10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended December 31, 2007

or

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

For the transition period from              to             

Commission File Number: 1-12785

NATIONWIDE FINANCIAL SERVICES, INC.

(Exact name of registrant as specified in its charter)

Delaware	31-1486870
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

One Nationwide Plaza, Columbus, Ohio	43215
(Address of principal executive offices)	(Zip Code)

(614) 249-7111

(Registrant’s telephone number, including area code)

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

Class A Common Stock (par value $0.01 per share)	New York Stock Exchange
(Title of Class)	(Name of each exchange on which registered)

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

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  x    No  ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ¨    No  x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  x    Accelerated filer  ¨    Non-accelerated filer  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

Aggregate market value of the registrant’s voting common equity held by non-affiliates on June 30, 2007 computed by reference to the closing sale price per share of the registrant’s Class A common stock on the New York Stock Exchange as of June 30, 2007 was $3.23 billion.

As of February 26, 2008, the registrant had 46,154,188 shares outstanding of its Class A common stock (par value $0.01 per share) and 91,778,717 shares outstanding of its Class B common stock (par value $0.01 per share).

Documents Incorporated by Reference

Part III of this Form 10-K incorporates by reference certain information from the registrant’s definitive Proxy Statement for the 2008 Annual Meeting of Shareholders.

NATIONWIDE FINANCIAL SERVICES, INC. AND SUBSIDIARIES

FORM 10-K

FOR THE YEAR ENDED DECEMBER 31, 2007

TABLE OF CONTENTS

PART I		1
ITEM 1	BUSINESS	1
ITEM 1A	RISK FACTORS	17
ITEM 1B	UNRESOLVED STAFF COMMENTS	20
ITEM 2	PROPERTIES	20
ITEM 3	LEGAL PROCEEDINGS	20
ITEM 4	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	20
PART II		21
ITEM 5	MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS	21
ITEM 6	SELECTED CONSOLIDATED FINANCIAL DATA	24
ITEM 7	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	25
ITEM 7A	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	77
ITEM 8	CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	85
ITEM 9	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL D ISCLOSURE	85
ITEM 9A	CONTROLS AND PROCEDURES	85
ITEM 9B	OTHER INFORMATION	86
PART III		87
ITEM 10	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	87
ITEM 11	EXECUTIVE COMPENSATION	91
ITEM 12	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED S TOCKHOLDER MATTERS	91
ITEM 13	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	91
ITEM 14	PRINCIPAL ACCOUNTING FEES AND SERVICES	91
PART IV		92
ITEM 15	EXHIBITS, FINANCIAL STATEMENT SCHEDULES	92
CONSOLIDATED FINANCIAL STATEMENTS
REPORT OF MANAGEMENT		F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM		F-2
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM		F-3
CONSOLIDATED STATEMENTS OF INCOME		F-4
CONSOLIDATED BALANCE SHEETS		F-5
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY		F-6
CONSOLIDATED STATEMENTS OF CASH FLOWS		F-7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS		F-8
SIGNATURES		F-82

PART I

ITEM 1    BUSINESS

Overview

Nationwide Financial Services, Inc. (NFS, or collectively with its subsidiaries, the Company) was formed in November 1996. NFS is the holding company for Nationwide Life Insurance Company (NLIC) and other companies that comprise the domestic life insurance and retirement savings operations of the Nationwide group of companies (Nationwide). This group includes Nationwide Financial Network (NFN), which refers to Nationwide Life Insurance Company of America (NLICA) and subsidiaries, including the affiliated distribution network. NFS is incorporated in Delaware and maintains its principal executive offices in Columbus, Ohio.

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 diverse range of products including individual annuities, private and public sector group retirement plans, other investment products sold to institutions, life insurance and investment advisory services. The Company also provides a wide range of banking products and services through Nationwide Bank (see Part II, Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A)—Overview—Nationwide Bank Merger for more information) and mutual funds through Nationwide Funds Group (NFG) (see Part II, Item 7—MD&A—Overview—Nationwide Funds Group Acquisition for more information).

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, wirehouse and regional firms, pension plan administrators, and life insurance specialists. Representatives of the Company that market products directly to a customer base include Nationwide Retirement Solutions, Inc. (NRS), an indirect wholly-owned subsidiary; NFN producers; Mullin TBG Insurance Agency Services, LLC (Mullin TBG), a joint venture between the Company’s majority-owned subsidiary, TBG Insurance Services Corporation d/b/a TBG Financial (TBG Financial), and MC Insurance Agency Services, LLC d/b/a Mullin Consulting (Mullin Consulting) (see Part II, Item 7—MD&A—Overview—Discontinued Operations for information related to the Company’s intention to sell its interest in this business); and NFG. The Company also distributes retirement savings products through the agency distribution force of its ultimate majority parent company, Nationwide Mutual Insurance Company (NMIC). The Company believes its broad range of competitive products, strong distributor relationships and diverse distribution network position it to compete effectively in the rapidly growing retirement savings market.

The Company has grown its customer base in recent years as a result of its long-term investments in developing the distribution channels necessary to reach its target customers and the products required to meet the demands of these customers. The Company believes its growth has been enhanced further by favorable demographic trends and the growing tendency of Americans to supplement traditional sources of retirement income with self-directed investments, such as products offered by the Company. From 1997 to 2007, the Company’s customer funds managed and administered grew from $57.46 billion to $162.4 billion, a compound annual growth rate of 9.91%. Asset growth during this period resulted from net flows into the Company’s products, interest credited to and market appreciation of policyholder accounts, and acquisitions.

Capital Stock Transactions

The 46.7 million shares of Class A common stock outstanding as of December 31, 2007 are publicly held and primarily were issued through NFS’ initial public offering completed in March 1997 and in conjunction with the acquisition of NFN in October 2002. The Class A shares represent 33.7% of the equity ownership in NFS and 4.8% of the combined voting power of NFS’ Class A and Class B common stock as of December 31, 2007. Nationwide Corporation (Nationwide Corp.), a majority-owned subsidiary of NMIC, owns all of the outstanding shares of Class B common stock, which represents the remaining 66.3% equity ownership and 95.2% of the combined voting power of the shareholders of NFS as of December 31, 2007.

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Business Segments

Individual Investments

The Individual Investments segment consists of individual The BEST of AMERICA^® and private label deferred variable annuity products, individual annuity products, deferred fixed annuity products, income products and investment advisory services. Individual deferred annuity contracts provide the customer with tax-deferred accumulation of savings and flexible payout options including lump sum, systematic withdrawal or a stream of payments for life. In addition, individual variable annuity contracts provide the customer with access to a wide range of investment options and asset protection features, while individual fixed annuity contracts generate a return for the customer at a specified interest rate fixed for prescribed periods.

The following table summarizes selected financial data for the Company’s Individual Investments segment for the years ended December 31:

(in millions)	2007		2006		2005
Total revenues	$	1,469.8	$	1,526.6	$	1,528.2
Pre-tax operating earnings		300.7		223.1		250.7
Account values as of year end		53,587.0		52,963.6		51,227.6

The Company believes that demographic trends and shifts in attitudes toward retirement savings will continue to support increased consumer demand for its individual investment products. The Company also believes that it possesses distinct competitive advantages in the market for variable annuities. Some of the Company’s most important advantages include its innovative product offerings and strong relationships with independent well-known fund managers. The Company’s principal annuity product series, The BEST of AMERICA, allows customers to choose from over 50 investment options, which include funds managed by many of the premier U.S. mutual fund managers. The Company also sells individual fixed annuities, primarily through the financial institutions channel.

The Company markets its Individual Investments products through a broad spectrum of distribution channels, including independent broker/dealers, financial institutions, wirehouse and regional firms, pension plan administrators, NRS, NFN producers and Nationwide agents. The Company attempts to increase its market share of sales through these channels by working closely with its investment managers and product distributors to adapt the Company’s products and services to changes in the retail and institutional marketplace.

The variable annuity market is attractive to the Company because of its demographic positioning and unique value proposition. The retirement income and other financial protection that characterize the current variable annuity market are valuable tools for individuals approaching or already in retirement. Tremendous opportunity exists for variable annuity providers that can reach this growing market as the baby boomer population approaches peak retirement ages. In addition, variable annuities generally have more favorable capital usage and risk-adjusted return prospects than fixed annuities. The Company has de-emphasized the sale of fixed annuities because of lower risk-adjusted return prospects and the difficulty in attracting and retaining customers in such a highly commoditized market.

The Company receives income from variable annuity contracts primarily in the form of asset fees. Most of the Company’s variable annuity products include a contingent deferred sales charge, also known as a “surrender charge” or “back-end load.” This charge is assessed against premium withdrawals in excess of specified amounts in the early years of the contract (usually the first seven years). Surrender charges are intended to protect the Company from withdrawals before the Company has had the opportunity to recover its initial sales expenses. Generally, surrender charges on individual variable annuity products equal 7% of deposits withdrawn during the first year, scaling ratably to no charge for the eighth year and beyond. Surrender charge periods of zero and four years are also available for some of the Company’s products.

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The Company’s variable annuity products consist almost entirely of flexible premium deferred variable annuity (FPVA) contracts. Such contracts are savings vehicles in which the customer makes a single deposit or series of deposits. The customer has the flexibility to invest in mutual funds managed by independent investment managers and NFG. In addition to mutual fund elections, fixed investment options are available to customers who purchase certain of the Company’s variable annuities by designation of some or all of their deposits to such options. A fixed option offers the customer a guarantee of principal and a guaranteed interest rate for a specified time period. Deposit intervals and amounts are flexible and, therefore, subject to variability. The value of a variable annuity fluctuates in accordance with the investment experience of the underlying mutual funds chosen by the customer. Such contracts have no maturity date and remain in force until the customer elects to take the proceeds of the annuity as a single payment or as a specified income stream for life or for a fixed number of years. The customer is permitted to withdraw all or part of the accumulated value of the annuity, less any applicable surrender charges, at any time. As specified in the FPVA contract, the customer generally can choose from a number of payment options that provide either a fixed or variable stream of benefit payments.

Guarantees are a common feature throughout the variable annuity industry. In addition to tax deferral, death benefit and living benefit guarantees differentiate variable annuities from other securities available in the financial services marketplace. Nearly all of the Company’s individual variable annuity products include guaranteed minimum death benefit (GMDB) features. A GMDB generally provides additional benefits if the annuitant dies and the policyholder’s contract value is less than a defined amount, which may be based on the premiums paid less amounts withdrawn or a policyholder contract value on a specified anniversary date. While GMDBs do create additional risk to the Company, such benefits are generally less valuable and less sensitive to assumption risk than living benefits. Accordingly, the Company is careful to offer only living benefit features that meet an acceptable risk/return profile. Beginning in 1999, the Company began offering optional guaranteed minimum income benefits (GMIBs), a living benefit that provides for enhanced annuitization guarantees. During 2003, the Company replaced its GMIB offering with Capital Preservation Plus, a guaranteed minimum accumulation benefit (GMAB) that provides a minimum investment return over 5 to 10 year horizons regardless of actual account performance. In 2005, the Company further modified its GMAB offering by developing a hybrid GMAB/guaranteed lifetime withdrawal benefit (GLWB) called Capital Preservation Plus Lifetime Income (CPPLI). This feature provides an enhanced retirement income floor option following the maturity of the GMAB guarantee. In 2006, the Company added a stand-alone GLWB, Lifetime Income (L.inc), to complement CPPLI in its product offerings. L.inc provides for enhanced retirement income security via guaranteed accumulation rates and withdrawal rates that increase with age without the liquidity loss associated with annuitization. The Company continually refines these features to keep them attractive to prospective buyers while also balancing the risk and costs borne by the Company. See Note 10 to the audited consolidated financial statements included in the F pages of this report for further discussion of variable annuity contracts offered by the Company.

Fixed annuity products are marketed to individuals who seek long-term savings products that provide a guarantee of principal, a stable net asset value and a guarantee of the interest rate to be credited to the principal amount for a specified time period. Fixed annuities generally consist of single premium deferred annuity (SPDA) and flexible premium deferred annuity (FPDA) contracts with initial interest guarantees of one to five years and annual re-determination of crediting rates thereafter. Both SPDAs and FPDAs are subject to long-term minimum crediting rates generally ranging from 1.5% to 3.5%. The Company invests fixed annuity customer deposits at its discretion in its general account investment portfolio, while variable annuity customer deposits are invested in mutual funds as directed by the customer and are held in the Company’s separate account. Unlike variable annuity assets that are held in the Company’s separate account, the Company bears the investment risk on assets held in its general account. The Company attempts to earn a spread by investing a customer’s deposits for higher yields than the interest rate it credits and associated expenses. Most fixed annuity contracts provide for the imposition of surrender charges, which are assessed against withdrawals (in excess of specified amounts) and serve to reimburse the company for unrecovered acquisition costs in the event of early termination. Generally, surrender charges on individual fixed annuity products are 6% to 8% of deposits withdrawn during the first year and typically decline annually, disappearing after five to seven contract years. Surrender charges are often limited to interest earned since inception. SPDA and FPDA contracts have no maturity date and remain in force

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until the customer elects to take the proceeds of the annuity as a single payment or as a specified income stream for life or for a fixed number of years. The Company’s individual fixed annuity products primarily are distributed through unaffiliated financial institutions and affiliated channels.

In 2005, the Company began issuing a fixed equity-indexed annuity (EIA) known as Clear Horizon. Unlike traditional individual fixed annuities, EIAs provide for interest earnings that are linked to the performance of specified equity market indices. Clear Horizon is a single premium, annual reset EIA under which an index credit is made (if applicable) on the last day of the calendar quarter of each policy anniversary, known as the index maturity date. The index credit is based on changes in the Standard & Poor’s (S&P) 500 Index and is subject to an index cap that varies based on when a contract is issued. Index credits are guaranteed never to be less than 0%.

Income products include single premium immediate annuity (SPIA) contracts. SPIAs are annuities that require a one-time deposit in exchange for guaranteed periodic annuity benefit payments, either for a certain time period or for the contractholder’s lifetime.

During 2007, the average net investment income earned and interest credited rates on contracts (including the fixed option under the Company’s variable contracts) in the Individual Investments segment were 5.69% and 3.76%, respectively (5.74% and 3.76%, respectively, in 2006).

The Company offers individual variable annuities under The BEST of AMERICA brand name. The Company also markets individual variable annuities as “private label” products.

Individual The BEST of AMERICA Products. The Company’s principal individual FPVA contracts are sold under the brand name The BEST of AMERICA, and the Company also offers FPVA contracts under different names. The BEST of AMERICA brand name individual variable annuities accounted for $5.17 billion (84%) of the Company’s Individual Investments segment sales in 2007 ($4.39 billion, or 81%, in 2006, and $3.14 billion, or 76%, in 2005) and $38.37 billion (72%) of the Company’s Individual Investments segment account values as of December 31, 2007 ($36.11 billion, or 68%, as of December 31, 2006). Certain of The BEST of AMERICA products are designed to allow for greater specialization of product design by distribution channel, liquidity options with shorter surrender charges, and enhanced death benefit and living benefit guarantees. America’s MarketFLEX Annuity is a specialty variable annuity offering tactical asset allocation services. All of these products generate asset fees and also may generate administration fees for the Company.

Private Label Individual Variable Annuities. These products accounted for $434.6 million (7%) of the Company’s Individual Investments segment sales in 2007 ($356.6 million, or 7%, in 2006, and $346.6 million, or 8%, in 2005) and $7.44 billion (14%) of the Company’s Individual Investments segment account values as of December 31, 2007 ($7.32 billion, or 14%, as of December 31, 2006). The Company has developed several private label variable annuity products in conjunction with other financial intermediaries. These products allow financial intermediaries to market products with substantially the same features as the Company’s brand name products to their own customer bases under their own brand names. The Company believes these private label products strengthen the Company’s ties to certain significant distributors of the Company’s products. These products generate asset fees and also may generate administrative fees for the Company.

Individual Deferred Fixed Annuity Contracts. Deferred fixed annuities consist of SPDA and FPDA contracts. Total deferred fixed annuities accounted for $156.3 million (3%) of the Company’s Individual Investments segment sales in 2007 ($186.5 million, or 3%, in 2006, and $194.4 million, or 5%, in 2005) and $4.72 billion (9%) of the Company’s Individual Investments segment account values as of December 31, 2007 ($6.54 billion, or 12%, as of December 31, 2006). SPDA and FPDA contracts are distributed primarily through financial institutions and Nationwide agents.

Individual Single Premium Immediate Annuity Contracts. The Company offers both fixed and variable SPIA contracts. SPIA contracts accounted for $216.7 million (4%) of the Company’s Individual Investments segment sales in 2007 ($230.7 million, or 4%, in 2006, and $196.7 million, or 5%, in 2005) and $2.10 billion (4%) of the

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Company’s Individual Investments account segment values as of December 31, 2007 ($2.03 billion, or 4%, as of December 31, 2006). SPIAs are annuities that require a one-time deposit in exchange for guaranteed, periodic annuity benefit payments, often for the contractholder’s lifetime. SPIA contracts are attractive to customers at or near retirement age seeking a steady stream of future income. The Company’s SPIA contracts are offered through both affiliated and unaffiliated distribution channels and may be purchased directly or through annuitization of any of the Company’s various individual and group deferred annuity contracts.

Retirement Plans

The Retirement Plans segment is comprised of the Company’s private and public sector retirement plans business. The private sector primarily includes Internal Revenue Code (IRC) Section 401 fixed and variable group annuity business generated through NLIC and trust and custodial services through Nationwide Trust Company, FSB, a division of Nationwide Bank (NTC). Also included in the private sector is Registered Investment Advisors Services, Inc. d/b/a RIA Services Inc. (RIA), which facilitates professional money management of participant assets by registered investment advisors. The public sector primarily includes IRC Section 457 and Section 401(a) business in the form of full-service arrangements that provide plan administration and fixed and variable group annuities as well as administration-only business.

The following table summarizes selected financial data for the Company’s Retirement Plans segment for the years ended December 31:

(in millions)	2007		2006		2005
Total revenues	$	1,146.2	$	1,115.6	$	1,045.2
Pre-tax operating earnings		252.6		221.2		191.3
Account values as of year end		80,546.6		76,597.1		69,850.8

Most private sector plans are sold through the Company’s trust product offerings. The Company also sells group annuity products, the majority of which are fixed annuities offered as an investment option along with the trust product offering. The mix of product sales is consistent with the Company’s significant investment in NTC to develop trust product capabilities not prevalent elsewhere in the market.

The Company’s variable group annuity and trust products provide individual participants the ability to invest in mutual funds managed by independent investment managers and NFG. Deposit intervals and amounts are flexible and, therefore, subject to variability. The value of a variable group annuity varies with the investment experience of the mutual funds chosen by participants. Participants are restricted in their ability to withdraw funds from these contracts without tax penalties. The Company receives income from variable group annuity and trust contracts primarily in the form of asset and administrative fees. In addition, many of the Company’s variable group annuity and trust products provide for a surrender charge that is assessed against withdrawals in excess of specified amounts made during a period generally not exceeding nine years from contract issuance. Surrender charges are intended to protect the Company from withdrawals early in the contract period, before the Company has had the opportunity to recover its sales expenses.

The Company’s fixed group annuity contracts provide individual participants a guarantee of principal and a guaranteed interest rate for a specified time period. The Company attempts to earn a spread by investing a participant’s deposits for higher yields than the interest rate credited to the participant’s contract.

During 2007, the average net investment income earned and interest credited rates on fixed contracts in the Retirement Plans segment were 5.88% and 3.98%, respectively (5.88% and 4.07%, respectively, during 2006).

The Company markets employer-sponsored group annuities to both public sector employees for use in connection with plans described under IRC Section 457, Section 403(b) and Section 401(a) and to private sector employees for use in connection with IRC Section 401 and 403(b) plans. In addition, trust products offered

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through NTC are marketed in the private sector. These private sector employer-sponsored group annuities and trust products are marketed under several brand names, including The BEST of AMERICA Group Pension Series.

The BEST of AMERICA Group Pension Series. These products are offered as group annuity contracts and trust products by NTC. The BEST of AMERICA group annuity products accounted for $1.06 billion (10%) of the Company’s Retirement Plans segment sales in 2007 ($1.23 billion, or 12%, in 2006, and $1.37 billion, or 14%, in 2005) and $7.18 billion (9%) of the Company’s Retirement Plans account values as of December 31, 2007 ($7.56 billion, or 10%, as of December 31, 2006). Trust products accounted for $5.13 billion (48%) of segment sales in 2007 ($4.50 billion, or 45%, in 2006, and $3.97 billion, or 42%, in 2005) and $21.81 billion (27%) of segment account values as of December 31, 2007 ($18.83 billion, or 25%, as of December 31, 2006). The BEST of AMERICA group products are typically offered only on a tax-qualified basis. These products may be structured with a variety of features that may be arranged in over 600 combinations of front-end loads, back-end loads and asset-based fees.

Section 457 Group Annuity Contracts. These group annuity contracts accounted for $1.55 billion (14%) of the Company’s Retirement Plans segment sales in 2007 ($1.53 billion, or 15%, in 2006, and $1.54 billion, or 16%, in 2005) and $17.10 billion (21%) of the Company’s Retirement Plans segment account values as of December 31, 2007 ($15.98 billion, or 21%, as of December 31, 2006). The Company offers a variety of group variable annuity contracts that are designed primarily for use in conjunction with plans described under IRC Section 457, which permits employees of state and local governments to defer a certain portion of their annual income and invest such income on a tax-deferred basis. These contracts typically generate asset fees and also may generate annual administrative fees for the Company.

Administration-Only Contracts. The Company offers administration and record-keeping services to IRC Section 457 plans outside of a group annuity contract. The contracts for these services accounted for $2.72 billion (25%) of the Company’s Retirement Plans segment sales in 2007 ($2.48 billion, or 25%, in 2006, and $2.34 billion, or 25%, in 2005) and $31.16 billion (39%) of the Company’s Retirement Plans segment account values as of December 31, 2007 ($27.97 billion, or 37%, as of December 31, 2006). In the past few years, the Company has experienced a shift in product mix from group annuity contracts to more administration-only cases. The Company collects a fee for administration-only contracts either as a percentage of plan assets or as a specified amount per participant or per contract.

NFN Group Annuities. NFN sells Selector+ Group Variable Annuities, which accounted for $149.4 million (1%) of the Company’s Retirement Plans segment sales in 2007 ($188.2 million, or 2%, in 2006, and $205.9 million, or 2%, in 2005) and provide diversified separate account investment options. The All Pro series of separate accounts is a series of multi-managed, style-specific separate accounts developed in conjunction with Wilshire Associates, Inc. The All Pro series is used in the STAR Program to develop asset allocation models. The STAR Program was developed to address the needs of plan sponsors making investment decisions to meet the stated objectives of their plan. The Selector+ Group Variable Annuity is available for governmental and corporate qualified retirement plans and has the flexibility to enable producers to choose from asset-based fees, deposit-based fees or a combination of both.

Individual Protection

The Individual Protection segment consists of investment life insurance products, including individual variable, corporate-owned life insurance (COLI) and bank-owned life insurance (BOLI) products; traditional life insurance products; and universal life insurance products. Life insurance products provide a death benefit and generally allow the customer to build cash value on a tax-advantaged basis.

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The following table summarizes selected financial data for the Company’s Individual Protection segment for the years ended December 31:

(in millions)	2007		2006		2005
Total revenues	$	1,349.7	$	1,321.0	$	1,321.1
Pre-tax operating earnings		299.8		280.8		266.1
Life insurance policy reserves as of year end		20,990.5		19,686.8		17,388.6
Life insurance in force as of year end		137,518.7		133,312.7		126,361.1

The Company seeks to become a leading provider of life insurance and protection solutions to small businesses and consumers, helping individuals achieve financial security as they prepare for and live in retirement. By continuing to invest in the expansion of its universal and variable universal life insurance products, the Company seeks to capture a growing share of new sales through its various distribution channels.

The Company markets its Individual Protection products through a broad spectrum of distribution channels. Unaffiliated entities that sell these products to their own customer bases include independent broker/dealers (including brokerage general agencies and producer groups), financial institutions, wirehouse and regional firms, and life insurance specialists. Representatives of the Company who market these products directly to a customer base include Mullin TBG, NFN producers and Nationwide agents.

COLI and BOLI Products. Corporations purchase COLI and banks purchase BOLI to fund non-qualified benefit plans. Corporations or banks may make a single premium payment or a series of premium payments. For fixed COLI and BOLI products, premium payments are credited with a guaranteed interest rate that is fixed for a specified time period. For variable COLI and BOLI products, the contractholder’s account value is credited with the investment experience of the underlying funds selected by the contractholder. COLI and BOLI products are sold through life insurance specialists, including Mullin TBG.

Traditional Life Insurance Products. Whole life insurance combines a death benefit with a savings plan that increases gradually over a period of years. The customer generally pays a level premium over the expected lifetime. Whole life insurance contracts allow customers to borrow against their savings and provide the option of surrendering the policy and receiving the accumulated cash value rather than the death benefit. Term life insurance provides only a death benefit without any savings component. Traditional life insurance products are sold through NFN producers and Nationwide agents, wirehouse and regional firms, and independent broker/dealers.

Universal Life and Variable Universal Life Insurance Products. The Company offers universal life insurance and variable universal life insurance products, including both flexible premium and single premium designs. These products provide life insurance under which the benefits payable upon death or surrender depend upon the policyholder’s account value. Universal life insurance provides whole life insurance with flexible premiums and adjustable death benefits. For universal life insurance, the policyholder’s account value is credited an adjustable rate of return set by the Company based on current interest rates. For variable universal life insurance, the policyholder’s account value is credited with the investment experience of the mutual funds chosen by the customer. Variable universal life insurance products also typically include a general account guaranteed interest investment option. For certain products, the Company guarantees that a policy will not lapse if the policyholder’s account value goes to zero, provided the policyholder has complied with the no lapse guarantee requirements, including the payment of minimum specified premiums. The Company’s variable universal life insurance products are marketed under the Nationwide and The BEST of AMERICA brand names, which have the same wide range of investment options as the Company’s variable annuity products. These products are distributed on an unaffiliated basis by independent broker/dealers, financial institutions, and wirehouse and regional firms, and on an affiliated basis by NFN producers and Nationwide agents.

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Corporate and Other

The Corporate and Other segment includes the medium-term note (MTN) program; the retail operations of Nationwide Bank; structured products business; revenues and expenses of the Company’s retail asset management business and non-insurance subsidiaries not reported in other segments; and other revenues and expenses not allocated to other segments.

The following table summarizes selected financial data for the Company’s Corporate and Other segment for the years ended December 31:

(in millions)	2007			2006			2005
Operating revenues	$	716.0		$	599.9		$	503.5
Pre-tax operating earnings		74.6			65.1			54.9
Non-operating net realized investment (losses) gains1		(152.8	)		(0.6	)		18.2

¹ Excluding operating items (periodic net amounts paid or received on interest rate swaps that do not qualify for hedge accounting treatment, trading portfolio realized gains and losses, trading portfolio valuation changes, and net realized gains and losses related to securitizations).

MTN Program. The Company’s MTN program represents sales of funding agreements that secure medium-term notes issued through an unrelated third party trust. This program was launched in 1999 to expand spread-based product offerings. Sales of funding agreements totaled $1.35 billion in 2007 ($1.78 billion in 2006 and $900.0 million in 2005) and accounted for the majority of the Company’s Corporate and Other segment account values as of December 31, 2007 and 2006. Sales under the Company’s MTN program are not included in the Company’s sales data, as they do not produce steady production flow that lends itself to meaningful comparisons.

Structured Products. Structured products transactions refer to the structuring, sale and management of investment programs, including commercial mortgage loan securitizations and low-income-housing tax credit syndications. The Company utilizes such transactions to optimize portfolio management decisions, generate fee income and increase assets under management.

Marketing and Distribution

The Company provides, through both its affiliated and unaffiliated channels, the means for employers sponsoring tax-favored retirement plans (such as those described in IRC Sections 401 and 457) to allow their employees to make contributions to such plans through payroll deductions. Typically, the Company obtains permission from an employer to market products to employees and arranges to deduct periodic deposits from employees’ regular paychecks. The Company believes that the payroll deduction market is characterized by more predictable levels of sales than other markets because these customers are less likely than customers in other markets to stop making annuity deposits, even in times of market volatility. In addition, the Company believes that payroll deduction access to customers provides significant insulation from competition by providing the customer with a convenient, planned method of periodic saving. Payroll deduction is the primary method used for collecting premiums and deposits in both the private sector market, where the Company’s products are distributed primarily through unaffiliated entities, and in the public sector market, where the Company’s products are distributed primarily by affiliated entities.

See Part II, Item 7—MD&A for sales by distribution channel for the years ended December 31, 2007, 2006 and 2005.

Unaffiliated Entities

Independent Broker/Dealers and Wirehouse and Regional Firms. The Company sells individual annuities, group retirement plans and life insurance through independent broker/dealers (including brokerage general agencies and producer groups in the Individual Protection segment) and wirehouse and regional firms in each

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state and the District of Columbia. The Company believes that it has developed strong broker/dealer relationships based on its diverse product mix, large selection of fund options and administrative technology. In addition to such relationships, the Company believes its financial strength and the Nationwide and The BEST of AMERICA brand names are competitive advantages in these distribution channels. The Company regularly seeks to expand this distribution network.

Financial Institutions. The Company markets individual variable and fixed annuities (under its brand names and on a private label basis), IRC Section 401 plans and life insurance through financial institutions, consisting primarily of banks and their subsidiaries. The Company believes that it has competitive advantages in this distribution channel, including its expertise in training financial institution personnel to sell annuities and pension products, its breadth of product offerings, its financial strength, the Nationwide and The BEST of AMERICA brand names, and the ability to offer private label products.

Pension Plan Administrators. The Company markets group retirement plans organized pursuant to IRC Section 401 and sponsored by employers as part of employee retirement programs through regional pension plan administrators. The Company also has linked pension plan administrators to the financial planning community to sell group pension products. The Company targets employers with 25 to 2,000 employees because it believes that these plan sponsors tend to require extensive record-keeping services from pension plan administrators and therefore are more likely to become long-term customers.

Life Insurance Specialists. The Company markets COLI and BOLI through life insurance specialists, which are firms that specialize in the design, implementation and administration of executive benefit plans.

Affiliated Entities

NRS. The Company markets various products and services to the public sector, primarily on a retail basis, through several subsidiary sales organizations. The Company markets group variable annuities and fixed annuities as well as administration and record-keeping services to state and local governments for use in their IRC Section 457 and Section 401(a) retirement programs. The Company maintains endorsement arrangements with state and local government entities, including the National Association of Counties (NACo), The United States Conference of Mayors (USCM) and The International Association of Fire Fighters (IAFF).

NFN Producers. NFN producers specialize in marketing asset accumulation, wealth preservation, life insurance, retirement and investment products to affluent individuals and business markets. NFN’s products (primarily variable life insurance and group annuities), are distributed through career agents, independent agents and a pension sales force. In addition to NFN products, NFN producers also sell other NFS products.

Mullin TBG. Mullin TBG sells NFS and unaffiliated entity COLI and BOLI products to fund non-qualified deferred compensation programs (see Part II, Item 7—MD&A—Overview—Discontinued Operations for information related to the Company’s intention to sell its interest in this business).

Nationwide Agents. The Company sells traditional, universal and variable universal life insurance products and individual annuities through the licensed agency distribution force of NMIC. Nationwide agents primarily target the holders of personal automobile and homeowners’ insurance policies issued by NMIC and affiliated companies. Nationwide agents exclusively sell Nationwide products and may not offer products that compete with those of the Company.

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Reinsurance

The Company follows the industry practice of reinsuring with other companies a portion of its life insurance and annuity risks in order to reduce net liability on individual risks, to provide protection against large losses and to obtain greater diversification of risks. During 2007, the Company increased the maximum amount of individual life insurance retained by the Company on any one life from $5.0 million to $10.0 million. This increase is prospective and did not change the retained amount for policies sold prior to the change. The Company cedes insurance primarily on an automatic basis, whereby risks are ceded to a reinsurer on specific blocks of business where the underlying risks meet certain predetermined criteria, and on a facultative basis, whereby the reinsurer’s prior approval is required for each risk reinsured. The Company also cedes insurance on a case-by-case basis, particularly where the Company may be writing new risks or is unwilling to retain the full costs associated with new lines of business. The Company maintains catastrophic reinsurance coverage to protect against large losses related to a single event. The ceding of risk does not discharge the original insurer from its primary obligation to the policyholder.

The Company has entered into reinsurance contracts with certain unaffiliated reinsurers to cede a portion of its general account life, annuity and health business. Total amounts recoverable under these reinsurance contracts include ceded reserves, paid and unpaid claims, and certain other amounts, and totaled $964.8 million and $1.09 billion as of December 31, 2007 and 2006, respectively. The impact of these contracts on the Company’s results of operations is immaterial. Under the terms of the contracts, specified assets have been placed in trusts as collateral for the recoveries. The trust assets are invested in investment grade securities, the fair value of which must at all times be greater than or equal to 100% or 102% of the reinsured reserves, as outlined in each of the underlying contracts. Certain portions of the Company’s variable annuity guaranteed benefit risks are also reinsured. These treaties reduce the Company’s exposure to death benefit and income benefit guarantee risk in the Individual Investments segment. The Company has no other material reinsurance arrangements with unaffiliated reinsurers.

The Company’s only material reinsurance agreements with affiliates are the modified coinsurance agreements pursuant to which NLIC ceded to other members of Nationwide all of its accident and health insurance business not ceded to unaffiliated reinsurers, as described in Note 17 to the audited consolidated financial statements included in the F pages of this report.

Ratings

Ratings with respect to claims-paying ability and financial strength are an important factor in establishing the competitive position of insurance companies. These ratings represent each rating agency’s opinion of an insurance company’s financial strength, operating performance, strategic position and ability to meet its obligations to policyholders. They are not evaluations directed toward the protection of investors and are not recommendations to buy, sell or hold securities. Such factors are of concern to policyholders, agents and intermediaries. Furthermore, rating agencies utilize proprietary capital adequacy models to establish ratings for the Company and certain subsidiaries. The Company’s ratings are at risk from changes in these models and the impact that changes in the underlying business in which it is engaged can have on such models. In an effort to minimize the adverse impact of this risk, the Company maintains regular communications with the rating agencies, performs evaluations using such capital adequacy models, and considers such models in the design of its products and transactions.

Ratings are important to maintaining public confidence in the Company and its ability to market its annuity and life insurance products. Rating agencies continually review the financial performance and condition of insurers, including the Company. Any lowering of the Company’s ratings could have a material adverse effect on the Company’s ability to market its products and could increase the rate of surrender of the Company’s products. Both of these consequences could have a material adverse effect on the Company’s liquidity and, under certain circumstances, net income. NLIC (and its insurance company subsidiary) and NLICA (and its main insurance

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company subsidiary) each have financial strength ratings of “A+” (Superior) from A.M. Best Company, Inc. (A.M. Best). Both NLIC and NLICA’s claims-paying ability/financial strength are rated “Aa3” (Excellent) by Moody’s Investors Service, Inc. (Moody’s) and “AA-” (Very Strong) by Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc. (S&P).

The Company’s financial strength is also reflected in the ratings of its senior notes, subordinated debentures, capital securities issued by a subsidiary trust and commercial paper issued by NLIC. The following table summarizes these ratings as of December 31, 2007:

	A.M. Best	Moody’s	S&P
Senior notes	a-	A3	A-
Subordinated debentures	bbb+	Baa1	BBB+
Capital securities issued by a subsidiary trust	bbb+	Baa1	BBB
Commercial paper issued by NLIC	AMB-1	P-1	A-1+

These ratings are subject to periodic review by A.M. Best, Moody’s and S&P, and the maintenance of such ratings cannot be assured. If any rating is reduced from its current level, the Company’s financial position and results of operations could be adversely affected.

Competition

The Company competes with many other insurers as well as non-insurance financial services companies, including banks, broker/dealers and mutual funds, some of whom have greater financial resources, offer alternative products and, with respect to other insurers, have higher ratings than the Company. While no single company dominates the marketplace, many of the Company’s competitors have well-established national reputations and substantially greater financial resources and market share than the Company. Competition in the Company’s lines of business primarily is based on price, product features, commission structure, perceived financial strength, claims-paying ability, customer and producer service, and name recognition.

Regulation

Regulation at State Level

As an insurance holding company, the Company is subject to regulation by the states in which its insurance subsidiaries are domiciled and/or transact business. Most states have enacted legislation that requires each insurance holding company and each insurance company in an insurance holding company system to register with the insurance regulatory authority of the insurance company’s state of domicile and annually furnish financial and other information concerning the operations of companies within the holding company system that materially affect the operations, management or financial condition of the insurers within such a system. Under such laws, a state insurance authority usually must approve in advance the direct or indirect acquisition of 10% or more of the voting securities of an insurance company domiciled in its state.

The Company is subject to the insurance holding company laws in the States of Ohio, Pennsylvania and Delaware. Under such laws, all transactions within an insurance holding company system affecting insurers must be fair and equitable, and each insurer’s policyholder surplus following any such transaction must be both reasonable in relation to its outstanding liabilities and adequate for its needs. These insurance holding company laws also require prior notice or regulatory approval of the change of control of an insurer or its holding company, material intercorporate transfers of assets within the holding company structure and certain other material transactions involving entities within the holding company structure.

The Company’s insurance subsidiaries are regulated and supervised in the jurisdictions in which they do business. Among other things, states regulate operating licenses; agent licenses; advertising and marketing practices; the form and content of insurance policies, including pricing; the type and amount of investments;

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statutory capital requirements; payment of dividends by insurance company subsidiaries; assessments by guaranty associations; affiliate transactions; and claims practices. These regulations are primarily intended to protect policyholders rather than shareholders. The Company cannot predict the effect that any proposed or future legislation may have on the financial condition or results of operations of the Company.

Insurance companies are required to file detailed annual and quarterly statutory financial statements with state insurance regulators in each of the states in which they do business, and their business and accounts are subject to examination by such agencies at any time. In addition, insurance regulators periodically examine an insurer’s financial condition, adherence to statutory accounting practices, and compliance with insurance department rules and regulations. Applicable state insurance laws, rather than federal bankruptcy laws, apply to the liquidation or restructuring of insurance companies. Changes in regulations, or in the interpretation of existing laws or regulations, may adversely impact pricing, reserve adequacy or exposure to litigation and could increase the costs of regulatory compliance by the Company’s insurance subsidiaries. Any proposed or future state legislation or regulations may negatively impact the Company’s financial position or results of operations.

As part of their routine regulatory oversight process, state insurance departments periodically conduct detailed examinations of the books, records and accounts of insurance companies domiciled in their states. Such examinations generally are conducted in cooperation with the insurance departments of multiple states under guidelines promulgated by the National Association of Insurance Commissioners (NAIC). The most recently completed financial examination of NLIC, Nationwide Life and Annuity Insurance Company (NLAIC), Nationwide Life Insurance Company of America (NLICA), Nationwide Life and Annuity Company of America (NLACA) and Nationwide Life Insurance Company of Delaware was conducted by the Ohio Department of Insurance (ODI) for the five-year period ended December 31, 2006 on behalf of itself and several other states. The examination was completed during the first quarter of 2008 and did not result in any significant issues or adjustments. The ODI, in addition to the departments of insurance of two other states involved with the exam, Pennsylvania and Delaware, issued reports for their respective domiciliary companies.

State insurance regulatory authorities regularly make inquiries, hold investigations and administer market conduct examinations with respect to insurers’ compliance with applicable insurance laws and regulations. NLIC, NLAIC, NLICA and NLACA are currently undergoing regulatory market conduct examinations in eight states. The Company’s insurance subsidiaries continuously monitor sales, marketing and advertising practices and related activities of their agents and personnel and provide continuing education and training in an effort to ensure compliance with applicable insurance laws and regulations. There can be no assurance that any non-compliance with such applicable laws and regulations would not have a material adverse effect on the Company.

In December 2004, the NAIC adopted model legislation implementing new disclosure requirements with respect to compensation of insurance producers. In 2005, related state legislation was adopted in a few states and focused on the producer rather than the insurance company. Although the Company is not aware of regulatory or legislative developments or proposals regarding producer compensation disclosure that would have a material impact on its operations, the NAIC maintains a task force that will continue to review producer compensation disclosure requirements, and additional changes that could impact the Company are possible.

Regulation of Dividends and Other Payments from Insurance Subsidiaries

As an insurance holding company, NFS’ ability to meet debt service obligations and pay operating expenses and dividends depends primarily on the receipt of sufficient funds from its primary operating subsidiary, NLIC. The inability of NLIC to pay dividends to NFS in an amount sufficient to meet debt service obligations and pay operating expenses and dividends would have a material adverse effect on the Company. The payment of dividends by NLIC is subject to restrictions set forth in the insurance laws and regulations of the State of Ohio, its domiciliary state. The State of Ohio insurance laws require Ohio-domiciled life insurance companies to seek prior regulatory approval to pay a dividend or distribution of cash or other property if the fair market value thereof, together with

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that of other dividends or distributions made in the preceding 12 months, exceeds the greater of (1) 10% of statutory-basis policyholders’ surplus as of the prior December 31 or (2) the statutory-basis net income of the insurer for the prior year. During the year ended December 31, 2007, NLIC paid dividends of $537.5 million to NFS, including a $242.5 million extraordinary dividend paid after obtaining approval from the ODI. NLIC’s statutory capital and surplus as of December 31, 2007 was $2.50 billion, and statutory net income for 2007 was $309.0 million. As of January 1, 2008, NLIC could not pay dividends to NFS without obtaining prior approval. As of April 2008, NLIC will be able to pay dividends to NFS totaling $246.5 million upon providing prior notice to the ODI. On February 20, 2008, NLIC declared a dividend of $246.5 million payable to NFS in April 2008. NLIC will provide notice to the ODI before paying this dividend to NFS.

The State of Ohio insurance laws also require insurers to seek prior regulatory approval for any dividend paid from other than earned surplus. Earned surplus is defined under the State of Ohio insurance laws as the amount equal to the Company’s unassigned funds as set forth in its most recent statutory financial statements, including net unrealized capital gains and losses or revaluation of assets. Additionally, following any dividend, an insurer’s policyholder surplus must be reasonable in relation to the insurer’s outstanding liabilities and adequate for its financial needs. The payment of dividends by NLIC may also be subject to restrictions set forth in the insurance laws of the State of New York that limit the amount of statutory profits on NLIC’s participating policies (measured before dividends to policyholders) available for the benefit of the Company and its shareholders.

The ability of NLICA to pay dividends to NFS is subject to regulation under Pennsylvania insurance law. Under Pennsylvania insurance laws, unless the Pennsylvania Insurance Department (PID) either approves or does not disapprove payment within 30 days after being notified, NLICA may not pay any cash dividends or other non-stock distributions to NFS during any 12-month period if the total payments exceed the greater of (1) 10% of statutory-basis policyholders’ surplus as of the prior December 31 or (2) the statutory-basis net income of the insurer for the prior year. NLICA paid a dividend of $75.0 million to NFS in 2007. The statutory capital and surplus of NLICA as of December 31, 2007 was $674.0 million, and statutory net income for the year ended December 31, 2007 was $91.6 million. As of January 1, 2008, NLICA could not pay dividends to NFS without obtaining prior approval.

NFS currently does not expect such regulator requirements to impair the ability of its insurance company subsidiaries to pay sufficient dividends in order for NFS to have the necessary funds available to meet its obligations.

Risk-Based Capital Requirements

In order to enhance the regulation of insurer solvency, the NAIC has adopted a model law to implement risk-based capital (RBC) requirements for life insurance companies. The requirements are designed to monitor capital adequacy and to raise the level of protection that statutory surplus provides for policyholders. The model law measures four major areas of risk facing life insurers: (1) the risk of loss from asset defaults and asset value fluctuation; (2) the risk of loss from adverse mortality (the relative incidence of death in a given time) and morbidity (the relative incidence of disability resulting from disease or physical impairment) experience; (3) the risk of loss from mismatching of asset and liability cash flow due to changing interest rates; and (4) business risks. Insurers having less statutory surplus than required by the RBC model formula will be subject to varying degrees of regulatory action depending on the level of capital inadequacy.

Based on the formula adopted by the NAIC, the adjusted capital of all of the Company’s insurance subsidiaries as of December 31, 2007 exceeded the levels at which the Company would be required to take corrective action.

Assessments Against and Refunds to Insurers

Insurance guaranty association laws exist in each state, the District of Columbia and the Commonwealth of Puerto Rico. Insurers doing business in any of these jurisdictions can be assessed for policyholder losses incurred by insolvent insurance companies. The amount and timing of any future assessment on or refund to the

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Company’s insurance subsidiaries under these laws cannot be reasonably estimated and are beyond the control of the Company and its insurance subsidiaries. A large part of the assessments paid by the Company’s insurance subsidiaries pursuant to these laws may be used as credits for a portion of the Company’s insurance subsidiaries’ premium taxes. For the years ended December 31, 2007, 2006 and 2005, net premium tax refunds received by the Company were immaterial.

Securities Laws

Certain of the Company’s insurance subsidiaries and certain policies and contracts offered by them are subject to regulation under the federal securities laws administered by the U.S. Securities and Exchange Commission (SEC) and under certain state securities laws. Certain separate accounts of the Company’s insurance subsidiaries are registered as investment companies under the Investment Company Act of 1940, as amended (Investment Company Act). Separate account interests under certain variable annuity contracts and variable insurance policies issued by the Company’s insurance subsidiaries are also registered under the Securities Act of 1933, as amended. Certain other subsidiaries of the Company are registered as broker/dealers under the Securities Exchange Act of 1934, as amended (Securities Exchange Act), and are members of, and subject to regulation by, the Financial Industry Regulatory Authority. Certain subsidiaries of the Company are also subject to the SEC’s net capital rules.

Certain of the Company’s subsidiaries are investment advisors registered under the Investment Advisors Act of 1940, as amended, and the Securities Act of 1933, as amended. The investment companies managed by such subsidiaries are registered with the SEC under the Investment Company Act, and the shares of certain of these entities are qualified for sale in certain states and the District of Columbia. A subsidiary of the Company is registered with the SEC as a transfer agent.

All aspects of the Company’s subsidiaries’ investment advisory activities are subject to applicable federal and state laws and regulations in the jurisdictions in which they conduct business. These laws and regulations primarily are intended to benefit investment advisory clients and investment company shareholders and generally grant supervisory agencies broad administrative powers, including the power to limit or restrict the transaction of business for failure to comply with such laws and regulations. In such event, the possible sanctions which may be imposed include the suspension of individual employees, limitations on the activities in which the investment advisor may engage, suspension or revocation of the investment advisor’s registration as an advisor, censure and fines.

Unitary Savings and Loan Holding Company Status

Nationwide Bank is a federal savings bank chartered by and subject to comprehensive regulation and periodic examination by the Office of Thrift Supervision (OTS) of the U.S. Department of the Treasury. As a result of the Company’s ownership of Nationwide Bank, the Company is a unitary savings and loan holding company subject to regulation by the OTS and the provisions of the Home Owners’ Loan Act of 1933 (Home Owners’ Loan Act). As a unitary savings and loan holding company, the Company generally is not restricted as to the types of business activities in which it may engage, so long as Nationwide Bank continues to meet the qualified thrift lender test (QTL Test). Under the Home Owners’ Loan Act, existing unitary savings and loan holding companies such as the Company are grandfathered with full powers to continue and expand their current activities. However, if the Company should fail to qualify as a unitary savings and loan holding company (as a result of failure of the QTL Test or otherwise), then the types of activities in which the Company and its non-savings association subsidiaries would be able to engage would generally be limited to those eligible for bank holding companies (subject, however, to the Company’s ability to elect status as a financial holding company under the Bank Holding Company Act of 1956, as amended by the Gramm-Leach-Bliley Act of 1999).

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ERISA Considerations

On December 13, 1993, the U.S. Supreme Court issued its opinion in John Hancock Mutual Life Insurance Company v. Harris Trust and Savings Bank, holding that certain assets in excess of amounts necessary to satisfy guaranteed obligations held by Hancock in its general account under a participating group annuity contract are “plan assets” and therefore subject to certain fiduciary obligations under the Employee Retirement Income Security Act of 1974, as amended (ERISA). ERISA requires that fiduciaries perform their duties solely in the interest of ERISA plan participants and beneficiaries, and with the care, skill, prudence and diligence that a prudent person acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims. The Court imposed ERISA fiduciary obligations to the extent that the insurer’s general account is not reserved to pay benefits under guaranteed benefit policies (i.e., benefits whose value would not fluctuate in accordance with the insurer’s investment experience).

The U.S. Secretary of Labor issued final regulations on January 5, 2000, providing guidance for determining, in cases where an insurer issues one or more policies backed by the insurer’s general account to or for the benefit of an employee benefit plan, which assets of the insurer constitute plan assets for purposes of ERISA and the IRC. The regulations apply only with respect to a policy issued by an insurer to an ERISA plan on or before December 31, 1998. In the case of such a policy, most provisions of the regulations became applicable on July 5, 2001. Generally, where the basis of a claim is that insurance company general account assets constitute plan assets, no person will be liable under ERISA or the IRC for conduct occurring prior to July 5, 2001. However, certain provisions under the final regulations are applicable as follows: (1) certain contract termination features became applicable on January 5, 2000 if the insurer engages in certain unilateral actions; and (2) the initial and separate account disclosure provisions became applicable July 5, 2000. New non-guaranteed benefit policies issued after December 31, 1998 subject the issuer to ERISA fiduciary obligations. Since the Company issues fixed group annuity contracts that are backed by its general account and used to fund employee benefit plans, the Company is subject to these requirements.

Tax Legislation

The American Jobs Creation Act of 2004 modified and codified the rules applicable to nonqualified deferred compensation plans, a market in which the Company provides services and products. The Pension Protection Act of 2006 imposed new conditions that must be met in order for death benefits from certain employer-owned life insurance contracts to continue to be received income tax-free. In addition, numerous changes were made to simplify the administration and operation of retirement programs such as individual retirement accounts and IRC Section 401(k) plans. In July 2007, the Internal Revenue Service (IRS) released new regulations regarding IRC Section 403(b) retirement arrangements, substantially increasing the administrative responsibilities of Section 403(b) contract issuers. These legislative and regulatory changes may lessen the competitive advantage of certain of the Company’s products compared to other investments. As a result, demand for certain of the Company’s products and services may be negatively impacted.

The U.S. Congress periodically has considered possible legislation that would eliminate many of the tax benefits currently afforded to annuity products. In November 2005, the President’s Advisory Panel on Federal Tax Reform issued a report containing proposals, which if enacted as proposed, could materially reduce the tax advantages of purchasing variable annuity and cash value life insurance products as compared to other investment vehicles. The report included several proposals regarding the creation of tax-advantaged retirement and life savings accounts that were similar to proposals previously made by the Bush administration. Although the proposals have not been enacted, those proposals, or other similar proposals, could be introduced for enactment in future periods.

Employees

As of December 31, 2007, the Company had approximately 4,800 employees, none of which were covered by a collective bargaining agreement.

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Available Information

The Company files electronically with the SEC its Current Reports on Form 8-K, Quarterly Reports on Form 10-Q, Annual Reports on Form 10-K and other reports, which are available on the SEC’s web site (http://www.sec.gov). In addition, all reports filed by the Company with the SEC may be read and copied at the SEC’s Public Reference Room located at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. The Company also makes available these reports, free of charge, on its web site under the SEC Filings subsection of the Investor Relations area (http://www.nationwidefinancial.com). The Company’s Code of Conduct, Governance Guidelines, Audit Committee Charter, Compensation Committee Charter, Governance Committee Charter, Finance Committee Charter and other corporate governance documents are also available on the Company’s web site. Copies of these documents are also available from the Company free of charge. Requests for copies should be made to Mark Barnett, Vice President—Investor Relations, One Nationwide Plaza, Columbus, Ohio 43215-2220, or via telephone at 614-249-8437.

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ITEM 1A    RISK FACTORS

Changes in general economic and market conditions and interest rates may significantly affect the value of the Company’s investment portfolio.

The Company’s investment portfolio primarily consists of fixed-income securities and mortgage loans on real estate. The market values of these invested assets fluctuate depending on general economic and market conditions and the interest rate environment. For example, if interest rates rise, the investments generally will decrease in value. If interest rates decline, the investments generally will increase in value with the possible exception of mortgage-backed securities (MBSs), which may decline due to higher prepayments on the mortgages underlying the securities.

MBSs, including collateralized mortgage obligations (CMOs), are subject to prepayment risks that vary with interest rates, among other things. During periods of declining interest rates, MBSs generally prepay faster as the underlying mortgages are prepaid and/or refinanced by borrowers in order to take advantage of lower rates. MBSs that have an amortized cost greater than par (i.e., purchased at a premium) may incur a reduction in yield or a loss as a result of such prepayments. In addition, during such periods, the Company generally will be unable to reinvest the proceeds of any such prepayment at comparable yields. Conversely, during periods of rising interest rates, the frequency of prepayments generally decreases. MBSs that have an amortized value less than par (i.e., purchased at a discount) may incur a decrease in yield or a loss as a result of slower prepayments.

There can be no assurance that management will be able to successfully manage the negative impact of interest rate changes. Additionally, for business, regulatory or other reasons, the Company periodically may elect or be required to sell certain of its invested assets when their fair values are less than their original cost, resulting in realized capital losses.

Changes in interest rates and in the financial markets may reduce the Company’s interest spread income, earnings and sales.

The Company is exposed to various interest rate risks. Many of the products contain guarantees that require the Company to credit at least a minimum rate of interest to policyholders. In addition, for competitive reasons, the Company may at times continue to credit above-minimum interest rates to policyholders despite reductions in prevailing market interest rates. Current crediting rates for many of the Company’s individual annuity products are at or near the contractual minimum rates. Decreases in market interest rates would result in declines in the portfolio yield on investments backing the Company’s individual annuity products. A reduction in interest spread income, the difference between the interest rates that the Company credits policyholders and the yield the Company is able to earn on investments, may reduce earnings. If policyholders cancel their policies or withdraw the cash values of their policies to seek better investment yields in response to changing interest rates, the Company’s revenues are likely to decrease. If market interest rates decline, net investment income will decrease if higher-yielding fixed-income securities mature or are redeemed and the proceeds must be reinvested in lower-yielding securities.

Volatility in interest rates and equity markets could reduce consumer demand for the Company’s products and result in lower sales.

Changes in interest rates may negatively impact the Company’s liquidity.

Significant increases in prevailing interest rates may cause the Company’s policyholders to withdraw the cash value of their policies as they seek more attractive returns. If large numbers of policyholders or policyholders with large balances withdraw their policy values, the Company may be required to borrow funds or liquidate investments to raise the cash necessary to fund their withdrawals. Particularly in periods of volatile interest rates, liquidations can result in capital losses to the Company. Because volatile interest rates often make fixed-income investments, such as mortgages and privately placed bonds, more difficult to sell, there also is a risk that the Company will find it difficult to raise the cash necessary to fund significant withdrawal activity.

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A decline in the equity markets can cause the values of the Company’s separate account assets to decline, reduce revenues, increase claims, increase payment obligations under guaranteed contracts and result in the accelerated amortization of deferred policy acquisition costs (DAC).

A significant source of revenues for the Company is derived from asset management fees, which are calculated as a percentage of separate account assets. Gains and losses in the equity markets will result in corresponding increases or decreases in separate account assets and asset management fee revenue. In addition, a decrease in separate account assets may decrease the Company’s expectations of future profit margins due to a decrease in asset fee revenue and/or an increase in guaranteed contract claims, which also may require the Company to accelerate amortization of DAC. See Part II, Item 7A—Quantitative and Qualitative Disclosures About Market Risk—Equity Market Risk for a complete discussion of risk factors related to equity market risk, including guaranteed contracts.

Recent developments in the residential mortgage market, especially the sub-prime market, may adversely affect the Company’s financial condition.

Recently, the residential mortgage market in the United States has deteriorated due to changing economic conditions. The Company has exposure to the sub-prime mortgage market due to certain investment portfolio holdings (see Part II, Item 7—MD&A—Investments—Mortgage-Backed and Asset-Backed Securities for further details). While the value of some of the Company’s mortgage securities has declined, management believes these declines in value are temporary and has the intent to hold to recovery. In addition, even though the Company closely monitors these holdings for impairment, the current valuation volatility and potential credit decline increase the Company’s overall risk of loss.

Deviations from assumptions regarding future persistency, mortality, morbidity and interest rates used in calculating reserve amounts could have a material adverse impact on the Company’s consolidated net income.

The process of calculating reserve amounts for a life insurance organization involves the use of a number of assumptions, including those related to persistency (how long a contract stays with a company), mortality, morbidity and interest rates (the rates expected to be paid or received on financial instruments, including insurance or investment contracts). Actual results could differ significantly from those assumed. As such, deviations from one or more of these assumptions could result in a material adverse impact on the Company’s consolidated net income.

A decline in the Company’s financial strength ratings could adversely affect the Company’s operations.

See Part I, Item 1—Business—Ratings for a description of risk factors related to ratings.

The Company’s insurance subsidiaries are subject to extensive regulations designed to benefit or protect policyholders rather than the Company.

See Part I, Item 1—Business—Regulation—Regulation at State Level for a general description of the regulations designed to benefit or protect policyholders. Changes in regulations or in the interpretation of existing laws or regulations may adversely impact pricing, reserve adequacy or exposure to litigation and could increase the costs of regulatory compliance by the Company’s insurance subsidiaries. Any proposed or future state legislation or regulations may negatively impact the Company’s financial position or results of operations.

Certain changes in federal laws and regulations may adversely affect the Company’s financial position or results of operations.

Although the federal government does not directly regulate the insurance industry, federal legislation, administrative policies and court decisions may significantly and adversely affect certain areas of the Company’s business. In addition to product tax issues, these areas include pension and employee welfare benefit plan

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regulation, financial services regulation and taxation generally. For example, the following events could adversely affect the Company’s business:

• changes in laws such as ERISA, as amended, that apply to group annuities (see Part I, Item 1—Business—Regulation—ERISA Considerations for a complete discussion of ERISA);

• changes in tax laws that would reduce or eliminate the tax-deferred accumulation of earnings on the premiums paid by the holders of annuities and life insurance products;

• repeal of the federal estate tax;

• changes in the availability of, or rules concerning the establishment and operation of, Section 401, 403(b) and 457 plans or individual retirement accounts;

• changes in tax laws (see Part I, Item 1—Business—Regulation—Tax Legislation for a description of risk factors related to potential tax legislation and “Tax Matters” in Note 18 to the audited consolidated financial statements included in the F pages of this report for information regarding the Company’s separate account dividends received reduction); or

• changes in tax regulations, such as the proposed regulations that would alter the way tax sheltered annuities described in Section 403(b) of the IRC may be offered and sold.

Litigation or regulatory actions in connection with late trading, market timing, compensation and bidding arrangements, unsuitable sales and replacements, the use of finite reinsurance and/or other sales practices could have a material adverse impact on the Company.

See Part I, Item 3—Legal Proceedings for a description of litigation and regulatory actions. These and future litigation matters may negatively affect the Company by resulting in the payment of substantial awards or settlements, increasing legal and compliance costs, requiring the Company to change certain aspects of its business operations, diverting management attention from other business issues or harming the Company’s reputation with customers.

Certain changes in accounting and/or financial reporting standards issued by the Financial Accounting Standards Board (FASB), the SEC or other standard-setting bodies could have a material adverse impact on the Company’s financial position or results of operations.

The Company is subject to the application of U.S. generally accepted accounting principles (GAAP), which periodically are revised and/or expanded. As such, the Company periodically is required to adopt new or revised accounting and/or financial reporting standards issued by recognized accounting standard setters or regulators, including the FASB and the SEC. It is possible that future requirements could change the Company’s current application of GAAP, resulting in a material adverse impact on the Company’s financial position or results of operations.

The continued threat of terrorism and ongoing military and other actions may result in decreases in the Company’s consolidated net income, revenue and assets under management and may adversely impact the Company’s consolidated investment portfolio.

The continued threat of terrorism within the U.S. and abroad, ongoing military and other actions, and heightened security measures in response to these types of threats may cause significant volatility and declines in the U.S., European and other securities markets, loss of life, property damage, additional disruptions to commerce and reduced economic activity. Actual terrorist attacks could cause a decrease in the Company’s consolidated net income and/or revenue as a result of decreased economic activity and/or payment of claims. In addition, some of the assets in the Company’s investment portfolio may be adversely affected by declines in the securities markets and economic activity caused by the continued threat of terrorism, ongoing military and other actions and heightened security measures.

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The Company cannot predict whether or the extent to which industry sectors in which the Company maintains investments may suffer losses as a result of potential decreased commercial and economic activity, how any such decrease might impact the ability of companies within the affected industry sectors to pay interest or principal on their securities, or how the value of any underlying collateral might be affected.

Although the Company does not believe that the continued threat of terrorist attacks will have any material impact on the Company’s financial strength or performance, the Company can offer no assurances that this threat, future terrorist-like events in the U.S. and abroad, or military actions by the U.S. will not have a material adverse impact on the Company’s business, financial position or results of operations.

The Company operates in a highly competitive industry, which can significantly impact operating results.

See Part I, Item 1—Business—Competition for a description of competitive factors affecting the Company. The Company’s revenues and profitability could be impacted negatively due to competition.

Unauthorized data access and other security breaches could have an adverse impact on the Company’s business and reputation.

Security breaches and other improper accessing of data in the Company’s facilities, networks or databases could result in loss or theft of data and information or systems interruptions that may expose the Company to liability and have an adverse impact on the Company’s business. Moreover, any compromise of the security of the Company’s data could harm the Company’s reputation and business. There can be no assurances that the Company will be able to implement security measures to prevent such security breaches.

ITEM 1B    UNRESOLVED STAFF COMMENTS

None.

ITEM 2    PROPERTIES

Pursuant to an arrangement between NMIC and certain of its subsidiaries, during 2007 the Company leased on average approximately 898,000 square feet of office space in the three-building home office complex and in other offices in central Ohio. In addition, the Company leases approximately 120,000 square feet of office space in Berwyn, Pennsylvania (of which approximately 90,000 square feet are subleased) and owns approximately 160,000 square feet of office space in Newark, Delaware (of which approximately 15,000 square feet are subleased to an affiliate). The Company believes that its present and planned facilities are adequate for the anticipated needs of the Company.

ITEM 3    LEGAL PROCEEDINGS

See Note 18 to the audited consolidated financial statements included in the F pages of this report for a discussion of legal proceedings.

ITEM 4    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

During the fourth quarter of 2007, no matters were submitted to a vote of security holders, through the solicitation of proxies or otherwise.

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PART II

ITEM 5 MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The Class A common stock of NFS is traded on the New York Stock Exchange under the symbol “NFS.” As of February 26, 2008, NFS had 111,143 registered shareholders of Class A common stock.

There is no established public trading market for the Company’s Class B common stock. All 91,778,717 shares of Class B common stock are owned by Nationwide Corp.

The following table presents quarterly high, low and closing sales prices of NFS Class A common stock and cash dividends declared on such shares for each quarter of 2007 and 2006:

	Market price						Dividends declared
Quarter ended	High		Low		Closing
March 31, 2007	$	55.80	$	51.84	$	53.86	$	0.26
June 30, 2007		64.74		54.05		63.22		0.26
September 30, 2007		65.52		45.32		53.82		0.26
December 31, 2007		55.60		41.78		45.01		0.26
March 31, 2006	$	44.94	$	41.73	$	43.02	$	0.23
June 30, 2006		44.50		42.46		44.08		0.23
September 30, 2006		48.76		43.71		48.10		0.23
December 31, 2006		54.57		47.83		54.20		0.23

See Part I, Item 1—Business—Regulation—Regulation of Dividends and Other Payments from Insurance Subsidiaries for information regarding restrictions on the ability of NFS’ insurance subsidiaries to pay dividends to NFS.

Pursuant to the Nationwide Financial Services, Inc. Second Amended and Restated Stock Retainer Plan for Non-Employee Directors (Director Stock Retainer Plan), 105 shares of Class A common stock were issued by NFS during the fourth quarter of 2007, at an average price of $47.47 per share, to NFS directors who are not employees of NFS or its affiliates. This was a partial payment of the annual stock retainer for 2007 paid by NFS to such directors in consideration of serving as directors of the Company. The Chairman of the Board receives a supplemental annual retainer of $40,000 for his additional duties, which in 2007 was paid monthly one-half in cash and one-half in shares of the Company’s Class A common stock. The issuance of such shares is exempt from registration under the Securities Act of 1933, as amended.

See Note 14 to the audited consolidated financial statements included in the F pages of this report for a description of the Company’s share repurchase program activity.

The following table summarizes the information required by Item 703 of Regulation S-K for purchases of NFS’ equity securities by NFS or any affiliated purchasers, as defined in Rule 10b-18(a)(3) under the Securities Exchange Act, during the Company’s fourth quarter:

Period	Total number of shares purchased	Average price paid per share		Total number of shares purchased as part of publicly announced programs	Approximate value of shares that may yet be purchased under the programs (in millions)
October 2007	—		N/A	—		—
November 2007	—		N/A	—		—
December 2007	646,811	$	44.91	646,811	$	471.0
Total	646,811		44.91	646,811		—

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See Part III, Item 12—Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters for additional information required by this item.

The following graph shows a comparison of the Company’s cumulative total shareholder return along with the S&P 500 and an index of peer companies (the Peer Group) selected by the Company for the past five years. The Peer Group includes the following companies: Aflac Incorporated; Genworth Financial, Inc.; Hartford Financial Services Group, Inc.; Lincoln National Corporation; Manulife Financial Corporation; MetLife, Inc.; Principal Financial Group, Inc.; Protective Life Corporation; and Prudential Financial, Inc. The Peer Group companies included in the peer group have business operations similar to the Company and are considered significant competitors of the Company.

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The graph plots the changes in the value of an initial $100 investment over the indicated time periods, assuming reinvestment of all dividends. Peer Group returns were weighted according to their respective aggregate market capitalization at the beginning of each period shown on the graph.

Comparison of Five-Year Cumulative Total Return

Nationwide Financial Services, Inc., S&P 500 and Peer Group

(Performance Results Through December 31, 2007)

* Assumes $100 invested at the close of trading on December 31, 2002 in Nationwide Financial Services, Inc. Class A common stock, S&P 500 and Peer Group.

	12/31/2002		12/31/2003		12/31/2004		12/31/2005		12/31/2006		12/31/2007
NFS	$	100.00	$	117.39	$	138.44	$	162.46	$	204.08	$	172.84
S&P 500		100.00		128.69		142.69		149.70		173.34		182.86
Peer Group		100.00		129.11		163.05		203.79		234.98		258.81

There can be no assurance that the Company’s stock performance will continue into the future with the same or similar trends depicted in the preceding graph. The Company will not make or endorse any predictions as to future stock performance.

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ITEM 6    SELECTED CONSOLIDATED FINANCIAL DATA

Five-Year Summary

	Years ended or as of December 31,
(in millions, except per share amounts)	2007		2006		2005		2004		2003
Statements of Income Data:
Total revenues	$	4,528.9	$	4,562.5	$	4,416.2	$	4,167.9	$	3,936.6
Income from continuing operations		609.7		727.1		639.0		524.5		414.3
Net income		626.8		724.0		610.4		516.4		407.4
Earnings from continuing operations per common share:
Basic	$	4.28	$	4.85	$	4.18	$	3.45	$	2.73
Diluted	$	4.25	$	4.82	$	4.16	$	3.43	$	2.72
Earnings per common share:
Basic	$	4.40	$	4.83	$	3.99	$	3.40	$	2.68
Diluted	$	4.37	$	4.80	$	3.97	$	3.38	$	2.67
Weighted average common shares outstanding:
Basic		142.5		149.9		152.9		152.1		151.8
Diluted		143.5		150.7		153.6		152.9		152.3
Cash dividends declared per common share	$	1.04	$	0.92	$	0.76	$	0.72	$	0.52
Balance Sheets Data:
Total assets	$	119,207.1	$	119,531.1	$	116,361.2	$	117,121.2	$	111,237.8
Long-term debt		1,565.1		1,398.5		1,398.0		1,406.0		1,405.6
Shareholders’ equity		5,324.6		5,622.7		5,387.6		5,234.0		4,868.9
Book value per common share	$	38.44	$	38.51	$	35.33	$	34.32	$	32.05
Segment Data:
Customer funds managed and administered:
Individual Investments	$	53,587.0	$	52,963.6	$	51,227.6	$	52,481.9	$	49,333.9
Retirement Plans		80,546.6		76,597.1		69,850.8		65,428.3		57,334.6
Individual Protection		20,990.5		19,686.8		17,388.6		15,683.0		13,897.1
Corporate and Other		7,241.3		7,662.4		7,017.8		6,703.4		7,133.4
Total	$	162,365.4	$	156,909.9	$	145,484.8	$	140,296.6	$	127,699.0
Pre-tax operating earnings:
Individual Investments	$	300.7	$	223.1	$	250.7	$	244.0	$	194.6
Retirement Plans		252.6		221.2		191.3		183.3		156.4
Individual Protection		299.8		280.8		266.1		247.3		225.5
Corporate and Other		74.6		65.1		54.9		66.8		52.6
Sales:
Individual Investments	$	6,126.6	$	5,391.1	$	4,109.2	$	5,338.5	$	6,738.8
Retirement Plans		10,691.2		10,010.0		9,509.4		8,912.7		7,719.9
Individual Protection		1,746.4		1,962.0		1,825.2		1,766.8		1,722.5
Total	$	18,564.2	$	17,363.1	$	15,443.8	$	16,018.0	$	16,181.2

As described in Part II, Item 7—MD&A—Overview—Discontinued Operations, the results of operations of TBG Financial and The 401(k) Company are reflected as discontinued for 2007 and all prior years. In addition, the results of operations of Cap Pro Holding, Inc. (Cap Pro), Nationwide Financial Services (Bermuda), Ltd. (NFSB) and William J. Lynch & Associates, Inc. (TBG Lynch) are reflected as discontinued for 2005 and all prior years. As described in Part II, Item 7—MD&A—Overview—Nationwide Funds Group Acquisition, the results of operations of NFG for 2007 and all prior years are reflected as though the companies were combined for all periods presented.

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ITEM 7 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

TABLE OF CONTENTS

FORWARD-LOOKING INFORMATION	26
OVERVIEW	27
CRITICAL ACCOUNTING POLICIES AND RECENTLY ISSUED ACCOUNTING STANDARDS	30
RESULTS OF OPERATIONS	35
SALES	38
BUSINESS SEGMENTS	44
LIQUIDITY AND CAPITAL RESOURCES	60
CONTRACTUAL OBLIGATIONS AND COMMITMENTS	64
OFF-BALANCE SHEET TRANSACTIONS	66
INVESTMENTS	66

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Forward-Looking Information

The information included herein contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to the results of operations and businesses of Nationwide Financial Services, Inc. and subsidiaries (NFS, or collectively, the Company). Whenever used in this report, words such as “anticipate,” “estimate,” “expect,” “intend,” “plan,” “believe,” “project,” “target” and other words of similar meaning are intended to identify such forward-looking statements. These forward-looking statements involve certain risks and uncertainties. Factors that may cause actual results to differ materially from those contemplated or projected, forecast, estimated or budgeted in such forward-looking statements include, among others, the following possibilities:

(i) change in Nationwide Corporation’s control of the Company through its beneficial ownership of 95.2% of the combined voting power of all the outstanding common stock and 66.3% of the economic interest in the Company;

(ii) NFS’ primary reliance, as a holding company, on dividends from its subsidiaries to meet debt service obligations and the applicable regulatory restrictions on the ability of NFS’ subsidiaries to pay such dividends;

(iii) the potential impact on the Company’s reported net income and related disclosures that could result from the adoption of certain accounting and/or financial reporting standards issued by the Financial Accounting Standards Board, the SEC or other standard-setting bodies;

(iv) tax law changes impacting the tax treatment of life insurance and investment products;

(v) repeal of the federal estate tax;

(vi) heightened competition, including specifically the intensification of price competition, the entry of new competitors and the development of new products by new and existing competitors;

(vii) adverse state and federal legislation and regulation, including limitations on premium levels, increases in minimum capital and reserves, and other financial viability requirements; restrictions on mutual fund distribution payment arrangements such as revenue sharing and 12b-1 payments; and regulation changes resulting from industry practice investigations;

(viii) failure to expand distribution channels in order to obtain new customers or failure to retain existing customers;

(ix) inability to carry out marketing and sales plans, including, among others, development of new products and/or changes to certain existing products and acceptance of the new and/or revised products in the market;

(x) changes in interest rates and the equity markets causing a reduction of investment income and/or asset fees, an acceleration of the amortization of DAC and/or value of business acquired (VOBA), a reduction in separate account assets or a reduction in the demand for the Company’s products;

(xi) reduction in the value of the Company’s investment portfolio as a result of changes in interest rates and yields in the market as well as geopolitical conditions and the impact of political, regulatory, judicial, economic or financial events, including terrorism, affecting the market generally and companies in the Company’s investment portfolio specifically;

(xii) general economic and business conditions which are less favorable than expected;

(xiii) competitive, regulatory or tax changes that affect the cost of, or demand for, the Company’s products;

(xiv) unanticipated changes in industry trends and ratings assigned by nationally recognized rating organizations;

(xv) settlement of tax liabilities for amounts that differ significantly from those recorded on the balance sheets;

26

(xvi) deviations from assumptions regarding future persistency, mortality (including as a result of the outbreak of a pandemic illness, such as Avian Flu), morbidity and interest rates used in calculating reserve amounts and in pricing the Company’s products;

(xvii) adverse litigation results and/or resolution of litigation and/or arbitration or investigation results that could result in monetary damages or impact the manner in which the Company conducts its operations; and

(xviii) adverse consequences, including financial and reputation costs, regulatory problems and potential loss of customers resulting from failure to meet privacy regulations and/or protect the Company’s customers’ confidential information.

Overview

Following is management’s discussion and analysis of financial condition and results of operations of the Company for the three years ended December 31, 2007. This discussion should be read in conjunction with the audited consolidated financial statements and related notes beginning on page F-1 of this report.

See Part I, Item 1—Business—Overview and Part I, Item 1—Business—Capital Stock Transactions for a description of the Company and its ownership structure.

Business Segments

Management views the Company’s business primarily based on its underlying products and uses this basis to define its four reportable segments: Individual Investments, Retirement Plans, Individual Protection, and Corporate and Other.

The primary segment profitability measure that management uses is pre-tax operating earnings, which is calculated by adjusting income from continuing operations before federal income taxes and discontinued operations to exclude: (1) net realized investment gains and losses, except for operating items (periodic net amounts paid or received on interest rate swaps that do not qualify for hedge accounting treatment, trading portfolio realized gains and losses, trading portfolio valuation changes, and net realized gains and losses related to securitizations); and (2) the adjustment to amortization of DAC and VOBA related to net realized investment gains and losses.

See Part I, Item 1—Business—Business Segments for a description of the components of each segment.

The following table summarizes pre-tax operating earnings by segment for the years ended December 31:

(dollars in millions)	2007		2006		Change	2005		Change
Individual Investments	$	300.7	$	223.1	35%	$	250.7	(11)%
Retirement Plans		252.6		221.2	14%		191.3	16%
Individual Protection		299.8		280.8	7%		266.1	6%
Corporate and Other		74.6		65.1	15%		54.9	19%

Revenues and Expenses

The Company earns revenues and generates cash primarily from policy charges, life insurance premiums and net investment income. Policy charges include asset fees, which are earned primarily from separate account values generated from the sale of individual and group variable annuities and investment life insurance products; cost of insurance charges earned on universal life insurance products, which are assessed on the amount of insurance in force in excess of the related policyholder account value; administrative fees, which include fees charged per contract on a variety of the Company’s products and premium loads on universal life insurance

27

products; and surrender fees, which are charged as a percentage of premiums withdrawn during a specified period for annuity and certain life insurance contracts. Net investment income includes earnings on investments supporting fixed annuities, the MTN program and certain life insurance products, and earnings on invested assets not allocated to product segments, all net of related investment expenses. Other income includes asset fees, administrative fees, commissions and other income earned by subsidiaries of the Company that provide administrative, marketing, distribution and retail asset management services.

Management makes decisions concerning the sale of invested assets based on a variety of market, business, tax and other factors. All realized gains and losses generated by these sales, charges related to other-than-temporary impairments of available-for-sale securities and other investments, and changes in valuation allowances on mortgage loans on real estate are reported in net realized investment gains and losses. Also included are changes in the fair values of derivatives qualifying as fair value hedges and the related changes in the fair values of hedged items; the ineffective, or excluded, portion of cash flow hedges; changes in the fair values of derivatives that do not qualify for hedge accounting treatment; and periodic net amounts paid or received on interest rate swaps that do not qualify for hedge accounting treatment.

The Company’s primary expenses include interest credited to policyholder accounts, life insurance and annuity benefits, amortization of DAC and general business operating expenses. Interest credited principally relates to individual and group fixed annuities, funding agreements backing the NLIC MTN program and certain life insurance products. Life insurance and annuity benefits include policyholder benefits in excess of policyholder accounts for universal life and individual deferred annuities and net claims and provisions for future policy benefits for traditional life insurance products and immediate annuities.

The Company regularly evaluates and adjusts the DAC balance when actual gross profits in a given reporting period vary from management’s initial estimates, with a corresponding charge or credit to current period earnings. This process is referred to by the Company as a “true-up”, which is performed, and the resulting impact recognized, on a quarterly basis. Additionally, the Company regularly evaluates its assumptions regarding the future estimated gross profits used as a basis for amortization of DAC and adjusts the total amortization recorded to date by a charge or credit to earnings if evidence suggests that these future assumptions and estimates should be revised. This process is referred to by the Company as “unlocking.” The Company regularly monitors its actual experience with factors impacting its assumptions about future expected gross profits and other relevant internal and external information regarding those assumptions and unlocks as such information and analysis warrants.

Profitability

The Company’s profitability largely depends on its ability to effectively price and manage risk on its various products, administer customer funds and control operating expenses. Lapse rates on existing contracts also impact profitability. The lapse rate and distribution of lapses affect surrender charges and impact DAC amortization assumptions when lapse experience changes significantly.

In particular, the Company’s profitability is driven by fee income on separate account products, general and separate account asset levels, and management’s ability to manage interest spread income. While asset fees are largely at guaranteed annual rates, amounts earned vary directly with the underlying performance of the separate accounts. Interest spread income is comprised of net investment income, excluding any applicable allocated charges for invested capital, less interest credited to policyholder accounts. Interest spread income can vary depending on crediting rates offered by the Company; performance of the investment portfolio, including the rate of prepayments; changes in market interest rates and the level of invested assets; the competitive environment; and other factors.

In addition, life insurance profits are significantly impacted by mortality, morbidity and persistency experience.

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Discontinued Operations

During the quarter ended December 31, 2007, the Company committed to a plan of sale of its interest in TBG Financial. Based on management’s determination that the carrying value of this business exceeded its estimated fair value (less the estimated cost to sell), the Company recorded a pre-tax loss totaling $49.0 million ($23.3 million, net of taxes), writing down a portion of the goodwill associated with this business.

Effective March 31, 2007, the Company completed the sale of The 401(k) Company for $115.4 million in cash and recorded a $45.5 million gain, net of taxes.

During the year ended December 31, 2005, management decided to discontinue the following operations: (1) Cap Pro, a majority-owned subsidiary of NFS that provided broker/dealer, registered investment advisor and insurance agency services to producers of certain certified public accounting firms; (2) NFSB, a wholly-owned subsidiary of NFS that sold variable and fixed annuity products in offshore markets; and (3) TBG Lynch, a wholly-owned subsidiary of TBG Financial that distributed BOLI products.

The results of operations of TBG Financial and The 401(k) Company for 2007 and all prior years are reflected as discontinued. The results of operations of Cap Pro, NFSB and TBG Lynch for 2005 are reflected as discontinued. In addition, the sales tables and “Other Data” section of the Retirement Plans segment table in the subsequent portions of MD&A exclude amounts applicable to The 401(k) Company. However, the “Other Data” sections of the tables in the subsequent segment portions of MD&A include amounts applicable to the operations that were discontinued in 2005. See Note 2(n) to the audited consolidated financial statements included in the F pages of this report for additional information on discontinued operations.

Cumulative Effect of Adoption of Accounting Principle

In September 2005, the Accounting Standards Executive Committee of the American Institute of Certified Public Accountants issued Statement of Position (SOP) 05-1, Accounting by Insurance Enterprises for Deferred Acquisition Costs in Connection with Modifications or Exchanges of Insurance Contracts (SOP 05-1). The Company adopted SOP 05-1 effective January 1, 2007, which resulted in a $6.0 million charge, net of taxes, as the cumulative effect of adoption of this accounting principle. See Note 3 to the audited consolidated financial statements included in the F pages of this report for a complete description of SOP 05-1.

Nationwide Bank Merger

Nationwide Bank and Nationwide Federal Credit Union (NFCU) entered into an Agreement and Plan of Merger, dated as of June 16, 2006, pursuant to which Nationwide Bank acquired 100% of the ownership interests in NFCU for $79.0 million in cash. The merger was effective January 1, 2007, with payment of merger consideration to the NFCU membership on January 8, 2007, on a pro rata basis according to the members’ deposit account balances as of March 31, 2006.

Nationwide Funds Group Acquisition

On February 2, 2007, NFS entered into a stock purchase agreement with Nationwide Corp. to acquire the Philadelphia-based retail asset management operations of NWD Investment Management, Inc. The transaction closed on April 30, 2007 with a final purchase price of $244.2 million. The acquired operations are known as NFG. The purchase was accounted for at historical cost in a manner similar to a pooling of interests because the involved entities are under common control. NFG is reflected in the Company’s current and prior year audited consolidated financial statements at the historical cost of the transferred net assets to provide comparative information as though the companies were combined for all periods presented. The excess purchase price over the historical cost of the acquired net assets was accounted for as a $202.5 million equity transaction.

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Critical Accounting Policies and Recently Issued Accounting Standards

The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements. Actual results could differ significantly from those estimates.

