	)
Other expenses		417			398			466
Total benefits and expenses	$	13,419		$	12,985		$	13,817

Income before federal income tax expense and net realized capital losses on investments	$	1,033		$	1,010		$	985
Federal income tax (benefit) expense		(73	)		64			(455	)

Income before net realized capital losses on investments	$	1,106		$	946		$	1,440
Net realized capital losses on investments, net of federal income tax expense of $7, $8 and $26 in 2019, 2018 and 2017, respectively, and excluding $0, $(1) and $3 of net realized capital (losses) gains transferred to the interest maintenance reserve in 2019, 2018 and 2017, respectively
		(477	)		(235	)		(401	)
Net income	$	629		$	711		$	1,039

See accompanying notes to statutory financial statements.

F-4

nationwide LIFE Insurance Company

(a wholly owned subsidiary of Nationwide Financial Services, Inc.)

Statutory Statements of Changes in Capital and Surplus

(in millions)	Capital shares		Surplus notes		Additional paid-in capital		Unassigned surplus			Capital and surplus
Balance as of December 31, 2016	$	4	$	700	$	963	$	3,541		$	5,208

Net income		-		-		-		1,039			1,039
Change in asset valuation reserve		-		-		-		(10	)		(10	)
Change in deferred income taxes		-		-		-		(446	)		(446	)
Change in net unrealized capital gains and losses, net of tax expense of $14		-		-		-		(157	)		(157	)
Change in nonadmitted assets		-		-		-		318			318
Other, net		-		-				(3	)		(3	)
Balance as of December 31, 2017	$	4	$	700	$	963	$	4,282		$	5,949

Net income		-		-		-		711			711
Change in asset valuation reserve		-		-		-		(12	)		(12	)
Change in deferred income taxes		-		-		-		72			72
Change in net unrealized capital gains and losses, net of tax expense of $88		-		-		-		(304	)		(304	)
Change in nonadmitted assets		-		-		-		(6	)		(6	)
Capital contribution from Nationwide Financial Services, Inc.		-		-		435		-			435
Balance as of December 31, 2018	$	4	$	700	$	1,398	$	4,743		$	6,845

Net income		-		-		-		629			629
Change in asset valuation reserve		-		-		-		(107	)		(107	)
Change in deferred income taxes		-		-		-		(29	)		(29	)
Change in net unrealized capital gains and losses, net of tax (benefit) of ($29)		-		-		-		426			426
Change in nonadmitted assets		-		-		-		59			59
Change in surplus notes		-		400		-		-			400
Capital contribution from Nationwide Financial Services, Inc.		-		-		600		-			600
Other, net		-		-		-		(1	)		(1	)
Balance as of December 31, 2019	$	4	$	1,100	$	1,998	$	5,720		$	8,822

See accompanying notes to statutory financial statements.

F-5

nationwide LIFE Insurance Company

(a wholly owned subsidiary of Nationwide Financial Services, Inc.)

Statutory Statements of Cash Flow

	Years ended December 31,
(in millions)	2019			2018			2017

Cash flows from operating activities:
Premiums collected, net of reinsurance	$	10,184		$	9,812		$	10,424
Net investment income		1,825			2,041			2,062
Other revenue		2,708			2,329			2,439
Policy benefits and claims paid		(14,778	)		(13,947	)		(12,861	)
Commissions, operating expenses and taxes, other than federal income tax paid		(847	)		(710	)		(563	)
Net transfers from separate accounts		3,805			2,606			985
Policyholders' dividends paid		(40	)		(45	)		(48	)
Federal income taxes recovered		87			74			115
Net cash provided by operating activities	$	2,944		$	2,160		$	2,553

Cash flows from investing activities:
Proceeds from investments sold, matured or repaid:
Bonds	$	3,547		$	3,366		$	3,905
Stocks		58			1			1
Mortgage loans		910			580			585
Derivative assets		4			560			-
Other assets		381			190			77
Total investment proceeds	$	4,900		$	4,697		$	4,568
Cost of investments acquired:
Bonds	$	(6,327	)	$	(4,499	)	$	(4,875	)
Stocks		(454	)		(608	)		(626	)
Mortgage loans		(800	)		(762	)		(670	)
Derivative assets		(687	)		-			(467	)
Other assets		(340	)		(610	)		(516	)
Total investments acquired	$	(8,608	)	$	(6,479	)	$	(7,154	)
Net decrease (increase) in policy loans		2			36			(16	)
Net cash used in investing activities	$	(3,706	)	$	(1,746	)	$	(2,602	)

Cash flows from financing activities and miscellaneous sources:
Surplus notes	$	400		$	-		$	-
Capital contribution from Nationwide Financial Services, Inc.		600			435			-
Net change in deposits on deposit-type contract funds and other insurance liabilities		(714	)		228			(326	)
Net change in short-term debt		(162	)		365			(303	)
Derivative liabilities		2			(135	)		44
Other cash provided (used)		93			(172	)		223
Net cash provided by (used in) financing activities and miscellaneous	$	219		$	721		$	(362	)

Net (decrease) increase in cash, cash equivalents and short-term investments	$	(543	)	$	1,135		$	(411	)
Cash, cash equivalents and short-term investments at beginning of year		1,099			(36	)		375
Cash, cash equivalents and short-term investments at end of year	$	556		$	1,099		$	(36	)

Supplemental disclosure of non-cash activities:
Exchange of bond investments	$	592		$	573		$	238
Intercompany transfer of securities	$	6		$	108		$	-
Intercompany transfer of mortgages	$	-		$	155		$	-

See accompanying notes to statutory financial statements.

F-6

NATIONWIDE LIFE INSURANCE COMPANY

(a wholly owned subsidiary of Nationwide Financial Services, Inc.)

Notes to December 31, 2019, 2018 and 2017 Statutory Financial Statements

(1)

Nature of Operations

Nationwide Life Insurance Company (“NLIC” or “the Company”) was incorporated in 1929 and is an Ohio domiciled stock life insurance company. The Company is a member of the Nationwide group of companies (“Nationwide”), which is comprised of Nationwide Mutual Insurance Company (“NMIC”) and all of its subsidiaries and affiliates.

All of the outstanding shares of NLIC’s common stock are owned by Nationwide Financial Services, Inc. (“NFS”), a holding company formed by Nationwide Corporation, a majority-owned subsidiary of NMIC.

The Company is a leading provider of long-term savings and retirement products in the United States of America (“U.S.”). The Company develops and sells a wide range of products and services, which include fixed and variable individual annuities, private and public sector group retirement plans, life insurance, investment advisory services and other investment products. The Company is licensed to conduct business in all fifty states, the District of Columbia, Guam, Puerto Rico and the U.S. Virgin Islands.

The Company sells its products through a diverse distribution network. Unaffiliated entities that sell the Company’s products to their own customer bases include independent broker-dealers, financial institutions, wirehouses and regional firms, pension plan administrators, life insurance agencies, life insurance specialists and registered investment advisors. Representatives of affiliates who market products directly to a customer base include Nationwide Retirement Solutions, Inc. and Nationwide Financial Network producers, which includes the agency distribution force of the Company’s ultimate parent company, NMIC. NMIC is in the process of transitioning away from utilizing the exclusive agent model, which will be completed in 2020. The Company believes its broad range of competitive products, strong distributor relationships and diverse distribution network position it to compete effectively under various economic conditions.

Wholly-owned subsidiaries of NLIC as of December 31, 2019 include Nationwide Life and Annuity Insurance Company (“NLAIC”) and its wholly-owned subsidiaries, Olentangy Reinsurance, LLC (“Olentangy”) and Nationwide SBL, LLC (“NWSBL”), Jefferson National Financial Corporation (“JNF”) and its wholly-owned subsidiaries, Jefferson National Securities Corporation (“JNSC”) and Jefferson National Life Insurance Company (“JNLIC”), and its wholly-owned subsidiary, Jefferson National Life Insurance Company of New York (“JNLNY”), Eagle Captive Reinsurance, LLC (“Eagle”), Nationwide Investment Services Corporation (“NISC”) and Nationwide Investment Advisor, LLC (“NIA”). NLAIC primarily offers universal life insurance, variable universal life insurance, term life insurance, corporate-owned life insurance and individual annuity contracts on a non-participating basis. Olentangy is a Vermont domiciled special purpose financial captive insurance company. NWSBL offers a securities-based lending product and is an Ohio limited liability company and nonadmitted subsidiary. JNF is a distributor of tax-advantaged investing solutions for registered investment advisors, fee-based advisors and the clients they serve. JNSC is a registered broker-dealer. JNLIC and JNLNY are licensed to underwrite both fixed and variable annuity products. Eagle is an Ohio domiciled special purpose financial captive insurance company. NISC is a registered broker-dealer. NIA is a registered investment advisor.

The Company is subject to regulation by the insurance departments of states in which it is domiciled and/or transacts business and undergoes periodic examinations by those departments.

As of December 31, 2019 and 2018, the Company did not have a significant concentration of financial instruments in a single investee, industry or geographic region. Also, the Company did not have a concentration of business transactions with a particular customer, lender, distribution source, market or geographic region in which a single event could cause a severe impact on the Company’s financial position after considering insurance risk that has been transferred to external reinsurers.

(2)

Summary of Significant Accounting Policies

Use of Estimates

The preparation of the statutory financial statements requires the Company to make estimates and assumptions that affect the amounts reported in the statutory financial statements and accompanying notes. Significant estimates include legal and regulatory reserves, certain investment and derivative valuations, future policy benefits and claims, provision for income taxes and valuation of deferred tax assets. Actual results could differ significantly from those estimates.

Basis of Presentation

The statutory financial statements of the Company are presented on the basis of accounting practices prescribed or permitted by the Ohio Department of Insurance (“the Department”). Prescribed statutory accounting practices are those practices incorporated directly or by reference in state laws, regulations and general administrative rules applicable to all insurance enterprises domiciled in a particular state. Permitted statutory accounting practices include practices not prescribed by the domiciliary state, but allowed by the domiciliary state regulatory authority.

F-7

NATIONWIDE LIFE INSURANCE COMPANY

(a wholly owned subsidiary of Nationwide Financial Services, Inc.)