The Company’s most critical estimates include those used to determine the following: the balance, recoverability and amortization of DAC for investment and universal life insurance products; impairment losses on investments; valuation allowances for mortgage loans on real estate; the liability for future policy benefits and claims; and federal income tax provision.

Note 2 and Note 3 to the audited consolidated financial statements included in the F pages of this report provide a summary of significant accounting policies and a discussion of recently issued accounting standards, respectively.

Deferred Policy Acquisition Costs for Investment and Universal Life Insurance Products

The Company has deferred certain costs of acquiring investment and universal life insurance products business, principally commissions, certain expenses of the policy issue and underwriting department, and certain variable sales expenses that relate to and vary with the production of new and renewal business. In addition, the Company defers sales inducements, such as interest credit bonuses and jumbo deposit bonuses. Investment products primarily consist of individual and group variable and fixed deferred annuities in the Individual Investments and Retirement Plans segments. Universal life insurance products include universal life insurance, variable universal life insurance, COLI, BOLI and other interest-sensitive life insurance policies in the Individual Protection segment. DAC is subject to recoverability testing in the year of policy issuance and loss recognition testing at the end of each reporting period.

For investment and universal life insurance products, DAC is being amortized with interest over the lives of the policies in relation to the present value of estimated gross profits from projected interest margins, asset fees, cost of insurance charges, administration fees, surrender charges, and net realized investment gains and losses less policy benefits and policy maintenance expenses. The DAC asset related to investment and universal life insurance products is adjusted to reflect the impact of unrealized gains and losses on fixed maturity securities available-for-sale, as described in Note 2(b) to the audited consolidated financial statements included in the F pages of this report.

The assumptions used in the estimation of future gross profits are based on the Company’s current best estimates of future events and are reviewed as part of an annual process during the second quarter. During the annual process, the Company performs a comprehensive study of assumptions, including mortality and persistency studies, maintenance expense studies, and an evaluation of projected general and separate account investment returns. The most significant assumptions that are involved in the estimation of future gross profits include future net separate account investment performance, surrender/lapse rates, interest margins and mortality. Currently, the Company’s long-term assumption for net separate account investment performance is approximately 7% growth per year and varies by product. This assumption, like others, is reviewed as part of the annual process. If this assumption were unlocked, the date of the unlocking could become the anchor date used in the reversion to the mean process (defined below). Variances from the long-term assumption are expected since the majority of the investments in the underlying separate accounts are in equity securities, which strongly correlate with the S&P 500 Index in the aggregate. The reversion to the mean process is based on actual net separate account investment performance from the anchor date to the valuation date. The Company then assumes different performance levels over the next three years such that the separate account mean return measured from the anchor date to the end of the life of the product equals the long-term assumption. The assumed net separate account investment performance used in the DAC models is intended to reflect what is anticipated. However, based on historical returns of the S&P 500 Index, and as part of its pre-set parameters, the Company’s reversion to the mean process generally limits net separate account investment performance to 0-15% during the three-year reversion period. See below for a discussion of current year assumption changes.

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Changes in assumptions can have a significant impact on the amount of DAC reported for investment and universal life insurance products and their related amortization patterns. In the event actual experience differs from assumptions or future assumptions are revised, the Company is required to record an increase or decrease in DAC amortization expense, which could be significant. In general, increases in the estimated long-term general and separate account returns result in increased expected future profitability and may lower the rate of DAC amortization, while increases in long-term lapse/surrender and mortality assumptions reduce the expected future profitability of the underlying business and may increase the rate of DAC amortization.

In addition to the comprehensive annual study of assumptions, management evaluates the appropriateness of the individual variable annuity DAC balance quarterly within pre-set parameters. These parameters are designed to appropriately reflect the Company’s long-term expectations with respect to individual variable annuity contracts while also evaluating the potential impact of short-term experience on the Company’s recorded individual variable annuity DAC balance. If the recorded balance of individual variable annuity DAC falls outside of these parameters for a prescribed time period, or if the recorded balance falls outside of these parameters and management determines it is not reasonably possible to get back within the parameters during this time period, assumptions are required to be unlocked, and DAC is recalculated using revised best estimate assumptions. When DAC assumptions are unlocked and revised, the Company continues to use the reversion to the mean process. See below for a discussion of current year assumption changes.

For variable annuity products, the DAC balance is sensitive to the effects of changes in the Company’s estimates of gross profits, primarily due to the significant portion of the Company’s gross profits that are dependent upon the rate of return on assets held in separate accounts. This rate of return influences fees earned by the Company from these products and costs incurred by the Company associated with minimum contractual guarantees, as well as other sources of future expected gross profits. As previously stated, the Company’s current long-term assumption for net separate account investment performance is approximately 7% growth per year. In its ongoing evaluation of this assumption, the Company monitors its historical experience, market information and other relevant trends. To demonstrate the sensitivity of both the Company’s variable annuity product DAC balance, which was approximately $1.9 billion in aggregate at December 31, 2007, and related amortization, a 1% increase (to 8%) or decrease (to 6%) in the long-term assumption for net separate account investment performance would result in an approximately $20 million net increase or net decrease, respectively, in DAC amortization over the following year. These fluctuations are reasonably likely to occur. The information provided above considers only changes in the assumption for long-term net separate account investment performance and excludes changes in other assumptions used in the Company’s evaluation of DAC.

At the end of the second quarter of 2007, the Company determined as part of its analysis of DAC that the overall profitability of separate account products is expected to exceed previous estimates due to favorable financial market trends. Accordingly, the Company unlocked its DAC assumptions after completing a comprehensive review of assumptions used to project DAC and other related balances, including sales inducement assets, VOBA, unearned revenue reserves, and guaranteed minimum death and income benefit reserves. This review covered all assumptions including expected separate account investment returns, lapse rates, mortality and expenses. Additionally, while the Company estimates that the overall profitability of its variable products has improved, it also expects the long-term net growth in separate account investment performance to moderate. As a result of its current analysis, including its evaluation of ongoing trends and expectations regarding financial market performance, the Company reduced its long-term net separate account growth rate assumption from approximately 8% to approximately 7%. The Company unlocked assumptions, as appropriate, for all investment and variable universal life insurance products in order to remain consistent across product lines using revised assumptions which reflect the Company’s current best estimate of future events. Therefore, in the second quarter of 2007, the Company recorded a net increase in DAC and a benefit to DAC amortization and other related balances totaling $216.5 million pre-tax, which was reported in the following segments in the pre-tax amounts indicated: Individual Investments—$196.4 million; Retirement Plans—$10.5 million; and Individual Protection—$9.6 million, net of a $5.1 million charge for the acceleration of amortization of VOBA.

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The most significant assumption changes that resulted from the Company’s unlocking decisions were resetting the anchor date for reversion to the mean calculations to June 30, 2007, resulting in resetting the assumption for net separate account growth to approximately 7% during the three-year reversion period; resetting the long-term assumption for net separate account growth and the discount rate used to calculate the present value of estimated gross profits to approximately 7% (formerly approximately 8%); and increasing estimated lapse rates for fixed annuity and BOLI products.

During the second quarter of 2007, the Company added a new feature to its existing guaranteed minimum withdrawal benefit rider, Lifetime Income (L.inc). This new feature results in a substantial change in the existing contracts and, therefore, an extinguishment of the DAC associated with those contracts pursuant to Statement of Position 05-1, Accounting by Insurance Enterprises for Deferred Acquisition Costs in Connection with Modifications or Exchanges of Insurance Contracts. As a result, existing DAC and other related balances were eliminated resulting in a $135.0 million pre-tax charge.

Impairment Losses on Investments

Management regularly reviews each investment in its fixed maturity and equity securities portfolios to evaluate the necessity of recording impairment losses for other-than-temporary declines in the fair value of investments.

For debt and equity securities not subject to Emerging Issues Task Force Issue No. 99-20, Recognition of Interest Income and Impairment on Purchased and Retained Beneficial Interests in Securitized Financial Assets (EITF 99-20), an other-than-temporary impairment charge is taken when the Company does not have the ability and intent to hold the security until the forecasted recovery or if it is no longer probable that the Company will recover all amounts due under the contractual terms of the security. Many criteria are considered during this process including, but not limited to, the current fair value as compared to cost or amortized cost, as appropriate, of the security; the amount and length of time a security’s fair value has been below cost or amortized cost; specific credit issues and financial prospects related to the issuer; management’s intent to hold or dispose of the security; and current economic conditions. Other-than-temporary impairment losses result in a permanent reduction to the cost basis of the underlying investment.

In addition to the above, for certain securitized financial assets with contractual cash flows, including asset-backed securities, EITF 99-20 also requires the Company to periodically update its best estimate of cash flows over the life of the security. If the fair value of a securitized financial asset is not greater than or equal to its carrying value based on current information and events, and if there has been an adverse change in estimated cash flows since the last revised estimate (considering both timing and amount), then the Company recognizes an other-than-temporary impairment and writes down the investment to fair value.

Impairment losses are recorded on investments in long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amounts.

A significant change in impairment losses reported in the consolidated financial statements may result if one of the factors that management considers when evaluating investments for impairment changes significantly, such as the deterioration in the credit worthiness of individual issuers, market liquidity or performance of underlying collateral.

Valuation Allowances for Mortgage Loans on Real Estate

The Company provides valuation allowances for impairments of mortgage loans on real estate based on a review by portfolio managers. Mortgage loans on real estate are considered impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the

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contractual terms of the loan agreement. When management determines that a loan is impaired, a provision for loss is established equal to the difference between the carrying value and the present value of expected future cash flows discounted at the loan’s effective interest rate, or the fair value of the collateral, if the loan is collateral dependent. In addition to the valuation allowance on specific loans, the Company maintains an unallocated allowance for probable losses inherent in the loan portfolio as of the balance sheet date, but not yet specifically identified by loan. Changes in the valuation allowance are recorded in net realized investment gains and losses. Loans in foreclosure are placed on non-accrual status. Interest received on non-accrual status mortgage loans on real estate is included in net investment income in the period received.

The valuation allowance account for mortgage loans on real estate is maintained at a level believed adequate by management and reflects management’s best estimate of probable credit losses, including losses incurred at the balance sheet date but not yet identified by specific loan. Management’s periodic evaluation of the adequacy of the allowance for losses is based on past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower’s ability to repay, the estimated value of the underlying collateral, composition of the loan portfolio, current economic conditions and other relevant factors.

Significant changes in the factors management considers in determining the valuation allowance for mortgage loans on real estate could result in a significant change in the valuation allowance reported in the consolidated financial statements.

Future Policy Benefits and Claims

The process of calculating reserve amounts for a life insurance organization involves the use of a number of assumptions, including those related to persistency, mortality, morbidity and interest rates.

The Company calculates its liability for future policy benefits and claims for investment products in the accumulation phase and universal life and variable universal life insurance policies as the policy account balance, which represents participants’ net premiums and deposits plus investment performance and interest credited less applicable contract charges.

The Company’s liability for funding agreements to an unrelated third party trust related to the Company’s MTN program equals the balance that accrues to the benefit of the contractholder, including interest credited. The funding agreements constitute insurance obligations and are considered annuity contracts under Ohio insurance laws.

The liability for future policy benefits and claims for traditional life insurance policies was determined using the net level premium method using interest rates varying from 2.0% to 10.5% and estimates of mortality, morbidity, investment yields and withdrawals that were used or being experienced at the time the policies were issued.

The liability for future policy benefits for payout annuities was calculated using the present value of future benefits and maintenance costs discounted using interest rates varying generally from 3.0% to 13.0%.

Federal Income Taxes

Management provides for federal income taxes based on amounts it 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, management may be required to significantly change the provision for federal income taxes recorded in the consolidated financial statements. Any such change could significantly affect the amounts reported in the consolidated statements of income.

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Management has established tax reserves in accordance with the requirements of FASB Interpretation (FIN) No. 48, Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109, Accounting for Income Taxes (FIN 48). See Note 3 to the audited consolidated financial statements included in the F pages of this report for a summary of FIN 48. These reserves are reviewed regularly and are adjusted as events occur that management believes impact its liability for additional taxes, such as lapsing of applicable statutes of limitations; conclusion of tax audits or substantial agreement 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. Management believes its tax reserves reasonably provide for potential assessments that may result from IRS examinations and other tax-related matters for all open tax years.

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Results of Operations

2007 Compared to 2006

The following table summarizes the Company’s consolidated results of operations for the years ended December 31:

(dollars in millions)	2007			2006			Change
Revenues:
Policy charges:
Asset fees	$	773.2		$	691.2		12%
Cost of insurance charges		420.5			402.0		5%
Administrative fees		119.4			139.1		(14)%
Surrender fees		70.8			83.7		(15)%
Total policy charges		1,383.9			1,316.0		5%
Premiums		432.7			441.5		(2)%
Net investment income		2,276.7			2,300.2		(1)%
Net realized investment (losses) gains		(165.2	)		9.1		NM
Other income		600.8			495.7		21%
Total revenues		4,528.9			4,562.5		(1)%
Benefits and expenses:
Interest credited to policyholder accounts		1,342.0			1,381.5		(3)%
Benefits and claims		682.9			646.8		6%
Policyholder dividends		83.1			90.7		(8)%
Amortization of DAC		382.1			462.9		(17)%
Amortization of VOBA		47.0			46.0		2%
Interest expense		110.6			103.1		7%
Debt extinguishment costs		10.2			—		NM
Other operating expenses		1,070.6			1,032.2		4%
Total benefits and expenses		3,728.5			3,763.2		(1)%
Income from continuing operations before federal income tax expense		800.4			799.3		—
Federal income tax expense		190.7			72.2		NM
Income from continuing operations		609.7			727.1		(16)%
Discontinued operations, net of taxes		23.1			(3.1	)	NM
Cumulative effect of adoption of accounting principle, net of taxes		(6.0	)		—		NM
Net income	$	626.8		$	724.0		(13)%

The decrease in net income compared to 2006 was impacted by several events. First, $114.2 million of tax reserves were released into earnings during the second quarter of 2006. Thus, the effective tax rates in 2007 and 2006 are not comparable. Second, 2007 results include the $45.5 million gain on the sale of The 401(k) Company, partially offset by a $23.3 million loss related to TBG Financial (both reported in discontinued operations as described previously). Lastly, the Company recorded higher income from continuing operations before federal income tax expense largely due to lower amortization of DAC and related adjustments as discussed previously and below, along with higher other income and asset fees. Partially offsetting these factors were net realized investment losses; higher other operating expenses; lower administrative fees; increased amortization of DAC and annuity benefits related to modifications of features in the Company’s L.INC product; and debt extinguishment costs.

Through June 2006, the Company’s federal income tax returns for tax years 2000-2002 were under IRS examination pursuant to a routine audit. In accordance with its regular practice, management established tax reserves representing its best estimate of additional amounts the Company could be required to pay if certain

35

positions it had taken were challenged and ultimately denied by the IRS with respect to these tax years. These reserves are reviewed regularly and are adjusted as events occur that management believes impacts the Company’s liability for additional taxes, such as lapsing of applicable statutes of limitations; conclusion of tax audits or substantial agreement on the deductibility/non-deductibility 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. A significant component of the Company’s tax reserve as of December 31, 2005 was related to the separate account dividends received reduction (DRD).

In July 2006, the Company reached substantial agreement with the IRS on all open issues for tax years 2000-2002, including issues related to the DRD. Accordingly, the Company revised its estimate of amounts that may be due in connection with certain tax positions, including the DRD, for all open tax years. As a result of the revised estimate, $114.2 million of tax reserves were released into earnings during the second quarter of 2006.

Lower amortization of DAC primarily was due to the unlocking of DAC during the second quarter of 2007, which lowered amortization of DAC by $235.8 million. In addition, during the second quarter of 2007, the Company modified the features of its L.inc product within the Individual Investments segment. This modification resulted in a substantial change to the existing contracts and required the Company to extinguish existing DAC and certain other related balances related to this product, resulting in increased amortization of DAC of $124.0 million and increased annuity benefits of $11.0 million.

Other income increased primarily in the Retirement Plans segment due to higher average assets driven by strong market performance in the private sector business. The Corporate and Other segment also contributed to the increase with higher revenues from retail broker/dealer operations, partially offset by lower income in the structured products business that resulted from an unfavorable environment for mortgage loan securitizations.

Asset fees increased primarily due to higher average separate account values driven by favorable market performance in the Individual Investments segment.

The Company recorded net realized investment losses in 2007 compared to net gains in 2006 primarily due to a $100.1 million increase in impairment charges driven by challenging conditions in the credit markets. In addition, the Company recorded higher losses on living benefit embedded derivatives, net of economic hedging activity, primarily as a result of increased volatility in market returns. See Part II, Item 7A—Quantitative and Qualitative Disclosures About Market Risk—Equity Market Risk for a detailed discussion of products with living benefits.

The increase in other operating expenses occurred within the Corporate and Other and Retirement Plans segments. The Corporate and Other segment was impacted by higher costs at Nationwide Bank, which completed its first year of retail operations, and increased commissions related to higher revenues in the retail broker/dealer operations. The increase in the Retirement Plans segment was due to higher trail commissions and continued investments in technology and infrastructure.

Lower administrative fees primarily were attributable to the Retirement Plans segment due to an $18.6 million policy adjustment in the second quarter of 2006 related to the surrender of a group fixed annuity contract.

Higher benefits and claims primarily were driven by increased annuity benefits of $12.5 million related to the unlocking of DAC and other related balances and the aforementioned increase in annuity benefits related to modification of L.inc features of $11.0 million. The remaining increase was due to higher guaranteed benefit expenses related to growth in this business.

On June 4, 2007, NFS redeemed all of its outstanding 8.00% senior notes due March 1, 2027 at a price of $317.4 million. This amount represents aggregate principal of $300.0 million, an $11.2 million premium due as a result of early redemption (3.728% of the principal amount) and $6.2 million of accrued interest through the redemption date. These senior notes were originally issued in March 1997 and, in accordance with their terms,

36

became subject to optional redemption by NFS on or after March 1, 2007. As a result of this transaction, NFS incurred a $10.2 million charge ($6.6 million, net of taxes) during the quarter ended June 30, 2007. This charge includes the redemption premium described above and the accelerated amortization of both unamortized debt issuance costs and the unamortized discount on the original issuance, partially offset by a deferred gain on previous hedging transactions. These amounts (excluding the redemption premium) otherwise would have been recognized through 2027.

2006 Compared to 2005

The following table summarizes the Company’s consolidated results of operations for the years ended December 31:

(dollars in millions)	2006			2005			Change
Revenues:
Policy charges:
Asset fees	$	691.2		$	639.9		8%
Cost of insurance charges		402.0			388.5		3%
Administrative fees		139.1			114.9		21%
Surrender fees		83.7			98.2		(15)%
Total policy charges		1,316.0			1,241.5		6%
Premiums		441.5			399.9		10%
Net investment income		2,300.2			2,344.1		(2)%
Net realized investment gains		9.1			20.8		(56)%
Other income		495.7			409.9		21%
Total revenues		4,562.5			4,416.2		3%
Benefits and expenses:
Interest credited to policyholder accounts		1,381.5			1,380.9		—
Benefits and claims		646.8			574.9		13%
Policyholder dividends		90.7			107.3		(15)%
Amortization of DAC		462.9			480.2		(4)%
Amortization of VOBA		46.0			45.0		2%
Interest expense		103.1			107.6		(4)%
Debt extinguishment costs		—			21.7		NM
Other operating expenses		1,032.2			918.2		12%
Total benefits and expenses		3,763.2			3,635.8		4%
Income from continuing operations before federal income tax expense		799.3			780.4		2%
Federal income tax expense		72.2			141.4		(49)%
Income from continuing operations		727.1			639.0		14%
Discontinued operations, net of taxes		(3.1	)		(28.6	)	NM
Net income	$	724.0		$	610.4		19%

The increase in net income primarily was driven by a tax benefit of $114.2 million recorded during the second quarter of 2006 as described previously compared to tax benefits and recoverables totaling $48.2 million recorded during the third quarter of 2005 as described below. In addition, the Company recorded higher income from continuing operations before federal income tax expense primarily due to increases in policy charges, other income and premiums. The comparison to the prior year also benefited from debt extinguishment costs incurred in 2005. Higher other operating expenses and benefits and claims, combined with lower interest spread income, partially offset the overall increase in income from continuing operations before federal income tax expense.

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During the third quarter of 2006, the Company recorded $8.3 million of net federal income tax expense adjustments primarily related to differences between the 2005 estimated tax liability and the amounts reported on the Company’s 2005 tax returns. During the third quarter of 2005, the Company refined its separate account DRD estimation process. As a result, the Company identified and recorded additional federal income tax benefits and recoverables in the amount of $42.6 million related to all tax years (2000 – 2005) that were open at that time. Also in the third quarter of 2005, the Company recorded $5.6 million of net benefit adjustments primarily related to differences between the 2004 estimated tax liability and the amounts reported on the Company’s 2004 tax returns. Because of the impact of this activity, along with the 2006 reserve release described above, the effective tax rates in 2006 and 2005 are not comparable.

The increase in policy charges was driven by higher asset fees and administrative fees. Asset fees rose due to increases in both the average asset fee rate charged and average separate account values within the Individual Investments segment. The average variable asset fee rate increased as new business sold with living benefit riders and corresponding higher fee rates influenced the overall average rate. Administrative fees increased primarily in the Retirement Plans segment due to a policy adjustment related to the surrender of a group fixed annuity contract.

Higher other income primarily was attributable to the Retirement Plans segment due to higher average variable assets in the private sector NTC business driven by strong market performance.

The increase in premiums was due to higher interest rates relative to a year ago, which created a favorable environment for immediate annuity product sales in the Individual Investments segment.

During the third quarter of 2005, the Company paid $206.2 million to redeem all of its outstanding 7.10% junior subordinated debentures due October 1, 2028, which in turn caused the redemption by Nationwide Financial Services Capital Trust II of its outstanding 7.10% Trust Preferred Securities and 7.10% Trust Common Securities. As a result of this transaction, the Company incurred debt extinguishment costs of $21.7 million for accelerated amortization of unamortized debt issuance costs, including a deferred loss on previous hedging transactions. These amounts otherwise would have been recognized through 2028.

Most of the increase in other operating expenses was attributable to the Retirement Plans segment due to increased trail commissions from higher average variable assets and investments in technology, sales processes and infrastructure.

Higher benefits and claims primarily occurred within the Individual Investments segment due to increased immediate annuity benefit reserves, which were driven by growth in sales relative to a year ago and an increasing proportion of business with living benefit features. This increase is consistent with the corresponding increase in immediate annuity premiums and asset fees described above.

Interest spread income decreased primarily within the Individual Investments segment due to a decline in general account assets caused by fixed annuity net outflows and lower income from mortgage loan prepayments and bond call premiums.

Sales

The Company regularly monitors and reports a production volume metric titled “sales.” Sales or similar measures are commonly used in the insurance industry as a measure of the volume of new and renewal business generated in a period.

Sales are not derived from any specific GAAP income statement accounts or line items and should not be viewed as a substitute for any financial measure determined in accordance with GAAP, including sales as it relates to non-insurance companies. Additionally, the Company’s definition of sales may differ from that used by other companies. As used in the insurance industry, sales, or similarly titled measures, generate customer funds managed and administered, which ultimately drive revenues.

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As calculated and analyzed by management, statutory premiums and deposits on individual and group annuities and life insurance products calculated in accordance with accounting practices prescribed or permitted by regulatory authorities and deposits on administration-only group retirement plans and the advisory services program are adjusted as described below to arrive at sales.

Life insurance premiums determined on a GAAP basis are significantly different than statutory premiums and deposits. Life insurance premiums determined on a GAAP basis are recognized as revenue when due, as calculated on an accrual basis in proportion to the service provided and performance rendered under the contract. In addition, many life insurance and annuity products involve an initial deposit or a series of deposits from customers. These deposits are accounted for as such on a GAAP basis and therefore are not reflected in the GAAP income statement. On a statutory basis, life insurance premiums collected (cash basis) and deposits received (cash basis) are aggregated and reported as statutory premiums and annuity consideration revenues.

Sales, as reported by the Company, are stated net of internal replacements, which management believes provides a more meaningful disclosure of production in a given period. In addition, the Company’s definition of sales excludes funding agreements issued under the Company’s MTN program; asset transfers associated with large case BOLI and large case retirement plan acquisitions; and deposits into Nationwide employee and agent benefit plans. Although these products contribute to asset and earnings growth, their production flows potentially can mask trends in the underlying business and thus do not provide meaningful comparisons and analyses.

Management believes that the presentation of sales as measured for management purposes enhances the understanding of the Company’s business and helps depict longer-term trends that may not be apparent in the results of operations due to differences between the timing of sales and revenue recognition.

The Company’s flagship products are marketed under The BEST of AMERICA brand and include individual variable and group annuities, group private sector retirement plans sold through NTC, and variable life insurance. The BEST of AMERICA products allow customers to choose from investment options managed by premier mutual fund managers. The Company has also developed private label variable and fixed annuity products in conjunction with other financial services providers that allow those providers to sell products to their own customer bases under their own brand names.

The Company also markets group deferred compensation retirement plans to employees of state and local governments for use under IRC Section 457. The Company utilizes its endorsement by NACo, USCM and IAFF when marketing IRC Section 457 products.

See Part I, Item 1—Business—Overview for a description of the Company’s sales distribution network.

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2007 Compared to 2006

The following table summarizes sales by product and segment for the years ended December 31:

(dollars in millions)	2007		2006		Change
Individual Investments
Individual variable annuities:
The BEST of AMERICA products	$	5,169.0	$	4,390.9	18%
Private label annuities		434.6		356.6	22%
NFN and other		2.8		3.6	(22)%
Total individual variable annuities		5,606.4		4,751.1	18%
Individual fixed annuities		156.3		186.5	(16)%
Income products		216.7		230.7	(6)%
Advisory services program		147.2		222.8	(34)%
Total Individual Investments		6,126.6		5,391.1	14%
Retirement Plans
Private sector:
The BEST of AMERICA annuity products		1,064.7		1,230.2	(13)%
The BEST of AMERICA trust products		5,126.3		4,504.0	14%
NFN products		149.4		188.2	(21)%
Other		82.7		69.4	19%
Total private sector		6,423.1		5,991.8	7%
Public sector:
IRC Section 457 annuities		1,548.5		1,533.3	1%
Administration-only agreements		2,719.6		2,484.9	9%
Total public sector		4,268.1		4,018.2	6%
Total Retirement Plans		10,691.2		10,010.0	7%
Individual Protection
Corporate-owned life insurance		552.7		805.9	(31)%
Traditional/universal life insurance		554.4		517.1	7%
The BEST of AMERICA variable life series		448.9		437.3	3%
NFN variable life products		190.4		201.7	(6)%
Total Individual Protection		1,746.4		1,962.0	(11)%
Total sales	$	18,564.2	$	17,363.1	7%

See Part II, Item 7—MD&A—Business Segments for an analysis of sales by product and segment.

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The following table summarizes sales by distribution channel for the years ended December 31:

(dollars in millions)	2007		2006		Change
Non-affiliated:
Independent broker/dealers	$	6,354.7	$	5,758.2	10%
Financial institutions		2,501.2		2,295.1	9%
Wirehouse and regional firms		2,879.0		2,433.6	18%
Pension plan administrators		507.7		532.8	(5)%
Life insurance specialists		329.6		580.6	(43)%
Total non-affiliated sales		12,572.2		11,600.3	8%
Affiliated:
NRS		4,299.9		4,050.2	6%
Nationwide agents		771.8		787.8	(2)%
NFN producers		697.1		698.7	—
Mullin TBG		223.2		226.1	(1)%
Total affiliated sales		5,992.0		5,762.8	4%
Total sales	$	18,564.2	$	17,363.1	7%

Total sales increased primarily due to improved individual variable annuity sales in the Individual Investments segment driven by continued market acceptance of the Company’s products with living benefit riders. In addition, higher sales in the Retirement Plans segment were led by private sector group trust product sales and public sector administration-only agreements, partially offset by lower group annuity sales as the majority of pension business continues to move to trust product offerings. Lower sales of COLI products in the Individual Protection segment due to the addition of two large COLI cases during 2006 also offset the overall increase.

Higher sales in the independent broker/dealers, wirehouse and regional firms, and financial institutions channels were driven by variable annuity products, specifically products offering living benefit riders.

The increase in sales through NRS reflects higher Retirement Plans sales as described above.

Sales decreased through the life insurance specialists channel due to the decline in COLI activity mentioned above.

41

2006 Compared to 2005

The following table summarizes sales by product and segment for the years ended December 31:

(dollars in millions)	2006		2005		Change
Individual Investments
Individual variable annuities:
The BEST of AMERICA products	$	4,390.9	$	3,135.5	40%
Private label annuities		356.6		346.6	3%
NFN and other		3.6		4.7	(23)%
Total individual variable annuities		4,751.1		3,486.8	36%
Individual fixed annuities		186.5		194.4	(4)%
Income products		230.7		196.7	17%
Advisory services program		222.8		231.3	(4)%
Total Individual Investments		5,391.1		4,109.2	31%
Retirement Plans
Private sector:
The BEST of AMERICA annuity products		1,230.2		1,371.1	(10)%
The BEST of AMERICA trust products		4,504.0		3,974.9	13%
NFN products		188.2		205.9	(9)%
Other		69.4		75.8	(8)%
Total private sector		5,991.8		5,627.7	6%
Public sector:
IRC Section 457 annuities		1,533.3		1,544.8	(1)%
Administration-only agreements		2,484.9		2,336.9	6%
Total public sector		4,018.2		3,881.7	4%
Total Retirement Plans		10,010.0		9,509.4	5%
Individual Protection
Corporate-owned life insurance		805.9		657.5	23%
Traditional/universal life insurance		517.1		512.7	1%
The BEST of AMERICA variable life series		437.3		426.0	3%
NFN variable life products		201.7		229.0	(12)%
Total Individual Protection		1,962.0		1,825.2	7%
Total sales	$	17,363.1	$	15,443.8	12%

See Part II, Item 7—MD&A—Business Segments for an analysis of sales by product and segment.

42

The following table summarizes sales by distribution channel for the years ended December 31:

(dollars in millions)	2006		2005		Change
Non-affiliated:
Independent broker/dealers	$	5,758.2	$	5,266.0	9%
Financial institutions		2,295.1		1,808.0	27%
Wirehouse and regional firms		2,433.6		1,912.5	27%
Pension plan administrators		532.8		469.0	14%
Life insurance specialists		580.6		382.4	52%
Total non-affiliated sales		11,600.3		9,837.9	18%
Affiliated:
NRS		4,050.2		3,914.7	3%
Nationwide agents		787.8		757.8	4%
NFN producers		698.7		658.0	6%
Mullin TBG		226.1		275.4	(18)%
Total affiliated sales		5,762.8		5,605.9	3%
Total sales	$	17,363.1	$	15,443.8	12%

The increase in total sales primarily was driven by higher variable annuity sales in the Individual Investments segment as a result of the strong performance of products with living benefit riders. Also contributing to the overall increase were improved private sector trust product sales in the Retirement Plans segment and higher COLI sales in the Individual Protection segment from the addition of two large cases during 2006.

Higher sales in the independent broker/dealers, financial institutions, and wirehouse and regional firms channels primarily were due to increased variable annuity sales, specifically products offering living benefit riders.

Sales increased through the life insurance specialists channel due to the COLI impact mentioned above.

43

Business Segments

Individual Investments

2007 Compared to 2006

The following table summarizes selected financial data for the Company’s Individual Investments segment for the years ended December 31:

(dollars in millions)	2007			2006			Change
Statements of Income Data
Revenues:
Policy charges:
Asset fees	$	587.6		$	511.4		15%
Administrative fees		27.1			20.4		33%
Surrender fees		47.9			56.6		(15)%
Total policy charges		662.6			588.4		13%
Premiums		133.3			142.5		(6)%
Net investment income		642.9			781.1		(18)%
Other income		31.0			14.6		112%
Total revenues		1,469.8			1,526.6		(4)%
Benefits and expenses:
Interest credited to policyholder accounts		444.3			528.3		(16)%
Benefits and claims		233.5			202.4		15%
Amortization of DAC		287.1			352.7		(19)%
Amortization of VOBA		5.3			6.5		(18)%
Other operating expenses		198.9			213.6		(7)%
Total benefits and expenses		1,169.1			1,303.5		(10)%
Pre-tax operating earnings	$	300.7		$	223.1		35%
Other Data
Interest spread margin:
Net investment income		5.69%			5.74%
Interest credited		3.76%			3.76%
Interest spread on average general account values		1.93%			1.98%
Sales:
Individual variable annuities	$	5,606.4		$	4,751.1		18%
Individual fixed annuities		156.3			186.5		(16)%
Income products		216.7			230.7		(6)%
Advisory services program		147.2			222.8		(34)%
Total sales	$	6,126.6		$	5,391.1		14%
Average account values:
General account	$	11,814.2		$	14,041.3		(16)%
Separate account		41,366.0			37,223.3		11%
Advisory services program		634.9			508.1		25%
Total average account values	$	53,815.1		$	51,772.7		4%
Account values as of year end:
Individual variable annuities	$	46,121.5		$	43,804.8		5%
Individual fixed annuities		4,717.3			6,536.1		(28)%
Income products		2,101.0			2,025.6		4%
Advisory services program		647.2			597.1		8%
Total account values	$	53,587.0		$	52,963.6		1%
Pre-tax operating earnings to average account values		0.56	%		0.43	%

44

The increase in pre-tax operating earnings primarily was driven by higher asset fees and lower amortization of DAC, partially offset by lower interest spread income and higher benefits and claims.

Asset fees are calculated daily and charged as a percentage of separate account values. Higher average separate account values driven by favorable market performance increased asset fees by $58.8 million. In addition, the average variable asset fee rate increased to 1.42% from 1.37% in the prior year as new business sold with living benefit riders and corresponding higher fee rates influenced the overall average rate, increasing asset fees by $17.4 million.

Lower amortization of DAC primarily was due to the aforementioned DAC unlocking, which lowered amortization of DAC by $208.9 million. In addition, the Company modified the features of its L.inc product within this segment during 2007. This modification required the Company to extinguish existing DAC and other balances related to L.inc, resulting in a $124.0 million increase in amortization of DAC and increased annuity benefits of $11.0 million as explained below.

Interest spread income declined due to three factors. First, general account assets decreased due to fixed annuity outflows, reducing income by $43.0 million. Second, interest spread margins declined during 2007 to 193 basis points compared to 198 basis points in 2006. Long-duration higher yielding investments rolling over into lower yielding assets drove the margin compression and accounted for $7.8 million in reduced income. Third, the current year included only $17.6 million of income from mortgage loan prepayments and bond call premiums compared to $21.0 million in 2006.

Higher benefits and claims primarily were driven by increased annuity benefits of $12.5 million related to the unlocking of DAC and other related balances in 2007 and the aforementioned increase in annuity benefits related to modification of L.inc features of $11.0 million. The remaining increase was due to higher guaranteed benefit expenses related to growth in this business.

Higher sales in the individual variable annuity business were driven by continued market acceptance of the Company’s products with living benefit riders, especially L.inc, and a more targeted sales process. Sales of products with the L.inc rider increased $867.8 million compared to 2006.

The following table summarizes selected information about the Company’s deferred individual fixed annuities, including the fixed option of variable annuities, as of December 31, 2007:

	Ratchet				Reset				Market value adjustment (MVA) and other				Total
(dollars in millions)	Account value		Weighted average crediting rate		Account value		Weighted average crediting rate		Account value		Weighted average crediting rate		Account value		Weighted average crediting rate
Minimum interest rate of 3.50% or greater	$	—	N/A		$	1,032.8	3.88	%	$	—	N/A		$	1,032.8	3.88	%
Minimum interest rate of 3.00% to 3.49%		1,289.3	4.12	%		3,375.2	3.12	%		—	N/A			4,664.5	3.40	%
Minimum interest rate lower than 3.00%		804.1	3.38	%		433.5	3.66	%		149.0	2.55	%		1,386.6	3.38	%
MVA with no minimum interest rate guarantee		—	N/A			—	N/A			1,512.5	2.73	%		1,512.5	2.73	%
Total deferred individual fixed annuities	$	2,093.4	3.84	%	$	4,841.5	3.33	%	$	1,661.5	2.72	%	$	8,596.4	3.33	%

45

2006 Compared to 2005

The following table summarizes selected financial data for the Company’s Individual Investments segment for the years ended December 31:

(dollars in millions)	2006			2005			Change
Statements of Income Data
Revenues:
Policy charges:
Asset fees	$	511.4		$	461.9		11%
Administrative fees		20.4			16.2		26%
Surrender fees		56.6			62.1		(9)%
Total policy charges		588.4			540.2		9%
Premiums		142.5			102.9		38%
Net investment income		781.1			869.9		(10)%
Other income		14.6			15.2		(4)%
Total revenues		1,526.6			1,528.2		—
Benefits and expenses:
Interest credited to policyholder accounts		528.3			589.1		(10)%
Benefits and claims		202.4			155.4		30%
Amortization of DAC		352.7			329.3		7%
Amortization of VOBA		6.5			7.2		(10)%
Other operating expenses		213.6			196.5		9%
Total benefits and expenses		1,303.5			1,277.5		2%
Pre-tax operating earnings	$	223.1		$	250.7		(11)%
Other Data
Interest spread margin:
Net investment income		5.74%			5.61%
Interest credited		3.76%			3.69%
Interest spread on average general account values		1.98%			1.92%
Sales:
Individual variable annuities	$	4,751.1		$	3,486.8		36%
Individual fixed annuities		186.5			194.4		(4)%
Income products		230.7			196.7		17%
Advisory services program		222.8			231.3		(4)%
Total sales	$	5,391.1		$	4,109.2		31%
Average account values:
General account	$	14,041.3		$	15,966.7		(12)%
Separate account		37,223.3			35,600.5		5%
Advisory services program		508.1			309.3		64%
Total average account values	$	51,772.7		$	51,876.5		—
Account values as of year end:
Individual variable annuities	$	43,804.8		$	40,796.0		7%
Individual fixed annuities		6,536.1			8,041.8		(19)%
Income products		2,025.6			1,978.3		2%
Advisory services program		597.1			411.5		45%
Total account values	$	52,963.6		$	51,227.6		3%
Pre-tax operating earnings to average account values		0.43	%		0.48	%

46

The decrease in pre-tax operating earnings was driven by higher benefits and claims, lower interest spread income, increased amortization of DAC and higher other operating expenses. Increased asset fees and premiums partially offset the overall decrease.

The increase in benefits and claims was driven by increased immediate annuity reserves due to growth in sales relative to a year ago and an increasing proportion of business with living benefit features. This increase is consistent with the increase in premiums on income products noted below.

Interest spread margins widened during 2006 to 198 basis points compared to 192 basis points in 2005. Lower general account assets caused by fixed annuity net outflows drove $16.0 million of the total reduction in interest spread income. Included in 2006 were 15 basis points, or $21.0 million, of income from mortgage loan prepayments and bond call premiums compared to 20 basis points, or $33.0 million, in 2005

Amortization of DAC increased primarily due to higher variable annuity gross profits driven by higher asset levels. Higher gross profits accounted for $20.8 million of the increase compared to 2005.

Other operating expenses increased primarily due to higher sales incentives and employee compensation and benefits. In addition, in 2006 the Company began expensing at fair value the costs resulting from share-based payment transactions, resulting in $3.7 million in expense for this segment.

Asset fees rose due to both a higher average asset fee rate charged and higher average separate account values, representing approximately $28 million and $22 million, respectively, of the overall increase. The average variable asset fee rate increased to 1.37% from 1.30% in the prior year as new business sold with living benefit riders and corresponding higher fee rates influenced the overall average rate.

The increase in premiums was due to higher interest rates relative to a year ago, which created a favorable environment for immediate annuity product sales. The Federal Funds rate was 5.25% at December 31, 2006 compared to 4.25% at December 31, 2005.

Higher sales occurred in the variable annuity business driven by the L.inc and CPPLI product riders and a more targeted sales process. Sales of products with the L.inc and CPPLI riders accounted for $886.3 million and $451.9 million, respectively, of the increase in sales compared to 2005.

The following table summarizes selected information about the Company’s deferred individual fixed annuities, including the fixed option of variable annuities, as of December 31, 2006:

	Ratchet			Reset			Market value adjustment (MVA) and other			Total
(dollars in millions)	Account value		Weighted average crediting rate	Account value		Weighted average crediting rate	Account value		Weighted average crediting rate	Account value		Weighted average crediting rate
Minimum interest rate of 3.50% or greater	$	—	N/A	$	1,027.5	4.28%	$	—	N/A	$	1,027.5	4.28%
Minimum interest rate of 3.00% to 3.49%		2,130.2	4.59%		4,720.4	3.13%		—	N/A		6,850.6	3.58%
Minimum interest rate lower than 3.00%		848.3	3.32%		615.2	3.59%		38.3	3.91%		1,501.8	3.45%
MVA with no minimum interest rate guarantee		—	N/A		—	N/A		1,586.9	2.88%		1,586.9	2.88%
Total deferred individual fixed annuities	$	2,978.5	4.23%	$	6,363.1	3.36%	$	1,625.2	2.91%	$	10,966.8	3.53%

47

Retirement Plans

2007 Compared to 2006

The following table summarizes selected financial data for the Company’s Retirement Plans segment for the years ended December 31:

(dollars in millions)	2007			2006			Change
Statements of Income Data
Revenues:
Policy charges:
Asset fees	$	132.5		$	134.0		(1)%
Administrative fees		11.8			36.0		(67)%
Surrender fees		3.0			4.5		(32)%
Total policy charges		147.3			174.5		(16)%
Net investment income		655.2			652.2		—
Other income		343.7			288.9		19%
Total revenues		1,146.2			1,115.6		3%
Benefits and expenses:
Interest credited to policyholder accounts		443.3			451.6		(2)%
Amortization of DAC		27.4			38.3		(29)%
Amortization of VOBA		2.2			6.9		(68)%
Other operating expenses		420.7			397.6		6%
Total benefits and expenses		893.6			894.4		—
Pre-tax operating earnings	$	252.6		$	221.2		14%
Other Data
Interest spread margin:
Net investment income		5.88%			5.88%
Interest credited		3.98%			4.07%
Interest spread on average general account values		1.90%			1.81%
Sales:
Private sector	$	6,423.1		$	5,991.8		7%
Public sector		4,268.1			4,018.2		6%
Total sales	$	10,691.2		$	10,010.0		7%
Average account values:
General account	$	11,135.3		$	11,093.0		—
Separate account		17,723.6			18,512.4		(4)%
Non-insurance assets		20,747.9			16,515.0		26%
Administration-only		29,844.5			25,904.7		15%
Total average account values	$	79,451.3		$	72,025.1		10%
Account values as of year end:
Private sector	$	32,286.5		$	32,645.3		(1)%
Public sector		48,260.1			43,951.8		10%
Total account values	$	80,546.6		$	76,597.1		5%
Pre-tax operating earnings to average account values		0.32	%		0.31	%

48

The increase in pre-tax operating earnings primarily was driven by higher other income and interest spread income and lower amortization of DAC, partially offset by lower administrative fees and higher other operating expenses.

The increase in other income, which includes administrative fees from non-insurance retirement and deferred compensation plans and asset-based fees from the NTC 401(k) platform, primarily was driven by higher other asset fees and mutual fund revenue of $35.2 million and $20.3 million, respectively, resulting from higher average variable assets.

Interest spread income increased due to a lower average crediting rate as interest spread margins widened to 190 basis points in 2007 compared to 181 basis points for 2006. Included in 2007 were 11 basis points, or $11.7 million, of income from mortgage loan prepayments and bond call premiums compared to 9 basis points, or $9.9 million, in 2006.

Lower amortization of DAC primarily was due to the aforementioned DAC unlocking of the net separate account growth rate assumption for the three-year period and adjusting the net separate account growth rate and related discount rate assumptions. These factors lowered amortization of DAC by $10.5 million.

Lower administrative fees were attributable to the surrender of a group annuity contract during 2006, which resulted in an $18.6 million policy adjustment. In addition, the surrender of a group retirement plan in 2006 resulted in the recognition of $5.1 million of previously deferred revenue and $3.5 million of related VOBA amortization.

The increase in other operating expenses reflects higher general operating expenses due to investments in technology and infrastructure and expected increases in support, development and amortization of a new administrative platform placed into service during 2006. In addition, trail commissions increased $22.0 million from higher average assets and asset-based variable expenses. Trail commissions represent compensation paid to the Company’s producing firms based on the level of assets under management rather than new deposits made in a given time period. Instead of paying a one-time amount at the point of sale, a smaller payment is made each period that the business remains in force. In some cases, a combination of both types of compensation is paid.

Public sector sales increased due to growth in administration-only agreements.

49

2006 Compared to 2005

The following table summarizes selected financial data for the Company’s Retirement Plans segment for the years ended December 31:

(dollars in millions)	2006			2005			Change
Statements of Income Data
Revenues:
Policy charges:
Asset fees	$	134.0		$	137.8		(3)%
Administrative fees		36.0			8.7		NM
Surrender fees		4.5			8.2		(45)%
Total policy charges		174.5			154.7		13%
Net investment income		652.2			661.4		(1)%
Other income		288.9			229.1		26%
Total revenues		1,115.6			1,045.2		7%
Benefits and expenses:
Interest credited to policyholder accounts		451.6			455.0		(1)%
Amortization of DAC		38.3			47.4		(19)%
Amortization of VOBA		6.9			3.5		97%
Other operating expenses		397.6			348.0		14%
Total benefits and expenses		894.4			853.9		5%
Pre-tax operating earnings	$	221.2		$	191.3		16%
Other Data
Interest spread margin:
Net investment income		5.88%			6.08%
Interest credited		4.07%			4.18%
Interest spread on average general account values		1.81%			1.90%
Sales:
Private sector	$	5,991.8		$	5,627.7		6%
Public sector		4,018.2			3,881.7		4%
Total sales	$	10,010.0		$	9,509.4		5%
Average account values:
General account	$	11,093.0		$	10,881.2		2%
Separate account		18,512.4			19,792.0		(6)%
Non-insurance assets		16,515.0			12,500.3		32%
Administration-only		25,904.7			24,289.9		7%
Total average account values	$	72,025.1		$	67,463.4		7%
Account values as of year end:
Private sector	$	32,645.3		$	29,758.8		10%
Public sector		43,951.8			40,092.0		10%
Total account values	$	76,597.1		$	69,850.8		10%
Pre-tax operating earnings to average account values		0.31	%		0.28	%

The increase in pre-tax operating earnings primarily was driven by higher other income and administrative fees and lower amortization of DAC, partially offset by higher other operating expenses.

50

The increase in other income primarily was driven by higher non-insurance asset fees and mutual fund reimbursements of $34.3 million and $19.8 million, respectively, resulting from higher average variable assets.

The increase in administrative fees primarily was due to the surrender of a group fixed annuity contract, which resulted in an $18.6 million policy adjustment in the second quarter of 2006. In addition, the surrender of a group retirement plan in the third quarter of 2006 resulted in the recognition of $5.1 million of previously deferred revenue and $3.5 million of related VOBA amortization.

Amortization of DAC was lower in 2006 primarily due to unlocking in 2005 related to mutual fund revenue assumptions that resulted in higher amortization expense in 2005 compared to favorable true-ups in 2006.

The increase in other operating expenses reflects higher trail commissions of $18.6 million from increased average variable assets and higher asset-based variable expenses. In addition, the current year included $7.1 million of amortization related to an internally developed software application that did not exist in the same period a year ago.

Interest spread margins declined to 181 basis points in 2006 compared to 190 basis points for 2005. Included in 2006 were 9 basis points, or $9.9 million, of income from mortgage loan prepayments and bond call premiums compared to 20 basis points, or $22.1 million, in 2005.

Private sector sales rose due to growth in total plans under administration and related recurring deposits.

Public sector sales increased due to increased flows from existing cases and higher rates of plan transfers, especially IAFF cases. These increases were partially offset by the loss of premium associated with the group fixed annuity contract surrender mentioned previously.

51

Individual Protection

2007 Compared to 2006

The following table summarizes selected financial data for the Company’s Individual Protection segment for the years ended December 31:

(dollars in millions)	2007		2006		Change
Statements of Income Data
Revenues:
Policy charges:
Asset fees	$	53.1	$	45.8	16%
Cost of insurance charges		420.5		402.0	5%
Administrative fees		80.5		82.7	(3)%
Surrender fees		19.9		22.6	(12)%
Total policy charges		574.0		553.1	4%
Premiums		299.4		299.0	—
Net investment income		472.3		468.1	1%
Other income		4.0		0.8	NM
Total revenues		1,349.7		1,321.0	2%
Benefits and expenses:
Interest credited to policyholder accounts		192.0		191.7	—
Benefits		449.4		444.4	1%
Policyholder dividends		83.1		90.7	(8)%
Amortization of DAC		93.1		81.6	14%
Amortization of VOBA		39.3		32.6	20%
Other operating expenses		193.0		199.2	(3)%
Total benefits and expenses		1,049.9		1,040.2	1%
Pre-tax operating earnings	$	299.8	$	280.8	7%
Other Data
Sales:
Corporate-owned life insurance	$	552.7	$	805.9	(31)%
Traditional/universal life insurance		554.4		517.1	7%
The BEST of AMERICA variable life series		448.9		437.3	3%
NFN variable life products		190.4		201.7	(6)%
Total sales	$	1,746.4	$	1,962.0	(11)%
Policy reserves as of year end:
Individual investment life insurance	$	6,298.2	$	5,842.5	8%
Corporate investment life insurance		9,278.8		8,514.4	9%
Traditional life insurance		4,156.4		4,170.9	—
Universal life insurance		1,257.1		1,159.0	8%
Total policy reserves	$	20,990.5	$	19,686.8	7%
Insurance in force as of year end:
Individual investment life insurance	$	57,772.0	$	57,536.7	—
Corporate investment life insurance		25,291.5		24,764.4	2%
Traditional life insurance		43,970.7		41,061.3	7%
Universal life insurance		10,484.5		9,950.3	5%
Total insurance in force	$	137,518.7	$	133,312.7	3%

52

The increase in pre-tax operating earnings primarily was due to higher policy charges and lower policyholder dividends. Higher amortization of DAC partially offset the overall increase.

Policy charges increased due to higher cost of insurance charges and asset fees. The aging of the individual life business block drove higher cost of insurance charges. The aging of a block generally increases cost of insurance charges as the Company’s related mortality risk also rises. Asset fees increased due to higher average separate account values.

Policyholder dividends have trended downward since the dividend scale was reduced in 2006. Furthermore, since participating policies are no longer sold, lapses decrease the number of policies on which dividends are paid.

Amortization of DAC increased primarily due to unlocking in 2006 related to mortality assumptions in fixed universal life and variable universal life that reduced amortization by $18.5 and $10.9 million, respectively. This increase was offset by lower amortization of DAC due to the aforementioned DAC unlocking in 2007 of the net separate account growth rate assumption for the three-year reversion period, adjusting the net separate account growth rate and related discount rate assumptions, and increasing estimated lapse rates for BOLI products. These factors lowered amortization of DAC by $18.1 million in 2007.

The decrease in sales primarily was due to the addition of two large COLI cases during 2006.

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2006 Compared to 2005

The following table summarizes selected financial data for the Company’s Individual Protection segment for the years ended December 31:

(dollars in millions)	2006		2005		Change
Statements of Income Data
Revenues:
Policy charges:
Asset fees	$	45.8	$	40.2	14%
Cost of insurance charges		402.0		388.5	3%
Administrative fees		82.7		90.0	(8)%
Surrender fees		22.6		27.9	(19)%
Total policy charges		553.1		546.6	1%
Premiums		299.0		297.0	1%
Net investment income		468.1		475.1	(1)%
Other income		0.8		2.4	(67)%
Total revenues		1,321.0		1,321.1	—
Benefits and expenses:
Interest credited to policyholder accounts		191.7		190.7	1%
Benefits		444.4		419.5	6%
Policyholder dividends		90.7		107.3	(15)%
Amortization of DAC		81.6		102.7	(21)%
Amortization of VOBA		32.6		34.3	(5)%
Other operating expenses		199.2		200.5	(1)%
Total benefits and expenses		1,040.2		1,055.0	(1)%
Pre-tax operating earnings	$	280.8	$	266.1	6%
Other Data
Sales:
Corporate-owned life insurance	$	805.9	$	657.5	23%
Traditional/universal life insurance		517.1		512.7	1%
The BEST of AMERICA variable life series		437.3		426.0	3%
NFN variable life products		201.7		229.0	(12)%
Total sales	$	1,962.0	$	1,825.2	7%
Policy reserves as of year end:
Individual investment life insurance	$	5,842.5	$	5,329.5	10%
Corporate investment life insurance		8,514.4		6,744.6	26%
Traditional life insurance		4,170.9		4,225.2	(1)%
Universal life insurance		1,159.0		1,089.3	6%
Total policy reserves	$	19,686.8	$	17,388.6	13%
Insurance in force as of year end:
Individual investment life insurance	$	57,536.7	$	57,021.7	1%
Corporate investment life insurance		24,764.4		23,635.5	5%
Traditional life insurance		41,061.3		36,589.3	12%
Universal life insurance		9,950.3		9,114.6	9%
Total insurance in force	$	133,312.7	$	126,361.1	6%

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The increase in pre-tax operating earnings primarily was driven by decreased amortization of DAC, lower policyholder dividends and increased cost of insurance charges. Higher benefits, lower net investment income and lower administrative fees partially offset the overall increase.

Amortization of DAC declined primarily due to unlocking in 2006 related to mortality assumptions in fixed universal life and variable universal life that reduced amortization by $18.5 and $10.9 million, respectively.

Higher cost of insurance charges were due to increased business in force combined with the aging of the individual life business block. The aging of a block generally increases cost of insurance charges.

Higher benefits were due to adverse mortality in both the fixed and investment life businesses, partially offset by a $3.3 million waiver of premium reserve release in fixed life during the first quarter of 2006. The overall increase in total policyholder benefits was partially offset by lower policyholder dividends, primarily driven by a lower current dividend scale.

Despite the slight growth in fixed account assets, net investment income declined primarily due to a $7.0 million decrease in income from mortgage loan prepayments and bond call premiums compared to the prior year.

Administrative fees decreased primarily due to a change in business mix in the current year.

The increase in sales primarily was due to the addition of two large COLI cases during 2006.

55

Corporate and Other

2007 Compared to 2006

The following table summarizes selected financial data for the Company’s Corporate and Other segment for the years ended December 31:

(dollars in millions)	2007			2006			Change
Statements of Income Data
Operating revenues:
Net investment income	$	506.3		$	398.8		27%
Other income		209.7			201.1		4%
Total operating revenues		716.0			599.9		19%
Benefits and operating expenses:
Interest credited to policyholder accounts		262.4			209.9		25%
Interest expense		110.6			103.1		7%
Debt extinguishment costs		10.2			—		NM
Other operating expenses		258.2			221.8		16%
Total benefits and operating expenses		641.4			534.8		20%
Pre-tax operating earnings		74.6			65.1		15%
Add: non-operating net realized investment losses1		(152.8	)		(0.6	)	NM
Add: adjustment to amortization related to net realized investment gains and losses		25.5			9.7		NM
Income (loss) from continuing operations before federal income tax expense	$	(52.7	)	$	74.2		NM
Other Data
Account values as of year end—
Funding agreements backing medium-term notes	$	4,525.7		$	4,599.5		(2)%
Nationwide Bank		798.3			222.3		NM
NFG		1,917.3			2,840.6		(33)%
Total account values	$	7,241.3		$	7,662.4		(5)%

¹ Excluding operating items (periodic net amounts paid or received on interest rate swaps that do not qualify for hedge accounting treatment, trading portfolio realized gains and losses, trading portfolio valuation changes, and net realized gains and losses related to securitizations).

The increase in pre-tax operating earnings primarily was attributable to higher interest spread income and other income, partially offset by higher other operating expenses and the aforementioned debt extinguishment costs.

Interest spread income increased primarily due to the $30.1 million contribution from Nationwide Bank, which completed its first year of retail operations. In addition, higher average assets and slightly higher average investment returns contributed to the increase.

Higher other income primarily was due to a $20.0 million increase in revenues from retail broker/dealer operations, partially offset by lower income in the structured products business driven by an unfavorable environment for mortgage loan securitizations.

Other operating expenses were higher primarily due to a $16.1 million increase at Nationwide Bank and higher commissions related to increased revenues from retail broker/dealer operations as mentioned above.

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The increase in non-operating net realized investment losses was driven by higher impairment charges in 2007 due to challenging conditions in the credit markets. In addition, the Company recorded higher losses on living benefit embedded derivatives, net of economic hedging activity, primarily as a result of increased volatility in market returns.

The following table summarizes net realized investment (losses) gains from continuing operations by source for the years ended December 31:

(in millions)	2007			2006
Total realized gains on sales, net of hedging losses	$	78.9		$	98.7
Total realized losses on sales, net of hedging gains		(85.0	)		(75.6	)
Total other-than-temporary and other investment impairments		(116.9	)		(16.8	)
Credit default swaps		(7.5	)		(1.1	)
Periodic net coupon settlements on non-qualifying derivatives		1.7			1.9
Other derivatives		(29.4	)		(0.6	)
Trading portfolio valuation loss		(5.7	)		—
Total realized (losses) gains before adjustments		(163.9	)		6.5
Amounts credited to policyholder dividend obligation		(2.5	)		0.1
Other		1.2			2.5
Net realized investment (losses) gains	$	(165.2	)	$	9.1

The Company has a comprehensive portfolio monitoring process for fixed maturity and equity securities to identify and evaluate the necessity of recording impairment losses for other-than-temporary declines in the fair value of investments. See Part II, Item 7—MD&A—Critical Accounting Policies and Recently Issued Accounting Standards—Impairment Losses on Investments for a complete discussion of this process.

57

2006 Compared to 2005

The following table summarizes selected financial data for the Company’s Corporate and Other segment for the years ended December 31:

(dollars in millions)	2006			2005			Change
Statements of Income Data
Operating revenues:
Net investment income	$	398.8		$	337.7		18%
Other income		201.1			165.8		21%
Total operating revenues		599.9			503.5		19%
Benefits and operating expenses:
Interest credited to policyholder accounts		209.9			146.1		44%
Interest expense		103.1			107.6		(4)%
Debt extinguishment costs		—			21.7		NM
Other operating expenses		221.8			173.2		28%
Total benefits and operating expenses		534.8			448.6		19%
Pre-tax operating earnings		65.1			54.9		19%
Add: non-operating net realized investment (losses) gains1		(0.6	)		18.2		NM
Add: adjustment to amortization related to net realized investment gains and losses		9.7			(0.8	)	NM
Income from continuing operations before federal income tax expense	$	74.2		$	72.3		3%
Other Data
Account values as of year end—
Funding agreements backing medium-term notes	$	4,599.5		$	3,998.2		15%
Nationwide Bank		222.3			—		NM
NFG		2,840.6			3,019.6		(6)%
Total account values	$	7,662.4		$	7,017.8		9%

¹ Excluding operating items (periodic net amounts paid or received on interest rate swaps that do not qualify for hedge accounting treatment, trading portfolio realized gains and losses, trading portfolio valuation changes, and net realized gains and losses related to securitizations).

Pre-tax operating earnings increased primarily due to higher other income and the aforementioned prior year debt extinguishment costs, partially offset by higher other operating expenses.

Higher other income primarily was due to increases in revenues from retail asset management and retail broker/dealer operations of $22.8 million and $8.2 million, respectively.

Higher other operating expenses primarily were driven by Nationwide Bank start-up costs of $14.0 million and increased retail broker/dealer project costs, partially offset by lower legal expenses due to favorable developments on several cases in 2006.

The Company recorded non-operating net realized investment losses during 2006 compared to non-operating net realized gains in the prior year primarily due to an increase in gross losses on sales of fixed maturity securities, partially offset by lower current year impairments as 2005 included significant losses on airline industry holdings.

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The following table summarizes net realized investment gains from continuing operations by source for the years ended December 31:

(in millions)	2006			2005
Total realized gains on sales, net of hedging losses	$	98.7		$	98.5
Total realized losses on sales, net of hedging gains		(75.6	)		(28.7	)
Total other-than-temporary and other investment impairments		(16.8	)		(41.2	)
Credit default swaps		(1.1	)		(7.5	)
Periodic net coupon settlements on non-qualifying derivatives		1.9			1.0
Other derivatives		(0.6	)		1.2
Trading portfolio valuation gain		—			0.4
Total realized gains before adjustments		6.5			23.7
Amounts credited to policyholder dividend obligation		0.1			(5.2	)
Other		2.5			2.3
Net realized investment gains	$	9.1		$	20.8

The following table summarizes for the year ended December 31, 2007 the Company’s largest aggregate losses on sales and write-downs by issuer, the related circumstances giving rise to the losses and the circumstances that may have affected other material investments held:

									December 31, 2007
(in millions)	Fair value at sale (proceeds)		YTD loss on sale			YTD write- downs			Holdings1		Net unrealized gain (loss)
U.S. government securities that were sold at a loss in 2007. No impairment is necessary on the remaining holdings.	$	1,232.7	$	(25.5	)	$	—		$	418.1	$	61.5
Ownership interest in a company that primarily provides financial services to small businesses. An impairment was recognized in the second and third quarters of 2007.		7.2		(0.2	)		(4.6	)		24.8		(0.1	)
Ownership interest in an investment lending company. An impairment was recognized in the fourth quarter of 2007.		—		—			(52.0	)		—		—
Ownership interest in a mortgage-backed security. An impairment was recognized in the fourth quarter of 2007.2		—		—			(15.0	)		37.9		(1.1	)
Ownership interest in a mortgage-backed security. An impairment was recognized in the third and fourth quarters of 2007.2		—		—			(14.0	)		6.0		—
An investment vehicle that holds the rights to certain motion pictures created and/or distributed by a major entertainment company. An impairment was recognized in the first quarter of 2007.		—		—			(10.6	)		—		—
Ownership interest in a mortgage-backed security. An impairment was recognized in the fourth quarter of 2007.2		—		—			(3.9	)		6.8		—
Total	$	1,239.9	$	(25.7	)	$	(100.1	)	$	493.6	$	60.3

¹ Holdings represent amortized cost of fixed maturity securities and cost of equity securities as of the date indicated.

² Security with Sub-prime collateral.

No other issuer had aggregate losses on sales and write-downs greater than 2.0% of the Company’s total gross losses on sales and write-downs on fixed maturity and equity securities.

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Liquidity and Capital Resources

Liquidity and capital resources demonstrate the overall financial strength of the Company and its ability to generate cash flows from its operations and borrow funds at competitive rates to meet operating and growth needs.

The Company’s capital structure consists of long-term debt and shareholders’ equity. The following table summarizes the Company’s capital structure as of December 31:

(in millions)	2007			2006		2005
Long-term debt	$	1,565.1		$	1,398.5	$	1,398.0
Shareholders’ equity, excluding accumulated other comprehensive income		5,406.1			5,590.8		5,286.9
Accumulated other comprehensive income		(81.5	)		31.9		100.7
Total shareholders’ equity		5,324.6			5,622.7		5,387.6
Total capital	$	6,889.7		$	7,021.2	$	6,785.6

NFS is a holding company whose principal assets are the common stock of NLIC and NLICA. The principal sources of funds for NFS to pay interest, dividends and operating expenses are existing cash and investments and dividends from NLIC, NLICA and other subsidiaries. See Part I, Item 1—Business—Regulation—Regulation of Dividends and Other Payments from Insurance Companies for a description of NLIC and NLICA dividend limitations. NFS currently does not expect such regulatory requirements to impair the ability of its insurance subsidiaries to pay sufficient dividends in order for NFS to have the necessary funds available to meet its obligations.

A primary liquidity concern with respect to annuity and life insurance products is the risk of early policyholder withdrawal. The Company attempts to mitigate this risk by offering variable products where the investment risk is transferred to the policyholder, charging surrender fees at the time of withdrawal for certain products, applying a market value adjustment to withdrawals for certain products in the Company’s general account, and monitoring and matching anticipated cash inflows and outflows.

For individual annuity products ($50.84 billion and $50.34 billion of reserves as of December 31, 2007 and 2006, respectively), surrender charges generally are calculated as a percentage of deposits and are assessed at declining rates during the first seven years after a deposit is made.

For group annuity products ($3.29 billion and $6.25 billion of reserves as of December 31, 2007 and 2006, respectively), surrender charge amounts and periods can vary significantly depending on the terms of each contract and the compensation structure for the producer. Generally, surrender charge percentages for group products are less than individual products because the Company incurs lower expenses at contract origination for group products. In addition, over ninety percent of the general account group annuity reserves are subject to a market value adjustment at withdrawal.

Life insurance policies are less susceptible to withdrawal than annuity products because policyholders generally must undergo a new underwriting process and may incur a surrender fee in order to obtain a new insurance policy.

The short-term and long-term liquidity requirements of the Company are monitored regularly to match cash inflows with cash requirements. The Company reviews its short-term and long-term projected sources and uses of funds and the asset/liability, investment and cash flow assumptions underlying these projections. The Company periodically makes adjustments to its investment policies to reflect changes in short-term and long-term cash needs and changing business and economic conditions.

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Given the Company’s historical cash flow and current financial results, management of the Company believes that cash flows from operating activities over the next year will provide sufficient liquidity for the operations of the Company and sufficient funds for dividend and interest payments.

The Company has additional financing capacity under a shelf registration statement dated May 14, 2007. Under the shelf registration statement, NFS can offer various security instruments including, but not limited to, unsecured senior or subordinated debt securities, preferred stock, Class A common stock, warrants, stock purchase contracts or stock purchase units. In conjunction with owned trusts, capital securities guaranteed by NFS also may be issued.

See Part II, Item 5—Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities for a description of the Company’s stock repurchase program and its impact on liquidity.

Short-Term Debt

The Company has available as a source of funds a $1.00 billion revolving variable rate credit facility entered into by NFS, NLIC and NMIC with a group of national financial institutions. The facility provides for several and not joint liability with respect to any amount drawn by any party. The facility provides covenants, including, but not limited to, requirements that the Company’s debt not exceed 40% of tangible net worth, as defined, and that NLIC maintain statutory surplus, as defined, in excess of $1.67 billion. As of December 31, 2007, the Company and NLIC were in compliance with all covenants. The Company had no amounts outstanding under this agreement as of December 31, 2007 and 2006. NLIC also has an $800.0 million commercial paper program and is required to maintain an available credit facility equal to 50% of any amounts outstanding under the commercial paper program. Therefore, borrowing capacity under the aggregate $1.00 billion revolving credit facility is reduced by 50% of any amounts outstanding under the commercial paper program. NLIC had $199.7 million of commercial paper outstanding at December 31, 2007 at a weighted average interest rate of 4.39% and no commercial paper outstanding at December 31, 2006.

NLIC has entered into an agreement with its custodial bank to borrow against the cash collateral that is posted in connection with its securities lending program. This is an uncommitted facility contingent on the liquidity of the securities lending program. The borrowing facility was established to fund commercial mortgage loans that were originated with the intent of sale through securitization. The maximum amount available under the agreement is $350.0 million. The borrowing rate on this program is equal to one-month U.S. London Interbank Offered Rate (LIBOR) (4.60% and 5.32% as of December 31, 2007 and 2006, respectively). NLIC had $85.6 million and $75.2 million outstanding under this agreement as of December 31, 2007 and 2006, respectively. As of December 31, 2007, the Company had not provided any guarantees on such borrowings, either directly or indirectly.

The Company also has a wholly-owned subsidiary that has available a variable rate line of credit agreement with a single financial institution for advances of up to 90 days in amounts up to $50.0 million. The line of credit is collateralized by investments owned by the subsidiary and is included in the consolidated balance sheets. The subsidiary had $14.0 million outstanding on that line of credit as of December 31, 2007 at a weighted average interest rate of 4.37%.

In addition, the Company has a majority-owned subsidiary that has available an annually renewable, 364-day, $10.0 million variable rate line of credit agreement with a single financial institution. The line of credit is guaranteed by NFS and is included in the consolidated balance sheets. The subsidiary had $10.0 million outstanding on that line of credit as of December 31, 2007 and 2006 at a weighted average interest rate of 5.54% in 2007 and 5.29% in 2006.

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The Company also has a wholly-owned subsidiary with a five-year letter of credit issuance agreement with a single financial institution to provide up to $50.0 million in letters of credit. The agreement was effective September 30, 2006 and is guaranteed by NFS. The subsidiary had issued $40.6 million in letters of credit from this facility as of December 31, 2007 and $24.7 million as of December 31, 2006.

Long-Term Debt

Long-term debt primarily is comprised of (1) two separate issuances of $300.0 million in principal amount of senior notes and two separate issuances of $200.0 million in principal amount of senior notes, none of which is subject to any sinking fund payments; (2) a single issuance of $400.0 million in principal amount of fixed-to-floating rate junior subordinated notes; and (3) a single issuance of $100.0 million in principal amount of junior subordinated debentures that are due March 1, 2037 and pay a distribution rate of 7.899%, issued to an unconsolidated subsidiary trust.

The $300.0 million principal of 6.25% senior notes due November 15, 2011 were issued in November 2001 and are not redeemable prior to their maturity date. The $300.0 million principal of 5.90% senior notes due July 1, 2012, issued in June 2002, and the $200.0 million principal of 5.625% senior notes due February 13, 2015, issued in February 2003, are redeemable, in whole or in part, at the option of NFS at any time or from time to time at a redemption price equal to the greater of: (1) 100% of the aggregate principal amount of the notes to be redeemed; or (2) the sum of the present value of the remaining scheduled payments of principal and interest on the notes, discounted to the redemption date on a semi-annual basis at a prevailing U.S. Treasury rate plus 20 basis points, together in each case with accrued interest payments to the redemption date. The $200.0 million principal of 5.10% senior notes due October 1, 2015 were issued in September 2005 and are redeemable, in whole or in part, at the option of NFS at any time or from time to time at a redemption price equal to the greater of: (1) 100% of the aggregate principal amount of the notes to be redeemed; or (2) the sum of the present value of the remaining scheduled payments of principal and interest on the notes, discounted to the redemption date on a semi-annual basis at a prevailing U.S. Treasury rate plus 15 basis points, together in each case with accrued interest payments to the redemption date.

The terms of each series of senior notes contain various restrictive business and financial covenants, including limitations on the disposition of subsidiaries. As of December 31, 2007, the Company was in compliance with all such covenants.

On May 18, 2007, NFS issued $400.0 million principal of 6.75% fixed-to-floating rate junior subordinated notes. These notes bear interest at a fixed rate of 6.75% for a 30-year period, after which the notes will bear interest at the rate of three-month U.S LIBOR plus 2.33%. These notes are redeemable under one of three scenarios. First, these notes are redeemable, in whole or in part, at any time on or after May 15, 2037 at their principal amount plus accrued and unpaid interest to the date of redemption, provided that in the event of a redemption in part, the principal amount outstanding after such redemption is at least $50.0 million. Next, these notes are redeemable, in whole or in part, prior to May 15, 2037, in cases not involving certain tax or rating agency events, at their principal amount plus accrued and unpaid interest to the date of redemption or, if greater, the “make-whole price,” provided that in the event of redemption in part the principal amount outstanding after such redemption is at least $50.0 million. “Make-whole price” means the sum of the present values of the outstanding principal (discounted from May 15, 2037) and remaining scheduled payments of interest that would have been payable to and including May 15, 2037 (discounted from their respective interest payment dates) on the notes to be redeemed (not including any portion of such payments of interest accrued to the redemption date) to the redemption date on a semiannual basis at a prevailing U.S. Treasury rate plus 30 basis points, plus accrued and unpaid interest on the principal amount being redeemed to the redemption date. Lastly, these notes are redeemable in whole, but not in part, prior to May 15, 2037, within 90 days after the occurrence of certain tax or rating agency events, at their principal amount plus accrued and unpaid interest to the date of redemption or, if greater, the “special event make-whole price.” “Special event make-whole price” means the sum of the present values of the outstanding principal (discounted from May 15, 2037) and remaining scheduled payments of

62

interest that would have been payable to and including May 15, 2037 (discounted from their respective interest payment dates) on the notes to be redeemed (not including any portion of such payments of interest accrued to the redemption date) to the redemption date on a semiannual basis at a prevailing U.S. Treasury rate plus 50 basis points, plus accrued and unpaid interest on the principal amount being redeemed to the redemption date.

On March 11, 1997, Nationwide Financial Services Capital Trust I (Trust I) sold, in a public offering, $100.0 million principal of 7.899% capital securities, representing preferred undivided beneficial interests in the assets of Trust I. This sale generated net proceeds of $98.3 million. Concurrent with the sale of the capital securities, NFS sold to Trust I $103.1 million principal of its 7.899% junior subordinated debentures due March 1, 2037. The junior subordinated debentures are the sole assets of Trust I and are redeemable by NFS in whole at any time or in part from time to time at par plus an applicable make-whole premium. The related capital securities will mature or be called simultaneously with the junior subordinated debentures and have a liquidation value of $1,000 per capital security. The capital securities are fully and unconditionally guaranteed by NFS, and there are no related sinking fund requirements. Distributions on the capital securities are cumulative and payable semi-annually in arrears.

In addition, the Company has a wholly-owned subsidiary with fixed rate borrowings from various financial institutions totaling $65.0 million as of December 31, 2007 with interest rates ranging from 3.27% to 4.45%. These borrowings have maturity dates ranging from two to ten years, and all are secured by investments pledged by the subsidiary. The subsidiary made interest payments of $0.1 million in 2007.

Guarantees

See Note 19 to the audited consolidated financial statements included in the F pages of this report for a description of the potential impact on liquidity of the Company’s guarantees.

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Contractual Obligations and Commitments

The following table summarizes the Company’s contractual obligations and commitments as of December 31, 2007 expected to be paid in the periods presented. Payment amounts reflect the Company’s estimate of undiscounted cash flows related to these obligations and commitments. Balance sheet amounts were determined in accordance with GAAP and may differ from the summation of undiscounted cash flows. The most significant difference relates to future policy benefits for life and health insurance, which include discounting.

	Payments due by period										Amount per balance sheet
(in millions)	Less than 1 year		1-3 years		3-5 years		More than 5 years		Total
Debt:
Short-term1	$	313.7	$	—	$	—	$	—		313.7	$	309.3
Long-term2:
Unrelated parties		87.4		194.8		790.6		1,572.8		2,645.6		1,462.0
Related parties		8.1		16.3		16.3		299.9		340.6		103.1
Subtotal		409.2		211.1		806.9		1,872.7		3,299.9		1,874.4
Lease and license obligations3:
Operating leases		26.3		33.5		25.1		36.7		121.6		—
License		11.7		24.2		5.7		—		41.6		—
Subtotal		38.0		57.7		30.8		36.7		163.2		—
Purchase and lending commitments:
Fixed maturity securities4		47.4		—		—		—		47.4		—
Commercial mortgage loans4		77.1		8.0		—		—		85.1		—
Limited partnerships5		159.4		35.7		35.7		—		230.8		—
Subtotal		283.9		43.7		35.7		—		363.3		—
Future policy benefits and claims6:
Fixed annuities and fixed option of variable annuities7		1,829.8		2,641.1		1,790.7		3,282.7		9,544.3		9,344.6
Life and health insurance7		732.5		1,668.6		1,164.5		12,224.4		15,790.0		8,192.4
Single premium immediate annuities8		261.4		481.2		413.3		1,896.7		3,052.6		1,971.8
Group pension deferred fixed annuities9		1,230.0		2,395.2		2,102.3		9,410.1		15,137.6		10,973.1
Funding agreements backing MTNs2, 10		1,005.4		2,681.6		1,525.2		249.7		5,461.9		4,959.6
Subtotal		5,059.1		9,867.7		6,996.0		27,063.6		48,986.4		35,441.5
Cash and securities collateral11:
Cash collateral on securities lending		604.6		—		—		—		604.6		604.6
Cash collateral on derivative transactions		245.4		—		—		—		245.4		245.4
Securities collateral on derivative transactions		18.5		—		—		—		18.5		18.5
Subtotal		868.5		—		—		—		868.5		868.5
Total	$	6,658.7	$	10,180.2	$	7,869.4	$	28,973.0	$	53,681.3	$	38,184.4

¹ No contractual provisions exist that could create, increase or accelerate those obligations presented. The amount presented includes contractual principal and interest based on rates in effect at December 31, 2007.

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² Contractual provisions exist that could increase or accelerate those obligations presented. The amounts presented include contractual principal and interest based on stated rates in effect at December 31, 2007.

³ Contractual provisions exist that could increase or accelerate those lease obligations presented, including various leases with early buyouts and/or escalation clauses. However, the impact of any such transactions would not be material to the Company’s financial position or results of operations.

⁴ No contractual provisions exist that could create, accelerate or materially increase those obligations presented.

⁵ Primarily related to investments in low-income-housing tax credit partnerships. Call dates for the obligations presented are either date or event specific. For date specific obligations, the Company is required to fund a specified amount on a stated date provided there are no defaults under the agreement. For event specific obligations, the Company is required to fund a specified amount of its capital commitment when properties in a fund become fully stabilized. For event specific obligations, the call date of these commitments may extend beyond one year but has been reflected in payments due in less than one year due to the call features. The Company’s capital typically is called within one to four years, depending on the timing of events.

⁶ A significant portion of policy contract benefits and claims to be paid do not have stated contractual maturity dates and may not result in any ultimate payment obligation. Amounts reported represent estimated undiscounted cash flows out of the Company’s general account related to death, surrender, annuity and other benefit payments under policy contracts in force at December 31, 2007. Separate account payments are not reflected due to the matched nature of these obligations and because the contract owners bear the investment risk of such deposits. Estimated payment amounts were developed based on the Company’s historical experience and related contractual provisions. Significant assumptions incorporated in the reported amounts include future policy lapse rates (including the impact of customer decisions to make future premium payments to keep the related policies in force); coverage levels remaining unchanged from those provided under contracts in force at December 31, 2007; future interest crediting rates; and estimated timing of payments. Actual amounts will vary, potentially by a significant amount, from the amounts indicated due to deviations between assumptions and actual results and the addition of new business in future periods.

⁷ Contractual provisions exist which could adjust the amount and/or timing of those obligations reported. Key assumptions related to payments due by period include customer lapse and withdrawal rates (including timing of death), exchanges to and from the fixed and separate accounts of the variable annuities, claims experience with respect to variable annuity guarantees, and future interest crediting level. Assumptions for future interest crediting levels were made based on processes consistent with the Company’s past practices, which is at the discretion of the Company, subject to guaranteed minimum crediting rates in many cases and/or subject to contractually obligated increases for specified time periods. Many of the contracts with potentially accelerated payments are subject to surrender charges, which are generally calculated as a percentage of deposits made and are assessed at declining rates during the first seven years after a deposit is made. Amounts disclosed include an estimate of those accelerated payments, net of applicable surrender charges. See Note 2(j) to the audited consolidated financial statements included in the F pages of this report for a description of the Company’s method for establishing life and annuity reserves in accordance with GAAP. Health reserves are immaterial and are reflected in the less than one-year column.

⁸ Certain assumptions have been made about mortality experience and retirement patterns in the amounts reported. Actual deaths and retirements may differ significantly from those projected, which could cause the timing of the obligations reported to vary significantly. In addition, contractual surrender provisions exist on an immaterial portion of these contracts that could accelerate those obligations presented. Amounts disclosed do not include an estimate of those accelerated payments. Most of the contracts with potentially accelerated payments are subject to surrender charges, which are generally calculated as a percentage of the commuted value of the remaining term certain benefit payments and are assessed at declining rates during the first seven policy years.

⁹ Contractual provisions exist that could increase those obligations presented. The process for determining future interest crediting rates as described in note 7 above was used to develop the estimates of payments due by period.

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¹⁰ See Part II, Item 7—MD&A—Off-Balance Sheet Transactions for a detailed discussion of the Company’s MTN program. Amounts presented include contractual principal and interest based on rates in effect at December 31, 2007.

¹¹ Since the timing of the return of collateral is uncertain, these obligations have been reflected in payments due in less than one year. See Part II, Item 7—MD&A—Investments—Securities Lending and Counterparty Risk Associated with Derivatives for a detailed discussion of the impact of collateral on the Company’s consolidated balance sheets.

Off-Balance Sheet Transactions

Under the MTN program, NLIC issues funding agreements to an unconsolidated third party trust to secure notes issued to investors by the trust. The funding agreements rank equal with all other insurance claims of the issuing company in the event of liquidation and should be treated as “annuities” under applicable Ohio insurance law. Therefore, the funding agreement obligations are classified as a component of future policy benefits and claims on the consolidated balance sheets. Because the Company is not the primary beneficiary of, and has no ownership interest in, or control over, the third party trust that issues the MTNs, the Company does not include the trust in its consolidated financial statements. Since the notes issued by the trust have a secured interest in the funding agreements issued by the Company, Moody’s and S&P assign the same ratings to the notes and the insurance financial strength of NLIC. See Part II, Item 7—MD&A—Investments—Securities Lending for information about off-balance sheet collateral related to the Company’s securities lending program.

Investments

General

The Company’s assets are divided between separate account and general account assets. As of December 31, 2007, $72.86 billion (61%) of the Company’s total assets were held in separate accounts ($70.69 billion, or 59%, as of December 31, 2006) and $46.35 billion (39%) were held in the Company’s general account ($48.84 billion, or 41%, as of December 31, 2006), including $39.07 billion of general account investments ($41.26 billion as of December 31, 2006).

Separate account assets consist primarily of deposits from the Company’s variable annuity and variable life insurance business. Most separate account assets are invested in various mutual funds. All of the investment performance in the Company’s separate account assets is passed through to the Company’s customers. See Note 6 to the audited consolidated financial statements included in the F pages of this report for further information regarding the Company’s investments.