Notes to December 31, 2019, 2018 and 2017 Statutory Financial Statements

The Company’s subsidiary, Eagle, applies a prescribed practice which values assumed guaranteed minimum death benefits (“GMDB”) and guaranteed lifetime withdrawal benefits (“GLWB”) risks on variable annuity contracts from NLIC and GLWB risks on fixed indexed annuity contracts from NLAIC using separate alternative reserving bases from the Statutory Accounting Principles detailed within the National Association of Insurance Commissioners (“NAIC”) Accounting Practices and Procedures manual (“NAIC SAP”) pursuant to Ohio Revised Code Chapter 3964 and approved by the Department. The prescribed practice related to NLIC guaranteed risks decreased the Company’s valuation of Eagle, included in other invested assets on the statutory statements of admitted assets, liabilities, capital and surplus, by $411 million and $183 million as of December 31, 2019 and 2018, respectively. The prescribed practice related to NLAIC guaranteed risks, which went into effect on December 31, 2019, increased the Company’s valuation of Eagle, included in other invested assets on the statutory statements of admitted assets, liabilities, capital and surplus, by $226 million as of December 31, 2019.

Olentangy was granted a permitted practice from the State of Vermont allowing Olentangy to carry the assets placed into a trust account by Union Hamilton Reinsurance Ltd. (“UHRL”) on its statutory statements of admitted assets, liabilities, capital and surplus at net admitted value. This permitted practice increased NLAIC’s valuation of this subsidiary, included in stocks on the statutory statements of admitted assets, liabilities, capital and surplus, by $67 million as of December 31, 2019 and 2018.

There was no difference in the Company’s net income as a result of prescribed or permitted practices. If the prescribed or permitted practices were not applied, the Company’s risk-based capital would continue to be above regulatory action levels. A reconciliation of the Company’s capital and surplus between NAIC SAP and prescribed and permitted practices is shown below:

(in millions)	SSAP #		F/S Page		State of domicile	As of December 31, 2019			As of December 31, 2018

Capital and Surplus
Statutory Capital and Surplus					OH	$	8,822		$	6,845
State Prescribed Practice:
Subsidiary valuation - Eagle: NLIC risks ceded		52		3	OH		411			183
Subsidiary valuation - Eagle: NLAIC risks ceded		52		3	OH		(226	)		-
State Permitted Practice:
Subsidiary valuation - Olentangy		20		3	VT		(67	)		(67	)
Statutory Capital and Surplus, NAIC SAP						$	8,940		$	6,961

Statutory accounting practices vary in some respects from U.S. generally accepted accounting principles (“GAAP”), including the following practices:

Financial Statements

●

Statutory financial statements are prepared using language and groupings substantially the same as the annual statements of the Company filed with the NAIC and state regulatory authorities;

●

assets must be included in the statutory statements of admitted assets, liabilities, capital and surplus at net admitted asset value and nonadmitted assets are excluded through a charge to capital and surplus;

●

an asset valuation reserve (“AVR”) is established in accordance with the NAIC Annual Statement Instructions for Life, Accident and Health Insurance Companies and is reported as a liability, and changes in the AVR are reported directly in capital and surplus;

●

an interest maintenance reserve (“IMR”) is established in accordance with the NAIC Annual Statement Instructions for Life, Accident and Health Insurance Companies and is reported as a liability, and the amortization of the IMR is reported as revenue;

●

the expense allowance associated with statutory reserving practices for investment contracts held in the separate accounts is reported in the general account as a negative liability;

●

accounting for contingencies requires recording a liability at the midpoint of a range of estimated possible outcomes when no better estimate in the range exists;

●

surplus notes are accounted for as a component of capital and surplus;

●

costs related to successful policy acquisitions are charged to operations in the year incurred;

●

negative cash balances are reported as negative assets;

●

certain income and expense items are charged or credited directly to capital and surplus;

F-8

NATIONWIDE LIFE INSURANCE COMPANY

(a wholly owned subsidiary of Nationwide Financial Services, Inc.)

Notes to December 31, 2019, 2018 and 2017 Statutory Financial Statements

●

the statutory statements of cash flows are presented on the basis prescribed by the NAIC; and

●

the statutory financial statements do not include accumulated other comprehensive income.

Future Policy Benefits and Claims

●

Deposits to universal life contracts, investment contracts and limited payment contracts are included in revenue; and

●

future policy benefit reserves are based on statutory requirements.

Reinsurance Ceded

●

Certain assets and liabilities are reported net of ceded reinsurance balances; and

●

provision is made for amounts receivable and outstanding for more than 90 days through a charge to capital and surplus.

Investments

●

Investments in bonds are generally stated at amortized cost, except those with an NAIC designation of “6”, which are stated at the lower of amortized cost or fair value;

●

investments in preferred stocks are generally stated at amortized cost, except those with an NAIC designation of “4” through “6”, which are stated at the lower of amortized cost or fair value;

●

the proportional amortized cost method is utilized to determine the liquidation value of Low-Income Housing Tax Credit Funds (“Tax Credit Funds”);

●

admitted subsidiary, controlled and affiliated entities are never consolidated; rather, those investments are generally carried at audited statutory capital and surplus or GAAP equity, as appropriate, and are recorded as an equity investment in stocks or other invested assets;

●

equity in earnings of subsidiary companies is recognized directly in capital and surplus as net unrealized capital gains or losses, while dividends from unconsolidated companies are recorded in operations as net investment income;

●

undistributed earnings and valuation adjustments from investments in joint ventures, partnerships and limited liability companies are recognized directly in capital and surplus as net unrealized capital gains or losses;

●

changes in non-specific mortgage loan reserves are recorded directly in capital and surplus as net unrealized capital gains or losses;

●

other-than-temporary impairments on bonds, excluding loan-backed and structured securities, are measured based on fair value; and

●

gains on sales of investments between affiliated companies representing economic transactions are deferred at the parent level until the related assets are paid down or an external sale occurs.

Separate Accounts

●

Assets and liabilities of guaranteed separate accounts are reported as separate account assets and separate account liabilities, respectively.

Derivative Instruments

●

Derivatives used in effective hedging transactions are valued in a manner consistent with the hedged asset or liability;

●

unrealized gains and losses on derivatives that are not considered to be effective hedges are charged to capital and surplus;

●

interest earned on derivatives not designated as hedging instruments is charged to net investment income; and

●

embedded derivatives are not separated from the host contract and accounted for separately as a derivative instrument.

Goodwill

●

Goodwill is limited to 10% of the prior reporting period’s adjusted statutory surplus, with any goodwill in excess of this limitation nonadmitted through a charge to surplus; and

●

goodwill is amortized and charged to surplus.

F-9

NATIONWIDE LIFE INSURANCE COMPANY

(a wholly owned subsidiary of Nationwide Financial Services, Inc.)

Notes to December 31, 2019, 2018 and 2017 Statutory Financial Statements

Federal Income Taxes

●

Changes in deferred federal income taxes are recognized directly in capital and surplus with limitations on the amount of deferred tax assets that can be reflected as an admitted asset (15% of surplus); and

●

uncertain tax positions are subject to a “more likely than not” standard for federal and foreign income tax loss contingencies only.

Nonadmitted Assets

●

In addition to the nonadmitted assets described above, certain other assets are nonadmitted and charged directly to capital and surplus. These include prepaid assets, certain software, disallowed IMR and other receivables outstanding for more than 90 days.

The financial information included herein is prepared and presented in accordance with SAP prescribed or permitted by the Department. Certain differences exist between SAP and GAAP, which are presumed to be material.

Revenues and Benefits

Life insurance premiums are recognized as revenue over the premium paying period of the related policies. Annuity considerations are recognized as revenue when received. Health insurance premiums are earned ratably over the terms of the related insurance and reinsurance contracts or policies. Policy benefits and claims that are expensed include interest credited to policy account balances, benefits and claims incurred in the period in excess of related policy reserves and other changes in future policy benefits.

Future Policy Benefits and Claims

Future policy benefits for traditional products are based on statutory mortality and interest requirements without consideration of withdrawals. The principal statutory mortality tables and interest assumptions used on policies in force are the 1958 Commissioner’s Standard Ordinary (“CSO”) table at interest rates of 2.5%, 3.0%, 3.5%, 4.0% and 4.5%, the 1941 CSO table at an interest rate of 2.5%, the 1980 CSO table at interest rates of 4.0%, 4.5%, 5.0% and 5.5%, the 2001 CSO table at an interest rate of 4.0% and 3.5% and the 2017 CSO table at an interest rate of 3.5% and 4.5%.

Future policy benefits for universal life and variable universal life contracts have been calculated based on participants’ contributions plus interest credited on any funds in the fixed account less applicable contract charges. These policies have been adjusted for possible future surrender charges in accordance with the Commissioner’s Reserve Valuation Method (“CRVM”).

Future policy benefits for annuity products have been established based on contract term, interest rates and various contract provisions. Individual deferred annuity contracts issued in 1990 and after have been adjusted for possible future surrender charges in accordance with the Commissioner’s Annuity Reserve Valuation Method (“CARVM”).

As of December 31, 2017, the Company calculated a portion of its life insurance reserves under a Principle-Based Reserves (“PBR”) framework in accordance with Valuation Manual 20: Requirements for PBR for Life Products. Valuation Manual 20 was only applicable for newly issued life insurance business and allowed for a three-year implementation period. Reserving for all life insurance business issued after the earlier of the products conversion or December 31, 2019 will be under a PBR framework.

As of December 31, 2019 and 2018, the Company calculated its reserves for variable annuity products with guaranteed minimum death, accumulation and withdrawal benefits and other contracts involving guaranteed benefits similar to those offered with variable annuities under the standard scenario of Actuarial Guideline XLIII "CARVM for Variable Annuities", which exceeded the stochastic 70^th percentile Conditional Tail Expectations scenario.

The aggregate reserves for individual accident and health policies consist of active life reserves, disabled life reserves and unearned premium reserves. The active life reserves for disability income are reserved for on the net level basis, at a 3.0% interest rate, using either the 1964 Commissioner’s Disability Table (for policies issued prior to 1982) or the 1985 Commissioner’s Individual Disability Table A (for policies issued after 1981). The active life reserves for major medical insurance (both scheduled and unscheduled benefits) are based on the benefit ratio method for policies issued after 1981.

The active life reserves for accident and health policies are reserved for on the net level basis, at a 3.0% interest rate, using either the 1956 Inter-Company Hospital-Surgical tables, the 1974 Medical Expense tables or the 1959 Accidental Death Benefits table.

The disabled life reserves for accident and health policies are calculated using the 1985 Commissioner’s Individual Disability Table A at a 3.0% interest rate. Unearned premium reserves are based on the actual gross premiums and actual days.

F-10

NATIONWIDE LIFE INSURANCE COMPANY

(a wholly owned subsidiary of Nationwide Financial Services, Inc.)

Notes to December 31, 2019, 2018 and 2017 Statutory Financial Statements

The aggregate reserves for group accident and health and franchise accident and health policies consist of disabled life reserves and unearned premium reserves. Reserves for benefits payable on disabled life claims are based on the 2012 Group Long-Term Disability (GLTD) Valuation Table, at varying interest rates of 2.75% - 6.0%, for group policies and the 1987 Commissioner’s Group Disability Table, at varying interest rates of 2.75% - 10.25%, for franchise policies.

Future policy benefits and claims for group long-term disability policies are the present value (discounted between 2.75% and 6.00%) of amounts not yet due on reported claims and an estimate of amounts to be paid on incurred but unreported claims. Future policy benefits and claims on other group health policies are not discounted.

The Company issues fixed and floating rate funding agreements to the Federal Home Loan Bank of Cincinnati (“FHLB”). The liabilities for such funding agreements are treated as annuities under Ohio law for life insurance companies and recorded in future policy benefits and claims. Refer to Note 9 for additional details.

Separate Accounts

Separate account assets represent contractholders’ funds that have been legally segregated into accounts with specific investment objectives. Separate account assets are recorded at fair value, with the value of separate account liabilities set to equal the fair value of separate account assets. Separate account assets are primarily comprised of public, privately-registered and non-registered mutual funds, whose fair value is primarily based on the funds’ net asset value. Other separate account assets are recorded at fair value based on the methodology that is applicable to the underlying assets.

Separate account liabilities, in conjunction with accrued transfers from separate accounts, represent contractholders’ funds adjusted for possible future surrender charges in accordance with the CARVM and the CRVM, respectively. The difference between full account value and CARVM/CRVM is reflected in accrued transfers to separate accounts, as prescribed by the NAIC, in the statutory statements of admitted assets, liabilities, capital and surplus. The annual change in the difference between full account value and CARVM/CRVM and its applicable federal income tax is reflected in the statutory statements of operations as part of the net transfers to separate accounts and federal income tax, respectively.

Retained Assets

The Company does not retain beneficiary assets. During a death benefit claim, the death benefit settlement method is payment to the beneficiary in the form of a check or electronic funds transfer.

Investments

Bonds and stocks of unaffiliated companies. Bonds are generally stated at amortized cost, except those with an NAIC designation of “6”, which are stated at the lower of amortized cost or fair value. Preferred stocks are generally stated at amortized cost, except those with an NAIC designation of “4” through “6”, which are stated at the lower of amortized cost or fair value. Common stocks are stated at fair value. Changes in the fair value of bonds and stocks stated at fair value are charged to capital and surplus.

Loan-backed and structured securities, which are included in bonds in the statutory financial statements, are stated in a manner consistent with the bond guidelines, but with additional consideration given to the special valuation rules implemented by the NAIC applicable to residential mortgage-backed securities that are not backed by U.S. government agencies, commercial mortgage-backed securities and certain other structured securities. Under these guidelines, an initial and adjusted NAIC designation is determined for each security. The initial NAIC designation, which takes into consideration the security’s amortized cost relative to an NAIC-prescribed valuation matrix, is used to determine the reporting basis (i.e., amortized cost or lower of amortized cost or fair value).

Interest income is recognized when earned, while dividends are recognized when declared. The Company nonadmits investment income due and accrued when amounts are over 90 days past due.

For investments in loan-backed and structured securities, the Company recognizes income and amortizes discounts and premiums using the effective-yield method based on prepayment assumptions, generally obtained using a model provided by a third-party vendor, and the estimated economic life of the securities. When actual prepayments differ significantly from estimated prepayments, the effective-yield is recalculated to reflect actual payments to date and anticipated future payments. Any resulting adjustment is included in net investment income in the period the estimates are revised. All other investment income is recorded using the effective-yield method without anticipating the impact of prepayments.

Purchases and sales of bonds and stocks are recorded on the trade date, with the exception of private placement bonds, which are recorded on the funding date. Realized gains and losses are determined on a specific identification method.

Independent pricing services are most often utilized, and compared to pricing from additional sources, to determine the fair value of bonds and stocks for which market quotations or quotations on comparable securities are available. For these bonds and stocks, the Company obtains the pricing services’ methodologies and classifies the investments accordingly in the fair value hierarchy.

F-11

NATIONWIDE LIFE INSURANCE COMPANY

(a wholly owned subsidiary of Nationwide Financial Services, Inc.)

Notes to December 31, 2019, 2018 and 2017 Statutory Financial Statements

A corporate pricing matrix is used in valuing certain corporate bonds. The corporate pricing matrix was developed using publicly available spreads for privately-placed corporate bonds with varying weighted average lives and credit quality ratings. The weighted average life and credit quality rating of a particular bond to be priced using the corporate pricing matrix are important inputs into the model and are used to determine a corresponding spread that is added to the appropriate U.S. Treasury yield to create an estimated market yield for that bond. The estimated market yield and other relevant factors are then used to estimate the fair value of the particular bond.

Non-binding broker quotes are also utilized to determine the fair value of certain bonds when deemed appropriate or when quotes are not available from independent pricing services or a corporate pricing matrix. These bonds are classified with the lowest priority in the fair value hierarchy as only one broker quote is ordinarily obtained, the investment is not traded on an exchange, the pricing is not available to other entities and/or the transaction volume in the same or similar investments has decreased. Inputs used in the development of prices are not provided to the Company by the brokers as the brokers often do not provide the necessary transparency into their quotes and methodologies. At least annually, the Company performs reviews and tests to ensure that quotes are a reasonable estimate of the investments’ fair value. Price movements of broker quotes are subject to validation and require approval from the Company’s management. Management uses its knowledge of the investment and current market conditions to determine if the price is indicative of the investment’s fair value.

For all bonds, the Company considers its ability and intent to hold the security for a period of time sufficient to allow for the anticipated recovery in value, the expected recovery of principal and interest and the extent to which the fair value has been less than amortized cost. If the decline in fair value to below amortized cost is determined to be other-than-temporary, a realized loss is recorded equal to the difference between the amortized cost of the investment and its fair value.

The Company periodically reviews loan-backed and structured securities in an unrealized loss position by comparing the present value of cash flows, including estimated prepayments, expected to be collected from the security to the amortized cost basis of the security. If the present value of cash flows expected to be collected, discounted at the security’s effective interest rate, is less than the amortized cost basis of the security, the impairment is considered other-than-temporary and a realized loss is recorded to realizable value.

All other bonds in an unrealized loss position are periodically reviewed to determine if a decline in fair value to below amortized cost is other-than-temporary. Factors considered during this review include timing and amount of expected cash flows, ability of the issuer to meet its obligations, financial condition and future prospects of the issuer, amount and quality of any underlying collateral and current economic and industry conditions that may impact an issuer.

Stocks may experience other-than-temporary impairment based on the prospects for full recovery in value in a reasonable period of time and the Company’s ability and intent to hold the stock to recovery. If a stock is determined to be other-than-temporarily impaired, a realized loss is recorded equal to the difference between the cost basis of the investment and its fair value.

Investments in subsidiaries. The investment in the Company’s wholly-owned insurance subsidiaries, NLAIC and Eagle, are carried using the equity method of accounting applicable to U.S. insurance subsidiary, controlled and affiliated (“SCA”) entities. This requires the investment to be recorded based on the value of its underlying audited statutory surplus. Furthermore, the equity method of accounting would be discontinued if the investment is reduced to zero, unless the Company has guaranteed obligations of the subsidiary or otherwise committed to provide further financial support. In accordance with the “look through” provisions of Statements of Statutory Accounting Principles (“SSAP”) No. 97, Investments in Subsidiary, Controlled and Affiliated Entities, the valuation of JNF, an unaudited downstream noninsurance holding company, is based on the individual audited SCA entities owned by the holding company. Additionally, all non-affiliated liabilities, commitments, contingencies, guarantees or obligations of the holding company are reflected in the determination of the carrying value of the investments. The Company’s investment in NISC and NIA, wholly-owned non-insurance subsidiaries, are carried using the equity method of accounting applicable to U.S. non-insurance subsidiary, controlled and affiliated entities. This requires the investment to be recorded based on its underlying audited GAAP equity. Investments in NLAIC, JNF and NISC are included in stocks, and the investment in Eagle is included in other invested assets on the statutory statements of admitted assets, liabilities, capital and surplus.

Mortgage loans, net of allowance. The Company holds commercial mortgage loans that are collateralized by properties throughout the U.S. Mortgage loans are held at unpaid principal balance adjusted for premiums and discounts, less a valuation allowance.

As part of the underwriting process, specific guidelines are followed to ensure the initial quality of a new mortgage loan. Third-party appraisals are obtained to support loaned amounts as the loans are collateral dependent or guaranteed.

The collectability and value of a mortgage loan is based on the ability of the borrower to repay and/or the value of the underlying collateral. Many of the Company’s mortgage loans are structured with balloon payment maturities, exposing the Company to risks associated with the borrowers’ ability to make the balloon payment or refinance the property. Loans are considered delinquent when contractual payments are 90 days past due.

F-12

NATIONWIDE LIFE INSURANCE COMPANY

(a wholly owned subsidiary of Nationwide Financial Services, Inc.)