The following table summarizes the Company’s consolidated general account investments by asset category as of December 31:

	2007			2006
(dollars in millions)	Carrying value		% of total	Carrying value		% of total
Fixed maturity securities	$	27,189.2	69.6	$	28,160.0	68.3
Equity securities		124.2	0.3		67.6	0.2
Trading assets		37.7	0.1		24.3	0.1
Mortgage loans on real estate, net		8,316.1	21.3		8,909.8	21.6
Real estate, net		21.8	0.1		59.1	0.1
Policy loans		1,018.3	2.6		966.9	2.3
Other long-term investments		1,187.2	3.0		856.0	2.0
Short-term investments		1,173.6	3.0		2,215.6	5.4
Total	$	39,068.1	100.0	$	41,259.3	100.0

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The following table lists the ten largest fixed maturity investment holdings by estimated fair value for both investment grade and non-investment grade securities included in the general account as of December 31, 2007 (excluding U.S. Treasury securities, obligations of U.S. Government corporations, and agency bonds not backed by the full faith and credit of the U.S. Government):

(in millions)	Predominant Rating1	Estimated Fair Value			Predominant Rating1	Estimated Fair Value
Investment Grade				Non-Investment Grade
Countrywide Alternative Loan Trust	AAA	$	300.9	MGM Mirage	BB	$	35.6
CS First Boston Mortgage Securities Corporation	AAA		170.0	Knight-Ridder, Inc.	B+		32.0
Bank of America Corporation	AA		152.4	Buffalo Rock Company, Inc.	BB+		31.3
Bear Sterns Commercial Mortgage Securities, Inc.	AA		148.2	Northern Foods, PLC	BB+		29.5
Master Asset Securitization Trust	AAA		146.3	Seminole Tribe of Florida	BB+		27.9
Lehman Mortgage Trust	AAA		129.7	Northwest Airlines	BB-		27.8
Morgan Stanley Capital I	AAA		113.6	Deluxe Corporation	BB-		24.7
Residential Accredit Loans, Inc.	AAA		101.3	Ruby Tuesday, Inc.	BBB-		24.6
Structured Asset Securities Corporation	AAA		101.0	Avis Finance Company, PLC	C		23.8
LB-UBS Commercial Mortgage Trust	AA		100.3	Northern Rock PLC	B-		21.7

¹ Based on a weighted average of ratings by Moody’s and S&P.

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Securities Available-for-Sale

The following table summarizes the amortized cost, gross unrealized gains and losses, and estimated fair values of securities available-for-sale as of the dates indicated:

(in millions)	Amortized cost		Gross unrealized gains		Gross unrealized losses		Estimated fair value
December 31, 2007:
Fixed maturity securities:
U.S. Treasury securities and obligations of U.S. Government corporations	$	172.8	$	17.4	$	0.9	$	189.3
Agencies not backed by the full faith and credit of the U.S. Government		418.1		61.5		—		479.6
Obligations of states and political subdivisions		273.3		1.7		2.8		272.2
Debt securities issued by foreign governments		56.2		2.5		0.3		58.4
Corporate securities
Public		9,233.2		175.2		178.8		9,229.6
Private		6,010.7		135.7		66.9		6,079.5
Mortgage-backed securities		7,142.5		40.3		108.2		7,074.6
Asset-backed securities		3,957.1		33.4		184.5		3,806.0
Total fixed maturity securities		27,263.9		467.7		542.4		27,189.2
Equity securities		117.5		8.3		1.6		124.2
Total securities available-for-sale	$	27,381.4	$	476.0	$	544.0	$	27,313.4
December 31, 2006:
Fixed maturity securities:
U.S. Treasury securities and obligations of U.S. Government corporations	$	179.0	$	12.2	$	2.1	$	189.1
Agencies not backed by the full faith and credit of the U.S. Government		564.5		46.2		2.3		608.4
Obligations of states and political subdivisions		274.7		0.7		7.4		268.0
Debt securities issued by foreign governments		36.2		1.7		0.2		37.7
Corporate securities
Public		9,732.8		220.0		127.4		9,825.4
Private		6,605.1		131.5		83.8		6,652.8
Mortgage-backed securities		6,946.0		23.8		122.8		6,847.0
Asset-backed securities		3,728.9		45.5		42.8		3,731.6
Total fixed maturity securities		28,067.2		481.6		388.8		28,160.0
Equity securities		57.2		11.0		0.6		67.6
Total securities available-for-sale	$	28,124.4	$	492.6	$	389.4	$	28,227.6

The average duration and average maturity of the Company’s general account fixed maturity securities as of December 31, 2007 were approximately 4.3 years and 5.8 years, respectively, compared to 4.4 years and 5.9 years, respectively, as of December 31, 2006. The market value of the Company’s general account investments may fluctuate significantly in response to changes in interest rates, investment quality ratings and credit spreads. In addition, the Company may be likely to experience realized investment losses to the extent its liquidity needs require the disposition of general account fixed maturity securities in unfavorable interest rate, liquidity or credit spread environments.

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For securities available-for-sale as of the dates indicated, the following table summarizes the Company’s gross unrealized losses based on the amount of time each type of security has been in an unrealized loss position:

(in millions)	Less than or equal to one year					More than one year					Total
	Estimated fair value		Gross unrealized losses			Estimated fair value		Gross unrealized losses			Estimated fair value		Gross unrealized losses
December 31, 2007:
Fixed maturity securities:
U.S. Treasury securities and obligations of U.S. Government corporations	$	23.7	$	0.6		$	4.2	$	0.3		$	27.9	$	0.9
Agencies not backed by the full faith and credit of the U.S. Government		—		—			13.9		—			13.9		—
Obligations of states and political subdivisions		23.9		0.2			154.3		2.6			178.2		2.8
Debt securities issued by foreign governments		26.4		0.3			1.2		—			27.6		0.3
Corporate securities
Public		2,452.6		103.4			2,287.7		75.4			4,740.3		178.8
Private		740.4		18.8			2,076.6		48.1			2,817.0		66.9
Mortgage-backed securities		1,448.4		27.6			2,775.7		80.6			4,224.1		108.2
Asset-backed securities		1,515.3		132.3			1,211.6		52.2			2,726.9		184.5
Total fixed maturity securities		6,230.7		283.2			8,525.2		259.2			14,755.9		542.4
Equity securities		37.5		1.6			0.1		—			37.6		1.6
Total	$	6,268.2	$	284.8		$	8,525.3	$	259.2		$	14,793.5	$	544.0
% of gross unrealized losses				52	%				48	%
December 31, 2006:
Fixed maturity securities:
U.S. Treasury securities and obligations of U.S. Government corporations	$	66.5	$	1.0		$	29.9	$	1.1		$	96.4	$	2.1
Agencies not backed by the full faith and credit of the U.S. Government		31.7		0.1			125.2		2.2			156.9		2.3
Obligations of states and political subdivisions		84.5		1.0			161.9		6.4			246.4		7.4
Debt securities issued by foreign governments		12.8		0.1			1.3		0.1			14.1		0.2
Corporate securities
Public		2,627.7		27.8			3,525.8		99.6			6,153.5		127.4
Private		1,288.6		15.0			2,165.1		68.8			3,453.7		83.8
Mortgage-backed securities		966.9		7.6			4,194.0		115.2			5,160.9		122.8
Asset-backed securities		580.2		4.5			1,475.0		38.3			2,055.2		42.8
Total fixed maturity securities		5,658.9		57.1			11,678.2		331.7			17,337.1		388.8
Equity securities		17.6		0.3			3.4		0.3			21.0		0.6
Total	$	5,676.5	$	57.4		$	11,681.6	$	332.0		$	17,358.1	$	389.4
% of gross unrealized losses				15	%				85	%

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The Company has assets that have been in an unrealized loss position for more than one year that are not other-than-temporarily impaired. The Company reviews each asset in an unrealized loss position and evaluates whether or not the loss is other-than-temporary. This evaluation considers several factors, including the extent of the unrealized loss, the rating of the affected security, the Company’s ability and intent to hold the security until recovery, and economic conditions that could affect the creditworthiness of the issuer. As of December 31, 2007, assets that have been in an unrealized loss position for more than one year totaled $259.2 million, or 48% of the Company’s total unrealized losses. Of this total, $231.8 million, or 89%, were classified as investment grade securities, as defined by the NAIC.

As noted in the table above, the majority of the increases in the Company’s unrealized losses from December 31, 2006 to December 31, 2007 were attributable to corporate securities and asset-backed securities (ABSs). These increased loss positions primarily were driven by the combined impacts of interest rate movements, volatility in investment quality ratings and credit spreads, and illiquid markets.

As of December 31, 2007, 67% of the Company’s corporate securities in unrealized loss positions, or $164.1 million, were classified as investment grade, as defined by the NAIC. Of these investment grade corporate securities, 58%, or $95.9 million, have been in an unrealized loss position for more than one year, but 90% of those investments have ratios of estimated fair value to amortized cost of at least 90%. Of the Company’s corporate securities in unrealized loss positions classified as non-investment grade, 66% have been in an unrealized loss position for less than one year.

As of December 31, 2007, 100% of the Company’s ABSs in unrealized loss positions, or $184.5 million, were classified as investment grade, as defined by the NAIC. Of these investment grade ABSs, 72%, or $132.0 million, have been in an unrealized loss position for less than one year, but 33% of those investments have ratios of estimated fair value to amortized cost of at least 90%. Of the Company’s ABSs in unrealized loss positions that have been in loss positions for more than one year, 58% have ratios of estimated fair value to amortized cost of at least 90%.

For fixed maturity securities that are available-for-sale as of December 31, 2007, the following table summarizes the Company’s gross unrealized loss position categorized as investment grade vs. non-investment grade, as defined by the NAIC, in an unrealized loss position for the period of time indicated, and based on the ratio of estimated fair value to amortized cost (in millions):

	Period of time for which unrealized loss has existed
	Investment Grade				Non-Investment Grade								Total
Ratio of estimated fair value to amortized cost	Less than or equal to one year		More than one year		Total		Less than or equal to one year		More than one year		Total		Less than or equal to one year		More than one year		Total
99.9% - 95.0%	$	68.9	$	116.2	$	185.1	$	15.5	$	7.0	$	22.5	$	84.4	$	123.2	$	207.6
94.9% - 90.0%		50.3		84.0		134.3		11.4		4.1		15.5		61.7		88.1		149.8
89.9% - 85.0%		37.6		18.9		56.5		3.8		7.5		11.3		41.4		26.4		67.8
84.9% - 80.0%		12.8		5.8		18.6		3.0		1.4		4.4		15.8		7.2		23.0
Below 80.0%		59.2		6.9		66.1		20.7		7.4		28.1		79.9		14.3		94.2
Total	$	228.8	$	231.8	$	460.6	$	54.4	$	27.4	$	81.8	$	283.2	$	259.2	$	542.4

As noted in the table above, as of December 31, 2007, 65% of the Company’s investments in an unrealized loss position had ratios of estimated fair value to amortized cost of at least 90%. In addition, 84% of the Company’s investments in an unrealized loss position were classified as investment grade, as defined by the NAIC. Of the Company’s investments in unrealized loss positions classified as non-investment grade, 67% have been in an unrealized loss position for less than one year.

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The NAIC assigns securities quality ratings and uniform valuations (called NAIC Designations), which are used by insurers when preparing their annual statements. The NAIC assigns designations to publicly traded and privately placed securities. The designations assigned by the NAIC range from class 1 (highest quality) to class 6 (lowest quality). Of the Company’s general account fixed maturity securities, 94% were in the two highest NAIC Designations as of December 31, 2007 and 2006.

The following table summarizes the credit quality, as determined by NAIC Designation, of the Company’s general account fixed maturity securities portfolio as of December 31:

(in millions)	Rating agency equivalent designation2	2007				2006
NAIC designation1		Amortized cost		Estimated fair value		Amortized cost		Estimated fair value
1	Aaa/Aa/A	$	19,153.4	$	19,056.5	$	19,362.3	$	19,351.3
2	Baa		6,445.9		6,512.7		6,928.8		6,997.2
3	Ba		1,194.0		1,166.7		1,091.5		1,101.6
4	B		348.2		341.6		647.8		659.8
5	Caa and lower		83.8		73.1		18.5		27.3
6	In or near default		38.6		38.6		18.3		22.8
	Total	$	27,263.9	$	27,189.2	$	28,067.2	$	28,160.0

¹ NAIC Designations are assigned at least annually. Some designations for securities shown have been assigned to securities not yet assigned an NAIC Designation in a manner approximating equivalent public rating categories.

² Comparisons between NAIC and Moody’s designations are published by the NAIC. If no Moody’s rating is available, the Company assigns internal ratings corresponding to public ratings.

Mortgage-Backed and Asset-Backed Securities

The Company’s general account MBS portfolio is comprised of residential MBS investments. As of December 31, 2007, MBS investments totaled $7.07 billion (26%) of the carrying value of the Company’s general account fixed maturity securities available-for-sale compared to $6.85 billion (24%) as of December 31, 2006.

The Company believes that MBS investments may add diversification, liquidity, credit quality and additional yield to its general account portfolio. The Company’s objective for its MBS portfolio is to provide reasonable cash flow stability and increased yield. The MBS portfolio includes CMOs, Real Estate Mortgage Investment Conduits (REMICs) and mortgage-backed pass-through securities. The Company’s general account MBS portfolio generally does not include interest-only securities, principal-only securities or other MBS investments which may exhibit extreme market volatility.

Prepayment/extension risk is an inherent risk of holding MBSs. However, the degree of prepayment/extension risk varies by the type of MBS held. The Company limits its exposure to prepayments/extensions by holding less volatile types of MBSs. As of December 31, 2007, $2.07 billion (29%) of the carrying value of the general account MBS portfolio was invested in planned amortization class CMOs/REMICs (PACs) compared to $2.36 billion (35%) as of December 31, 2006. PACs are securities whose cash flows are designed to remain constant in a variety of mortgage prepayment environments. Most of the Company’s non-PAC MBSs possess varying degrees of cash flow structure and prepayment/extension risk. The MBS portfolio contained 8% of pure pass-throughs as of December 31, 2007 compared to 5% as of December 31, 2006.

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The following table summarizes the distribution by investment type of the Company’s general account MBS portfolio as of December 31:

	2007			2006
(dollars in millions)	Estimated fair value		% of total	Estimated fair value		% of total
Planned amortization class	$	2,067.7	29.2	$	2,362.9	34.5
Sequential		1,528.5	21.6		1,539.7	22.5
Non-accelerating securities—CMO		1,450.3	20.5		1,532.7	22.4
Very accurately defined maturity		645.0	9.1		784.6	11.5
Multi-family mortgage pass-through certificates		548.7	7.8		367.5	5.4
Floating rate		361.7	5.1		54.4	0.8
Accrual		77.4	1.1		116.8	1.7
Other		395.3	5.6		88.4	1.2
Total	$	7,074.6	100.0	$	6,847.0	100.0

The Company’s general account ABS portfolio includes home equity and credit card-backed investments, among others. As of December 31, 2007, ABS investments totaled $3.81 billion (14%) of the carrying value of the Company’s general account fixed maturity securities available-for-sale compared to $3.73 billion (13%) as of December 31, 2006.

The Company believes that general account ABS investments may add diversification, liquidity, credit quality and additional yield to its general account portfolio. Like the MBS portfolio, the Company’s objective for its ABS portfolio is to provide reasonable cash flow stability and increased yield. The Company’s general account ABS portfolio generally does not include interest-only securities, principal-only securities or other ABS investments which may exhibit extreme market volatility.

The following table summarizes the distribution by investment type of the Company’s general account ABS portfolio as of December 31:

(dollars in millions)	2007			2006
	Estimated fair value		% of total	Estimated fair value		% of total
Commercial mortgage-backed securities	$	1,216.5	32.0	$	1,245.8	33.5
Home equity/improvement		858.5	22.6		750.8	20.1
CBO/CLO/CDO		343.3	9.0		225.6	6.0
Trust preferred—residual income		341.4	9.0		326.5	8.7
Credit card-backed		326.1	8.6		398.1	10.7
Non-accelerated securities		176.1	4.6		189.6	5.1
Enhanced equity/equity trust certificates		126.2	3.3		146.9	3.9
Franchise/business loan		110.7	2.9		57.8	1.5
Pass-through certificate		80.8	2.1		110.0	2.9
Student loans		50.5	1.3		84.5	2.3
Other		175.9	4.6		196.0	5.3
Total	$	3,806.0	100.0	$	3,731.6	100.0

When making investments in mortgage-backed or asset-backed securities, the Company evaluates the quality of the underlying collateral, the structure of the transaction (which dictates how losses in the underlying collateral will be distributed) and prepayment risks.

Recent conditions in the securities markets, including changes in interest rates, investment quality ratings, liquidity and credit spreads, have resulted in declines in the values of investment securities, including MBSs and ABSs. When evaluating whether these securities are other-than-temporarily impaired, the Company considers

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characteristics of the underlying collateral, such as delinquency and default rates, the quality of the underlying borrower, the type of collateral in the pool, the vintage year of the collateral, subordination levels within the structure of the collateral pool, expected future cash flows, and the Company’s ability and intent to hold the security to recovery. These same factors also affect the estimated fair value of these securities.

In general, recent market activity has negatively impacted the valuation of securities containing Alt-A and Sub-prime collateral, which are classifications of investments in which the Company invests. The Company considers Alt-A collateral to be mortgages whose underwriting standards do not qualify the mortgage for regular conforming or jumbo loan programs. Typical underwriting characteristics that cause a mortgage to fall into the Alt-A classification may include, but are not limited to, inadequate loan documentation of a borrower’s financial information, debt-to-income ratios above normal lending limits, loan-to-value ratios above normal lending limits that do not have primary mortgage insurance, a borrower who is a temporary resident, and loans securing non-conforming types of real estate. Alt-A mortgages are generally issued to borrowers having higher Fair Isaac Credit Organization (FICO) scores, and the lender typically issues a slightly higher interest rate for such mortgages. In addition, the Company considers Sub-prime collateral to be mortgages that are first-lien mortgage loans issued to Sub-prime borrowers, as demonstrated by recent delinquent rent or housing payments or substandard FICO scores. Second-lien mortgage loans are also considered Sub-prime.

The estimated fair values of the Company’s holdings of Alt A and Sub-prime collateralized mortgages are determined under the same processes as other fixed maturity securities (see Note 2(b) included in the F pages of this report for further information).

The Company’s investments in securities that contain Alt-A and Sub-prime collateral are predominantly highly rated. As of December 31, 2007, 100.0% and 95.2% of securities containing Alt-A and Sub-prime collateral, respectively, were rated AA or better. In addition, 55.2% and 71.2% of Alt-A and Sub-prime collateral, respectively, was originated in 2005 or earlier.

The following tables summarize the distribution by collateral classification, rating and origination year, respectively, of the Company’s general account mortgage-backed and asset-backed securities as of December 31, 2007:

(dollars in millions)	Amortized     cost	Estimated fair value		% of estimated fair value total
Government agency	$ 3,515.4	$	3,524.7	32.4
Prime	1,573.2		1,541.6	14.2
Alt-A	2,279.3		2,230.3	20.5
Sub-prime	864.4		809.3	7.4
Non-mortgage collateral	2,867.3		2,774.7	25.5
Total	$11,099.6	$	10,880.6	100.0

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	Alt-A				Sub-prime
(dollars in millions)	Amortized     cost	Estimated fair value		% of estimated fair value total	Amortized cost		Estimated fair value		% of estimated fair value total
AAA	$2,252.6	$	2,204.3	98.8	$	630.6	$	595.3	73.5
AA	26.7		26.0	1.2		191.0		175.3	21.7
A	—		—	—		33.9		30.5	3.8
BBB	—		—	—		2.6		1.9	0.2
BB and below	—		—	—		6.3		6.3	0.8
Total	$2,279.3	$	2,230.3	100.0	$	864.4	$	809.3	100.0
	Alt-A				Sub-prime
(dollars in millions)	Amortized     cost	Estimated fair value		% of estimated fair value total	Amortized cost		Estimated fair value		% of estimated fair value total
Pre-2005	$513.6	$	506.9	22.7	$	507.9	$	479.9	59.4
2005	752.6		724.4	32.5		97.7		95.7	11.8
2006	562.2		553.5	24.8		219.8		198.6	24.5
2007	450.9		445.5	20.0		39.0		35.1	4.3
Total	$2,279.3	$	2,230.3	100.0	$	864.4	$	809.3	100.0

Private Placement Fixed Maturity Securities

The Company invests in private placement fixed maturity securities because of the generally higher nominal yield available compared to comparably rated public fixed maturity securities, more restrictive financial and business covenants available in private fixed maturity security loan agreements, and stronger prepayment protection. Although private placement fixed maturity securities are not registered with the SEC and generally are less liquid than public fixed maturity securities, restrictive financial and business covenants included in private placement fixed maturity security loan agreements generally are designed to compensate for the impact of increased liquidity risk. A significant portion of the private placement fixed maturity securities that the Company holds are participations in issues that are also owned by other investors. In addition, some of these securities are rated by nationally recognized rating agencies, and substantially all have been assigned a rating designation by the NAIC, as shown in the earlier table summarizing the credit quality of the Company’s general account fixed maturity securities portfolio.

Mortgage Loans

As of December 31, 2007, general account mortgage loans were $8.32 billion (21%) of the carrying value of consolidated general account investments compared to $8.91 billion (22%) as of December 31, 2006. Substantially all of these loans were commercial mortgage loans. Commitments to fund mortgage loans of $85.1 million were outstanding as of December 31, 2007 compared to $139.5 million as of December 31, 2006.

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The table below summarizes the carrying values of mortgage loans by regional exposure and property type as of December 31, 2007:

(in millions)	Office		Warehouse		Retail		Apartment & Other		Total
New England	$	141.1	$	27.1	$	78.3	$	92.5	$	339.0
Middle Atlantic		172.9		278.0		355.5		164.0		970.4
East North Central		91.2		239.2		555.8		491.7		1,377.9
West North Central		34.9		70.7		77.0		152.3		334.9
South Atlantic		155.9		494.1		737.1		562.4		1,949.5
East South Central		25.8		45.0		122.0		154.0		346.8
West South Central		22.8		170.1		179.7		242.4		615.0
Mountain		123.0		138.1		168.4		359.4		788.9
Pacific		333.0		434.5		438.6		386.2		1,592.3
Total principal	$	1,100.6	$	1,896.8	$	2,712.4	$	2,604.9		8,314.7
Valuation allowance										(24.8	)
Unamortized premium										12.9
Lower of cost or market adjustment on mortgage loans held for sale										(3.8	)
Cumulative change in fair value of hedged mortgage loans and commitments										17.1
Total mortgage loans on real estate, net									$	8,316.1

As of December 31, 2007, the Company’s largest exposure to any single borrower, region and property type was 2%, 23% and 33%, respectively, of the Company’s general account mortgage loan portfolio, compared to 3%, 25% and 34%, respectively, as of December 31, 2006.

As of December 31, 2007 and 2006, the Company’s mortgage loans classified as delinquent, foreclosed and restructured were immaterial as a percentage of the total mortgage loan portfolio.

Securities Lending

The Company, through an agent, lends certain portfolio holdings and in turn receives cash collateral with the objective of increasing the yield on its investments. The cash collateral is invested in high-quality, short-term investments. The Company’s policy requires the maintenance of collateral of a minimum of 102% of the fair value of the securities loaned. Net returns on the investments, after payment of a rebate to the borrower, are shared between the Company and the agent. Both the borrower and the Company can request or return the loaned securities at any time. The Company maintains ownership of the loaned securities at all times and is entitled to receive from the borrower any payments for interest or dividends received on such securities during the loan term. The Company recognizes loaned securities as part of its investments available-for-sale. The Company recognizes the short-term investments acquired with the cash collateral and its obligation to return such collateral to the borrower in short-term investments and other liabilities, respectively.

As of December 31, 2007 and 2006, the Company had received $604.6 million and $886.7 million, respectively, of cash collateral on securities lending. The Company had not received any non-cash collateral on securities lending as of December 31, 2007 and 2006. As of December 31, 2007 and 2006, the Company had loaned securities with a fair value of $593.0 million and $859.9 million, respectively.

Counterparty Risk Associated with Derivatives

Credit risk associated with derivatives is measured as the net replacement cost in the event the counterparties with contracts in a gain position relative to the Company fail to perform under the terms of those

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contracts. The Company’s derivative activities primarily are with financial institutions and corporations. To attempt to minimize credit risk, the Company enters into legally enforceable master netting agreements, which reduce risk by permitting the closeout and netting of transactions with the same counterparty upon 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 varies based on an assessment of the credit risk of the counterparty. Generally, the Company accepts collateral in the form of cash, U.S. Treasury securities and other marketable securities.

As of December 31, 2007 and 2006, the Company had received $245.4 million and $171.0 million, respectively, of cash for derivative collateral. The Company also held $18.5 million and $12.8 million of securities as off-balance sheet collateral on derivative transactions as of December 31, 2007 and 2006, respectively. As of December 31, 2007, the Company had pledged fixed maturity securities with a fair value of $18.8 million as collateral to various derivative counterparties compared to none as of December 31, 2006.

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ITEM 7A    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk Sensitive Financial Instruments

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

Interest Rate Risk

Fluctuations in interest rates can impact the Company’s earnings, cash flows and the fair value of its assets and liabilities. In a declining interest rate environment, the Company may be required to reinvest the proceeds from maturing and prepaying investments at rates lower than the overall portfolio yield, which could reduce future interest spread income. In addition, minimum guaranteed crediting rates (ranging from 1.5% to 3.5% for a majority of the individual annuity contracts in force) on certain individual annuity contracts could prevent the Company from lowering its interest crediting rates to levels commensurate with prevailing market interest rates, resulting in a reduction to the Company’s interest spread income. The average crediting rate for fixed annuity products during 2007 was 3.76% and 3.98% for the Individual Investments and Retirement Plans segments, respectively (compared to 3.76% and 4.07%, respectively, during 2006), well in excess of guaranteed rates.

The Company attempts to mitigate this risk by managing the maturity and interest-rate sensitivities of assets to be consistent with those of liabilities. In recent years, management has taken actions to address low interest rate environments and the resulting impact on interest spread margins, including reducing commissions on fixed annuity sales, launching new products with new guaranteed rates, discontinuing the sale of its leading annual reset fixed annuities and invoking contractual provisions that limit the amount of variable annuity deposits allocated to the guaranteed fixed option. In addition, the Company adheres to a strict discipline of setting interest crediting rates on new business at levels adequate to provide returns consistent with management expectations.

Conversely, a rising interest rate environment could result in a reduction in interest spread income or an increase in policyholder surrenders. Existing general account investments supporting annuity liabilities had a weighted average maturity of approximately 5.8 years as of December 31, 2007. Therefore, a change in portfolio yield will lag changes in market interest rates. This lag increases if the rate of prepayments of securities slows. To the extent the Company sets renewal rates based on current market rates, this will result in reduced interest spreads. Alternatively, if the Company sets renewal crediting rates while attempting to maintain a desired spread from the portfolio yield, the rates offered by the Company may be less than new money rates offered by competitors. This difference could result in an increase in surrender activity by policyholders. If unable to fund surrenders with cash flow from operations, the Company might need to sell assets, which likely would have declined in value due to the increase in interest rates. The Company attempts to mitigate this risk by offering products that assess surrender charges and/or market value adjustments at the time of surrender, and by managing the maturity and interest-rate sensitivities of assets to approximate those of liabilities.

Asset/Liability Management Strategies to Manage Interest Rate Risk

The Company employs an asset/liability management approach tailored to the specific requirements of each of its products. Each line of business has an investment policy based on its specific characteristics. The policy establishes asset maturity and duration, quality and other relevant guidelines.

An underlying pool or pools of investments, including combinations of dedicated and common asset pools, support each general account line of business. Dedicated pools of assets have been created for certain liabilities or groups of liabilities within most lines and represent the majority of the pools. These pools consist of whole

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assets purchased specifically for the underlying line of business. In general, assets placed in any given portfolio remain there until they mature (or are called), but active management of specific securities, sectors and several top-down risks may result in portfolio turnover or transfers among the various portfolios. The common asset pools are generally maintained on the basis of the desired maturity characteristics of the assets used (e.g., 4 to 7 years weighted average life). The various lines of business are given “ownership” percentages of assets acquired by the pools depending on their contribution to the amounts purchased in the pools, in a manner analogous to investment year allocations. This methodology is sometimes referred to as synthetic segmentation.

Investment strategies are executed by dedicated investment professionals based on the guidance established for the various pools. To assist them in this regard, they receive periodic projections of investment needs from each line’s management team. Line of business management teams, investment portfolio managers and finance professionals periodically evaluate how well assets purchased and the underlying portfolio match the underlying liabilities for each line.

Using this information, in conjunction with each line’s investment strategy, actual asset purchases or commitments are made. In addition, plans for future asset purchases are formulated when appropriate. This process is repeated frequently so that invested assets for each line match its investment needs as closely as possible. The primary objectives are to ensure that each line’s liabilities are invested in accordance with its investment strategy and that over or under investment is minimized.

As part of this process, the investment portfolio managers provide each line’s actuaries with forecasts of anticipated rates that the line’s future investments are expected to produce. This information, in combination with yields attributable to the line’s current investments and its investment “rollovers,” gives the line actuaries data to use in computing and declaring interest crediting rates for their lines of business in conjunction with management approval.

There are two approaches to developing investment policies:

• For liabilities where cash flows are not interest sensitive and the credited rate is fixed (e.g., immediate annuities), the Company attempts to manage risk with a combination cash matching/duration matching strategy. Duration is a measure of the sensitivity of price to changes in interest rates. For a rate movement of 100 basis points, the fair value of liabilities with a duration of 5 years would change by approximately 5%. For this type of liability, the Company generally targets an asset/liability duration mismatch of -0.25 to +0.50 years. In addition, the Company attempts to minimize asset and liability cash flow mismatches, especially over the first five years. However, the desired degree of cash matching is balanced against the cost of cash matching.

• For liabilities where the Company has the right to modify the credited rate and policyholders also have options, the Company’s risk management process includes modeling both the assets and liabilities over multiple stochastic scenarios. The Company considers a range of potential policyholder behavior as well as the specific liability crediting strategy. This analysis, combined with appropriate risk tolerances, drives the Company’s investment policy.

Use of Derivatives to Manage Interest Rate Risk

The Company periodically purchases fixed rate investments to back variable rate liabilities. As a result, the Company can be exposed to interest rate risk due to the mismatch between variable rate liabilities and fixed rate assets. In an effort to mitigate the risk from this mismatch, the Company enters into various types of derivative instruments, with fluctuations in the fair values of the derivatives offsetting changes in the fair values of the investments resulting from changes in interest rates. The Company principally uses pay fixed/receive variable interest rate swaps to manage this risk.

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Under these interest rate swaps, the Company receives variable interest rate payments and makes fixed rate payments. The fixed interest paid on the swap offsets the fixed interest received on the investment, resulting in the Company receiving the variable interest payments on the swap, generally 3-month U.S. LIBOR, and the credit spread on the investment. The net receipt of a variable rate will then more closely match the variable rate paid on the liability.

As a result of entering into commercial mortgage loan and private placement commitments, the Company is exposed to changes in the fair value of such commitments due to changes in interest rates during the commitment period prior to funding of the loans. In an effort to manage this risk, the Company enters into short U.S. Treasury futures and/or pay fixed interest rate swaps during the commitment period. With short U.S. Treasury futures or pay fixed interest rate swaps, if interest rates rise/fall, the gains/losses on the futures will offset the change in fair value of the commitment attributable to the change in interest rates.

The Company periodically purchases variable rate investments such as commercial mortgage loans and corporate bonds. As a result, the Company can be exposed to variability in cash flows and investment income due to changes in interest rates. Such variability poses risks to the Company when the assets are funded with fixed rate liabilities. In an effort to manage this risk, the Company may enter into receive fixed/pay variable interest rate swaps.

In using these interest rate swaps, the Company receives fixed interest rate payments and makes variable rate payments. The variable interest paid on the swap offsets the variable interest received on the investment, resulting in the Company receiving the fixed interest payments on the swap and the credit spread on the investment. The net receipt of a fixed rate will then more closely match the fixed rate paid on the liability.

The Company manages interest rate risk at the segment level. Different segments may simultaneously hedge interest rate risks associated with owning fixed and variable rate investments considering the risk relevant to a particular segment.

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Characteristics of Interest Rate Sensitive Financial Instruments

The table below provides information about the Company’s financial instruments as of December 31, 2007 that are sensitive to changes in interest rates. Insurance contracts that subject the Company to significant mortality risk, including life insurance contracts and life-contingent immediate annuities, do not meet the definition of a financial instrument and are not included in the table.

	Estimated year of maturities/repayments														2007 Fair Value		2006 Fair Value
(in millions)	2008		2009		2010		2011		2012		There- after		Total
Assets
Fixed maturity securities:
Corporate bonds:
Principal	$	1,993.0	$	1,749.6	$	1,990.3	$	2,066.8	$	1,825.8	$	5,618.4	$	15,243.9	$	15,309.1	$	16,478.2
Weighted average interest rate		5.83%		6.33%		6.06%		6.02%		5.88%		6.48%		6.19%
Mortgage and other asset-backed securities:
Principal	$	1,577.7	$	1,184.0	$	1,294.7	$	1,180.0	$	1,120.8	$	4,742.4	$	11,099.6	$	10,880.6	$	10,578.6
Weighted average interest rate		5.54%		5.65%		5.55%		5.63%		5.55%		5.69%		5.63%
Other fixed maturity securities:
Principal	$	88.1	$	46.0	$	42.6	$	36.4	$	66.9	$	640.4	$	920.4	$	999.5	$	1,103.2
Weighted average interest rate		5.05%		6.05%		5.05%		4.74%		5.58%		6.42%		6.08%
Mortgage loans on real estate:
Principal	$	228.7	$	232.9	$	444.6	$	906.1	$	699.9	$	5,782.6	$	8,294.8	$	8,335.7	$	8,821.5
Weighted average interest rate		5.85%		6.10%		6.62%		6.40%		6.26%		6.02%		6.11%
Liabilities
Individual deferred fixed annuities:
Principal	$	2,043.2	$	1,557.9	$	1,246.4	$	990.7	$	811.8	$	2,589.4	$	9,239.4	$	7,644.4	$	10,070.1
Weighted average crediting rate		3.23%		3.28%		3.39%		3.50%		3.53%		3.55%
Group pension deferred fixed annuities:
Principal	$	1,277.2	$	1,166.2	$	1,147.9	$	990.4	$	847.2	$	5,544.2	$	10,973.1	$	11,190.5	$	11,353.5
Weighted average crediting rate		4.11%		4.11%		4.11%		4.12%		4.13%		4.14%
Funding agreements backing MTNs:
Principal	$	801.5	$	1,304.0	$	1,142.4	$	784.6	$	677.4	$	—	$	4,709.9	$	4,537.5	$	4,611.8
Weighted average crediting rate		4.71%		4.27%		4.17%		4.21%		4.07%		—
Immediate annuities:
Principal	$	267.9	$	239.1	$	204.9	$	176.7	$	150.8	$	932.4	$	1,971.8	$	565.2	$	491.6
Weighted average crediting rate		6.55%		6.60%		6.65%		6.70%		6.75%		6.82%
Short-term debt:
Principal	$	309.3	$	—	$	—	$	—	$	—	$	—	$	309.3	$	309.3	$	85.2
Weighted average interest rate		4.66%		—		—		—		—		—		4.66%
Long-term debt:
Principal	$	—	$	20.0	$	—	$	299.2	$	314.2	$	931.7	$	1,565.1	$	1,566.8	$	1,437.5
Weighted average interest rate		—		3.56%		—		6.25%		5.82%		6.18%		6.09%

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	Estimated year of maturities/repayments														2007 Fair Value			2006 Fair Value
(in millions, except settlement prices)	2008		2009		2010		2011		2012		There- after		Total
Derivative Financial Instruments
Interest rate swaps:
Pay fixed/receive variable:
Notional value	$	471.4	$	789.7	$	463.8	$	875.0	$	348.6	$	265.8	$	3,214.3	$	(163.6	)	$	(95.4	)
Weighted average pay rate		4.85%		3.68%		5.02%		5.03%		5.17%		5.23%		4.70%
Weighted average receive rate1		5.40%		5.37%		5.37%		5.43%		5.51%		5.44%		5.41%
Pay fixed/receive variable, forward starting:
Notional value	$	—	$	—	$	—	$	—	$	—	$	98.6	$	98.6	$	(3.7	)	$	(0.8	)
Weighted average pay rate		—		—		—		—		—		5.18%		5.18%
Weighted average receive rate		—		—		—		—		—		1.75%		1.75%
Pay variable/receive fixed:
Notional value	$	228.8	$	15.9	$	11.4	$	266.6	$	223.4	$	338.9	$	1,085.0	$	246.6		$	214.1
Weighted average pay rate1		2.79%		4.98%		5.98%		5.28%		5.50%		4.98%		4.71%
Weighted average receive rate		2.53%		4.17%		8.52%		6.25%		5.44%		5.08%		4.93%
Pay fixed/receive fixed:
Notional value	$	16.8	$	64.1	$	51.8	$	67.8	$	11.4	$	124.1	$	336.0	$	(24.4	)	$	(46.4	)
Weighted average pay rate		5.83%		5.73%		3.66%		5.61%		4.70%		5.14%		5.14%
Weighted average receive rate		4.04%		4.16%		4.66%		5.12%		6.10%		5.73%		5.07%
Credit default swaps sold:
Notional value	$	115.0	$	29.5	$	57.0	$	6.0	$	48.0	$	—	$	255.5	$	(8.5	)	$	2.5
Weighted average receive rate		0.57%		0.99%		0.66%		3.55%		0.92%		—		0.78%
Credit default swaps purchased:
Notional value	$	11.5	$	0.8	$	—	$	10.5	$	—	$	22.0	$	44.8	$	3.2		$	(0.2	)
Weighted average pay rate		1.10%		5.00%		—		0.89%		—		0.57%		0.85%
Embedded derivatives:
Notional value	$	—	$	—	$	—	$	—	$	—	$	20.0	$	20.0	$	(122.0	)	$	54.5
Total return swaps2:
Notional value	$	375.0	$	—	$	—	$	—	$	—	$	—	$	375.0	$	(3.3	)	$	0.1
Mortgage loan commitments held for sale:
Notional value	$	86.5	$	—	$	—	$	—	$	—	$	—	$	86.5	$	(0.8	)	$	—
Treasury futures:
Short positions:
Contract amount/notional value	$	3.0	$	—	$	—	$	—	$	—	$	—	$	3.0	$	—		$	—
Weighted average settlement price		111.4		—		—		—		—		—		111.4
Long positions:
Contract amount/notional value	$	197.5	$	—	$	—	$	—	$	—	$	—	$	197.5	$	0.9		$	(2.1	)
Weighted average settlement price		112.9		—		—		—		—		—		112.9
Equity futures:
Short positions:
Contract amount/notional value	$	286.7	$	—	$	—	$	—	$	—	$	—	$	286.7	$	4.5		$	(0.2	)
Weighted average settlement price		1,492.8		—		—		—		—		—		1,492.8
Long positions:
Contract amount/notional value	$	0.6	$	—	$	—	$	—	$	—	$	—	$	0.6	$	—		$	—
Weighted average settlement price		1,480.6		—		—		—		—		—		1,480.6
Option contracts
Long positions:
Contract amount/notional value	$	179.4	$	97.2	$	230.4	$	653.6	$	420.5	$	664.2	$	2,245.3	$	147.4		$	70.0
Weighted average settlement price		1,499.1		1,068.5		1,124.7		1,198.0		1,260.4		1,283.4		1,245.9

¹ Variable rates are generally based on 1, 3 or 6-month U.S. LIBOR and reflect the effective rate as of December 31, 2007.

² Total return swaps are based on the Lehman CMBS Index.

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

Mortgage-backed and other asset-backed securities: The year of maturity is determined based on the terms of the securities and the current rate of prepayment of the underlying pools of mortgages or assets. The Company limits its exposure to prepayments by purchasing less volatile types of MBS and ABS investments. See Part II, Item 7—MD&A—Investments—Securities Available-for-Sale for further information.

Corporate bonds and other fixed maturity securities and mortgage loans on real estate: The maturity year is that of the security or loan.

Individual deferred fixed annuities: The maturity year is based on the expected date of policyholder withdrawal, taking into account actual experience, current interest rates and contract terms. Individual deferred fixed annuities are certain individual annuity contracts, which are also subject to surrender charges calculated as a percentage of the deposits made and assessed at declining rates during the first seven years after a deposit is made. Also included in deferred fixed annuities were $1.27 billion of participating group annuity contracts in 2007 ($1.27 billion in 2006). As of December 31, 2007, individual annuity general account liabilities totaling $3.95 billion ($5.12 billion in 2006) were in contracts where the crediting rate is reset periodically, with portions resetting in each calendar quarter, and $656.6 million that reset annually in 2007 compared to $795.9 million in 2006. Individual fixed annuity policy reserves of $1.47 billion in 2007 ($2.29 billion in 2006) were in contracts that adjust the crediting rate every five years. Individual fixed annuity policy reserves of $620.3 million in 2007 were in contracts that adjust the crediting rate every three years compared to $684.0 million in 2006. The average crediting rate is calculated as the difference between the projected yield of the assets backing the liabilities and a targeted interest spread. However, for certain individual annuities the crediting rate is also adjusted to partially reflect current new money rates.

Group pension deferred fixed annuities: The maturity year is based on the expected date of policyholder withdrawal, taking into account actual experience, current interest rates and contract terms. Included were group annuity contracts representing $10.97 billion and $11.13 billion of general account liabilities as of December 31, 2007 and 2006, respectively, which are generally subject to market value adjustment upon surrender and which also may be subject to surrender charges. Of the total group annuity liabilities, $26.1 million ($6.4 million in 2006) were in contracts where the crediting rate is reset monthly, $9.70 billion ($9.76 billion in 2006) were in contracts where the crediting rate is reset quarterly, $518.0 million ($484.6 million in 2006) were in contracts that adjust the crediting rate on an annual basis with portions resetting in each calendar quarter, and $725.1 million ($905.6 million in 2006) were in contracts where the crediting rate is reset annually on January 1.

Funding agreements backing MTNs: As of December 31, 2007 and 2006, fixed annuity policy reserves of $4.53 billion and $4.60 billion, respectively, relate to funding agreements issued in conjunction with the Company’s MTN program where the crediting rate either is fixed for the term of the contract or is variable based on an underlying index.

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

Short-term debt and long-term debt: The maturity year is the stated maturity date of the obligation. While certain obligations are callable, either at a premium or with a make-whole provision, the Company currently has no plans to call the obligations prior to the stated maturity date.

Derivative financial instruments: The maturity year is based on the terms of the related contract. Interest rate swaps include cross-currency interest rate swaps, which are used to reduce the Company’s existing asset and liability foreign currency exposure. Cross-currency interest rate swaps in place against each foreign currency obligation hedge the Company against adverse currency movements with respect to both period interest payments and principal repayment. Underlying details by currency therefore have been omitted. Variable swap rates and settlement prices reflect rates and prices in effect as of December 31, 2007.

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Foreign Currency Risk Management

In conjunction with the Company’s MTN program, the Company periodically issues both fixed and variable rate liabilities denominated in foreign currencies. As a result, the Company is exposed to changes in the fair value of liabilities due to changes in foreign currency exchange rates and related interest rates. In an effort to manage these risks, the Company enters into cross-currency interest rate swaps.

The Company is exposed to changes in the fair value of fixed rate investments denominated in a foreign currency due to changes in foreign currency exchange rates and related interest rates. In an effort to manage this risk, the Company uses cross-currency interest rate hedges to swap these asset characteristics to variable U.S. dollar rate instruments. Cross-currency interest rate swaps on assets are structured to pay a fixed rate, in a foreign currency, and receive a variable U.S. dollar rate, generally 3-month U.S. LIBOR. These derivative instruments are designated as a fair value hedge of a fixed rate foreign denominated asset.

Cross-currency interest rate swaps on variable rate investments are structured to pay a variable rate, in a foreign currency, and receive a fixed U.S. dollar rate. The terms of the foreign currency paid on the swap will exactly match the terms of the foreign currency received on the asset, thus eliminating currency risk. These derivative instruments are designated as a cash flow hedge.

Equity Market Risk

Asset fees calculated as a percentage of separate account assets are a significant source of revenue to the Company. As of December 31, 2007, approximately 82% of separate account assets were invested in equity mutual funds (approximately 83% as of December 31, 2006). Gains and losses in the equity markets result in corresponding increases and decreases in the Company’s separate account assets and asset fee revenue. In addition, a decrease in separate account assets may decrease the Company’s expectations of future profit margins due to a decrease in asset fee revenue and/or an increase in guaranteed contract claims, which also may require the Company to accelerate amortization of DAC.

The Company’s long-term assumption for net separate account returns is 7% annual growth. If equity markets were unchanged throughout a given year, the Company estimates that its net earnings per diluted share, calculated using current weighted average diluted shares outstanding, would be approximately $0.05 to $0.10 less than if the Company’s long-term assumption for net separate account returns were realized. This analysis assumes no other factors change and that an unlocking of DAC assumptions would not be required. However, as it does each quarter, the Company would evaluate its DAC balance and underlying assumptions to determine the need for unlocking. The Company can provide no assurance that the experience of flat equity market returns would not result in changes to other factors affecting profitability, including the possibility of unlocking of DAC assumptions.

Many of the Company’s individual variable annuity contracts offer GMDB features. A GMDB generally provides a benefit if the annuitant dies and the contract value is less than a specified amount, which may be based on premiums paid less amounts withdrawn or contract value on a specified anniversary date. A decline in the stock market causing the contract value to fall below this specified amount, which varies from contract to contract based on the date the contract was entered into as well as the GMDB feature elected, will increase the net amount at risk, which is the GMDB in excess of the contract value. This could result in additional GMDB claims.

In an effort to mitigate this risk, the Company implemented a GMDB economic hedging program for certain new and existing business. Prior to implementation of the GMDB hedging program in 2000, the Company managed this risk primarily by entering into reinsurance arrangements. The GMDB economic hedging program is designed to offset changes in the economic value of the designated GMDB. Currently the program shorts S&P 500 Index futures, which provides an offset to changes in the value of the designated obligation. The futures are

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not designated as hedges and, therefore, hedge accounting is not applied. The Company’s economic and accounting hedges are not perfectly offset. Therefore, the hedging activity is likely to lead to earnings volatility. This volatility was negligible in 2007. As of December 31, 2007 and 2006, the Company’s net amount at risk was $528.0 million and $574.3 million before reinsurance, respectively, and $319.3 million and $196.2 million net of reinsurance, respectively. As of December 31, 2007 and 2006, the Company’s reserve for GMDB claims was $47.6 million and $29.6 million, respectively.

The Company also offers certain variable annuity products with GMAB, GLWB and hybrid GMAB/GLWB riders (collectively referred to as living benefits). A GMAB provides the contractholder with a guaranteed return of premium, adjusted proportionately for withdrawals, after a specified time period (5, 7 or 10 years) selected by the contractholder at the time of issuance of a variable annuity contract. In some cases, the contractholder also has the option, after a specified time, to drop the rider and continue the variable annuity contract without the GMAB. The design of the GMAB rider limits the risk to the Company in a variety of ways including asset allocation requirements, which serve to reduce the Company’s potential exposure to underlying fund performance risks. Specifically, the terms in the GMAB rider limit policyholder asset allocation by either (1) requiring partial allocation of assets to a guaranteed term option (a fixed rate investment option) and excluding certain funds that are highly volatile or difficult to hedge or (2) requiring all assets be allocated to one of the approved asset allocation funds or models defined by the Company.

Beginning in March 2005, the Company began offering a hybrid GMAB/GLWB through its CPPLI contract rider. This living benefit combines a GMAB feature in its first 5-10 years with a lifetime withdrawal benefit election at the end of the GMAB feature. Upon maturity of the GMAB, the contractholder can elect the lifetime withdrawal benefit, which would continue for the duration of the insured’s life; elect a new CPPLI rider; or drop the rider completely and continue the variable annuity contract without any rider. If the lifetime withdrawal benefit is elected and the insured’s contract value is exhausted through such withdrawals and market conditions, the Company will continue to fund future withdrawals at a pre-defined level until the insured’s death. In some cases, the contractholder has the right to drop the GLWB portion of this rider or periodically reset the guaranteed withdrawal basis to a higher level. This benefit requires a minimum allocation to guaranteed term options or adherence to limitations required by an approved asset allocation strategy as previously described above.

In March 2006, the Company added L.inc, a stand-alone GLWB, to complement CPPLI in its product offerings. This rider is very similar to the hybrid benefit discussed above in that L.inc and CPPLI both have guaranteed withdrawal rates that increase based on the age at which the contractholder begins taking income. The withdrawal rates are applied to a benefit base to determine the guaranteed lifetime income amount available to a contractholder. The benefit base is equal to the variable annuity premium at contract issuance and may increase as a result of a ratchet feature that is driven by account performance and a roll-up feature that is driven by policy duration. Generally, the longer the contractholder waits before commencing withdrawals, the greater the guaranteed lifetime income. One key difference between L.inc and CPPLI is that the charge associated with L.inc is assessed against the benefit base. This is a risk mitigation feature as it alleviates much of the uncertainty around account performance and customer withdrawal patterns, both of which can lead to lower than expected revenue streams if the charge were assessed on account value. In June 2007, the Company added a feature to L.inc to allow for a lump settlement in lieu of lifetime withdrawals in certain situations.

The Company’s living benefit riders represent an embedded derivative in a variable annuity contract that is required to be separated from, and valued apart from, the host variable annuity contract. The embedded derivatives are carried at fair value. Subsequent changes in the fair value of the embedded derivatives are recognized in earnings as a component of net realized investment gains and losses. The fair value of the embedded derivatives is calculated based on a combination of capital market and actuarial assumptions. Projections of cash flows inherent in the valuation of the embedded derivative incorporate numerous assumptions including, but not limited to, expectations of contractholder persistency, contractholder withdrawal patterns, risk neutral market returns, correlations of market returns and market return volatility. As of December 31, 2007 and 2006, the net balance of the embedded derivatives for living benefits was a liability of $91.9 million and an asset of $23.7 million, respectively.

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Similar to the Company’s economic hedging for GMDBs, the living benefits features are also being economically hedged. The primary risks being hedged are the exposures associated with declining equity market returns and downward interest rate movements. The Company employs a variety of instruments to mitigate this exposure including S&P 500 Index futures, U.S. Treasury futures, interest rate swaps and long-dated over-the-counter put options. The positions used in the economic hedging program are not designated as hedges and, therefore, hedge accounting is not applied. The living benefits hedging program is designed to offset changes in the economic value of the living benefits obligation to contractholders. Changes in the fair value of the embedded derivatives are likely to create volatility in earnings. The hedging activity associated with changes in the economic value of the living benefits obligations will likely mitigate a portion of this earnings volatility.

Inflation

The rate of inflation did not have a material effect on the revenues or operating results of the Company during 2007, 2006 or 2005.

ITEM 8 CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See Part IV, Item 15—Exhibits, Financial Statement Schedules for an index to the Company’s audited consolidated financial statements included in the F pages of this report.

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

None.

ITEM 9A CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Company’s Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934). Based on such evaluation, such officers have concluded that the Company’s disclosure controls and procedures are effective as of the end of the period covered by this Annual Report.

Management Report on Internal Control Over Financial Reporting

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Securities Exchange Act of 1934. The Company’s internal control system was designed to provide reasonable assurance to management and its Board of Directors regarding the preparation and fair presentation of published financial statements. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to the preparation and presentation of financial statements.

The Company’s management assessed the effectiveness of NFS’ internal control over financial reporting as of December 31, 2007. In making this assessment, the Company’s management used the criteria set forth in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on those criteria, the Company’s management concluded that NFS’ internal control over financial reporting was effective as of December 31, 2007.

The Company’s independent registered public accounting firm, KPMG LLP, issued an attestation report on the effectiveness of management’s internal control over financial reporting. This report appears on page F-2.

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Changes in Internal Control Over Financial Reporting

There have been no changes during the Company’s fourth fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

ITEM 9B OTHER INFORMATION

None.

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PART III

ITEM 10    DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information set forth under the captions “Proposal 1—Election of Directors—Nominees for Class I Directors,—Class II Directors, and—Class III Directors,” “Biographical Information—Directors,” “Section 16 Beneficial Ownership Compliance,” “The Board of Directors and its Committees—Additional Governance Policies—Code of Conduct and Business Practices,” the first paragraph under “The Board of Directors and its Committees—Audit Committee,” and the second paragraph under “The Board of Directors and its Committees—Audit Committee—Audit Committee Membership” in NFS’ 2008 Proxy Statement is incorporated herein by reference.

Executive Officers of the Registrant

Name	Age	Position with NFS (as of February 27, 2008)
W.G. Jurgensen	56	Chief Executive Officer
Mark R. Thresher	51	President and Chief Operating Officer
Patricia R. Hatler	53	Executive Vice President—Chief Legal and Governance Officer
Terri L. Hill	48	Executive Vice President—Chief Administrative Officer
Lawrence A. Hilsheimer	50	Executive Vice President
Michael C. Keller	48	Executive Vice President—Chief Information Officer
James R. Lyski	45	Executive Vice President—Chief Marketing Officer
Stephen S. Rasmussen	55	Executive Vice President
Robert A. Rosholt	57	Executive Vice President—Finance, Investments and Strategy
Anne L. Arvia	44	Senior Vice President—Nationwide Bank
Carol A. Baldwin Moody	51	Senior Vice President—Chief Compliance Officer
Thomas E. Barnes	54	Senior Vice President—Assistant to the CEO and Secretary
John L. Carter	45	Senior Vice President—Non-Affiliated Sales
Roger A. Craig	45	Senior Vice President—Division General Counsel and Assistant Secretary
Timothy G. Frommeyer	43	Senior Vice President—Chief Financial Officer
Peter A. Golato	54	Senior Vice President—Individual Protection Business Head
Harry H. Hallowell	47	Senior Vice President and Treasurer
Kelly A. Hamilton	43	Senior Vice President—Internal Audits
Michael A. Hamilton	41	Senior Vice President—NFN Retail Distribution
Eric S. Henderson	45	Senior Vice President—Individual Investments Business
William S. Jackson	54	Senior Vice President—Nationwide Retirement Plans
Gail G. Snyder	53	Senior Vice President—Chief Investment Officer

Business experience for each of the individuals listed in the above table is set forth below:

W.G. Jurgensen has been Chief Executive Officer of NFS and several subsidiaries of NFS since August 2000 and a director of NFS since May 2000. He served as Chairman of the Board of NFS from January 2001 to June 2003 and Chief Executive Officer—Elect from May to August 2000. Since August 2000, he has been Chief Executive Officer of NMIC, Nationwide Mutual Fire Insurance Company (Nationwide Mutual Fire), NLIC and NLAIC, and was Chief Executive Officer—Elect of those companies from May to August 2000. He also serves as Chief Executive Officer of several other companies within Nationwide, which is comprised of NFS, NMIC, Nationwide Mutual Fire and all of their respective subsidiaries and affiliates (collectively, Nationwide). Mr. Jurgensen has been a director of NMIC, Nationwide Mutual Fire, NLIC and NLAIC since May 2000 and serves as a director of several other companies within Nationwide, as well as a trustee of Nationwide Foundation, a not-for-profit corporation that contributes to nonprofit agencies and community projects. Mr. Jurgensen has been a director of ConAgra Foods, Inc., a producer and marketer of food products, since August 2002. Before joining Nationwide, Mr. Jurgensen was Executive Vice President of Bank One Corporation (now JP Morgan

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Chase & Co.), an investment banking and financial services institution, from 1998 to May 2000. He served as Executive Vice President of First Chicago NBD Corporation, a financial institution, and Chairman of FCC National Bank, a financial institution, from 1996 to May 1998.

Mark R. Thresher has been President and Chief Operating Officer of NFS, NLIC and NLAIC since May 2004. He was President and Chief Operating Officer—Elect from April 2004 to May 2004; President and Chief Operating Officer—Elect and Chief Financial Officer from December 2003 to April 2004; and Senior Vice President—Chief Financial Officer from November 2002 to December 2003 of NFS, NLIC and NLAIC. Mr. Thresher also served NFS as its Senior Vice President—Chief Financial Officer and Treasurer from November 2002 to December 2003; Senior Vice President—Finance and Treasurer from May 1999 to November 2002; and Vice President—Finance and Controller from December 1996 to May 1999. He was Senior Vice President—Finance of NLIC and NLAIC from May 1999 to November 2002, and Vice President—Controller of those companies from December 1996 to May 1999. He also served as Vice President and Treasurer of several other companies within Nationwide from June 1996 to August 1996. Prior to joining Nationwide, Mr. Thresher served as a partner with KPMG LLP, a public accounting firm, from July 1988 to May 1996.

Patricia R. Hatler has been Executive Vice President—Chief Legal and Governance Officer of NFS since December 2004. Previously, Ms. Hatler served NFS as its Executive Vice President and General Counsel from October 2004 to December 2004; Executive Vice President, General Counsel and Secretary from March 2003 to October 2004; Senior Vice President, General Counsel and Secretary from May 2000 to March 2003; and Senior Vice President and General Counsel from August 1999 to May 2000. She has been Executive Vice President and Chief Legal and Governance Officer of several other companies within Nationwide since December 2004 and held similar positions with several Nationwide companies, including Executive Vice President, General Counsel and Secretary, since July 1999. Prior to that time, she was General Counsel and Corporate Secretary of Independence Blue Cross, a health insurance provider, from 1983 to July 1999.

Terri L. Hill has been Executive Vice President—Chief Administrative Officer of NFS and several other Nationwide companies since September 2003. She was Senior Vice President—Human Resources/Operations for Scottsdale Insurance Company (Scottsdale), a wholly-owned subsidiary of NMIC, and its affiliates from December 2000 to September 2003; Vice President—Human Resources/Communications of Scottsdale from May 1997 to December 2000; and Vice President—Human Resources of Scottsdale from October 1996 to May 1997. Ms. Hill was Vice President—Human Relations from February 1985 to September 1996 at American Express, a diversified worldwide travel, financial and network services company, and Director of Personnel for Bullock’s Department Stores, a department store retailer, from August 1981 to February 1985.

Larry A. Hilsheimer has been Executive Vice President of NFS and several other companies within Nationwide since October 2007. Prior to joining Nationwide, Mr. Hilsheimer served as a partner of Deloitte and Touche USA LLP, from June 1988 to October 2007, and was a Senior Manager from June 1986 to June 1988.

Michael C. Keller has been Executive Vice President—Chief Information Officer of NFS since August 2001. Mr. Keller has been Executive Vice President—Chief Information Officer of several other companies within Nationwide since June 2001. Prior to that time, Mr. Keller was Senior Vice President of Bank One, a financial institution, from January 1998 to June 2001, and held various management positions with IBM Corporation, an information technology company, from July 1982 to December 1997.

James R. Lyski has been Executive Vice President—Chief Marketing Officer of NFS since October 2006. Mr. Lyski previously served as Senior Vice President for Strategy, Product and Marketing at CIGNA HealthCare, Inc., an employee benefits company, from October 2002 to October 2006; as Chief Operating Officer of Atabok, Inc., a Boston-based technology company, from June 2000 to October 2002; and as Vice President for U.S. Marketing at FedEx Corporation, a global shipping company, from August 1989 to May 2000.

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Stephen S. Rasmussen has been Executive Vice President of NFS and President and Chief Operating Officer of NMIC and Nationwide Mutual Fire since September 2003. Since December 2000, Mr. Rasmussen has served as a Director, President and Chief Operating Officer of ALLIED Group, Inc., a wholly-owned subsidiary of NMIC. He also serves as Chairman and Director of several Allied subsidiaries and as Director of several other companies within Nationwide.

Robert A. Rosholt has been Executive Vice President—Finance, Investments and Strategy of NFS since October 2002. Since January 2006, he has served as Executive Vice President—Chief Financial Officer of NMIC and several other companies within Nationwide. He served as Executive Vice President—Chief Finance and Investment Officer of NMIC and several other companies within Nationwide from October 2002 to December 2005. He also serves as a Director of several Nationwide companies. Prior to joining Nationwide, Mr. Rosholt was Executive Vice President and Chief Operating Officer of the U.S. brokerage business of Aon Corporation, a provider of risk management, retail, reinsurance, and wholesale brokerage, claims management, and human capital consulting services, from September 2000 to October 2002, and held various management positions, including Chief Financial Officer, with Bank One from June 1974 to May 2000.

Anne L. Arvia has been Senior Vice President—Nationwide Bank since September 2006. Prior to joining Nationwide Bank, Ms. Arvia served as the Chief Executive Officer of ShoreBank, a community and environmental bank, from May 2002 to August 2006; as the President of ShoreBank from May 2001 to August 2006; and held various other positions with ShoreBank from May 1991 to April 2002.

Carol A. Baldwin Moody has been Senior Vice President, Chief Compliance Officer of NFS and several other companies within Nationwide since October 2005. Previously, she was Chief Compliance Officer for TIAA-CREF from 2004 to 2005. Prior to that time, she served as Managing Director and General Counsel of TCW/Latin America Partners LLC from 2000 to 2004 and held various senior-level positions with Citibank from 1988 to 2000.

Thomas E. Barnes has been Senior Vice President—Assistant to the CEO and Secretary of NFS and several other companies within Nationwide since July 2007. Previously, Mr. Barnes served several Nationwide companies as Vice President—Assistant to the CEO and Secretary from March 2005 to July 2007; Vice President—Corporate Governance and Secretary from October 2004 to March 2005; Vice President and Assistant Secretary May 2003 to October 2004; as Associate Vice President and Assistant Secretary from May 2002 to May 2003; and in various other positions within Nationwide since 1984.

John L. Carter has been Senior Vice President—Non-Affiliated Sales of NFS, NLIC and NLAIC and President of Nationwide Financial Distributors, Inc., as well as Senior Vice President of several other Nationwide companies, since November 2005. Previously, he served as Corporate Vice President of Platform Distribution at Prudential Financial, a financial services company, from August 1999 to November 2005. Prior to that time, Mr. Carter held positions with other financial services firms, including Kidder Peabody, where he served in executive sales positions, and UBS.

Roger A. Craig has been Senior Vice President—Division General Counsel and Assistant Secretary of NFS since August 2007, and Senior Vice President—Division General Counsel of several other companies within Nationwide since July 2007. Previously, Mr. Craig served several Nationwide companies as Vice President—Division General Counsel from October 2004 to August 2007; Vice President—Associate General Counsel from March 2003 to October 2004; Associate Vice President—Associate General Counsel from February 2001 to March 2003; and in various other positions within Nationwide since 1991. Prior to that time, he was counsel to Huffy Corporation and an attorney at Crabbe, Brown, Jones, Potts & Schmidt.

Timothy G. Frommeyer has been Senior Vice President—Chief Financial Officer of NFS and several other Nationwide companies since November 2005. He served as Vice President and Chief Actuary of NLIC and NLAIC from May 2004 to November 2005. He also served as Senior Vice President—Finance and Actuarial of NRS from November 2001 to May 2004 and Vice President—Public Sector Finance and Actuarial of NLIC and

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NLAIC from November 2001 to May 2004. From April 2000 to May 2001, Mr. Frommeyer served as Associate Vice President—Public Sector and Retail Actuarial of NLIC and NLAIC. Prior to that time, he held various other positions within Nationwide.

Peter A. Golato has been Senior Vice President—Individual Protection Business Head of NFS and several other companies within Nationwide since May 2004. Mr. Golato also serves as a Director (since May 2004) and President (since August 2004) of NLICA, NLACA and Nationwide Life Insurance Company of Delaware (NLIC of Delaware). Previously, he was Vice President—Brokerage Life Sales of NLIC and NLAIC from May 2000 to May 2004, and NMIC and Nationwide Mutual Fire from May 2000 to October 2004. Mr. Golato held various positions within Nationwide from March 1993 to May 2000. Prior to that time, he was Marketing Manager for Aetna Life and Casualty Company, a provider of managed care benefits and dental, pharmacy, vision, and group insurance coverage, from September 1976 to March 1993.

Harry H. Hallowell has been Senior Vice President and Treasurer of NFS and several other companies within Nationwide since January 2006. Previously, Mr. Hallowell served as Vice President and Head Portfolio Risk Manager for Nationwide’s Office of Investments from May 2003 to December 2005. From 1984 to 2003, he served as a Senior Vice President and Head of Corporate Funding for Bank One Corporation.

Kelly A. Hamilton has been Senior Vice President—Internal Audits of NFS and several other companies within Nationwide since September 2005. She served several Nationwide companies as Senior Vice President—PC Finance, from September 2003 to August 2005; Vice President—Corporate Controller, from August 2001 to September 2003, and Associate Vice President—Corporate Accounting Services, from April 2000 to August 2001. Additionally, Ms. Hamilton held other positions within Nationwide starting in July 1995. Ms. Hamilton also serves as a Director of several Nationwide companies. Previously, she held a variety of management and accounting positions at KPMG LLP from January 1986 to July 1995.

Michael A. Hamilton has been Senior Vice President—NFN Retail Distribution of NFS and several other companies within Nationwide since October 2007. Mr. Hamilton has also served as a Director of NLICA, NLACA and Nationwide Life Insurance Company of Delaware since May 2007. Previously, he served as Vice President—NFN Retail Distribution of NLIC and NLAIC from April 2007 to October 2007. Prior to joining Nationwide, Mr. Hamilton served as the President of Pennsylvania Life Insurance Company from April 2004 to January 2007; the Regional Director of National Planning Corporation from April 2000 to July 2003; and the Regional Director of Jackson National Life Distributors, Inc. from April 1998 to April 2004.

Eric S. Henderson has been Senior Vice President—Individual Investments Business Head of NFS and several other companies within Nationwide since August 2007. Previously, Mr. Henderson served as Vice President—CFO—Individual Investments from August 2004 to August 2007; as Vice President—Product Management from February 2004 to August 2004; as Associate Vice President—Product Manager-Variable Annuities from April 2002 to February 2004; and in various other positions within Nationwide since 1985.

William S. Jackson has been Senior Vice President, Nationwide Retirement Plans, of NFS since October 2006. Previously, Mr. Jackson served as Sales Center Vice President from August 2001 to September 2006; as Sales Financial Services Sales Officer from February 1999 to August 2001; and in various other positions within Nationwide since 1984.

Gail G. Snyder has been Senior Vice President—Chief Investment Officer of NFS and several other Nationwide companies since January 2006. She was previously Senior Vice President—Enterprise Portfolio and Strategy Management of NMIC and several other Nationwide companies from January 2005 to January 2006. Previously, she served as Senior Vice President—Portfolio Management of Genworth Financial, Inc., an insurance and financial services company, from May 2004 to December 2004. From March 1995 to May 2005, she served in various capacities at divisions of General Electric, including Senior Vice President—Insurance-Strategic Client Solutions of GE Asset Management, a financial services firm; Chief Investment Officer of GE

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Mortgage Insurance, a mortgage services firm; and Vice President of First Colony Life Insurance Company, an insurance services company acquired by General Electric. She also held various investment positions at Provident Life and Accident Insurance Company, an insurance services company, from December 1986 to March 1995.

The Board of Directors adopted the Nationwide Code of Conduct and Business Practices (Code), which is posted on the Company’s web site (http://www.nationwidefinancial.com) under the Corporate Governance subsection of the Investor Relations area of the web site. The Code is available in print, free of charge, to any shareholder who requests it. Requests for copies should be made to Mark Barnett, Vice President—Investor Relations, One Nationwide Plaza, Columbus, Ohio, 43215, or via telephone at 614-249-8437. All directors, officers and employees of the Nationwide group of companies are required to adhere to the Code. As required by SEC regulations and the listing standards of the New York Stock Exchange, the Code contains written standards designed to deter wrongdoing and to promote honest, ethical conduct including ethical handling of conflicts; full, fair, accurate, timely and understandable disclosure in regulatory reports and public communications; compliance with laws, rules and regulations; prompt internal reporting of violations of the Code; and accountability for adherence to the Code. It also contains compliance standards and procedures that facilitate the effective operation of the Code. Any waivers from, or amendments to, the Code for directors and executive officers must be approved by the Board of Directors or a designated board committee and will be promptly disclosed to the shareholders by posting any waiver on the NFS web site listed above.

ITEM 11    EXECUTIVE COMPENSATION

Information required by this item is set forth under the captions “Director Compensation” and “Executive Compensation” in the NFS 2008 Proxy Statement and is incorporated herein by reference.

ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Information required by this item is set forth under the caption “Beneficial Ownership of Common Stock” in the NFS 2008 Proxy Statement and is incorporated herein by reference.

ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Information required by this item is set forth under the captions “Certain Relationships and Related Transactions” and “The Board of Directors and its Committees—Additional Governance Policies—Independence Standards for Directors” in the NFS 2008 Proxy Statement and is incorporated herein by reference.

ITEM 14    PRINCIPAL ACCOUNTING FEES AND SERVICES

Information required by this item is set forth under the caption “Proposal 2—Ratification of the Appointment of Independent Registered Public Accounting Firm—Principal Accounting Fees and Services” in the NFS 2008 Proxy Statement and is incorporated herein by reference.

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PART IV

ITEM 15    EXHIBITS, FINANCIAL STATEMENT SCHEDULES

	Page
Consolidated Financial Statements
Management Report on Internal Control Over Financial Reporting	F-1
Report of Independent Registered Public Accounting Firm	F-2
Report of Independent Registered Public Accounting Firm	F-3
Consolidated Statements of Income for the years ended December 31, 2007, 2006 and 2005	F-4
Consolidated Balance Sheets as of December 31, 2007 and 2006	F-5
Consolidated Statements of Changes in Shareholders’ Equity for the years ended December 31, 2007, 2006 and 2005	F-6
Consolidated Statements of Cash Flows for the years ended December 31, 2007, 2006 and 2005	F-7
Notes to Consolidated Financial Statements	F-8
Financial Statement Schedules
Schedule I—Consolidated Summaryof Investments—Other Than Investments in Related Parties as of December 31, 2007	F-75
Schedule II—Condensed Financial Information of Registrant	F-76
Schedule III—Supplementary Insurance Information as of December 31, 2007, 2006 and 2005 and for the years then ended	F-79
Schedule IV—Reinsurance as of December 31, 2007, 2006 and 2005 and for the years then ended	F-80
Schedule V—Valuation and Qualifying Accounts for the years ended December 31, 2007, 2006 and 2005	F-81
Exhibits	F-83

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

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Management Report on Internal Control Over Financial Reporting

The management of Nationwide Financial Services, Inc. and its subsidiaries (the Company) is responsible for the preparation and integrity of the consolidated financial statements and other financial information contained in this Annual Report on Form 10-K. The consolidated financial statements were prepared in accordance with U.S. generally accepted accounting principles, and where necessary, include amounts that are based on the best estimates and judgment of management. Management believes the consolidated financial statements present fairly the Company’s financial position and results of operations and that other financial data contained in the Annual Report on Form 10-K has been compiled in a manner consistent with the consolidated financial statements.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Securities Exchange Act of 1934. Our internal control system was designed to provide reasonable assurance to management and our Board of Directors regarding the preparation and fair presentation of published financial statements. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to the preparation and presentation of financial statements.

Our management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2007. In making this assessment, our management used the criteria set forth in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on those criteria, our management concluded that the Company’s internal control over financial reporting was effective as of December 31, 2007.

Our independent registered public accounting firm, KPMG LLP, performed audits of the Company’s consolidated financial statements and internal control over financial reporting. Management has made available to KPMG LLP all of the Company’s financial records and related data.

Management also recognizes its responsibility for fostering a strong ethical business environment that ensures the Company’s affairs are conducted according to the highest standards of professional conduct, honesty and integrity. The Company’s Code of Conduct and Business Practices (Code), which is posted on the Company’s web site, reflects this responsibility. The Code addresses the necessity of ensuring open communication within the Company; potential conflicts of interest; marketing practices; compliance with all laws, including those relating to financial disclosure; and the confidentiality of proprietary information. The Company’s Office of Ethics and Business Practices is responsible for raising employee awareness of the Company’s Code and serves as a confidential resource for inquiries and reporting.

The Audit Committee of the Board of Directors of the Company, composed of independent directors pursuant to the New York Stock Exchange listing standards and rules of the Securities and Exchange Commission, meets periodically with the external and internal auditors, jointly and separately, to evaluate the effectiveness of work performed by them in discharging their respective responsibilities and to assure their independence and free access to the Audit Committee.

/s/ Mark R. Thresher
Name:	Mark R. Thresher
Title:	President and Chief Operating Officer

February 29, 2008

F-1

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders

Nationwide Financial Services, Inc.:

We have audited Nationwide Financial Services, Inc. and subsidiaries’ (the Company’s) internal control over financial reporting as of December 31, 2007, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management Report on Internal Control Over Financial Reporting contained in Item 9A, Controls and Procedures, of the Company’s 2007 Annual Report on Form 10-K. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Nationwide Financial Services, Inc. and subsidiaries maintained, in all material respects, effective internal control over financial reporting as of December 31, 2007, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Nationwide Financial Services, Inc. and subsidiaries as of December 31, 2007 and 2006, and the related consolidated statements of income, shareholders’ equity and cash flows for each of the years in the three-year period ended December 31, 2007, and our report dated February 29, 2008 expressed an unqualified opinion on those consolidated financial statements.

/s/ KPMG LLP

Columbus, Ohio

February 29, 2008

F-2

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders

Nationwide Financial Services, Inc.:

We have audited the accompanying consolidated balance sheets of Nationwide Financial Services, Inc. and subsidiaries (the Company) as of December 31, 2007 and 2006, and the related consolidated statements of income, shareholders’ equity and cash flows for each of the years in the three-year period ended December 31, 2007. In connection with our audits of the consolidated financial statements, we also have audited the financial statement schedules as listed in the accompanying index. These consolidated financial statements and financial statement schedules are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedules based on our audits.

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

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Nationwide Financial Services, Inc. and subsidiaries as of December 31, 2007 and 2006, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2007, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the related financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Nationwide Financial Services, Inc. and subsidiaries’ internal control over financial reporting as of December 31, 2007, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated February 29, 2008 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

As discussed in Note 3 to the consolidated financial statements, the Company adopted the American Institute of Certified Public Accountants’ Statement of Position 05-1, Accounting by Insurance Enterprises for Deferred Acquisition Costs in Connection with Modifications or Exchanges of Insurance Contracts, in 2007.

/s/ KPMG LLP

Columbus, Ohio

February 29, 2008

F-3

NATIONWIDE FINANCIAL SERVICES, INC. AND SUBSIDIARIES

Consolidated Statements of Income

(in millions, except per share amounts)

	Years ended December 31,
	2007			2006			2005
Revenues:
Policy charges	$	1,383.9		$	1,316.0		$	1,241.5
Premiums		432.7			441.5			399.9
Net investment income		2,276.7			2,300.2			2,344.1
Net realized investment (losses) gains		(165.2	)		9.1			20.8
Other income		600.8			495.7			409.9
Total revenues		4,528.9			4,562.5			4,416.2
Benefits and expenses:
Interest credited to policyholder accounts		1,342.0			1,381.5			1,380.9
Benefits and claims		682.9			646.8			574.9
Policyholder dividends		83.1			90.7			107.3
Amortization of deferred policy acquisition costs		382.1			462.9			480.2
Amortization of value of business acquired		47.0			46.0			45.0
Interest expense		110.6			103.1			107.6
Debt extinguishment costs		10.2			—			21.7
Other operating expenses		1,070.6			1,032.2			918.2
Total benefits and expenses		3,728.5			3,763.2			3,635.8
Income from continuing operations before federal income tax expense		800.4			799.3			780.4
Federal income tax expense		190.7			72.2			141.4
Income from continuing operations		609.7			727.1			639.0
Discontinued operations, net of taxes		23.1			(3.1	)		(28.6	)
Cumulative effect of adoption of accounting principle, net of taxes		(6.0	)		—			—
Net income	$	626.8		$	724.0		$	610.4
Earnings from continuing operations per common share:
Basic	$	4.28		$	4.85		$	4.18
Diluted	$	4.25		$	4.82		$	4.16
Earnings per common share:
Basic	$	4.40		$	4.83		$	3.99
Diluted	$	4.37		$	4.80		$	3.97
Weighted average common shares outstanding:
Basic		142.5			149.9			152.9
Diluted		143.5			150.7			153.6
Cash dividends declared per common share	$	1.04		$	0.92		$	0.76

See accompanying notes to consolidated financial statements.

F-4

NATIONWIDE FINANCIAL SERVICES, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(in millions, except per share amounts)

	December 31,
	2007			2006
Assets
Investments:
Securities available-for-sale, at fair value:
Fixed maturity securities (cost $27,263.9 and $28,067.2)	$	27,189.2		$	28,160.0
Equity securities (cost $117.5 and $57.2)		124.2			67.6
Mortgage loans on real estate, net		8,316.1			8,909.8
Short-term investments, including amounts managed by a related party		1,173.6			2,215.6
Other investments		2,265.0			1,906.3
Total investments		39,068.1			41,259.3
Cash		73.6			84.1
Accrued investment income		368.4			373.8
Deferred policy acquisition costs		4,095.6			3,851.0
Value of business acquired		354.8			392.7
Goodwill		301.2			359.0
Other assets		2,090.4			2,516.5
Separate account assets		72,855.0			70,694.7
Total assets	$	119,207.1		$	119,531.1
Liabilities and Shareholders’ Equity
Liabilities:
Future policy benefits and claims	$	35,441.5		$	38,097.8
Short-term debt		309.3			85.2
Long-term debt		1,565.1			1,398.5
Other liabilities		3,711.6			3,632.2
Separate account liabilities		72,855.0			70,694.7
Total liabilities		113,882.5			113,908.4
Shareholders’ equity:
Preferred stock ($0.01 par value; authorized—50.0 shares; issued and outstanding—none)		—			—
Class A common stock ($0.01 par value; authorized—750.0 shares; issued—71.7 and 69.7 shares; outstanding—46.7 and 54.2 shares)		0.7			0.7
Class B common stock ($0.01 par value; authorized—750.0 shares; issued and outstanding—91.8 shares)		1.0			1.0
Additional paid-in capital		1,782.4			1,688.5
Retained earnings		4,853.0			4,618.5
Accumulated other comprehensive (loss) income		(81.5	)		31.9
Treasury stock, at cost (25.0 and 15.5 shares)		(1,229.6	)		(716.3	)
Other, net		(1.4	)		(1.6	)
Total shareholders’ equity		5,324.6			5,622.7
Total liabilities and shareholders’ equity	$	119,207.1		$	119,531.1

F-5

NATIONWIDE FINANCIAL SERVICES, INC. AND SUBSIDIARIES

Consolidated Statements of Changes in Shareholders’ Equity

(in millions)

	Class A common stock		Class B common stock		Additional paid-in capital			Retained earnings			Accumulated other comprehensive (loss) income			Treasury stock			Other, net			Total shareholders’ equity
Balance as of December 31, 2004	$	0.7	$	1.0	$	1,517.2		$	3,536.3		$	432.2		$	(251.4	)	$	(2.0	)	$	5,234.0
Cash dividends declared		—		—		—			(116.2	)		—			—			—			(116.2	)
Common shares repurchased under announced program		—		—		—			—			—			(51.4	)		—			(51.4	)
Stock options exercised		—		—		39.4			—			—			—			—			39.4
Other, net		—		—		3.4			0.6			—			(1.4	)		0.3			2.9
Comprehensive income:
Net income		—		—		—			610.4			—			—			—			610.4
Other comprehensive loss, net of taxes		—		—		—			—			(331.5	)		—			—			(331.5	)
Total comprehensive income																					278.9
Balance as of December 31, 2005		0.7		1.0		1,560.0			4,031.1			100.7			(304.2	)		(1.7	)		5,387.6
Cash dividends declared		—		—		—			(136.6	)		—			—			—			(136.6	)
Common shares repurchased under announced program		—		—		(4.8	)		—			—			(412.0	)		—			(416.8	)
Stock options exercised		—		—		87.6			—			—			—			—			87.6
Other, net		—		—		45.7			—			—			(0.1	)		0.1			45.7
Comprehensive income:
Net income		—		—		—			724.0			—			—			—			724.0
Other comprehensive loss,		—		—		—			—			(68.8	)		—			—			(68.8	)
Total comprehensive income																					655.2
Balance as of December 31, 2006		0.7		1.0		1,688.5			4,618.5			31.9			(716.3	)		(1.6	)		5,622.7
Cash dividends declared		—		—		—			(190.5	)		—			—			—			(190.5	)
Common shares repurchased under announced program		—		—		(1.6	)		—			—			(511.4	)		—			(513.0	)
Stock options exercised		—		—		75.0			—			—			—			—			75.0
Nationwide Funds Group acquisition, net (see Note 2)		—		—		12.1			(202.5	)		—			—			—			(190.4	)
Other, net		—		—		8.4			0.7			—			(1.9	)		0.2			7.4
Comprehensive income:
Net income		—		—		—			626.8			—			—			—			626.8
Other comprehensive loss, net of taxes		—		—		—			—			(113.4	)		—			—			(113.4	)
Total comprehensive income																					513.4
Balance as of December 31, 2007	$	0.7	$	1.0	$	1,782.4		$	4,853.0		$	(81.5	)	$	(1,229.6	)	$	(1.4	)	$	5,324.6

See accompanying notes to consolidated financial statements.

F-6

NATIONWIDE FINANCIAL SERVICES, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(in millions)

	Years ended December 31,
	2007			2006			2005
Cash flows from operating activities:
Net income	$	626.8		$	724.0		$	610.4
Adjustments to reconcile net income to net cash provided by operating activities:
Gain on sale of subsidiary		(45.5	)		—			—
Net realized investment losses (gains)		165.2			(9.1	)		(20.8	)
Interest credited to policyholder accounts		1,342.0			1,381.5			1,380.9
Capitalization of deferred policy acquisition costs		(631.3	)		(588.4	)		(489.0	)
Amortization of deferred policy acquisition costs		382.1			462.9			480.2
Amortization and depreciation, excluding debt extinguishment costs		84.2			113.7			143.0
Debt extinguishment costs (non-cash)		10.2			—			21.7
Decrease (increase) in other assets		431.8			(288.4	)		615.9
(Decrease) increase in policy and other liabilities		(136.6	)		632.5			(765.1	)
Other, net		(2.7	)		4.8			(4.4	)
Net cash provided by operating activities		2,226.2			2,433.5			1,972.8
Cash flows from investing activities:
Proceeds from maturity of securities available-for-sale		4,698.8			5,579.4			5,555.0
Proceeds from sale of securities available-for-sale		5,026.9			2,645.0			3,480.5
Proceeds from repayments or sales of mortgage loans on real estate		2,570.1			2,549.4			2,962.9
Cost of securities available-for-sale acquired		(8,946.4	)		(6,489.3	)		(8,295.6	)
Cost of mortgage loans on real estate originated or acquired		(1,951.1	)		(2,319.2	)		(2,716.0	)
Net decrease (increase) in short-term investments		1,042.0			(142.4	)		(55.6	)
Collateral (paid) received—securities lending, net		(207.3	)		(314.6	)		36.6
Subsidiary sale		115.4			—			—
Subsidiary mergers and acquisitions		(319.2	)		—			(18.0	)
Other, net		24.9			(81.0	)		135.4
Net cash provided by investing activities		2,054.1			1,427.3			1,085.2
Cash flows from financing activities:
Net increase (decrease) in short-term debt		224.1			(167.1	)		21.5
Net proceeds from issuance of long-term debt		460.4			—			199.4
Principal payments on long-term debt		(300.0	)		—			(206.2	)
Cash dividends paid		(186.9	)		(132.7	)		(114.8	)
Investment and universal life insurance product deposits		3,913.8			3,781.7			3,956.1
Investment and universal life insurance product withdrawals		(8,101.8	)		(7,024.6	)		(6,914.0	)
Common shares repurchased under announced program		(502.4	)		(416.8	)		(49.0	)
Other, net		202.0			133.3			38.2
Net cash used in financing activities		(4,290.8	)		(3,826.2	)		(3,068.8	)
Net (decrease) increase in cash		(10.5	)		34.6			(10.8	)
Cash, beginning of period		84.1			49.5			60.3
Cash, end of period	$	73.6		$	84.1		$	49.5

See accompanying notes to consolidated financial statements.

F-7

NATIONWIDE FINANCIAL SERVICES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2007, 2006 and 2005

(1) Nature of Operations

Nationwide Financial Services, Inc. (NFS, or collectively with its subsidiaries, the Company) was formed in November 1996. NFS is the holding company for Nationwide Life Insurance Company (NLIC) and other companies that comprise the domestic life insurance and retirement savings operations of the Nationwide group of companies (Nationwide). This group includes Nationwide Financial Network (NFN), which refers to Nationwide Life Insurance Company of America (NLICA) and subsidiaries, including the affiliated distribution network. NFS is incorporated in Delaware and maintains its principal executive offices in Columbus, Ohio.

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 diverse range of products including individual annuities, private and public sector group retirement plans, other investment products sold to institutions, life insurance and investment advisory services. The Company also provides a wide range of banking products and services through Nationwide Bank and mutual funds through Nationwide Funds Group (NFG) (see Note 2(o) for more information).

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, wirehouse and regional firms, pension plan administrators, and life insurance specialists. Representatives of the Company that market products directly to a customer base include Nationwide Retirement Solutions, Inc. (NRS), an indirect wholly-owned subsidiary; NFN producers; Mullin TBG Insurance Agency Services, LLC, a joint venture between the Company’s majority-owned subsidiary, TBG Insurance Services Corporation d/b/a TBG Financial (TBG Financial), and MC Insurance Agency Services, LLC d/b/a Mullin Consulting (Mullin Consulting) (see Note 2(n) for information related to the Company’s intention to sell its interest in this business); and NFG. The Company also distributes retirement savings products through the agency distribution force of its ultimate majority parent company, Nationwide Mutual Insurance Company (NMIC). The Company believes its broad range of competitive products, strong distributor relationships and diverse distribution network position it to compete effectively in the rapidly growing retirement savings market under various economic conditions.

As of December 31, 2007 and 2006, the Company did not have a significant concentration of financial instruments in a single investee, industry or geographic region of the U.S. Also, the Company did not have a concentration of business transactions with a particular customer, lender, distribution source, market or geographic region of the U.S. in which business is conducted that makes it overly vulnerable to a single event which could cause a severe impact to the Company’s financial position.

The 46.7 million shares of Class A common stock outstanding as of December 31, 2007 are publicly held and primarily were issued through NFS’ initial public offering completed in March 1997 and in conjunction with the acquisition of NFN in October 2002. The Class A shares represent 33.7% of the equity ownership in NFS and 4.8% of the combined voting power of NFS’ Class A and Class B common stock as of December 31, 2007. Nationwide Corporation (Nationwide Corp.), a majority-owned subsidiary of NMIC, owns all of the outstanding shares of Class B common stock, which represents the remaining 66.3% equity ownership and 95.2% of the combined voting power of the shareholders of NFS as of December 31, 2007.

(2) Summary of Significant Accounting Policies

The Company’s significant accounting policies that materially affect financial reporting are summarized below. The accompanying consolidated financial statements were prepared in accordance with United States generally accepted accounting principles (GAAP).

F-8

NATIONWIDE FINANCIAL SERVICES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

December 31, 2007, 2006 and 2005

The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements. Actual results could differ significantly from those estimates.

The Company’s most critical estimates include those used to determine the following: the balance, recoverability and amortization of deferred policy acquisition costs (DAC) for investment and universal life insurance products; impairment losses on investments; valuation allowances for mortgage loans on real estate; the liability for future policy benefits and claims; and federal income tax provision. Although some variability is inherent in these estimates, recorded amounts reflect management’s best estimates based on facts and circumstances as of the balance sheet date. Management believes the amounts provided are appropriate.

The Company determined that certain cash flows related to Nationwide Bank’s merger with Nationwide Federal Credit Union totaling $278.4 million and $245.1 million for the three months ended March 31, 2007 and the six months ended June 30, 2007, respectively, which were included as cash flows provided by operating activities on the condensed consolidated statements of cash flows in the applicable Quarterly Reports on Form 10-Q, should be presented as investing and financing activities. These cash flows will be presented in that manner on a comparative basis in the 2008 filings.

Certain items in the 2006 and 2005 consolidated financial statements and related notes have been reclassified to conform to the current presentation.

(a) Consolidation Policy

The consolidated financial statements include the accounts of NFS and companies in which NFS directly or indirectly has a controlling financial interest. Minority interest expense is included in other operating expenses in the consolidated statements of income, and minority interest is included in other liabilities on the consolidated balance sheets. All significant intercompany balances and transactions were eliminated.

(b) Valuation of Investments, Investment Income and Related Gains and Losses

The Company is required to classify its fixed maturity securities and marketable equity securities as held-to-maturity, available-for-sale or trading. Trading assets may include any combination of fixed maturity securities and marketable equity securities. Trading assets are stated at fair value, with changes in fair value recorded as a component of net realized investment gains and losses. All other fixed maturity and marketable equity securities are classified as available-for-sale. Available-for-sale securities are stated at fair value, with unrealized gains and losses, net of adjustments to DAC, value of business acquired (VOBA), future policy benefits and claims, policyholder dividend obligation and deferred federal income taxes reported as a separate component of accumulated other comprehensive income (AOCI) in shareholders’ equity. The adjustments to DAC and VOBA represent the changes in amortization of DAC and VOBA that would have been required as a charge or credit to operations had such unrealized amounts been realized and allocated to the product lines. The adjustment to future policy benefits and claims represents the increase in policy reserves from using a discount rate that would have been required had such unrealized amounts been realized and the proceeds reinvested at then current market interest rates, which were lower than the then current effective portfolio rate.

The fair value of fixed maturity and marketable equity securities is generally obtained from independent pricing services based on market quotations. For fixed maturity securities not priced by independent services (generally private placement securities), an internally developed pricing model or “corporate pricing matrix” is

F-9

NATIONWIDE FINANCIAL SERVICES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

December 31, 2007, 2006 and 2005

most often used. The corporate pricing matrix is developed by obtaining private spreads versus the U.S. Treasury yield for corporate securities with varying weighted average lives and bond ratings. The weighted average life and bond rating of a particular fixed maturity security to be priced using the corporate matrix are important inputs into the model and are used to determine a corresponding spread that is added to the 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 fixed maturity security. Additionally, a “structured product model” is used to value certain fixed maturity securities with complex cash flows, such as certain mortgage-backed and asset-backed securities. The structured product model uses third party pricing tools. For securities for which quoted market prices are not available and for which the Company’s structured product model is not suitable for estimating fair values, fair values are determined using other modeling techniques, primarily a commercial software application utilized in valuing complex securitized investments with variable cash flows. The company also utilized broker quotes in pricing securities or to validate modeled prices. As of December 31, 2007, 71% of the fair values of fixed maturity securities were obtained from independent pricing services, 16% from the Company’s pricing matrices and 13% from other sources, compared to 72%, 19% and 9%, respectively, as of December 31, 2006.

Management regularly reviews each investment in its fixed maturity and equity securities portfolios to evaluate the necessity of recording impairment losses for other-than-temporary declines in the fair value of investments.

For debt and equity securities not subject to Emerging Issues Task Force Issue No. 99-20, Recognition of Interest Income and Impairment on Purchased and Retained Beneficial Interests in Securitized Financial Assets (EITF 99-20), an other-than-temporary impairment charge is taken when the Company does not have the ability and intent to hold the security until the forecasted recovery or if it is no longer probable that the Company will recover all amounts due under the contractual terms of the security. Many criteria are considered during this process including, but not limited to, the current fair value as compared to cost or amortized cost, as appropriate, of the security; the amount and length of time a security’s fair value has been below cost or amortized cost; specific credit issues and financial prospects related to the issuer; management’s intent to hold or dispose of the security; and current economic conditions. Other-than-temporary impairment losses result in a permanent reduction to the cost basis of the underlying investment.

In addition to the above, for certain securitized financial assets with contractual cash flows, including asset-backed securities, EITF 99-20 also requires the Company to periodically update its best estimate of cash flows over the life of the security. If the fair value of a securitized financial asset is not greater than or equal to its carrying value based on current information and events, and if there has been an adverse change in estimated cash flows since the last revised estimate (considering both timing and amount), then the Company recognizes an other-than-temporary impairment and writes down the investment to fair value.

For mortgage-backed securities, the Company recognizes income using a constant effective yield method based on prepayment assumptions and the estimated economic life of the securities. When estimated prepayments differ significantly from anticipated 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. All other investment income is recorded using the interest method without anticipating the impact of prepayments.

The Company provides valuation allowances for impairments of mortgage loans on real estate based on a review by portfolio managers. Mortgage loans on real estate are considered impaired 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 is impaired, a provision for

F-10

NATIONWIDE FINANCIAL SERVICES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

December 31, 2007, 2006 and 2005

loss is established equal to either the difference between the carrying value and the present value of expected future cash flows discounted at the loan’s effective interest rate or the fair value of the collateral if the loan is collateral dependent. In addition to the valuation allowance on specific loans, the Company maintains an allowance not yet specifically identified by loan for probable losses inherent in the loan portfolio as of the balance sheet date. The valuation allowance account for mortgage loans on real estate reflects management’s best estimate of probable credit losses, including losses incurred at the balance sheet date but not yet identified by specific loan. Management’s periodic evaluation of the adequacy of the allowance for losses is based on past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower’s ability to repay, the estimated value of the underlying collateral, composition of the loan portfolio, current economic conditions and other relevant factors. Changes in the valuation allowance are recorded in net realized investment gains and losses. Loans in foreclosure are placed on non-accrual status. Interest received on non-accrual status mortgage loans on real estate is included in net investment income in the period received.

The Company grants mainly commercial mortgage loans on real estate to customers throughout the U.S. As of December 31, 2007, the Company’s largest exposure to any single borrower, region and property type was 2%, 23% and 33%, respectively, of the Company’s general account mortgage loan portfolio, compared to 3%, 25% and 34%, respectively, as of December 31, 2006.

Real estate to be held and used is carried at cost less accumulated depreciation. Real estate designated as held for disposal is not depreciated and is carried at the lower of the carrying value at the time of such designation or fair value less cost to sell. Other long-term investments are carried on the equity method of accounting.

Impairment losses are recorded on investments in long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amounts.

Realized gains and losses on the sale of investments are determined on the basis of specific security identification. Changes in the Company’s mortgage loan valuation allowance and recognition of impairment losses for other-than-temporary declines in the fair values of applicable investments are included in net realized investment gains and losses.

(c) Derivative Instruments

Derivatives are carried at fair value. On the date a derivative contract is entered into, the Company designates the derivative as a hedge of the fair value of a recognized asset or liability or of an unrecognized firm commitment (fair value hedge); a hedge of a forecasted transaction or the variability of cash flows to be received or paid related to a recognized asset or liability (cash flow hedge); a foreign currency fair value or cash flow hedge (foreign currency hedge); or a non-hedge transaction. The Company formally documents all relationships between hedging instruments and hedged items, as well as its risk-management objective and strategy for entering into various hedge transactions. This process includes linking all derivatives that are designated as fair value, cash flow or foreign currency hedges to specific assets and liabilities on the balance sheet or to specific firm commitments or forecasted transactions. The Company also formally assesses, both at the hedge’s inception and on an ongoing basis, whether the derivatives that are used for hedging transactions are expected to be and, for ongoing hedging relationships, have been highly effective in offsetting changes in fair values or cash flows of hedged items. When it is determined that a derivative is not, or is not expected to be, highly effective as a hedge or that it has ceased to be a highly effective hedge, the Company discontinues hedge accounting prospectively.

F-11

NATIONWIDE FINANCIAL SERVICES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

December 31, 2007, 2006 and 2005

The Company enters into interest rate swaps, cross-currency swaps or Euro futures to hedge the fair value of existing fixed rate assets and liabilities. In addition, the Company uses short U.S. Treasury future positions to hedge the fair value of bond and mortgage loan commitments. Typically, the Company is hedging the risk of changes in fair value attributable to changes in benchmark interest rates. Derivative instruments classified as fair value hedges are carried at fair value, with changes in fair value recorded in net realized investment gains and losses. Changes in the fair value of the hedged item that are attributable to the risk being hedged are also recorded in net realized investment gains and losses.

Accrued interest receivable or payable under interest rate and foreign currency swaps are recognized as an adjustment to net investment income or interest credited to policyholder accounts consistent with the nature of the hedged item, except for interest rate swaps hedging the anticipated sale of investments where amounts receivable or payable under the swaps are recorded as net realized investment gains and losses, and except for interest rate swaps hedging the anticipated purchase of investments where amounts receivable or payable under the swaps are initially recorded in AOCI to the extent the hedging relationship is effective.

The Company periodically may enter into a derivative transaction that will not qualify for hedge accounting. The Company does not enter into speculative positions. Although these transactions do not qualify for hedge accounting, or have not been designated in hedging relationships by the Company, they are part of its overall risk management strategy. For example, the Company may sell credit default protection through a credit default swap. Although the credit default swap is not effective in hedging specific investments, the income stream allows the Company to manage overall investment yields while exposing the Company to acceptable credit risk. The Company may enter into a cross-currency basis swap (pay a variable U.S. rate and receive a variable foreign-denominated rate) to eliminate the foreign currency exposure of a variable rate foreign-denominated liability. Although basis swaps may qualify for hedge accounting, the Company has chosen not to designate these derivatives as hedging instruments due to the difficulty in assessing and monitoring effectiveness for both sides of the basis swap. Derivative instruments that do not qualify for hedge accounting or are not designated as hedging instruments are carried at fair value, with changes in fair value recorded in net realized investment gains and losses.

(d) Revenues and Benefits

Investment and Universal Life Insurance Products: Investment products consist primarily of individual and group variable and fixed deferred annuities. Universal life insurance products include universal life insurance, variable universal life insurance, corporate-owned life insurance (COLI), bank-owned life insurance (BOLI) and other interest-sensitive life insurance policies. Revenues for investment products and universal life insurance products consist of net investment income, asset fees, cost of insurance charges, administrative fees and surrender charges that have been earned and assessed against policy account balances during the period. The timing of revenue recognition as it relates to fees assessed on investment contracts and universal life contracts is determined based on the nature of such fees. Asset fees, cost of insurance charges and administrative fees are

F-12

NATIONWIDE FINANCIAL SERVICES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

December 31, 2007, 2006 and 2005

assessed on a daily or monthly basis and recognized as revenue when assessed and earned. Certain amounts assessed that represent compensation for services to be provided in future periods are reported as unearned revenue and recognized in income over the periods benefited. Surrender charges are recognized upon surrender of a contract in accordance with contractual terms. Policy benefits and claims that are charged to expense include interest credited to policyholder accounts and benefits and claims incurred in the period in excess of related policyholder accounts.

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

(e) Deferred Policy Acquisition Costs for Investment and Universal Life Insurance Products

The Company has deferred certain costs of acquiring investment and universal life insurance products business, principally commissions, certain expenses of the policy issue and underwriting department, and certain variable sales expenses that relate to and vary with the production of new and renewal business. In addition, the Company defers sales inducements, such as interest credit bonuses and jumbo deposit bonuses. Investment products primarily consist of individual and group variable and fixed deferred annuities in the Individual Investments and Retirement Plans segments. Universal life insurance products include universal life insurance, variable universal life insurance, COLI, BOLI and other interest-sensitive life insurance policies in the Individual Protection segment. DAC is subject to recoverability testing in the year of policy issuance and loss recognition testing at the end of each reporting period.

For investment and universal life insurance products, DAC is being amortized with interest over the lives of the policies in relation to the present value of estimated gross profits from projected interest margins, asset fees, cost of insurance charges, administration fees, surrender charges, and net realized investment gains and losses less policy benefits and policy maintenance expenses. The DAC asset related to investment and universal life insurance products is adjusted to reflect the impact of unrealized gains and losses on fixed maturity securities available-for-sale, as described in Note 2(b) to the audited consolidated financial statements included in the F pages of this report.

The assumptions used in the estimation of future gross profits are based on the Company’s current best estimates of future events and are reviewed as part of an annual process during the second quarter. During the annual process, the Company performs a comprehensive study of assumptions, including mortality and persistency studies, maintenance expense studies, and an evaluation of projected general and separate account investment returns. The most significant assumptions that are involved in the estimation of future gross profits include future net separate account investment performance, surrender/lapse rates, interest margins and mortality. Currently, the Company’s long-term assumption for net separate account investment performance is approximately 7% growth per year and varies by product. This assumption, like others, is reviewed as part of the annual process. If this assumption were unlocked, the date of the unlocking could become the anchor date used in the reversion to the mean process (defined below). Variances from the long-term assumption are expected since the majority of the investments in the underlying separate accounts are in equity securities, which strongly correlate with the Standard & Poor’s (S&P) 500 Index in the aggregate. The reversion to the mean process is based on actual net separate account investment performance from the anchor date to the valuation date. The Company then assumes different performance levels over the next three years such that the separate account

F-13

NATIONWIDE FINANCIAL SERVICES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

December 31, 2007, 2006 and 2005

mean return measured from the anchor date to the end of the life of the product equals the long-term assumption. The assumed net separate account investment performance used in the DAC models is intended to reflect what is anticipated. However, based on historical returns of the S&P 500 Index, and as part of its pre-set parameters, the Company’s reversion to the mean process generally limits net separate account investment performance to 0-15% during the three-year reversion period. See below for a discussion of current year assumption changes.

Changes in assumptions can have a significant impact on the amount of DAC reported for investment and universal life insurance products and their related amortization patterns. In the event actual experience differs from assumptions or future assumptions are revised, the Company is required to record an increase or decrease in DAC amortization expense, which could be significant. In general, increases in the estimated long-term general and separate account returns result in increased expected future profitability and may lower the rate of DAC amortization, while increases in long-term lapse/surrender and mortality assumptions reduce the expected future profitability of the underlying business and may increase the rate of DAC amortization.

In addition to the comprehensive annual study of assumptions, management evaluates the appropriateness of the individual variable annuity DAC balance quarterly within pre-set parameters. These parameters are designed to appropriately reflect the Company’s long-term expectations with respect to individual variable annuity contracts while also evaluating the potential impact of short-term experience on the Company’s recorded individual variable annuity DAC balance. If the recorded balance of individual variable annuity DAC falls outside of these parameters for a prescribed time period, or if the recorded balance falls outside of these parameters and management determines it is not reasonably possible to get back within the parameters during this time period, assumptions are required to be unlocked, and DAC is recalculated using revised best estimate assumptions. When DAC assumptions are unlocked and revised, the Company continues to use the reversion to the mean process. See below for a discussion of current year assumption changes.

At the end of the second quarter of 2007, the Company determined as part of its analysis of DAC that the overall profitability of separate account products is expected to exceed previous estimates due to favorable financial market trends. Accordingly, the Company unlocked its DAC assumptions after completing a comprehensive review of assumptions used to project DAC and other related balances, including sales inducement assets, VOBA, unearned revenue reserves, and guaranteed minimum death and income benefit reserves. This review covered all assumptions including expected separate account investment returns, lapse rates, mortality and expenses. Additionally, while the Company estimates that the overall profitability of its variable products has improved, it also expects the long-term net growth in separate account investment performance to moderate. As a result of its current analysis, including its evaluation of ongoing trends and expectations regarding financial market performance, the Company reduced its long-term net separate account growth rate assumption from approximately 8% to approximately 7%. The Company unlocked assumptions, as appropriate, for all investment products and variable universal life insurance products in order to remain consistent across product lines using revised assumptions which reflect the Company’s current best estimate of future events. Therefore, in the second quarter of 2007, the Company recorded a net increase in DAC and a benefit to DAC amortization and other related balances totaling $216.5 million pre-tax, which was reported in the following segments in the pre-tax amounts indicated: Individual Investments—$196.4 million; Retirement Plans—$10.5 million; and Individual Protection—$9.6 million, net of a $5.1 million charge for the acceleration of amortization of VOBA.

The most significant assumption changes that resulted from the Company’s unlocking decisions were resetting the anchor date for reversion to the mean calculations to June 30, 2007, resulting in resetting the assumption for net separate account growth to approximately 7% during the three-year reversion period; resetting

F-14

NATIONWIDE FINANCIAL SERVICES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

December 31, 2007, 2006 and 2005

the long-term assumption for net separate account growth and the discount rate used to calculate the present value of estimated gross profits to approximately 7% (formerly approximately 8%); and increasing estimated lapse rates for fixed annuity and BOLI products.

During the second quarter of 2007, the Company added a new feature to its existing guaranteed minimum withdrawal benefit rider, Lifetime Income (L.inc). This new feature results in a substantial change in the existing contracts and, therefore, an extinguishment of the DAC associated with those contracts pursuant to Statement of Position 05-1, Accounting by Insurance Enterprises for Deferred Acquisition Costs in Connection with Modifications or Exchanges of Insurance Contracts. As a result, existing DAC and other related balances were eliminated resulting in a $135.0 million pre-tax charge.

(f) Value of Business Acquired and Other Intangible Assets

As a result of the acquisition of NFN in 2002 and the application of purchase accounting, the Company reports an intangible asset representing the estimated fair value of the business in force and the portion of the purchase price that was allocated to the value of the right to receive future cash flows from the life insurance and annuity contracts existing as of the closing date of the NFN acquisition. The value assigned to VOBA was supported by an independent valuation study commissioned by the Company and executed by a team of qualified valuation experts, including actuarial consultants. The expected future cash flows used in determining such value were based on actuarially determined projections by major lines of business of future policy and contract charges, premiums, mortality and morbidity, separate account performance, surrenders, changes in reserves, operating expenses, investment income and other factors. These projections considered all known or expected factors at the valuation date based on the judgment of management. The actual experience on purchased business, to some extent, has and may continue to vary from projections due to differences in renewal premiums, investment spreads, investment gains and losses, mortality and morbidity costs, or other factors.

Amortization of VOBA occurs with interest over the anticipated lives of the major lines of business to which it relates (initially ranging from 13 to 30 years) in relation to estimated gross profits, gross margins or premiums, as appropriate. If estimated gross profits, gross margins or premiums differ from expectations, the amortization of VOBA is adjusted on a retrospective or prospective basis, as appropriate. The VOBA asset related to investment products and universal life insurance products is adjusted annually for the impact of net unrealized gains and losses on securities available-for-sale had such gains and losses been realized and allocated to the product lines, as described in Note 2(b). The recoverability of VOBA is evaluated annually. If the evaluation indicates that the existing insurance liabilities, together with the present value of future net cash flows from the blocks of business acquired, is insufficient to recover VOBA, the difference, if any, is charged to expense as accelerated amortization of VOBA.

For those products amortized in relation to estimated gross profits, the most significant assumptions involved in the estimation of future gross profits include future net separate account performance, surrender/lapse rates, interest margins and mortality. The Company’s long-term assumption for net separate account performance is currently 7%. If actual net separate account performance varies from the 7% assumption, the Company assumes different performance levels over the next three years such that the mean return equals the long-term assumption. The assumed net separate account return assumptions used in the VOBA models are intended to reflect what is anticipated. However, based on historical returns of the S&P 500 Index, the Company’s reversion to the mean process generally limits returns to 0-15% during the three-year reversion period.

F-15

NATIONWIDE FINANCIAL SERVICES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

December 31, 2007, 2006 and 2005

Changes in assumptions can have a significant impact on the amount of VOBA reported for all products and their related amortization patterns. In the event actual experience differs from assumptions or assumptions are revised, the Company is required to record an increase or decrease in VOBA amortization expense (VOBA unlocking), which could be significant. In general, increases in the estimated long-term general and separate account returns result in increased expected future profitability and may lower the rate of VOBA amortization, while increases in long-term lapse/surrender and mortality assumptions reduce the expected future profitability of the underlying business and may increase the rate of VOBA amortization.

The use of discount rates was necessary to establish fair values of VOBA and other intangible assets acquired in the NFN transaction. In selecting the appropriate discount rates, management considered its weighted average cost of capital as well as the weighted average cost of capital required by market participants. In addition, consideration was given to the perceived risk of the assets acquired, which includes the expected growth and competitive profile of the life insurance market and the nature of the assumptions used in the valuation process. An after-tax discount rate of 11.0% was used to value VOBA, while after-tax discount rates ranging from 11.0% to 12.5% were used to value the other intangible assets acquired in the NFN transaction, as well as for net realized gains and losses, net of taxes, allocated to the closed block.

Intangible assets include NFN’s career agency force, independent agency force, retirement services distribution channel, state licenses and certain other contracts and relationships. These intangible assets have been assigned values using various methodologies, including present value of projected future cash flows, analysis of similar transactions that have occurred or could be expected to occur in the market, and replacement or reproduction cost. Other factors considered in the valuation include the relative risk profile of each asset, the deterioration of the economic life, and the enhancement to other associated assets. The initial valuations of these intangible assets were also supported by an independent valuation study that was commissioned by the Company and executed by qualified valuation experts.

The other identified intangible assets with finite lives are amortized over their estimated useful lives, which initially ranged from 5 to 22 years (weighted average 19 years), primarily based on the cash flows generated by these assets.

(g) Goodwill

In connection with acquisitions of operating entities, the Company recognizes the excess of the purchase price over the fair value of net assets acquired as goodwill. Goodwill is not amortized, but is evaluated for impairment at the reporting unit level annually in the third quarter. Goodwill of a reporting unit also is tested for impairment on an interim basis in addition to the annual evaluation if an event occurs or circumstances change which would more likely than not reduce the fair value of a reporting unit below its carrying amount.

The process of evaluating goodwill for impairment requires several judgments and assumptions to be made to determine the fair value of the reporting units, including the method used to determine fair value; discount rates; expected levels of cash flows, revenues and earnings; and the selection of comparable companies used to develop market-based assumptions.

During the quarter ended September 30, 2006, the Company changed the timing of its annual goodwill impairment testing from the fourth quarter (based on September 30 financial information) to the third quarter (based on June 30 financial information). This change allows the Company to complete its annual goodwill impairment testing prior to its year-end closing activities for the current year and annual financial planning for

F-16

NATIONWIDE FINANCIAL SERVICES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

December 31, 2007, 2006 and 2005

the subsequent year. In addition, this change did not delay, accelerate or avoid an impairment charge. Accordingly, management believes that the accounting change described above is preferable under the circumstances.

(h) Closed Block

In connection with the sponsored demutualization of Provident Mutual Life Insurance Company (Provident) prior to its acquisition by the Company, Provident established a closed block for the benefit of certain classes of individual participating policies that had a dividend scale payable in 2001. Assets were allocated to the closed block in an amount that produces cash flows which, together with anticipated revenues from closed block business, is reasonably expected to be sufficient to provide for (1) payment of policy benefits, specified expenses and taxes, and (2) the continuation of dividends throughout the life of the Provident policies included in the closed block based upon the dividend scales payable for 2001, if the experience underlying such dividend scales continues.

Assets allocated to the closed block benefit only the holders of the policies included in the closed block and will not revert to the benefit of the Company. No reallocation, transfer, borrowing or lending of assets can be made between the closed block and other portions of the Company’s general account, any of its separate accounts, or any affiliate of the Company without the approval of the Pennsylvania Insurance Department (PID). The closed block will remain in effect as long as any policy in the closed block is in force.

If, over time, the aggregate performance of the closed block assets and policies is better than was assumed in funding the closed block, dividends to policyholders will increase. If, over time, the aggregate performance of the closed block assets and policies is less favorable than was assumed in the funding, dividends to policyholders could be reduced. If the closed block has insufficient funds to make guaranteed policy benefit payments, such payments will be made from the Company’s assets outside of the closed block, which are general account assets.

The assets and liabilities allocated to the closed block are recorded in the Company’s consolidated financial statements on the same basis as other similar assets and liabilities. The carrying amount of closed block liabilities in excess of the carrying amount of closed block assets at the date Provident was acquired by the Company represents the maximum future earnings from the assets and liabilities designated to the closed block that can be recognized in income, for the benefit of stockholders, over the period the policies in the closed block remain in force.

If actual cumulative earnings exceed expected cumulative earnings, the expected earnings are recognized in income. This is because the excess cumulative earnings over expected cumulative earnings, which represents undistributed accumulated earnings attributable to policyholders, is recorded as a policyholder dividend obligation. Therefore, the excess will be paid to closed block policyholders as an additional policyholder dividend in the future unless it is otherwise offset by future performance of the closed block that is less favorable than originally expected. If actual cumulative performance is less favorable than expected, actual earnings will be recognized in income.

The principal cash flow items that affect the amount of closed block assets and liabilities are premiums, net investment income, purchases and sales of investments, policyholder benefits, policyholder dividends, premium taxes and income taxes. The principal income and expense items excluded from the closed block are management and maintenance expenses, commissions, net investment income, and realized gains and losses on investments held outside of the closed block that support the closed block business, all of which enter into the determination of total gross margins of closed block policies for the purpose of the amortization of VOBA.

F-17

NATIONWIDE FINANCIAL SERVICES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

December 31, 2007, 2006 and 2005

(i) Separate Accounts

Separate account assets and liabilities represent contractholders’ funds that have been legally segregated into accounts with specific investment objectives. Separate account assets are recorded at fair value based primarily on market quotations of the underlying securities. Investment income and realized investment gains or losses of these accounts accrue directly to the contractholders. The activity of the separate accounts is not reflected in the consolidated statements of income except for (1) the fees the Company receives, which are assessed on a daily or monthly basis and recognized as revenue when assessed and earned, and (2) the activity related to contract guarantees, which are riders to existing variable annuity contracts.

(j) Future Policy Benefits and Claims

The process of calculating reserve amounts for a life insurance organization involves the use of a number of assumptions, including those related to persistency (how long a contract stays with a company), mortality (the relative incidence of death in a given time), morbidity (the relative incidence of disability resulting from disease or physical impairment) and interest rates (the rates expected to be paid or received on financial instruments, including insurance or investment contracts).

The Company calculates its liability for future policy benefits and claims for investment products in the accumulation phase and universal life and variable universal life insurance policies as the policy account balance, which represents participants’ net premiums and deposits plus investment performance and interest credited less applicable contract charges.

The Company’s liability for funding agreements to an unrelated third party trust related to the Company’s medium-term note (MTN) program equals the balance that accrues to the benefit of the contractholder, including interest credited. The funding agreements constitute insurance obligations and are considered annuity contracts under Ohio insurance laws.

The liability for future policy benefits and claims for traditional life insurance policies was determined using the net level premium method using interest rates varying from 2.0% to 10.5% and estimates of mortality, morbidity, investment yields and withdrawals that were used or being experienced at the time the policies were issued.

The liability for future policy benefits for payout annuities was calculated using the present value of future benefits and maintenance costs discounted using interest rates varying generally from 3.0% to 13.0%.

(k) Participating Business

Participating business, which refers to policies that participate in profits through policyholder dividends, represented approximately 6% of the Company’s life insurance in force in 2007 (8% in 2006 and 10% in 2005), 56% of the number of life insurance policies in force in 2007 (60% in 2006 and 62% in 2005) and 12% of life insurance statutory premiums in 2007 (8% in 2006 and 9% in 2005). The provision for policyholder dividends was based on then current dividend scales and has been included in future policy benefits and claims in the consolidated balance sheets.

F-18

NATIONWIDE FINANCIAL SERVICES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

December 31, 2007, 2006 and 2005

(l) Federal Income Taxes

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 significantly change the provision for federal income taxes recorded in the consolidated financial statements. Any such change could significantly affect the amounts reported in the consolidated statements of income. Management has established reserves in accordance with FIN 48 based on current facts and circumstances regarding tax exposure items where the ultimate deductibility is open to interpretation. Management evaluates the appropriateness of such reserves quarterly based on any new developments specific to their fact patterns. Information considered includes results of completed tax examinations, Technical Advice Memorandums and other rulings issued by the Internal Revenue Service (IRS) or the tax courts.

The Company utilizes the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under this method, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established when it is determined that it is more likely than not that the deferred tax asset will not be fully realized.

(m) Reinsurance Ceded

Reinsurance premiums ceded and reinsurance recoveries on benefits and claims incurred are deducted from the respective income and expense accounts. Assets and liabilities related to reinsurance ceded are reported in the consolidated balance sheets on a gross basis, separately from the related future policy benefits and claims of the Company.

(n) Discontinued Operations

During the quarter ended December 31, 2007, the Company committed to a plan of sale of its interest in TBG Financial. Based on management’s determination that the carrying value of this business exceeded its estimated fair value (less the estimated cost to sell), the Company recorded a pre-tax loss totaling $49.0 million ($23.3 million, net of taxes), writing down a portion of the goodwill associated with this business. TBG Financial is engaged in the distribution of COLI and BOLI products primarily to large companies. Upon finalization of the sale of its interest in TBG Financial, NFS will no longer be engaged in the distribution of COLI and BOLI products. However, NFS will continue its manufacturing capabilities in this market. Accordingly, the results of operations of TBG Financial for all years presented and the 2007 loss related to measuring the disposal group at fair value less cost to sell are reflected as discontinued in the consolidated statements of income.

Effective March 31, 2007, the Company completed the sale of The 401(k) Company for $115.4 million in cash and recorded a $45.5 million gain, net of taxes. The 401(k) Company provides administrative and record-keeping services to employers in the private sector for use in Internal Revenue Code (IRC) Section 401(k) retirement programs. Since this sale represents the Company’s exit from the large plan 401(k) market, the results of operations of The 401(k) Company and the gain on sale are reflected as discontinued in the consolidated statements of income.

F-19

NATIONWIDE FINANCIAL SERVICES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

December 31, 2007, 2006 and 2005

During the year ended December 31, 2005, the Company discontinued the following operations: (1) Cap Pro Holding, Inc. (Cap Pro), a majority-owned subsidiary of NFS that provided broker/dealer, registered investment advisor and insurance agency services to producers of certain certified public accounting firms; (2) Nationwide Financial Services (Bermuda), Ltd. (NFSB), a wholly-owned subsidiary of NFS that sold variable and fixed annuity products in offshore markets; and (3) William J. Lynch & Associates, Inc. (TBG Lynch), a wholly-owned subsidiary of TBG Financial that distributed BOLI products.

The Company’s 2005 loss on discontinued operations, net of taxes, primarily consists of the following: (1) Cap Pro—$4.5 million; (2) NFSB—$8.3 million; and (3) TBG Lynch—$11.7 million. The results of operations of Cap Pro, NFSB and TBG Lynch are reflected as discontinued for 2005.

During the quarter ended June 30, 2005, the Company decided to dispose of Cap Pro. The 2005 loss on discontinued operations related to Cap Pro primarily was due to a $10.8 million pre-tax goodwill impairment charge.

During December 2005, the Company sold its NFSB operations for $48.0 million in cash. The Company recorded a loss on the sale of $7.8 million, net of taxes.

Also in December 2005, the Company entered into an agreement to sell its TBG Lynch operations for a total of $10.2 million in cash and other consideration. As a result, the Company recorded a loss on the planned transaction of $11.7 million, net of taxes, primarily driven by the write-off of goodwill. The sale was finalized in February 2006.

(o) Nationwide Funds Group Acquisition

On February 2, 2007, NFS entered into a stock purchase agreement with Nationwide Corp. to acquire the Philadelphia-based retail asset management operations of NWD Investment Management, Inc. (NWD). The transaction closed on April 30, 2007 with a final purchase price of $244.2 million. NWD is now known as NFG. The purchase was accounted for at historical cost in a manner similar to a pooling of interests because the involved entities are under common control. NFG is reflected in the Company’s current and prior year consolidated financial statements at the historical cost of the transferred net assets to provide comparative information as though the companies were combined for all periods presented. The excess purchase price over the historical cost of the acquired net assets was accounted for as a $202.5 million equity transaction. In addition, NFG paid a $42.0 million dividend to Nationwide Corp. during the second quarter of 2007 but prior to the acquisition date.

(p) Change in Accounting Principle

Historically, the Company accrued for legal costs associated with litigation defense and regulatory investigations by estimating the ultimate costs of such activity. Beginning April 1, 2007, the Company’s accrual for such legal expenses includes only the amount for services that have been provided but not yet paid. The Company believes the newly adopted accounting principle is preferable because it more accurately reflects expenses in the periods in which they are incurred. The Company continues to estimate and accrue the ultimate amounts expected to be paid for litigation and regulatory investigation loss contingencies.

F-20

NATIONWIDE FINANCIAL SERVICES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

December 31, 2007, 2006 and 2005

(q) Summary of Impact of NFG Acquisition and Change in Accounting Principle

The Company has presented its consolidated financial statements and accompanying notes as applicable for all years presented to reflect the NFG acquisition and to retroactively apply the adoption of the change in accounting principle described above.

The following tables summarize the impact of the items described above for the years ended December 31:

(in millions, except per share amounts)	NFG Acquisition		Change in Accounting Principle			Total
2007
Net investment income	$	1.8	$	—		$	1.8
Other income		213.2		—			213.2
Other operating expenses		165.5		1.9			167.4
Net income		44.9		(1.2	)		43.7
Earnings per common share:
Basic	$	0.32	$	(0.01	)	$	0.31
Diluted		0.31		(0.01	)		0.30
2006
Net investment income	$	0.9	$	—		$	0.9
Other income		171.4		—			171.4
Other operating expenses		152.3		4.2			156.5
Net income		12.9		(2.7	)		10.2
Earnings per common share:
Basic	$	0.09	$	(0.02	)	$	0.07
Diluted		0.09		(0.02	)		0.07
2005
Net investment income	$	0.2	$	—		$	0.2
Other income		137.6		—			137.6
Other operating expenses		119.2		0.6			119.8
Net income		12.1		(0.4	)		11.7
Earnings per common share:
Basic	$	0.08	$	—		$	0.08
Diluted		0.08		—			0.08

The cumulative effect of the changes described above as of January 1, 2006 was an increase of $148.0 million to retained earnings and a decrease of $110.8 million to additional paid-in capital.

F-21

NATIONWIDE FINANCIAL SERVICES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

December 31, 2007, 2006 and 2005

(r) Share-Based Payments

Effective January 1, 2006, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 123 (revised 2004), Share-Based Payment (SFAS 123R), and began expensing, at fair value, the costs resulting from share-based payment transactions. The following table summarizes share-based payment expense for the years ended December 31:

(in millions, except per share amounts)	2007		2006
Share-based payment expense	$	9.4	$	8.6
Share-based payment expense, net of taxes		6.1		5.6
Expense per common share, net of taxes:
Basic	$	0.04	$	0.04
Diluted		0.04		0.04

Prior to 2006, the Company elected to follow Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees (APB 25) and related interpretations in accounting for stock options granted to employees as permitted by SFAS No. 123, Accounting for Stock-Based Compensation (SFAS 123), as amended by SFAS No. 148, Accounting for Stock-Based Compensation—Transition and Disclosure. Under APB 25, the Company did not recognize share-based payment expense in its financial statements because the stock option awards qualified as fixed awards and the exercise price of the Company’s employee stock options equaled the market price of the underlying stock on the date of grant.

The following table summarizes the effect on net income and earnings per common share for the year ended December 31, 2005, if the Company had accounted for compensation cost for employee stock options in accordance with the fair value accounting method, as permitted by SFAS 123:

(in millions, except per share amounts)
Net income, as reported	$	610.4
Less total share-based payment expense determined under fair value method, net of taxes		7.9
Pro forma net income	$	602.5
Earnings per common share:
Basic, as reported	$	3.99
Basic, pro forma		3.94
Diluted, as reported		3.97
Diluted, pro forma		3.92

The Third Amended and Restated Nationwide Financial Services, Inc. 1996 Long-Term Equity Compensation Plan (LTEP) covers selected employees, directors and agents of the Company and certain of its affiliates. The LTEP provides for the grant of any or all of the following types of stock-based compensation awards: (1) stock options for shares of Class A common stock; (2) restricted stock; (3) stock-based Nationwide value added (NVA) awards; (4) stock appreciation rights (SARs), either in tandem with stock options or freestanding; and (5) performance shares and performance units. The LTEP provides that it will remain in effect, subject to the right of the Company’s Board of Directors to terminate it sooner, until all shares subject to the LTEP have been delivered under awards. However, in no event may any LTEP award of incentive stock options be granted on or after February 27, 2012. The number of shares of Class A common stock that may be issued under the LTEP, or as to which SARs or other awards may be granted, currently may not exceed 20.1 million. As of December 31, 2007, 12.5 million shares of Class A common stock options have been granted. Shares issued upon option exercise are new shares not issued from treasury.

F-22

NATIONWIDE FINANCIAL SERVICES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

December 31, 2007, 2006 and 2005

Substantially all stock options (1) are non-qualified; (2) are granted with an exercise price at least equal to the fair value of shares on the grant date; (3) have a ten-year term; and (4) vest and become exercisable at the rate of one-third on each annual anniversary date of a three-year period of continued employment or upon retirement. Restricted stock awards are issued with a specific period of restriction varying by award as determined by the Compensation Committee of the Company’s Board of Directors. As of December 31, 2007, there were no outstanding NVA awards, SARs, performance shares or performance units payable in shares of Class A common stock.

The Nationwide Financial Services, Inc. Second Amended and Restated Stock Retainer Plan for Non-Employee Directors (Director Stock Retainer Plan) covers non-employee directors of the Company. The Director Stock Retainer Plan provides that payment of all or a portion of the retainer payable to a member of the board of directors may be made in shares of Class A common stock or in deferred stock units (DSUs). DSUs vest upon grant and are valued at the current fair value of the Company’s Class A common stock. They will be settled in cash or stock, pursuant to the terms of the applicable award agreement, in the January following the director’s termination from the board. As of December 31, 2007, there were approximately 41,000 DSUs outstanding. All outstanding DSUs will be settled in cash.

The following table summarizes outstanding stock options for the year ended December 31, 2007:

(options in millions)	Options on Class A common stock		Weighted average exercise price
Outstanding, beginning of period	6.0		$	36.88
Granted	0.6			55.02
Exercised	(1.7	)		37.25
Cancelled	(0.2	)		41.16
Outstanding, end of period	4.7			39.05
Vested and exercisable, end of period	3.4		$	35.80

As of December 31, 2007, vested and exercisable stock options had an aggregate intrinsic value of $32.0 million with a weighted average remaining contractual term of approximately 5 years. Stock options exercised during 2007 had an aggregate intrinsic value of approximately $29.9 million.

The following table summarizes nonvested stock options for the year ended December 31, 2007:

(options in millions)	Options on Class A common stock		Weighted average grant date fair value
Nonvested, beginning of period	1.6		$	12.18
Granted	0.6			15.61
Vested	(0.8	)		11.66
Cancelled	(0.1	)		12.39
Nonvested, end of period	1.3			14.12

F-23

NATIONWIDE FINANCIAL SERVICES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

December 31, 2007, 2006 and 2005

As of December 31, 2007, the total share-based payment cost related to nonvested stock options not yet recognized was approximately $9.9 million. The weighted average period over which this cost was expected to be recognized was approximately 1 year.

The fair values of stock options are estimated on the dates of grant using a Black-Scholes option-pricing model. In accordance with Financial Accounting Standards Board (FASB) Staff Position (FSP) FAS 123R-2, Practical Accommodation to the Application of Grant Date as Defined in FASB Statement No. 123R (FSP FAS 123R-2), the total of 745,818 stock options awarded by the Compensation Committee in February and March 2006 were not considered granted for accounting purposes until April 2006 when the awards were communicated to recipients. Accordingly, the fair values of these awards were not estimated until the April 2006 effective grant date, and the related expense was recognized in the financial statements beginning in the second quarter of 2006.

The following table summarizes the weighted average fair value of options granted and assumptions used to determine the fair value of options granted for the years ended December 31:

	2007			2006			2005
Fair value of options granted	$	15.61		$	14.06		$	11.04
Dividend yield		1.89	%		2.11	%		2.06	%
Expected volatility		27.14	%		31.88	%		32.78	%
Risk-free interest rate		4.70	%		4.92	%		3.78	%
Expected life (years)		5.7			5.9			5.5

The dividend yield was estimated considering current dividends and stock prices. Expected volatility was estimated using a weighted average of the Company’s historical actual experience. The risk-free interest rate was estimated based on a U.S. Treasury Bond yield with a remaining term approximating that of the expected option life. The expected option life was estimated using a weighted average of the Company’s actual experience assuming that outstanding options were exercised at the midpoint of the remaining term.

(3) Recently Issued Accounting Standards

In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations (SFAS 141R), which replaces SFAS No. 141, Business Combinations (SFAS 141). The objective of SFAS 141R is to improve the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial reports about a business combination and its effects. Accordingly, SFAS 141R establishes principles and requirements for how the acquirer: 1) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree; 2) recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase; and 3) determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS 141R applies to all transactions or other events in which an entity obtains control of one or more businesses and retains the fundamental requirements in SFAS 141 that the acquisition method of accounting be used for all business combinations and for an acquirer to be identified for each business combination. SFAS 141R defines the acquirer as the entity that obtains control of one or more businesses in the business combination and establishes the acquisition date as the date that the acquirer achieves control. SFAS 141R is applicable prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. Earlier application is prohibited. The Company currently is evaluating the impact of adopting SFAS 141R.

F-24

NATIONWIDE FINANCIAL SERVICES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

December 31, 2007, 2006 and 2005

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements, an Amendment of ARB No. 51 (SFAS 160). The objective of SFAS 160 is to improve the relevance, comparability, and transparency of the financial information that a reporting entity provides in its consolidated financial statements by establishing accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS 160 also amends certain consolidation procedures prescribed by Accounting Research Bulletin No. 51, Consolidated Financial Statements, for consistency with the requirements of SFAS 141R. SFAS 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. Earlier adoption is prohibited. The Company currently is evaluating the impact of adopting SFAS 160.

In June 2007, the Accounting Standards Executive Committee (AcSEC) of the American Institute of Certified Public Accountants (AICPA) issued Statement of Position (SOP) 07-1, Clarification of the Scope of the Audit and Accounting Guide Investment Companies and Accounting by Parent Companies and Equity Method Investors for Investments in Investment Companies (SOP 07-1). SOP 07-1 provides guidance for determining whether an entity is within the scope of the AICPA Audit and Accounting Guide Investment Companies (the Guide). For those entities that are investment companies under SOP 07-1, this SOP also addresses whether the specialized industry accounting principles of the Guide (i.e., fair value accounting) should be retained by a parent company in consolidation or by an investor that has the ability to exercise significant influence over the investment company and applies the equity method of accounting to its investment in the entity (referred to as an equity method investor). In addition, SOP 07-1 includes certain disclosure requirements for parent companies and equity method investors in investment companies that retain investment company accounting in the parent company’s consolidated financial statements or the financial statements of an equity method investor. The provisions of SOP 07-1 were to be effective for fiscal years beginning on or after December 15, 2007. On February 14, 2008, the FASB issued FSP SOP 07-1-1, which delays indefinitely the effective date of SOP 07-1. The Company will monitor the FASB and AICPA deliberations regarding this standard.

In April 2007, the FASB issued FSP FIN 39-1, An Amendment of FASB Interpretation No. 39 (FSP FIN 39-1). FSP FIN 39-1 addresses whether a reporting entity that is party to a master netting arrangement can offset fair value amounts recognized for the right to reclaim cash collateral (a receivable) or the obligation to return cash collateral (a payable) against fair value amounts recognized for derivative instruments that have been offset under the same master netting arrangement in accordance with paragraph 10 of Interpretation 39. FSP FIN 39-1 is effective for fiscal years beginning after November 15, 2007, with early application permitted. FSP FIN 39-1 is not expected to have a material impact on the Company’s financial position or results of operations upon adoption.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities, Including an amendment of FASB Statement No. 115 (SFAS 159). SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. SFAS 159 is expected to expand the use of fair value measurement, which is consistent with the FASB’s long-term measurement objectives for accounting for financial instruments. SFAS 159 also establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. SFAS 159 does not affect any existing accounting literature that requires certain assets and liabilities to be carried at fair value. In addition, SFAS 159 does not establish requirements for recognizing and measuring dividend income, interest income or interest expense, nor does it eliminate disclosure

F-25

NATIONWIDE FINANCIAL SERVICES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

December 31, 2007, 2006 and 2005

requirements included in other accounting standards, including requirements for disclosures about fair value measurements included in SFAS No. 157, Fair Value Measurements (SFAS 157), and SFAS No. 107, Disclosures about Fair Value of Financial Instruments. SFAS 159 is effective as of the beginning of an entity’s first fiscal year beginning after November 15, 2007. The Company will elect adoption of SFAS 159 for certain financial instruments effective January 1, 2008, which is not expected to have a material impact on the Company’s financial position or results of operations. The Company will assess election for new financial assets or liabilities on a prospective basis.

In September 2006, the FASB issued SFAS No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans—an amendment of FASB Statements No. 87, 88, 106, and 132(R) (SFAS 158). SFAS 158 requires an employer to recognize the overfunded or underfunded status of a defined benefit postretirement plan (other than a multiemployer plan) as an asset or liability on its balance sheet and to recognize changes in that funded status in the year in which the changes occur through comprehensive income. SFAS 158 also requires an employer to measure the funded status of a plan as of the date of its year-end balance sheet, with limited exceptions. An employer with publicly traded equity securities is required to initially recognize the funded status of a defined benefit postretirement plan and to provide the required disclosures as of the end of the fiscal year ending after December 15, 2006. The requirement to measure plan assets and benefit obligations as of the date of the employer’s fiscal year-end balance sheet is effective for fiscal years ending after December 15, 2008. The Company adopted SFAS 158 effective December 31, 2006. The adoption of SFAS 158 did not have a material impact on the Company’s financial position or results of operations.

In September 2006, the FASB issued SFAS 157. SFAS 157 provides enhanced guidance for using fair value to measure assets and liabilities and requires new disclosures about fair value measurements. SFAS 157 also provides guidance regarding the extent to which companies measure assets and liabilities at fair value, the information used to measure fair value, and the effect of fair value measurements on earnings. For assets and liabilities that are measured at fair value on a recurring basis in periods subsequent to initial recognition, the reporting entity shall disclose information that enables financial statement users to assess the inputs used to develop those measurements. For recurring fair value measurements using significant unobservable inputs, the reporting entity shall disclose the effect of the measurements on earnings for the period. SFAS 157 applies whenever other standards require (or permit) assets or liabilities to be measured at fair value but does not expand the use of fair value in any new circumstances. SFAS 157 is effective for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years, with early adoption permitted. The Company will adopt SFAS 157 effective January 1, 2008. SFAS 157 is not expected to have a material impact on the Company’s financial position or results of operations upon adoption.

In September 2006, the United States Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin (SAB) No. 108 (SAB 108). SAB 108 addresses how the effects of prior year uncorrected misstatements should be considered when quantifying misstatements in current-year financial statements. SAB 108 requires registrants to quantify misstatements using both the balance sheet and income-statement approaches and to evaluate whether either approach results in quantifying an error that is material in light of relevant quantitative and qualitative factors. SAB 108 does not change the SEC’s previous guidance in SAB No. 99 on evaluating the materiality of misstatements. The Company adopted SAB 108 effective December 31, 2006. SAB 108 did not have a material impact on the Company’s financial position or results of operations upon adoption.

In June 2006, the FASB issued FASB Interpretation (FIN) No. 48, Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109, Accounting for Income Taxes (FIN 48). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with

F-26

NATIONWIDE FINANCIAL SERVICES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

December 31, 2007, 2006 and 2005

FASB Statement No. 109, Accounting for Income Taxes. FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. The Company adopted FIN 48 effective January 1, 2007. FIN 48 did not have a material impact on the Company’s financial position or results of operations upon adoption.

In March 2006, the FASB issued SFAS No. 156, Accounting for Servicing of Financial Assets (SFAS 156). SFAS 156 amends SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities (SFAS 140). SFAS 156 requires that all separately recognized servicing assets and servicing liabilities be initially measured at fair value, if practicable. SFAS 156 permits, but does not require, the subsequent measurement of separately recognized servicing assets and servicing liabilities at fair value. An entity that uses derivative instruments to mitigate the risks inherent in servicing assets and servicing liabilities is required to account for those derivative instruments at fair value. Under SFAS 156, an entity can elect subsequent fair value measurement to account for its separately recognized servicing assets and servicing liabilities. By electing that option, an entity may simplify its accounting because SFAS 156 permits income statement recognition of the potential offsetting changes in fair value of those servicing assets and servicing liabilities and derivative instruments in the same accounting period. SFAS 156 is effective for fiscal years beginning after September 15, 2006. The Company adopted SFAS 156 effective January 1, 2007. SFAS 156 did not have a material impact on the Company’s financial position or results of operations upon adoption.

In February 2006, the FASB issued SFAS No. 155, Accounting for Certain Hybrid Financial Instruments (SFAS 155). SFAS 155 amends SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities (SFAS 133), and SFAS 140. SFAS 155 also resolves issues addressed in SFAS 133 Implementation Issue No. D1, Application of Statement 133 to Beneficial Interests in Securitized Financial Assets. In summary, SFAS 155: (1) permits an entity to make an irrevocable election to measure any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation at fair value in its entirety, with changes in fair value recognized in earnings; (2) clarifies which interest-only strips and principal-only strips are not subject to the requirements of SFAS 133; (3) establishes a requirement to evaluate interests in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation; (4) clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives; and (5) amends SFAS 140 to eliminate the prohibition on a qualifying special purpose entity from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. SFAS 155 is effective for all financial instruments acquired or issued after the beginning of an entity’s first fiscal year that begins after September 15, 2006. Provisions of SFAS 155 may be applied to instruments that an entity holds at the date of adoption on an instrument-by-instrument basis. The Company adopted SFAS 155 effective January 1, 2006. On the date of adoption, there was no impact to the Company’s financial position or results of operations.

In September 2005, AcSEC issued SOP 05-1. SOP 05-1 provides guidance on accounting by insurance enterprises for deferred acquisition costs on internal replacements of insurance and investment contracts other than those specifically described in SFAS No. 97, Accounting and Reporting by Insurance Enterprises for Certain Long-Duration Contracts and for Realized Gains and Losses from the Sale of Investments, issued by the FASB. SOP 05-1 defines an internal replacement as a modification in product benefits, features, rights or coverages that occurs as a result of the exchange of a contract for a new contract, or by amendment, endorsement or rider to a contract, or by the election of a new feature or coverage within a contract. SOP 05-1 is effective for internal replacements occurring in fiscal years beginning after December 15, 2006. Retrospective application of

F-27

NATIONWIDE FINANCIAL SERVICES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

December 31, 2007, 2006 and 2005

SOP 05-1 to previously issued financial statements is not permitted. Initial application of SOP 05-1 is required as of the beginning of an entity’s fiscal year. The Company adopted SOP 05-1 effective January 1, 2007, which resulted in a $6.0 million charge, net of taxes, as the cumulative effect of adoption of this accounting principle.

In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections (SFAS 154), which replaces Accounting Principles Board Opinion No. 20, Accounting Changes, and SFAS No. 3, Reporting Accounting Changes in Interim Financial Statements. SFAS 154 applies to all voluntary changes in accounting principle as well as to changes required by an accounting pronouncement in the unusual instance that the pronouncement does not include specific transition provisions. SFAS 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005, with earlier adoption permitted. The Company adopted SFAS 154 effective January 1, 2006. SFAS 154 did not have any impact on the Company’s financial position or results of operations upon adoption.

In December 2004, the FASB issued SFAS 123R, which replaces SFAS No. 123 and supersedes APB 25. SFAS 123R requires companies to expense at fair value all costs resulting from share-based payment transactions, except for equity instruments held by employee share ownership plans. SFAS 123R also amended SFAS No. 95, Statement of Cash Flows, to require excess tax benefits to be reported as a financing cash inflow rather than as a reduction of taxes paid. In March 2005, the SEC issued SAB No. 107, which summarizes the views of the SEC regarding the interaction between SFAS 123R and certain SEC rules and regulations and provides the SEC’s views on the valuation of share-based payments for public companies. The Company considered this guidance in its adoption of SFAS 123R. SFAS 123R as issued by the FASB was to be effective for the Company as of the beginning of the first reporting period that began after June 15, 2005. However, in April 2005, the SEC adopted a rule that amended the effective date of SFAS 123R. The SEC’s new rule allowed companies to implement SFAS 123R at the beginning of their next fiscal year, instead of the next reporting period, beginning after June 15, 2005. The Company adopted SFAS 123R effective January 1, 2006 using the modified prospective method. The cumulative effect of adoption of SFAS 123R did not have a material impact on the Company’s financial position or results of operations. See Note 2(r) for information on the Company’s share-based payments.

In October 2006, the FASB issued FSP FAS 123R-6, Technical Corrections of FASB Statement No. 123R (FSP FAS 123R-6). This FSP addresses certain technical corrections of SFAS 123R. The Company applied the provisions in this FSP effective January 1, 2007. FSP FAS 123R-6 did not have a material impact on the Company’s financial position or results of operations upon adoption.

In October 2006, the FASB issued FSP FAS 123R-5, An Amendment of FSP FAS 123R-1 (FSP FAS 123R-5). This FSP addresses whether a modification of an instrument in connection with an equity restructuring should be considered a modification for purposes of applying FSP FAS 123R-1, Classification and Measurement of Freestanding Financial Instruments Originally Issued in Exchange for Employee Services under FASB Statement No. 123R. The Company applied the provisions in this FSP effective January 1, 2007. FSP FAS 123R-5 did not have a material impact on the Company’s financial position or results of operations upon adoption.

In November 2005, the FASB issued FSP FAS 123R-3, Transition Election Related to Accounting for the Tax Effects of Share-Based Payment Awards (FSP FAS 123R-3). This FSP provides a practical transition election related to accounting for the tax effects of share-based payment awards to employees. An entity can elect to follow the transition guidance for the additional paid-in capital pool in SFAS 123R or the alternative transition method described in this FSP. An entity that adopts SFAS 123R using either modified retrospective or modified

F-28

NATIONWIDE FINANCIAL SERVICES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

December 31, 2007, 2006 and 2005

prospective application may make a one-time election to adopt the transition method described in this FSP. The Company elected to use the alternative transition method effective January 1, 2006. The Company’s adoption of FSP FAS 123R-3 did not have a material impact on the Company’s financial position or results of operations.

In October 2005, the FASB issued FSP FAS 123R-2. This FSP is a practical accommodation in determining the grant date of an award subject to SFAS 123R, assuming all other criteria in the grant date definition have been met. According to this FSP, a mutual understanding of the key terms and conditions of an award to an individual employee will be presumed to exist at the date the award is approved in accordance with the relevant corporate governance requirements (that is, by the Board or management with the relevant authority) if certain conditions are met. The Company adopted FSP FAS 123R-2 effective January 1, 2006. FSP FAS 123R-2 has not had a material impact on the Company’s financial position or results of operations. See Note 2(r) for a discussion of the impact of FSP FAS 123R-2 on 2006 grants.

(4) Fair Value of Financial Instruments

Assets and liabilities that are presented at fair value in the consolidated balance sheets are not included in the disclosures below, including investment securities, cash, separate accounts, securities lending collateral and derivative financial instruments. Those financial assets and liabilities not presented at fair value are discussed below.

The fair value of a financial instrument is defined as the amount at which the financial instrument could be bought or sold, or in the case of liabilities incurred or settled, in a current transaction between willing parties. In cases where quoted market prices are not available, fair value is based on the best information available in the circumstances. Such estimates of fair value consider prices for similar assets or similar liabilities and the results of valuation techniques to the extent available in the circumstances. Examples of valuation techniques include the present value of estimated expected future cash flows using discount rates commensurate with the risks involved, option-pricing models, matrix pricing, option-adjusted spread models and fundamental analysis. Valuation techniques for measuring assets and liabilities must be consistent with the objective of measuring fair value and should incorporate assumptions that market participants would use in their estimates of values, future revenues and future expenses, including assumptions about interest rates, default, prepayment and volatility.

Many of the Company’s assets and liabilities subject to these disclosure requirements are not actively traded, requiring fair values to be estimated by management using matrix pricing, present value or other suitable valuation techniques. These techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Although fair value estimates are calculated using assumptions that management believes are appropriate, changes in assumptions could cause these estimates to vary materially. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in the immediate settlement of the instruments.

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

In estimating its fair value disclosures, the Company used the following methods and assumptions:

Mortgage loans on real estate, net: The fair values of mortgage loans on real estate are estimated using discounted cash flow analyses based on interest rates currently being offered for similar loans to borrowers with similar credit ratings. Loans with similar characteristics are aggregated for purposes of the calculations. Estimated fair value is based on the present value of expected future cash flows discounted at the loan’s effective interest rate.

F-29

NATIONWIDE FINANCIAL SERVICES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

December 31, 2007, 2006 and 2005

Policy loans: The carrying amount reported in the consolidated balance sheets approximates fair value.

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

Short-term debt: The carrying amount reported in the consolidated balance sheets approximates fair value.

Long-term debt: The fair values for senior notes are based on quoted market prices. The fair values of the junior subordinated debentures issued to a related party are based on quoted market prices of the capital securities of Nationwide Financial Services Capital Trust I (Trust I), which approximate the fair value of this obligation.

The following table summarizes the carrying values and estimated fair values of financial instruments subject to disclosure requirements as of December 31:

	2007						2006
(in millions)	Carrying value			Estimated fair value			Carrying value			Estimated fair value
Assets
Investments:
Mortgage loans on real estate, net	$	8,316.1		$	8,335.7		$	8,909.8		$	8,821.5
Policy loans		1,018.3			1,018.3			966.9			966.9
Liabilities
Investment contracts		(25,546.0	)		(23,937.6	)		(28,225.1	)		(26,527.0	)
Short-term debt		(309.3	)		(309.3	)		(85.2	)		(85.2	)
Long-term debt		(1,565.1	)		(1,566.8	)		(1,398.5	)		(1,437.5	)

(5) Derivative Financial Instruments

Qualitative Disclosure

Interest Rate Risk Management

The Company periodically purchases fixed rate investments to back variable rate liabilities. As a result, the Company can be exposed to interest rate risk due to the mismatch between variable rate liabilities and fixed rate assets. In an effort to mitigate the risk from this mismatch, the Company enters into various types of derivative instruments, with fluctuations in the fair values of the derivatives offsetting changes in the fair values of the investments resulting from changes in interest rates. The Company principally uses pay fixed/receive variable interest rate swaps to manage this risk.

Under these interest rate swaps, the Company receives variable interest rate payments and makes fixed rate payments. The fixed interest paid on the swap offsets the fixed interest received on the investment, resulting in the Company receiving the variable interest payments on the swap, generally 3-month U.S. London Interbank Offered Rate (LIBOR), and the credit spread on the investment. The net receipt of a variable rate will then more closely match the variable rate paid on the liability.

F-30

NATIONWIDE FINANCIAL SERVICES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

December 31, 2007, 2006 and 2005

As a result of entering into fixed rate commercial mortgage loan and private placement commitments, the Company is exposed to changes in the fair value of such commitments due to changes in interest rates during the commitment period prior to funding of the loans. In an effort to manage this risk, the Company enters into short U.S. Treasury futures and/or pay fixed interest rate swaps during the commitment period. With short U.S. Treasury futures or pay fixed interest rate swaps, if interest rates rise/fall, the gains/losses on the futures will offset the change in fair value of the commitment attributable to the change in interest rates.

The Company periodically purchases variable rate investments such as commercial mortgage loans and corporate bonds. As a result, the Company can be exposed to variability in cash flows and investment income due to changes in interest rates. Such variability poses risks to the Company when the assets are funded with fixed rate liabilities. In an effort to manage this risk, the Company may enter into receive fixed/pay variable interest rate swaps.

In using these interest rate swaps, the Company receives fixed interest rate payments and makes variable rate payments. The variable interest paid on the swap offsets the variable interest received on the investment, resulting in the Company receiving the fixed interest payments on the swap and the credit spread on the investment. The net receipt of a fixed rate will then more closely match the fixed rate paid on the liability.

The Company manages interest rate risk at the segment level. Different segments may simultaneously hedge interest rate risks associated with owning fixed and variable rate investments considering the risk relevant to a particular segment.

Foreign Currency Risk Management

In conjunction with the Company’s MTN program, the Company periodically issues both fixed and variable rate liabilities denominated in foreign currencies. As a result, the Company is exposed to changes in the fair value of liabilities due to changes in foreign currency exchange rates and related interest rates. In an effort to manage these risks, the Company enters into cross-currency interest rate swaps.

The Company is exposed to changes in the fair value of fixed rate investments denominated in a foreign currency due to changes in foreign currency exchange rates and related interest rates. In an effort to manage this risk, the Company uses cross-currency interest rate hedges to swap these asset characteristics to variable U.S. dollar rate instruments. Cross-currency interest rate swaps on assets are structured to pay a fixed rate, in a foreign currency, and receive a variable U.S. dollar rate, generally 3-month U.S. LIBOR. These derivative instruments are designated as a fair value hedge of a fixed rate foreign denominated asset.

Cross-currency interest rate swaps on variable rate investments are structured to pay a variable rate, in a foreign currency, and receive a fixed U.S. dollar rate. The terms of the foreign currency paid on the swap will exactly match the terms of the foreign currency received on the asset, thus eliminating currency risk. These derivative instruments are designated as a cash flow hedge.

Equity Market Risk Management

Asset fees calculated as a percentage of separate account assets are a significant source of revenue to the Company. As of December 31, 2007, approximately 82% of separate account assets were invested in equity mutual funds (approximately 83% as of December 31, 2006). Gains and losses in the equity markets result in corresponding increases and decreases in the Company’s separate account assets and asset fee revenue. In

F-31

NATIONWIDE FINANCIAL SERVICES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

December 31, 2007, 2006 and 2005

addition, a decrease in separate account assets may decrease the Company’s expectations of future profit margins due to a decrease in asset fee revenue and/or an increase in guaranteed contract claims, which also may require the Company to accelerate amortization of DAC.

The Company’s long-term assumption for net separate account returns is 7% annual growth. If equity markets were unchanged throughout a given year, the Company estimates that its net earnings per diluted share, calculated using current weighted average diluted shares outstanding, would be approximately $0.05 to $0.10 less than if the Company’s long-term assumption for net separate account returns were realized. This analysis assumes no other factors change and that an unlocking of DAC assumptions would not be required. However, as it does each quarter, the Company would evaluate its DAC balance and underlying assumptions to determine the need for unlocking. The Company can provide no assurance that the experience of flat equity market returns would not result in changes to other factors affecting profitability, including the possibility of unlocking of DAC assumptions.

Many of the Company’s individual variable annuity contracts offer GMDB features. A GMDB generally provides a benefit if the annuitant dies and the contract value is less than a specified amount, which may be based on premiums paid less amounts withdrawn or contract value on a specified anniversary date. A decline in the stock market causing the contract value to fall below this specified amount, which varies from contract to contract based on the date the contract was entered into as well as the GMDB feature elected, will increase the net amount at risk, which is the GMDB in excess of the contract value. This could result in additional GMDB claims.

In an effort to mitigate this risk, the Company implemented a GMDB economic hedging program for certain new and existing business. Prior to implementation of the GMDB hedging program in 2000, the Company managed this risk primarily by entering into reinsurance arrangements. The GMDB economic hedging program is designed to offset changes in the economic value of the designated GMDB obligation. Currently the program shorts S&P 500 Index futures, which provides an offset to changes in the value of the designated obligation. The futures are not designated as hedges and, therefore, hedge accounting is not applied. The Company’s economic and accounting hedges are not perfectly offset. Therefore, the economic hedging activity is likely to lead to earnings volatility. This volatility was negligible in 2007. As of December 31, 2007 and 2006, the Company’s net amount at risk was $528.0 million and $574.3 million before reinsurance, respectively, and $319.3 million and $196.2 million net of reinsurance, respectively. As of December 31, 2007 and 2006, the Company’s reserve for GMDB claims was $47.6 million and $29.6 million, respectively.

The Company also offers certain variable annuity products with guaranteed minimum accumulation benefit (GMAB), guaranteed lifetime withdrawal benefit (GLWB) and hybrid GMAB/GLWB riders (collectively referred to as living benefits). A GMAB provides the contractholder with a guaranteed return of premium, adjusted proportionately for withdrawals, after a specified time period (5, 7 or 10 years) selected by the contractholder at the time of issuance of a variable annuity contract. In some cases, the contractholder also has the option, after a specified time, to drop the rider and continue the variable annuity contract without the GMAB. The design of the GMAB rider limits the risk to the Company in a variety of ways including asset allocation requirements, which serve to reduce the Company’s potential exposure to underlying fund performance risks. Specifically, the terms in the GMAB rider limit policyholder asset allocation by either (1) requiring partial allocation of assets to a guaranteed term option (a fixed rate investment option) and excluding certain funds that are highly volatile or difficult to hedge or (2) requiring all assets be allocated to one of the approved asset allocation funds or models defined by the Company.

F-32

NATIONWIDE FINANCIAL SERVICES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

December 31, 2007, 2006 and 2005

Beginning in March 2005, the Company began offering a hybrid GMAB/GLWB through its Capital Preservation Plus Lifetime Income (CPPLI) contract rider. This living benefit combines a GMAB feature in its first 5-10 years with a lifetime withdrawal benefit election at the end of the GMAB feature. Upon maturity of the GMAB, the contractholder can elect the lifetime withdrawal benefit, which would continue for the duration of the insured’s life; elect a new CPPLI rider; or drop the rider completely and continue the variable annuity contract without any rider. If the lifetime withdrawal benefit is elected and the insured’s contract value is exhausted through such withdrawals and market conditions, the Company will continue to fund future withdrawals at a pre-defined level until the insured’s death. In some cases, the contractholder has the right to drop the GLWB portion of this rider or periodically reset the guaranteed withdrawal basis to a higher level. This benefit requires a minimum allocation to guaranteed term options or adherence to limitations required by an approved asset allocation strategy as previously described above.

In March 2006, the Company added Lifetime Income (L.inc), a stand-alone GLWB, to complement CPPLI in its product offerings. This rider is very similar to the hybrid benefit discussed above in that L.inc and CPPLI both have guaranteed withdrawal rates that increase based on the age at which the contractholder begins taking income. The withdrawal rates are applied to a benefit base to determine the guaranteed lifetime income amount available to a contractholder. The benefit base is equal to the variable annuity premium at contract issuance and may increase as a result of a ratchet feature that is driven by account performance and a roll-up feature that is driven by policy duration. Generally, the longer the contractholder waits before commencing withdrawals, the greater the guaranteed lifetime income. One key difference between L.inc and CPPLI is that the charge associated with L.inc is assessed against the benefit base. This is a risk mitigation feature as it alleviates much of the uncertainty around account performance and customer withdrawal patterns, both of which can lead to lower than expected revenue streams if the charge were assessed on account value. In June 2007, the Company added a feature to L.inc to allow for a lump settlement in lieu of lifetime withdrawals in certain situations.

The Company’s living benefit riders represent an embedded derivative in a variable annuity contract that is required to be separated from, and valued apart from, the host variable annuity contract. The embedded derivatives are carried at fair value. Subsequent changes in the fair value of the embedded derivatives are recognized in earnings as a component of net realized investment gains and losses. The fair value of the embedded derivatives is calculated based on a combination of capital market and actuarial assumptions. Projections of cash flows inherent in the valuation of the embedded derivative incorporate numerous assumptions including, but not limited to, expectations of contractholder persistency, contractholder withdrawal patterns, risk neutral market returns, correlations of market returns and market return volatility. As of December 31, 2007 and 2006, the net balance of the embedded derivatives for living benefits was a liability of $91.9 million and an asset of $23.7 million, respectively.

Similar to the Company’s economic hedging for GMDBs, the living benefits features are also being economically hedged. The primary risks being hedged are the exposures associated with declining equity market returns and downward interest rate movements. The Company employs a variety of instruments to mitigate this exposure including S&P 500 Index futures, U.S. Treasury futures, interest rate swaps and long-dated over-the-counter put options. The positions used in the economic hedging program are not designated as hedges and, therefore, hedge accounting is not applied. The living benefits hedging program is designed to offset changes in the economic value of the living benefits obligation to contractholders. Changes in the fair value of the embedded derivatives are likely to create volatility in earnings. The hedging activity associated with changes in the economic value of the living benefits obligations will likely mitigate a portion of this earnings volatility.

F-33

NATIONWIDE FINANCIAL SERVICES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

December 31, 2007, 2006 and 2005

Other Non-Hedging Derivatives

The Company periodically enters into basis swaps (receive one variable rate, pay another variable rate) to better match the cash flows received from the specific variable-rate investments with the variable rate paid on a group of liabilities. While the pay-side terms of the basis swap will be consistent with the terms of the asset, the Company is not able to match the receive-side terms of the derivative to a specific liability. Therefore, basis swaps do not receive hedge accounting treatment.

The Company sells credit default protection on selected debt instruments and combines the credit default swap with selected assets the Company owns to replicate a higher yielding bond. These selected assets may have sufficient duration for the related liability, but do not earn a sufficient credit spread. The combined credit default swap and investments provide cash flows with the duration and credit spread targeted by the Company. The credit default swaps do not qualify for hedge accounting treatment.

The Company also has purchased credit default protection on selected debt instruments exposed to short-term credit concerns, or because the combination of the corporate bond and purchased default protection provides sufficient spread and duration targeted by the Company. The purchased credit default protection is not designated for hedge accounting treatment.

Quantitative Disclosure

Fair Value Hedges

During the years ended December 31, 2007, 2006 and 2005, a net loss of $2.4 million, a net gain of $2.9 million and a net gain of $4.1 million, respectively, were recognized in net realized investment gains and losses. This represents the ineffective portion of the fair value hedging relationships. There were no gains or losses attributable to the portion of the derivative instruments’ changes in fair value excluded from the assessment of hedge effectiveness. There were also no gains or losses recognized in earnings as a result of hedged firm commitments no longer qualifying as fair value hedges.

Cash Flow Hedges

For the years ended December 31, 2007, 2006 and 2005, the ineffective portion of cash flow hedges was a net loss of $1.4 million, a net loss of $1.5 million and a net gain of $3.2 million, respectively. There were no net gains or losses attributable to the portion of the derivative instruments’ changes in fair value excluded from the assessment of hedge effectiveness.

In general, the maximum length of time over which the Company is hedging its exposure to the variability in future cash flows associated with forecasted transactions, other than those relating to variable interest on existing financial instruments, is twelve months or less. However, in 2003 the Company entered into a hedge of a forecasted purchase of shares of a mutual fund tied to the S&P 500 Index where delivery of the shares will occur in 2033.

During 2007, the Company did not discontinue any cash flow hedges because the original forecasted transaction was no longer probable. Additionally, no amounts were reclassified from AOCI into earnings due to the probability that a forecasted transaction would not occur.

F-34

NATIONWIDE FINANCIAL SERVICES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

December 31, 2007, 2006 and 2005

Other Derivative Instruments, Including Embedded Derivatives

Net realized investment gains and losses for the years ended December 31, 2007, 2006 and 2005 included net losses of $12.4 million, $0.5 million and $9.1 million, respectively, related to other derivative instruments, including embedded derivatives, not designated in hedging relationships. In addition, the Individual Investments segment included net losses of $51.8 million (recorded as a $41.7 million net realized loss, net investment income of $2.6 million and annuity expense of $12.7 million) and $11.4 million (recorded as net investment income of $10.7 million and annuity expense of $22.1 million) for the years ended December 31, 2007 and 2006, respectively, related to other derivative instruments, including embedded derivatives, not designated in hedging relationships. For the years ended December 31, 2007, 2006 and 2005, net losses of $0.5 million, $10.6 million and $80.7 million, respectively, were recorded in net realized investment gains and losses reflecting the change in fair value of cross-currency interest rate swaps hedging variable rate MTNs denominated in foreign currencies. No additional net gains were recorded in net realized investment gains and losses to reflect the change in spot rates of these foreign currency denominated obligations during the year ended December 31, 2007 compared to $14.1 million and $78.3 million during the years ended December 31, 2006 and 2005, respectively.

The following table summarizes the notional amount of derivative financial instruments outstanding as of December 31:

(in millions)	2007		2006
Interest rate swaps:
Pay fixed/receive variable rate swaps hedging investments	$	1,692.9	$	1,930.5
Pay variable/receive fixed rate swaps hedging investments		21.0		60.4
Pay fixed/receive variable rate swaps hedging liabilities		1,120.7		1,048.8
Pay variable/receive fixed rate swaps hedging liabilities		343.1		—
Cross-currency interest rate swaps:
Hedging foreign currency denominated investments		375.5		452.9
Hedging foreign currency denominated liabilities		1,144.1		1,137.1
Credit default swaps		300.3		376.8
Other non-hedging instruments		518.1		101.8
Equity option contracts		2,361.8		1,640.7
Interest rate futures contracts		371.3		214.2
Total	$	8,248.8	$	6,963.2

The notional value is the amount upon which exchanges of interest are based. Exposure to a counterparty arises if the net expected cash flows are positive, as calculated based on forward interest rate curves and notional contract values.

F-35

NATIONWIDE FINANCIAL SERVICES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

December 31, 2007, 2006 and 2005

(6) Investments

The following table summarizes the amortized cost, gross unrealized gains and losses, and estimated fair values of securities available-for-sale as of the dates indicated:

(in millions)	Amortized cost		Gross unrealized gains		Gross unrealized losses		Estimated fair value
December 31, 2007:
Fixed maturity securities:
U.S. Treasury securities and obligations of U.S. Government corporations	$	172.8	$	17.4	$	0.9	$	189.3
Agencies not backed by the full faith and credit of the U.S. Government		418.1		61.5		—		479.6
Obligations of states and political subdivisions		273.3		1.7		2.8		272.2
Debt securities issued by foreign governments		56.2		2.5		0.3		58.4
Corporate securities
Public		9,233.2		175.2		178.8		9,229.6
Private		6,010.7		135.7		66.9		6,079.5
Mortgage-backed securities		7,142.5		40.3		108.2		7,074.6
Asset-backed securities		3,957.1		33.4		184.5		3,806.0
Total fixed maturity securities		27,263.9		467.7		542.4		27,189.2
Equity securities		117.5		8.3		1.6		124.2
Total securities available-for-sale	$	27,381.4	$	476.0	$	544.0	$	27,313.4
December 31, 2006:
Fixed maturity securities:
U.S. Treasury securities and obligations of U.S. Government corporations	$	179.0	$	12.2	$	2.1	$	189.1
Agencies not backed by the full faith and credit of the U.S. Government		564.5		46.2		2.3		608.4
Obligations of states and political subdivisions		274.7		0.7		7.4		268.0
Debt securities issued by foreign governments		36.2		1.7		0.2		37.7
Corporate securities
Public		9,732.8		220.0		127.4		9,825.4
Private		6,605.1		131.5		83.8		6,652.8
Mortgage-backed securities		6,946.0		23.8		122.8		6,847.0
Asset-backed securities		3,728.9		45.5		42.8		3,731.6
Total fixed maturity securities		28,067.2		481.6		388.8		28,160.0
Equity securities		57.2		11.0		0.6		67.6
Total securities available-for-sale	$	28,124.4	$	492.6	$	389.4	$	28,227.6

The market value of the Company’s general account investments may fluctuate significantly in response to changes in interest rates, investment quality ratings and credit spreads. In addition, the Company may be likely to experience realized investment losses to the extent its liquidity needs require the disposition of general account fixed maturity securities in unfavorable interest rate, liquidity or credit spread environments.