Notes to December 31, 2019, 2018 and 2017 Statutory Financial Statements

Mortgage loans require a loan-specific reserve when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. When management determines that a loan requires a loan-specific reserve, a provision for loss is established equal to the difference between the carrying value and the fair value of the collateral less costs to sell. Loan-specific reserve charges are recorded in net realized capital gains and losses. In the event a loan-specific reserve charge is reversed, the recovery is also recorded in net realized capital gains and losses.

In addition to the loan-specific reserves, the Company maintains a non-specific reserve based primarily on loan surveillance categories and property type classes, which reflects management’s best estimates of probable credit losses inherent in the portfolio of loans without specific reserves as of the date of the statutory statements of admitted assets, liabilities, capital and surplus. Management’s periodic evaluation of the adequacy of the non-specific reserve is based on past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect a group of borrowers’ ability to repay in the portfolio, the estimated value of the underlying collateral, composition of the loan portfolio, current economic conditions and other relevant factors. Non-specific reserve changes are recorded directly in capital and surplus as net unrealized capital gains and losses.

Management evaluates the credit quality of individual mortgage loans and the portfolio as a whole through a number of loan quality measurements, including, but not limited to, loan-to-value (“LTV”) and debt service coverage (“DSC”) ratios. The LTV ratio is calculated as a ratio of the amortized cost of a loan to the estimated value of the underlying collateral. DSC is the amount of cash flow generated by the underlying collateral of the mortgage loan available to meet periodic interest and principal payments of the loan. These loan quality measurements contribute to management’s assessment of relative credit risk in the mortgage loan portfolio. Based on underwriting criteria and ongoing assessment of the properties’ performance, management believes the amounts, net of valuation allowance, are collectible. This process identifies the risk profile and potential for loss individually and in the aggregate for the commercial mortgage loan portfolios. These factors are updated and evaluated at least annually.

Interest income on performing mortgage loans is recognized in net investment income over the life of the loan using the effective-yield method. Loans in default or in the process of foreclosure are placed on non-accrual status. Interest received on non-accrual status mortgage loans is included in net investment income in the period received. Loans are restored to accrual status when the principal and interest is current and it is determined the future principal and interest payments are probable or the loan is modified.

Policy loans. Policy loans, which are collateralized by the related insurance policy, are held at the outstanding principal balance and do not exceed the net cash surrender value of the policy. As such, no valuation allowance for policy loans is required.

Cash and cash equivalents. Cash and cash equivalents include highly liquid investments with original maturities of less than three months.

Short-term investments. Short-term investments consist primarily of government agency discount notes with maturities of twelve months or less at acquisition. The Company carries short-term investments at amortized cost which approximates fair value. The Company and various affiliates maintain agreements with Nationwide Cash Management Company (“NCMC”), an affiliate, under which NCMC acts as a common agent in handling the purchase and sale of short-term securities for the respective accounts of the participants. Amounts on deposit with NCMC for the benefit of the Company are included in short-term investments on the statutory statements of admitted assets, liabilities, capital and surplus.

Other invested assets. Other invested assets consist primarily of alternative investments in hedge funds, private equity funds, private and emerging market debt funds, tax credit funds, real estate partnerships and the investment in Eagle. Except for investments in certain tax credit funds, these investments are recorded using the equity method of accounting. Changes in carrying value as a result of the equity method are reflected as net unrealized capital gains and losses as a direct adjustment to capital and surplus. Gains and losses are generally recognized through income at the time of disposal or when operating distributions are received. Partnership interests in tax credit funds are held at amortized cost with amortization charged to net investment income over the period in which the tax benefits, primarily credits, are earned. Tax credits are recorded as an offset to tax expense in the period utilized.

F-13

NATIONWIDE LIFE INSURANCE COMPANY

(a wholly owned subsidiary of Nationwide Financial Services, Inc.)

Notes to December 31, 2019, 2018 and 2017 Statutory Financial Statements

The Company has sold $2.2 billion, $2.0 billion and $1.7 billion in Tax Credit Funds to unrelated third parties as of December 31, 2019, 2018 and 2017, respectively. The Company has guaranteed after-tax benefits to the third-party investors through periods ending in 2037. These guarantees are in effect for periods of approximately 15 years each. The Tax Credit Funds provide a stream of tax benefits to the investors that will generate a yield and return of capital. If the tax benefits are not sufficient to provide these cumulative after-tax yields, the Company must fund any shortfall. The maximum amount of undiscounted future payments that the Company could be required to pay the investors under the terms of the guarantees is $1.4 billion, but the Company does not anticipate making any material payments related to the guarantees. The Company’s risks are mitigated in the following ways: (1) the Company has the right to buyout the equity related to the guarantee under certain circumstances, (2) the Company may replace underperforming properties to mitigate exposure to guarantee payments, (3) the Company oversees the asset management of the deals and (4) changes in tax laws are explicitly excluded from the Company’s guarantees of after-tax benefits.

Securities Lending. The Company has entered into securities lending agreements with a custodial bank whereby eligible securities are loaned to third parties, primarily major brokerage firms. These transactions are used to generate additional income in the securities portfolio. The Company is entitled to receive from the borrower any payments of interest and dividends received on loaned securities during the loan term. The agreements require a minimum of 102% of the fair value of the loaned securities to be held as collateral. Cash collateral is invested by the custodial bank in investment-grade securities, which are included in the total invested assets of the Company. Periodically, the Company may receive non-cash collateral, which would be recorded off-balance sheet. The Company recognizes loaned securities in bonds. A securities lending payable is recorded in other liabilities for the amount of cash collateral received. If the fair value of the collateral received (cash and/or securities) is less than the fair value of the securities loaned, the shortfall is nonadmitted. Net income received from securities lending activities is included in net investment income. Because the borrower or the Company may terminate a securities lending transaction at any time, if loans are terminated in advance of the reinvested collateral asset maturities, the Company would repay its securities lending obligations from operating cash flows or the proceeds of sales from its investment portfolio, which includes significant liquid securities.

Derivative Instruments

The Company uses derivative instruments to manage exposures and mitigate risks primarily associated with interest rates, equity markets and foreign currency. These derivative instruments primarily include interest rate swaps, cross-currency swaps, futures and options.

Derivative instruments used in hedging transactions considered to be effective hedges are reported in a manner consistent with the hedged items. Derivative instruments used in hedging transactions that do not meet or no longer meet the criteria of an effective hedge are accounted for at fair value with changes in fair value recorded in capital and surplus as unrealized gains or losses.

The fair value of derivative instruments is determined using various valuation techniques relying predominantly on observable market inputs. These inputs include interest rate swap curves, credit spreads, interest rates, counterparty credit risk, equity volatility and equity index levels.

The Company’s derivative transaction counterparties are generally financial institutions. To reduce the credit risk associated with open contracts, the Company enters into master netting agreements which permit the closeout and netting of transactions with the same counterparty upon the occurrence of certain events. In addition, the Company attempts to reduce credit risk by obtaining collateral from counterparties. The determination of the need for and the levels of collateral vary based on an assessment of the credit risk of the counterparty. The Company accepts collateral in the forms of cash and marketable securities. Non-cash collateral received is recorded off-balance sheet.

Cash flows and payment accruals on derivatives are recorded in net investment income.

Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources while unobservable inputs reflect the Company’s view of market assumptions in the absence of observable market information. The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. In determining fair value, the Company uses various methods, including market, income and cost approaches.

The Company categorizes its financial instruments into a three-level hierarchy based on the priority of the inputs to the valuation technique. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure fair value fall within different levels of the hierarchy, the category level is based on the lowest priority level input that is significant to the fair value measurement of the instrument in its entirety.

F-14

NATIONWIDE LIFE INSURANCE COMPANY

(a wholly owned subsidiary of Nationwide Financial Services, Inc.)

Notes to December 31, 2019, 2018 and 2017 Statutory Financial Statements

The Company categorizes assets and liabilities held at fair value in the statutory statements of admitted assets, liabilities, capital and surplus as follows:

Level 1. Unadjusted quoted prices accessible in active markets for identical assets or liabilities at the measurement date and mutual funds where the value per share (unit) is determined and published daily and is the basis for current transactions.

Level 2. Unadjusted quoted prices for similar assets or liabilities in active markets or inputs (other than quoted prices) that are observable or that are derived principally from or corroborated by observable market data through correlation or other means. Primary inputs to this valuation technique may include comparative trades, bid/asks, interest rate movements, U.S. Treasury rates, London Interbank Offered Rate (“LIBOR”), prime rates, cash flows, maturity dates, call ability, estimated prepayments and/or underlying collateral values.

Level 3. Prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. Inputs reflect management’s best estimates of the assumptions market participants would use at the measurement date in pricing the asset or liability. Consideration is given to the risk inherent in both the method of valuation and the valuation inputs. Primary inputs to this valuation technique include broker quotes and comparative trades.

The Company reviews its fair value hierarchy classifications for assets and liabilities quarterly. Changes in observability of significant valuation inputs identified during these reviews may trigger reclassifications. Reclassifications are reported as transfers at the beginning of the period in which the change occurs.

Asset Valuation Reserve

The Company maintains an AVR as prescribed by the NAIC for the purpose of offsetting potential credit related investment losses on each invested asset category, excluding cash, policy loans and income receivable. The AVR contains a separate component for each category of invested assets. The change in AVR is charged or credited directly to capital and surplus.

Interest Maintenance Reserve

The Company records an IMR as prescribed by the NAIC, which represents the net deferral for interest-related gains or losses arising from the sale of certain investments, such as bonds, mortgage loans and loan-backed and structured securities sold. The IMR is applied as follows:

●

For bonds, the designation from the NAIC Capital Markets and Investments Analysis Office must not have changed more than one designation between the beginning of the holding period and the date of sale;

●

the bond must never have been classified as a default security;

●

for mortgage loans, during the prior two years, they must not have had interest more than 90 days past due, been in the process of foreclosure or in the course of voluntary conveyance, nor had restructured terms; and

●

for loan-backed and structured securities, all interest-related other-than-temporary impairments and interest-related realized gains or losses on sales of the securities.