F-36

NATIONWIDE FINANCIAL SERVICES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

December 31, 2007, 2006 and 2005

The table below summarizes the amortized cost and estimated fair values of fixed maturity securities available-for-sale, by maturity, as of December 31, 2007. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

(in millions)	Amortized cost			Estimated fair value
Fixed maturity securities available-for-sale:
Due in one year or less	$	1,523.3		$	1,525.8
Due after one year through five years		6,891.4			7,002.2
Due after five years through ten years		4,117.4			4,155.2
Due after ten years		3,632.2			3,625.4
Subtotal		16,164.3			16,308.6
Mortgage-backed securities		7,142.5			7,074.6
Asset-backed securities		3,957.1			3,806.0
Total	$	27,263.9		$	27,189.2
The following table presents the components of net unrealized (losses) gains on securities available-for-sale, as of December 31:
(in millions)	2007			2006
Net unrealized (losses) gains, before adjustments and taxes	$	(68.0	)	$	103.2
Adjustment to DAC		87.1			83.3
Adjustment to VOBA		1.4			(6.6	)
Adjustment to future policy benefits and claims		(80.9	)		(86.8	)
Adjustment to policyholder dividend obligation		(13.8	)		(16.0	)
Deferred federal income tax benefit (expense)		26.1			(27.1	)
Net unrealized (losses) gains	$	(48.1	)	$	50.0

The following table presents an analysis of the net decrease in net unrealized gains on securities available-for-sale before adjustments and taxes for the years ended December 31:

(in millions)	2007			2006			2005
Fixed maturity securities	$	(167.5	)	$	(182.4	)	$	(818.4	)
Equity securities		(3.7	)		(0.4	)		(3.1	)
Net decrease	$	(171.2	)	$	(182.8	)	$	(821.5	)

F-37

NATIONWIDE FINANCIAL SERVICES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

December 31, 2007, 2006 and 2005

For securities available-for-sale as of the dates indicated, the following table summarizes the Company’s gross unrealized losses based on the amount of time each type of security has been in an unrealized loss position:

	Less than or equal to one year					More than one year					Total
(in millions)	Estimated fair value		Gross unrealized losses			Estimated fair value		Gross unrealized losses			Estimated fair value		Gross unrealized losses
December 31, 2007:
Fixed maturity securities:
U.S. Treasury securities and obligations of U.S. Government corporations	$	23.7	$	0.6		$	4.2	$	0.3		$	27.9	$	0.9
Agencies not backed by the full faith and credit of the U.S. Government		—		—			13.9		—			13.9		—
Obligations of states and political subdivisions		23.9		0.2			154.3		2.6			178.2		2.8
Debt securities issued by foreign governments		26.4		0.3			1.2		—			27.6		0.3
Corporate securities
Public		2,452.6		103.4			2,287.7		75.4			4,740.3		178.8
Private		740.4		18.8			2,076.6		48.1			2,817.0		66.9
Mortgage-backed securities		1,448.4		27.6			2,775.7		80.6			4,224.1		108.2
Asset-backed securities		1,515.3		132.3			1,211.6		52.2			2,726.9		184.5
Total fixed maturity securities		6,230.7		283.2			8,525.2		259.2			14,755.9		542.4
Equity securities		37.5		1.6			0.1		—			37.6		1.6
Total	$	6,268.2	$	284.8		$	8,525.3	$	259.2		$	14,793.5	$	544.0
% of gross unrealized losses				52	%				48	%
December 31, 2006:
Fixed maturity securities:
U.S. Treasury securities and obligations of U.S. Government corporations	$	66.5	$	1.0		$	29.9	$	1.1		$	96.4	$	2.1
Agencies not backed by the full faith and credit of the U.S. Government		31.7		0.1			125.2		2.2			156.9		2.3
Obligations of states and political subdivisions		84.5		1.0			161.9		6.4			246.4		7.4
Debt securities issued by foreign governments		12.8		0.1			1.3		0.1			14.1		0.2
Corporate securities
Public		2,627.7		27.8			3,525.8		99.6			6,153.5		127.4
Private		1,288.6		15.0			2,165.1		68.8			3,453.7		83.8
Mortgage-backed securities		966.9		7.6			4,194.0		115.2			5,160.9		122.8
Asset-backed securities		580.2		4.5			1,475.0		38.3			2,055.2		42.8
Total fixed maturity securities		5,658.9		57.1			11,678.2		331.7			17,337.1		388.8
Equity securities		17.6		0.3			3.4		0.3			21.0		0.6
Total	$	5,676.5	$	57.4		$	11,681.6	$	332.0		$	17,358.1	$	389.4
% of gross unrealized losses				15	%				85	%

F-38

NATIONWIDE FINANCIAL SERVICES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

December 31, 2007, 2006 and 2005

The Company has assets that have been in an unrealized loss position for more than one year that are not other-than-temporarily impaired. The Company reviews each asset in an unrealized loss position and evaluates whether or not the loss is other-than-temporary. This evaluation considers several factors, including the extent of the unrealized loss, the rating of the affected security, the Company’s ability and intent to hold the security until recovery, and economic conditions that could affect the creditworthiness of the issuer. As of December 31, 2007, assets that have been in an unrealized loss position for more than one year totaled $259.2 million, or 48% of the Company’s total unrealized losses. Of this total, $231.8 million, or 89%, were classified as investment grade securities, as defined by the National Association of Insurance Commissioners (NAIC).

As noted in the table above, the majority of the increases in the Company’s unrealized losses from December 31, 2006 to December 31, 2007 were attributable to corporate securities and asset-backed securities (ABSs). These increased loss positions primarily were driven by the combined impacts of interest rate movements, volatility in investment quality ratings and credit spreads, and illiquid markets.

As of December 31, 2007, 67% of the Company’s corporate securities in unrealized loss positions, or $164.1 million, were classified as investment grade, as defined by the NAIC. Of these investment grade corporate securities, 58%, or $95.9 million, have been in an unrealized loss position for more than one year, but 90% of those investments have ratios of estimated fair value to amortized cost of at least 90%. Of the Company’s corporate securities in unrealized loss positions classified as non-investment grade, 66% have been in an unrealized loss position for less than one year.

As of December 31, 2007, 100% of the Company’s ABSs in unrealized loss positions, or $184.5 million, were classified as investment grade, as defined by the NAIC. Of these investment grade ABSs, 72%, or $132.0 million, have been in an unrealized loss position for less than one year, but 33% of those investments have ratios of estimated fair value to amortized cost of at least 90%. Of the Company’s ABSs in unrealized loss positions that have been in loss positions for more than one year, 58% have ratios of estimated fair value to amortized cost of at least 90%.

For fixed maturity securities that are available-for-sale as of December 31, 2007, the following table summarizes the Company’s gross unrealized loss position categorized as investment grade vs. non-investment grade, as defined by the NAIC, in an unrealized loss position for the period of time indicated, and based on the ratio of estimated fair value to amortized cost (in millions):

	Period of time for which unrealized loss has existed
	Investment Grade						Non-Investment Grade						Total
Ratio of estimated fair value to amortized cost	Less than or equal to one year		More than one year		Total		Less than or equal to one year		More than one year		Total		Less than or equal to one year		More than one year		Total
99.9% - 95.0%	$	68.9	$	116.2	$	185.1	$	15.5	$	7.0	$	22.5	$	84.4	$	123.2	$	207.6
94.9% - 90.0%		50.3		84.0		134.3		11.4		4.1		15.5		61.7		88.1		149.8
89.9% - 85.0%		37.6		18.9		56.5		3.8		7.5		11.3		41.4		26.4		67.8
84.9% - 80.0%		12.8		5.8		18.6		3.0		1.4		4.4		15.8		7.2		23.0
Below 80.0%		59.2		6.9		66.1		20.7		7.4		28.1		79.9		14.3		94.2
Total	$	228.8	$	231.8	$	460.6	$	54.4	$	27.4	$	81.8	$	283.2	$	259.2	$	542.4

F-39

NATIONWIDE FINANCIAL SERVICES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

December 31, 2007, 2006 and 2005

As noted in the table above, as of December 31, 2007, 65% of the Company’s investments in an unrealized loss position had ratios of estimated fair value to amortized cost of at least 90%. In addition, 84% of the Company’s investments in an unrealized loss position were classified as investment grade, as defined by the NAIC. Of the Company’s investments in unrealized loss positions classified as non-investment grade, 67% have been in an unrealized loss position for less than one year.

The NAIC assigns securities quality ratings and uniform valuations (called NAIC Designations), which are used by insurers when preparing their annual statements. The NAIC assigns designations to publicly traded and privately placed securities. The designations assigned by the NAIC range from class 1 (highest quality) to class 6 (lowest quality). Of the Company’s general account fixed maturity securities, 94% were in the two highest NAIC Designations as of December 31, 2007 and 2006.

The following table summarizes the credit quality, as determined by NAIC Designation, of the Company’s general account fixed maturity securities portfolio as of December 31:

(in millions)		2007				2006
NAIC designation1	Rating agency equivalent designation2	Amortized cost		Estimated fair value		Amortized cost		Estimated fair value
1	Aaa/Aa/A	$	19,153.4	$	19,056.5	$	19,362.3	$	19,351.3
2	Baa		6,445.9		6,512.7		6,928.8		6,997.2
3	Ba		1,194.0		1,166.7		1,091.5		1,101.6
4	B		348.2		341.6		647.8		659.8
5	Caa and lower		83.8		73.1		18.5		27.3
6	In or near default		38.6		38.6		18.3		22.8
	Total	$	27,263.9	$	27,189.2	$	28,067.2	$	28,160.0

¹ NAIC Designations are assigned at least annually. Some designations for securities shown have been assigned to securities not yet assigned an NAIC Designation in a manner approximating equivalent public rating categories.

² Comparisons between NAIC and Moody’s designations are published by the NAIC. If no Moody’s rating is available, the Company assigns internal ratings corresponding to public ratings.

Recent conditions in the securities markets, including changes in interest rates, investment quality ratings, liquidity and credit spreads, have resulted in declines in the values of investment securities, including mortgage-backed securities (MBSs) and ABSs. When evaluating whether these securities are other-than-temporarily impaired, the Company considers characteristics of the underlying collateral, such as delinquency and default rates, the quality of the underlying borrower, the type of collateral in the pool, the vintage year of the collateral, subordination levels within the structure of the collateral pool, expected future cash flows, and the Company’s ability and intent to hold the security to recovery. These same factors also affect the estimated fair value of these securities.

The Company’s investments in MBSs and ABSs include securities that are supported by Alt-A and Sub-prime collateral. The Company considers Alt-A collateral to be mortgages whose underwriting standards do not qualify the mortgage for regular conforming or jumbo loan programs. Typical underwriting characteristics that cause a mortgage to fall into the Alt-A classification may include, but are not limited to, inadequate loan documentation of a borrower’s financial information, debt-to-income ratios above normal lending limits, loan-to-value ratios above normal lending limits that do not have primary mortgage insurance, a borrower who is a temporary resident, and loans securing non-conforming types of real estate. Alt-A mortgages are generally issued

F-40

NATIONWIDE FINANCIAL SERVICES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

December 31, 2007, 2006 and 2005

to borrowers having higher Fair Isaac Credit Organization (FICO) scores, and the lender typically issues a slightly higher interest rate for such mortgages. The Company considers Sub-prime collateral to be mortgages that are first-lien mortgage loans issued to Sub-prime borrowers, as demonstrated by recent delinquent rent or housing payments or substandard FICO scores. Second-lien mortgage loans are also considered Sub-prime. The amortized cost and estimated fair value of the Company’s investments in securities containing Alt-A collateral totaled $2,279.3 and $2,230.3, respectively, and the amortized cost and estimated fair value of the Company’s investments in securities containing Sub-prime collateral totaled $864.4 and $809.3, respectively. As of December 31, 2007, 100.0% and 95.2% of securities containing Alt-A and Sub-prime collateral, respectively, were rated AA or better. In addition, 55.2% and 71.2% of Alt-A and Sub-prime collateral, respectively, was originated in 2005 or earlier.

Proceeds from the sale of securities available-for-sale during 2007, 2006 and 2005 were $5.02 billion, $2.65 billion and $3.48 billion, respectively. During 2007, gross gains of $77.9 million ($66.6 million and $88.5 million in 2006 and 2005, respectively) and gross losses of $73.8 million ($71.2 million and $24.1 million in 2006 and 2005, respectively) were realized on those sales.

Real estate held for use was $17.8 million and $38.8 million as of December 31, 2007 and 2006, respectively. These assets are carried at cost less accumulated depreciation, which was $3.6 million and $16.0 million as of December 31, 2007 and 2006, respectively. The carrying value of real estate held for sale was $4.0 million and $16.0 million as of December 31, 2007 and 2006, respectively.

The carrying value of commercial mortgage loans on real estate considered to be impaired was $7.4 million as of December 31, 2007 ($17.5 million as of December 31, 2006), for which the related valuation allowance was $3.0 million ($12.3 million as of December 31, 2006). No valuation allowance exists for collateral dependent commercial mortgage loans for which the fair value of the collateral is estimated to be greater than the carrying value. During 2007, the average carrying value of impaired mortgage loans on real estate was $3.7 million ($3.5 million in 2006). Interest income on those loans, which is recognized on a cash basis, was $0.4 million in 2007 ($1.9 million in 2006).

The following table summarizes activity in the valuation allowance account for mortgage loans on real estate for the years ended December 31:

(in millions)	2007			2006		2005
Allowance, beginning of period	$	36.0		$	35.1	$	36.9
Net (reductions) additions to allowance		(11.2	)		0.9		(1.8	)
Allowance, end of period	$	24.8		$	36.0	$	35.1

F-41

NATIONWIDE FINANCIAL SERVICES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

December 31, 2007, 2006 and 2005

The following table summarizes net realized investment (losses) gains from continuing operations by source for the years ended December 31:

(in millions)	2007			2006			2005
Total realized gains on sales, net of hedging losses		78.9			98.7			98.5
Total realized losses on sales, net of hedging gains		(85.0	)		(75.6	)		(28.7	)
Total other-than-temporary and other investment impairments		(116.9	)		(16.8	)		(41.2	)
Credit default swaps		(7.5	)		(1.1	)		(7.5	)
Periodic net coupon settlements on non-qualifying derivatives		1.7			1.9			1.0
Other derivatives		(29.4	)		(0.6	)		1.2
Trading portfolio valuation (loss) gain		(5.7	)		—			0.4
Total realized (losses) gains before adjustments		(163.9	)		6.5			23.7
Amounts credited to policyholder dividend obligation		(2.5	)		0.1			(5.2	)
Other		1.2			2.5			2.3
Net realized investment (losses) gains	$	(165.2	)	$	9.1		$	20.8

The following table summarizes net investment income from continuing operations by investment type for the years ended December 31:

(in millions)	2007		2006		2005
Securities available-for-sale:
Fixed maturity securities	$	1,547.4	$	1,582.4	$	1,628.8
Equity securities		5.1		3.5		4.4
Trading assets		3.4		2.1		2.2
Mortgage loans on real estate		554.1		577.8		619.5
Short-term investments		44.6		56.6		23.5
Other		190.8		150.5		128.9
Gross investment income		2,345.4		2,372.9		2,407.3
Less investment expenses		68.7		72.7		63.2
Net investment income	$	2,276.7	$	2,300.2	$	2,344.1

Fixed maturity securities with an amortized cost of $198.8 million and $21.7 million as of December 31, 2007 and 2006, respectively, were on deposit with various regulatory agencies as required by law.

As of December 31, 2007 and 2006, the Company had received $604.6 million and $886.7 million, respectively, of cash collateral on securities lending. The Company had not received any non-cash collateral on securities lending as of December 31, 2007 and 2006. As of December 31, 2007 and 2006, the Company had loaned securities with a fair value of $593.0 million and $859.9 million, respectively.

As of December 31, 2007 and 2006, the Company had received $245.4 million and $171.0 million, respectively, of cash for derivative collateral. The Company also held $18.5 million and $12.8 million of securities as off-balance sheet collateral on derivative transactions as of December 31, 2007 and 2006, respectively. As of December 31, 2007, the Company had pledged fixed maturity securities with a fair value of $18.8 million as collateral to various derivative counterparties compared to none as of December 31, 2006.

F-42

NATIONWIDE FINANCIAL SERVICES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

December 31, 2007, 2006 and 2005

(7) Value of Business Acquired and Other Intangible Assets

The following table presents a reconciliation of VOBA for the years ended December 31:

(in millions)	2007			2006
Balance at beginning of period	$	392.7		$	449.7
Amortization of VOBA		(47.0	)		(46.0	)
Net realized losses on investments		1.1			2.4
Subtotal		346.8			406.1
Change in unrealized gain on available-for-sale securities		8.0			(13.4	)
Balance at end of period	$	354.8		$	392.7

Interest on the unamortized VOBA balance (at interest rates ranging from 4.50% to 7.56%) is included in amortization and was $24.8 million, $27.5 million and $30.3 million during the years ended December 31, 2007, 2006 and 2005, respectively.

The following table summarizes intangible assets as of December 31:

		2007				2006
(in millions)	Initial useful life1	Gross carrying amount		Accumulated amortization		Gross carrying amount		Accumulated amortization
Amortizing:
VOBA	28 years	$	594.9	$	241.5	$	594.9	$	195.6
Distribution forces	20 years		30.4		3.7		30.4		2.6
Other	14 years		19.7		10.1		20.0		8.1
Total amortizing intangible assets			645.0		255.3		645.3		206.3
Non-amortizing:
State insurance licenses	Indefinite		8.0		—		8.0		—
Total intangible assets		$	653.0	$	255.3	$	653.3	$	206.3

¹ The initial useful life was based on applicable assumptions. Actual periods are subject to revision based on variances from assumptions and other relevant factors. The state insurance licenses have indefinite lives and therefore are not amortized.

The Company’s annual impairment testing did not result in material impairment losses on intangible assets during 2007, 2006 and 2005.

Based on current assumptions, which are subject to change, the following table summarizes estimated amortization for the next five years ended December 31:

(in millions)	VOBA		Intangible assets with finite lives		Total intangible assets
2008	$	33.4	$	1.9	$	35.3
2009		30.9		2.0		32.9
2010		28.8		2.2		31.0
2011		23.1		2.3		25.4
2012		19.6		2.4		22.0

F-43

NATIONWIDE FINANCIAL SERVICES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

December 31, 2007, 2006 and 2005

(8) Goodwill

The following table summarizes changes in the carrying value of goodwill by segment for the years indicated:

(in millions)	Retirement Plans			Individual Protection			Corporate and Other		Total
Balance as of December 31, 2005	$	82.2		$	282.3		$	—	$	364.5
Adjustments		—			(5.5	)		—		(5.5	)
Balance as of December 31, 2006		82.2			276.8			—		359.0
Adjustments		(18.7	)		(49.0	)		9.9		(57.8	)
Balance as of December 31, 2007	$	63.5		$	227.8		$	9.9	$	301.2

The 2006 adjustment represents a write-down to fair value of the portion of NFS’ investment in TBG Financial that was contributed to the joint venture between TBG Financial and Mullin Consulting during the first quarter of 2006.

The 2007 adjustment in the Retirement Plans segment relates to the sale of The 401(k) Company. The 2007 adjustment in the Individual Protection segment relates to the discontinued operations of TBG Financial (see Note 2(n) for more information). The 2007 adjustment in the Corporate and Other segment relates to the merger of Nationwide Federal Credit Union into Nationwide Bank.

The Company’s 2007 annual impairment testing did not result in any impairments on existing goodwill.

F-44

NATIONWIDE FINANCIAL SERVICES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

December 31, 2007, 2006 and 2005

(9) Closed Block

The amounts shown in the following tables for assets, liabilities, revenues and expenses of the closed block of NLICA are those that enter into the determination of amounts that are to be paid to policyholders.

The following table summarizes financial information for the closed block as of December 31:

(in millions)	2007			2006
Liabilities:
Future policyholder benefits	$	1,860.4		$	1,881.0
Policyholder funds and accumulated dividends		141.8			141.5
Policyholder dividends payable		30.9			30.1
Policyholder dividend obligation		60.7			64.0
Other policy obligations and liabilities		11.0			10.6
Total liabilities		2,104.8			2,127.2
Assets:
Fixed maturity securities available-for-sale, at estimated fair value		1,178.0			1,154.5
Mortgage loans on real estate		320.1			344.9
Policy loans		200.5			206.8
Other assets		156.4			159.2
Total assets		1,855.0			1,865.4
Excess of reported liabilities over assets		249.8			261.8
Portion of above representing other comprehensive income:
Decrease in unrealized gain on fixed maturity securities available-for-sale		(2.2	)		(14.8	)
Adjustment to policyholder dividend obligation		2.2			14.8
Total		—			—
Maximum future earnings to be recognized from assets and liabilities	$	249.8		$	261.8
Other comprehensive income:
Fixed maturity securities available-for-sale:
Fair value	$	1,178.0		$	1,154.5
Amortized cost		1,164.3			1,138.6
Shadow policyholder dividend obligation		(13.7	)		(15.9	)
Net unrealized appreciation	$	—		$	—

F-45

NATIONWIDE FINANCIAL SERVICES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

December 31, 2007, 2006 and 2005

The following table summarizes closed block operations for the years ended December 31:

(in millions)	2007			2006			2005
Revenues:
Premiums	$	95.7		$	98.0		$	104.4
Net investment income		102.5			105.0			110.2
Realized investment (losses) gains		(1.5	)		(4.1	)		1.2
Realized (losses) gains credited to policyholder benefit obligation		(2.5	)		0.1			(5.2	)
Total revenues		194.2			199.0			210.6
Benefits and expenses:
Policy and contract benefits		136.4			137.9			142.7
Change in future policyholder benefits and interest credited to policyholder accounts		(19.3	)		(22.8	)		(28.5	)
Policyholder dividends		61.1			58.3			55.6
Change in policyholder dividend obligation		(3.6	)		5.7			17.7
Other expenses		1.2			1.2			1.2
Total benefits and expenses		175.8			180.3			188.7
Total revenues, net of benefits and expenses, before federal income tax expense		18.4			18.7			21.9
Federal income tax expense		6.4			6.5			7.7
Revenues, net of benefits and expenses and federal income tax expense	$	12.0		$	12.2		$	14.2
Maximum future earnings from assets and liabilities:
Beginning of period	$	261.8		$	274.0		$	288.2
Change during period		(12.0	)		(12.2	)		(14.2	)
End of period	$	249.8		$	261.8		$	274.0

Cumulative closed block earnings from inception through December 31, 2007 and 2006 were higher than expected as determined in the actuarial calculation. Therefore, policyholder dividend obligations (excluding the adjustment for unrealized gains on available-for-sale securities) were $47.0 million and $48.1 million at December 31, 2007 and 2006, respectively. Other adjustments include revisions to the prior year-end balances including primarily policyholder dividends payable and adjustments to current and deferred taxes.

(10) Variable Annuity Contracts

The Company issues traditional variable annuity contracts through its separate accounts, for which investment income and gains and losses on investments accrue directly to, and investment risk is borne by, the contractholder. The Company also issues non-traditional variable annuity contracts in which the Company provides various forms of guarantees to benefit the related contractholders. The Company provides four primary guarantee types under non-traditional variable annuity contracts: (1) GMDB; (2) GMAB; (3) guaranteed minimum income benefits (GMIB); (4) GLWB; and (5) a hybrid guarantee with GMAB and GLWB.

F-46

NATIONWIDE FINANCIAL SERVICES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

December 31, 2007, 2006 and 2005

The GMDB provides a specified minimum return upon death. Many of these death benefits are spousal, whereby a death benefit will be paid upon death of the first spouse. The survivor has the option to terminate the contract or continue it and have the death benefit paid into the contract and a second death benefit paid upon the survivor’s death. The Company has offered six primary GMDB types:

• Return of premium—provides the greater of account value or total deposits made to the contract less any partial withdrawals and assessments, which is referred to as “net premiums.” There are two variations of this benefit. In general, there is no lock-in age for this benefit. However, for some contracts the GMDB reverts to the account value at a specified age, typically age 75.

• Reset—provides the greater of a return of premium death benefit or the most recent five-year anniversary (prior to lock-in age) account value adjusted for withdrawals. For most contracts, this GMDB locks in at age 86 or 90, and for others the GMDB reverts to the account value at age 75, 85, 86 or 90.

• Ratchet—provides the greater of a return of premium death benefit or the highest specified “anniversary” account value (prior to age 86) adjusted for withdrawals. Currently, there are three versions of ratchet, with the difference based on the definition of anniversary: monthaversary—evaluated monthly; annual—evaluated annually; and five-year—evaluated every fifth year.

• Rollup—provides the greater of a return of premium death benefit or premiums adjusted for withdrawals accumulated at generally 5% simple interest up to the earlier of age 86 or 200% of adjusted premiums. There are two variations of this benefit. For certain contracts, this GMDB locks in at age 86, and for others the GMDB reverts to the account value at age 75.

• Combo—provides the greater of annual ratchet death benefit or rollup death benefit. This benefit locks in at either age 81 or 86.

• Earnings enhancement—provides an enhancement to the death benefit that is a specified percentage of the adjusted earnings accumulated on the contract at the date of death. There are two versions of this benefit: (1) the benefit expires at age 86, and a credit of 4% of account value is deposited into the contract; and (2) the benefit does not have an end age, but has a cap on the payout and is paid upon the first death in a spousal situation. Both benefits have age limitations. This benefit is paid in addition to any other death benefits paid under the contract.

The GMAB, offered in the Company’s Capital Preservation Plus contract rider, is a living benefit that provides the contractholder with a guaranteed return of premium, adjusted proportionately for withdrawals, after a specified time period (5, 7 or 10 years) selected by the contractholder at the issuance of the variable annuity contract. In some cases, the contractholder also has the option, after a specified time period, to drop the rider and continue the variable annuity contract without the GMAB. In general, the GMAB requires a minimum allocation to guaranteed term options or adherence to limitations required by an approved asset allocation strategy.

The GMIB is a living benefit that provides the contractholder with a guaranteed annuitization value. The GMIB types are:

• Ratchet—provides an annuitization value equal to the greater of account value, net premiums or the highest one-year anniversary account value (prior to age 86) adjusted for withdrawals.

• Rollup—provides an annuitization value equal to the greater of account value and premiums adjusted for withdrawals accumulated at 5% compound interest up to the earlier of age 86 or 200% of adjusted premiums.

F-47

NATIONWIDE FINANCIAL SERVICES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

December 31, 2007, 2006 and 2005

• Combo—provides an annuitization value equal to the greater of account value, ratchet GMIB benefit or rollup GMIB benefit.

See Note 5 for a complete description of the Company’s hybrid GMAB/GLWB offered through its CPPLI contract rider. All GMAB contracts with the hybrid GMAB/GLWB rider are included with GMAB contracts in the following tables.

The following table summarizes the account values and net amount at risk, net of reinsurance, for variable annuity contracts with guarantees invested in both general and separate accounts as of December 31:

	2007					2006
(in millions)	Account value		Net amount at risk1		Wtd. avg. attained age	Account value		Net amount at risk1		Wtd. avg. attained age
GMDB:
Return of premium	$	9,086.7	$	18.7	62	$	9,243.7	$	33.9	60
Reset		18,055.4		62.1	64		17,752.7		49.3	63
Ratchet		15,931.7		133.3	66		13,651.6		31.7	65
Rollup		492.2		8.4	71		568.1		11.3	70
Combo		2,555.5		47.0	68		2,588.7		28.9	68
Subtotal		46,121.5		269.5	66		43,804.8		155.1	64
Earnings enhancement		519.2		49.8	62		477.8		41.1	61
Total—GMDB	$	46,640.7	$	319.3	65	$	44,282.6	$	196.2	63
GMAB2:
5 Year	$	2,985.6	$	4.6	N/A	$	2,131.1	$	0.1	N/A
7 Year		2,644.1		6.2	N/A		1,865.7		0.1	N/A
10 Year		927.3		1.3	N/A		784.0		—	N/A
Total—GMAB	$	6,557.0	$	12.1	N/A	$	4,780.8	$	0.2	N/A
GMIB3:
Ratchet	$	425.2	$	—	N/A	$	450.6	$	—	N/A
Rollup		1,119.9		—	N/A		1,187.1		—	N/A
Combo		0.3		—	N/A		0.5		—	N/A
Total—GMIB	$	1,545.4	$	—	N/A	$	1,638.2	$	—	N/A
GLWB:
L.inc	$	2,865.8	$	—	N/A	$	993.8	$	—	N/A

¹ Net amount at risk is calculated on a seriatum basis and equals the respective guaranteed benefit less the account value (or zero if the account value exceeds the guaranteed benefit). As it relates to GMIB, net amount at risk is calculated as if all policies were eligible to annuitize immediately, although all GMIB options have a waiting period of at least 7 years from issuance, with the earliest annuitizations beginning in 2007.

² GMAB contracts with the hybrid GMAB/GLWB rider had account values of $4.77 billion and $2.95 billion as of December 31, 2007 and 2006, respectively.

³ The weighted average period remaining until expected annuitization is not meaningful and has not been presented because there is currently no material GMIB exposure.

F-48

NATIONWIDE FINANCIAL SERVICES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

December 31, 2007, 2006 and 2005

The following table summarizes account balances of variable annuity contracts that were invested in separate accounts as of December 31:

(in millions)	2007		2006
Mutual funds:
Bond	$	5,170.9	$	4,499.2
Domestic equity		31,450.4		30,084.2
International equity		4,009.4		3,446.8
Total mutual funds		40,630.7		38,030.2
Money market funds		1,742.1		1,429.1
Total	$	42,372.8	$	39,459.3

The Company’s GMDB claim reserves are determined by estimating the expected value of death benefits on contracts that trigger a policy benefit and recognizing the excess ratably over the accumulation period based on total expected assessments. GMIB claim reserves are determined each period by estimating the expected value of annuitization benefits in excess of the projected account balance at the date of annuitization and recognizing the excess ratably over the accumulation period based on total assessments. The Company regularly evaluates its GMDB and GMIB claim reserve estimates and adjusts the additional liability balances as appropriate, with a related charge or credit to other benefits and claims in the period of evaluation if actual experience or other evidence suggests that earlier assumptions should be revised. The assumptions used in calculating GMIB claim reserves are consistent with those used for calculating GMDB claim reserves. In addition, the calculation of GMIB claim reserves assumes benefit utilization ranges from a low of 3% when the contractholder’s annuitization value is at least 10% in the money to 100% utilization when the contractholder is 90% or more in the money.

The Company’s living benefit riders represent an embedded derivative in a variable annuity contract that is required to be separated from, and valued apart from, the host variable annuity contract. The embedded derivatives are carried at fair value. Subsequent changes in the fair value of the embedded derivatives are recognized in earnings as a component of net realized investment gains and losses. The fair value of the embedded derivatives is calculated based on a combination of capital market and actuarial assumptions.

The following assumptions and methodology were used to determine the GMDB claim reserves as of December 31, 2007 and 2006:

• Data used was based on a combination of historical numbers and future projections generally involving 50 probabilistically generated economic scenarios

• Mean gross equity performance—8.1%

• Equity volatility—18.7%

• Mortality—100% of Annuity 2000 table

• Asset fees—equivalent to mutual fund and product loads

• Discount rate—7.0% and 8.0% as of December 31, 2007 and 2006, respectively

F-49

NATIONWIDE FINANCIAL SERVICES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

December 31, 2007, 2006 and 2005

Lapse rate assumptions vary by duration as shown below:

Duration (years)	1		2		3		4		5		6		7		8		9		10+
Minimum	4.00	%	5.00	%	6.00	%	7.00	%	8.00	%	9.50	%	10.00	%	11.00	%	14.00	%	14.00	%
Maximum	4.00	%	5.00	%	6.00	%	7.00	%	35.00	%	35.00	%	23.00	%	35.00	%	35.00	%	23.00	%

(11) Short-Term Debt

The following table summarizes short-term debt as of December 31:

(in millions)	2007		2006
$800.0 million commercial paper program	$	199.7	$	—
$350.0 million securities lending program facility		85.6		75.2
$50.0 million line of credit		14.0		—
$10.0 million line of credit		10.0		10.0
Total short-term debt	$	309.3	$	85.2

The Company has available as a source of funds a $1.00 billion revolving variable rate credit facility entered into by NFS, NLIC and NMIC with a group of national financial institutions. The facility provides for several and not joint liability with respect to any amount drawn by any party. The facility provides covenants, including, but not limited to, requirements that the Company’s debt not exceed 40% of tangible net worth, as defined, and that NLIC maintain statutory surplus, as defined, in excess of $1.67 billion. As of December 31, 2007, the Company and NLIC were in compliance with all covenants. The Company had no amounts outstanding under this agreement as of December 31, 2007 and 2006. NLIC also has an $800.0 million commercial paper program and is required to maintain an available credit facility equal to 50% of any amounts outstanding under the commercial paper program. Therefore, borrowing capacity under the aggregate $1.00 billion revolving credit facility is reduced by 50% of any amounts outstanding under the commercial paper program. NLIC had $199.7 million of commercial paper outstanding at December 31, 2007 at a weighted average interest rate of 4.39% and no commercial paper outstanding at December 31, 2006.

NLIC has entered into an agreement with its custodial bank to borrow against the cash collateral that is posted in connection with its securities lending program. This is an uncommitted facility contingent on the liquidity of the securities lending program. The borrowing facility was established to fund commercial mortgage loans that were originated with the intent of sale through securitization. The maximum amount available under the agreement is $350.0 million. The borrowing rate on this program is equal to one-month U.S. LIBOR (4.60% and 5.32% as of December 31, 2007 and 2006, respectively). NLIC had $85.6 million and $75.2 million outstanding under this agreement as of December 31, 2007 and 2006, respectively. As of December 31, 2007, the Company had not provided any guarantees on such borrowings, either directly or indirectly.

The Company also has a wholly-owned subsidiary that has available a variable rate line of credit agreement with a single financial institution for advances of up to 90 days in amounts up to $50.0 million. The line of credit is collateralized by investments owned by the subsidiary and is included in the consolidated balance sheets. The subsidiary had $14.0 million outstanding on that line of credit as of December 31, 2007 at a weighted average interest rate of 4.37%.

In addition, the Company has a majority-owned subsidiary that has available an annually renewable, 364-day, $10.0 million variable rate line of credit agreement with a single financial institution. The line of credit is guaranteed by NFS and is included in the consolidated balance sheets. The subsidiary had $10.0 million

F-50

NATIONWIDE FINANCIAL SERVICES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

December 31, 2007, 2006 and 2005

outstanding on that line of credit as of December 31, 2007 and 2006 at a weighted average interest rate of 5.54% in 2007 and 5.29% in 2006.

The Company paid interest on short-term debt totaling $15.5 million, $12.3 million and $11.8 million in 2007, 2006 and 2005, respectively.

(12) Long-Term Debt

The following table summarizes long-term debt as of December 31:

(in millions)	2007		2006
$300.0 million principal, 8.00% senior notes, due March 1, 2027	$	—	$	298.6
$300.0 million principal, 6.25% senior notes, due November 15, 2011		299.2		299.2
$300.0 million principal, 5.90% senior notes, due July 1, 2012		299.2		299.0
$200.0 million principal, 5.625% senior notes, due February 13, 2015		199.3		199.2
$200.0 million principal, 5.10% senior notes, due October 1, 2015		199.5		199.4
$400.0 million principal, 6.75% fixed-to-floating rate junior subordinated notes, due May 15, 2037		399.4		—
$100.0 million principal, 7.899% junior subordinated debentures issued to a related party, due March 1, 2037		103.1		103.1
Other		65.4		—
Total long-term debt	$	1,565.1	$	1,398.5

On May 18, 2007, NFS issued $400.0 million principal of 6.75% fixed-to-floating rate junior subordinated notes. These notes bear interest at a fixed rate of 6.75% for a 30-year period, after which the notes will bear interest at the rate of three-month U.S. LIBOR plus 2.33%. These notes are redeemable under one of three scenarios. First, these notes are redeemable, in whole or in part, at any time on or after May 15, 2037 at their principal amount plus accrued and unpaid interest to the date of redemption, provided that in the event of a redemption in part, the principal amount outstanding after such redemption is at least $50.0 million. Next, these notes are redeemable, in whole or in part, prior to May 15, 2037, in cases not involving tax or rating agency events, at their principal amount plus accrued and unpaid interest to the date of redemption or, if greater, the “make-whole price,” provided that in the event of redemption in part the principal amount outstanding after such redemption is at least $50.0 million. “Make-whole price” means the sum of the present values of the outstanding principal (discounted from May 15, 2037) and remaining scheduled payments of interest that would have been payable to and including May 15, 2037 (discounted from their respective interest payment dates) on the notes to be redeemed (not including any portion of such payments of interest accrued to the redemption date) to the redemption date on a semiannual basis at a prevailing U.S. Treasury rate plus 30 basis points, plus accrued and unpaid interest on the principal amount being redeemed to the redemption date. Lastly, these notes are redeemable in whole, but not in part, prior to May 15, 2037, within 90 days after the occurrence of certain tax or rating agency events, at their principal amount plus accrued and unpaid interest to the date of redemption or, if greater, the “special event make-whole price.” “Special event make-whole price” means the sum of the present values of the outstanding principal (discounted from May 15, 2037) and remaining scheduled payments of interest that would have been payable to and including May 15, 2037 (discounted from their respective interest payment dates) on the notes to be redeemed (not including any portion of such payments of interest accrued to the redemption date) to the redemption date on a semiannual basis at a prevailing U.S. Treasury rate plus 50 basis points, plus accrued and unpaid interest on the principal amount being redeemed to the redemption date.

F-51

NATIONWIDE FINANCIAL SERVICES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

December 31, 2007, 2006 and 2005

On June 4, 2007, NFS redeemed all of its outstanding 8.00% senior notes due March 1, 2027 at a price of $317.4 million. This amount represents aggregate principal of $300.0 million, an $11.2 million premium due as a result of early redemption (3.728% of the principal amount) and $6.2 million of accrued interest through the redemption date. These senior notes were originally issued in March 1997 and, in accordance with their terms, became subject to optional redemption by NFS on or after March 1, 2007. As a result of this transaction, NFS incurred a $10.2 million charge ($6.6 million, net of taxes) during the quarter ended June 30, 2007. This charge includes the redemption premium described above and the accelerated amortization of both unamortized debt issuance costs and the unamortized discount on the original issuance, partially offset by a deferred gain on previous hedging transactions. These amounts (excluding the redemption premium) otherwise would have been recognized through 2027.

The $300.0 million principal of 6.25% senior notes due November 15, 2011 were issued in November 2001 and are not redeemable prior to their maturity date. The $300.0 million principal of 5.90% senior notes due July 1, 2012, issued in June 2002, and the $200.0 million principal of 5.625% senior notes due February 13, 2015, issued in February 2003, are redeemable, in whole or in part, at the option of NFS at any time or from time to time at a redemption price equal to the greater of (1) 100% of the aggregate principal amount of the notes to be redeemed or (2) the sum of the present value of the remaining scheduled payments of principal and interest on the notes, discounted to the redemption date on a semi-annual basis at a prevailing U.S. Treasury rate plus 20 basis points, together in each case with accrued interest payments to the redemption date. The $200.0 million principal of 5.10% senior notes due October 1, 2015 were issued in September 2005 and are redeemable, in whole or in part, at the option of NFS at any time or from time to time at a redemption price equal to the greater of (1) 100% of the aggregate principal amount of the notes to be redeemed or (2) the sum of the present value of the remaining scheduled payments of principal and interest on the notes, discounted to the redemption date on a semi-annual basis at a prevailing U.S. Treasury rate plus 15 basis points, together in each case with accrued interest payments to the redemption date.

The terms of each series of senior notes contain various restrictive business and financial covenants, including limitations on the disposition of subsidiaries. As of December 31, 2007 and 2006, the Company was in compliance with all such covenants.

On March 11, 1997, Trust I sold, in a public offering, $100.0 million principal of 7.899% capital securities, representing preferred undivided beneficial interests in the assets of Trust I. This sale generated net proceeds of $98.3 million. Concurrent with the sale of the capital securities, NFS sold to Trust I $103.1 million principal of its 7.899% junior subordinated debentures due March 1, 2037. The junior subordinated debentures are the sole assets of Trust I and are redeemable by NFS in whole at any time or in part from time to time at par plus an applicable make-whole premium. The related capital securities will mature or be called simultaneously with the junior subordinated debentures and have a liquidation value of $1,000 per capital security. The capital securities are fully and unconditionally guaranteed by NFS, and there are no related sinking fund requirements. Distributions on the capital securities are cumulative and payable semi-annually in arrears.

The Company made interest payments on the senior notes of $76.1 million in 2007, $82.0 million in 2006 and $71.7 million in 2005.

Distributions related to junior subordinated debentures were classified as interest expense in the consolidated statements of income. The Company made distributions of $21.3 million, $8.1 million and $19.0 million related to junior subordinated debentures in 2007, 2006 and 2005, respectively.

In addition, the Company has a wholly-owned subsidiary with fixed rate borrowings from various financial institutions totaling $65.0 million as of December 31, 2007 with interest rates ranging from 3.27% to 4.45%.

F-52

NATIONWIDE FINANCIAL SERVICES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

December 31, 2007, 2006 and 2005

These borrowings have maturity dates ranging from two to ten years, and all are secured by investments pledged by the subsidiary. The subsidiary made interest payments of $0.1 million in 2007.

(13) Federal Income Taxes

NFS’ acquisition of NFN in 2002 reduced Nationwide Corp.’s economic ownership in the Company from 79.8% to 63.0%. Therefore, NFS and its subsidiaries no longer qualify to be included in the NMIC consolidated federal income tax return. The members of the NMIC consolidated federal income tax return group participated in a tax sharing arrangement, which uses a consolidated approach in allocating the amount of current and deferred expense to the separate financials statements of subsidiaries.

Under IRC regulations, NFS and its subsidiaries cannot file a life/non-life consolidated federal income tax return until five full years following NFS’ departure from the NMIC consolidated federal income tax return group. Therefore, NFS and its direct non-life insurance company subsidiaries will file a consolidated federal income tax return; NLIC and Nationwide Life and Annuity Insurance Company (NLAIC) will file a consolidated federal income tax return; the direct non-life insurance companies under NLIC will file separate federal income tax returns; NLICA and its direct life insurance company subsidiaries will file a consolidated federal income tax return; and the direct non-life insurance companies under NLICA will file a consolidated federal income tax return, until 2008, when NFS will become eligible to file a single life/non-life consolidated federal income tax return with all of its eligible subsidiaries.

The following table summarizes the tax effects of temporary differences that give rise to significant components of the net deferred tax liability as of December 31:

(in millions)	2007			2006
Deferred tax assets:
Future policy benefits	$	733.9		$	735.4
Other		312.9			186.5
Gross deferred tax assets		1,046.8			921.9
Less valuation allowance		(23.7	)		(23.7	)
Deferred tax assets, net of valuation allowance		1,023.1			898.2
Deferred tax liabilities:
Deferred policy acquisition costs		1,110.9			1,014.6
Value of business acquired		124.2			137.4
Other		174.8			256.8
Gross deferred tax liabilities		1,409.9			1,408.8
Net deferred tax liability	$	386.8		$	510.6

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion of the total gross deferred tax assets will not be realized. Future taxable amounts or recovery of federal income taxes paid within the statutory carryback period can offset nearly all future deductible amounts. Because it is more likely than not that certain deferred tax assets will not be realized, the Company established a valuation allowance of $23.7 million as of December 31, 2007 and 2006 and $31.7 million as of December 31, 2005.

F-53

NATIONWIDE FINANCIAL SERVICES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

December 31, 2007, 2006 and 2005

The Company’s current federal income tax asset was $0.6 million and $20.8 million as of December 31, 2007 and 2006, respectively.

Total federal income taxes paid were $155.0 million, $0.3 million and $236.0 million during the years ended December 31, 2007, 2006 and 2005, respectively.

As of December 31, 2007, the Company had $6.3 million of net operating loss carryforwards related to non-life losses that are expected to be fully utilized in 2008 when the company will elect to file a life/non-life consolidated federal tax return.

During the second quarter of 2007, the Company recorded $6.4 million of net federal income tax expense adjustments primarily related to differences between the 2006 estimated tax liability and the amounts the Company reported on its 2006 tax returns. The Company recorded an additional $1.5 million and $0.2 million of such adjustments during the third and fourth quarters of 2007, respectively.

Through June 2006, the Company’s federal income tax returns for tax years 2000-2002 were under IRS examination pursuant to a routine audit. In accordance with its regular practice, management established tax reserves based on the current facts and circumstances regarding each tax exposure item for which the ultimate deductibility is open to interpretation. These reserves are reviewed regularly and are adjusted as events occur that management believes impacts the Company’s liability for additional taxes, such as lapsing of applicable statutes of limitations; conclusion of tax audits or substantial agreement on the deductibility/non-deductibility 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. A significant component of the Company’s tax reserve as of December 31, 2005 was related to the separate account dividends received deduction (DRD). See “Tax Matters” in Note 18 for more information regarding DRD.

In July 2006, the Company reached substantial agreement with the IRS on all open issues for tax years 2000-2002, including issues related to the DRD. Accordingly, the Company revised its estimate of amounts that may be due in connection with certain tax positions, including the DRD, for all open tax years. As a result of the revised estimate, $114.2 million of tax reserves were released into earnings during the second quarter of 2006.

During the third quarter of 2006, the Company recorded $8.3 million of net federal income tax expense adjustments primarily related to differences between the 2005 estimated tax liability and the amounts reported on the Company’s 2005 tax returns.

During the third quarter of 2005, the Company refined its separate account DRD estimation process. As a result, the Company identified and recorded additional federal income tax benefits and recoverables of $42.6 million related to all tax years (2000 – 2005) that were open at that time. In addition, the Company recorded $5.6 million of net benefit adjustments primarily related to differences between the 2004 estimated tax liability and the amounts reported on the Company’s 2004 tax returns.

F-54

NATIONWIDE FINANCIAL SERVICES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

December 31, 2007, 2006 and 2005

The following table summarizes the federal income tax expense attributable to income from continuing operations for the years ended December 31:

(in millions)	2007		2006			2005
Current	$	155.6	$	(11.5	)	$	116.8
Deferred		35.1		83.7			24.6
Federal income tax expense	$	190.7	$	72.2		$	141.4

Total federal income tax expense differs from the amount computed by applying the U.S. federal income tax rate to income from continuing operations before federal income taxes as follows for the years ended December 31:

	2007					2006					2005
(dollars in millions)	Amount			%		Amount			%		Amount			%
Computed (expected) tax expense	$	280.1		35.0		$	279.8		35.0		$	273.1		35.0
DRD		(67.6	)	(8.5	)		(73.0	)	(9.1	)		(115.4	)	(14.8	)
Reserve release		—		—			(114.2	)	(14.3	)		—		—
Other, net		(21.8	)	(2.7	)		(20.4	)	(2.6	)		(16.3	)	(2.1	)
Total	$	190.7		23.8		$	72.2		9.0		$	141.4		18.1

(14) Shareholders’ Equity, Regulatory Risk-Based Capital and Dividend Restrictions

Overview

The Board of Directors of the Company has the authority to issue 50.0 million shares of preferred stock without further action of the shareholders. Preferred stock may be issued in one or more classes with full, special, limited or no voting powers; designations, preferences and relative, participating, optional or other special rights; and qualifications and limitations or restrictions as stated in any resolution adopted by the Board of Directors of the Company issuing any class of preferred stock. No shares of preferred stock have been issued or are outstanding.

The holders of Class A common stock are entitled to one vote per share. The holders of Class B common stock are entitled to ten votes per share. Class A common stock has no conversion rights. Class B common stock is convertible into Class A common stock, in whole or in part, at any time and from time to time at the option of the holder, on the basis of one share of Class A common stock for each share of Class B common stock converted. If at any time after the initial issuance of shares of Class A common stock the number of outstanding shares of Class B common stock falls below 5% of the aggregate number of issued and outstanding shares of common stock, then each outstanding share of Class B common stock shall automatically convert into one share of Class A common stock. In the event of any sale or transfer of shares of Class B common stock to any person or persons other than NMIC or its affiliates, such shares of Class B common stock so transferred shall be automatically converted into an equal number of shares of Class A common stock. Cash dividends of $1.04, $0.92 and $0.76 per common share were declared during 2007, 2006 and 2005, respectively.

Share Repurchase Program

On August 3, 2005, the Company’s Board of Directors (the Board) approved a stock repurchase program (the Program). The Program originally authorized the Company to repurchase up to an aggregate of $300.0 million in value of shares of its common stock in the open market, in block trades or otherwise, and through

F-55

NATIONWIDE FINANCIAL SERVICES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

December 31, 2007, 2006 and 2005

privately negotiated transactions. On August 2, 2006 and February 21, 2007, the Board extended the Program and authorized additional repurchases of up to $200.0 million and $450.0 million, respectively, in value of shares of the Company’s common stock. On December 5, 2007, the Board further extended the Program through December 2009 and authorized repurchases of up to $500.0 million in value of shares of the Company’s common stock in addition to the $950.0 million total previously authorized. Repurchases under the program are to be made in compliance with all applicable laws and regulations, including SEC rules. All shares repurchased under the Program are classified as treasury stock in the condensed consolidated balance sheets. The Program may be superseded or discontinued at any time.

During the year ended December 31, 2007, the Company repurchased 9,623,140 shares of its Class A common stock for an aggregate of $511.4 million at an average price per share of $53.14. Included in the total shares repurchased were 2,965,492 shares repurchased during April 2007 under an accelerated share repurchase agreement (ASR) for $165.0 million at an average price per share of $55.64 and 2,921,983 shares repurchased during September 2007 under a separate ASR for $152.5 million at an average price per share of $52.19.

The Company entered into each ASR with UBS AG, London Branch (UBS). Under each ASR, the Company immediately repurchased shares of Class A common stock from UBS. Simultaneously, in April 2007 and September 2007, the Company entered into separate six-month and five-month forward contracts, respectively, with UBS indexed to the number of shares repurchased. Under the terms of each forward contract, the Company is required to pay or entitled to receive a per share price adjustment based on the difference between the average daily volume weighted prices during the duration of each ASR and the initial reference price. If obligated to make payment to or receive payment from UBS, the Company can elect settlement in cash or in shares of its Class A common stock. The April 2007 ASR terminated during the third quarter of 2007. During October 2007, the Company settled its remaining obligation to UBS under the April 2007 ASR by issuing UBS 221,073 shares of its Class A common stock valued at $12.0 million. During November 2007, the Company settled its remaining obligation to UBS under the September 2007 ASR by issuing UBS 47,783 shares of its Class A common stock valued at $2.2 million.

From the Program’s inception through December 31, 2007, the Company repurchased a total of 15,675,368 shares of its Class A common stock for an aggregate of $779.0 million at an average price per share of $49.70, including the impact of a per share price adjustment during 2006 related to a March 2006 ASR.

In addition to the Class A share repurchases described above, NFS and Nationwide Corp. entered into a Share Purchase Agreement on November 27, 2006. Pursuant to this agreement, NFS purchased 3,855,050 shares of its Class B common stock held by Nationwide Corp. for $200.0 million at an average price per share of $51.88 (the five-day average closing price on the New York Stock Exchange for the period beginning November 27, 2006 and ending December 1, 2006). The transaction closed on December 4, 2006. Upon the repurchase, the Class B common stock converted automatically to Class A common stock. The Company retained these shares in treasury for future issuance.

The Company’s management will determine the timing and amount of any additional repurchases based upon its evaluation of market conditions, share price and other factors. The Company anticipates that it will continue to fund the Program using cash flows from operating activities.

Regulatory Risk-Based Capital

Each insurance company’s state of domicile imposes minimum risk-based capital (RBC) requirements that were developed by the NAIC. The formulas for determining the amount of RBC specify various weighting factors that are applied to financial balances or various levels of activity based on the perceived degree of risk. Regulatory compliance

F-56

NATIONWIDE FINANCIAL SERVICES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

December 31, 2007, 2006 and 2005

is determined by a ratio of total adjusted capital, as defined by the NAIC, to authorized control level RBC, as defined by the NAIC. Companies below specific trigger points or ratios are classified within certain levels, each of which requires specified corrective action. Each of the Company’s insurance company subsidiaries exceeded the minimum RBC requirements for all periods presented herein.

Dividend Restrictions

As an insurance holding company, NFS’ ability to meet debt service obligations and pay operating expenses and dividends depends primarily on the receipt of sufficient funds from its primary operating subsidiary, NLIC. The inability of NLIC to pay dividends to NFS in an amount sufficient to meet debt service obligations and pay operating expenses and dividends would have a material adverse effect on the Company. The payment of dividends by NLIC is subject to restrictions set forth in the insurance laws and regulations of the State of Ohio, its domiciliary state. The State of Ohio insurance laws require Ohio-domiciled life insurance companies to seek prior regulatory approval to pay a dividend or distribution of cash or other property if the fair market value thereof, together with that of other dividends or distributions made in the preceding 12 months, exceeds the greater of (1) 10% of statutory-basis policyholders’ surplus as of the prior December 31 or (2) the statutory-basis net income of the insurer for the prior year. During the year ended December 31, 2007, NLIC paid dividends of $537.5 million to NFS, including a $242.5 million extraordinary dividend paid after obtaining approval from the Ohio Department of Insurance (ODI). NLIC’s statutory capital and surplus as of December 31, 2007 was $2.50 billion, and statutory net income for 2007 was $309.0 million. As of January 1, 2008, NLIC could not pay dividends to NFS without obtaining prior approval. As of April 2008, NLIC will be able to pay dividends to NFS totaling $246.5 million upon providing prior notice to the ODI. On February 20, 2008, NLIC declared a dividend of $246.5 million payable to NFS in April 2008. NLIC will provide notice to the ODI before paying this dividend to NFS.

The State of Ohio insurance laws also require insurers to seek prior regulatory approval for any dividend paid from other than earned surplus. Earned surplus is defined under the State of Ohio insurance laws as the amount equal to the Company’s unassigned funds as set forth in its most recent statutory financial statements, including net unrealized capital gains and losses or revaluation of assets. Additionally, following any dividend, an insurer’s policyholder surplus must be reasonable in relation to the insurer’s outstanding liabilities and adequate for its financial needs. The payment of dividends by NLIC may also be subject to restrictions set forth in the insurance laws of the State of New York that limit the amount of statutory profits on NLIC’s participating policies (measured before dividends to policyholders) available for the benefit of the Company and its shareholders.

The ability of NLICA to pay dividends to NFS is subject to regulation under Pennsylvania insurance law. Under Pennsylvania insurance laws, unless the PID either approves or does not disapprove payment within 30 days after being notified, NLICA may not pay any cash dividends or other non-stock distributions to NFS during any 12-month period if the total payments exceed the greater of (1) 10% of statutory-basis policyholders’ surplus as of the prior December 31 or (2) the statutory-basis net income of the insurer for the prior year. NLICA paid a dividend of $75.0 million to NFS in 2007. The statutory capital and surplus of NLICA as of December 31, 2007 was $674.0 million, and statutory net income for the year ended December 31, 2007 was $91.6 million. As of January 1, 2008, NLICA could not pay dividends to NFS without obtaining prior approval.

NFS currently does not expect such regulator requirements to impair the ability of its insurance company subsidiaries to pay sufficient dividends in order for NFS to have the necessary funds available to meet its obligations.

Comprehensive Income

The Company’s comprehensive income includes net income and certain items that are reported directly within separate components of shareholders’ equity that are not recorded in net income (other comprehensive income or loss).

F-57

NATIONWIDE FINANCIAL SERVICES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

December 31, 2007, 2006 and 2005

The following table summarizes the Company’s other comprehensive loss, before and after federal income tax benefit, for the years ended December 31:

(in millions)	2007			2006			2005
Net unrealized losses on securities available-for-sale arising during the period:
Net unrealized losses before adjustments	$	(274.7	)	$	(194.3	)	$	(789.2	)
Net adjustment to DAC		3.8			40.5			194.7
Net adjustment to VOBA		8.0			(13.4	)		12.0
Net adjustment to future policy benefits and claims		5.9			23.1			18.9
Net adjustment to policyholder dividend obligation		2.2			14.7			34.7
Related federal income tax benefit		89.4			45.2			185.1
Net unrealized losses		(165.4	)		(84.2	)		(343.8	)
Reclassification adjustment for net realized losses (gains) on securities available-for-sale realized during the period:
Net unrealized losses (gains)		103.5			11.5			(32.3	)
Related federal income tax (benefit) expense		(36.2	)		(4.0	)		11.3
Net reclassification adjustment		67.3			7.5			(21.0	)
Other comprehensive loss on securities available-for-sale		(98.1	)		(76.7	)		(364.8	)
Accumulated net holding (losses) gains on cash flow hedges:
Unrealized holding (losses) gains		(17.2	)		(0.2	)		51.2
Related federal income tax benefit (expense)		6.0			0.1			(17.9	)
Other comprehensive (loss) income on cash flow hedges		(11.2	)		(0.1	)		33.3
Other net unrealized losses		(4.7	)		—			—
Unrecognized amounts on pension plans:
Net unrecognized amounts		1.0			12.3			—
Related federal income tax expense		(0.4	)		(4.3	)		—
Other comprehensive income on unrecognized pension amounts		0.6			8.0			—
Total other comprehensive loss	$	(113.4	)	$	(68.8	)	$	(331.5	)

Adjustments for net realized gains and losses on the ineffective portion of cash flow hedges were immaterial during the years ended December 31, 2007, 2006 and 2005.

(15) Earnings Per Share

Basic earnings per share represent the amount of earnings for the period available to each share of common stock outstanding during the reporting period. Diluted earnings per share represent the amount of earnings for the period available to each share of common stock outstanding during the reporting period adjusted for the potential issuance of common shares for stock options, if dilutive.

F-58

NATIONWIDE FINANCIAL SERVICES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

December 31, 2007, 2006 and 2005

The following table presents information relating to the Company’s calculations of basic and diluted earnings per share (EPS) for the years ended December 31:

	2007									2006									2005
(in millions, except per share amounts)	Amount			Basic EPS			Diluted EPS			Amount			Basic EPS			Diluted EPS			Amount			Basic EPS			Diluted EPS
Income from continuing operations	$	609.7		$	4.28		$	4.25		$	727.1		$	4.85		$	4.82		$	639.0		$	4.18		$	4.16
Discontinued operations, net of taxes		23.1			0.16			0.16			(3.1	)		(0.02	)		(0.02	)		(28.6	)		(0.19	)		(0.19	)
Cumulative effect of adoption of accounting principle, net of taxes		(6.0	)		(0.04	)		(0.04	)		—			—			—			—			—			—
Net income	$	626.8		$	4.40		$	4.37		$	724.0		$	4.83		$	4.80		$	610.4		$	3.99		$	3.97
Weighted average common shares outstanding—basic		142.5									149.9									152.9
Dilutive effect of stock options		1.0									0.8									0.7
Weighted average common shares outstanding—diluted		143.5									150.7									153.6

(16) Employee Benefit Plans

Defined Benefit Plans

The Company, excluding NFN, and certain affiliated companies participate in a qualified defined benefit pension plan sponsored by NMIC. This plan covers all employees of participating companies who have completed at least one year of service. Plan contributions are invested in a group annuity contract issued by NLIC. All participants are eligible for benefits based on an account balance feature. Participants last hired before 2002 are eligible for benefits based on the highest average annual salary of a specified number of consecutive years of the last ten years of service, if such benefits are of greater value than the account balance feature. The Company funds pension costs accrued for direct employees plus an allocation of pension costs accrued for employees of affiliates whose work benefits the Company. A separate non-qualified defined benefit pension plan sponsored by NMIC covers certain executives with at least one year of service. The Company’s portion of expense relating to the plans sponsored by NMIC was $11.4 million, $22.3 million and $17.9 million for the years ended December 31, 2007, 2006 and 2005, respectively.

NFN also has separate qualified and non-qualified defined benefit pension plans (the NFN pension plans). The NFN pension plans generally cover all NFN employees of participating companies who have completed at least one year of service. All participants are eligible for benefits based on an account balance feature. Participants hired before 2002 are eligible for benefits based on the highest average annual salary of a specified number of consecutive years of the last ten years of service, if such benefits are of greater value than the account balance feature. Plan contributions are invested in a group annuity contract issued by NLICA. The Company’s portion of income relating to the NFN pension plans was $2.7 million, $1.7 and $1.4 million for the years ended December 31, 2007, 2006 and 2005, respectively.

See Note 17 for more information on group annuity contracts issued by the Company for various employee benefit plans sponsored by NMIC or its affiliates.

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NATIONWIDE FINANCIAL SERVICES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

December 31, 2007, 2006 and 2005

The following table summarizes information regarding the funded status of the NFN pension plans (all are U.S. plans), as of December 31:

(in millions)	2007			2006
Change in benefit obligation:
Benefit obligation at beginning of year	$	101.3		$	102.9
Service cost		2.9			2.6
Interest cost		4.9			4.8
Actuarial loss		(1.6	)		0.1
Benefits paid		(7.5	)		(9.4	)
Plan amendment1		—			0.3
Benefit obligation at end of year		100.0			101.3
Change in plan assets:
Fair value of plan assets at beginning of year		146.7			135.8
Actual return on plan assets		9.9			17.5
Employer contributions		0.9			2.8
Benefits paid		(7.5	)		(9.4	)
Fair value of plan assets at end of year		150.0			146.7
Funded status	$	50.0		$	45.4
Amounts not yet reflected in net periodic benefit cost and included in AOCI:
Unrecognized prior service cost1	$	(0.3	)	$	(0.3	)
Unrecognized net gain		13.6			12.6
Amount included in AOCI		13.3			12.3
Cumulative employer contributions in excess of net periodic benefit cost		36.7			33.1
Net amount recognized on balance sheet	$	50.0		$	45.4
Accumulated benefit obligation	$	92.9		$	94.1

¹ Represents the increase in the projected benefit obligation related to the application of the Pension Protection Act effective December 31, 2006.

The following table summarizes the weighted average assumptions used to calculate the benefit obligation of the NFN pension plans as of the December 31 measurement date:

	2007		2006
Discount rate	5.25	%	5.25	%
Rate of increase in future compensation levels	4.75	%	4.75	%

The following table summarizes the asset allocation for the NFN qualified pension plan at the end of 2007 and 2006 and the target allocation for 2008, by asset category:

	Percentage of plan assets				Target allocation percentage
Asset Category	2007		2006		2008
Equity securities	64	%	67	%	62 - 68%
Debt securities	36	%	33	%	32 - 38%
Other	—		—		0 - 10%
Total	100	%	100	%

F-60

NATIONWIDE FINANCIAL SERVICES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

December 31, 2007, 2006 and 2005

The NFN pension plans employ a total return investment approach using a mix of equities and fixed income investments to maximize the long-term return of plan assets in exchange for a prudent level of risk. Risk tolerance is established through careful consideration of plan liabilities and funded status. On a quarterly basis, the portfolio of investments within the annuity contract issued by NFN is analyzed in light of current market conditions and rebalanced to match the target allocations.

The NFN pension plans employ a prospective building block approach in determining the expected long-term rate of return on plan assets. This process is integrated with the determination of other economic assumptions such as discount rate and salary scale. Historical markets are studied, and long-term historical relationships between equities and fixed income investments are preserved consistent with the widely accepted capital market principle that assets with higher volatility generate a greater return over the long run (called a risk premium). Historical risk premiums are used to develop expected real rates of return for each asset sub-class. The expected real rates of return, reduced for investment expenses, are applied to the target allocation of each asset sub-class to produce an expected real rate of return for the target portfolio. This expected real rate of return will vary by plan and will change when the plan’s target investment portfolio changes. Current market factors such as inflation and interest rates are incorporated into the process. For a given measurement date, the discount rate is set by reference to the yield on high-quality corporate bonds to approximate the rate at which plan benefits could effectively be settled. For December 31, 2007 and 2006, the reference bond portfolio was the Moody’s Investors Service, Inc. AA long-term corporate bond index. For pension benefits, a downward adjustment to the discount rate of 0.50% to 0.75% was included for plan administration and other expenses. The historical real rate of return is subtracted from these bonds to generate an assumed inflation rate. The expected long-term rate of return on plan assets is the assumed inflation rate plus the expected real rate of return. This process effectively sets the expected return for the plan’s portfolio at the yield for the reference bond portfolio, adjusted for expected risk premiums of the target asset portfolio. Given the prospective nature of this calculation, short-term fluctuations in the market do not impact the expected risk premiums. However, as the yield for the reference bond fluctuates, the assumed inflation rate and the expected long-term rate are adjusted in tandem.

Effective December 31, 2005, the historical risk premiums and expected real rates of return were re-evaluated affecting December 31, 2005 benefit obligations and 2006 costs. For benefits obligations, a lower real rate of return on corporate bonds led to a higher implied inflation rate and a higher rate of future compensation increase, which was 4.25% at December 31, 2005.

In addition, the Company and certain affiliated companies, including NFN, participate in life and health care defined benefit plans sponsored by NMIC for qualifying retirees. Postretirement life and health care benefits are contributory. The level of contribution required by a qualified retiree depends on the retiree’s years of service and date of hire. In general, postretirement benefits are available to full-time employees who are credited with 120 months of retiree life and health service. Postretirement health care benefit contributions are adjusted annually and contain cost-sharing features such as deductibles and coinsurance. In addition, there are caps on the Company’s portion of the per-participant cost of the postretirement health care benefits. The Company’s policy is to fund the cost of health care benefits in amounts determined at the discretion of management. Plan assets are invested primarily in group annuity contracts issued by NLIC. The Company’s portion of expense relating to these plans was immaterial for the years ended December 31, 2007, 2006 and 2005.

Defined Contribution Plans

NMIC sponsors a defined contribution retirement savings plan covering substantially all employees of the Company. Employees may make salary deferral contributions of up to 80%. With the exception of NFN agents, salary deferrals of up to 6% are subject to a 50% Company match. The Company’s expense for contributions to these plans was $8.2 million, $7.4 million and $7.3 million for the years ended December 31, 2007, 2006 and 2005, respectively.

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NATIONWIDE FINANCIAL SERVICES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

December 31, 2007, 2006 and 2005

NFN also provides a funded noncontributory defined contribution plan that covers substantially all of its agents. The Company’s expense for contributions to this plan was $0.7 million, $0.7 million and $0.6 million for the years ended December 31, 2007, 2006 and 2005, respectively.

(17) Related Party Transactions

The Company has entered into significant, recurring transactions and agreements with NMIC, other affiliates and subsidiaries as a part of its ongoing operations. These include annuity and life insurance contracts, office space leases, and agreements related to reinsurance, cost sharing, administrative services, marketing, intercompany loans, intercompany repurchases, cash management services and software licensing. Measures used to allocate expenses among companies include individual employee estimates of time spent, special cost studies, the number of full-time employees, commission expense and other methods agreed to by the participating companies.

In addition, Nationwide Services Company, LLC (NSC), a subsidiary of NMIC, provides computer, telephone, mail, employee benefits administration and other services to NMIC and certain of its direct and indirect subsidiaries, including the Company, based on specified rates for units of service consumed. For the years ended December 31, 2007, 2006 and 2005, the Company made payments to NMIC and NSC totaling $288.5 million, $264.5 million and $314.7 million, respectively.

The Company has issued group annuity and life insurance contracts and performs administrative services for various employee benefit plans sponsored by NMIC or its affiliates. Total account values of these contracts were $3.06 billion and $5.64 billion as of December 31, 2007 and 2006, respectively. Total revenues from these contracts were $132.3 million, $139.3 million and $141.9 million for the years ended December 31, 2007, 2006 and 2005, respectively, and include policy charges, net investment income from investments backing the contracts and administrative fees. Total interest credited to the account balances was $110.1 million, $111.4 million and $108.3 million for the years ended December 31, 2007, 2006 and 2005, respectively. The terms of these contracts are materially consistent with what the Company offers to unaffiliated parties who are similarly situated.

The Company leases office space from NMIC. For the years ended December 31, 2007, 2006 and 2005, the Company made lease payments to NMIC of $24.4 million, $19.3 million and $18.7 million, respectively.

NLIC has a reinsurance agreement with NMIC whereby all of NLIC’s accident and health business not ceded to unaffiliated reinsurers is ceded to NMIC on a modified coinsurance basis. Either party may terminate the agreement on January 1 of any year with prior notice. Under a modified coinsurance agreement, the ceding company retains invested assets, and investment earnings are paid to the reinsurer. Under the terms of NLIC’s agreements, the investment risk associated with changes in interest rates is borne by the reinsurer. The ceding of risk does not discharge the original insurer from its primary obligation to the policyholder. The Company believes that the terms of the modified coinsurance agreements are consistent in all material respects with what the Company could have obtained with unaffiliated parties. Revenues ceded to NMIC for the years ended December 31, 2007, 2006 and 2005 were $317.6 million, $430.8 million and $429.5 million, respectively, while benefits, claims and expenses ceded during these years were $348.1 million, $470.4 million and $398.8 million, respectively.

Under a marketing agreement with NMIC, NLIC makes payments to cover a portion of the agent marketing allowance that is paid to Nationwide agents. These costs cover product development and promotion, sales literature, rent and similar items. Payments under this agreement totaled $20.1 million, $28.3 million and $26.5 million for the years December 31, 2007, 2006 and 2005, respectively.

F-62

NATIONWIDE FINANCIAL SERVICES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

December 31, 2007, 2006 and 2005

The Company also participates in intercompany repurchase agreements with affiliates whereby the seller transfers securities to the buyer at a stated value. Upon demand or after a stated period, the seller repurchases the securities at the original sales price plus interest. As of December 31, 2007 and 2006, the Company had no outstanding borrowings from affiliated entities under such agreements. During 2007, 2006 and 2005, the most the Company had outstanding at any given time was $178.2 million, $191.5 million and $55.3 million, respectively, and the amounts the Company incurred for interest expense on intercompany repurchase agreements during these years were immaterial.

The Company and various affiliates entered into agreements with Nationwide Cash Management Company (NCMC), an affiliate, under which NCMC acts as a common agent in handling the purchase and sale of short-term securities for the respective accounts of the participants. Amounts on deposit with NCMC for the benefit of the Company were $473.0 million and $869.6 million as of December 31, 2007 and 2006, respectively, and are included in short-term investments on the consolidated balance sheets.

The Company and an affiliate are currently developing a browser-based policy administration and online brokerage software application for defined benefit plans. In connection with the development of this application, the Company made net payments, which were expensed, to that affiliate related to development totaling $13.0 million, $9.5 million and $4.1 million for the years ended December 31, 2007, 2006 and 2005, respectively.

Through September 30, 2002, the Company filed a consolidated federal income tax return with NMIC, as described in Note 13. Effective October 1, 2002, NFS began filing a consolidated federal tax return with its non-life insurance company subsidiaries. There were no payments (from) to NMIC for the year ended December 31, 2007 compared to $(16.3) million and $45.0 million for the years ended December 31, 2006 and 2005, respectively. These payments related to tax years prior to deconsolidation.

(18) Contingencies

Legal Matters

The Company is a party to litigation and arbitration proceedings in the ordinary course of its business. It is often not possible to determine the ultimate outcome of the pending investigations and legal proceedings or to provide reasonable ranges of potential losses with any degree of certainty. Some matters, including certain of those referred to below, are in very preliminary stages, and the Company does not have sufficient information to make an assessment of the plaintiffs’ claims for liability or damages. In some of the cases seeking to be certified as class actions, the court has not yet decided whether a class will be certified or (in the event of certification) the size of the class and class period. In many of the cases, the plaintiffs are seeking undefined amounts of damages or other relief, including punitive damages and equitable remedies, which are difficult to quantify and cannot be defined based on the information currently available. The Company does not believe, based on information currently known by management, that the outcomes of such pending investigations and legal proceedings are likely to have a material adverse effect on the Company’s consolidated financial position. However, given the large and/or indeterminate amounts sought in certain of these matters and inherent unpredictability of litigation, it is possible that an adverse outcome in certain matters could have a material adverse effect on the Company’s consolidated financial results in a particular quarterly or annual period.

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

F-63

NATIONWIDE FINANCIAL SERVICES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

December 31, 2007, 2006 and 2005

The financial services industry, including mutual fund, variable annuity, retirement plan, life insurance and distribution companies, has also been the subject of increasing scrutiny by regulators, legislators and the media over the past few years. Numerous regulatory agencies, including the SEC, the Financial Industry Regulatory Authority and the New York State Attorney General, have commenced industry-wide investigations regarding late trading and market timing in connection with mutual funds and variable insurance contracts, and have commenced enforcement actions against some mutual fund and life insurance companies on those issues. The Company has been contacted by or received subpoenas from the SEC and the New York State Attorney General, who are investigating market timing in certain mutual funds offered in insurance products sponsored by the Company. The Company has cooperated with these investigations. Information requests from the New York State Attorney General and the SEC with respect to investigations into late trading and market timing were last responded to by the Company and its affiliates in December 2003 and June 2005, respectively, and no further information requests have been received with respect to these matters.

In addition, state and federal regulators and other governmental bodies have commenced investigations, proceedings or inquiries relating to compensation and bidding arrangements and possible anti-competitive activities between insurance producers and brokers and issuers of insurance products, and unsuitable sales and replacements by producers on behalf of the issuer. Also under investigation are compensation and revenue sharing arrangements between the issuers of variable insurance contracts and mutual funds or their affiliates, fee arrangements in retirement plans, the use of side agreements and finite reinsurance agreements, funding agreements issued to back medium-term note (MTN) programs, recordkeeping and retention compliance by broker/dealers, and supervision of former registered representatives. Related investigations, proceedings or inquiries may be commenced in the future. The Company and/or its affiliates have been contacted by or received subpoenas from state and federal regulatory agencies and other governmental bodies, state securities law regulators and state attorneys general for information relating to certain of these investigations, including those relating to compensation, revenue sharing and bidding arrangements, anti-competitive activities, unsuitable sales or replacement practices, fee arrangements in retirement plans, the use of side agreements and finite reinsurance agreements, and funding agreements backing the NLIC MTN program. The Company is cooperating with regulators in connection with these inquiries and will cooperate with NMIC in responding to these inquiries to the extent that any inquiries encompass NMIC’s operations.

These proceedings are expected to continue in the future and could result in legal precedents and new industry-wide legislation, rules and regulations that could significantly affect the financial services industry, including mutual fund, retirement plan, life insurance and annuity companies. These proceedings also could affect the outcome of one or more of the Company’s litigation matters. There can be no assurance that any litigation or regulatory actions will not have a material adverse effect on the Company in the future.

On November 20, 2007, NLIC and NRS were named in a lawsuit filed in the Circuit Court of Jefferson County, Alabama entitled Ruth A. Gwin and Sandra H. Turner, and a class of similarly situated individuals v NLIC, NRS, Alabama State Employees Association, PEBCO, Inc. and Fictitious Defendants A to Z. The plaintiffs purport to represent a class of all participants in the Alabama State Employees Association (ASEA) plan, excluding members of the Board of Control during the Class Period and excluding ASEA’s directors, officers and board members during the class period. The class period is the date from which NLIC and/or NRS first made a payment to ASEA or PEBCO arising out of the funding agreement dated March 24, 2004 to the date class notice is provided. The plaintiffs allege that the defendants breached their fiduciary duties, converted plan participants’ properties, and breached their contract when payments were made and the plan was administered under the funding agreement. The complaint seeks a declaratory judgment, an injunction, disgorgement of amounts paid, compensatory and punitive damages, interest, attorneys’ fees and costs, and such other equitable and legal relief to which the plaintiffs and class members may be entitled. On January 9, 2008, NLIC and NRS

F-64

NATIONWIDE FINANCIAL SERVICES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

December 31, 2007, 2006 and 2005

filed a Notice of Removal to the United States District Court Northern District of Alabama, Southern Division. On January 16, 2008, NLIC and NRS filed a motion to dismiss. On January 24, 2008, the plaintiffs filed a motion to remand. The motions have been fully briefed. NLIC and NRS intend to defend this case vigorously.

On July 11, 2007, NLIC was named in a lawsuit filed in the United States District Court for the Western District of Washington at Tacoma entitled Jerre Daniels-Hall and David Hamblen, Individually and on behalf of All Others Similarly Situated v. National Education Association, NEA Member Benefits Corporation, Nationwide Life Insurance Company, Security Benefit Life Insurance Company, Security Benefit Group, Inc., Security Distributors, Inc., et. al. The plaintiffs seek to represent a class of all current or former National Education Association (NEA) members who participated in the NEA Valuebuilder 403(b) program at any time between January 1, 1991 and the present (and their heirs and/or beneficiaries). The plaintiffs allege that the defendants violated the Employee Retirement Income Security Act of 1974, as amended (ERISA) by failing to prudently and loyally manage plan assets, by failing to provide complete and accurate information, by engaging in prohibited transactions, and by breaching their fiduciary duties when they failed to prevent other fiduciaries from breaching their fiduciary duties. The complaint seeks to have the defendants restore all losses to the plan, restoration of plan assets and profits to participants, disgorgement of endorsement fees, disgorgement of service fee payments, disgorgement of excessive fees charged to plan participants, other unspecified relief for restitution, declaratory and injunctive relief, and attorneys’ fees. On October 12, 2007, NLIC filed a motion to dismiss. The motion has been fully briefed. NLIC intends to defend this lawsuit vigorously.

On November 15, 2006, NFS, NLIC and NRS were named in a lawsuit filed in the United States District Court for the Southern District of Ohio entitled Kevin Beary, Sheriff of Orange County, Florida, In His Official Capacity, Individually and On Behalf of All Others Similarly Situated v. Nationwide Life Insurance Co., Nationwide Retirement Solutions, Inc. and Nationwide Financial Services, Inc. The plaintiff seeks to represent a class of all sponsors of 457(b) deferred compensation plans in the United States that had variable annuity contracts with the defendants at any time during the class period, or in the alternative, all sponsors of 457(b) deferred compensation plans in Florida that had variable annuity contracts with the defendants during the class period. The class period is from January 1, 1996 until the class notice is provided. The plaintiff alleges that the defendants breached their fiduciary duties by arranging for and retaining service payments from certain mutual funds. The complaint seeks an accounting, a declaratory judgment, a permanent injunction and disgorgement or restitution of the service fee payments allegedly received by the defendants, including interest. On January 25, 2007, NFS, NLIC and NRS filed a motion to dismiss. On September 17, 2007, the Court granted the motion to dismiss. On October 1, 2007, the plaintiff filed a motion to vacate judgment and for leave to file an amended complaint. On October 25, 2007, NFS, NLIC and NRS filed their opposition to the plaintiff’s motion. NFS, NLIC and NRS continue to defend this lawsuit vigorously.

On February 11, 2005, NLIC was named in a class action lawsuit filed in Common Pleas Court, Franklin County, Ohio entitled Michael Carr v. Nationwide Life Insurance Company. The plaintiff claims that the total of modal payments that policyholders paid per year exceeded the guaranteed maximum premium provided for in the policy. The complaint seeks recovery for breach of contract, fraud by omission, violation of the Ohio Deceptive Trade Practices Act and unjust enrichment. The complaint also seeks unspecified compensatory damages, disgorgement of all amounts in excess of the guaranteed maximum premium and attorneys’ fees. On February 2, 2006, the court granted the plaintiff’s motion for class certification on the breach of contract and unjust enrichment claims. The court certified a class consisting of all residents of the United States and the Virgin Islands who, during the class period, paid premiums on a modal basis to NLIC for term life insurance policies issued by NLIC during the class period that provide for guaranteed maximum premiums, excluding certain specified products. Excluded from the class are NLIC; any parent, subsidiary or affiliate of NLIC; all employees, officers and directors of NLIC; and any justice, judge or magistrate judge of the State of Ohio who may hear the

F-65

NATIONWIDE FINANCIAL SERVICES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

December 31, 2007, 2006 and 2005

case. The class period is from February 10, 1990 through February 2, 2006, the date the class was certified. On January 26, 2007, the plaintiff filed a motion for summary judgment. On April 30, 2007, NLIC filed a motion for summary judgment. On February 4, 2008, the Court entered its ruling on the parties’ pending motions for summary judgment. The Court granted NLIC’s motion for summary judgment for some of the plaintiffs’ causes of action, including breach of contract claims on all decreasing term policies, plaintiff Carr’s individual claims for fraud by omission, violation of the Ohio Deceptive Trade Practices Act and all unjust enrichment claims. However, several claims against NLIC remain, including plaintiff Carr’s individual claim for breach of contract and the plaintiff Class’ claims for breach of contract for the term life policies in 43 of 51 jurisdictions. The Court has requested additional briefing on NLIC’s affirmative defense that the doctrine of voluntary payment acts as a defense to the breach of contract claims. NLIC continues to defend this lawsuit vigorously.

On April 13, 2004, NLIC was named in a class action lawsuit filed in Circuit Court, Third Judicial Circuit, Madison County, Illinois, entitled Woodbury v. Nationwide Life Insurance Company. NLIC removed this case to the United States District Court for the Southern District of Illinois on June 1, 2004. On December 27, 2004, the case was transferred to the United States District Court for the District of Maryland and included in the multi-district proceeding entitled In Re Mutual Funds Investment Litigation. In response, on May 13, 2005, the plaintiff filed the first amended complaint purporting to represent, with certain exceptions, a class of all persons who held (through their ownership of an NLIC annuity or insurance product) units of any NLIC sub-account invested in mutual funds that included foreign securities in their portfolios and that experienced market timing or stale price trading activity. The first amended complaint purports to disclaim, with respect to market timing or stale price trading in NLIC’s annuities sub-accounts, any allegation based on NLIC’s untrue statement, failure to disclose any material fact, or usage of any manipulative or deceptive device or contrivance in connection with any class member’s purchases or sales of NLIC annuities or units in annuities sub-accounts. The plaintiff claims, in the alternative, that if NLIC is found with respect to market timing or stale price trading in its annuities sub-accounts, to have made any untrue statement, to have failed to disclose any material fact or to have used or employed any manipulative or deceptive device or contrivance, then the plaintiff purports to represent a class, with certain exceptions, of all persons who, prior to NLIC’s untrue statement, omission of material fact, use or employment of any manipulative or deceptive device or contrivance, held (through their ownership of an NLIC annuity or insurance product) units of any NLIC sub-account invested in mutual funds that included foreign securities in their portfolios and that experienced market timing activity. The first amended complaint alleges common law negligence and seeks to recover damages not to exceed $75,000 per plaintiff or class member, including all compensatory damages and costs. On June 1, 2006, the District Court granted NLIC’s motion to dismiss the plaintiff’s complaint. The plaintiff appealed the District Court’s decision, and the issues have been fully briefed. NLIC continues to defend this lawsuit vigorously.

On August 15, 2001, NFS and NLIC were named in a lawsuit filed in the United States District Court for the District of Connecticut entitled Lou Haddock, as trustee of the Flyte Tool & Die, Incorporated Deferred Compensation Plan, et al v. Nationwide Financial Services, Inc. and Nationwide Life Insurance Company. Currently, the plaintiffs’ fifth amended complaint, filed March 21, 2006, purports to represent a class of qualified retirement plans under ERISA that purchased variable annuities from NLIC. The plaintiffs allege that they invested ERISA plan assets in their variable annuity contracts and that NLIC and NFS breached ERISA fiduciary duties by allegedly accepting service payments from certain mutual funds. The complaint seeks disgorgement of some or all of the payments allegedly received by NFS and NLIC, other unspecified relief for restitution, declaratory and injunctive relief, and attorneys’ fees. To date, the District Court has rejected the plaintiffs’ request for certification of the alleged class. On September 25, 2007, NFS’ and NLIC’s motion to dismiss the plaintiffs’ fifth amended complaint was denied. On October 12, 2007, NFS and NLIC filed their answer to the plaintiffs’ fifth amended complaint and amended counterclaims. On November 1, 2007, the plaintiffs filed a motion to dismiss NFS’ and NLIC’s amended counterclaims. On November 15, 2007, the plaintiffs filed a motion for class certification. On February 8, 2008, the Court denied the plaintiffs’ motion to dismiss the amended counterclaim, with the exception that it was tentatively granting the plaintiffs’ motion to dismiss with respect

F-66

NATIONWIDE FINANCIAL SERVICES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

December 31, 2007, 2006 and 2005

to NFS’ and NLIC’s claim that it could recover any “disgorgement remedy” from plan sponsors. NFS and NLIC continue to defend this lawsuit vigorously.

On October 9, 2003, NLICA was named as one of twenty-six defendants in a lawsuit filed in the United States District Court for the Middle District of Pennsylvania entitled Steven L. Flood, Luzerne County Controller and the Luzerne County Retirement Board on behalf of the Luzerne County Employee Retirement System v. Thomas A. Makowski, Esq., et al. NLICA is a defendant as the successor in interest to Provident Mutual Life Insurance Company, which is alleged to have entered into four agreements to manage assets and investments of the Luzerne County Employee Retirement System (the Plan). In their complaint, the plaintiffs alleged that NLICA aided and abetted certain other defendants in breaching their fiduciary duties to the Plan. The plaintiffs also alleged that NLICA violated the Federal Racketeer Influenced and Corrupt Organizations Act by engaging in and conspiring to engage in an improper scheme to mismanage funds in order to collect excessive fees and commissions and that NLICA was unjustly enriched by the allegedly excessive fees and commissions. The complaint seeks treble compensatory damages, punitive damages, a full accounting, imposition of a constructive trust on all funds paid by the Plan to all defendants, pre- and post-judgment interest, and costs and disbursements, including attorneys’ fees. On November 27, 2007, the court granted NLICA’s motion for summary judgment and dismissed all of the federal claims with prejudice. The court declined to exercise jurisdiction over the state claims and dismissed those without prejudice. The plaintiffs have elected not to appeal the court’s decision.

Tax Matters

Management has established tax reserves in accordance with the requirements of FIN 48. See Note 3 for a summary of the provisions of FIN 48. These reserves are reviewed regularly and are adjusted as events occur that management believes impact its liability for additional taxes, such as lapsing of applicable statutes of limitations; conclusion of tax audits or substantial agreement 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. Management believes its tax reserves reasonably provide for potential assessments that may result from IRS examinations and other tax-related matters for all open tax years.

The separate account DRD is a significant component of the Company’s federal income tax provision. On August 16, 2007, the IRS issued Revenue Ruling 2007-54. This ruling took a position with respect to the DRD that could have significantly reduced the Company’s DRD. The Company believes that the position taken by the IRS in the ruling was contrary to existing law and the relevant legislative history.

In Revenue Ruling 2007-61, released September 25, 2007, the IRS and the U.S. Department of the Treasury suspended Revenue Ruling 2007-54 and informed taxpayers of their intention to address certain issues in connection with the DRD in future tax regulations. Final tax regulations could impact the Company’s DRD in periods subsequent to their effective date.

(19) Guarantees

Since 2001, the Company has sold $677.2 million of credit enhanced equity interests in Low-Income-Housing Tax Credit Funds (Tax Credit Funds) to unrelated third parties. The Company has guaranteed cumulative after-tax yields to the third party investors ranging from 3.75% to 5.25% over periods ending between 2002 and 2022. As of December 31, 2007, the Company held guarantee reserves totaling $6.0 million on these transactions. 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, then the Company must fund any shortfall, which

F-67

NATIONWIDE FINANCIAL SERVICES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

December 31, 2007, 2006 and 2005

is mitigated by stabilization collateral set aside by the Company at the inception of the transactions. The maximum amount of undiscounted future payments that the Company could be required to pay the investors under the terms of the guarantees is $1.28 billion. The Company does not anticipate making any material payments related to these guarantees.

As of December 31, 2007, the Company held stabilization reserves of $1.6 million as collateral for certain properties owned by the Tax Credit Funds that had not met all of the criteria necessary to generate tax credits. Such criteria include completion of construction and the leasing of each unit to a qualified tenant, among others. Properties meeting the necessary criteria are considered to have “stabilized.” The properties are evaluated regularly, and the collateral is released when stabilized.

To the extent there are cash deficits in any specific property owned by the Tax Credit Funds, property reserves, property operating guarantees and reserves held by the Tax Credit Funds are exhausted before the Company is required to perform under its guarantees. To the extent the Company is ever required to perform under its guarantees, it may recover any such funding out of the cash flow distributed from the sale of the underlying properties of the Tax Credit Funds. This cash flow distribution would be paid to the Company prior to any cash flow distributions to unrelated third party investors.

(20) Variable Interest Entities

As of December 31, 2007 and 2006, the Company had relationships with 19 and 18 variable interest entities (VIEs), respectively, each of which the Company was the primary beneficiary. Each VIE is a conduit that assists the Company in structured products transactions involving the sale of Tax Credit Funds to third party investors for which the Company provides guaranteed returns (see Note 19). The results of operations and financial position of these VIEs are included along with corresponding minority interest liabilities in the accompanying consolidated financial statements.

VIE net assets were $465.7 million and $445.5 million as of December 31, 2007 and 2006, respectively. The following table summarizes the components of net assets as of December 31:

(in millions)	2007			2006
Other long-term investments	$	434.1		$	432.5
Short-term investments		31.9			33.7
Other assets		38.1			37.8
Other liabilities		(38.4	)		(58.5	)

The Company’s total loss exposure from VIEs of which the Company is the primary beneficiary was immaterial as of December 31, 2007 and 2006 (except for the impact of guarantees disclosed in Note 19).

In addition to the VIEs described above, the Company holds variable interests, in the form of limited partnerships or similar investments, in Tax Credit Funds of which the Company is not the primary beneficiary. These investments have been held by the Company for periods of 1 to 10 years and allow the Company to utilize certain tax credits and realize other tax benefits from affordable housing projects. The Company also has certain investments in other securitization transactions that qualify as VIEs, but of which the Company is not the primary beneficiary. The total exposure to loss on these VIEs was $254.1 million and $175.0 million as of December 31, 2007 and 2006, respectively.

F-68

NATIONWIDE FINANCIAL SERVICES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

December 31, 2007, 2006 and 2005

(21) Segment Information

Management views the Company’s business primarily based on its underlying products and uses this basis to define its four reportable segments: Individual Investments, Retirement Plans, Individual Protection, and Corporate and Other.

The primary segment profitability measure that management uses is pre-tax operating earnings, which is calculated by adjusting income from continuing operations before federal income taxes and discontinued operations to exclude: (1) net realized investment gains and losses, except for operating items (periodic net amounts paid or received on interest rate swaps that do not qualify for hedge accounting treatment, trading portfolio realized gains and losses, trading portfolio valuation changes, and net realized gains and losses related to securitizations); and (2) the adjustment to amortization of DAC and VOBA related to net realized investment gains and losses.

Individual Investments

The Individual Investments segment consists of individual The BEST of AMERICA^® and private label deferred variable annuity products, individual annuity products, deferred fixed annuity products, income products and investment advisory services. Individual deferred annuity contracts provide the customer with tax-deferred accumulation of savings and flexible payout options including lump sum, systematic withdrawal or a stream of payments for life. In addition, individual variable annuity contracts provide the customer with access to a wide range of investment options and asset protection features, while individual fixed annuity contracts generate a return for the customer at a specified interest rate fixed for prescribed periods.

Retirement Plans

The Retirement Plans segment is comprised of the Company’s private and public sector retirement plans business. The private sector primarily includes IRC Section 401 fixed and variable group annuity business generated through NLIC and trust and custodial services through Nationwide Trust Company, FSB, a division of Nationwide Bank. Also included in the private sector is Registered Investment Advisors Services, Inc. d/b/a RIA Services Inc., which facilitates professional money management of participant assets by registered investment advisors. The public sector primarily includes IRC Section 457 and Section 401(a) business in the form of full-service arrangements that provide plan administration and fixed and variable group annuities as well as administration-only business.

Individual Protection

The Individual Protection segment consists of investment life insurance products, including individual variable, COLI and BOLI products; traditional life insurance products; and universal life insurance products. Life insurance products provide a death benefit and generally allow the customer to build cash value on a tax-advantaged basis.

Corporate and Other

The Corporate and Other segment includes the MTN program; the retail operations of Nationwide Bank; structured products business; revenues and expenses of the Company’s retail asset management business and non-insurance subsidiaries not reported in other segments; and other revenues and expenses not allocated to other segments.

F-69

NATIONWIDE FINANCIAL SERVICES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

December 31, 2007, 2006 and 2005

The following tables summarize the Company’s business segment operating results for the years ended December 31:

(in millions)	Individual Investments		Retirement Plans		Individual Protection		Corporate and Other			Total
2007
Revenues:
Policy charges	$	662.6	$	147.3	$	574.0	$	—		$	1,383.9
Premiums		133.3		—		299.4		—			432.7
Net investment income		642.9		655.2		472.3		506.3			2,276.7
Non-operating net realized investment losses1		—		—		—		(152.8	)		(152.8	)
Other income		31.0		343.7		4.0		209.7			588.4
Total revenues		1,469.8		1,146.2		1,349.7		563.2			4,528.9
Benefits and expenses:
Interest credited to policyholder accounts		444.3		443.3		192.0		262.4			1,342.0
Benefits and claims		233.5		—		449.4		—			682.9
Policyholder dividends		—		—		83.1		—			83.1
Amortization of DAC		287.1		27.4		93.1		(25.5	)		382.1
Amortization of VOBA		5.3		2.2		39.3		0.2			47.0
Interest expense		—		—		—		110.6			110.6
Debt extinguishment costs		—		—		—		10.2			10.2
Other operating expenses		198.9		420.7		193.0		258.0			1,070.6
Total benefits and expenses		1,169.1		893.6		1,049.9		615.9			3,728.5
Income (loss) from continuing operations before federal income tax expense		300.7		252.6		299.8		(52.7	)	$	800.4
Less: non-operating net realized investment losses1		—		—		—		152.8
Less: adjustment to amortization related to net realized investment gains and losses		—		—		—		(25.5	)
Pre-tax operating earnings	$	300.7	$	252.6	$	299.8	$	74.6
Assets as of year end	$	56,555.8	$	27,956.6	$	22,920.6	$	11,774.1		$	119,207.1

¹ Excluding operating items (periodic net amounts paid or received on interest rate swaps that do not qualify for hedge accounting treatment, trading portfolio realized gains and losses, trading portfolio valuation changes, and net realized gains and losses related to securitizations).

F-70

NATIONWIDE FINANCIAL SERVICES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

December 31, 2007, 2006 and 2005

(in millions)	Individual Investments		Retirement Plans		Individual Protection		Corporate and Other			Total
2006
Revenues:
Policy charges	$	588.4	$	174.5	$	553.1	$	—		$	1,316.0
Premiums		142.5		—		299.0		—			441.5
Net investment income		781.1		652.2		468.1		398.8			2,300.2
Non-operating net realized investment losses1		—		—		—		(0.6	)		(0.6	)
Other income		14.6		288.9		0.8		201.1			505.4
Total revenues		1,526.6		1,115.6		1,321.0		599.3			4,562.5
Benefits and expenses:
Interest credited to policyholder accounts		528.3		451.6		191.7		209.9			1,381.5
Benefits and claims		202.4		—		444.4		—			646.8
Policyholder dividends		—		—		90.7		—			90.7
Amortization of DAC		352.7		38.3		81.6		(9.7	)		462.9
Amortization of VOBA		6.5		6.9		32.6		—			46.0
Interest expense		—		—		—		103.1			103.1
Other operating expenses		213.6		397.6		199.2		221.8			1,032.2
Total benefits and expenses		1,303.5		894.4		1,040.2		525.1			3,763.2
Income from continuing operations before federal income tax expense		223.1		221.2		280.8		74.2		$	799.3
Less: non-operating net realized investment losses1		—		—		—		0.6
Less: adjustment to amortization related to net realized investment gains and losses		—		—		—		(9.7	)
Pre-tax operating earnings	$	223.1	$	221.2	$	280.8	$	65.1
Assets as of year end	$	56,516.6	$	30,317.9	$	22,194.6	$	10,502.0		$	119,531.1

¹ Excluding operating items (periodic net amounts paid or received on interest rate swaps that do not qualify for hedge accounting treatment, trading portfolio realized gains and losses, trading portfolio valuation changes, and net realized gains and losses related to securitizations).

F-71

NATIONWIDE FINANCIAL SERVICES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

December 31, 2007, 2006 and 2005

(in millions)	Individual Investments		Retirement Plans		Individual Protection		Corporate and Other			Total
2005
Revenues:
Policy charges	$	540.2	$	154.7	$	546.6	$	—		$	1,241.5
Premiums		102.9		—		297.0		—			399.9
Net investment income		869.9		661.4		475.1		337.7			2,344.1
Non-operating net realized investment gains1		—		—		—		18.2			18.2
Other income		15.2		229.1		2.4		165.8			412.5
Total revenues		1,528.2		1,045.2		1,321.1		521.7			4,416.2
Benefits and expenses:
Interest credited to policyholder accounts		589.1		455.0		190.7		146.1			1,380.9
Benefits and claims		155.4		—		419.5		—			574.9
Policyholder dividends		—		—		107.3		—			107.3
Amortization of DAC		329.3		47.4		102.7		0.8			480.2
Amortization of VOBA		7.2		3.5		34.3		—			45.0
Interest expense		—		—		—		107.6			107.6
Debt extinguishment costs		—		—		—		21.7			21.7
Other operating expenses		196.5		348.0		200.5		173.2			918.2
Total benefits and expenses		1,277.5		853.9		1,055.0		449.4			3,635.8
Income from continuing operations before federal income tax expense		250.7		191.3		266.1		72.3		$	780.4
Less: non-operating net realized investment gains1		—		—		—		(18.2	)
Less: adjustment to amortization related to net realized investment gains and losses		—		—		—		0.8
Pre-tax operating earnings	$	250.7	$	191.3	$	266.1	$	54.9
Assets as of year end	$	53,809.7	$	31,678.1	$	19,755.6	$	11,117.8		$	116,361.2

¹ Excluding operating items (periodic net amounts paid or received on interest rate swaps that do not qualify for hedge accounting treatment, trading portfolio realized gains and losses, trading portfolio valuation changes, and net realized gains and losses related to securitizations).

F-72

NATIONWIDE FINANCIAL SERVICES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

December 31, 2007, 2006 and 2005

(22) Quarterly Results of Operations (Unaudited)

The following tables summarize the unaudited quarterly results of operations for the years ended December 31:

(in millions, except per share amounts)	First Quarter			Second Quarter			Third Quarter			Fourth Quarter
2007
Revenues:
Policy charges	$	335.9		$	343.1		$	345.5		$	359.4
Premiums		110.4			104.9			101.7			115.7
Net investment income		589.8			577.8			547.3			561.8
Net realized investment losses		(11.4	)		(2.6	)		(20.4	)		(130.8	)
Other income		135.3			145.2			157.7			162.6
Total revenues		1,160.0			1,168.4			1,131.8			1,068.7
Benefits and expenses:
Interest credited to policyholder accounts		342.1			337.0			333.3			329.6
Benefits and claims		153.6			186.1			161.4			181.8
Policyholder dividends		21.3			20.0			23.1			18.7
Amortization of DAC		133.2			18.3			112.1			118.5
Amortization of VOBA		10.3			15.4			11.9			9.4
Interest expense		24.5			27.5			28.9			29.7
Debt extinguishment costs		—			10.2			—			—
Other operating expenses		260.3			273.9			270.2			266.2
Total benefits and expenses		945.3			888.4			940.9			953.9
Income from continuing operations before federal income tax expense		214.7			280.0			190.9			114.8
Federal income tax expense		45.9			80.8			44.7			19.3
Income from continuing operations		168.8			199.2			146.2			95.5
Discontinued operations, net of taxes		45.5			(1.9	)		0.8			(21.3	)
Cumulative effect of adoption of accounting principle, net of taxes		(6.0	)		—			—			—
Net income	$	208.3		$	197.3		$	147.0		$	74.2
Earnings from continuing operations per common share:
Basic	$	1.16		$	1.39		$	1.03		$	0.69
Diluted	$	1.15		$	1.38		$	1.02		$	0.68
Earnings per common share:
Basic	$	1.43		$	1.38		$	1.04		$	0.53
Diluted	$	1.42		$	1.37		$	1.03		$	0.53

F-73

(in millions, except per share amounts)	First Quarter			Second Quarter			Third Quarter			Fourth Quarter
2006
Revenues:
Policy charges	$	321.0		$	337.6		$	327.6		$	329.8
Premiums		107.8			109.7			110.5			113.5
Net investment income		577.4			572.2			578.2			572.4
Net realized investment (losses) gains		(6.8	)		(9.9	)		9.6			16.2
Other income		115.4			120.1			125.4			134.8
Total revenues		1,114.8			1,129.7			1,151.3			1,166.7
Benefits and expenses:
Interest credited to policyholder accounts		342.1			345.7			348.2			345.5
Benefits and claims		156.1			156.4			163.8			170.5
Policyholder dividends		20.2			24.5			24.6			21.4
Amortization of DAC		120.6			126.0			108.2			108.1
Amortization of VOBA		11.6			12.5			14.5			7.4
Interest expense		25.6			24.9			25.8			26.8
Other operating expenses		256.8			247.4			247.0			281.0
Total benefits and expenses		933.0			937.4			932.1			960.7
Income from continuing operations before federal income tax expense		181.8			192.3			219.2			206.0
Federal income tax expense (benefit)		40.3			(70.5	)		55.6			46.8
Income from continuing operations		141.5			262.8			163.6			159.2
Discontinued operations, net of taxes		(0.5	)		(0.1	)		(1.7	)		(0.8	)
Net income	$	141.0		$	262.7		$	161.9		$	158.4
Earnings from continuing operations per common share:
Basic	$	0.93		$	1.76		$	1.09		$	1.07
Diluted	$	0.92		$	1.75		$	1.09		$	1.06
Earnings per common share:
Basic	$	0.93		$	1.76		$	1.08		$	1.07
Diluted	$	0.92		$	1.75		$	1.08		$	1.06

F-74

NATIONWIDE FINANCIAL SERVICES, INC. AND SUBSIDIARIES

Schedule I Consolidated Summary of Investments—Other Than Investments in Related Parties

As of December 31, 2007 (in millions)

Column A	Column B		Column C		Column D
Type of investment	Cost		Market value		Amount at which shown in the consolidated balance sheet
Fixed maturity securities available-for-sale:
Bonds:
U.S. Treasury securities and obligations of U.S. Government corporations	$	172.8	$	189.3	$	189.3
Agencies not backed by the full faith and credit of the U.S. Government		418.1		479.6		479.6
Obligations of states and political subdivisions		273.3		272.2		272.2
Foreign governments		56.2		58.4		58.4
Public utilities		1,549.1		1,567.2		1,567.2
All other corporate		24,794.4		24,622.5		24,622.5
Total fixed maturity securities available-for-sale		27,263.9		27,189.2		27,189.2
Equity securities available-for-sale:
Common stocks:
Banks, trusts and insurance companies		26.8		31.5		31.5
Industrial, miscellaneous and all other		23.9		24.3		24.3
Nonredeemable preferred stocks		66.8		68.4		68.4
Total equity securities available-for-sale		117.5		124.2		124.2
Trading assets		41.7		37.7		37.7
Mortgage loans on real estate, net		8,314.7				8,316.1	1
Real estate, net:
Investment properties		15.4				11.9	2
Acquired in satisfaction of debt		11.0				9.9	2
Total real estate, net		26.4				21.8
Policy loans		1,018.3				1,018.3
Other long-term investments		1,187.2				1,187.2
Short-term investments, including amounts managed by a related party		1,180.6				1,173.6	3
Total investments	$	39,150.3			$	39,068.1

¹ Difference from Column B primarily is attributable to valuation allowances due to impairments on mortgage loans on real estate (see Note 6 to the audited consolidated financial statements), hedges and commitment hedges on mortgage loans on real estate.

² Difference from Column B primarily results from adjustments for accumulated depreciation.

³ Difference from Column B primarily is due to unrealized gains and/or losses from securities lending.

See accompanying report of independent registered public accounting firm.

F-75

NATIONWIDE FINANCIAL SERVICES, INC. AND SUBSIDIARIES

Schedule II Condensed Financial Information of Registrant (in millions)

Condensed Balance Sheets				December 31,
				2007			2006
Assets
Investments in subsidiaries				$	5,818.5		$	6,076.7
Securities available-for-sale, at fair value:
Fixed maturity securities (cost $103.3)					103.5			—
Equity securities (cost $15.1)					15.5			—
Short-term investments, including amounts managed by a related party					29.7			161.4
Trading assets					37.7			24.3
Investment in surplus notes from a subsidiary					700.0			700.0
Goodwill					48.4			97.4
Other assets					151.5			29.3
Total assets				$	6,904.8		$	7,089.1
Liabilities and Shareholders’ Equity
Long-term debt				$	1,499.8		$	1,398.5
Other liabilities					80.4			67.9
Total liabilities					1,580.2			1,466.4
Shareholders’ equity					5,324.6			5,622.7
Total liabilities and shareholders’ equity				$	6,904.8		$	7,089.1
Condensed Statements of Income	Years ended December 31,
	2007			2006			2005
Revenues:
Dividends received from subsidiaries	$	789.9		$	508.1		$	255.0
Net investment income		69.4			61.9			58.5
Net realized investment (losses) gains		(2.1	)		3.6			1.5
Other income		0.6			0.1			2.1
Total revenues		857.8			573.7			317.1
Expenses:
Interest expense		94.2			91.3			95.1
Debt extinguishment costs		10.2			—			21.7
Other operating expenses		18.4			19.2			2.5
Total expenses		122.8			110.5			119.3
Income before federal income tax benefit		735.0			463.2			197.8
Federal income tax benefit		(6.2	)		(10.2	)		(14.2	)
Income from continuing operations before equity in undistributed net (loss) income of subsidiaries		741.2			473.4			212.0
Equity in undistributed net (loss) income of subsidiaries		(87.0	)		250.3			395.3
Income from continuing operations		654.2			723.7			607.3
Discontinued operations, net of taxes		(27.4	)		0.3			3.1
Net income	$	626.8		$	724.0		$	610.4

See accompanying notes to condensed financial statements and report of independent registered public accounting firm.

F-76

NATIONWIDE FINANCIAL SERVICES, INC. AND SUBSIDIARIES

Schedule II Condensed Financial Information of Registrant, Continued

	Years ended December 31,
Condensed Statements of Cash Flows (in millions)	2007			2006			2005
Cash flows from operating activities:
Net income	$	626.8		$	724.0		$	610.4
Adjustments to reconcile net income to net cash provided by operating activities:
Net realized investment losses (gains)		2.1			(3.6	)		(1.5	)
Equity in undistributed net loss (income) of subsidiaries		87.0			(250.3	)		(395.3	)
Other, net		(66.4	)		20.1			(27.0	)
Net cash provided by operating activities		649.5			490.2			186.6
Cash flows from investing activities:
Proceeds from maturity of securities available-for-sale		30.6			—			—
Cost of securities available-for-sale acquired		(148.9	)		—			—
Net decrease (increase) in short-term investments		131.7			4.7			(87.3	)
Capital contributed to subsidiaries		—			(50.0	)		—
Subsidiary mergers and acquisitions		(319.2	)		—			(14.1	)
Subsidiary sale		115.4			—			59.2
Other, net		(0.8	)		8.7			(17.1	)
Net cash used in investing activities		(191.2	)		(36.6	)		(59.3	)
Cash flows from financing activities:
Net proceeds from issuance of long-term debt		395.4			—			199.4
Principal payments on long-term debt		(300.0	)		—			(206.2	)
Cash dividends paid		(186.9	)		(132.7	)		(114.8	)
Common shares repurchased under announced program		(502.4	)		(416.8	)		(49.0	)
Other, net		135.6			96.2			41.7
Net cash used in financing activities		(458.3	)		(453.3	)		(128.9	)
Net increase (decrease) in cash		—			0.3			(1.6	)
Cash, beginning of year		0.3			—			1.6
Cash, end of year	$	0.3		$	0.3		$	—

See accompanying notes to condensed financial statements and report of independent registered public accounting firm.

F-77

NATIONWIDE FINANCIAL SERVICES, INC. AND SUBSIDIARIES

Schedule II Condensed Financial Information of Registrant, Continued

Notes to Condensed Financial Statements

(1) Organization and Presentation

NFS is the holding company for NLIC and other companies that comprise the domestic life insurance and retirement savings operations of the Nationwide group of companies, including NFN.

(2) Long-term Debt and Guarantees

The following table summarizes long-term debt as of December 31:

(in millions)	2007		2006
$300.0 million principal, 8.00% senior notes, due March 1, 2027	$	—	$	298.6
$300.0 million principal, 6.25% senior notes, due November 15, 2011		299.2		299.2
$300.0 million principal, 5.90% senior notes, due July 1, 2012		299.3		299.0
$200.0 million principal, 5.625% senior notes, due February 13, 2015		199.3		199.2
$200.0 million principal, 5.10% senior notes, due October 1, 2015		199.5		199.4
$400.0 million principal, 6.75% fixed-to-floating rate junior subordinated notes, due May 15, 2037		399.4		—
$100.0 million principal, 7.899% junior subordinated debentures issued to a related party, due March 1, 2037		103.1		103.1
Total long-term debt	$	1,499.8	$	1,398.5

See Note 12 to the audited consolidated financial statements of the Company included earlier in this report for a complete description of the components of long-term debt and disclosure of distributions classified as interest expense.

(3) Related Party Transactions

NLIC made interest payments to NFS on surplus notes totaling $53.7 million in 2007, 2006 and 2005. Payments of interest and principal under the notes require the prior approval of the ODI.

See Note 2(o) and Note 17 to the audited consolidated financial statements of the Company included earlier in this report for a description of other related party transactions.

See accompanying report of independent registered public accounting firm.

F-78

NATIONWIDE FINANCIAL SERVICES, INC. AND SUBSIDIARIES

Schedule III Supplementary Insurance Information

As of December 31, 2007, 2006 and 2005 and for each of the years then ended (in millions)

Column A	Column B		Column C		Column D			Column E		Column F
Year: Segment	Deferred policy acquisition costs		Future policy benefits, losses, claims and loss expenses		Unearned premiums1			Other policy claims and benefits payable1		Premium revenue
2007
Individual Investments	$	2,078.0	$	11,316.4						$	133.3
Retirement Plans		292.9		10,973.1							—
Individual Protection		1,637.6		8,192.4							299.4
Corporate and Other		87.1		4,959.6							—
Total	$	4,095.6	$	35,441.5						$	432.7
2006
Individual Investments	$	1,945.0	$	13,753.4						$	142.5
Retirement Plans		292.1		11,163.2							—
Individual Protection		1,530.5		8,148.8							299.0
Corporate and Other		83.4		5,032.4							—
Total	$	3,851.0	$	38,097.8						$	441.5
2005
Individual Investments	$	1,936.4	$	15,815.0						$	102.9
Retirement Plans		294.5		11,264.6							—
Individual Protection		1,412.0		8,049.0							297.0
Corporate and Other		42.5		4,619.5							—
Total	$	3,685.4	$	39,748.1						$	399.9
Column A	Column G		Column H		Column I			Column J		Column K
Year: Segment	Net investment income2		Benefits, claims, losses and settlement expenses		Amortization of deferred policy acquisition costs			Other operating expenses2		Premiums written
2007
Individual Investments	$	642.9	$	677.8	$	287.1		$	204.2
Retirement Plans		655.2		443.3		27.4			422.9
Individual Protection		472.3		724.5		93.1			232.3
Corporate and Other		506.3		262.4		(25.5	)		379.0
Total	$	2,276.7	$	2,108.0	$	382.1		$	1,238.4
2006
Individual Investments	$	781.1	$	730.7	$	352.7		$	220.1
Retirement Plans		652.2		451.6		38.3			404.5
Individual Protection		468.1		726.8		81.6			231.8
Corporate and Other		398.8		209.9		(9.7	)		324.9
Total	$	2,300.2	$	2,119.0	$	462.9		$	1,181.3
2005
Individual Investments	$	869.9	$	744.5	$	329.3		$	203.7
Retirement Plans		661.4		455.0		47.4			351.5
Individual Protection		475.1		717.5		102.7			234.8
Corporate and Other		337.7		146.1		0.8			302.5
Total	$	2,344.1	$	2,063.1	$	480.2		$	1,092.5

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

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

See accompanying report of independent registered public accounting firm.

F-79

NATIONWIDE FINANCIAL SERVICES, INC. AND SUBSIDIARIES

Schedule IV Reinsurance

As of December 31, 2007, 2006 and 2005 and for each of the years then ended (dollars in millions)

Column A	Column B		Column C		Column D		Column E		Column F
	Gross amount		Ceded to other companies		Assumed from other companies		Net amount		Percentage of amount assumed to net
2007
Life insurance in force	$	213,683.5	$	76,178.6	$	14.0	$	137,518.9	0.0	%
Premiums:
Life insurance 1	$	523.3	$	92.5	$	1.9	$	432.7	0.4	%
Accident and health insurance		289.2		316.8		27.6		—	NM
Total	$	812.5	$	409.3	$	29.5	$	432.7	6.8	%
2006
Life insurance in force	$	209,941.7	$	76,648.6	$	19.6	$	133,312.7	0.0	%
Premiums:
Life insurance 1	$	490.8	$	51.1	$	1.8	$	441.5	0.4	%
Accident and health insurance		388.9		417.4		28.5		—	NM
Total	$	879.7	$	468.5	$	30.3	$	441.5	6.9	%
2005
Life insurance in force	$	197,781.9	$	71,895.0	$	474.2	$	126,361.1	0.4	%
Premiums:
Life insurance 1	$	468.5	$	69.6	$	1.0	$	399.9	0.2	%
Accident and health insurance		415.2		445.1		29.9		—	NM
Total	$	883.7	$	514.7	$	30.9		399.9	7.7	%

¹ Primarily represents premiums from traditional life insurance and life-contingent immediate annuities and excludes deposits on investment and universal life insurance products.

See accompanying report of independent registered public accounting firm.

F-80

NATIONWIDE FINANCIAL SERVICES, INC. AND SUBSIDIARIES

Schedule V Valuation and Qualifying Accounts

Years ended December 31, 2007, 2006 and 2005 (in millions)

Column A	Column B		Column C				Column D		Column E
Description	Balance at beginning of period		Charged (credited) to costs and expenses		Charged to other accounts		Deductions1		Balance at end of period
2007
Valuation allowances—mortgage loans on real estate	$	36.0	$	1.1	$	—	$	12.3	$	24.8
2006
Valuation allowances—mortgage loans on real estate	$	35.1	$	5.8	$	—	$	4.9	$	36.0
2005
Valuation allowances—mortgage loans on real estate	$	36.9	$	2.5	$	—	$	4.3	$	35.1

¹ Amounts represent transfers to real estate owned and recoveries.

See accompanying report of independent registered public accounting firm.

F-81

SIGNATURES

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

		NATIONWIDE FINANCIAL SERVICES, INC.
		(Registrant)
Date: February 29, 2008	By	/s/    W.G. JURGENSEN
	W.G. Jurgensen, Chief Executive Officer

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

/s/    ARDEN L. SHISLER	February 20, 2008	/s/    W.G. JURGENSEN	February 29, 2008
Arden L. Shisler, Chairman of the Board	Date	W.G. Jurgensen, Chief Executive Officer and Director	Date
/s/    JOSEPH A. ALUTTO	February 20, 2008	/s/    JAMES G. BROCKSMITH, JR.	February 20, 2008
Joseph A. Alutto, Director	Date	James G. Brocksmith, Jr., Director	Date
/s/    KEITH W. ECKEL	February 20, 2008	/s/    LYDIA M. MARSHALL	February 20, 2008
Keith W. Eckel, Director	Date	Lydia M. Marshall, Director	Date
/s/    DONALD L. MCWHORTER	February 20, 2008	/s/    DAVID O. MILLER	February 20, 2008
Donald L. McWhorter, Director	Date	David O. Miller, Director	Date
/s/    MARTHA MILLER DE LOMBERA	February 20, 2008	/s/    JAMES F. PATTERSON	February 20, 2008
Martha Miller de Lombera, Director	Date	James F. Patterson, Director	Date
/s/    GERALD D. PROTHRO	February 20, 2008	/s/    ALEX SHUMATE	February 20, 2008
Gerald D. Prothro, Director	Date	Alex Shumate, Director	Date
/s/    MARK R. THRESHER	February 29, 2008	/s/    TIMOTHY G. FROMMEYER	February 29, 2008
Mark R. Thresher, President and Chief Operating Officer	Date	Timothy G. Frommeyer, Senior Vice President—Chief Financial Officer	Date

F-82

Exhibit Index

Exhibit
3.1	Form of Restated Certificate of Incorporation of Nationwide Financial Services, Inc. (previously filed as Exhibit 3.1 to Form S-1/A, Registration Number 333-18527, filed February 10, 1997, and incorporated herein by reference)
3.2	Amended and Restated Bylaws of Nationwide Financial Services, Inc. (previously filed as Exhibit 3.2 to Form 10-K, Commission File Number 1-12785, filed March 1, 2007, and incorporated herein by reference)
4.1	Form of Indenture relating to the 8.00% senior notes, including the form of Global Note and the form of Definitive Note (previously filed as Exhibit 4.1 to Form S-1/A, Registration Number 333-18531, filed February 25, 1997, and incorporated herein by reference)
4.2	Form of Indenture relating to the Junior Subordinated Deferrable Interest Debentures due 2037 of Nationwide Financial Services, Inc. (previously filed as Exhibit 4.1 to Form S-1, Registration Number 333-18533, filed March 5, 1997, and incorporated herein by reference)
4.3	Senior Indenture dated November 1, 2001 relating to senior notes (previously filed as Exhibit 4.1 to Form 8-K, Commission File Number 333-18527, filed November 16, 2001, and incorporated herein by reference)
4.4	Form of First Supplemental Indenture relating to the 6.25% senior notes (previously filed as Exhibit 4.2 to Form 8-K, Commission File Number 333-18527, filed November 16, 2001, and incorporated herein by reference)
4.5	Second Supplemental Indenture relating to the 5.90% senior notes (previously filed as Exhibit 4.1 to Form 8-K, Commission File Number 333-18527, filed June 24, 2002, and incorporated herein by reference)
4.6	Third Supplemental Indenture relating to the 5.625% senior notes (previously filed as Exhibit 4.1 to Form 8-K, Commission File Number 1-12785, filed February 13, 2003, and incorporated herein by reference)
4.7	Fourth Supplemental Indenture relating to the 5.10% senior notes (previously filed as Exhibit 4.1 to Form 8-K, Commission File Number 1-12785, filed September 23, 2005, and incorporated herein by reference)
4.8	Junior Subordinated Debt Indenture dated as of May 18, 2007 between Nationwide Financial Services, Inc. and Wilmington Trust Company (previously filed as Exhibit 4.1 to Form 8-K, Commission File Number 1-12785, filed March 18, 2007, and incorporated herein by reference)
4.9	First Supplemental Indenture dated as of May 18, 2007 to the Junior Subordinated Debt Indenture between Nationwide Financial Services, Inc. and Wilmington Trust Company (previously filed as Exhibit 4.2 to Form 8-K, Commission File Number 1-12785, filed March 18, 2007, and incorporated herein by reference)
10.1	Form of Intercompany Agreement among Nationwide Mutual Insurance Company, Nationwide Corporation and Nationwide Financial Services, Inc. (previously filed as Exhibit 10.1 to Form S-1/A, Registration Number 333-18533, filed March 5, 1997, and incorporated herein by reference)
10.1.1	Form of Amendment No. 1 to the Intercompany Agreement among Nationwide Mutual Insurance Company, Nationwide Corporation and Nationwide Financial Services, Inc. (previously filed as Exhibit 10.1.1 to Form 10-K, Commission File Number 1-12785, filed March 1, 2005, and incorporated herein by reference)
10.2	Tax Sharing Agreement dated as of January 1, 2008 among Nationwide Financial Services, Inc. and any company that in the future becomes a subsidiary of Nationwide Financial Services, Inc. if eligible under the Internal Revenue Code (previously filed as Exhibit 99.1 to Form 8-K, Commission File Number 1-12785, filed January 29, 2008, and incorporated herein by reference)

F-83

Exhibit
10.3	Form of Tax Sharing Agreement dated as of October 1, 2002 among Nationwide Life Insurance Company and any corporation that may hereafter be a subsidiary of Nationwide Life Insurance Company (previously filed as Exhibit 10.4 to Form 10-K, Commission File Number 1-12785, filed March 11, 2004, and incorporated herein by reference)
10.4	Form of Tax Sharing Agreement dated as of October 1, 2002 among Nationwide Life Insurance Company of America and any corporation that may hereafter be a subsidiary of Nationwide Life Insurance Company of America (previously filed as Exhibit 10.5 to Form 10-K, Commission File Number 1-12785, filed March 11, 2004, and incorporated herein by reference)
10.5	Form of Tax Sharing Agreement dated as of October 1, 2002 among Nationwide Provident Holding Company and any corporation that may hereafter be a subsidiary of Nationwide Provident Holding Company (previously filed as Exhibit 10.2 to Form 10-K, Commission File Number 1-12785, filed March 11, 2004, and incorporated herein by reference)
10.6	Form of Amended and Restated Cost Sharing Agreement among parties named therein (previously filed as Exhibit 10.3 to Form 10-K, Commission File Number 1-12785, filed March 14, 2003, and incorporated herein by reference)
10.7	Amended and Restated Five Year Credit Agreement, dated December 31, 2007, among Nationwide Financial Services, Inc., Nationwide Life Insurance Company, Nationwide Mutual Insurance Company, the banks party thereto and Wachovia Bank, National Association, as syndication agent and Citicorp USA, Inc., as agent
10.8	Form of Lease Agreement between Nationwide Mutual Insurance Company, Nationwide Life Insurance Company, Nationwide Life and Annuity Insurance Company and Nationwide Financial Services, Inc. (previously filed as Exhibit 10.7 to Form S-1/A, Registration Number 333-18531, filed February 25, 1997, and incorporated herein by reference)
10.9*	Form of Third Amended and Restated Nationwide Financial Services, Inc. 1996 Long-Term Equity Compensation Plan (previously filed as Exhibit 10.4 to Form 10-Q, Commission File Number 1-12785, filed August 6, 2004, and incorporated herein by reference)
10.10*	General Description of Nationwide Performance Incentive Plan (previously filed as Exhibit 10.9 to Form 10-K, Commission File Number 333-18527, filed March 29, 2001, and incorporated herein by reference)
10.11*	Form of Amended and Restated Nationwide Office of Investments Incentive Plan dated as of October 7, 2003 (previously filed as Exhibit 10.13 to Form 10-K, Commission File Number 1-12785, filed March 1, 2005, and incorporated herein by reference)
10.12*	Nationwide Excess Benefit Plan effective as of January 1, 2000 (previously filed as Exhibit 10.14 to Form 10-K, Commission File Number 1-12785, filed March 1, 2005, and incorporated herein by reference)
10.13*	Nationwide Supplemental Retirement Plan As Amended and Restated effective January 1, 2005 (previously filed as Exhibit 10.1 to Form 10-K, Commission File Number 1-12785, filed March 1, 2005, and incorporated herein by reference)
10.14*	Nationwide Severance Pay Plan effective as of March 1, 2003 (previously filed as Exhibit 10.16 to Form 10-K, Commission File Number 1-12785, filed March 1, 2005, and incorporated herein by reference)
10.15*	Nationwide Supplemental Defined Contribution Plan effective as of January 1, 2005 (previously filed as Exhibit 10.17 to Form 10-K, Commission File Number 1-12785, filed March 1, 2005, and incorporated herein by reference)

F-84

Exhibit
10.16*	Nationwide Individual Deferred Compensation Plan, as Amended and Restated, effective as of January 1, 2005 (previously filed as Exhibit 10.18 to Form 10-K, Commission File Number 1-12785, filed March 1, 2005, and incorporated herein by reference)
10.17*	Nationwide Board of Directors Deferred Compensation Plan, as Amended and Restated, effective as of January 1, 2005 (previously filed as Exhibit 10.19 to Form 10-K, Commission File Number 1-12785, filed March 1, 2005, and incorporated herein by reference)
10.18*	Nationwide Financial Services, Inc. Second Amended and Restated Stock Retainer Plan for Non-Employee Directors (previously filed as Exhibit 10.19 to Form 10-K, Commission File Number 1-12785, filed March 1, 2006, and incorporated herein by reference)
10.19	Investment Agency Cost Allocation Agreement dated October 30, 2002 between Nationwide Financial Services, Inc. and Nationwide Cash Management Company (previously filed as Exhibit 10.21 to Form 10-K, Commission File Number 1-12785, filed March 11, 2004, and incorporated herein by reference)
10.20	Investment Agency Cost Allocation Agreement dated October 30, 2002 between Nationwide Life Insurance Company and Nationwide Cash Management Company (previously filed as Exhibit 10.22 to Form 10-K, Commission File Number 1-12785, filed March 11, 2004, and incorporated herein by reference)
10.21	Investment Agency Cost Allocation Agreement dated October 30, 2002 between Nationwide Life and Annuity Insurance Company and Nationwide Cash Management Company (previously filed as Exhibit 10.23 to Form 10-K, Commission File Number 1-12785, filed March 11, 2004, and incorporated herein by reference)
10.22	Master Repurchase Agreement between Nationwide Life Insurance Company, Nationwide Life and Annuity Insurance Company, and Nationwide Mutual Insurance Company and certain of its Subsidiaries and affiliates (previously filed as Exhibit 10.20 to Form 10-K, Commission File Number 1-12785, filed March 29, 2000, and incorporated herein by reference)
10.23	Stock Purchase and Sale Agreement between Nationwide Corporation and Nationwide Financial Services, Inc. (previously filed as Exhibit 10.21 to Form 10-K, Commission File Number 1-12785, filed March 29, 2000, and incorporated herein by reference)
10.24	Stock Purchase and Sale Agreement between Nationwide Financial Services, Inc. and Nationwide Mutual Insurance Company (previously filed as Exhibit 10.22 to Form 10-K, Commission File Number 333-18527, filed March 29, 2000, and incorporated herein by reference)
10.25	Form of Employee Leasing Agreement, dated July 1, 2000, between Nationwide Mutual Insurance Company and Nationwide Financial Services, Inc. (previously filed as Exhibit 10.35 to Form 10-Q, Commission File Number 333-18527, filed May 11, 2001, and incorporated herein by reference)
10.26*	Nationwide Financial Services, Inc. Senior Executive Incentive Plan (previously filed as Exhibit 10.37 to Form 10-Q, Commission File Number 1-12785, filed August 10, 2001, and incorporated herein by reference)
10.26.1*	First Amendment to the Nationwide Financial Services, Inc. Senior Executive Incentive Plan (previously filed as Exhibit 10.6 to Form 10-Q, Commission File Number 1-12785, filed August 6, 2004, and incorporated herein by reference)
10.27	Fund Participation Agreement between Nationwide Financial Services, Inc., Gartmore Mutual Fund Capital Trust and Gartmore Distribution Services, Inc. dated as of May 2, 2005 (previously filed as Exhibit 10.38 to Form 10-K, Commission File Number 1-12785, filed March 1, 2006, and incorporated herein by reference)

F-85

Exhibit
10.28	Fund Agreement between Nationwide Financial Services, Inc., Gartmore Mutual Fund Capital Trust, Gartmore Mutual Funds, Gartmore Morley Capital Management, Inc. and Gartmore Distribution Services, Inc. dated as of October 1, 2002 (previously filed as Exhibit 10.39 to Form 10-K, Commission File Number 1-12785, filed March 1, 2006, and incorporated herein by reference)
10.28.1	Amendment No. 1 dated August 1, 2005 to Fund Agreement between Nationwide Financial Services, Inc., Gartmore Mutual Fund Capital Trust, Gartmore Mutual Funds, Gartmore Morley Capital Management, Inc. and Gartmore Distribution Services, Inc. dated as of October 1, 2002 (previously filed as Exhibit 10.39.1 to Form 10-K, Commission File Number 1-12785, filed March 1, 2006, and incorporated herein by reference)
10.29	Letter of Agreement between Nationwide Financial Services, Inc. and Gartmore Mutual Fund Capital Trust dated as of December 21, 2005 (previously filed as Exhibit 10.40 to Form 10-K, Commission File Number 1-12785, filed March 1, 2006, and incorporated herein by reference)
10.30*	Form of Deferred Stock Unit Agreement (Cash Settlement) for the Second Amended and Restated Nationwide Financial Services, Inc. Stock Retainer Plan for Non-Employee Directors (previously filed as Exhibit 10.44 to Form 10-K, Commission File Number 1-12785, filed March 1, 2006, and incorporated herein by reference)
10.30.1*	Form of Deferred Stock Unit Agreement (Share Settlement) for the Second Amended and Restated Nationwide Financial Services, Inc. Stock Retainer Plan for Non-Employee Directors (previously filed as Exhibit 10.44.1 to Form 10-K, Commission File Number 1-12785, filed March 1, 2006, and incorporated herein by reference)
10.31*	Employment letter agreement between Nationwide Financial Services, Inc. and John Carter dated October 27, 2005 (previously filed as Exhibit 10.1 to Form 10-Q, Commission File Number 1-12785, filed November 3, 2005, and incorporated herein by reference)
10.32*	Summary of terms of employment of Timothy G. Frommeyer (previously filed as Exhibit 10.2 to Form 10-Q, Commission File Number 1-12785, filed November 3, 2005, and incorporated herein by reference)
10.33*	Summary of Non-Employee Director Compensation
10.34	Form of Software License Agreement (previously filed as Exhibit 10.4 to Form 10-Q, Commission File Number 1-12785, filed August 4, 2005, and incorporated herein by reference)
10.35*	Employment Offer Letter Agreement between Nationwide Financial Services, Inc. and Gail Snyder dated November 28, 2005 (previously filed as Exhibit 10.49 to Form 10-K, Commission File Number 1-12785, filed March 1, 2006, and incorporated herein by reference)
10.36	Purchase Agreement between Nationwide Financial Services, Inc. and UBS AG, London Branch, dated March 30, 2006 (previously filed as Exhibit 10.1 to Form 10-Q, Commission File Number 1-12785, filed May 5, 2006, and incorporated herein by reference)
10.37*	Form of NVA Target Award Opportunity and Stock Option Award for Third Amended and Restated Nationwide Financial Services, Inc. 1996 Long-Term Equity Compensation Plan (previously filed as Exhibit 10.2 to Form 10-Q, Commission File Number 1-12785, filed May 5, 2006, and incorporated herein by reference)
10.38*	Form of NVA Target Award Opportunity for Third Amended and Restated Nationwide Financial Services, Inc. 1996 Long-Term Equity Compensation Plan (previously filed as Exhibit 10.3 to Form 10-Q, Commission File Number 1-12785, filed May 5, 2006, and incorporated herein by reference)

F-86

Exhibit
10.39	Agreement and Plan of Merger between Nationwide Federal Credit Union, Nationwide Bank and Nationwide Financial Services, Inc., dated June 16, 2006 (previously filed as Exhibit 10.1 to Form 10-Q, Commission File Number 1-12785, filed August 3, 2006, and incorporated herein by reference)
10.40*	Offer Letter for Anne L. Arvia, dated June 30, 2006 (previously filed as Exhibit 10.2 to Form 10-Q, Commission File Number 1-12785, filed August 3, 2006, and incorporated herein by reference)
10.41	Guarantee Agreement between Nationwide Financial Services, Inc. and Wachovia Bank, National Association, dated June 29, 2006 (previously filed as Exhibit 10.3 to Form 10-Q, Commission File Number 1-12785, filed August 3, 2006, and incorporated herein by reference)
10.42*	Offer Letter for William Jackson, dated August 21, 2006 (previously filed as Exhibit 10.1 to Form 10-Q, Commission File Number 1-12785, filed November 3, 2006, and incorporated herein by reference)
10.43*	Offer Letter for James Lyski, dated August 30, 3006 (previously filed as Exhibit 10.2 to Form 10-Q, Commission File Number 1-12785, filed November 3, 2006, and incorporated herein by reference)
10.44	Share Purchase Agreement between Nationwide Financial Services, Inc. and Nationwide Corporation, dated November 27, 2006 (previously filed as Exhibit 10.55 to Form 10-K, Commission File Number 1-12785, filed March 1, 2007, and incorporated herein by reference)
10.45	Guaranty Agreement between Nationwide Financial Services, Inc. and The Charles Schwab Corporation, dated December 22, 2006 (previously filed as Exhibit 10.56 to Form 10-K, Commission File Number 1-12785, filed March 1, 2007, and incorporated herein by reference)
10.46	Purchase Agreement between Nationwide Financial Services, Inc. and Nationwide Corporation, dated February 2, 2007 (previously filed as Exhibit 10.1 to Form 8-K, Commission File Number 1-12785, filed February 6, 2007, and incorporated herein by reference)
10.47	Purchase Agreement between Nationwide Financial Services, Inc. and UBS AG, London Branch, dated April 5, 2007 (previously filed as Exhibit 10.2 to Form 10-Q, Commission File Number 1-12785, filed May 4, 2007, and incorporated herein by reference)
10.48	Purchase Agreement between Nationwide Financial Services, Inc. and UBS AG, London Branch dated September 7, 2007 (previously filed as Exhibit 10.2 to Form 10-Q, Commission File Number 1-12785, filed November 5, 2007, and incorporated herein by reference)
10.49*	Executive Severance Agreement, dated January 1, 2008, between Nationwide Mutual Insurance Company and Larry Hilsheimer
10.50*	Executive Severance Agreement, dated January 1, 2008, between Nationwide Mutual Insurance Company and Terri L. Hill
10.51*	Executive Severance Agreement, dated January 1, 2008, between Nationwide Mutual Insurance Company and James Lyski
10.52*	Executive Severance Agreement, dated January 1, 2008, between Nationwide Mutual Insurance Company and Michael C. Keller
10.53*	Executive Severance Agreement, dated January 1, 2008, between Nationwide Mutual Insurance Company and Patricia R. Hatler
10.54*	Executive Severance Agreement, dated January 1, 2008, between Nationwide Financial Services, Inc. and Mark R. Thresher (previously filed as Exhibit 99.1 to From 8-K, Commission File Number 1-12785, filed February 19, 2008, and incorporated herein by reference)

F-87

Exhibit
10.55*	Executive Severance Agreement, dated January 1, 2008, between Nationwide Mutual Insurance Company and Stephen S. Rasmussen
10.56*	Executive Severance Agreement, dated January 1, 2008, between Nationwide Mutual Insurance Company and W.G Jurgensen (previously filed as Exhibit 99.2 to From 8-K, Commission File Number 1-12785, filed February 19, 2008, and incorporated herein by reference)
10.57*	Nationwide Financial Services, Inc. 2008 Deferred Compensation Plan for Non-Employee Directors, effective as of February 19, 2008
10.58*	First Amendment to the Nationwide Individual Deferred Compensation Plan, as amended and restated, effective as of January 1, 2005
10.59*	Second Amendment to the Nationwide Individual Deferred Compensation Plan, as amended and restated, effective as of January 1, 2005
10.60*	Third Amendment to the Nationwide Individual Deferred Compensation Plan, as amended and restated (now known as the Nationwide Officer Deferred Compensation Plan), effective as of January 1, 2005
12	Computation of Ratio of Earnings to Fixed Charges
18.1	Letter regarding change in accounting principle from KPMG LLP related to annual goodwill impairment testing (previously filed as Exhibit 18 to Form 10-Q, Commission File Number 1-12785, filed November 12, 2003, and incorporated herein by reference)
18.2	Letter regarding change in accounting principle from KPMG LLP related to accrued legal expenses (previously filed as Exhibit 18.1 to Form 10-Q, Commission File Number 1-12785, filed August 2, 2007, and incorporated herein by reference)
21	Subsidiaries of the Registrant
23	Consent of KPMG LLP, Independent Registered Public Accounting Firm
31.1	Certification of W.G. Jurgensen pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Timothy G. Frommeyer pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002

F-88

Exhibit
32.1	Certification of W.G. Jurgensen pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (this exhibit is intended to be furnished in accordance with Regulation S-K, Item 601(b)(32)(ii) and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or incorporated by reference into any document filed under the Securities Act of 1933, except as shall be expressly set forth by specific reference to such filing)
32.2	Certification of Timothy G. Frommeyer pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (this exhibit is intended to be furnished in accordance with Regulation S-K, Item 601(b)(32)(ii) and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or incorporated by reference into any document filed under the Securities Act of 1933, except as shall be expressly set forth by specific reference to such filing)

* Management Compensatory Plan

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

F-89

EX-10.7

Exhibit 10.7

SECOND AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT

DATED AS OF DECEMBER 31, 2007

AMONG

NATIONWIDE MUTUAL INSURANCE COMPANY,

NATIONWIDE LIFE INSURANCE COMPANY,

NATIONWIDE FINANCIAL SERVICES, INC.,

THE SUBSIDIARY BORROWERS PARTY HERETO,

THE LENDERS,

CITICORP USA, INC.,

AS AGENT,

THE FRONTING BANKS PARTY HERETO,

AND

THE SWING LINE BANKS PARTY HERETO

WACHOVIA BANK, NATIONAL ASSOCIATION,

AS SYNDICATION AGENT

ABN AMRO BANK N.V.,

BANK OF AMERICA, N.A.,

THE BANK OF NEW YORK,

JPMORGAN CHASE BANK, N.A.,

KEYBANK NATIONAL ASSOCIATION

AND

HSBC BANK USA, NATIONAL ASSOCIATION

AS CO-DOCUMENTATION AGENTS

CITIGROUP GLOBAL MARKETS INC.

AND

WACHOVIA CAPITAL MARKETS, LLC

AS JOINT LEAD ARRANGERS AND JOINT BOOK MANAGERS

TABLE OF CONTENTS

Section		Page
ARTICLE I DEFINITIONS		1
ARTICLE II THE CREDITS		19
2.1	The Facility	19
2.2	Ratable Advances	20
2.3	Competitive Bid Advances	22
2.4	Method of Borrowing	25
2.5	Fees; Reduction and Increase of Aggregate Commitment	25
2.6	Minimum Amount of Each Ratable Advance; Minimum Amount of Fixed Rate Advances	27
2.7	Principal Payments	27
2.8	Changes in Interest Rate, etc.	28
2.9	Rates Applicable After Default	28
2.10	Method of Payment	29
2.11	Noteless Agreement; Evidence of Indebtedness	30
2.12	Telephonic Notices	30
2.13	Interest Payment Dates; Interest and Fee Basis	31
2.14	Notification of Advances, Interest Rates, Prepayments and Commitment Reductions	31
2.15	Lending Installations	31
2.16	Non-Receipt of Funds by the Agent	31
2.17	Swing Line Advances	32
2.18	Letters of Credit	35
2.19	Subsidiary Borrowers	43
ARTICLE III YIELD PROTECTION; TAXES		44
3.1	Yield Protection	44
3.2	Changes in Capital Adequacy Regulations	45
3.3	Availability of Types of Advances	45
3.4	Funding Indemnification	46
3.5	Taxes	46
3.6	Lender Statements; Survival of Indemnity	48
ARTICLE IV CONDITIONS PRECEDENT		49
4.1	Effectiveness of Agreement	49
4.2	Each Advance	50
ARTICLE V REPRESENTATIONS AND WARRANTIES		50
5.1	Existence and Standing	50
5.2	Authorization and Validity	51
5.3	No Conflict; Government Consent	51
5.4	Financial Statements	52
5.5	Material Adverse Change	52
5.6	Taxes	52
5.7	Litigation and Contingent Obligations	52

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TABLE OF CONTENTS (continued)

Section		Page
5.8	Subsidiaries	53
5.9	ERISA	53
5.10	Accuracy of Information	53
5.11	Regulation U	53
5.12	Material Agreements	53
5.13	Compliance With Laws	53
5.14	Plan Assets; Prohibited Transactions	54
5.15	Environmental Matters	54
5.16	Investment Company Act	54
5.17	Defaults	54
5.18	Insurance Licenses	54
ARTICLE VI COVENANTS		55
6.1	Financial Reporting	55
6.2	Use of Proceeds	57
6.3	Notice of Default	57
6.4	Conduct of Business	57
6.5	Taxes	58
6.6	Insurance	58
6.7	Compliance with Laws	58
6.8	Maintenance of Properties	58
6.9	Inspection	58
6.10	Merger	59
6.11	Sale of Assets	59
6.12	Liens	59
6.13	Affiliates	61
6.14	ERISA Compliance	62
6.15	Financial Covenants	62
ARTICLE VII DEFAULTS		63
7.1	Representation or Warranty	63
7.2	Non-Payment of Obligations	63
7.3	Specific Defaults	63
7.4	Other Defaults	63
7.5	Cross-Default	63
7.6	Voluntary Proceedings	64
7.7	Involuntary Proceedings	64
7.8	Condemnation	64
7.9	Judgments	64
7.10	Change in Control	64
7.11	Rate Management Obligation	64
7.12	License	65
7.13	Violation of Insurance Laws	65
7.14	Directive or Mandate	65
7.15	Cross-Default With Respect to Other Borrowers	65

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TABLE OF CONTENTS (continued)

Section		Page
7.16	Invalidity of Disavowal of Guaranty	65
ARTICLE VIII ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES		65
8.1	Acceleration	65
8.2	Amendments	66
8.3	Fronting Banks and Swing Line Lenders; Guaranty	67
8.4	Preservation of Rights	67
ARTICLE IX GENERAL PROVISIONS		67
9.1	Survival of Representations	67
9.2	Governmental Regulation	67
9.3	Headings	67
9.4	Entire Agreement	67
9.5	Several Obligations; Benefits of this Agreement	68
9.6	Expenses; Indemnification	68
9.7	Numbers of Documents	69
9.8	Accounting	69
9.9	Severability of Provisions	69
9.10	Nonliability of Lenders	69
9.11	Confidentiality	69
9.12	Nonreliance	70
9.13	Disclosure	70
9.14	USA PATRIOT ACT NOTIFICATION	70
ARTICLE X THE AGENT		70
10.1	Appointment; Nature of Relationship	70
10.2	Powers	71
10.3	General Immunity	71
10.4	No Responsibility for Loans, Letters of Credit, Recitals, etc.	71
10.5	Action on Instructions of Lenders	72
10.6	Employment of Agents and Counsel	72
10.7	Reliance on Documents; Counsel	72
10.8	Agent’s Reimbursement and Indemnification	72
10.9	Notice of Default	73
10.10	Rights as a Lender or a Fronting Bank	73
10.11	Lender and Fronting Bank Credit Decision	73
10.12	Successor Agent	73
10.13	Agent and Arranger Fees	74
10.14	Delegation to Affiliates	74
10.15	Co-Agents, Documentation Agent, Syndication Agent, Managing Agent, etc.	74
ARTICLE XI SETOFF; RATABLE PAYMENTS		75
11.1	Setoff	75
11.2	Ratable Payments	75

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TABLE OF CONTENTS (continued)

Section		Page
ARTICLE XII BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS		75
12.1	Successors and Assigns	75
12.2	Participations	76
12.3	Assignments	77
12.4	Dissemination of Information	77
12.5	Tax Treatment	78
12.6	Designation	78
ARTICLE XIII NOTICES		79
13.1	Notices	79
13.2	Electronic Communications	79
13.3	Change of Address	81
ARTICLE XIV COUNTERPARTS		81
ARTICLE XV CHOICE OF LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL		82
15.1	CHOICE OF LAW	82
15.2	CONSENT TO JURISDICTION	82
15.3	WAIVER OF JURY TRIAL	82
ARTICLE XVI AMENDMENT AND RESTATEMENT		82
SCHEDULES
Pricing Schedule
Schedule 1	Commitments
Schedule 2	List of Swing Line Commitments
Schedule 5.08	Subsidiaries
Schedule 6.12	Liens
EXHIBITS
Exhibit A-1	Ratable Note
Exhibit A-2	Competitive Bid Note
Exhibit B	Compliance Certificate
Exhibit C	Assignment Agreement
Exhibit D	Competitive Bid Quote
Exhibit E	Competitive Bid Quote Request
Exhibit F	Invitation for Competitive Bid Quotes
Exhibit G	Form of Notice of Swing Line Borrowing
Exhibit H	Form of Letter of Credit Request
Exhibit I	Form of Designation Letter
Exhibit J	Form of Termination Letter
Exhibit K	Form of Guaranty

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SECOND AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT

This Second Amended and Restated Five Year Credit Agreement, dated as of December 31, 2007, is among Nationwide Mutual Insurance Company, Nationwide Life Insurance Company, Nationwide Financial Services, Inc., the Subsidiary Borrowers party hereto, the Lenders, Citicorp USA, Inc., as Agent, the Fronting Banks party hereto and the Swing Line Lenders party hereto. The parties hereto agree as follows:

RECITALS:

WHEREAS, the Borrowers, the Lenders and the Agent are parties to an Amended and Restated Five Year Credit Agreement dated as of May 13, 2005 (as heretofore amended, modified or restated, the “Existing Credit Agreement”); and

WHEREAS, the Borrowers, the Lenders and the Agent wish to amend and, subject to Section 16.2, restate the Existing Credit Agreement as hereinafter set forth.

NOW, THEREFORE, in consideration of the mutual covenants and undertakings herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Borrowers, the Lenders, the Agent, the Fronting Banks and the Swing Line Lenders hereby agree that the Existing Credit Agreement shall be amended and restated to read as follows:

ARTICLE I

DEFINITIONS

As used in this Agreement:

“ABR Advance” means an Advance which, except as otherwise provided in Section 2.9, bears interest at the Alternate Base Rate.

“ABR Loan” means a Loan which, except as otherwise provided in Section 2.9, bears interest at the Alternate Base Rate.

“Absolute Rate” means, with respect to an Absolute Rate Loan made by a given Lender for the relevant Absolute Rate Interest Period, the rate of interest per annum (rounded to the nearest 1/100 of 1%) offered by such Lender and accepted by the Requesting Borrower pursuant to Section 2.3.

“Absolute Rate Advance” means a borrowing hereunder consisting of the aggregate amount of the several Absolute Rate Loans made by some or all of the Lenders to the Requesting Borrower at the same time and for the same Absolute Rate Interest Period.

“Absolute Rate Auction” means a solicitation of Competitive Bid Quotes setting forth Absolute Rates pursuant to Section 2.3.

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“Absolute Rate Interest Period” means, with respect to an Absolute Rate Advance, a period of not less than 1 and not more than 270 days commencing on a Business Day selected by the Requesting Borrower pursuant to this Agreement. If such Absolute Rate Interest Period would end on a day which is not a Business Day, such Absolute Rate Interest Period shall end on the next succeeding Business Day.

“Absolute Rate Loan” means a Loan which bears interest at an Absolute Rate.

“Account Party” has the meaning set forth in Section 2.18(a).

“Advance” means a Ratable Advance, a Competitive Bid Advance or a Swing Line Advance.

“Affiliate” of any Person means any other Person directly or indirectly controlling, controlled by or under common control with such Person. A Person shall be deemed to control another Person if the controlling Person owns 10% or more of any class of voting securities (or other ownership interests) of the controlled Person or possesses, directly or indirectly, the power to direct or cause the direction of the management or policies of the controlled Person, whether through ownership of stock, by contract or otherwise.

“Agent” means CUSA in its capacity as contractual representative of the Lenders and the Fronting Banks pursuant to Article X, and not in its individual capacity as a Lender or a Fronting Bank, and any successor Agent appointed pursuant to Article X.

“Aggregate Commitment” means the aggregate of the Commitments of all the Lenders, as increased or reduced from time to time pursuant to the terms hereof.

“Agreement” means this credit agreement, as it may be amended or modified and in effect from time to time.

“Agreement Accounting Principles” means generally accepted accounting principles as in effect from time to time, applied in a manner consistent with that used in preparing the financial statements referred to in Section 5.4; provided, however, that for the purposes of all computations required to be made with respect to compliance by any Borrower with Section 6.15, such term shall mean generally accepted accounting principles (excluding where SAP is applicable) as in effect on the date hereof, applied in a manner consistent with those used in preparing the financial statements referred to in Section 5.4.

“Alternate Base Rate” means, for any day, a rate of interest per annum equal to the higher of (a) the Prime Rate for such day or (b) the sum of the Federal Funds Effective Rate for such day plus 1/2% per annum.

“Annual Statement” means the annual statutory financial statement of any Insurance Company required to be filed with the insurance commissioner (or similar authority) of its jurisdiction of incorporation, which statement shall be in the form required by such Insurance Company’s jurisdiction of incorporation or, if no specific form is so required, in the form of

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financial statements permitted by such insurance commissioner (or such similar authority) to be used for filing annual statutory financial statements and shall contain the type of information permitted by such insurance commissioner (or similar authority) to be disclosed therein, together with all exhibits or schedules filed therewith.

“Applicable Facility Fee Rate” means, at any time, the percentage rate per annum at which Facility Fees are accruing on the Aggregate Commitment (without regard to usage) at such time as set forth in the Pricing Schedule.

“Applicable Margin” means, with respect to Ratable Advances and Swing Line Advances at any time, the percentage rate per annum which is applicable at such time with respect to Advances as set forth under the heading “Eurodollar Margin” in the Pricing Schedule.

“Applicable Percentage” means, with respect to any Lender, the percentage of the total Commitments represented by such Lender’s Commitment. If the Commitments have terminated or expired, the Applicable Percentages shall be determined based upon the Commitments most recently in effect, giving effect to any assignments.

“Applicable Utilization Fee Rate” means, at any time, the percentage rate per annum at which Utilization Fees are accruing as set forth in the Pricing Schedule.

“Arrangers” means, collectively, CGMI, WCM and their respective successors, in their capacity as Joint Lead Arrangers and Joint Book Managers.

“Article” means an article of this Agreement unless another document is specifically referenced.

“Assignment Agreement” means an Assignment Agreement in substantially the form of Exhibit C hereto.

“Authorized Officer” means any of the Treasurer or any Assistant Treasurer of a Borrower, acting singly.

“AXXX/XXX Transaction” means a transaction entered into by a Borrower in order to finance a portion of such Borrower’s reserve funding required by statute or regulation in connection with such Borrower’s sale of certain life insurance products.

“Beneficiary” means any Person designated by an Account Party to whom a Fronting Bank is to make payment, or on whose order payment is to be made, under a Letter of Credit.

“Borrowers” means, collectively, Nationwide Mutual, Nationwide Life, NFS, each Subsidiary Borrower and their respective successors and assigns.

“Borrowing Date” means a date on which an Advance (other than Swing Line Advances) is made hereunder.

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“Borrowing Notice” means a Competitive Bid Borrowing Notice or a Ratable Borrowing Notice, as the context may require.

“Business Day” means (a) with respect to any borrowing, payment or rate selection of Eurodollar Advances, a day (other than a Saturday or Sunday) on which banks generally are open in New York City for the conduct of substantially all of their commercial lending activities, interbank wire transfers can be made on the Fedwire system and dealings in United States dollars are carried on in the London interbank market and (b) for all other purposes, a day (other than a Saturday or Sunday) on which banks generally are open in New York City for the conduct of substantially all of their commercial lending activities and interbank wire transfers can be made on the Fedwire system.

“Capitalized Lease” of a Person means any lease of Property by such Person as lessee which would be capitalized on a balance sheet of such Person prepared in accordance with Agreement Accounting Principles.

“Capitalized Lease Obligations” of a Person means the amount of the obligations of such Person under Capitalized Leases which would be shown as a liability on a balance sheet of such Person prepared in accordance with Agreement Accounting Principles.

“Cash Equivalent Investments” means (a) short-term obligations of, or fully guaranteed by, the United States of America, (b) commercial paper rated A-1 or better by S&P or P-1 or better by Moody’s, (c) demand deposit accounts maintained in the ordinary course of business, and (d) certificates of deposit issued by and time deposits with commercial banks (whether domestic or foreign) having capital and surplus in excess of $100,000,000; provided in each case that the same provides for payment of both principal and interest (and not principal alone or interest alone) and is not subject to any contingency regarding the payment of principal or interest.

“CGMI” means Citigroup Global Markets Inc.

“Change in Control” means (a) in the case of Nationwide Mutual, it shall cease to be a mutual insurance company, (b) in the case of Nationwide Life, it shall cease to be a Wholly-Owned Subsidiary of NFS, and (c) in the case of NFS, it shall cease to be a Subsidiary of Nationwide Mutual.

“Closing Date” means the date hereof.

“Code” means the Internal Revenue Code of 1986, as amended, reformed or otherwise modified from time to time.

“Combined Annual Statement” means the Annual Statement required to be filed by Nationwide Mutual and its affiliated property and casualty insurers.

“Commitment” means, (a) with respect to each Lender, the amount specified for such Lender on Schedule 1 and (b) with respect to each Person which becomes a Lender after the

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Closing Date, the amount specified for such Person on the signature page of the Assignment Agreement to which it is a party, in each case, as such amount may be permanently terminated or reduced from time to time pursuant to Section 2.5(c) or Section 8.1 or reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 12.3.

“Competitive Bid Advance” means a borrowing hereunder made by some or all of the Lenders on the same Borrowing Date and consisting of the aggregate amount of the several Competitive Bid Loans of the same Type, for the same Interest Period and to the same Borrower.

“Competitive Bid Borrowing Notice” is defined in Section 2.3.6.

“Competitive Bid Loan” means a Eurodollar Bid Rate Loan or an Absolute Rate Loan, or both, as the case may be.

“Competitive Bid Margin” means the margin above or below the applicable Eurodollar Base Rate (adjusted for reserve costs, if applicable) offered for a Eurodollar Bid Rate Loan, expressed as a percentage (rounded to the nearest 1/100 of 1%) to be added or subtracted from such Eurodollar Base Rate.

“Competitive Bid Note” means any promissory note in the form of Exhibit A-2 hereto issued at the request of a Lender pursuant to Section 2.11 to evidence its Competitive Bid Loans.

“Competitive Bid Quote” means a Competitive Bid Quote substantially in the form of Exhibit D hereto completed and delivered by a Lender to the Agent in accordance with Section 2.3.4.

“Competitive Bid Quote Request” means a Competitive Bid Quote Request substantially in the form of Exhibit E hereto completed and delivered by the Borrower to the Agent in accordance with Section 2.3.2.

“Consolidated Person” means, for any taxable year of reference, each Person which is a member of the affiliated group of such Borrower if consolidated returns are or shall be filed for such affiliated group for federal income tax purposes or any combined or unitary group of which such Borrower is a member for state income tax purposes.

“Consolidated Tangible Net Worth” means at any date the consolidated shareholders’ equity of NFS and its consolidated Subsidiaries plus any unrealized losses or less (a) any unrealized gains (in each case to the extent reflected in the determination of such consolidated shareholders’ equity) related, directly or indirectly, to securities available-for-sale, as determined in accordance with Statement of Financial Accounting Standards No. 115 (or any successor statements or amendments thereto) (in each case as affected by any subsequent relevant pronouncements of the Financial Accounting Standards Board or, if and to the extent applicable, the Securities and Exchange Commission) and (b) Intangible Assets, all determined as of such date in accordance with Agreement Accounting Principles based upon its most recent financial statements prepared in accordance with Agreement Accounting Principles; provided, that in

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calculating Consolidated Tangible Net Worth on any date the impact thereon of FIN 46 shall be excluded.

“Contingent Obligation” of a Person means any agreement, undertaking or arrangement by which such Person assumes, guarantees, endorses, contingently agrees to purchase or provide funds for the payment of, or otherwise becomes or is contingently liable upon, the obligation or liability of any other Person, or agrees to maintain the net worth or working capital or other financial condition of any other Person, or otherwise assures any creditor of such other Person against loss, including, without limitation, any comfort letter, operating agreement, take-or-pay contract or the obligations of any such Person as general partner of a partnership with respect to the liabilities of the partnership, but excluding (a) Contingent Obligations in respect of insurance policies issued in the ordinary course of business (including, without limitation, Contingent Obligations in respect of reinsurance agreements entered into in connection with the sale of Wausau General Insurance Company and its affiliates), (b) Contingent Obligations incurred by any Borrower in connection with the issuance of a License to a Subsidiary and (c) Contingent Obligations in respect of undrawn letters of credit which are issued in the ordinary course of business to support reinsurance obligations.

“Conversion/Continuation Notice” is defined in Section 2.2.4.

“Controlled Group” means all members of a controlled group of corporations or other business entities and all trades or businesses (whether or not incorporated) under common control which, together with the Borrower or any of its Subsidiaries, are treated as a single employer under Section 414 of the Code.

“CUSA” means Citicorp USA, Inc., in its individual capacity, and its successors.

“Date of Issuance” means the date of issuance by a Fronting Bank of a Letter of Credit under this Agreement.

“Default” means an event described in Article VII.

“Defaulting Lender” is defined in Section 2.18(l).

“Designating Lender” is defined in Section 12.6.

“Designation Letter” means a letter in substantially the form of Exhibit I hereto.

“Domestic Subsidiary” means each Subsidiary that is incorporated under the laws of the United States, any State thereof or the District of Columbia.

“Drawing” means a drawing by a Beneficiary under any Letter of Credit.

“Drawing Date” means the date on which payment of a Drawing is made by a Fronting Bank.

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“Environmental Laws” means any and all federal, state, local and foreign statutes, laws, judicial decisions, regulations, ordinances, rules, judgments, orders, decrees, plans, injunctions, permits, concessions, grants, franchises, licenses, agreements and other governmental restrictions relating to (a) the protection of the environment, (b) the effect of the environment on human health, (c) emissions, discharges or releases of pollutants, contaminants, hazardous substances or wastes into surface water, ground water or land, or (d) the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, hazardous substances or wastes or the clean-up or other remediation thereof.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any rule or regulation issued thereunder.

“Eurodollar Advance” means a Eurodollar Ratable Advance or a Eurodollar Bid Rate Advance, or both, as the context may require.

“Eurodollar Auction” means a solicitation of Competitive Bid Quotes setting forth Competitive Bid Margins pursuant to Section 2.3.

“Eurodollar Base Rate” means, with respect to a Eurodollar Advance to a Borrower for the relevant Eurodollar Interest Period, the applicable British Bankers’ Association Interest Settlement Rate for deposits in U.S. dollars appearing on Reuters Screen FRBD as of 11:00 a.m. (London time) two Business Days prior to the first day of such Eurodollar Interest Period, and having a maturity equal to such Eurodollar Interest Period, provided that, (a) if Reuters Screen FRBD is not available to the Agent for any reason, the applicable Eurodollar Base Rate for the relevant Eurodollar Interest Period shall instead be the applicable British Bankers’ Association Interest Settlement Rate for deposits in U.S. dollars as reported by any other generally recognized financial information service as of 11:00 a.m. (London time) two Business Days prior to the first day of such Eurodollar Interest Period, and having a maturity equal to such Eurodollar Interest Period, and (b) if no such British Bankers’ Association Interest Settlement Rate is available to the Agent, the applicable Eurodollar Base Rate for the relevant Eurodollar Interest Period shall instead be the rate determined by the Agent to be the rate at which CUSA or one of its Affiliate banks offers to place deposits in U.S. dollars with first-class banks in the London interbank market at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Eurodollar Interest Period, in the approximate amount of CUSA’s relevant Eurodollar Ratable Loan, or, in the case of a Eurodollar Bid Rate Advance, the amount of the Eurodollar Bid Rate Advance requested by such Borrower, and having a maturity equal to such Eurodollar Interest Period.

“Eurodollar Bid Rate” means, with respect to a Eurodollar Bid Rate Loan made by a given Lender for the relevant Eurodollar Interest Period, the sum of (a) the quotient of (i) the Eurodollar Base Rate applicable to such Interest Period, divided by (ii) one minus the Reserve Requirement (expressed as a decimal) applicable to such Interest Period, plus (b) the Competitive Bid Margin offered by such Lender and accepted by the Requesting Borrower.

“Eurodollar Bid Rate Advance” means a Competitive Bid Advance which bears interest at a Eurodollar Bid Rate.

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“Eurodollar Bid Rate Loan” means a Loan which bears interest at a Eurodollar Bid Rate.

“Eurodollar Interest Period” means, with respect to a Eurodollar Advance to a Borrower, a period of one, two, three or six months commencing on a Business Day selected by such Borrower pursuant to this Agreement. Such Eurodollar Interest Period shall end on the day which corresponds numerically to such date one, two, three or six months thereafter, as applicable; provided, however, that if there is no such numerically corresponding day in such next, second, third or sixth succeeding month, such Eurodollar Interest Period shall end on the last Business Day of such next, second, third or sixth succeeding month. If a Eurodollar Interest Period would otherwise end on a day which is not a Business Day, such Eurodollar Interest Period shall end on the next succeeding Business Day; provided, however, that if said next succeeding Business Day falls in a new calendar month, such Eurodollar Interest Period shall end on the immediately preceding Business Day.

“Eurodollar Loan” means a Eurodollar Ratable Loan or a Eurodollar Bid Rate Loan, or both, as the context may require.

“Eurodollar Ratable Advance” means a Ratable Advance to a Borrower which bears interest at a Eurodollar Rate requested by such Borrower pursuant to Section 2.2.

“Eurodollar Ratable Loan” means a Ratable Loan to a Borrower which bears interest at a Eurodollar Rate requested by such Borrower pursuant to Section 2.2.

“Eurodollar Rate” means, with respect to a Eurodollar Ratable Advance for the relevant Eurodollar Interest Period, the sum of (a) the quotient of (i) the Eurodollar Base Rate applicable to such Eurodollar Interest Period, divided by (ii) one minus the Reserve Requirement (expressed as a decimal) applicable to such Eurodollar Interest Period, plus (b) the Applicable Margin.

“Excluded Taxes” means, in the case of each Lender, Fronting Bank, applicable Lending Installation and the Agent, taxes imposed on its overall net income, and franchise taxes imposed on it, by (a) the jurisdiction under the laws of which such Lender, Fronting Bank or the Agent is incorporated or organized or (b) any jurisdiction in which the Agent or such Lender or Fronting Bank maintains a lending office.

“Exhibit” refers to an exhibit to this Agreement, unless another document is specifically referenced.

“Existing Credit Agreement” is defined in the recitals.

“Expiration Date” means, with respect to a Letter of Credit, its stated expiration date.

“Extension of Credit” means the making of any Advance or the issuance (or amendment extending the term or increasing the amount) of a Letter of Credit.

“Facility Fee” is defined in Section 2.5(a).

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“Facility Termination Date” means May 13, 2010, or any earlier date on which the Aggregate Commitment is reduced to zero or otherwise terminated pursuant to the terms hereof.

“FAS 35” means Financial Accounting Statement No. 35, “Accounting and Reporting by Defined Benefit Pension Plans” issued by the Financial Accounting Standards Board in March, 1980.

“Federal Funds Effective Rate” means, for any day, an interest rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published for such day (or, if such day is not a Business Day, for the immediately preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations at approximately 11:00 a.m. (New York time) on such day on such transactions received by the Agent from three Federal funds brokers of recognized standing selected by the Agent in its sole discretion.

“FIN 46” means Interpretation No. 46, “Consolidation of Variable Interest Entities,” issued by the Financing Accounting Standards Board in January 2003.

“Fixed Rate” means the Eurodollar Rate, the Eurodollar Bid Rate or the Absolute Rate.

“Fixed Rate Advance” means an Advance which bears interest at a Fixed Rate.

“Fixed Rate Loan” means a Loan which bears interest at a Fixed Rate.

“Fronting Bank” means Citicorp USA, Inc., Wachovia Bank, National Association and any other Lender (in each case, acting directly or through an Affiliate) that delivers an instrument in form and substance satisfactory to the Borrowers and the Agent whereby such other Lender (or its Affiliate) agrees to act as “Fronting Bank” hereunder and that specifies the maximum aggregate Stated Amount of Letters of Credit that such other Lender (or its Affiliates) will agree to issue hereunder.

“Fronting Bank Fee Letter” has the meaning set forth in Section 4.1(h).

“Governmental Authority” means any government (foreign or domestic) or any state or other political subdivision thereof or any governmental body, agency, authority, department or commission (including without limitation any board of insurance, insurance department or insurance commissioner and any taxing authority or political subdivision) or any instrumentality or officer thereof (including without limitation any court or tribunal) exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government and any corporation, partnership or other entity directly or indirectly owned by any of the foregoing.

“Guaranty” means a guaranty in the form of Exhibit K hereto made by any Borrower (other than a Subsidiary Borrower) in favor of the Agent for the benefit of the Lenders with

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respect to the Obligations of its Subsidiary Borrowers, as the same may be amended, restated, modified or supplemented from time to time.

“Hybrid Securities” shall mean, at any time, trust preferred securities, deferrable interest subordinated debt securities, mandatory convertible debt or other hybrid securities issued by the Borrowers or any of their Subsidiaries that (a) are accorded equity treatment by S&P and (b) that, by their terms (or by the terms of any security into which they are convertible for or which they are exchangeable) or upon the happening of any event or otherwise, do not mature or are not mandatorily redeemable or are not subject to any mandatory repurchase requirement, at any time on prior to the date which is six months after the Facility Termination Date.