The realized gains or losses, net of related federal income tax, from the applicable bonds and mortgage loans sold, have been removed from the net realized gain or loss amounts and established as a net liability. This liability is amortized into income such that the amount of each capital gain or loss amortized in a given year is based on the excess of the amount of income which would have been reported that year, if the asset had not been disposed of over the amount of income which would have been reported had the asset been repurchased at its sale price. In the event the unamortized IMR liability balance is negative, the balance is reclassified as an asset and fully nonadmitted. The Company utilizes the grouped method for amortization. Under the grouped method, the liability is amortized into income over the remaining period to expected maturity based on the groupings of the individual securities into five-year bands.

Goodwill

For companies whose operations are primarily insurance related, goodwill is the excess of the cost to acquire a company over the Company’s share of the statutory book value of the acquired entity. Goodwill is recorded in stocks in the statutory statements of admitted assets, liabilities and surplus. Goodwill is amortized on a straight-line basis over the period of economic benefit, not to exceed ten years, with a corresponding charge to surplus.

Unamortized goodwill totaled $116 million and $132 million as of December 31, 2019 and 2018, respectively. All unamortized goodwill as of December 31, 2019 and 2018, is related to the acquisition of JNF, which represents 69% and 76%, respectively, of JNF’s gross SCA value. All goodwill was admitted as of December 31, 2019 and 2018. Amortization of goodwill totaled $16 million, $16 million and $14 million for the years ended December 31, 2019, 2018 and 2017, respectively. No goodwill was impaired during these periods.

F-15

NATIONWIDE LIFE INSURANCE COMPANY

(a wholly owned subsidiary of Nationwide Financial Services, Inc.)

Notes to December 31, 2019, 2018 and 2017 Statutory Financial Statements

Federal Income Taxes

The Company utilizes the asset and liability method of accounting for income taxes. Under this method, deferred tax assets, net of any nonadmitted portion and statutory valuation allowance, and deferred tax liabilities, are recognized for the expected future tax consequences attributable to differences between the statutory financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income or loss in the years in which those temporary differences are expected to be recovered or settled. The change in deferred taxes, excluding the impact of taxes on unrealized capital gains or losses and nonadmitted deferred taxes, is charged directly to surplus.

The Company provides for federal income taxes based on amounts the Company believes it ultimately will owe. Inherent in the provision for federal income taxes are estimates regarding the deductibility of certain items and the realization of certain tax credits. In the event the ultimate deductibility of certain items or the realization of certain tax credits differs from estimates, the Company may be required to change the provision for federal income taxes recorded in the statutory financial statements, which could be significant.

Tax reserves are reviewed regularly and are adjusted as events occur that the Company believes impact its liability for additional taxes, such as lapsing of applicable statutes of limitations, conclusion of tax audits or substantial agreement with taxing authorities on the deductibility/nondeductibility of uncertain items, additional exposure based on current calculations, identification of new issues, release of administrative guidance or rendering of a court decision affecting a particular tax issue. The Company believes its tax reserves reasonably provide for potential assessments that may result from Internal Revenue Service (“IRS”) examinations and other tax-related matters for all open tax years.

The Company is included in the NMIC consolidated federal income tax return.

Reinsurance Ceded

The Company cedes insurance to other companies in order to limit potential losses and to diversify its exposures. Such agreements do not relieve the Company of its primary obligation to the policyholder in the event the reinsurer is unable to meet the obligations it has assumed. Reinsurance premiums ceded and reinsurance recoveries on benefits and claims incurred are deducted from the respective income and expense accounts. Assets and liabilities related to reinsurance ceded are reported in the statutory statements of admitted assets, liabilities, capital and surplus on a net basis within the related future policy benefits and claims of the Company.

Participating Business

Participating business, which refers to policies that participate in profits through policyholder dividends, represented approximately 4% and 5% of the Company’s life insurance in force in 2019 and 2018, respectively, and 50% and 51% of the number of life insurance policies in force in 2019 and 2018, respectively. The provision for policyholder dividends was based on the respective year’s dividend scales, as approved by the Board of Directors. Policyholder dividends are recognized when declared. No additional income was allocated to participating policyholders during 2019 and 2018.

Subsequent Events

The Company evaluated subsequent events through March 20, 2020, the date the statutory financial statements were issued.

Subsequent to December 31, 2019, equity and financial markets have experienced significant volatility and interest rates have continued to decline due to the COVID-19 pandemic. The Company is currently in the process of determining the impact of the pandemic to its operations and financial condition.

F-16

NATIONWIDE LIFE INSURANCE COMPANY

(a wholly owned subsidiary of Nationwide Financial Services, Inc.)

Notes to December 31, 2019, 2018 and 2017 Statutory Financial Statements

(3)

Analysis of Actuarial Reserves and Deposit Liabilities by Withdrawal Characteristics

The following table summarizes the analysis of individual annuities actuarial reserves by withdrawal characteristics, as of the dates indicated:

				Separate		Separate
	General			account with		account non-					% of
(in millions)	account			guarantees		guaranteed		Total			Total
December 31, 2019
Subject to discretionary withdrawal:
With market value adjustment	$	19		$	181	$	29	$	229			0	%
At book value less current surrender charge of 5% or more		270			-		-		270			1	%
At fair value		-			-		61,535		61,535			91	%
Total with market value adjustment or at fair value	$	289		$	181	$	61,564	$	62,034			92	%
At book value without adjustment (minimal or no charge or adjustment)		3,587			-		11		3,598			5	%
Not subject to discretionary withdrawal		1,761			-		56		1,817			3	%
Total, gross	$	5,637		$	181	$	61,631	$	67,449			100	%
Less: Reinsurance ceded		(104	)		-		-		(104	)
Total, net	$	5,533		$	181	$	61,631	$	67,345
Amount included in 'Subject to discretionary withdrawal at book value less current surrender charge of 5% or more' that will move to 'Subject to discretionary withdrawal at book value without adjustment (minimal or no charge or adjustment)'	$	128		$	-	$	-	$	128

December 31, 2018
Subject to discretionary withdrawal:
With market value adjustment	$	20		$	203	$	-	$	223			0	%
At book value less current surrender charge of 5% or more		422			-		-		422			1	%
At fair value		-			-		54,038		54,038			90	%
Total with market value adjustment or at fair value	$	442		$	203	$	54,038	$	54,683			91	%
At book value without adjustment (minimal or no charge or adjustment)		2,497			-		12		2,509			4	%
Not subject to discretionary withdrawal		2,622			-		49		2,671			5	%
Total, gross	$	5,561		$	203	$	54,099	$	59,863			100	%
Less: Reinsurance ceded		(105	)		-		-		(105	)
Total, net	$	5,456		$	203	$	54,099	$	59,758
Amount included in 'Subject to discretionary withdrawal at book value less current surrender charge of 5% or more' that will move to 'Subject to discretionary withdrawal at book value without adjustment (minimal or no charge or adjustment)'	$	223		$	-	$	-	$	223

F-17

NATIONWIDE LIFE INSURANCE COMPANY

(a wholly owned subsidiary of Nationwide Financial Services, Inc.)

Notes to December 31, 2019, 2018 and 2017 Statutory Financial Statements

The following table summarizes the analysis of group annuities actuarial reserves by withdrawal characteristics, as of the dates indicated:

				Separate		Separate
	General			account with		account non-					% of
(in millions)	account			guarantees		guaranteed		Total			Total
December 31, 2019
Subject to discretionary withdrawal:
With market value adjustment	$	16,485		$	2,166	$	-	$	18,651			44	%
At book value less current surrender charge of 5% or more		1			-		-		1			0	%
At fair value		-			-		18,284		18,284			43	%
Total with market value adjustment or at fair value	$	16,486		$	2,166	$	18,284	$	36,936			87	%
At book value without adjustment (minimal or no charge or adjustment)		5,354			-		-		5,354			12	%
Not subject to discretionary withdrawal		584			2		-		586			1	%
Total, gross	$	22,424		$	2,168	$	18,284	$	42,876			100	%
Less: Reinsurance ceded		(60	)		-		-		(60	)
Total, net	$	22,364		$	2,168	$	18,284	$	42,816
Amount included in 'Subject to discretionary withdrawal at book value less current surrender charge of 5% or more' that will move to 'Subject to discretionary withdrawal at book value without adjustment (minimal or no charge or adjustment)'	$	1		$	-	$	-	$	1

December 31, 2018
Subject to discretionary withdrawal:
With market value adjustment	$	15,748		$	2,366	$	-	$	18,114			46	%
At book value less current surrender charge of 5% or more		76			-		-		76			0	%
At fair value		-			-		15,869		15,869			40	%
Total with market value adjustment or at fair value	$	15,824		$	2,366	$	15,869	$	34,059			86	%
At book value without adjustment (minimal or no charge or adjustment)		4,938			-		-		4,938			12	%
Not subject to discretionary withdrawal		614			2		-		616			2	%
Total, gross	$	21,376		$	2,368	$	15,869	$	39,613			100	%
Less: Reinsurance ceded		(63	)		-		-		(63	)
Total, net	$	21,313		$	2,368	$	15,869	$	39,550
Amount included in 'Subject to discretionary withdrawal at book value less current surrender charge of 5% or more' that will move to 'Subject to discretionary withdrawal at book value without adjustment (minimal or no charge or adjustment)'	$	4		$	-	$	-	$	4

F-18

NATIONWIDE LIFE INSURANCE COMPANY

(a wholly owned subsidiary of Nationwide Financial Services, Inc.)