“Indebtedness” of a Person means such Person’s (a) obligations for borrowed money, (b) obligations representing the deferred purchase price of Property or services (other than accounts payable arising in the ordinary course of such Person’s business payable on terms customary in the trade), (c) obligations, whether or not assumed, secured by Liens or payable out of the proceeds or production from Property now or hereafter owned or acquired by such Person, (d) obligations which are evidenced by notes, acceptances, or other instruments, including notes issued to an Affiliate in connection with the issuance by such Affiliate of trust preferred securities, (e) obligations of such Person to purchase securities or other Property arising out of or in connection with the sale of the same or substantially similar securities or Property, (f) Capitalized Lease Obligations, (g) Contingent Obligations, (h) obligations in respect of Surplus Debentures, (i) Net Mark-to-Market Exposure under Rate Management Transactions, (j) non-contingent obligations of such Person to reimburse any Lender or other Person in respect of amounts paid under a letter of credit and (k) any other obligation for borrowed money or other financial accommodation which in accordance with Agreement Accounting Principles or SAP, as applicable, would be shown as a liability on the consolidated balance sheet of such Person; provided, however, that for the purpose of determining compliance with Section 6.15.3 on any date, “Indebtedness” shall exclude (i) obligations of NFS and its Subsidiaries arising in respect of securities lending activities and securities repurchase or reverse-repurchase activities undertaken in the ordinary course of business in compliance with all applicable laws, (ii) indebtedness of NFS and its Subsidiaries incurred in connection with the sale or issuance of Structured Finance Securities, provided that no Borrower or Subsidiary has any recourse obligations with respect thereto, (iii) indebtedness of NFS and its Subsidiaries incurred in connection with the sale or issuance of Hybrid Securities; provided, that the total indebtedness incurred in connection with the sale or issuance of Hybrid Securities and excluded pursuant to this clause (iii) may at no time exceed 15% of the Total Capitalization of NFS and (iv) securities issued by NFS and its Subsidiaries in connection with the sale or issuance of credit enhanced equity interests in low income housing tax funds; provided, that the amount of any indebtedness so excluded shall be reduced by the amount of any guarantee reserves associated therewith.

“Insurance Company” means Nationwide Mutual, Nationwide Life or any Insurance Subsidiary.

“Insurance Subsidiary” means any Subsidiary (including any Subsidiary Borrower) which is engaged in the business of underwriting policies of insurance.

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“Intangible Assets” means the amount (to the extent reflected in determining such consolidated shareholders’ equity) of all unamortized debt discount and expense, unamortized deferred charges, goodwill, patents, trademarks, service marks, trade names, anticipated future benefit of tax loss carry-forwards, copyrights, organization or developmental expenses and other intangible assets; provided, that the deferred policy acquisition costs shall not be considered Intangible Assets for the purposes of this definition.

“Interest Period” means a Eurodollar Interest Period or an Absolute Rate Interest Period.

“Invitation for Competitive Bid Quotes” means an Invitation for Competitive Bid Quotes substantially in the form of Exhibit F hereto, completed and delivered by the Agent to the Lenders in accordance with Section 2.3.3.

“L/C Commitment Amount” means $300,000,000 as the same may be reduced permanently from time to time pursuant to Section 2.5 hereof.

“Lenders” means the lending institutions listed on the signature pages of this Agreement, and, as the context requires, means the Swing Line Lenders, and, in each case, their respective successors and assigns.

“Lending Installation” means, with respect to a Lender, a Fronting Bank or the Agent, the office, branch, subsidiary or Affiliate of such Lender, such Fronting Bank or the Agent listed on the signature pages hereof or on a Schedule or otherwise selected by such Lender, such Fronting Bank or the Agent pursuant to Section 2.15.

“Letter of Credit” has the meaning set forth in Section 2.18(a).

“Letter of Credit Cash Cover” has the meaning set forth in Section 8.1.

“Letter of Credit Request” has the meaning set forth in Section 2.18(c).

“LIBOR Market Index Rate” means for any day, the rate for one (1) month U.S. Dollar deposits as reported on Reuters Page LIBOR01, or its successor page, as of 11:00 a.m., London time, on such day, or if such day is not a Business Day, then the immediately preceding Business Day (or if not so reported, then as determined by the Agent from another recognized source of interbank quotation).

“License” means any license, certificate of authority, permit or other authorization which is required to be obtained from any Governmental Authority in connection with the operation, ownership or transaction of insurance business.

“Lien” means any lien (statutory or other), mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, the interest of a vendor or lessor under any conditional sale, Capitalized Lease or other title retention agreement).

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“Loan” means, with respect to a Lender, such Lender’s loans (including Swing Line Borrowings) made pursuant to Article II (or, in the case of a loan made pursuant to Section 2.2, any conversion or continuation thereof).

“Loan Documents” means this Agreement and any Notes issued pursuant to Section 2.11, any Designation Letter, any Guaranty, any Fronting Bank Fee Letter and the other documents and agreements contemplated hereby and executed by any Borrower in favor of the Agent, any Lender or any Fronting Bank.

“Material Adverse Effect” means, with respect to any Borrower, a material adverse effect on (a) the business, Property, condition (financial or otherwise), results of operations, or prospects of such Borrower and its Subsidiaries taken as a whole, (b) the ability of such Borrower to perform its obligations under the Loan Documents, or (c) the validity or enforceability of any of the Loan Documents or the rights or remedies of the Agent, the Lenders or the Fronting Banks thereunder.

“Material Affiliate” means:

(a) in respect of Nationwide Mutual, (i) any other Person which is a party to the Nationwide Insurance Intercompany Pooling Agreement, effective as of January 1, 1999, as amended or supplemented from time to time, and (ii) any of its Material Subsidiaries; and

(b) in respect of each of Nationwide Life, NFS and any Subsidiary Borrower, any of its Material Subsidiaries.

“Material Indebtedness” is defined in Section 7.5.

“Material Insurance Subsidiary” means an Insurance Subsidiary which is a Material Subsidiary.

“Material Subsidiary” means:

(a) in respect of Nationwide Mutual, any Subsidiary having, as of the date of the Combined Annual Statement most recently delivered to the Lenders pursuant to Section 5.4(a) or Section 6.1(d), consolidated assets with a value of at least two percent (2%) of the total combined assets set out in such statement; provided, that, for the purposes of this Agreement, neither Nationwide Life nor NFS nor any of their consolidated Subsidiaries shall be considered to be a Material Subsidiary of Nationwide Mutual; and

(b) in respect of each of Nationwide Life, NFS and any Subsidiary Borrower, any Subsidiary having, as of the date of the balance sheet most recently delivered to the Lenders pursuant to Section 5.4 or Section 6.1, consolidated assets with a value of at least two percent (2%) of the total consolidated assets set out in such statement.

“Moody’s” means Moody’s Investors Service, Inc.

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“Multiemployer Plan” means a Plan maintained pursuant to a collective bargaining agreement or any other arrangement to which the Borrower or any member of the Controlled Group is a party to which more than one employer is obligated to make contributions.

“NAIC” means the National Association of Insurance Commissioners or any successor thereto, or in lieu thereof, any other association, agency or other organization performing advisory, coordination or other like functions among insurance departments, insurance commissioners and similar Governmental Authorities of the various states of the United States toward the promotion of uniformity in the practices of such Governmental Authorities.

“Nationwide Life” means Nationwide Life Insurance Company, an Ohio insurance company.

“Nationwide Mutual” means Nationwide Mutual Insurance Company, an Ohio mutual insurance company.

“Net Mark-to-Market Exposure” of a Person means, as of any date of determination, the excess (if any) of all unrealized losses over all unrealized profits of such Person arising from Rate Management Transactions. “Unrealized losses” means the fair market value of the cost to such Person of replacing such Rate Management Transaction as of the date of determination (assuming the Rate Management Transaction were to be terminated as of that date), and “unrealized profits” means the fair market value of the gain to such Person of replacing such Rate Management Transaction as of the date of determination (assuming such Rate Management Transaction were to be terminated as of that date).

“NFS” means Nationwide Financial Services, Inc., a Delaware corporation.

“Non-U.S. Lender” is defined in Section 3.5(d).

“Notes” means, collectively, all of the Competitive Bid Notes and all of the Ratable Notes which may be issued hereunder, and “Note” means any one of the Notes.

“Notice of Swing Line Borrowing” means a notice of a Swing Line Borrowing pursuant to Section 2.17 which, if in writing, shall be substantially in the form of Exhibit G.

“Obligations” means all unpaid principal of and accrued and unpaid interest on the Loans, all outstanding Letters of Credit, all Reimbursement Obligations, all accrued and unpaid fees and all expenses, reimbursements, indemnities and other obligations of the Borrowers or any Borrower to the Lenders, any Lender, the Fronting Banks, any Fronting Bank, the Agent or any indemnified party arising under the Loan Documents.

“Other Taxes” is defined in Section 3.5(b).

“Outstanding Credits” means, on any date of determination, an amount equal to (a) the aggregate principal amount of all Advances outstanding on such date plus (b) the aggregate

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undrawn amount of all issued Letters of Credit outstanding on such date plus (c) the aggregate amount of Reimbursement Obligations outstanding on such date (exclusive of Reimbursement Obligations that, on such date of determination, are repaid with the proceeds of Advances made in accordance with Section 2.18(f) and (g), to the extent the principal amount of such Advances is included in the determination of the aggregate principal amount of all outstanding Advances as provided in clause (a) of this definition). The “Outstanding Credits” of a Lender on any date of determination shall be an amount equal to the outstanding Advances made by such Lender plus the amount of such Lender’s participation interest in outstanding Letters of Credit, Reimbursement Obligations and Swing Line Advances included in the definition of “Outstanding Credits”.

“Participants” is defined in Section 12.2.1.

“Participation Transfer Date” is defined in Section 2.18(l).

“Participation Transfer Period” is defined in Section 2.18(l).

“Payment Date” means the last day of each March, June, September and December.

“PBGC” means the Pension Benefit Guaranty Corporation, or any successor thereto.

“Percentage” means, in respect of any Lender on any date of determination, the percentage obtained by dividing such Lender’s Commitment on such day by the total of the Commitments on such day, and multiplying the quotient so obtained by 100%.

“Person” means any natural person, corporation, firm, joint venture, partnership, limited liability company, association, enterprise, trust or other entity or organization, or any government or political subdivision or any agency, department or instrumentality thereof.

“Plan” means an employee pension benefit plan which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code as to which a Borrower or any member of the Controlled Group may have any liability.

“Pricing Schedule” means the Schedule attached hereto identified as such.

“Prime Rate” means a rate per annum equal to the prime rate of interest announced from time to time by Citibank, N.A. or its parent (which is not necessarily the lowest rate charged to any customer), changing when and as said prime rate changes.

“Property” of a Person means any and all property, whether real, personal, tangible, intangible, or mixed, of such Person, or other assets owned, leased or operated by such Person.

“Purchasers” is defined in Section 12.3.1.

“Quarterly Statement” means the quarterly statutory financial statement of any Insurance Company required to be filed with the insurance commissioner (or similar authority) of its

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jurisdiction of incorporation or, if no specific form is so required, in the form of financial statements permitted by such insurance commissioner (or such similar authority) to be used for filing quarterly statutory financial statements and shall contain the type of financial information permitted by such insurance commissioner (or such similar authority) to be disclosed therein, together with all exhibits or schedules filed therewith.

“Ratable Advance” means a borrowing hereunder (a) made by the Lenders to a Borrower on the same Borrowing Date, or (b) converted or continued by the Lenders on the same date of conversion or continuation, consisting, in either case, of the aggregate amount of the several Ratable Loans of the same Type and, in the case of Eurodollar Ratable Loans, for the same Interest Period.

“Ratable Borrowing Notice” is defined in Section 2.2.3.

“Ratable Loan” means a Loan made by a Lender pursuant to Section 2.2 hereof.

“Ratable Note” means any promissory note in the form of Exhibit A-1 hereto issued at the request of a Lender pursuant to Section 2.11 to evidence its Ratable Loans.

“Rate Management Obligations” of a Person means any and all obligations of such Person, whether absolute or contingent and howsoever and whensoever created, arising, evidenced or acquired (including all renewals, extensions and modifications thereof and substitutions therefor), under (a) any and all Rate Management Transactions, and (b) any and all cancellations, buy backs, reversals, terminations or assignments of any Rate Management Transactions.

“Rate Management Transaction” means any transaction (including an agreement with respect thereto) now existing or hereafter entered into by any Borrower which is a credit default swap, rate swap, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, forward transaction, currency swap transaction, cross-currency rate swap transaction, currency option or any other similar transaction (including any option with respect to any of these transactions) or any combination thereof, whether linked to one or more interest rates, foreign currencies, commodity prices, equity prices or other financial measures.

“Regulation D” means Regulation D of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor thereto or other regulation or official interpretation of said Board of Governors relating to reserve requirements applicable to member banks of the Federal Reserve System.

“Regulation U” means Regulation U of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor or other regulation or official interpretation of said Board of Governors relating to the extension of credit by banks for the purpose of purchasing or carrying margin stocks applicable to member banks of the Federal Reserve System.

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“Reimbursement Obligation” means the obligation of the applicable Borrower to reimburse a Fronting Bank for any Drawing paid by such Fronting Bank pursuant to Section 2.18 (g).

“Reportable Event” means a reportable event as defined in Section 4043 of ERISA and the regulations issued under such section, with respect to a Plan, excluding, however, such events as to which the PBGC has by regulation waived the requirement of Section 4043(a) of ERISA that it be notified within 30 days of the occurrence of such event, provided, however, that a failure to meet the minimum funding standard of Section 412 of the Code and of Section 302 of ERISA shall be a Reportable Event regardless of the issuance of any such waiver of the notice requirement in accordance with either Section 4043(a) of ERISA or Section 412(d) of the Code.

“Reports” is defined in Section 9.6.

“Requesting Borrower” is defined in Section 2.3.2.

“Required Lenders” means Lenders in the aggregate holding more than 50% of the aggregate unpaid principal amount of (a)(i) the outstanding Advances (excluding Competitive Bid Advances and Swing Line Advances), (ii) the undrawn face amount of issued Letters of Credit outstanding, (iii) Reimbursement Obligations outstanding and (iv) Swingline Advances outstanding or (b) if none of the foregoing, the Aggregate Commitment. For purposes hereof, each Lender shall be deemed to hold its Applicable Percentage of the undrawn face amount of issued Letters of Credit outstanding, Reimbursement Obligations outstanding and Swingline Advances outstanding.

“Reserve Requirement” means, with respect to an Interest Period, the maximum aggregate reserve requirement (including all basic, supplemental, marginal and other reserves) which is imposed under Regulation D on Eurocurrency liabilities.

“Returned Payment” is defined in Section 2.10(b).

“S&P” means Standard and Poor’s Ratings Services, a division of The McGraw Hill Companies, Inc.

“SAP” means, with respect to any Insurance Company, the statutory accounting practices prescribed or permitted by the insurance commissioner (or other similar authority) in the jurisdiction of such Person for the preparation of annual statements and other financial reports by insurance companies of the same type as such Person in effect from time to time, applied in a manner consistent with those used in preparing the financial statements referred to in Section 5.4(a) and (b); provided, that, except as otherwise provided in the definition of Agreement Accounting Principles, with respect to the financial covenants contained in Section 6.15 hereof, and the related definitions, “SAP” means such statutory accounting practices in effect on the date hereof, applied in a manner consistent with those used in preparing the financial statements referred to in Section 5.4(a) and (b).

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“Schedule” refers to a specific schedule to this Agreement, unless another document is specifically referenced.

“Section” means a numbered section of this Agreement, unless another document is specifically referenced.

“Single Employer Plan” means a Plan maintained by a Borrower or any member of the Controlled Group for employees of such Borrower or any member of the Controlled Group.

“SPV” is defined in Section 12.6.

“Stated Amount” means the maximum amount available to be drawn by a Beneficiary under a Letter of Credit.

“Statutory Surplus” means, with respect to (a) Nationwide Mutual at any time, the surplus as regards policyholders of Nationwide Mutual at such time, as determined in accordance with SAP (“Liabilities, Surplus and Other Funds” statement, page 3, line 35 of the Annual Statement) based upon its most recently filed Quarterly Statement and (b) Nationwide Life at any time, the statutory capital and surplus of Nationwide Life at such time, as determined in accordance with SAP (“Liabilities, Surplus and Other Funds” statement, page 3, line 38 of the Annual Statement) based upon its most recently filed Quarterly Statement.

“Structured Finance Securities” means (a) notes or other instruments secured by collateral consisting primarily of debt securities and/or other types of debt obligations, including loans and credit default swaps or (b) securities whose benefits are derived from a discreet pool of assets, either fixed or revolving, that are acquired with the intention to convert into cash within a finite period of time under a recognized securitization program sponsored by any Borrower.

“Subsidiary” of a Person means (a) any corporation more than 50% of the outstanding securities having ordinary voting power of which shall at the time be owned or controlled, directly or indirectly, by such Person or by one or more of its Subsidiaries or by such Person and one or more of its Subsidiaries, or (b) any partnership, limited liability company, association, joint venture or similar business organization more than 50% of the ownership interests having ordinary voting power of which shall at the time be so owned or controlled.

“Subsidiary Borrower” means a Wholly-Owned Subsidiary of Nationwide Mutual, Nationwide Life or NFS, designated as such by the respective Borrower pursuant to Section 2.19.

“Substantial Portion” means, with respect to the Property of a Borrower and its Subsidiaries, Property which (a) represents more than 10% of the consolidated assets of such Borrower and its Subsidiaries as would be shown in the consolidated financial statements of such Borrower and its Subsidiaries as at the beginning of the twelve-month period ending with the month in which such determination is made, or (b) is responsible for more than 10% of the consolidated net sales or of the consolidated net income of such Borrower and its Subsidiaries as reflected in the financial statements referred to in clause (a) above.

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“Surplus Debentures” means, as to Nationwide Mutual, debt securities of Nationwide Mutual the proceeds of which are permitted to be included, in whole or in part, as Statutory Surplus as approved and permitted by the insurance department of Nationwide Mutual’s state of domicile.

“Swing Line Advance” means an Advance made by a Swing Line Lender to any Borrower as part of a Swing Line Borrowing pursuant to Section 2.17.

“Swing Line Borrowing” means a borrowing consisting of a Swing Line Advance made by a Swing Line Lender pursuant to Section 2.17.

“Swing Line Commitment” means, with respect to any Swing Line Lender, the aggregate outstanding amount of Swing Line Advances that such Swing Line Lender agrees to make, as modified from time to time pursuant to an agreement signed by such Swing Line Lender. With respect to each Lender that is a Swing Line Lender on the date hereof, such Swing Line Lender’s Swing Line Commitment shall equal the “Swing Line Commitment” listed on Schedule 2 and, with respect to any Lender that becomes a Swing Line Lender after the date hereof, such Lender’s Swing Line Commitment shall equal the amount agreed upon between the Borrowers and such Lender at the time such Lender becomes a Swing Line Lender.

“Swing Line Exposure” means, at any time, the aggregate principal amount of all Swing Line Loans outstanding at such time. The Swing Line Exposure of any Lender at any time shall be its Applicable Percentage of the total Swing Line Exposure at such time.

“Swing Line Lender” means each of the Lenders identified as a “Swing Line Lender” on Schedule 2 and any other Lender or Affiliate thereof that may be appointed from time to time by Nationwide Mutual to provide Swing Line Advances under this Agreement, that consents to such appointment and that is reasonably acceptable to the Agent.

“Swing Line Sublimit” means an amount equal to the lesser of (a) $200,000,000 and (b) the aggregate Commitments. The Swing Line Sublimit is part of, and not in addition to, the aggregate Commitments.

“Taxes” means any and all present or future taxes, duties, levies, imposts, deductions, charges or withholdings, and any and all liabilities with respect to the foregoing, but excluding Excluded Taxes and Other Taxes.

“Termination Letter” means a letter in substantially the form of Exhibit J hereto.

“Total Capitalization” means at any time, with respect to NFS, the sum of (i) the consolidated Indebtedness of NFS and its Subsidiaries as of such time and (ii) the consolidated shareholders’ equity of NFS and its Subsidiaries as of such time based upon its most recent financial statements prepared in accordance with Agreement Accounting Principles, excluding, however, the effect of any unrealized gain or loss reported under Statement of Financial Accounting Standards No. 115 and the impact thereon of FIN 46.

“Transferee” is defined in Section 12.4.

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“Type” means, with respect to any Advance, its nature as an ABR Advance, an Absolute Rate Advance, a Eurodollar Bid Rate Advance, a Eurodollar Ratable Advance or a Swing Line Advance.

“Unfunded Liabilities” means the amount (if any) by which the sum of (i) the present value of all vested accrued benefits under all Single Employer Plans, calculated using PBGC actuarial assumptions for single employer plans, and (ii) the present value of all non-vested accrued benefits for such Plans, calculated using FAS 35 actuarial assumptions, exceeds the fair market value of all such Plan assets allocable to such benefits, all determined as of the then most recent valuation date for such Plans.

“Unmatured Default” means an event which but for the lapse of time or the giving of notice, or both, would constitute a Default.

“Utilization Fee” is defined in Section 2.5(b).

“WCM” means Wachovia Capital Markets, LLC.

“Wholly-Owned Subsidiary” of a Person means (a) any Subsidiary all of the outstanding voting securities of which shall at the time be owned or controlled, directly or indirectly, by such Person or one or more Wholly-Owned Subsidiaries of such Person, or by such Person and one or more Wholly-Owned Subsidiaries of such Person, or (b) any partnership, limited liability company, association, joint venture or similar business organization 100% of the ownership interests having ordinary voting power of which shall at the time be so owned or controlled.

The foregoing definitions shall be equally applicable to both the singular and plural forms of the defined terms. References herein to particular columns, lines or sections of any Person’s Annual Statement shall be deemed, where appropriate, to be references to the corresponding column, line or section of such Person’s Quarterly Statement, or if no such corresponding column, line or section exists or if any report form changes, then to the corresponding item referenced thereby. In the event that any changes in Agreement Accounting Principles or SAP occur after the date of this Agreement and such changes result in a material variation in the method of calculation of financial covenants or other terms of this Agreement, then the Borrowers, the Agent and the Lenders agree to amend such provisions of this Agreement so as to equitably reflect such changes in order that the criteria for evaluating each Borrower’s financial condition will be the same after such changes as if such changes had not occurred.

ARTICLE II

THE CREDITS

2.1 The Facility.

2.1.1 Description of Facility. The Lenders grant to the Borrowers a revolving credit facility pursuant to which, and upon the terms and subject to the conditions herein set forth:

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(a) each Lender severally agrees to make Ratable Loans to each of the Borrowers, and participate in Letters of Credit issued upon the request of the Borrowers, provided that after giving effect to the making of each such Ratable Loan and the issuance of each such Letter of Credit, such Lender’s Outstanding Credits shall not exceed in the aggregate at any one time outstanding the amount of such Lender’s Commitment in accordance with Section 2.2; and

(b) each Lender may, in its sole discretion, make bids to make Competitive Bid Loans to each of the Borrowers in accordance with Section 2.3.

2.1.2 Amount of Facility. In no event may the aggregate principal amount of all Outstanding Credits (including the Ratable Advances, the Competitive Bid Advances, the Swing Line Advances and the outstanding Letters of Credit and Reimbursement Obligations) (a) to all Borrowers exceed the Aggregate Commitment or (b) exceed $300,000,000 to Subsidiary Borrowers. The Commitments may be terminated or reduced from time to time pursuant to Section 2.5(c) or Section 8.1, and may be increased from time to time pursuant to Section 2.5(d).

2.1.3 Availability of Facility. Subject to the terms of this Agreement, the facility is available from the date hereof to the Facility Termination Date, and the Borrowers may borrow, repay and reborrow at any time prior to the Facility Termination Date. The Commitments to lend hereunder shall expire on the Facility Termination Date.

2.1.4 Repayment of Facility. Any outstanding Advances and all other unpaid Obligations shall be paid in full by the Borrowers on the Facility Termination Date.

2.1.5 Several Obligations. Each Borrower will be severally obligated for all Advances made to such Borrower and all interest accrued with respect thereto, and no Borrower will be obligated for any Advances made to any other Borrower; provided that each Borrower will be jointly and severally liable with each of its respective Subsidiary Borrowers in respect of the Obligations of each such Subsidiary Borrower in accordance with the corresponding Guaranty. Except as provided in this Section 2.1.5 and as otherwise expressly provided herein, the Borrowers shall be jointly and severally liable for all other Obligations hereunder.

2.2 Ratable Advances.

2.2.1 Ratable Advances. Each Ratable Advance hereunder shall consist of Loans made to a Borrower from the several Lenders ratably in proportion to the ratio that their respective Commitments bear to the Aggregate Commitment. The aggregate outstanding amount of Competitive Bid Advances shall reduce each Lender’s Commitment ratably in the proportion such Lender’s Commitment bears to the Aggregate Commitment regardless of which Lender or Lenders make such Competitive Bid Advances.

2.2.2 Types of Ratable Advances. The Ratable Advances may be ABR Advances or Eurodollar Ratable Advances, or a combination thereof, selected by the Borrower requesting such Advance in accordance with Section 2.2.3.

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2.2.3 Method of Selecting Types and Interest Periods for Ratable Advances.  Each applicable Borrower shall select the Type of Ratable Advance and, in the case of each Eurodollar Ratable Advance, the Interest Period applicable thereto from time to time. Such Borrower shall give the Agent irrevocable notice (a “Ratable Borrowing Notice”) not later than 11:00 a.m. (New York time) at least one Business Day before the Borrowing Date of each ABR Advance and three Business Days before the Borrowing Date for each Eurodollar Ratable Advance. Notwithstanding the foregoing, a Ratable Borrowing Notice for an ABR Advance may be given by a Borrower not later than 15 minutes after the time which such Borrower is required to reject one or more bids offered in connection with an Absolute Rate Auction pursuant to Section 2.3.6 and a Ratable Borrowing Notice for a Eurodollar Ratable Advance may be given not later than 15 minutes after the time such Borrower is required to reject one or more bids offered in connection with a Eurodollar Auction pursuant to Section 2.3.6. A Ratable Borrowing Notice shall specify:

(a) the Borrowing Date, which shall be a Business Day, of such Ratable Advance,

(b) the aggregate amount of such Ratable Advance,

(c) the Type of Ratable Advance selected, and

(d) in the case of each Eurodollar Ratable Advance, the Interest Period applicable thereto (which may not end after the Facility Termination Date).

2.2.4 Conversion and Continuation of Outstanding Ratable Advances. ABR Advances shall continue as ABR Advances unless and until such ABR Advances are converted into Eurodollar Advances pursuant to this Section 2.2.4 or are repaid in accordance with Section 2.7. Each Eurodollar Ratable Advance shall continue as a Eurodollar Ratable Advance until the end of the then applicable Eurodollar Interest Period therefor, at which time such Eurodollar Ratable Advance shall be automatically converted into an ABR Advance unless (i) such Eurodollar Ratable Advance is or was repaid in accordance with Section 2.7 or (ii) the Borrower to which such Eurodollar Ratable Advance was made shall have given the Agent a Conversion/Continuation Notice (as defined below) requesting that, at the end of such Eurodollar Interest Period, such Eurodollar Ratable Advance continue as a Eurodollar Ratable Advance for the same or another Eurodollar Interest Period. Subject to the terms of Section 2.6, each Borrower may elect from time to time to convert all or any part of an ABR Advance made to such Borrower into a Eurodollar Ratable Advance. Such Borrower shall give the Agent irrevocable notice (a “Conversion/Continuation Notice”) of each conversion of an ABR Advance into a Eurodollar Ratable Advance or continuation of a Eurodollar Ratable Advance not later than 11:00 a.m. (New York time) at least three Business Days prior to the date of the requested conversion or continuation, specifying:

(a) the requested date of such conversion or continuation, which shall be a Business Day,

(b) the aggregate amount and Type of the Ratable Advance which is to be converted or continued, and

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(c) the amount of such Ratable Advance which is to be converted into or continued as a Eurodollar Ratable Advance and the duration of the Eurodollar Interest Period applicable thereto.

2.3 Competitive Bid Advances.

2.3.1. Competitive Bid Option. In addition to Ratable Advances pursuant to Section 2.2, but subject to the terms and conditions of this Agreement (including, without limitation, the limitation set forth in Section 2.1.2 as to the maximum aggregate principal amount of all outstanding Advances hereunder), each Borrower may, as set forth in this Section 2.3, request the Lenders, prior to the Facility Termination Date, to make offers to make Competitive Bid Advances to such Borrower. Each Lender may, but shall have no obligation to, make such offers and such Borrower may, but shall have no obligation to, accept any such offers in the manner set forth in this Section 2.3. Each Competitive Bid Advance to a Borrower shall be repaid by such Borrower on the last day of the Interest Period applicable thereto.

2.3.2. Competitive Bid Quote Request. When a Borrower (in such capacity, a “Requesting Borrower”) wishes to request offers to make Competitive Bid Loans under this Section 2.3, it shall transmit to the Agent by telecopy a Competitive Bid Quote Request so as to be received no later than (i) 11:00 a.m. (New York time) at least five Business Days prior to the Borrowing Date proposed therein, in the case of a Eurodollar Auction, or (ii) 10:00 a.m. (New York time) at least one Business Day prior to the Borrowing Date proposed therein, in the case of an Absolute Rate Auction, specifying:

(a) the proposed Borrowing Date, which shall be a Business Day, for such Competitive Bid Advance,

(b) the aggregate principal amount of such Competitive Bid Advance,

(c) whether the Competitive Bid Quotes requested are to set forth a Competitive Bid Margin or an Absolute Rate, or both,

(d) whether the proposed Competitive Bid Advance will be subject to prepayment, and

(e) the Interest Period applicable thereto (which may not end after the Facility Termination Date).

The Requesting Borrower may request offers to make Competitive Bid Loans for more than one Interest Period and for a Eurodollar Auction and an Absolute Rate Auction in a single Competitive Bid Quote Request. No Competitive Bid Quote Request shall be given within 5 Business Days (or such other number of days as the requesting Borrower and the Agent may agree) of any other Competitive Bid Quote Request. A Competitive Bid Quote Request that does not conform substantially to the format of Exhibit E hereto shall be rejected, and the Agent shall promptly notify the Requesting Borrower of such rejection.

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2.3.3. Invitation for Competitive Bid Quotes. Promptly and in any event before the close of business on the same Business Day of receipt of a Competitive Bid Quote Request that is not rejected pursuant to Section 2.3.2, the Agent shall send to each of the Lenders by telecopy an Invitation for Competitive Bid Quotes substantially in the form of Exhibit F hereto, which shall constitute an invitation by the Requesting Borrower to each Lender to submit Competitive Bid Quotes offering to make the Competitive Bid Loans to which such Competitive Bid Quote Request relates in accordance with this Section 2.3.

2.3.4. Submission and Contents of Competitive Bid Quotes. (a) Each Lender may, in its sole discretion, submit a Competitive Bid Quote containing an offer or offers to make Competitive Bid Loans in response to any Invitation for Competitive Bid Quotes. Each Competitive Bid Quote must comply with the requirements of this Section 2.3.4 and must be submitted to the Agent by telecopy at its offices specified in or pursuant to Article XIII not later than (i) 10:00 a.m. (New York time) at least three Business Days prior to the proposed Borrowing Date, in the case of a Eurodollar Auction or (ii) 10:00 a.m. (New York time) on the proposed Borrowing Date, in the case of an Absolute Rate Auction (or, in either case upon reasonable prior notice to the Lenders, such other time and date as the Requesting Borrower and the Agent may agree); provided that Competitive Bid Quotes submitted by CUSA may only be submitted if the Agent or CUSA notifies the Requesting Borrower of the terms of the offer or offers contained therein not later than 15 minutes prior to the latest time at which the relevant Competitive Bid Quotes must be submitted by the other Lenders. Subject to Articles IV and VIII, any Competitive Bid Quote so made shall be irrevocable except with the written consent of the Agent given on the instructions of the Requesting Borrower.

(b) Each Competitive Bid Quote shall be in substantially the form of Exhibit D hereto and shall in any case specify:

(i) the proposed Borrowing Date, which shall be the same as that set forth in the applicable Invitation for Competitive Bid Quotes,

(ii) the principal amount of the Competitive Bid Loan for which each such offer is being made, which principal amount (A) may be greater than, less than or equal to the Commitment of the quoting Lender, (B) must be at least $25,000,000 and an integral multiple of $1,000,000, and (C) may not exceed the principal amount of Competitive Bid Loans for which offers were requested,

(iii) in the case of a Eurodollar Auction, the Competitive Bid Margin offered for each such Competitive Bid Loan,

(iv) the minimum amount, if any, of the Competitive Bid Loan which may be accepted by the Requesting Borrower,

(v) in the case of an Absolute Rate Auction, the Absolute Rate offered for each such Competitive Bid Loan,

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(vi) the maximum aggregate amount, if any, of Competitive Bid Loans offered by the quoting Lender which may be accepted by the Requesting Borrower, and

(vii) the identity of the quoting Lender.

(c) The Agent shall reject any Competitive Bid Quote that:

(i) is not substantially in the form of Exhibit D hereto or does not specify all of the information required by this Section 2.3.4(c),

(ii) contains qualifying, conditional or similar language, other than any such language contained in Exhibit D hereto,

(iii) proposes terms other than or in addition to those set forth in the applicable Invitation for Competitive Bid Quotes, or

(iv) arrives after the time set forth in Section 2.3.4(a).

If any Competitive Bid Quote shall be rejected pursuant to this Section 2.3.4(c), then the Agent shall notify the relevant Lender of such rejection as soon as practical.

2.3.5. Notice to Requesting Borrower. The Agent shall promptly notify the Requesting Borrower of the terms (a) of any Competitive Bid Quote submitted by a Lender that is in accordance with Section 2.3.4 and (b) of any Competitive Bid Quote that amends, modifies or is otherwise inconsistent with a previous Competitive Bid Quote submitted by such Lender with respect to the same Competitive Bid Quote Request. Any such subsequent Competitive Bid Quote shall be disregarded by the Agent unless such subsequent Competitive Bid Quote specifically states that it is submitted solely to correct a manifest error in such former Competitive Bid Quote. The Agent’s notice to the Requesting Borrower shall specify the aggregate principal amount of Competitive Bid Loans for which offers have been received for each Interest Period specified in the related Competitive Bid Quote Request and the respective principal amounts and Eurodollar Bid Rates or Absolute Rates, as the case may be, so offered.

2.3.6. Acceptance and Notice by Borrower. Not later than (a) 11:00 a.m. (New York time) at least three Business Days prior to the proposed Borrowing Date, in the case of a Eurodollar Auction or (b) 11:00 a.m. (New York time) on the proposed Borrowing Date, in the case of an Absolute Rate Auction (or, in either case upon reasonable prior notice to the Lenders, such other time and date as the Requesting Borrower and the Agent may agree), the Requesting Borrower shall notify the Agent of its acceptance or rejection of the offers so notified to it pursuant to Section 2.3.5; provided, however, that the failure by the Requesting Borrower to give such notice to the Agent shall be deemed to be a rejection of all such offers. In the case of acceptance, such notice (a “Competitive Bid Borrowing Notice”) shall specify the aggregate principal amount of offers for each Interest Period that are accepted. The Requesting Borrower may accept any Competitive Bid Quote in whole or in part (subject to the terms of Section 2.3.4(b)(iv)); provided that:

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(a) the aggregate principal amount of each Competitive Bid Advance may not exceed the applicable amount set forth in the related Competitive Bid Quote Request,

(b) acceptance of offers may only be made on the basis of ascending Eurodollar Bid Rates or Absolute Rates, as the case may be, and

(c) the Requesting Borrower may not accept any offer that is described in Section 2.3.4(c) or that otherwise fails to comply with the requirements of this Agreement.

2.3.7. Allocation by Agent. If offers are made by two or more Lenders with the same Eurodollar Bid Rates or Absolute Rates, as the case may be, for a greater aggregate principal amount than the amount in respect of which offers are accepted for the related Interest Period, the principal amount of Competitive Bid Loans in respect of which such offers are accepted shall be allocated by the Agent among such Lenders as nearly as possible (in such multiples, not greater than $1,000,000, as the Agent may deem appropriate) in proportion to the aggregate principal amount of such offers; provided, however, that no Lender shall be allocated a portion of any Competitive Bid Advance which is less than the minimum amount which such Lender has indicated that it is willing to accept. Allocations by the Agent of the amounts of Competitive Bid Loans shall be conclusive in the absence of manifest error. The Agent shall promptly, but in any event on the same Business Day, notify each Lender of its receipt of a Competitive Bid Borrowing Notice and the aggregate principal amount of such Competitive Bid Advance allocated to each participating Lender.

2.3.8. Administration Fee. Each Requesting Borrower hereby agrees to pay to the Agent an administration fee of $3,000 for each Competitive Bid Quote Request transmitted by such Requesting Borrower to the Agent pursuant to Section 2.3.2. Such administration fee shall be payable in arrears on each Payment Date hereafter and on the Facility Termination Date (or such earlier date on which the Aggregate Commitment shall terminate or be cancelled) for any period then ending for which such fee, if any, shall not have been theretofore paid.

2.4 Method of Borrowing. Not later than 1:00 p.m. (New York time) on each Borrowing Date, each Lender shall make available its Loan or Loans in funds immediately available in New York to the Agent at its address specified pursuant to Article XIII. Promptly upon its receipt thereof, the Agent will make the funds so received from the Lenders available to the applicable Borrower at the Agent’s aforesaid address.

2.5 Fees; Reduction and Increase of Aggregate Commitment.

(a) Facility Fee. The Borrowers jointly and severally agree to pay to the Agent for the account of each Lender a facility fee (the “Facility Fee”) at a per annum rate equal to the Applicable Facility Fee Rate on each Lender’s Commitment regardless of usage. Each Borrower shall be obligated to pay to the Agent for the account of each Lender an undivided one-third portion of the Facility Fee, with such Borrower’s portion

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based on its Status (as defined in the Pricing Schedule). The Facility Fee is payable quarterly in arrears on each Payment Date hereafter and on the Facility Termination Date.

(b) Utilization Fee. For each day on which the aggregate principal amount of all outstanding Advances (including Ratable Advances, Competitive Bid Advances and Swing Line Advances) exceeds 50% of the Aggregate Commitment, the Borrowers jointly and severally agree to pay to the Agent for the account of each Lender based on each Lender’s outstanding Advances a utilization fee (the “Utilization Fee”) at a per annum rate equal to the Applicable Utilization Fee Rate on the average daily amount of all outstanding Advances. The Utilization Fee is payable quarterly in arrears on each Payment Date hereafter and on the Facility Termination Date.

(c) Reductions in Aggregate Commitment. The Borrowers may permanently reduce the Aggregate Commitment in whole, or in part ratably among the Lenders in integral multiples of $10,000,000, upon at least three Business Days’ written notice to the Agent, which notice shall specify the amount of any such reduction, provided, however, that the amount of the Aggregate Commitment may not be reduced below the aggregate principal amount of the Outstanding Credits. All accrued fees shall be payable on the effective date of any termination of the obligations of the Lenders to make Loans hereunder. Subject to the foregoing, any reduction of the Commitments to an amount below the L/C Commitment Amount shall result in a reduction of the L/C Commitment Amount to the extent of such deficit. Each such notice of termination or reduction shall be irrevocable; provided, further, that, if, after giving effect to any reduction of the Commitments, the Swing Line Sublimit exceeds the amount of the Aggregate Commitment, the Swing Line Sublimit shall be automatically reduced by the amount of such excess.

(d) Increase in Aggregate Commitment. The Borrowers may, at their option, no more than one time in any calendar year, seek to increase the Aggregate Commitment, in minimum increments of $25,000,000, by up to an aggregate amount of $300,000,000 (resulting in a maximum Aggregate Commitment of $1,300,000,000) upon at least three (3) Business Days’ written notice to the Agent, which notice shall specify the amount of such increase and shall be delivered at a time when no Default or Unmatured Default has occurred and is continuing. The Borrowers may, after giving such notice, offer the increase in the Aggregate Commitment on either a ratable basis to the Lenders or on a non-pro rata basis to one or more Lenders and/or to other banks or entities reasonably acceptable to the Agent. Any Lender may, in its sole discretion, accept or reject any offer from the Borrowers to increase its Commitment. No increase in the Aggregate Commitment shall become effective until the existing or new Lenders extending such incremental Commitment amount and the Borrowers shall have delivered to the Agent a document in form reasonably satisfactory to the Agent pursuant to which any such existing Lender states the amount of its Commitment increase, any such new Lender states its Commitment amount and agrees to assume and accept the obligations and rights of a Lender hereunder and the Borrowers accept such incremental Commitments. The Lenders (new or existing) shall accept an assignment from the existing Lenders, and the existing Lenders shall make an assignment to the new or existing Lender accepting a new or increased Commitment, of an interest in each then outstanding Ratable Advance such

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that, after giving effect thereto, all Ratable Advances are held ratably by the Lenders in proportion to their respective Commitments. Assignments pursuant to the preceding sentence shall be made in exchange for the principal amount assigned plus accrued and unpaid interest and Facility Fees. The Borrowers shall make any payments under Section 3.4 resulting from such assignments.

(e) Letter of Credit Fee. Each Borrower shall severally pay to the Agent, for the account of the Lenders, a fee in an amount equal to the then Applicable Margin for Eurodollar Advances multiplied by the Stated Amount of each Letter of Credit issued for the account of such Borrower, in each case for the number of days that such Letter of Credit is issued but undrawn, payable quarterly in arrears on each Payment Date and on the Termination Date.

(f) Fronting Fee. Each Borrower agrees to pay to each Fronting Bank, for its own account, certain fees in such amounts and payable on such terms as set forth in the Fronting Bank Fee Letter to which such Fronting Bank is a party.

2.6 Minimum Amount of Each Ratable Advance; Minimum Amount of Fixed Rate Advances. Each Eurodollar Ratable Advance shall be in the minimum amount of $25,000,000 (and in multiples of $1,000,000 if in excess thereof), and each ABR Advance shall be in the minimum amount of $25,000,000 (and in multiples of $1,000,000 if in excess thereof); provided, however, that any ABR Advance may be in the amount of the unused Aggregate Commitment. No Borrower shall request a Fixed Rate Advance if, after giving effect to the requested Fixed Rate Advance, more than six (6) separate Fixed Rate Advances would be outstanding in respect of all Borrowers.

2.7 Principal Payments.

(a) Optional Principal Payments. Each Borrower may from time to time pay, without penalty or premium, all outstanding ABR Advances (other than Swing Line Advances), or, in a minimum aggregate amount of $10,000,000, any portion of the outstanding ABR Advances (other than Swing Line Advances), upon one Business Day’s prior notice to the Agent. Each Borrower may from time to time pay, subject to the payment of any funding indemnification amounts required by Section 3.4 but without penalty or premium, all outstanding Eurodollar Ratable Advances, or, in a minimum aggregate amount of $10,000,000 or any integral multiple of $1,000,000 in excess thereof, any portion of the outstanding Eurodollar Ratable Advances upon three Business Days’ prior notice to the Agent. Except as specifically agreed to by the applicable Borrower and Lender, a Competitive Bid Loan may not be paid prior to the last day of the applicable Interest Period. Any optional principal payment of a Competitive Bid Loan which is permitted by such Borrower and such Lender shall be made subject to the payment of any funding indemnification amounts required by Section 3.4 and to any minimum amounts agreed upon by such Borrower and such Lender. Each partial prepayment of any Swing Line Borrowing shall be without penalty or premium and in an aggregate principal amount not less than $1,000,000 with notice to the Agent and the Swing Line Lender by 11:00 a.m. (New York time) on the date of repayment.

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(b) Mandatory Principal Payments.

(i) If and to the extent that the Outstanding Credits on any date hereunder shall exceed the aggregate amount of the Commitments hereunder on such date, each Borrower agrees to (A) prepay on such date a principal amount of Advances made to it and/or (B) pay to the Agent an amount in immediately available funds (which funds shall be held as collateral pursuant to arrangements satisfactory to the Agent) equal to all or a portion of the amount available for drawing under the Letters of Credit outstanding at such time and issued for its account, which prepayments under clause (A) and payment under clause (B) shall, when taken together result in the amount of Outstanding Credits (after giving effect to such prepayments) minus the amount paid to the Agent pursuant to clause (B) being less than or equal to the aggregate amount of the Commitments hereunder on such date.

(ii) If at any time the aggregate outstanding principal amount of the Swing Line Advances exceeds the Swing Line Sublimit, each Borrower agrees to prepay the Swing Line Advances made to it in a principal amount sufficient to cause the aggregate outstanding principal amount of Swing Line Advances to be less than or equal to the Swing Line Sublimit.

(iii) Each Swing Line Advance shall be paid in full not later than 7 business days after the date such Swing Line Advance is made.

2.8 Changes in Interest Rate, etc. Each ABR Advance shall bear interest on the outstanding principal amount thereof, for each day from and including the date such Advance is made or is automatically converted from a Eurodollar Ratable Advance into an ABR Advance pursuant to Section 2.2.4, to but excluding the date it is paid or is converted into a Eurodollar Ratable Advance pursuant to Section 2.2.4 hereof, at a rate per annum equal to the Alternate Base Rate for such day. Changes in the rate of interest on that portion of any Advance maintained as an ABR Advance will take effect simultaneously with each change in the Alternate Base Rate. Each Eurodollar Advance shall bear interest on the outstanding principal amount thereof from and including the first day of the Interest Period applicable thereto to (but not including) the last day of such Interest Period (i) in the case of a Eurodollar Ratable Advance, at the Eurodollar Rate for the Interest Period in effect for such Eurodollar Ratable Advance and (ii) in the case of a Eurodollar Bid Rate Advance, at the Eurodollar Bid Rate for the Interest Period in effect for such Eurodollar Bid Rate Advance. Each Absolute Rate Advance shall bear interest on the outstanding principal amount thereof from and including the first day of the Interest Period applicable thereto to (but not including) the last day of such Interest Period at the Absolute Rate applicable to such Absolute Rate Advance. No Interest Period may end after the Facility Termination Date.

2.9 Rates Applicable After Default. Notwithstanding anything to the contrary contained in Section 2.2.3 or 2.2.4, during the continuance of a Default or Unmatured Default with respect to any Borrower, the Required Lenders may, at their option, by notice to such Borrower (which notice may be revoked at the option of the Required Lenders notwithstanding any provision of Section 8.2 requiring unanimous consent of the Lenders to changes in interest

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rates), declare that no Advance to such Borrower may be made as, converted into or continued as a Eurodollar Ratable Advance or Swing Line Advance. During the continuance of a Default with respect to such Borrower, the Required Lenders may, at their option, by notice to such Borrower (which notice may be revoked at the option of the Required Lenders notwithstanding any provision of Section 8.2 requiring unanimous consent of the Lenders to changes in interest rates), declare that (a) each Fixed Rate Advance made to such Borrower shall bear interest for the remainder of the applicable Interest Period at the rate otherwise applicable to such Interest Period plus 2% per annum, (b) each ABR Advance made to such Borrower shall bear interest at a rate per annum equal to the Alternate Base Rate in effect from time to time plus 2% per annum and (c) the Letter of Credit fee set forth in Section 2.5(e) shall be increased by 2% per annum, provided that, during the continuance of a Default with respect to any Borrower under Section 7.6 or 7.7, the interest rates set forth in clauses (a) and (b) above shall be applicable to all Extensions of Credit to all Borrowers without any election or action on the part of the Agent or any Lender.

2.10 Method of Payment.

(a) Obligations. All payments of the Obligations hereunder shall be made, without setoff, deduction, or counterclaim, in immediately available funds to the Agent at the Agent’s address specified pursuant to Article XIII, or at any other Lending Installation of the Agent specified in writing by the Agent to the Borrowers, by 1:00 p.m. (New York time) on the date when due and shall (except with respect to repayments of Swing Line Advances and except in the case of Reimbursement Obligations (which shall be paid and applied as set forth in Section 2.18(l)) or as otherwise specifically required hereunder) be applied ratably by the Agent among the Lenders. Each payment delivered to the Agent for the account of any Lender shall be delivered promptly by the Agent to such Lender in the same type of funds that the Agent received at its address specified pursuant to Article XIII or at any Lending Installation specified in a notice received by the Agent from such Lender. The Agent is hereby authorized to charge the account of each Borrower maintained with CUSA for each payment of principal, interest and fees as it becomes due hereunder with respect to such Borrower.

(b) Returned Payments. To the extent that any payment by or on behalf of a Borrower is made to the Agent, any Fronting Bank or any Lender, or the Agent, any Fronting Bank or any Lender exercises its right of setoff, and such payment or the proceeds of such setoff or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to a trustee, receiver or any other party, in connection with any proceeding under any bankruptcy, insolvency or other similar law now or hereafter in effect or otherwise (including pursuant to any settlement entered into by the Agent, such Fronting Bank or such Lender in its discretion) (a “Returned Payment”), then (i) to the extent of such recovery, the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such setoff had not occurred, and (ii) each Lender and each Fronting Bank severally agrees to pay to the Agent upon demand its applicable share (without duplication) of any amount so recovered from or repaid by the Agent, plus interest thereon from the date of such demand to the date such payment is made at a rate per annum equal to the Federal Funds Effective Rate from time to time in

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effect. The obligations of the Lenders and the Fronting Banks under clause (ii) of the preceding sentence shall survive the payment in full of any amounts hereunder and the termination of this Agreement.

2.11 Noteless Agreement; Evidence of Indebtedness.  (a) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of each Borrower to such Lender resulting from each Loan made by such Lender to such Borrower from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder.

(b) The Agent shall also maintain accounts in which it will record (i) the amount of each Loan made to each Borrower hereunder, the Type thereof and the Interest Period with respect thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from each Borrower to each Lender hereunder and (iii) the amount of any sum received by the Agent hereunder from each Borrower and each Lender’s share thereof.

(c) The entries maintained in the accounts maintained pursuant to paragraphs (a) and (b) above shall be prima facie evidence of the existence and amounts of the Obligations therein recorded; provided, however, that the failure of the Agent or any Lender to maintain such accounts or any error therein shall not in any manner affect the obligation of the Borrowers to repay the Obligations in accordance with their terms.

(d) Any Lender may request that its Ratable Loans or its Competitive Bid Loans be evidenced by Ratable Notes or Competitive Bid Notes, respectively. In such event, each Borrower shall prepare, execute and deliver to such Lender a Ratable Note or a Competitive Bid Note, as the case may be, payable to the order of such Lender. Thereafter, the Loans evidenced by such Note and interest thereon shall at all times (including after any assignment pursuant to Section 12.3) be represented by one or more Notes payable to the order of the payee named therein or any assignee pursuant to Section 12.3, except to the extent that any such Lender or assignee subsequently returns any such Note for cancellation and requests that such Loans once again be evidenced as described in paragraphs (a) and (b) above.

2.12 Telephonic Notices. Each Borrower hereby authorizes the Lenders and the Agent to extend, convert or continue Advances, effect selections of Types of Advances, submit Competitive Bid Quotes and transfer funds based on telephonic notices made by any person or persons the Agent or any Lender in good faith believes to be acting on behalf of such Borrower, it being understood that the foregoing authorization is specifically intended to allow Borrowing Notices, Conversion/Continuation Notices and Competitive Bid Quote Requests to be given telephonically. Each Borrower agrees to deliver promptly to the Agent a written confirmation, if such confirmation is requested by the Agent or any Lender, of each telephonic notice signed by an Authorized Officer. If the written confirmation differs in any material respect from the action taken by the Agent and the Lenders, the records of the Agent and the Lenders shall govern absent manifest error.

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2.13 Interest Payment Dates; Interest and Fee Basis. Interest accrued on each ABR Advance (other than Swing Line Advances) shall be payable on each Payment Date, commencing with the first such date to occur after the date hereof, on any date on which the ABR Advance is prepaid, whether due to acceleration or otherwise, and at maturity. Interest accrued on that portion of the outstanding principal amount of any ABR Advance converted into a Eurodollar Ratable Advance on a day other than a Payment Date shall be payable on the date of conversion. Interest accrued on each Fixed Rate Advance shall be payable on the last day of its applicable Interest Period, on any date on which the Fixed Rate Advance is prepaid, whether by acceleration or otherwise, and at maturity. Interest accrued on each Fixed Rate Advance having an Interest Period longer than three months shall also be payable on the last day of each three-month interval during such Interest Period. Interest on Fixed Rate Advances and fees shall be calculated for actual days elapsed on the basis of a 360-day year, and interest on ABR Advances shall be calculated for actual days elapsed on the basis of a 365 or 366 day year, as applicable. Interest shall be payable for the day an Advance is made but not for the day of any payment on the amount paid if payment is received prior to noon (local time) at the place of payment. If any payment of principal of or interest on an Advance shall become due on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day and, in the case of a principal payment, such extension of time shall be included in computing interest in connection with such payment.

2.14 Notification of Advances, Interest Rates, Prepayments and Commitment Reductions. Promptly after receipt thereof, the Agent will notify each Lender of the contents of each Aggregate Commitment reduction notice, Ratable Borrowing Notice, Conversion/Continuation Notice, Competitive Bid Borrowing Notice, Notice of Swing Line Borrowing and repayment notice received by it hereunder. Promptly after notice from the Fronting Bank, the Agent will notify each Lender of the contents of each Letter of Credit Request. The Agent will notify each Lender of the interest rate applicable to each Fixed Rate Advance promptly upon determination of such interest rate and will give each Lender prompt notice of each change in the Alternate Base Rate.

2.15 Lending Installations. Each Lender may book its Loans and its participation interests in outstanding Letters of Credit and Reimbursement Obligations at any Lending Installation selected by such Lender or such Fronting Bank, as the case may be, and may change its Lending Installation from time to time. All terms of this Agreement shall apply to any such Lending Installation and the Loans, participation interests in outstanding Letters of Credit and Reimbursement Obligations, and any Notes issued hereunder shall be deemed held by each Lender or such Fronting Bank, as the case may be, for the benefit of any such Lending Installation. Each Lender and each Fronting Bank may, by written notice to the Agent and the Borrowers in accordance with Article XIII, designate replacement or additional Lending Installations through which Loans will be made by it or Letters of Credit will be issued by it and for whose account Loan payments or payments with respect to Letters of Credit are to be made.

2.16 Non-Receipt of Funds by the Agent. Unless a Borrower or a Lender, as the case may be, notifies the Agent prior to the date on which it is scheduled to make payment to the Agent of (a) in the case of a Lender, the proceeds of a Loan or (b) in the case of a Borrower, a payment of principal, interest or fees to the Agent for the account of the Lenders, that it does not intend to make such payment, the Agent may assume that such payment has been made. The

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Agent may, but shall not be obligated to, make the amount of such payment available to the intended recipient in reliance upon such assumption. If such Lender or such Borrower, as the case may be, has not in fact made such payment to the Agent, the recipient of such payment shall, on demand by the Agent, repay to the Agent the amount so made available together with interest thereon in respect of each day during the period commencing on the date such amount was so made available by the Agent until the date the Agent recovers such amount at a rate per annum equal to (i) in the case of payment by a Lender, the Federal Funds Effective Rate for such day for the first three days and, thereafter, the interest rate applicable to the relevant Loan or (ii) in the case of payment by a Borrower, the interest rate applicable to the relevant Loan. The failure of any Lender to make any Loan required to be made by it shall not relieve any other Lender of its obligations hereunder; provided, that the Commitments and the Competitive Bid Advances of the Lenders are several and no Lender shall be responsible for any other Lender’s failure to make Loans as required hereunder.

2.17 Swing Line Advances.

(a) The Swing Line. Subject to the terms and conditions set forth herein, each Swing Line Lender agrees to make Swing Line Advances to any Borrower (including any Subsidiary Borrower following the satisfaction in full of the conditions set forth in Section 2.19(a)) in U.S. dollars only from time to time on any Business Day during the period from the date hereof until the Facility Termination Date in an aggregate amount not to exceed at any time the amount of such Swing Line Lender’s Swing Line Commitment; provided, however, no Swing Line Lender shall be required to make a Swing Line Advance hereunder if (i) the amount of such Swing Line Advance, together with the aggregate principal amount of all other Swing Line Advances outstanding would exceed the Swing Line Sublimit, (ii) the making of such Swing Line Advance, together with the making of the other Swing Line Advances constituting part of the same Swing Line Borrowing, would cause the total amount of all Outstanding Credits to exceed the Aggregate Commitment or (iii) the making of such Swing Line Advance by a Swing Line Lender, together with such Swing Line Lender’s other Outstanding Credits, would cause the total amount of all Outstanding Credits of such Swing Line Lender to exceed the amount of the Commitment of such Swing Line Lender. Within the foregoing limits, and subject to the other terms and conditions hereof, each Borrower may borrow under this Section 2.17, prepay under Section 2.7, and reborrow under this Section 2.17. Immediately upon the making of a Swing Line Advance, each Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from the applicable Swing Line Lender a risk participation in such Swing Line Advance in an amount equal to such Lender’s ratable portion (according to the Lenders’ respective Commitments) times the amount of such Swing Line Advance. No more than five Swing Line Advances may be outstanding hereunder at any time.

(b) Borrowing Procedures. Each Swing Line Borrowing shall be made upon any Borrower’s irrevocable notice to the applicable Swing Line Lender and the Agent, which may be given by telephone. Each such notice must be received by the applicable Swing Line Lender and the Agent not later than 2:00 p.m. (New York time) on the date of the proposed Swing Line Borrowing or at such later time as a Swingline Lender may agree, and shall specify (i) the date of such Swing Line Borrowing, (ii) the aggregate

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amount of such Swing Line Borrowing, which shall be in an aggregate amount of not less than $1,000,000 or an integral multiple of $1,000,000 in excess thereof and (iii) the identity of the Borrower requesting such Swing Line Borrowing. Each such telephonic notice must be confirmed promptly by delivery to the relevant Swing Line Lender and the Agent of a written Notice of Swing Line Borrowing, appropriately completed and signed by such Borrower. Promptly after receipt by such Swing Line Lender of any telephonic Notice of Swing Line Borrowing, such Swing Line Lender will confirm with the Agent (by telephone or in writing) that the Agent has also received such Notice of Swing Line Borrowing and, if not, such Swing Line Lender will notify the Agent (by telephone or in writing) of the contents thereof. Unless such Swing Line Lender has received notice (by telephone or in writing) from the Agent (including at the request of any Lender) prior to 3:00 p.m. (New York time) on the date of the proposed Swing Line Borrowing (A) directing such Swing Line Lender not to make such Swing Line Advance as a result of the limitations set forth in the first sentence of Section 2.17(a) or (B) that one or more of the applicable conditions specified in Article IV is not then satisfied, then, subject to the terms and conditions hereof, such Swing Line Lender will, not later than 4:00 p.m. on the borrowing date specified in such Notice of Swing Line Borrowing, make the amount of its Swing Line Advance available to the applicable Borrower at its office by crediting the account of such Borrower on the books of such Swing Line Lender in immediately available funds.

(c) Interest on Swing Line Advances. Each Borrower agrees to pay interest on the unpaid principal amount of each Swing Line Advance made by each Swing Line Lender to such Borrower from the date of such Swing Line Advance until such principal amount shall be paid in full, at a rate per annum equal to the LIBOR Market Index Rate plus the Applicable Margin, payable on the date such Swing Line Advance is paid in full and as provided in Section 2.7; provided, however, that if and for so long as a Default shall have occurred and be continuing the unpaid principal amount of each Swing Line Advance shall (to the fullest extent permitted by law) bear interest until paid in full at a rate per annum equal at all times to a rate equal to 2% above the rate then applicable to such Swing Line Advance or, if higher, the Alternate Base Rate plus 2% per annum, payable upon demand.

(d) Refinancing of Swing Line Advances.

(i) Each Swing Line Lender at any time in its sole and absolute discretion may request, on behalf of any Borrower (each of which hereby irrevocably authorizes each Swing Line Lender to so request on its behalf), that each Lender make an ABR Advance in an amount equal to the amount of Swing Line Advances made by such Swing Line Lender then outstanding to such Borrower. Such request shall be made in writing and in accordance with the requirements of Section 2.2, without regard to the minimum and multiples specified therein for the principal amount of ABR Advances, but subject to the unutilized portion of the Commitments and the conditions set forth in Section 4.2. Such Swing Line Lender shall furnish such Borrower with a copy of the applicable written notice of borrowing promptly after delivering such notice to the Agent. Each Lender shall, before 1:00 p.m. (New York time) on the date of such

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borrowing, make available for the account of its applicable Lending Installation to the Agent at its address referred to in Section 13.1, in same day funds, such Lender’s ratable portion (according to the Lenders’ respective Commitments) of such ABR Advance. After the Agent’s receipt of such funds and upon fulfillment of the applicable conditions set forth in Article IV, the Agent will make such funds available to the applicable Swing Line Lender for the account of such Borrower at the Agent’s aforesaid address, whereupon, subject to Section 2.17(d)(ii), each Lender that so makes funds available shall be deemed to have made an ABR Advance to such Borrower in such amount. The Agent shall remit the funds so received to the applicable Swing Line Lender.

(ii) If for any reason any Swing Line Advance cannot be refinanced by an ABR Advance in accordance with Section 2.17(d)(i), the request for ABR Advances submitted by a Swing Line Lender as set forth herein shall be deemed to be a request by such Swing Line Lender that each Lender fund its risk participation in the relevant Swing Line Advances and each Lender’s payment to the Agent for the account of such Swing Line Lender pursuant to Section 2.17(c)(i) shall be deemed payment in respect of such participation.

(iii) If any Lender fails to make available to the Agent for the account of any Swing Line Lender any amount required to be paid by such Lender pursuant to the foregoing provisions of this Section 2.17(d) by the time specified in Section 2.17(d)(i), such Swing Line Lender shall be entitled to recover from such Lender (acting through the Agent), on demand, such amount with interest thereon for the period from the date such payment is required to the date on which such payment is immediately available to such Swing Line Lender at a rate per annum equal to the greater of the Federal Funds Effective Rate and a rate determined by such Swing Line Lender in accordance with banking industry rules on interbank compensation. A certificate of such Swing Line Lender submitted to any Lender (through the Agent) with respect to any amounts owing under this clause (iii) shall be conclusive absent manifest error.

(iv) Each Lender’s obligation to make ABR Advances or to purchase and fund risk participations in Swing Line Advances pursuant to this Section 2.17(d) shall be absolute and unconditional and shall not be affected by any circumstance, including (A) any setoff, counterclaim, recoupment, defense or other right which such Lender may have against any Swing Line Lender, any Borrower or any other Person for any reason whatsoever, (B) the occurrence or continuance of an Unmatured Default or Default, or (C) any other occurrence, event or condition, whether or not similar to any of the foregoing; provided, however, that each Lender’s obligation to make ABR Advances pursuant to this Section 2.17(d) is subject to the conditions set forth in Section 4.2. No such funding of risk participations shall relieve or otherwise impair the obligation of any Borrower to repay Swing Line Advances, together with interest as provided herein.

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(e) Repayment of Participations.

(i) At any time after any Lender has purchased and funded a risk participation in a Swing Line Advance, if the applicable Swing Line Lender receives any payment on account of such Swing Line Advance, such Swing Line Lender will distribute to such Lender its ratable portion (according to the Lenders’ respective Commitments) of such payment (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Lender’s risk participation was funded) in the same funds as those received by such Swing Line Lender.

(ii) If any payment received by any Swing Line Lender in respect of principal or interest on any Swing Line Advance is required to be returned by such Swing Line Lender under any of the circumstances described in Section 2.10(b) (including pursuant to any settlement entered into by the Swing Line Lender in its discretion), each Lender shall pay to such Swing Line Lender its ratable portion (according to the Lenders’ respective Commitments) thereof on demand of the Agent, plus interest thereon from the date of such demand to the date such amount is returned, at a rate per annum equal to the Federal Funds Rate. The Agent will make such demand upon the request of such Swing Line Lender. The obligations of the Lenders under this clause shall survive the payment in full of the obligations hereunder and the termination of this Agreement.

(f) Interest for Account of Swing Line Lenders. Each Swing Line Lender shall be responsible for invoicing the relevant Borrower for interest on the Swing Line Advances made to such Borrower. Until each Lender funds its ABR Advance or risk participation pursuant to this Section 2.17 to refinance such Lender’s ratable portion (according to the Lenders’ respective Commitments) of any Swing Line Advance, interest in respect of such ratable portion (according to the Lenders’ respective Commitments) shall be solely for the account of such Swing Line Lender.

(g) Payments Directly to Swing Line Lenders. Each Borrower with outstanding Swing Line Advances shall make all payments of principal and interest in respect of the Swing Line Advances directly to the Swing Line Lender that made such Advances.

2.18 Letters of Credit.

(a) Agreement of Fronting Banks. Subject to the terms and conditions of this Agreement, each Fronting Bank agrees to issue and amend (including, without limitation, to extend or renew) for the account of any Borrower or any Subsidiary thereof (each such Person, an “Account Party”) one or more standby letters of credit (individually, a “Letter of Credit” and collectively, the “Letters of Credit”) from and including the date hereof to the Facility Termination Date, in an aggregate Stated Amount at any time outstanding not to exceed the L/C Commitment Amount minus Reimbursement Obligations outstanding at such time. Each Letter of Credit shall be renewable (if so requested by the Borrower) and shall have an Expiration Date of no later than the earlier of (x) the Facility

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Termination Date and (y) the date occurring one year after the Date of Issuance of such Letter of Credit; provided, however, that no Fronting Bank will issue or amend a Letter of Credit if, immediately following such issuance or amendment, (i) the Stated Amount of such Letter of Credit, when aggregated with (1) the Stated Amounts of all other outstanding Letters of Credit and (2) the outstanding Reimbursement Obligations, would exceed the L/C Commitment Amount or (ii) the total amount of all Outstanding Credits would exceed the Aggregate Commitment. Letters of Credit shall be denominated in U.S. dollars only.

(b) Forms. Each Letter of Credit shall be in a form customarily used by the Fronting Bank that is to issue such Letter of Credit or in such other form as has been approved by such Fronting Bank. At the time of issuance or amendment, subject to the terms and conditions of this Agreement, the amount and the terms and conditions of each Letter of Credit shall be subject to approval by the applicable Fronting Bank and the applicable Borrower.

(c) Notice of Issuance; Application. The applicable Borrower shall give the applicable Fronting Bank and the Agent written notice (or telephonic notice confirmed in writing) at least five Business Days (or such lesser number to which the Fronting Bank may agree) prior to the requested Date of Issuance of a Letter of Credit, such notice to be in substantially the form of Exhibit H hereto (a “Letter of Credit Request”). Such Borrower shall also execute and deliver such customary letter of credit application forms as requested from time to time by such Fronting Bank. Such application forms shall indicate the identity of the Account Party and that such Borrower is the “Applicant” or shall otherwise indicate that such Borrower is the obligor in respect of any Letter of Credit to be issued thereunder. If the terms or conditions of the application forms conflict with any provision of this Agreement, the terms of this Agreement shall govern.

(d) Issuance. Provided that the applicable Borrower has given the notice prescribed by Section 2.18(c) and subject to the other terms and conditions of this Agreement, including the satisfaction of the applicable conditions precedent set forth in Article IV, the applicable Fronting Bank shall issue the requested Letter of Credit on the requested Date of Issuance as set forth in the applicable Letter of Credit Request for the benefit of the stipulated Beneficiary and shall deliver the original of such Letter of Credit to the Beneficiary at the address specified in the notice. At the request of the applicable Borrower, such Fronting Bank shall deliver a copy of each Letter of Credit to such Borrower within a reasonable time after the Date of Issuance thereof. Upon the request of such Borrower, such Fronting Bank shall deliver to such Borrower a copy of any Letter of Credit proposed to be issued hereunder prior to the issuance thereof.

(e) Notice of Drawing. Each Fronting Bank shall promptly notify the applicable Borrower by telephone, facsimile or other telecommunication of any Drawing under a Letter of Credit issued for the account of such Borrower by such Fronting Bank.

(f) Payments. Each Borrower hereby agrees to pay to each Fronting Bank, in the manner provided in subsection (g) below:

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(i) on each Drawing Date, an amount equal to the amount paid by such Fronting Bank under any Letter of Credit issued for the account of such Borrower by such Fronting Bank; and

(ii) if any Drawing shall be reimbursed to any Fronting Bank after 12:00 noon (New York time) on the Drawing Date, interest on any and all amounts required to be paid pursuant to clause (i) of this subsection (f) from and after the due date thereof until payment in full, payable on demand, at an annual rate of interest equal to 2.00% above Citibank, N.A.’s “base rate” as in effect from time to time.

(g) Method of Reimbursement. Each Borrower shall reimburse each Fronting Bank for each Drawing under any Letter of Credit issued for the account of such Borrower by such Fronting Bank pursuant to subsection (f) above in the following manner:

(i) such Borrower shall immediately reimburse such Fronting Bank in the manner described in Section 2.18(l); or

(ii) if (A) such Borrower has not reimbursed such Fronting Bank pursuant to clause (i) above and (B) the applicable conditions to borrowing set forth in Articles II and IV have been fulfilled, such Borrower may reimburse such Fronting Bank for such Drawing with the proceeds of an ABR Advance or, if the conditions specified in the foregoing clauses (A), (B) and (C) have been satisfied and a notice of borrowing requesting a Eurodollar Ratable Advance has been given in accordance with Section 2.2.3, with the proceeds of a Eurodollar Ratable Advance.

(h) Nature of Fronting Banks’ Duties. In determining whether to honor any Drawing under any Letter of Credit issued by any Fronting Bank, such Fronting Bank shall be responsible only to determine that the documents and certificates required to be delivered under that Letter of Credit have been delivered and that they comply on their face with the requirements of that Letter of Credit. Each Borrower otherwise assumes (as between the Borrower and the Fronting Bank) all risks of the acts and omissions of, or misuse of any Letters of Credit issued by any Fronting Bank for the account of such Borrower by, the Beneficiary of such Letter of Credit. In furtherance and not in limitation of the foregoing, but consistent with applicable law, no Fronting Bank shall be responsible, absent gross negligence or willful misconduct, (i) for the form, validity, sufficiency, accuracy, genuineness or legal effects of any document submitted by any party in connection with the application for and issuance of any drawing honored under a Letter of Credit, even if it should in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged; (ii) for the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign any such Letter of Credit, or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason; (iii) for errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex, facsimile or otherwise, whether or not they be in cipher; (iv) for errors in

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interpretation of technical terms; (v) for any loss or delay in the transmission or otherwise of any document required in order to make a drawing under any such Letter of Credit, or the proceeds thereof; (vi) for the misapplication by the Beneficiary of any such Letter of Credit or of the proceeds of any drawing honored under such Letter of Credit; and (vii) for any consequences arising from causes beyond the control of such Fronting Bank. None of the above shall affect, impair or prevent the vesting of any of such Fronting Bank’s rights or powers hereunder. Not in limitation of the foregoing, any action taken or omitted to be taken by any Fronting Bank under or in connection with any Letter of Credit shall not create against such Fronting Bank any liability to the Borrowers or any Lender, except for actions or omissions resulting from the gross negligence or willful misconduct of such Fronting Bank or any of its agents or representatives, and the Fronting Bank shall not be required to take any action that exposes the Fronting Bank to personal liability or that is contrary to this Agreement or applicable law.

(i) Obligations of Borrowers Absolute. The obligation of each Borrower to reimburse each Fronting Bank for Drawings honored under the Letters of Credit issued for the account of such Borrower by such Fronting Bank shall be unconditional and irrevocable and shall be paid strictly in accordance with the terms of this Agreement under all circumstances including, without limitation, the following circumstances:

(i) any lack of validity or enforceability of any Letter of Credit;

(ii) the existence of any claim, set-off, defense or other right that any Borrower, any Account Party or any Affiliate of any Borrower or any Account Party may have at any time against a Beneficiary or any transferee of any Letter of Credit (or any Persons or entities for whom any such Beneficiary or transferee may be acting), such Fronting Bank or any other Person, whether in connection with this Agreement, the transactions contemplated herein or any unrelated transaction;

(iii) any draft, demand, certificate or any other documents presented under any Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect;

(iv) the surrender or impairment of any security for the performance or observance of any of the terms of any of the Loan Documents;

(v) any non-application or misapplication by the Beneficiary of the proceeds of any Drawing under a Letter of Credit; or

(vi) the fact that a Default or Unmatured Default shall have occurred and be continuing.

No payment made under this Section shall be deemed to be a waiver of any claim any Borrower may have against any Fronting Bank or any other Person.

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(j) Participations by Lenders. By the issuance of a Letter of Credit and without any further action on the part of any Fronting Bank or any Lender in respect thereof, each Fronting Bank shall hereby be deemed to have granted to each Lender, and each Lender shall hereby be deemed to have acquired from such Fronting Bank, an undivided interest and participation in such Letter of Credit (including any letter of credit issued by such Fronting Bank in substitution or exchange for such Letter of Credit pursuant to the terms thereof) equal to such Lender’s Percentage of the Stated Amount of such Letter of Credit, effective upon the issuance of such Letter of Credit. In consideration and in furtherance of the foregoing, each Lender hereby absolutely and unconditionally agrees to pay to such Fronting Bank, in accordance with this subsection (j), such Lender’s Percentage of each payment made by such Fronting Bank in respect of an unreimbursed Drawing under a Letter of Credit. Such Fronting Bank shall notify the Agent of the amount of such unreimbursed Drawing honored by it not later than (x) 12:00 noon (New York time) on the date of payment of a draft under a Letter of Credit, if such payment is made at or prior to 11:00 a.m. (New York time) on such day, and (y) the close of business (New York time) on the date of payment of a draft under a Letter of Credit, if such payment is made after 11:00 a.m. (New York time) on such day, and the Agent shall notify each Lender of the date and amount of such unreimbursed Drawing under such Letter of Credit honored by such Fronting Bank and the amount of such Lender’s Percentage therein no later than (1) 1:00 p.m. (New York time) on such day, if such payment is made at or prior to 11:00 a.m. (New York time) on such day, and (2) 11:00 a.m. (New York time) on the next following Business Day, if such payment is made after 11:00 a.m. (New York time) on such day. Not later than 2:00 p.m. (New York time) on the date of receipt of a notice of an unreimbursed Drawing by a Lender, such Lender agrees to pay to such Fronting Bank an amount equal to the product of (A) such Lender’s Percentage and (B) the amount of the payment made by such Fronting Bank in respect of such unreimbursed Drawing.

If payment of the amount due pursuant to the preceding sentence from a Lender is received by such Fronting Bank after the close of business on the date it is due, such Lender agrees to pay to such Fronting Bank, in addition to (and along with) its payment of the amount due pursuant to the preceding sentence, interest on such amount at a rate per annum equal to (i) for the period from and including the date such payment is due to but excluding the second succeeding Business Day, the Federal Effective Funds Rate, and (ii) for the period from and including the second Business Day succeeding the date such payment is due to but excluding the date on which such amount is paid in full, the Federal Funds Effective Rate plus 2.00%.

(k) Obligations of Lenders Absolute. Each Lender acknowledges and agrees that (i) its obligation to acquire a participation in any Fronting Bank’s liability in respect of the Letters of Credit and (ii) its obligation to make the payments specified herein, and the right of each Fronting Bank to receive the same, in the manner specified herein, are absolute and unconditional and shall not be affected by any circumstances whatsoever, including, without limitation, (A) the occurrence and continuance of any Default or Unmatured Default; (B) any other breach or default by any Borrower, the Agent or any Lender hereunder; (C) any lack of validity or enforceability of any Letter of Credit or any Loan Document; (D) the existence of any claim, setoff, defense or other right that the

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Lender may have at any time against any Borrower, any other Account Party, any Beneficiary, any Fronting Bank or any other Lender; (E) the existence of any claim, setoff, defense or other right that any Borrower may have at any time against any Beneficiary, any Fronting Bank, the Agent, any Lender or any other Person, whether in connection with this Agreement or any other documents contemplated hereby or any unrelated transactions; (F) any amendment or waiver of, or consent to any departure from, all or any of the Letters of Credit or this Agreement; (G) any statement or any document presented under any Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; (H) payment by any Fronting Bank under any Letter of Credit against presentation of a draft or certificate that does not comply with the terms of such Letter of Credit, so long as such payment is not the consequence of such Fronting Bank’s gross negligence or willful misconduct in determining whether documents presented under a Letter of Credit comply with the terms thereof; (I) the occurrence of the Facility Termination Date; or (J) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing. Nothing herein shall prevent the assertion by any Lender of a claim by separate suit or compulsory counterclaim, nor shall any payment made by a Lender under Section 2.18 hereof be deemed to be a waiver of any claim that a Lender may have against any Fronting Bank or any other Person.

(l) Proceeds of Reimbursements. Upon receipt of a payment from a Borrower pursuant to subsection (f) hereof, the applicable Fronting Bank shall promptly transfer to each Lender such Lender’s pro rata share (determined in accordance with such Lender’s Percentage) of such payment based on such Lender’s pro rata share (determined as aforesaid) of amounts previously paid pursuant to subsection (j), above, and not previously transferred by such Fronting Bank pursuant to this subsection (l); provided, however, that if a Lender shall fail to pay to such Fronting Bank any amount required by subsection (j) above by the close of business on the Business Day following the date on which such payment was due from such Lender, and such Borrower shall not have reimbursed such Fronting Bank for such amount pursuant to subsection (f) hereof (such unreimbursed amount being hereinafter referred to as a “Transferred Amount”), such Fronting Bank shall be deemed to have purchased, on such following Business Day (a “Participation Transfer Date”) from such Lender (a “Defaulting Lender”), a participation in such Transferred Amount and shall be entitled, for the period from and including the Participation Transfer Date to the earlier of (i) the date on which such Borrower shall have reimbursed such Fronting Bank for such Transferred Amount and (ii) the date on which such Lender shall have reimbursed such Fronting Bank for such Transferred Amount (the “Participation Transfer Period”), to the rights, privileges and obligations of a “Lender” under this Agreement with respect to such Transferred Amount, and such Defaulting Lender shall not be deemed to be a Lender hereunder, and shall not have any rights or interests of a Lender hereunder, with respect to such Transferred Amount, and its Percentage shall be reduced accordingly with the amount by which such Percentage is reduced deemed held by such Fronting Bank during the Participation Transfer Period; and provided further, however, that if, at any time after the occurrence of a Participation Transfer Date with respect to any Lender and prior to the reimbursement by such Lender of such Fronting Bank with respect to the related Transferred Amount pursuant to subsection (j) above, such Fronting Bank shall receive any payment from such Borrower

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pursuant to subsection (f) hereof, such Fronting Bank shall not be obligated to pay any amounts to such Lender, and such Fronting Bank shall retain such amounts (including, without limitation, interest payments due from such Borrower pursuant to subsection (f) hereof) for its own account as a Lender, provided that all such amounts shall be applied in satisfaction of the unpaid amounts (including, without limitation, interest payments due from such Lender pursuant to subsection (j), above) due from such Lender with respect to such Transferred Amount.

If at any time after the occurrence of a Participation Transfer Date with respect to any Lender, the Agent shall receive any payment from any Borrower for the account of such Lender pursuant to this Agreement, if at the time of receipt of such amounts by the Agent such Lender shall not have reimbursed the applicable Fronting Bank with respect to the related Transferred Amount pursuant to subsection (j) above, the Agent shall not pay any such amounts to such Lender but shall pay all such amounts to such Fronting Bank, and such Fronting Bank shall retain such amounts for its own account as a Lender and apply such amounts in satisfaction of the unpaid amounts (including, without limitation, interest payments due from such Lender pursuant to subsection (j) above) due from such Lender with respect to such Transferred Amount.

All payments due to the Lenders from any Fronting Bank pursuant to this subsection (l) shall be made to the Lenders if, as, and, to the extent possible, when such Fronting Bank receives payments in respect of Drawings under the Letters of Credit pursuant to subsection (f) hereof, and in the same funds in which such amounts are received; provided that if any Lender to which such Fronting Bank is required to transfer any such payment (or any portion thereof) pursuant to this subsection (l) does not receive such payment (or portion thereof) prior to (i) the close of business on the Business Day on which such Fronting Bank received such payment from such Borrower, if such Fronting Bank received such payment prior to 1:00 p.m. (New York time) on such day, or (ii) 1:00 p.m. (New York time) on the Business Day next succeeding the Business Day on which such Fronting Bank received such payment from the Borrower, if such Fronting Bank received such payment after 1:00 p.m. (New York time) on such day, such Fronting Bank agrees to pay to such Lender, along with its payment of the portion of such payment due to such Lender, interest on such amount at a rate per annum equal to (A) for the period from and including the Business Day when such payment was required to be made to the Lenders to but excluding the second succeeding Business Day, the Federal Funds Effective Rate and (B) for the period from and including the second Business Day succeeding the Business Day when such payment was required to be made to the Lenders to but excluding the date on which such amount is paid in full, the Federal Funds Effective Rate plus 2.00%. The provisions of this subsection (l) shall not affect or impair any of the obligations under this Agreement of any Defaulting Lender to any Fronting Bank, all of which shall remain unaffected by any default in payment by any Fronting Bank to such Defaulting Lender.

(m) Concerning the Fronting Banks. Each Fronting Bank will exercise and give the same care and attention to the Letters of Credit issued by it as it gives to its other letters of credit and similar obligations, and each Lender agrees that each Fronting Bank’s sole liability to each Lender shall be (i) to distribute promptly, as and when received by such Fronting Bank, and in accordance with the provisions of subsection (l) above, such

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Lender’s pro rata share (determined in accordance with such Lender’s Percentage) of any payments to such Fronting Bank by the Borrowers pursuant to subsection (f) above in respect of Drawings under the Letters of Credit issued by such Fronting Bank, (ii) to exercise or refrain from exercising any right or to take or to refrain from taking any action under this Agreement or any Letter of Credit issued by such Fronting Bank as may be directed in writing by the Required Lenders (or, when expressly required by the terms of this Agreement, all of the Lenders) or the Agent acting at the direction and on behalf of the Required Lenders (or, when expressly required by the terms of this Agreement, all of the Lenders), except to the extent required by the terms hereof or thereof or by applicable law, and (iii) as otherwise expressly set forth in this Section 2.18. No Fronting Bank shall be liable for any action taken or omitted at the request or with approval of the Required Lenders (or, when expressly required by the terms of this Agreement, all of the Lenders) or of the Agent acting on behalf of the Required Lenders (or, when expressly required by the terms of this Agreement, all of the Lenders) or for the nonperformance of the obligations of any other party under this Agreement, any Letter of Credit or any other document contemplated hereby or thereby. Without in any way limiting any of the foregoing, each Fronting Bank may rely upon the advice of counsel concerning legal matters and upon any written communication or any telephone conversation that it believes to be genuine or to have been signed, sent or made by the proper Person and shall not be required to make any inquiry concerning the performance by any Borrower, any Beneficiary or any other Person of any of their respective obligations and liabilities under or in respect of this Agreement, any Letter of Credit or any other documents contemplated hereby or thereby. No Fronting Bank shall have any obligation to make any claim, or assert any Lien, upon any property held by such Fronting Bank or assert any offset thereagainst in satisfaction of all or any part of the obligations of the Borrowers hereunder; provided that each Fronting Bank shall, if so directed by the Required Lenders or the Agent acting on behalf of and with the consent of the Required Lenders, have an obligation to make a claim, or assert a Lien, upon property held by such Fronting Bank in connection with this Agreement, or assert an offset thereagainst.