Notes to December 31, 2019, 2018 and 2017 Statutory Financial Statements

The following table summarizes the analysis of deposit-type contracts and other liabilities without life or disability contingencies by withdrawal characteristics, as of the dates indicated:

			Separate
	General		account non-				% of
(in millions)	account		guaranteed		Total		Total
December 31, 2019
Subject to discretionary withdrawal:
With market value adjustment	$	3	$	-	$	3		0	%
At fair value		13		-		13		0	%
Total with market value adjustment or at fair value	$	16	$	-	$	16		0	%
At book value without adjustment (minimal or no charge or adjustment)		775		4		779		25	%
Not subject to discretionary withdrawal		2,331		12		2,343		75	%
Total, gross	$	3,122	$	16	$	3,138		100	%
Less: Reinsurance ceded		-		-		-
Total, net	$	3,122	$	16	$	3,138

December 31, 2018
Subject to discretionary withdrawal:
With market value adjustment	$	4	$	-	$	4		0	%
At fair value		13		-		13		0	%
Total with market value adjustment or at fair value	$	17	$	-	$	17		0	%
At book value without adjustment (minimal or no charge or adjustment)		504		4		508		14	%
Not subject to discretionary withdrawal		3,316		12		3,328		86	%
Total, gross	$	3,837	$	16	$	3,853		100	%
Less: Reinsurance ceded		-		-		-
Total, net	$	3,837	$	16	$	3,853

The following table is a reconciliation of total annuity actuarial reserves and deposit fund liabilities, as of the dates indicated:

	December 31,
(in millions)	2019		2018
Life, accident and health annual statement:
Annuities, net (excluding supplemental contracts with life contingencies)	$	27,880	$	26,750
Supplemental contracts with life contingencies, net		17		19
Deposit-type contracts		3,122		3,837
Subtotal	$	31,019	$	30,606

Separate accounts annual statement:
Annuities, net (excluding supplemental contracts with life contingencies)	$	82,264	$	72,539
Other contract deposit funds		16		16
Subtotal	$	82,280	$	72,555
Total annuity actuarial reserves and deposit fund liabilities, net	$	113,299	$	103,161

F-19

NATIONWIDE LIFE INSURANCE COMPANY

(a wholly owned subsidiary of Nationwide Financial Services, Inc.)

Notes to December 31, 2019, 2018 and 2017 Statutory Financial Statements

The following table summarizes the analysis of life actuarial reserves by withdrawal characteristics, as of the dates indicated:

	General account									Separate account - nonguaranteed
	Account			Cash						Account		Cash
(in millions)	value			value			Reserve			value		value		Reserve
December 31, 2019
Subject to discretionary withdrawal, surrender values or policy loans:
Term policies with cash value	$	-		$	11		$	11		$	-	$	-	$	-
Universal life		2,549			2,561			2,728			-		-		-
Universal life with secondary guarantees		335			265			613			-		-		-
Indexed universal life with secondary guarantees		140			99			146			-		-		-
Other permanent cash value life insurance		-			1,328			2,676			-		-		-
Variable life		1,903			1,992			2,080			21,853		21,840		19,596
Subtotal	$	4,927		$	6,256		$	8,254		$	21,853	$	21,840	$	19,596
Not subject to discretionary withdrawal or no cash value:
Term policies without cash value		-			-			299			-		-		-
Accidental death benefits		-			-			1			-		-		-
Disability - active lives		-			-			12			-		-		-
Disability - disabled lives		-			-			57			-		-		-
Miscellaneous reserves		-			-			36			-		-		-
Total, gross	$	4,927		$	6,256		$	8,659		$	21,853		21,840		19,596
Less: reinsurance ceded		(10	)		(10	)		(272	)		-		-		-
Total, net	$	4,917		$	6,246		$	8,387		$	21,853		21,840		19,596

F-20

NATIONWIDE LIFE INSURANCE COMPANY

(a wholly owned subsidiary of Nationwide Financial Services, Inc.)

Notes to December 31, 2019, 2018 and 2017 Statutory Financial Statements

	General account									Separate account - nonguaranteed
	Account			Cash						Account		Cash
(in millions)	value			value			Reserve			value		value		Reserve
December 31, 2018
Subject to discretionary withdrawal, surrender values or policy loans:
Term policies with cash value	$	-		$	11		$	11		$	-	$	-	$	-
Universal life		2,682			2,692			2,704			-		-		-
Universal life with secondary guarantees		309			245			534			-		-
Indexed universal life with secondary guarantees		103			73			108			-		-		-
Other permanent cash value life insurance		-			1,478			2,731			-		-		-
Variable life		1,626			1,715			1,799			16,599		16,583		16,583
Subtotal	$	4,720		$	6,214		$	7,887		$	16,599	$	16,583	$	16,583
Not subject to discretionary withdrawal or no cash value:
Term policies without cash value		-			-			337			-		-		-
Accidental death benefits		-			-			1			-		-		-
Disability - active lives		-			-			10			-		-		-
Disability - disabled lives		-			-			53			-		-		-
Miscellaneous reserves		-			-			35			-		-		-
Total, gross	$	4,720		$	6,214		$	8,323		$	16,599		16,583		16,583
Less: reinsurance ceded		(11	)		(11	)		(294	)		-		-		-
Total, net	$	4,709		$	6,203		$	8,029		$	16,599		16,583		16,583

The following table is a reconciliation of life actuarial reserves, as of the dates indicated:

	December 31,
(in millions)	2019		2018
Life, accident and health annual statement:
Life Insurance, net	$	8,292	$	7,937
Accidental death benefits, net		1		1
Disability - active lives, net		10		9
Disability - disabled lives, net		52		50
Miscellaneous reserves section, net		32		31
Subtotal	$	8,387	$	8,028

Separate accounts annual statement:
Annuities, net (excluding supplemental contracts with life contingencies)	$	22,138	$	18,905
Other contract deposit funds		5		2
Subtotal	$	22,143	$	18,907
Total annuity actuarial reserves and deposit fund liabilities, net	$	30,530	$	26,935

F-21

NATIONWIDE LIFE INSURANCE COMPANY

(a wholly owned subsidiary of Nationwide Financial Services, Inc.)

Notes to December 31, 2019, 2018 and 2017 Statutory Financial Statements

Direct Premium Written by Managing General Agents and Third-Party Administrators

The following table summarizes direct premium written by managing general agents and third-party administrators as of December 31, 2019:

(in millions)
Managing general agent/ third party reserve	FEIN number		Exclusive contract	Types of business written	Types of authority granted¹	Total Direct Premium
RMTS - Manufacturers & Traders Trust Co.		20-1049240	Not Exclusive	Accident & health	C / CA / B / P / U	$	29
Fringe Insurance Benefits, Inc.		74-2616364	Not Exclusive	Accident & health	B / P / U		44
Star Line Group		04-3499188	Not Exclusive	Accident & health	C / CA / B / P / U		11
Consolidated Health Plans		04-3187843	Exclusive	Accident & health	C / CA / P / B		53
AccuRisk Solutions, LLC		31-1777676	Not Exclusive	Accident & health	C / CA / B / P /U		59
Merchants Benefit Administration, Inc.		86-0875918	Exclusive	Accident & health	B / C / CA / P		6
Roundstone Management, Ltd.		27-0371422	Not Exclusive	Accident & health	C / CA / B / P / U		70
Health Insurance Innovations		46-1282634	Not Exclusive	Accident & health	B / P / U		1
Gilsbar, Inc.		72-0519951	Not Exclusive	Accident & health	B / P / U		23
Matrix		01-0544915	Not Exclusive	Accident & health	C / CA / B / P / U		18
IRC		74-2824053	Not Exclusive	Accident & health	C / CA / B / P / U		26
TMS RE Inc		65-0644164	Not Exclusive	Accident & health	C / CA / B / P / U		94
United Group Programs Inc.		59-1896277	Not Exclusive	Accident & health	C / CA / B / P / U		7
USMGU		46-4619917	Not Exclusive	Accident & health	C / CA / B / P / U		3
Total Direct Premiums Written and Produced						$	444

Authority code key includes: C– claims payment, CA– claims adjustment, B- binding authority, P-premium collection, U- underwriting.

F-22

NATIONWIDE LIFE INSURANCE COMPANY

(a wholly owned subsidiary of Nationwide Financial Services, Inc.)

Notes to December 31, 2019, 2018 and 2017 Statutory Financial Statements

(4)

Separate Accounts

The Company’s separate account statement includes assets legally insulated from the general account as of the dates indicated, attributed to the following product lines:

	December 31, 2019				December 31, 2018
(in millions)	Separate account assets legally insulated		Separate account assets (not legally insulated)		Separate account assets legally insulated		Separate account assets (not legally insulated)
Product / Transaction:
Individual annuities	$	67,222	$	-	$	59,425	$	-
Group annuities		16,187		-		14,376		-
Life insurance		22,246		-		19,073		-
Total	$	105,655	$	-	$	92,874	$	-

The following table summarizes amounts paid towards separate account guarantees by the general account and related risk charges paid by the separate account for the years ended:

(in millions)	Total paid toward separate account guarantees		Risk charges paid to general account
2019	$	58	$	612
2018	$	18	$	594
2017	$	13	$	559
2016	$	36	$	507
2015	$	21	$	465

The Company does not engage in securities lending transactions within its separate accounts.

Most separate accounts held by the Company relate to individual and group variable annuity and variable universal life insurance contracts of a non-guaranteed return nature. The net investment experience of the separate accounts is credited directly to the contract holder and can be positive or negative. The individual variable annuity contracts generally provide an incidental death benefit of the greater of account value or premium paid (net of prior withdrawals). However, many individual variable annuity contracts also provide death benefits equal to (i) the most recent fifth-year anniversary account value, (ii) the highest account value on any previous anniversary, (iii) premiums paid increased 5% or certain combinations of these, all adjusted for prior withdrawals. The death benefit and cash value under the variable universal life policies may vary with the investment performance of the underlying investments in the separate accounts. The assets and liabilities of these separate accounts are carried at fair value and are non-guaranteed.

Certain other separate accounts relate to a guaranteed term option, which provides a guaranteed interest rate that is paid over certain maturity durations ranging from three to ten years, so long as certain conditions are met. If amounts allocated to the guaranteed term option are distributed prior to the maturity period, a market value adjustment can be assessed. The assets and liabilities of these separate accounts are carried at fair value and are included as a nonindexed guarantee.

Another separate account offered by the Company contains a group of universal life policies wherein the assets supporting the account values on the underlying policies reside in a Private Placement Separate Account. It provides an annual interest rate guarantee, subject to a minimum guarantee of 3%. The interest rate declared each year reflects the anticipated investment experience of the account and are included as a nonindexed guarantee less than or equal to 4%.

Another separate account offered by the Company contains a group of variable universal life policies wherein the assets supporting the account values on the underlying policies reside in a Private Placement Variable Separate Account. It provides a quarterly interest rate based on a crediting formula that reflects the market value to book value ratio of the investments, investment portfolio yield and a specified duration. The business has been included as a nonindexed guarantee less than or equal to 4%.

F-23

NATIONWIDE LIFE INSURANCE COMPANY

(a wholly owned subsidiary of Nationwide Financial Services, Inc.)

Notes to December 31, 2019, 2018 and 2017 Statutory Financial Statements

The following tables summarize the separate account reserves of the Company, as of the dates indicated:

			Nonindexed		Nonindexed
			guarantee		guarantee		Nonguaranteed
			less than or		more than		separate
(in millions)	Indexed		equal to 4%		4%		accounts		Total
December 31, 2019
Premiums, considerations or deposits	$	-	$	135	$	-	$	6,007	$	6,142
Reserves
For accounts with assets at:
Fair value	$	-	$	2,202	$	146	$	99,612	$	101,960
Amortized cost		-		2,463		-		-		2,463
Total reserves	$	-	$	4,665	$	146	$	99,612	$	104,423
By withdrawal characteristics:
With market value adjustment	$	-	$	2,202	$	146	$	29	$	2,377
At book value without market value adjustment and with current surrender charge of 5% or more		-		-		-		-		-
At fair value		-		-		-		99,499		99,499
At book value without market value adjustment and with current surrender charge less than 5%		-		2,463		-		13		2,476
Subtotal	$	-	$	4,665	$	146	$	99,541	$	104,352
Not subject to discretionary withdrawal		-		-		-		71		71
Total reserves¹	$	-	$	4,665	$	146	$	99,612	$	104,423

The total reserves balance does not equal the liabilities related to separate accounts of $105.7 billion in the Statutory Statements of Admitted Assets, Liabilities, Capital and Surplus by $1.2 billion, due to an adjustment for CARVM/CRVM reserves and other liabilities that have not been allocated to the categories outlined above.

			Nonindexed		Nonindexed
			guarantee		guarantee		Nonguaranteed
			less than or		more than		separate
(in millions)	Indexed		equal to 4%		4%		accounts		Total
December 31, 2018
Premiums, considerations or deposits	$	-	$	122	$	-	$	6,270	$	6,392
Reserves
For accounts with assets at:
Fair value	$	-	$	2,371	$	198	$	86,569	$	89,138
Amortized cost		-		2,322		-		-		2,322
Total reserves	$	-	$	4,693	$	198	$	86,569	$	91,460
By withdrawal characteristics:
With market value adjustment	$	-	$	2,371	$	198	$	-	$	2,569
At book value without market value adjustment and with current surrender charge of 5% or more		-		-		-		-		-
At fair value		-		-		-		86,493		86,493
At book value without market value adjustment and with current surrender charge less than 5%		-		2,322		-		15		2,337
Subtotal	$	-	$	4,693	$	198	$	86,508	$	91,399
Not subject to discretionary withdrawal		-		-		-		61		61
Total reserves¹	$	-	$	4,693	$	198	$	86,569	$	91,460

The total reserves balance does not equal the liabilities related to separate accounts of $92.9 billion in the Statutory Statements of Admitted Assets, Liabilities, Capital and Surplus by $1.4 billion, due to an adjustment for CARVM/CRVM reserves and other liabilities that have not been allocated to the categories outlined above.

F-24

NATIONWIDE LIFE INSURANCE COMPANY

(a wholly owned subsidiary of Nationwide Financial Services, Inc.)

Notes to December 31, 2019, 2018 and 2017 Statutory Financial Statements

The following table is a reconciliation of net transfers to (from) separate accounts, as of the dates indicated:

	December 31,
(in millions)	2019			2018			2017
Transfers as reported in the statutory statements of operations of the separate accounts:
Transfers to separate accounts	$	6,142		$	6,392		$	6,732
Transfers from separate accounts		(9,470	)		(8,461	)		(7,327	)
Net transfers from separate accounts	$	(3,328	)	$	(2,069	)	$	(595	)
Reconciling adjustments:
Exchange accounts offsetting in the general account		(321	)		(303	)		(255	)
Fees not included in general account transfers		(68	)		(58	)		(67	)
Other miscellaneous adjustments not included in the general account balance		(30	)		(38	)		(33	)
Transfers as reported in the statutory statements of operations	$	(3,747	)	$	(2,468	)	$	(950	)

F-25

NATIONWIDE LIFE INSURANCE COMPANY

(a wholly owned subsidiary of Nationwide Financial Services, Inc.)

Notes to December 31, 2019, 2018 and 2017 Statutory Financial Statements

(5)

Investments

Bonds and Stocks

The following table summarizes the carrying value, the excess of fair value over carrying value, the excess of carrying value over fair value and the fair value of bonds and stocks, as of the dates indicated:

(in millions)	Carrying value		Fair value in excess of carrying value		Carrying value in excess of fair value		Fair value
December 31, 2019
Bonds:
U.S. Government	$	7	$	-	$	-	$	7
States, territories and possessions		398		42		1		439
Political subdivisions		344		52		1		395
Special revenues		2,702		370		5		3,067
Industrial and miscellaneous		26,240		2,012		65		28,187
Loan-backed and structured securities		5,433		238		31		5,640
Total bonds	$	35,124	$	2,714	$	103	$	37,735
Common stocks unaffiliated	$	181	$	-	$	-	$	181
Common stocks affiliated¹		2,386		-		-		2,386
Preferred stocks unaffiliated		55		4		-		59
Total stocks	$	2,622	$	4	$	-	$	2,626
Total bonds and stocks	$	37,746	$	2,718	$	103	$	40,361

December 31, 2018
Bonds:
U.S. Government	$	8	$	-	$	-	$	8
States, territories and possessions		363		25		2		386
Political subdivisions		268		35		1		302
Special revenues		2,043		191		6		2,228
Industrial and miscellaneous		24,661		438		738		24,361
Loan-backed and structured securities		5,005		188		59		5,134
Total bonds	$	32,348	$	877	$	806	$	32,419
Common stocks unaffiliated	$	138	$	-	$	-	$	138
Common stocks affiliated¹		1,644		-		-		1,644
Preferred stocks unaffiliated		38		6		2		42
Total stocks	$	1,820	$	6	$	2	$	1,824
Total bonds and stocks	$	34,168	$	883	$	808	$	34,243

Includes investment in NLAIC and JNF of $2.2 billion and $169 million as of December 31, 2019, respectively, and $1.5 billion and $175 million as of December 31, 2018, respectively.

The carrying value of bonds on deposit with various states as required by law or special escrow agreement was $3 million as of December 31, 2019 and 2018.

F-26

NATIONWIDE LIFE INSURANCE COMPANY

(a wholly owned subsidiary of Nationwide Financial Services, Inc.)

Notes to December 31, 2019, 2018 and 2017 Statutory Financial Statements

The following table summarizes the carrying value and fair value of bonds, by contractual maturity, as of December 31, 2019. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without early redemption penalties:

(in millions)	Carrying value		Fair value
Bonds:
Due in one year or less	$	1,000	$	1,009
Due after one year through five years		6,874		7,141
Due after five years through ten years		10,404		10,997
Due after ten years		11,413		12,948
Total bonds excluding loan-backed and structured securities	$	29,691	$	32,095
Loan-backed and structured securities		5,433		5,640
Total bonds	$	35,124	$	37,735

The following table summarizes the fair value and unrealized losses on bonds and stocks (amount by which cost or amortized cost exceeds fair value), for which other-than-temporary declines in value have not been recognized, based on the amount of time each type of bond or stock has been in an unrealized loss position, as of the dates indicated:

	Less than or equal to one year				More than one year				Total
(in millions)	Fair value		Unrealized losses		Fair value		Unrealized losses		Fair value		Unrealized losses
December 31, 2019
Bonds:
States, territories and possessions		23		1		-		-		23		1
Political subdivisions		65		1		-		-		65		1
Special revenues		397		5		-		-		397		5
Industrial and miscellaneous		852		9		911		103		1,763		112
Loan-backed and structured securities		704		6		1,124		28		1,828		34
Total bonds	$	2,041	$	22	$	2,035	$	131	$	4,076	$	153
Common stocks unaffiliated		32		-		16		1		48		1
Preferred stocks unaffiliated		1		-		-		-		1		-
Total bonds and stocks	$	2,074	$	22	$	2,051	$	132	$	4,125	$	154

December 31, 2018
Bonds:
U.S. Government	$	-	$	-	$	1	$	-	$	1	$	-
States, territories and possessions		107		2		-		-		107		2
Political subdivisions		29		1		-		-		29		1
Special revenues		230		4		53		3		283		7
Industrial and miscellaneous		10,798		437		4,314		368		15,112		805
Loan-backed and structured securities		1,950		24		649		41		2,599		65
Total bonds	$	13,114	$	468	$	5,017	$	412	$	18,131	$	880
Common stocks unaffiliated		39		6		-		-		39		6
Preferred stocks unaffiliated		35		2		-		-		35		2
Total bonds and stocks	$	13,188	$	476	$	5,017	$	412	$	18,205	$	888

As of December 31, 2019, management evaluated securities in an unrealized loss position and all non-marketable securities for impairment. As of the reporting date, the Company does not have the intent to sell and has the intent and ability to hold these securities until the fair value recovers, which may be maturity, and therefore, does not consider the securities to be other-than-temporarily impaired.

F-27

NATIONWIDE LIFE INSURANCE COMPANY

(a wholly owned subsidiary of Nationwide Financial Services, Inc.)

Notes to December 31, 2019, 2018 and 2017 Statutory Financial Statements

There was no intent to sell other-than-temporary impairments on loan-backed and structured securities for the years ended December 31, 2019 and 2018.

Mortgage Loans, Net of Allowance

The following table summarizes the amortized cost of mortgage loans by method of evaluation for credit loss, and the related valuation allowances by type of credit loss, as of the dates indicated:

	December 31,
(in millions)	2019		2018
Amortized cost:
Loans with non-specific reserves	$	7,675	$	7,783
Loans with specific reserves		14		6
Total amortized cost	$	7,689	$	7,789
Valuation allowance:
Non-specific reserves	$	31	$	23
Specific reserves		3		2
Total valuation allowance¹	$	34	$	25
Mortgage loans, net of allowance	$	7,655	$	7,764

Changes in the valuation allowance are due to current period provisions. These changes in the valuation allowance for the years ended December 31, 2019, 2018, and 2017 were immaterial.

As of December 31, 2019 and 2018, the Company’s mortgage loans classified as delinquent and/or in non-accrual status were immaterial in relation to the total mortgage loan portfolio.

The following table summarizes the LTV ratio and DSC ratio of the mortgage loan portfolio as of the dates indicated:

	LTV ratio									DSC ratio
(in millions)	Less than 90%			90% or greater			Total			Greater than 1.00			Less than 1.00			Total
December 31, 2019
Apartment	$	2,958		$	125		$	3,083		$	3,071		$	12		$	3,083
Industrial		905			-			905			904			1			905
Office		1,305			-			1,305			1,291			14			1,305
Retail		2,167			9			2,176			2,156			20			2,176
Other		220			-			220			220			-			220
Total	$	7,555		$	134		$	7,689		$	7,642		$	47		$	7,689
Weighted average DSC ratio		2.13			1.19			2.11			2.12			0.90			2.11
Weighted average LTV ratio		54	%		95	%		54	%		54	%		72	%		54	%

December 31, 2018
Apartment	$	3,064		$	71		$	3,135		$	3,135		$	-		$	3,135
Industrial		953			10			963			959			4			963
Office		1,329			-			1,329			1,323			6			1,329
Retail		2,169			-			2,169			2,167			2			2,169
Other		193			-			193			193			-			193
Total	$	7,708		$	81		$	7,789		$	7,777		$	12		$	7,789
Weighted average DSC ratio		2.08			1.59			2.07			2.07			0.76			2.07
Weighted average LTV ratio		55	%		94	%		56	%		56	%		61	%		56	%

As of December 31, 2019 and 2018, the Company has a diversified mortgage loan portfolio with no more than 23% and 24%, respectively, in a geographic region in the U.S. and no more than 1% with any one borrower. The maximum and minimum lending rates for mortgage loans originated or acquired during 2019 were 12.0% and 3.1%, respectively, and for those originated or acquired during 2018 were 10.0% and 2.8%, respectively. As of December 31, 2019 and 2018, the maximum LTV ratio of any one loan at the time of loan origination was 82% and 85%. As of December 31, 2019 and 2018, the Company did not hold mortgage loans with interest 90 days or more past due. Additionally, there were no taxes, assessments or any amounts advanced and not included in the mortgage loan portfolio.

F-28

NATIONWIDE LIFE INSURANCE COMPANY

(a wholly owned subsidiary of Nationwide Financial Services, Inc.)

Notes to December 31, 2019, 2018 and 2017 Statutory Financial Statements

Securities Lending

The fair value of loaned securities was $306 million and $145 million as of December 31, 2019 and 2018, respectively. The Company held $132 million and $101 million of cash collateral on securities lending as of December 31, 2019 and 2018, respectively. As of December 31, 2019, the carrying value and fair value of reinvested collateral assets was $133 million. As of December 31, 2018, the carrying value and fair value of reinvested collateral assets was $101 million. The fair value of bonds acquired with reinvested collateral assets was $134 million and $102 million as of December 31, 2019 and 2018, respectively. There are no securities lending transactions that extend beyond one year as of the reporting date. The Company received $180 million and $48 million of non-cash collateral on securities lending as of December 31, 2019 and 2018, respectively.

Low-Income Housing Tax Credit Funds

The amount of low-income housing tax credits and other tax benefits recognized was $35 million, $33 million and $32 million for the years ended December 31, 2019, 2018 and 2017, respectively.

The partnership interests in low-income housing tax credit funds recognized in the statements of admitted assets, liabilities, capital and surplus was $174 million and $166 million as of December 31, 2019 and 2018, respectively.

Net Investment Income

The following table summarizes net investment income by investment type, for the years ended:

	December 31,
(in millions)	2019			2018			2017
Bonds	$	1,408		$	1,378		$	1,414
Mortgage loans		353			335			335
Policy loans		45			54			38
Other		276			269			272
Gross investment income	$	2,082		$	2,036		$	2,059
Investment expenses		(108	)		(109	)		(101	)
Net investment income	$	1,974		$	1,927		$	1,958

There was no investment income due and accrued that was nonadmitted as of December 31, 2019 and 2018.

Net Realized Capital Gains and Losses

The following table summarizes net realized capital gains and losses for the years ended:

	December 31,
(in millions)	2019			2018			2017
Gross gains on sales	$	71		$	22		$	44
Gross losses on sales		(21	)		(16	)		(31	)
Net realized gains on sales	$	50		$	6		$	13
Net realized derivative losses		(515	)		(226	)		(382	)
Other-than-temporary impairments		(5	)		(8	)		(3	)
Total net realized losses on sales	$	(470	)	$	(228	)	$	(372	)
Tax expense on net losses		7			8			26
Net realized capital losses, net of tax	$	(477	)	$	(236	)	$	(398	)
Less: Realized (losses) gains transferred to the IMR		-			(1	)		3
Net realized capital losses, net of tax and transfers to the IMR	$	(477	)	$	(235	)	$	(401	)

For the year ended December 31, 2019, gross realized gains and gross realized losses on sales of bonds were $56 million and $19 million, respectively. For the year ended December 31, 2018, gross realized gains and gross realized losses on sales of bonds were $15 million and $13 million, respectively. For the year ended December 31, 2017, gross realized gains and gross realized losses on sales of bonds were $42 million and $26 million, respectively.

The Company did not enter into any material repurchase transactions that would be considered wash sales during the years ended December 31, 2019 and 2018.

F-29

NATIONWIDE LIFE INSURANCE COMPANY

(a wholly owned subsidiary of Nationwide Financial Services, Inc.)

Notes to December 31, 2019, 2018 and 2017 Statutory Financial Statements

Investment Commitments

The Company had unfunded commitments related to its investment in limited partnerships and limited liability companies totaling $496 million and $454 million as of December 31, 2019 and 2018, respectively. As of December 31, 2019 and 2018, there were $45 million and $179 million of commitments to purchase private placement bonds, $147 million and $7 million of outstanding commitments to fund mortgage loans and $0 and $11 million of outstanding commitments to purchase common stock, respectively.

(6)

Derivative Instruments

The Company is exposed to certain risks related to its ongoing business operations which are managed using derivative instruments.

Interest rate risk management. In the normal course of business, the Company enters into transactions that expose it to interest rate risk arising from mismatches between assets and liabilities. The Company may use interest rate swaps and futures to reduce or alter interest rate exposure.

Interest rate contracts are used by the Company in association with fixed and variable rate investments to achieve cash flow streams that support certain financial obligations of the Company and to produce desired investment returns. As such, interest rate contracts are generally used to convert fixed rate cash flow streams to variable rate cash flow streams or vice versa.

Equity market risk management. The Company issues a variety of insurance products that expose it to equity risks. To mitigate these risks, the Company enters into a variety of derivatives including equity index futures, options and total return swaps.

Other risk management. As part of its regular investing activities, the Company may purchase foreign currency denominated investments. These investments and the associated income expose the Company to volatility associated with movements in foreign exchange rates. As foreign exchange rates change, the increase or decrease in the cash flows of the derivative instrument are intended to mitigate the changes in the functional-currency equivalent cash flows of the hedged item. To mitigate this risk, the Company uses cross-currency swaps.

Credit risk associated with derivatives transactions. The Company periodically evaluates the risks within the derivative portfolios due to credit exposure. When evaluating this risk, the Company considers several factors which include, but are not limited to, the counterparty credit risk associated with derivative receivables, the Company’s own credit as it relates to derivative payables, the collateral thresholds associated with each counterparty and changes in relevant market data in order to gain insight into the probability of default by the counterparty. As of December 31, 2019 and 2018, the impact of the exposure to credit risk on the fair value measurement of derivatives and the effectiveness of the Company’s hedging relationships was immaterial.

F-30

NATIONWIDE LIFE INSURANCE COMPANY

(a wholly owned subsidiary of Nationwide Financial Services, Inc.)

Notes to December 31, 2019, 2018 and 2017 Statutory Financial Statements

The following table summarizes the fair value and related notional amounts of derivative instruments, as of the dates indicated:

(in millions)	Notional amount		Net carrying value			Fair value asset		Fair value liability			Average fair value
December 31, 2019
Interest rate swaps	$	7	$	(1	)	$	-	$	(1	)	$	-
Options		202		6			6		-			1
Cross currency swaps		1,537		66			99		(19	)		1
Futures		3,153		-			-		-			-
Total	$	4,899	$	71		$	105	$	(20	)	$	2

December 31, 2018
Interest rate swaps	$	7	$	(1	)	$	-	$	(1	)	$	(1	)
Options		234		2			2		-			-
Cross currency swaps		1,441		79			90		(36	)		1
Futures		2,647		-			-		-			-
Total	$	4,329	$	80		$	92	$	(37	)	$	-

Of the $105 million and $92 million of fair value of derivative assets as of December 31, 2019 and 2018, $14 million and $24 million were subject to master netting agreements, the Company received $68 million and $52 million of cash collateral and $45 million and $22 million in pledged securities, resulting in an immaterial uncollateralized position as of December 31, 2019 and 2018. Of the $20 million and $37 million of fair value of derivative liabilities as of December 31, 2019 and 2018, $14 million and $24 million were subject to master netting agreements, the Company posted $3 million and $12 million of cash collateral respectively, resulting in an immaterial uncollateralized position as of December 31, 2019 and 2018. Securities received as collateral are recorded off-balance sheet and exclude initial margin posted on derivatives of $128 million and $127 million as of December 31, 2019 and 2018, respectively.

The following table summarizes net gains and losses on derivatives programs by type of derivative instrument, as of the dates indicated:

	Net realized (losses) gains recorded in operations							Unrealized (losses) gains recorded in capital and surplus
	December 31,							December 31,
(in millions)	2019		2018			2017		2019		2018		2017
Interest rate swaps	$	-	$	(5	)	$	-	$	-	$	35

NATIONWIDE LIFE INS CO S-1