Each Fronting Bank may accept deposits from, make loans or otherwise extend credit to, and generally engage in any kind of banking or trust business with the Borrowers or any of their Affiliates, or any other Person, and receive payment on such loans or extensions of credit and otherwise act with respect thereto freely and without accountability in the same manner as if it were not a Fronting Bank hereunder.

Each Fronting Bank makes no representation or warranty and shall have no responsibility with respect to: (i) the genuineness, legality, validity, binding effect or enforceability of this Agreement or any other documents contemplated hereby; (ii) the truthfulness, accuracy or performance of any of the representations, warranties or agreements contained in this Agreement or any other documents contemplated hereby; (iii) the collectibility of any amounts due under this Agreement; (iv) the financial condition of the Borrowers or any other Person; or (v) any act or omission of any Beneficiary with respect to its use of any Letter of Credit or the proceeds of any Drawing under any Letter of Credit.

(n) Indemnification of Fronting Banks by Lenders. To the extent that any Fronting Bank is not reimbursed and indemnified by the Borrowers under Section 10.8

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hereof, each Lender agrees to reimburse and indemnify such Fronting Bank on demand, pro rata in accordance with such Lender’s Percentage, for and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever that may be imposed on, incurred by or asserted against such Fronting Bank, in any way relating to or arising out of this Agreement, any Letter of Credit or any other document contemplated hereby or thereby, or any action taken or omitted by such Fronting Bank under or in connection with this Agreement, any Letter of Credit or any other document contemplated hereby or thereby; provided, however, that such Lender shall not be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from such Fronting Bank’s gross negligence or willful misconduct; and provided further, however, that such Lender shall not be liable to such Fronting Bank or any other Lender for the failure of any Borrower to reimburse such Fronting Bank for any drawing made under a Letter of Credit issued for the account of such Borrower with respect to which such Lender has paid such Fronting Bank such Lender’s pro rata share (determined in accordance with such Lender’s Percentage), or for such Borrower’s failure to pay interest thereon. Each Lender’s obligations under this subsection (n) shall survive the payment in full of all amounts payable by such Lender under subsection (j) above, and the termination of this Agreement and the Letters of Credit. Nothing in this subsection (n) is intended to limit any Lender’s reimbursement obligation contained in subsection (j) above.

(o) Representations of Lenders. As between any Fronting Bank and the Lenders, by its execution and delivery of this Agreement each Lender hereby represents and warrants solely to such Fronting Bank that (i) it is duly organized and validly existing in good standing under the laws of the jurisdiction of its formation, and has full corporate power, authority and legal right to execute, deliver and perform its obligations to such Fronting Bank under this Agreement; and (ii) this Agreement constitutes its legal, valid and binding obligation enforceable against it in accordance with the terms hereof, except as such enforceability may be limited by applicable bank organization, moratorium, conservatorship or other laws now or hereafter in effect affecting the enforcement of creditors rights in general and the rights of creditors of banks, and except as such enforceability may be limited by general principles of equity (whether considered in a proceeding at law or in equity).

(p) Successor Fronting Bank. Any Fronting Bank may resign at any time by giving written notice thereof to the Lenders, the Fronting Banks and the Borrowers, as long as such Fronting Bank has no Letters of Credit outstanding under this Agreement. Upon such resignation, the Borrowers may designate one or more Lenders as Fronting Banks to replace the retiring Fronting Bank.

2.19 Subsidiary Borrowers.

(a) Designation. Each Borrower (other than a Subsidiary Borrower) may, at any time or from time to time, designate one or more of its Wholly-Owned Subsidiaries which is a Domestic Subsidiary as a “Subsidiary Borrower” hereunder by furnishing to the Agent (i) a Designation Letter in duplicate, duly completed and executed by such

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designating Borrower and such Wholly-Owned Subsidiary, (ii) a Guaranty for any Subsidiary Borrower being designated, duly executed by such designating Borrower, (iii) the items described in paragraphs (a), (b), (c) and (e) of Section 4.1 relating to such Subsidiary Borrower and Guaranty in such form and scope as the Agent shall reasonably request and (iv) such other documents as the Agent shall reasonably request. Upon any such designation of a Wholly-Owned Subsidiary, such Subsidiary shall be a Subsidiary Borrower hereunder (with the related rights and obligations) and shall, for so long as it remains a Wholly-Owned Subsidiary of the respective Borrower be entitled to request Loans and Letters of Credit on and subject to the terms and conditions of, and to the extent provided in, this Agreement.

(b) Termination of Subsidiary Borrower Status. So long as all Loans made to any Subsidiary Borrower and any related obligations have been paid in full, all Letters of Credit issued for the account of such Subsidiary Borrower have been cancelled or expired and all Reimbursement Obligations with respect thereto paid in full, the designating Borrower may terminate the status of its Subsidiary Borrower as a Subsidiary Borrower hereunder by furnishing to the Agent a Termination Letter in duplicate, duly completed and executed by such Borrower and such Subsidiary. Any Termination Letter furnished hereunder shall be effective upon receipt by the Agent, which shall promptly notify the Lenders. Notwithstanding the foregoing, the delivery of a Termination Letter with respect to any Subsidiary Borrower shall not terminate (i) any actual or contingent Obligation of such Subsidiary Borrower that remains unpaid at the time of such delivery or (ii) the obligations of any Borrower under the corresponding Guaranty with respect to any such Obligations.

ARTICLE III

YIELD PROTECTION; TAXES

3.1 Yield Protection. If, on or after the date of this Agreement, the adoption of any law or any governmental or quasi-governmental rule, regulation, policy, guideline or directive (whether or not having the force of law), or any change in the interpretation or administration thereof by any governmental or quasi-governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender or applicable Lending Installation or any Fronting Bank with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency:

(a) subjects any Lender, any applicable Lending Installation or any Fronting Bank to any Taxes, or changes the basis of taxation of payments (other than with respect to Excluded Taxes) to any Lender or any Fronting Bank in respect of its Fixed Rate Loans, Letters of Credit or participations therein, or

(b) imposes or increases or deems applicable any reserve, assessment, insurance charge, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender or any applicable Lending Installation (other than reserves and assessments taken into account in determining the interest rate applicable to Fixed Rate Advances), or

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(c) imposes any other condition the result of which is to increase the cost to any Lender, any applicable Lending Installation or any Fronting Bank of making, funding or maintaining its Fixed Rate Loans, or of issuing or participating in Letters of Credit, or reduces any amount receivable by any Lender, any applicable Lending Installation or any Fronting Bank in connection with its Fixed Rate Loans, or requires any Lender, any applicable Lending Installation or any Fronting Bank to make any payment calculated by reference to the amount of Fixed Rate Loans, Letters of Credit or participations therein held or interest or Letter of Credit fees received by it, by an amount deemed material by such Lender or such Fronting Bank, as the case may be,

and the result of any of the foregoing is to increase the cost to such Lender, the applicable Lending Installation, or such Fronting Bank, as the case may be, of making or maintaining its Fixed Rate Loans or Commitment or of issuing or participating in Letters of Credit or to reduce the return received by such Lender, the applicable Lending Installation, or such Fronting Bank, as the case may be, in connection with such Fixed Rate Loans, Commitment, Letters of Credit or participations therein, then, within 15 days of demand by such Lender or such Fronting Bank, as the case may be, the Borrowers shall pay such Lender or such Fronting Bank, as the case may be, such additional amount or amounts as will compensate such Lender or such Fronting Bank, as the case may be, for such increased cost or reduction in amount received.

3.2 Changes in Capital Adequacy Regulations. If a Lender or a Fronting Bank determines the amount of capital required or expected to be maintained by such Lender or such Fronting Bank, any Lending Installation of such Lender or such Fronting Bank or any corporation controlling such Lender or Fronting Bank is increased as a result of a Change, then, within 15 days of demand by such Lender or such Fronting Bank, the Borrowers shall pay such Lender or such Fronting Bank the amount necessary to compensate for any shortfall in the rate of return on the portion of such increased capital which such Lender or such Fronting Bank determines is attributable to this Agreement, its Outstanding Credits, Loans or its Commitment to make Loans and issue or participate in Letters of Credit, as the case may be, hereunder (after taking into account such Lender’s or such Fronting Bank’s policies as to capital adequacy). “Change” means (a) any change after the date of this Agreement in the Risk-Based Capital Guidelines or (b) any adoption of or change in any other law, governmental or quasi-governmental rule, regulation, policy, guideline, interpretation, or directive (whether or not having the force of law) after the date of this Agreement which affects the amount of capital required or expected to be maintained by any or any Lender, any Fronting Bank or any Lending Installation or any corporation controlling any Lender or any Fronting Bank. “Risk-Based Capital Guidelines” means (i) the risk-based capital guidelines in effect in the United States on the date of this Agreement, including transition rules, and (ii) the corresponding capital regulations promulgated by regulatory authorities outside the United States implementing the July 1988 report of the Basle Committee on Banking Regulation and Supervisory Practices Entitled “International Convergence of Capital Measurements and Capital Standards,” including transition rules, and any amendments to such regulations adopted prior to the date of this Agreement.

3.3 Availability of Types of Advances. If (a) any Lender determines that maintenance of its Eurodollar Ratable Loans or Eurodollar Bid Rate Loans at a suitable Lending Installation would violate any applicable law, rule, regulation, or directive, whether or not having

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the force of law, or (b) if the Required Lenders determine that (i) deposits of a type and maturity appropriate to match fund Eurodollar Ratable Advances are not available or (ii) the interest rate applicable to Eurodollar Ratable Advances does not accurately reflect the cost of making or maintaining Eurodollar Ratable Advances, then the Agent shall, in the case of clause (a) above, suspend the availability of Eurodollar Ratable Advances and Eurodollar Bid Rate Advances and, pursuant to a notice given to the applicable Borrowers from the Agent, require any affected Eurodollar Rate Advances and Eurodollar Bid Rate Advances to be repaid or converted to ABR Advances, subject to the payment of any funding indemnification amounts required by Section 3.4, and, in the case of clause (b) above, suspend the availability of Eurodollar Ratable Advances and, pursuant to a notice given to the applicable Borrowers from the Agent, require any affected Eurodollar Ratable Advances to be repaid or converted to ABR Rate Advances, subject to the payment of any funding indemnification amounts required by Section 3.4.

3.4 Funding Indemnification. If any payment of a Fixed Rate Advance occurs on a date which is not the last day of the applicable Interest Period, whether because of acceleration, prepayment or otherwise, or a Fixed Rate Advance is not made on the date specified by the requesting Borrower for any reason other than default by the Lenders, such Borrower will indemnify each Lender for any loss or cost incurred by it resulting therefrom, including, without limitation, any loss or cost in liquidating or employing deposits acquired to fund or maintain such Fixed Rate Advance.

3.5 Taxes. (a) All payments by the Borrowers to or for the account of any Lender, any Fronting Bank or the Agent hereunder or under any Note or Letter of Credit application shall be made free and clear of and without deduction for any and all Taxes. If any Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder to any Lender, any Fronting Bank or the Agent, (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 3.5) such Lender, such Fronting Bank or the Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) such Borrower shall make such deductions, (iii) such Borrower shall pay the full amount deducted to the relevant authority in accordance with applicable law and (iv) such Borrower shall furnish to the Agent the original copy of a receipt evidencing payment thereof within 30 days after such payment is made.

(b) In addition, the Borrowers hereby agree to pay any present or future stamp or documentary taxes and any other excise or property taxes, charges or similar levies which arise from any payment made hereunder or under any Note or from the execution or delivery of, or otherwise with respect to, this Agreement or any Note (“Other Taxes”).

(c) The Borrowers hereby agree to indemnify the Agent, each Lender and each Fronting Bank for the full amount of Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed on amounts payable under this Section 3.5) paid by the Agent, such Lender or such Fronting Bank and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto. Payments due under this indemnification shall be made within 30 days of the date the Agent, such Lender or such Fronting Bank makes demand therefor pursuant to Section 3.6.

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(d) Each Lender and each Fronting Bank that is not incorporated under the laws of the United States of America or a state thereof (each a “Non-U.S. Lender”) agrees that it will, not more than ten Business Days after the date of this Agreement, (i) deliver to each of the Borrowers and the Agent two duly completed copies of United States Internal Revenue Service Form W-8BEN or W-8ECI, certifying in either case that such Non-U.S. Lender is entitled to receive payments under this Agreement without deduction or withholding of any United States federal income taxes, and (ii) deliver to each of the Borrowers and the Agent a United States Internal Revenue Form W-8 or W-9, as the case may be, and certify that it is entitled to an exemption from United States backup withholding tax. Each Non-U.S. Lender further undertakes to deliver to each of the Borrowers and the Agent (x) renewals or additional copies of such form (or any successor form) on or before the date that such form expires or becomes obsolete, and (y) after the occurrence of any event requiring a change in the most recent forms so delivered by it, such additional forms or amendments thereto as may be reasonably requested by any Borrower or the Agent. All forms or amendments described in the preceding sentence shall certify that such Non-U.S. Lender is entitled to receive payments under this Agreement without deduction or withholding of any United States federal income taxes, unless an event (including without limitation any change in treaty, law or regulation) has occurred prior to the date on which any such delivery would otherwise be required which renders all such forms inapplicable or which would prevent such Non-U.S. Lender from duly completing and delivering any such form or amendment with respect to it and such Non-U.S. Lender advises the Borrowers and the Agent that it is not capable of receiving payments without any deduction or withholding of United States federal income tax.

(e) For any period during which a Non-U.S. Lender has failed to provide any Borrower with an appropriate form pursuant to clause (d), above (unless such failure is due to a change in treaty, law or regulation, or any change in the interpretation or administration thereof by any Governmental Authority, occurring subsequent to the date on which a form originally was required to be provided), such Non-U.S. Lender shall not be entitled to indemnification under this Section 3.5 with respect to Taxes imposed by the United States; provided that, should a Non-U.S. Lender which is otherwise exempt from or subject to a reduced rate of withholding tax become subject to Taxes because of its failure to deliver a form required under clause (d), above, such Borrower shall take such steps as such Non-U.S. Lender shall reasonably request to assist such Non-U.S. Lender to recover such Taxes.

(f) Any Lender or Fronting Bank that is entitled to an exemption from or reduction of withholding tax with respect to payments under this Agreement or any Note pursuant to the law of any relevant jurisdiction or any treaty shall deliver to the Borrowers (with a copy to the Agent), at the time or times prescribed by applicable law, such properly completed and executed documentation prescribed by applicable law as will permit such payments to be made without withholding or at a reduced rate.

(g) If the U.S. Internal Revenue Service or any other Governmental Authority of the United States or any other country or any political subdivision thereof asserts a claim that the Agent did not properly withhold tax from amounts paid to or for the

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account of any Lender or any Fronting Bank (because the appropriate form was not delivered or properly completed, because such Lender or such Fronting Bank failed to notify the Agent of a change in circumstances which rendered its exemption from withholding ineffective, or for any other reason), such Lender or such Fronting Bank, as applicable, shall indemnify the Agent fully for all amounts paid, directly or indirectly, by the Agent as tax, withholding therefor, or otherwise, including penalties and interest, and including taxes imposed by any jurisdiction on amounts payable to the Agent under this subsection, together with all costs and expenses related thereto (including attorneys fees and time charges of attorneys for the Agent, which attorneys may be employees of the Agent). The obligations of the Lenders and the Fronting Banks under this Section 3.5(g) shall survive the payment of the Obligations and termination of this Agreement.

(h) If any Lender or any Fronting Bank receives a refund which it determines in its sole discretion to be in respect of any Taxes as to which it has been indemnified by any Borrower or with respect to which such Borrower (or any Person acting on behalf of such Borrower) has paid additional amounts pursuant to this Section 3.5, then such Lender or such Fronting Bank, as applicable, shall promptly repay such refund to such Borrower (but only to the extent of indemnity payments made, or additional amounts paid, by such Borrower (or such Person acting on behalf of such Borrower) under this Section 3.5 with respect to Taxes giving rise to such refund), net of all amounts paid pursuant to Section 3.5(c) and all out-of-pocket expenses of such Lender, such Fronting Bank or the Agent, as the case may be; provided, that such Borrower, upon the request of such Lender, such Fronting Bank or the Agent, agrees to return such refund (together with any penalties, interest or other charges due in connection therewith to the appropriate taxing authority or other Governmental Authority) to such Lender, such Fronting Bank or the Agent in the event such Lender, such Fronting Bank or the Agent is required to pay or to return such refund to the relevant taxing authority or other Governmental Authority.

3.6 Lender Statements; Survival of Indemnity. To the extent reasonably possible, each Lender shall designate an alternate Lending Installation with respect to its Eurodollar Loans to reduce any liability of the Borrowers to such Lender under Sections 3.1, 3.2 and 3.5 or to avoid the unavailability of Eurodollar Ratable Advances under Section 3.3, so long as such designation is not, in the judgment of such Lender, disadvantageous to such Lender. Each Lender shall deliver a written statement of such Lender to the Borrowers (with a copy to the Agent) as to the amount due, if any, under Section 3.1, 3.2, 3.4 or 3.5. Such written statement shall set forth in reasonable detail the calculations upon which such Lender determined such amount and shall be final, conclusive and binding on the Borrowers in the absence of manifest error. Determination of amounts payable under such Sections in connection with a Eurodollar Loan shall be calculated as though each Lender funded its Eurodollar Loan through the purchase of a deposit of the type and maturity corresponding to the deposit used as a reference in determining the Eurodollar Rate or Eurodollar Bid Rate, as the case may be, applicable to such Loan, whether in fact that is the case or not. Unless otherwise provided herein, the amount specified in the written statement of any Lender (which statement shall be conclusive absent manifest error) shall be payable within ten (10) days after receipt by the Borrowers of such written statement. The obligations of the Borrowers under Sections 3.1, 3.2, 3.4 and 3.5 shall survive payment of the Obligations and termination of this Agreement.

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ARTICLE IV

CONDITIONS PRECEDENT

4.1 Effectiveness of Agreement. This Agreement shall not become effective, and the Lenders shall not be required to make any Advance, and the Fronting Banks shall not be required to issue any Letters of Credit hereunder, unless the Borrowers have furnished to the Agent with sufficient copies for the Lenders and each Fronting Bank:

(a) Charters and Good Standing Certificates. Copies of the articles or certificate of incorporation of each Borrower, together with all amendments, and a certificate of good standing, each certified by the appropriate governmental officer in its jurisdiction of incorporation, as well as any other information required by Section 326 of the USA PATRIOT ACT or necessary for the Agent or any Lender to verify the identity of any Borrower as required by Section 326 of the USA PATRIOT Act, and, in the case of Nationwide Mutual and Nationwide Life, a certificate of authority (or its equivalent) issued by the insurance department of such Borrower’s state of domicile.

(b) By-Laws and Resolutions. Copies, certified by the Secretary or Assistant Secretary of each Borrower, of its by-laws or code of regulations and of its Board of Directors’ resolutions and of resolutions or actions of any other body authorizing the execution of the Loan Documents to which such Borrower is a party.

(c) Incumbency Certificates. An incumbency certificate, executed by the Secretary or Assistant Secretary of each Borrower, which shall identify by name and title and bear the signatures of the Authorized Officers and any other officers of each Borrower authorized to sign the Loan Documents to which such Borrower is a party and to make borrowings hereunder, upon which certificate the Agent and the Lenders shall be entitled to rely until informed of any change in writing by such Borrower.

(d) Closing Certificates. A certificate, signed by an authorized officer of each Borrower, stating that on the date hereof no Default or Unmatured Default has occurred and is continuing.

(e) Opinion. A written opinion of the Borrowers’ counsel, addressed to the Lenders in form and substance acceptable to the Agent and its counsel.

(f) Notes. Any Notes requested by a Lender pursuant to Section 2.11 payable to the order of each such requesting Lender.

(g) Fronting Bank Letters. The Borrowers and each Fronting Bank shall have entered into an agreement, in form and substance satisfactory to such Fronting Bank, concerning fees payable by the Borrower to such Fronting Bank for its own account (the “Fronting Bank Fee Letters”).

(h) Fronting Fees. The Borrowers shall have paid all the fees payable in accordance with the Fronting Bank Fee Letters.

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(i) Other. Such other documents as any Lender or its counsel may have reasonably requested.

4.2 Each Advance. The Lenders shall not be required to make any Extension of Credit unless as of such Extension of Credit:

(a) There exists no Default or Unmatured Default with respect to the applicable Borrower.

(b) The representations and warranties of the applicable Borrower contained in Article V (other than the representations and warranties set forth in Sections 5.5 and 5.7) are true and correct as of such Extension of Credit except to the extent any such representation or warranty is stated to relate solely to an earlier date, in which case such representation or warranty shall have been true and correct on and as of such earlier date.

(c) All legal matters incident to the making of such Extension of Credit shall be satisfactory to the Lenders and their counsel.

(d) Immediately after such Extension of Credit, the total amount of all Outstanding Credits will not exceed the Aggregate Commitment.

Each Ratable Borrowing Notice with respect to each such Ratable Advance, each Competitive Bid Borrowing Notice with respect to each such Competitive Bid Advance, each Notice of Swing Line Borrowing with respect to each such Swing Line Advance and each Letter of Credit Request with respect to each request for the issuance of a Letter of Credit, as the case may be, shall constitute a representation and warranty by such Borrower that the conditions contained in Sections 4.2(a) and (b) have been satisfied. Any Lender may require a duly completed compliance certificate in substantially the form of Exhibit B as a condition to making an Extension of Credit.

ARTICLE V

REPRESENTATIONS AND WARRANTIES

Each Borrower represents and warrants to the Lenders and the Fronting Banks that:

5.1 Existence and Standing.

(a) In the case of Nationwide Mutual, such Borrower is a mutual insurance company duly and properly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation or organization and has all requisite authority to conduct its business in each jurisdiction in which its business is conducted, except where the failure to be authorized to conduct business could not reasonably be expected to have a Material Adverse Effect.

(b) In the case of Nationwide Life, such Borrower is an insurance company duly and properly incorporated, validly existing and in good standing under the laws of

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its jurisdiction of incorporation or organization and has all requisite authority to conduct its business in each jurisdiction in which its business is conducted, except where the failure to be authorized to conduct business could not reasonably be expected to have a Material Adverse Effect.

(c) In the case of NFS, such Borrower is a corporation duly and properly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation or organization and has all requisite authority to conduct its business in each jurisdiction in which its business is conducted, except where the failure to be authorized to conduct business could not reasonably be expected to have a Material Adverse Effect.

(d) Each of such Borrower’s Material Subsidiaries is a corporation, partnership, limited liability company or business trust duly and properly incorporated or organized, as the case may be, validly existing and in good standing under the laws of its jurisdiction of incorporation or organization and has all requisite authority to conduct its business in each jurisdiction in which its business is conducted, except where the failure to be so qualified, licensed or authorized could not reasonably be expected to have a Material Adverse Effect.

5.2 Authorization and Validity. Such Borrower has the power and authority and legal right to execute and deliver the Loan Documents to which it is a party and to perform its obligations thereunder. The execution and delivery by such Borrower of the Loan Documents to which it is a party and the performance of its obligations thereunder have been duly authorized by proper corporate proceedings, and the Loan Documents to which such Borrower is a party constitute legal, valid and binding obligations of such Borrower enforceable against such Borrower in accordance with their terms, except as enforceability may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors’ rights generally and by general principles of equity.

5.3 No Conflict; Government Consent. Neither the execution and delivery by such Borrower of the Loan Documents to which it is a party, nor the consummation of the transactions therein contemplated, nor compliance with the provisions thereof will violate (a) any law, rule, regulation (including Regulations T, U and X), order, writ, judgment, injunction, decree or award binding on such Borrower or any of its Subsidiaries or (b) such Borrower’s or any Subsidiary’s articles or certificate of incorporation, partnership agreement, certificate of partnership, articles or certificate of organization, by-laws, or operating or other management agreement, as the case may be, or (c) the provisions of any indenture, instrument or agreement to which such Borrower or any of its Subsidiaries is a party or is subject, or by which it, or its Property, is bound, or conflict with or constitute a default thereunder, or result in, or require, the creation or imposition of any Lien in, of or on the Property of such Borrower or a Subsidiary of such Borrower pursuant to the terms of any such indenture, instrument or agreement. No order, consent, adjudication, approval, license, authorization, or validation of, or filing, recording or registration with, or exemption by, or other action in respect of any Governmental Authority, or any subdivision thereof, or any other Person (including without limitation the shareholders or policyholders, as applicable, of any Person) which has not been obtained by such Borrower or any of its Subsidiaries, is required to be obtained by such Borrower or any of its Subsidiaries in connection

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with the execution and delivery of the Loan Documents, the borrowings under this Agreement, the payment and performance by such Borrower of the Obligations or the legality, validity, binding effect or enforceability of any of the Loan Documents.

5.4 Financial Statements.

(a) In the case of Nationwide Mutual, the December 31, 2006 Annual Statement of Nationwide Mutual heretofore delivered to the Lenders and the Fronting Banks was prepared in accordance with SAP, and such Annual Statement was prepared and fairly presents the financial condition and operations of Nationwide Mutual as at such date and the results of its operations for the period then ended.

(b) In the case of Nationwide Life, the December 31, 2006 Annual Statement of Nationwide Life heretofore delivered to the Lenders and the Fronting Banks was prepared in accordance with SAP, and such Annual Statement was prepared and fairly presents the financial condition and operations of Nationwide Life as at such date and the results of its operations for the period then ended.

(c) In the case of NFS, the December 31, 2006 consolidated financial statements of NFS and its Subsidiaries heretofore delivered to the Lenders and the Fronting Banks were prepared in accordance with Agreement Accounting Principles, and such statements were prepared and fairly present the consolidated financial condition and operations of NFS and its Subsidiaries at such date and the consolidated results of their operations for the period then ended.

5.5 Material Adverse Change. Since December 31, 2006, there has been no change in the business, Property, prospects, condition (financial or otherwise) or results of operations of such Borrower and its Subsidiaries which could reasonably be expected to have a Material Adverse Effect.

5.6 Taxes. Such Borrower and its Subsidiaries have filed all United States federal tax returns and all other material tax returns which are required to be filed and have paid all taxes due pursuant to said returns or pursuant to any assessment received by such Borrower or any of its Subsidiaries, except such taxes, if any, as are being contested in good faith and as to which adequate reserves have been provided in accordance with Agreement Accounting Principles or SAP, as applicable, and as to which no Lien exists. The United States income tax returns of such Borrower and its Subsidiaries have been audited by the Internal Revenue Service through the fiscal year ended December 31, 2002. No tax Liens have been filed and no material claims are being asserted with respect to any such taxes. The charges, accruals and reserves on the books of such Borrower and its Material Subsidiaries in respect of any taxes or other governmental charges are adequate. For the purpose of this Section 5.6, each reference to a Borrower shall be deemed to include a reference to all predecessor entities thereto.

5.7 Litigation and Contingent Obligations. There is no litigation, arbitration, governmental investigation, proceeding or inquiry pending or, to the knowledge of any of their officers, threatened against or affecting such Borrower or any of its Subsidiaries which could reasonably be expected to have a Material Adverse Effect on such Borrower or which seeks to

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prevent, enjoin or delay the making of any Extension of Credit. Other than any liability incident to any litigation, arbitration or proceeding which could not reasonably be expected to have a Material Adverse Effect, neither such Borrower nor any of its Subsidiaries has any material contingent obligations not provided for or disclosed in the financial statements referred to in Section 5.4.

5.8 Subsidiaries. Schedule 5.8 contains an accurate list of all Subsidiaries of such Borrower as of December 17, 2007, setting forth the percentage of their respective capital stock or other ownership interests owned by such Borrower or other Subsidiaries of such Borrower. All of the issued and outstanding shares of capital stock or other ownership interests of such Subsidiaries have been (to the extent such concepts are relevant with respect to such ownership interests) duly authorized and issued and are fully paid and non-assessable.

5.9 ERISA. No Single Employer Plan has an Unfunded Liability. Neither such Borrower nor any other member of the Controlled Group has incurred, or is reasonably expected to incur, any withdrawal liability to Multiemployer Plans. Each Plan complies in all material respects with all applicable requirements of law and regulations, no Reportable Event has occurred with respect to any Plan. Neither such Borrower nor any other member of the Controlled Group has (i) withdrawn from any Plan or initiated steps to do so, or (ii) taken any steps to reorganize or terminate any Plan; provided, that if any such action has been taken, it could not reasonably be expected to result in liability to the Borrower or any Subsidiary which would have a Material Adverse Effect.

5.10 Accuracy of Information. No information, exhibit or report furnished by such Borrower or any of its Subsidiaries to the Agent or to any Lender or any Fronting Bank in connection with the negotiation of, or compliance with, the Loan Documents contained any material misstatement of fact or omitted to state a material fact or any fact necessary to make the statements contained therein not misleading.

5.11 Regulation U. Margin stock (as defined in Regulation U) constitutes less than 25% of the value of those assets of such Borrower and its Subsidiaries which are subject to any limitation on sale, pledge, or other restriction hereunder.

5.12 Material Agreements. Neither such Borrower nor any Material Subsidiary of such Borrower is a party to any agreement or instrument or subject to any charter or other corporate restriction which could reasonably be expected to have a Material Adverse Effect. Neither such Borrower nor any Material Subsidiary of such Borrower is in default (beyond any applicable grace or notice period with respect thereto, if any) in the performance, observance or fulfillment of (a) any of the obligations, covenants or conditions contained in any agreement to which it is a party, which default could reasonably be expected to have a Material Adverse Effect or (b) any monetary obligation under any agreement or instrument evidencing or governing Indebtedness.

5.13 Compliance With Laws. Such Borrower and its Subsidiaries have complied with all applicable statutes, rules, regulations, orders and restrictions of any domestic or foreign government or any instrumentality or agency thereof having jurisdiction over the conduct of their respective businesses or the ownership of their respective Property except for any failure to

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comply with any of the foregoing which could not reasonably be expected to have a Material Adverse Effect.

5.14 Plan Assets; Prohibited Transactions. With respect to Nationwide Mutual and NFS, such Borrower is not an entity deemed to hold “plan assets” within the meaning of 29 C.F.R. §2510.3-101 of an employee benefit plan (as defined in Section 3(3) of ERISA) which is subject to Title I of ERISA or any plan within the meaning of Section 4975 of the Code. With respect to Nationwide Life, such Borrower is not, as a result of the significant participation test found in 29 C.F.R. §2510.3-101(a)(2)(ii) and (f), an entity deemed to hold “plan assets” of any employee benefit plan (as defined in Section 3(3) of ERISA) which is subject to Title I of ERISA or any plan within the meaning of Section 4975 of the Code, because less than 25% of the value of any class or type of its equity interests is, or could be deemed to be, held by benefit plan investors, as defined in 29 C.F.R. §2510.3-101(f)(2). To the knowledge of the Borrower, neither the execution of this Agreement nor the making of Extensions of Credit hereunder gives rise to a prohibited transaction, within the meaning of Section 406(a) of ERISA or Section 4975 of the Code, that is not the subject of a prohibited transaction class exemption, all of the conditions of which are satisfied by the Borrower.

5.15 Environmental Matters. In the ordinary course of its business, the officers of such Borrower consider the effect of Environmental Laws on the business of such Borrower and its Subsidiaries, in the course of which they identify and evaluate potential risks and liabilities accruing to such Borrower due to Environmental Laws. On the basis of this consideration, such Borrower has concluded that Environmental Laws cannot reasonably be expected to have a Material Adverse Effect. Neither such Borrower nor any Subsidiary of such Borrower has received any notice to the effect that its operations are not in material compliance with any of the requirements of applicable Environmental Laws or are the subject of any federal or state investigation evaluating whether any remedial action is needed to respond to a release of any toxic or hazardous waste or substance into the environment, which non-compliance or remedial action could reasonably be expected to have a Material Adverse Effect on such Borrower.

5.16 Investment Company Act. Such Borrower is not an “investment company” or a company “controlled” by an “investment company”, within the meaning of the Investment Company Act of 1940, as amended.

5.17 Defaults. No Default or Unmatured Default has occurred and is continuing.

5.18 Insurance Licenses. No License of such Borrower (in the case of Nationwide Mutual and Nationwide Life) or any Material Insurance Subsidiary of such Borrower, the loss of which could reasonably be expected to have a Material Adverse Effect, is the subject of a proceeding for suspension or revocation. To such Borrower’s knowledge, there is no sustainable basis for such suspension or revocation, and no such suspension or revocation has been threatened by any Governmental Authority.

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ARTICLE VI

COVENANTS

Until the Commitments have expired or been terminated and the principal of and interest on each Extension of Credit and all fees payable hereunder shall have been paid in full, unless the Required Lenders shall otherwise consent in writing, each Borrower covenants and agrees that:

6.1 Financial Reporting. Such Borrower will maintain, for itself and each Subsidiary of such Borrower, a system of accounting established and administered in accordance with Agreement Accounting Principles or SAP, as applicable, and furnish to the Lenders and the Fronting Banks:

(a) In the case of NFS, within 100 days after the close of each of its fiscal years, an unqualified audit report on Form 10K as filed with the Securities and Exchange Commission, certified by independent certified public accountants acceptable to the Lenders and the Fronting Banks and prepared in accordance with Agreement Accounting Principles on a consolidated basis for itself and its Subsidiaries, including balance sheets as of the end of such period and related statements of income, shareholders’ equity and cash flows, accompanied by any internal control letter prepared by said accountants.

(b) In the case of NFS, within 60 days after the close of the first three quarterly periods of each of its fiscal years, for itself and its Subsidiaries, consolidated unaudited balance sheets as at the close of each such period and consolidated statements of income, shareholders’ equity and cash flows for the period from the beginning of such fiscal year to the end of such quarter, all certified by its chief financial officer.

(c) (i)In the case of each of Nationwide Mutual and Nationwide Life, upon the earlier of (A) thirty (30) days after the regulatory filing date or (B) one hundred (100) days after the close of each fiscal year of such Borrower, copies of the unaudited Annual Statement of such Borrower, certified by the chief financial officer or the treasurer of such Borrower, all such statements to be prepared in accordance with SAP consistently applied throughout the periods reflected therein and (ii) in the case of Nationwide Life, no later than each June 15, copies of such Annual Statement audited and certified by independent certified public accountants of recognized national statement.

(d) In the case of Nationwide Mutual, (i) within thirty (30) days after the regulatory filing date, copies of the unaudited Combined Annual Statement of Nationwide Mutual, certified by the chief financial officer or the treasurer of Nationwide Mutual, all such statements to be prepared in accordance with SAP consistently applied throughout the periods reflected therein and (ii) no later than each June 15, copies of such Combined Annual Statement audited and certified by independent certified public accountants of recognized national statement.

(e) In the case of Nationwide Mutual and Nationwide Life, upon the earlier of (i) thirty (30) days after the regulatory filing date or (ii) sixty (60) days after the close of

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each of the first three (3) fiscal quarters of each fiscal year of Nationwide Mutual and Nationwide Life, copies of the unaudited Quarterly Statement of such Borrower, certified by the chief financial officer or treasurer of such Borrower, all such statements to be prepared in accordance with SAP consistently applied through the period reflected therein.

(f) Together with the financial statements required under Sections 6.1(a), (b), (c) and (e), a compliance certificate in substantially the form of Exhibit B signed by its chief financial officer or treasurer showing the calculations necessary to determine compliance with this Agreement and stating that no Default or Unmatured Default exists, or if any Default or Unmatured Default exists, stating the nature and status thereof.

(g) Promptly and in any event within ten (10) days after learning thereof, notification of any changes after the Closing Date in the rating given by Moody’s, S&P or A.M. Best & Co. in respect of any Borrower.

(h) Within five (5) Business Days after the receipt thereof by such Borrower, any written communication from the Insurance Department of the State of Ohio (provided that such communication is directed to such Borrower specifically with respect to a particular inquiry and not to insurance companies generally) which asserts in any material respect that such Borrower has an unsound financial condition;

(i) Within ten (10) days after the required annual filing with the PBGC, a statement of the Unfunded Liabilities of each Single Employer Plan, if any, certified as correct by an actuary enrolled under ERISA.

(j) As soon as possible and in any event within 10 days after such Borrower knows that any Reportable Event has occurred with respect to any Plan, a statement, signed by the chief financial officer of such Borrower, describing said Reportable Event and the action which such Borrower proposes to take with respect thereto.

(k) Promptly upon the furnishing thereof to the shareholders (in the case of NFS) or the policyholders (in the case of Nationwide Mutual), copies of all financial statements, reports and proxy statements so furnished.

(l) Promptly and in any event within ten (10) days after learning thereof, notification of (i) any tax assessment, demand, notice of proposed deficiency or notice of deficiency received by such Borrower or any other Consolidated Person or (ii) the filing of any tax Lien or commencement of any judicial proceeding by or against such Consolidated Person, if any such assessment, demand, notice, Lien or judicial proceeding (or all such assessments, demands, notices, Liens and judicial proceedings, in the aggregate) relates to tax liabilities in excess of ten percent (10%) of (A) in the case of Nationwide Mutual and Nationwide Life, the Statutory Surplus (determined without reduction for any reserve for liabilities) of such Borrower or (B) in the case of NFS, the Consolidated Tangible Net Worth (determined without reduction for any reserve for liabilities) of NFS.

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(m) Such other information (including non-financial information) as the Agent, any Lender or any Fronting Bank may from time to time reasonably request.

6.2 Use of Proceeds. Such Borrower will, and will cause each Subsidiary of such Borrower to, use the proceeds of the Extensions of Credit for general corporate purposes (including commercial paper back-up). Such Borrower will not, nor will it permit any Subsidiary of such Borrower to, use any of the proceeds of the Extensions of Credit to purchase or carry any “margin stock” (as defined in Regulation U).

6.3 Notice of Default. Such Borrower will, and will cause each of its Material Subsidiaries to, give prompt notice in writing to the Lenders and the Fronting Banks of the occurrence of (a) any Default or Unmatured Default, (b) any other development, financial or otherwise, relating specifically to such Borrower or any of its Material Subsidiaries (and not of a general economic or political nature) which could reasonably be expected to have a Material Adverse Effect on such Borrower, (c) their receipt of any notice from any Governmental Authority of the expiration without renewal, revocation or suspension of, or the institution of any proceedings which could reasonably be expected to result in the revocation or suspension of, any material License now or hereafter held by any Material Insurance Subsidiary of such Borrower which is required to conduct insurance business in compliance with all applicable laws and regulations and the expiration, revocation or suspension of which could reasonably be expected to have a Material Adverse Effect, (d) their receipt of any notice from any Governmental Authority which could reasonably be expected to result in disciplinary proceedings against or in respect of any Material Insurance Subsidiary, or the issuance of any order, the taking of any action or any request for an extraordinary audit for cause by any Governmental Authority which, if adversely determined, could reasonably be expected to have a Material Adverse Effect, (e) any material judicial or administrative order of which they are aware limiting or controlling the insurance business of such Borrower (in the case of Nationwide Mutual and Nationwide Life) or any Material Insurance Subsidiary of such Borrower (and not the insurance industry generally) which has been issued or adopted and which could reasonably be expected to create a Material Adverse Effect or (f) the commencement of any litigation of which they are aware which could reasonably be expected to create a Material Adverse Effect.

6.4 Conduct of Business. Such Borrower will, and will cause each of its Material Subsidiaries to, (a) carry on and conduct its business in substantially the same manner and in substantially the same fields of enterprise as it is presently conducted, (b) do all things reasonably necessary to remain duly incorporated or organized, validly existing and (to the extent such concept applies to such entity) in good standing as a domestic corporation, partnership or limited liability company in its jurisdiction of incorporation or organization, as the case may be, and maintain all requisite authority to conduct its business in each jurisdiction in which its business is conducted except where the failure to maintain such authority could not reasonably be expected to have a Material Adverse Effect, and (c) do all things necessary to renew, extend and continue in effect all Licenses which may at any time and from time to time be necessary for such Borrower (in the case of Nationwide Mutual or Nationwide Life) or any Material Insurance Subsidiary of such Borrower to operate its insurance business in compliance with all applicable laws and regulations except for any License the loss of which could not reasonably be expected to have a Material Adverse Effect; provided such Borrower (in the case of Nationwide Mutual or Nationwide Life) or any Material Insurance Subsidiary of such

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Borrower may withdraw from one or more states (other than its state of domicile) as an admitted insurer if such withdrawal is determined by such Borrower’s senior management to be in the best interest of such Borrower and could not reasonably be expected to have a Material Adverse Effect; provided, further, that nothing provided in this Section 6.4 shall prohibit any consolidation, merger, sale, lease or other transfer permitted under Section 6.10. Such Borrower shall not change its state of domicile or incorporation without the prior written consent of the Required Lenders, which consent shall not be unreasonably withheld or delayed.

6.5 Taxes. Such Borrower will, and will cause each of its Subsidiaries to, timely file complete and correct United States federal and applicable foreign, state and local tax returns required by law and pay when due all taxes, assessments and governmental charges and levies upon it or its income, profits or Property, except those which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves have been set aside in accordance with Agreement Accounting Principles or SAP, as applicable.

6.6 Insurance. Such Borrower will, and will cause each of its Subsidiaries to, maintain with financially sound and reputable insurance companies insurance on all their Property in such amounts and covering such risks as is consistent with sound business practice, and such Borrower will furnish to any Lender or any Fronting Bank upon request full information as to the insurance carried; provided, that such Borrower and its Subsidiaries may self-insure such risks to the extent it deems it prudent to do so.

6.7 Compliance with Laws. Such Borrower will, and will cause each of its Subsidiaries to, comply with all laws, rules, regulations, orders, writs, judgments, injunctions, decrees or awards to which it may be subject including, without limitation, all Environmental Laws, the noncompliance with which could reasonably be expected to have a Material Adverse Effect.

6.8 Maintenance of Properties. Such Borrower will, and will cause each of its Subsidiaries to, do all things necessary to maintain, preserve, protect and keep its Property in good repair, working order and condition, and make all necessary and proper repairs, renewals and replacements so that its business carried on in connection therewith may be properly conducted at all times; provided, however, that nothing herein contained shall prevent such Borrower and its Subsidiaries from discontinuing the operation and maintenance of any of its Property if such discontinuance is desirable in the conduct of its business and such Borrower or such Subsidiary has concluded that such discontinuance could not individually or in the aggregate reasonably be expected to have a Material Adverse Effect.

6.9 Inspection. Such Borrower will, and will cause each of its Subsidiaries to, permit the Agent and each of the Lenders and Fronting Banks, by their respective representatives and agents, to inspect any of the Property, books and financial records of such Borrower and each of its Subsidiaries, to examine and make copies of the books of accounts and other financial records of such Borrower and each of its Subsidiaries, and to discuss the affairs, finances and accounts of such Borrower and each of its Subsidiaries with, and to be advised as to the same by, their respective officers at such reasonable times and intervals as the Agent, any Lender or any Fronting Bank may designate. Such Borrower will keep or cause to be kept, and cause each of its Subsidiaries to keep or cause to be kept, appropriate records and books of account in which

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complete entries are to be made reflecting its and their business and financial transactions, such entries to be made in accordance with Agreement Accounting Principles or SAP, as applicable, consistently applied.

6.10 Merger. Such Borrower will not merge or consolidate with or into any other Person, except that such Borrower may merge with another Person if (a) such Borrower is the corporation surviving the merger and (b) after giving effect to such merger, no Unmatured Default or Default shall have occurred and be continuing.

6.11 Sale of Assets. Such Borrower will not, directly or indirectly through one of its Subsidiaries, lease, sell or otherwise dispose of all or any substantial part of the Property of such Borrower and its Subsidiaries, taken as a whole, to any other Person.

6.12 Liens. Such Borrower will not, nor will it permit any Subsidiary to, create, incur, or suffer to exist any Lien in, of or on the Property of such Borrower or any of its Subsidiaries, except:

(a) Liens existing on the date hereof and described on Schedule 6.12;

(b) any Lien on any Property securing Indebtedness incurred or assumed for the purpose of financing all or any part of the cost of acquiring such Property; provided, that such Lien (i) applies only to such acquired Property and (ii) attaches to such Property concurrently with or within 90 days after the acquisition thereof;

(c) any Lien on any Property of any Person existing at the time such Person is merged or consolidated with or into such Borrower or its Subsidiary; provided that such Lien (i) applies only to such acquired Property and (ii) is not created in contemplation of such merger or consolidation;

(d) any Lien existing on any Property prior to the acquisition thereof by such Borrower or its Subsidiary; provided, that such Lien (i) applies only to such acquired Property and (ii) is not created in contemplation of such acquisition;

(e) any Lien arising out of the refinancing, extension, renewal or refunding of any Indebtedness secured by any Lien permitted by any of the foregoing clauses of this Section 6.12; provided, that such Indebtedness is not increased and is not secured by additional Property;

(f) Liens imposed by law, such as carriers’, warehousemen’s and mechanics’ liens and other similar Liens arising in the ordinary course of business which secure payment of obligations not more than 60 days past due;

(g) Liens arising in the ordinary course of business which (i) do not secure Indebtedness, (ii) do not secure any obligation in an amount exceeding $25,000,000 and (iii) do not in the aggregate materially detract from the value of its assets or materially impair the use thereof in the operation of its business;

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(h) Liens on cash and cash equivalents securing Rate Management Obligations which are incurred for bona fide hedging purposes or replication purposes and not for speculation;

(i) Liens (i) arising from judicial attachments and judgments, (ii) securing appeal bonds or supersedeas bonds, and (iii) arising in connection with court proceedings (including, without limitation, surety bonds and letters of credit or any other instrument serving a similar purpose); provided, that (A) the execution or other enforcement of such Liens is effectively stayed, (B) the claims secured thereby are being actively contested in good faith and by appropriate proceedings, and (C) adequate book reserves shall have been established and maintained and shall exist with respect thereto;

(j) Liens in the nature of reservations, exceptions, encroachments, easements, rights-of-way, covenants, conditions, restrictions, leases and other similar title exceptions or encumbrances affecting real Property; provided, that such exceptions and encumbrances do not in the aggregate materially detract from the value of such Property or materially interfere with the use of such Property in the ordinary conduct of the business of such Borrower and its Subsidiaries, taken as a whole;

(k) Liens on Property of a Subsidiary of such Borrower (other than a Subsidiary which is a Borrower); provided, that such Liens secure only obligations owing to such Borrower;

(l) in the case of Nationwide Mutual, Liens on securities owned by Nationwide Mutual securing its obligations under one or more prepaid equity forward contracts;

(m) in the case of Nationwide Mutual and Nationwide Life, Liens on securities, cash and cash equivalents granted in connection with securities lending activities or securities repurchase or reverse-repurchase activities of such Borrower and its Subsidiaries in the ordinary course of business in compliance with all applicable laws; provided, that the aggregate amount of securities, cash and cash equivalents subject to such Liens may at no time exceed 5% of such Borrower’s Statutory Surplus;

(n) Liens consisting of deposits made by such Borrower (in the case of Nationwide Mutual and Nationwide Life) on behalf of itself or any Insurance Subsidiary or by any Insurance Subsidiary of such Borrower with the insurance regulatory authority in its jurisdiction of formation or other statutory Liens or Liens or claims imposed or required by applicable insurance law or regulation against the assets of such Borrower or any Insurance Subsidiary of such Borrower, in each case in favor of policyholders of such Borrower or such Insurance Subsidiary and granted in the ordinary course of such Borrower’s or such Insurance Subsidiary’s business;

(o) Liens granted by Nationwide Realty Investors, Ltd. and its Subsidiaries on real property owned thereby and the improvements thereon in connection with the development or operation of such real property and improvements;

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(p) Liens granted on assets of Subsidiaries of such Borrower (other than a Subsidiary which is a Borrower) securing indebtedness of such Person incurred in connection with the sale or issuance of Structured Finance Securities, provided that no Borrower or Subsidiary has any recourse obligations with respect thereto;

(q) in the case of Nationwide Life, Liens securing Rate Management Obligations of Nationwide Life incurred in connection with funding agreements issued by Nationwide Life to support its Medium Term Note Program;

(r) Liens on mortgage loans and foreclosure receivables securing indebtedness of a Borrower or its Subsidiaries under a warehousing credit facility in an aggregate principal or face amount at any date not to exceed $150,000,000;

(s) Liens created in connection with Capitalized Lease Obligations; provided, that the principal amount of the Indebtedness secured by any and all such Liens shall not at any time exceed $200,000,000;

(t) Liens granted by Subsidiaries of such Borrower, which Subsidiaries are hedge funds or mutual funds, provided that no Borrower or Subsidiary has any recourse obligations with respect thereto;

(u) Liens incurred in connection with AXXX/XXX Transactions, provided that no Borrower or Subsidiary thereof has any recourse obligations with respect thereto; and

(v) in the case of Nationwide Bank, Liens in connection with repurchase agreements in the ordinary course of business in compliance with all applicable laws;

(w) in the case of NFS and its Subsidiaries, Liens on securities, cash and cash equivalents granted in connection with the marketing of standard banking products by NFS and its Subsidiaries in the ordinary course of business in compliance with all applicable laws; provided, that the aggregate amount of securities, cash and cash equivalents subject to such Liens may not at any time exceed 5% of the Consolidated Tangible Net Worth of NFS; and

(x) Liens not otherwise permitted by the foregoing clauses of this Section 6.12 securing Indebtedness in an aggregate principal or face amount at any date not to exceed (i) in the case of Nationwide Mutual and Nationwide Life, 5% of such Borrower’s Statutory Surplus and (ii) in the case of NFS, 5% of the Consolidated Tangible Net Worth of NFS.

Notwithstanding anything to the contrary in this Section 6.12, in no event shall Nationwide Mutual or its Subsidiaries create, incur or suffer to exist any Lien on the stock of NFS, and in no event shall NFS create, incur or suffer to exist any Lien on the stock of Nationwide Life.

6.13 Affiliates. The Borrower will not, and will not permit any Subsidiary to, enter into any transaction (including, without limitation, the purchase or sale of any Property or service) with, or make any payment or transfer to, any Affiliate except in the ordinary course of

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business and pursuant to the reasonable requirements of the Borrower’s or such Subsidiary’s business and upon fair and reasonable terms no less favorable to the Borrower or such Subsidiary than the Borrower or such Subsidiary would obtain in a comparable arms-length transaction; provided, that the foregoing provisions of this Section 6.13 shall not prohibit any such Person from declaring or paying any lawful dividend or other payment ratably in respect of all of its capital stock of the relevant class so long as, after giving effect thereto, no Default in respect of such Borrower shall have occurred and be continuing.

6.14 ERISA Compliance. With respect to any Plan, neither such Borrower nor any of its Subsidiaries shall or shall permit any other member of the Controlled Group to:

(a) engage in any “prohibited transaction” (as such term is defined in Section 406 of ERISA or Section 4975 of the Code) for which a civil penalty pursuant to Section 502(i) of ERISA or a tax pursuant to Section 4975 of the Code in excess of $5,000,000 for all Plans in the aggregate (less amounts determined pursuant to clauses (b), (c) and (d)) could reasonably be expected to be imposed;

(b) permit an “accumulated funding deficiency” (as such term is defined in Section 302 of ERISA) in excess of $5,000,000 for all Plans in the aggregate (less amounts determined pursuant to clauses (a), (c) and (d)) to be incurred whether or not waived, or permit any Unfunded Liability which could reasonably be expected to have a Material Adverse Effect;

(c) permit the occurrence of any Reportable Event which could reasonably be expected to result in liability (i) to the Borrower or any Subsidiary in excess of $5,000,000 for all Plans in the aggregate (less amounts determined pursuant to clauses (a), (b) and (d)) or (ii) to any other member of the Controlled Group in an amount which could reasonably be expected to have a Material Adverse Effect;

(d) fail to make any contribution or payment to any Multiemployer Plan which any member of the Controlled Group may be required to make under any agreement relating to such Multiemployer Plan or any law pertaining thereto which results in or could result in a liability (i) of the Borrower or any Subsidiary in excess of $5,000,000 for all Plans in the aggregate (less amounts determined pursuant to clauses (a), (b) and (c)) or (ii) of any other member of the Controlled Group which could reasonably be expected to have a Material Adverse Effect; or

(e) permit the establishment or amendment of any Plan or cause or permit any Plan to fail to comply with the applicable provisions of ERISA and the Code, which establishment, amendment or failure could reasonably be expected to result in liability to any member of the Controlled Group which individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

6.15 Financial Covenants.

6.15.1 Statutory Surplus of Nationwide Mutual. Nationwide Mutual will not permit its Statutory Surplus, determined as at the end of each fiscal quarter of

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Nationwide Mutual, to be less than 70% of its Statutory Surplus as of December 31, 2004.

6.15.2 Statutory Surplus of Nationwide Life. Nationwide Life will not permit its Statutory Surplus, determined as at the end of each fiscal quarter of Nationwide Life, to be less than 70% of its Statutory Surplus as of December 31, 2004 at any time.

6.15.3 Leverage Ratio of NFS. NFS will not permit the ratio, determined as of the end of each fiscal quarter of NFS, of (a) Indebtedness of NFS and its Subsidiaries calculated on a consolidated basis as of such time to (b) Total Capitalization of NFS, to be greater than 0.40 to 1.0.

ARTICLE VII

DEFAULTS

The occurrence of any one or more of the following events with respect to any Borrower shall constitute a Default with respect to such Borrower:

7.1 Representation or Warranty. Any representation or warranty made or deemed made by or on behalf of such Borrower or any of its Subsidiaries to the Lenders, the Fronting Banks or the Agent under or in connection with this Agreement, any Extension of Credit, or any certificate or information delivered by or on behalf of such Borrower or any of its Subsidiaries in connection with this Agreement or any other Loan Document shall be materially false on the date as of which made.

7.2 Non-Payment of Obligations. Nonpayment of principal of any Loan made to such Borrower when due, nonpayment of any Reimbursement Obligation within one Business Day after the same becomes due, or nonpayment of interest upon any Loan made to such Borrower or of any Facility Fee or Utilization Fee, Letter of Credit fee or other obligations of such Borrower under any of the Loan Documents within five days after the same becomes due.

7.3 Specific Defaults. The breach by such Borrower of any of the terms or provisions of Section 6.2, 6.10, 6.11, 6.12, 6.14, or 6.15.

7.4 Other Defaults. The breach by such Borrower (other than a breach which constitutes a Default under another Section of this Article VII) of any of the terms or provisions of this Agreement which is not remedied within twenty (20) days after written notice from the Agent, any Fronting Bank or any Lender.

7.5 Cross-Default. Failure of such Borrower or any of its Material Affiliates to pay when due any Indebtedness aggregating in excess of $25,000,000 (“Material Indebtedness”); or the default by such Borrower or any of its Material Affiliates in the performance (beyond the applicable grace period with respect thereto, if any) of any term, provision or condition contained in any agreement under which any such Material Indebtedness was created or is governed, or any other event shall occur or condition exist, the effect of which default or event is to cause, or to permit the holder or holders of such Material Indebtedness to cause, such Material Indebtedness

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to become due prior to its stated maturity; or any Material Indebtedness of such Borrower or any of its Material Affiliates shall be declared to be due and payable or required to be prepaid or repurchased (other than by a regularly scheduled payment) prior to the stated maturity thereof; or such Borrower or any of its Material Affiliates shall not pay, or admit in writing its inability to pay, its debts generally as they become due.

7.6 Voluntary Proceedings. Such Borrower or any of its Material Affiliates shall (a) have an order for relief entered with respect to it under the Federal bankruptcy or state insurance insolvency laws as now or hereafter in effect, (b) make an assignment for the benefit of creditors, (c) apply for, seek, consent to, or acquiesce in, the appointment of a receiver, custodian, trustee, examiner, liquidator or similar official for it or any Substantial Portion of its Property, (d) institute any proceeding seeking an order for relief under the Federal bankruptcy or state insurance insolvency laws as now or hereafter in effect or seeking to adjudicate it a bankrupt or insolvent, or seeking dissolution, winding up, liquidation, reorganization, arrangement, adjustment or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors or fail to file an answer or other pleading denying the material allegations of any such proceeding filed against it, (e) take any corporate or partnership action to authorize or effect any of the foregoing actions set forth in this Section 7.6 or (f) fail to contest in good faith any appointment or proceeding described in Section 7.7.

7.7 Involuntary Proceedings. Without the application, approval or consent of such Borrower or any of its Material Affiliates, a receiver, trustee, examiner, liquidator or similar official shall be appointed for such Borrower or any of its Material Affiliates or any Substantial Portion of its Property, or a proceeding described in Section 7.6(d) shall be instituted against such Borrower or any of its Material Affiliates and such appointment continues undischarged or such proceeding continues undismissed or unstayed for a period of 60 consecutive days.

7.8 Condemnation. Any court, government or governmental agency shall condemn, seize or otherwise appropriate, or take custody or control of, all or any portion of the Property of such Borrower and its Material Affiliates which, when taken together with all other Property of such Borrower and its Material Affiliates so condemned, seized, appropriated, or taken custody or control of, during the twelve-month period ending with the month in which any such action occurs, constitutes a Substantial Portion.

7.9 Judgments. Such Borrower or any of its Material Affiliates shall fail within 30 days to pay, bond or otherwise discharge one or more (a) judgments or orders for the payment of money in excess of $25,000,000 (or the equivalent thereof in currencies other than U.S. Dollars) in the aggregate, or (b) nonmonetary judgments or orders which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect, which judgment(s), in any such case, is/are not stayed on appeal or otherwise being appropriately contested in good faith.

7.10 Change in Control. Any Change in Control shall occur.

7.11 Rate Management Obligation. Nonpayment by such Borrower or any of its Subsidiaries of any Rate Management Obligation in respect of any Rate Management Transaction entered into between such Borrower or any of its Subsidiaries and any Lender or Affiliate thereof with respect to the Obligations under this Agreement when due or the breach by

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such Borrower or any of its Subsidiaries of any material term, provision or condition contained in any Rate Management Transaction entered into with respect to the Obligations under this Agreement.

7.12 License. Any License of such Borrower (in the case of Nationwide Mutual and Nationwide Life) or any Material Insurance Subsidiary of such Borrower in a material jurisdiction of such Person (a) shall be revoked by the Governmental Authority which issued such License, or any action (administrative or judicial) which could reasonably be expected to result in the revocation of such License shall have been commenced against such Borrower or any such Material Insurance Subsidiary and shall not have been dismissed within thirty (30) days after the commencement thereof, (b) shall be suspended by such Governmental Authority for a period in excess of thirty (30) days or (c) shall not be reissued or renewed by such Governmental Authority upon the expiration thereof following application for such reissuance or renewal of such Borrower or such Material Insurance Subsidiary. For the purposes of this Section 7.12, “material jurisdiction” shall mean a jurisdiction in which such Borrower or Material Insurance Subsidiary generates 10% or more of its total premiums.

7.13 Violation of Insurance Laws. Such Borrower (in the case of Nationwide Mutual and Nationwide Life) or any Material Insurance Subsidiary of such Borrower shall be the subject of a final non-appealable order imposing a fine in an amount in excess of $5,000,000 in any single instance or other such orders imposing fines in excess of $10,000,000 in the aggregate after May 13, 2005 by or at the request of any state insurance regulatory agency as a result of the violation by such Borrower or such Material Insurance Subsidiary of such state’s applicable insurance laws or the regulations promulgated in connection therewith.

7.14 Directive or Mandate. Such Borrower (in the case of Nationwide Mutual and Nationwide Life) or any Material Insurance Subsidiary shall become subject to any conservation, rehabilitation or liquidation order (which, in the case of any Material Insurance Subsidiary, is not stayed within ten (10) days), directive or mandate issued by any Governmental Authority or such Borrower (in the case of Nationwide Mutual and Nationwide Life) or any Material Insurance Subsidiary shall become subject to any other directive or mandate issued by any Governmental Authority which could reasonably be expected to have a Material Adverse Effect.

7.15 Cross-Default With Respect to Other Borrowers. The occurrence of a Default under Section 7.2, 7.6 or 7.7 with respect to any other Borrower.

7.16 Invalidity of Disavowal of Guaranty. Any Guaranty or any provisions thereof shall cease to be in full force or effect as to any Borrower, or any Person acting for or on behalf of any Borrower shall deny or disaffirm such Borrower’s obligations under the Guaranty.

ARTICLE VIII

ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES

8.1 Acceleration. If any Default described in Section 7.6 or 7.7 occurs, (a) the obligation of each Lender to make Loans, and the obligation of the Fronting Banks to issue

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Letters of Credit, shall automatically be terminated and (b) all Advances, an amount equal to the aggregate Stated Amount of all issued but undrawn Letters of Credit (such amount being the “Letter of Credit Cash Cover”) and all other amounts payable under this Agreement shall automatically become and be due and payable, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by the Borrowers.

If any other Default occurs, the Required Lenders (or the Agent with the consent of the Required Lenders) may terminate or suspend the obligations of the Lenders to make Loans and the obligations of the Fronting Banks to issue Letters of Credit hereunder, or declare all Advances, the Letter of Credit Cash Cover and all other amounts payable under this Agreement to be due and payable, or both, whereupon all such amounts shall become immediately due and payable, without presentment, demand, protest or notice of any kind, all of which each Borrower hereby expressly waives.

In the event that any Borrower is required to pay the Letter of Credit Cash Cover pursuant to this Section, such payment shall be made in immediately available funds to the Agent, which shall hold such funds as collateral pursuant to arrangements satisfactory to the Agent and the Fronting Banks to secure Reimbursement Obligations in respect of Letters of Credit then outstanding.

If, within 30 days after acceleration of the maturity of any or all of the Obligations or termination of the obligations of the Lenders to make Loans and the Fronting Banks to issue Letters of Credit to one or more of the Borrowers hereunder as a result of any Default (other than any Default as described in Section 7.6 or 7.7 with respect to any Borrower) and before any judgment or decree for the payment of the Obligations due shall have been obtained or entered, the Required Lenders (in their sole discretion) may direct, and the Agent shall, by notice to the affected Borrower or Borrowers, rescind and annul such acceleration and/or termination.

8.2 Amendments. Subject to the provisions of this Article VIII, the Required Lenders (or the Agent with the consent in writing of the Required Lenders) and the Borrowers may enter into agreements supplemental hereto for the purpose of adding or modifying any provisions to the Loan Documents or changing in any manner the rights of the Lenders or the Borrowers hereunder or waiving any Default hereunder; provided, however, that no such supplemental agreement shall, without the consent of all of the Lenders:

(a) Extend the final maturity of any Loan or forgive all or any portion of the principal amount thereof, or reduce the rate or extend the time of payment of interest or fees thereon;

(b) Reduce the percentage specified in the definition of Required Lenders;

(c) Extend the Facility Termination Date, or reduce the amount or extend the payment date for, the mandatory payments required under Section 2.1.4, or increase the amount of the Commitment of any Lender hereunder, or permit the Borrowers to assign their rights under this Agreement; and

(d) Amend this Section 8.2.

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No amendment of any provision of this Agreement relating to the Agent shall be effective without the written consent of the Agent. The Agent may waive payment of the fee required under Section 12.3.2 without obtaining the consent of any other party to this Agreement.

8.3 Fronting Banks and Swing Line Lenders; Guaranty. No amendment, waiver or consent that would adversely affect the rights of, or increase the obligations of, any Fronting Bank, or that would alter any provision hereof relating to or affecting Letters of Credit issued by such Fronting Bank, shall be effective unless agreed to in writing by such Fronting Bank. No amendment, waiver or consent that would adversely affect the rights of, or increase the obligations of, any Swing Line Lender, or that would alter provisions hereof relating to or affecting Swing Line Advances made by such Swing Line Lender, shall be effective unless agreed to in writing by such Swing Line Lender. No amendment of any provision of this Agreement shall release any guarantor from its obligations under any Guaranty, without the written consent of each Lender.

8.4 Preservation of Rights. No delay or omission of the Lenders, the Fronting Banks or the Agent to exercise any right under the Loan Documents shall impair such right or be construed to be a waiver of any Default or an acquiescence therein, and the making of an Extension of Credit to any Borrower notwithstanding the existence of a Default with respect to such Borrower or the inability of such Borrower to satisfy the conditions precedent to such Extension of Credit shall not constitute any waiver or acquiescence. Any single or partial exercise of any such right shall not preclude other or further exercise thereof or the exercise of any other right, and no waiver, amendment or other variation of the terms, conditions or provisions of the Loan Documents whatsoever shall be valid unless in writing signed by the Lenders, the Fronting Banks or the Swing Line Banks, as applicable, required pursuant to Section 8.2 or 8.3, and then only to the extent in such writing specifically set forth. All remedies contained in the Loan Documents or by law afforded shall be cumulative and all shall be available to the Agent, the Lenders and the Fronting Banks until the Obligations have been paid in full.

ARTICLE IX

GENERAL PROVISIONS

9.1 Survival of Representations. All representations and warranties of the Borrowers contained in this Agreement shall survive the Extensions of Credit herein contemplated.

9.2 Governmental Regulation. Anything contained in this Agreement to the contrary notwithstanding, no Lender or Fronting Bank shall be obligated to extend credit to any Borrower in violation of any limitation or prohibition provided by any applicable statute or regulation.

9.3 Headings. Section headings in the Loan Documents are for convenience of reference only, and shall not govern the interpretation of any of the provisions of the Loan Documents.

9.4 Entire Agreement. The Loan Documents embody the entire agreement and understanding among the Borrowers, the Agent, the Fronting Banks and the Lenders and

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supersede all prior agreements and understandings among the Borrowers, the Agent, the Fronting Banks and the Lenders relating to the subject matter thereof other than the fee letter described in Section 10.13.

9.5 Several Obligations; Benefits of this Agreement. The respective obligations of the Lenders hereunder are several and not joint and no Lender or Fronting Bank shall be the partner or agent of any other (except to the extent to which the Agent is authorized to act as such). The failure of any Lender or Fronting Bank to perform any of its obligations hereunder shall not relieve any other Lender or Fronting Bank from any of its obligations hereunder. This Agreement shall not be construed so as to confer any right or benefit upon any Person other than the parties to this Agreement and their respective successors and assigns, provided, however, that the parties hereto expressly agree that each Arranger shall enjoy the benefits of the provisions of Sections 9.6, 9.10 and 10.11 to the extent specifically set forth therein and shall have the right to enforce such provisions on its own behalf and in its own name to the same extent as if it were a party to this Agreement.

9.6 Expenses; Indemnification. (a) Each Borrower jointly and severally agrees to reimburse the Agent and the Arrangers for any reasonable costs, internal charges and out-of-pocket expenses (including reasonable attorneys’ fees and time charges of attorneys for the Agent, which attorneys may be employees of the Agent) paid or incurred by the Agent or the Arrangers in connection with the preparation, negotiation, execution, delivery, syndication, review, amendment, modification, and administration of the Loan Documents. Each Borrower also jointly and severally agrees to reimburse the Agent, the Arrangers, the Fronting Banks and the Lenders for any costs, internal charges and out-of-pocket expenses (including attorneys’ fees and time charges of attorneys for the Agent, the Arrangers, the Fronting Banks and the Lenders, which attorneys may be employees of the Agent, the Arrangers, the Fronting Banks or the Lenders) paid or incurred by the Agent, the Arrangers or any Lender in connection with the collection and enforcement of the Loan Documents. Expenses being reimbursed by the Borrowers under this Section include, without limitation, costs and expenses incurred in connection with the Reports described in the following sentence. Each Borrower acknowledges that from time to time CUSA may prepare and may distribute to the Lenders (but shall have no obligation or duty to prepare or to distribute to the Lenders) certain audit reports (the “Reports”) pertaining to such Borrower’s assets for internal use by CUSA from information furnished to it by or on behalf of such Borrower, after CUSA has exercised its rights of inspection pursuant to this Agreement.

(b) Each Borrower hereby further jointly and severally agrees to indemnify the Agent, each Arranger, each Lender, each Fronting Bank, their respective affiliates, and each of their directors, officers and employees against all losses, claims, damages, penalties, judgments, liabilities and expenses (including, without limitation, all expenses of litigation or preparation therefor whether or not the Agent, any Arranger, any Fronting Bank, any Lender or any affiliate is a party thereto) which any of them may pay or incur arising out of or relating to this Agreement, the other Loan Documents, the transactions contemplated hereby or the direct or indirect application or proposed application of the proceeds of any Extension of Credit hereunder except to the extent that they are determined in a final non-appealable judgment by a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of the party seeking

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indemnification and except as provided in Section 3.5. The obligations of the Borrowers under this Section 9.6 shall survive the termination of this Agreement.

9.7 Numbers of Documents. All statements, notices, closing documents, and requests hereunder shall be furnished to the Agent with sufficient counterparts so that the Agent may furnish one to each of the Lenders.

9.8 Accounting. Except as provided to the contrary herein, all accounting terms used herein shall be interpreted and all accounting determinations hereunder shall be made in accordance with Agreement Accounting Principles.

9.9 Severability of Provisions. Any provision in any Loan Document that is held to be inoperative, unenforceable, or invalid in any jurisdiction shall, as to that jurisdiction, be inoperative, unenforceable, or invalid without affecting the remaining provisions in that jurisdiction or the operation, enforceability, or validity of that provision in any other jurisdiction, and to this end the provisions of all Loan Documents are declared to be severable.

9.10 Nonliability of Lenders. The relationship between the Borrowers on the one hand and the Lenders, the Fronting Banks and the Agent on the other hand shall be solely that of borrower and lender. Neither the Agent, any Arranger, any Lender nor any Fronting Bank shall have any fiduciary responsibilities to any Borrower. Neither the Agent, any Arranger, any Lender nor any Fronting Bank undertakes any responsibility to any Borrower to review or inform such Borrower of any matter in connection with any phase of such Borrower’s business or operations. Each Borrower agrees that neither the Agent, any Arranger, any Lender nor any Fronting Bank shall have liability to such Borrower (whether sounding in tort, contract or otherwise) for losses suffered by the Borrower in connection with, arising out of, or in any way related to, the transactions contemplated and the relationship established by the Loan Documents, or any act, omission or event occurring in connection therewith, unless it is determined in a final non-appealable judgment by a court of competent jurisdiction that such losses resulted from the gross negligence or willful misconduct of the party from which recovery is sought. Neither the Agent, any Arranger, any Lender nor any Fronting Bank shall have any liability with respect to, and each Borrower hereby waives, releases and agrees not to sue for, any special, indirect or consequential damages suffered by such Borrower in connection with, arising out of, or in any way related to the Loan Documents or the transactions contemplated thereby.

9.11 Confidentiality. Each Lender and each Fronting Bank agrees to hold any confidential information which it may receive from the Borrowers pursuant to this Agreement in confidence, except for disclosure (a) to its Affiliates and to other Lenders and their respective Affiliates, provided that such Persons agree to keep such information confidential to the same extent required by the Lenders hereunder, (b) to legal counsel, accountants, and other professional advisors to such Lender or to a Transferee, (c) to regulatory officials, (d) to any Person as requested pursuant to or as required by law, regulation, or legal process, (e) to any Person in connection with any legal proceeding to which such Lender is a party and is legally required to disclose such information, (f) of public information such Lender receives from any Borrower to its direct or indirect contractual counterparties in swap agreements or to legal counsel, accountants and other professional advisors to such counterparties, and (g) permitted by

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Section 12.4. Notwithstanding anything herein to the contrary, confidential information shall not include, and each Lender (and each employee, representative or other agent of any Lender) may disclose to any and all Persons, without limitation of any kind, the “tax treatment” and “tax structure” (in each case, within the meaning of Treasury Regulation Section 1.6011-4) of the transactions contemplated hereby and all materials of any kind (including opinions or other tax analyses) that are or have been provided to such Lender relating to such tax treatment or tax structure; provided that with respect to any document or similar item that in either case contains information concerning such tax treatment or tax structure of the transactions contemplated hereby as well as other information, this sentence shall only apply to such portions of the document or similar item that relate to such tax treatment or tax structure.

9.12 Nonreliance. Each Lender and each Fronting Bank hereby represents that it is not relying on or looking to any margin stock (as defined in Regulation U of the Board of Governors of the Federal Reserve System) for the repayment of the Extensions of Credit provided for herein.

9.13 Disclosure. Each Borrower and each Lender and each Fronting Bank hereby acknowledge and agree that CUSA and/or its Affiliates from time to time may hold investments in, make other loans to or have other relationships with any Borrower and its Affiliates.

9.14 USA PATRIOT ACT NOTIFICATION. The following notification is provided to the Borrowers pursuant to Section 326 of the USA Patriot Act of 2001, 31 U.S.C. Section 5318:

IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT. To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify, and record information that identifies each person or entity that opens an account, including any deposit account, treasury management account, loan, other extension of credit, or other financial services product. What this means for the Borrowers: When a Borrower opens an account, if such Borrower is an individual, the Agent and the Lenders will ask for such Borrower’s name, residential address, tax identification number, date of birth, and other information that will allow the Agent and the Lenders to identify such Borrower, and, if such Borrower is not an individual, the Agent and the Lenders will ask for such Borrower’s name, tax identification number, business address, and other information that will allow the Agent and the Lenders to identify such Borrower. The Agent and the Lenders may also ask, if such Borrower is an individual, to see such Borrower’s driver’s license or other identifying documents, and, if such Borrower is not an individual, to see such Borrower’s legal organizational documents or other identifying documents.

ARTICLE X

THE AGENT

10.1 Appointment; Nature of Relationship. CUSA is hereby appointed by each of the Lenders as its contractual representative (herein referred to as the “Agent”) hereunder and under each other Loan Document, and each of the Lenders and each of the Fronting Banks irrevocably authorizes the Agent to act as the contractual representative of such Lender and such Fronting Bank with the rights and duties expressly set forth herein and in the other Loan Documents. The

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Agent agrees to act as such contractual representative upon the express conditions contained in this Article X. Notwithstanding the use of the defined term “Agent,” it is expressly understood and agreed that the Agent shall not have any fiduciary responsibilities to any Lender or any Fronting Bank by reason of this Agreement or any other Loan Document and that the Agent is merely acting as the contractual representative of the Lenders and the Fronting Banks with only those duties as are expressly set forth in this Agreement and the other Loan Documents. In its capacity as the Lenders’ and the Fronting Banks’ contractual representative, the Agent (a) does not hereby assume any fiduciary duties to any of the Lenders or any of the Fronting Banks, (b) is a “representative” of the Lenders and the Fronting Banks within the meaning of Section 9-105 of the Uniform Commercial Code and (c) is acting as an independent contractor, the rights and duties of which are limited to those expressly set forth in this Agreement and the other Loan Documents. Each of the Lenders and each of the Fronting Banks hereby agrees to assert no claim against the Agent on any agency theory or any other theory of liability for breach of fiduciary duty, all of which claims each Lender and each Fronting Bank hereby waives.

10.2 Powers. The Agent shall have and may exercise such powers under the Loan Documents as are specifically delegated to the Agent by the terms of each thereof, together with such powers as are reasonably incidental thereto. The Agent shall have no implied duties to the Lenders or the Fronting Banks, or any obligation to the Lenders or the Fronting Banks to take any action thereunder except any action specifically provided by the Loan Documents to be taken by the Agent.

10.3 General Immunity. Neither the Agent nor any of its directors, officers, agents or employees shall be liable to the Borrowers, any Borrower, the Lenders, any Lender, the Fronting Banks, or any Fronting Bank for any action taken or omitted to be taken by it or them hereunder or under any other Loan Document or in connection herewith or therewith except to the extent such action or inaction is determined in a final non-appealable judgment by a court of competent jurisdiction to have arisen from the gross negligence or willful misconduct of such Person.

10.4 No Responsibility for Loans, Letters of Credit, Recitals, etc. Neither the Agent nor any of its directors, officers, agents or employees shall be responsible for or have any duty to ascertain, inquire into, or verify (a) any statement, warranty or representation made in connection with any Loan Document or any borrowing hereunder; (b) the performance or observance of any of the covenants or agreements of any obligor under any Loan Document, including, without limitation, any agreement by an obligor to furnish information directly to each Lender and each Fronting Bank; (c) the satisfaction of any condition specified in Article IV, except receipt of items required to be delivered solely to the Agent; (d) the existence or possible existence of any Default or Unmatured Default; (e) the validity, enforceability, effectiveness, sufficiency or genuineness of any Loan Document or any other instrument or writing furnished in connection therewith; (f) the value, sufficiency, creation, perfection or priority of any Lien in any collateral security; or (g) the financial condition of any Borrower or any guarantor of any of the Obligations or of any Borrower’s or any such guarantor’s respective Subsidiaries. The Agent shall have no duty to disclose to the Lenders or to the Fronting Banks information that is not required to be furnished by any Borrower to the Agent at such time, but is voluntarily furnished by any Borrower to the Agent (either in its capacity as Agent or in its individual capacity).

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10.5 Action on Instructions of Lenders. The Agent shall in all cases be fully protected in acting, or in refraining from acting, hereunder and under any other Loan Document in accordance with written instructions signed by the Required Lenders, and such instructions and any action taken or failure to act pursuant thereto shall be binding on all of the Lenders and the Fronting Banks. The Lenders and the Fronting Banks hereby acknowledge that the Agent shall be under no duty to take any discretionary action permitted to be taken by it pursuant to the provisions of this Agreement or any other Loan Document unless it shall be requested in writing to do so by the Required Lenders. The Agent shall be fully justified in failing or refusing to take any action hereunder and under any other Loan Document unless it shall first be indemnified to its satisfaction by the Lenders and the Fronting Banks pro rata against any and all liability, cost and expense that it may incur by reason of taking or continuing to take any such action.

10.6 Employment of Agents and Counsel. The Agent may execute any of its duties as Agent hereunder and under any other Loan Document by or through employees, agents, and attorneys-in-fact and shall not be answerable to the Lenders or to the Fronting Banks, except as to money or securities received by it or its authorized agents, for the default or misconduct of any such agents or attorneys-in-fact selected by it with reasonable care. The Agent shall be entitled to advice of counsel concerning the contractual arrangement between the Agent, the Lenders and the Fronting Banks and all matters pertaining to the Agent’s duties hereunder and under any other Loan Document.

10.7 Reliance on Documents; Counsel. The Agent shall be entitled to rely upon any Note, notice, consent, certificate, affidavit, letter, telegram, statement, paper or document believed by it to be genuine and correct and to have been signed or sent by the proper person or persons, and, in respect to legal matters, upon the opinion of counsel selected by the Agent, which counsel may be employees of the Agent.

10.8 Agent’s Reimbursement and Indemnification. The Lenders and the Fronting Banks agree to reimburse and indemnify the Agent ratably in proportion to their respective Commitments (or, if the Commitments have been terminated, in proportion to their Commitments immediately prior to such termination) (a) for any amounts not reimbursed by the Borrowers for which the Agent is entitled to reimbursement by the Borrowers under the Loan Documents, (b) for any other expenses incurred by the Agent on behalf of the Lenders and the Fronting Banks, in connection with the preparation, execution, delivery, administration and enforcement of the Loan Documents (including, without limitation, for any expenses incurred by the Agent in connection with any dispute between the Agent, any Lender, any Fronting Bank or between two or more of the Lenders and/or the Fronting Banks) and (c) for any liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind and nature whatsoever which may be imposed on, incurred by or asserted against the Agent in any way relating to or arising out of the Loan Documents or any other document delivered in connection therewith or the transactions contemplated thereby (including, without limitation, for any such amounts incurred by or asserted against the Agent in connection with any dispute between the Agent, any Lender, any Fronting Bank or between two or more of the Lenders and/or the Fronting Banks), or the enforcement of any of the terms of the Loan Documents or of any such other documents, provided that (i) no Lender or Fronting Bank shall be liable for any of the foregoing to the extent any of the foregoing is found in a final non-appealable judgment by a court of competent jurisdiction to have resulted from the gross

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negligence or willful misconduct of the Agent and (ii) any indemnification required pursuant to Section 3.5(g) shall, notwithstanding the provisions of this Section 10.8, be paid by the relevant Lender or Fronting Bank in accordance with the provisions thereof. The obligations of the Lenders and the Fronting Banks under this Section 10.8 shall survive payment of the Obligations and termination of this Agreement.

10.9 Notice of Default. The Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Unmatured Default hereunder unless the Agent has received written notice from a Lender, a Fronting Bank or a Borrower referring to this Agreement describing such Default or Unmatured Default and stating that such notice is a “notice of default”. In the event that the Agent receives such a notice, the Agent shall give prompt notice thereof to the Lenders and the Fronting Banks.

10.10 Rights as a Lender or a Fronting Bank. In the event the Agent is a Lender or a Fronting Bank, the Agent shall have the same rights and powers hereunder and under any other Loan Document with respect to its Commitment and its Extensions of Credit as any Lender or Fronting Bank, as applicable, and may exercise the same as though it were not the Agent, and the term “Lender, “Lenders”, “Fronting Bank” or “Fronting Banks” shall, at any time when the Agent is a Lender or a Fronting Bank, as applicable, unless the context otherwise indicates, include the Agent in its individual capacity. The Agent and its Affiliates may accept deposits from, lend money to, and generally engage in any kind of trust, debt, equity or other transaction, in addition to those contemplated by this Agreement or any other Loan Document, with any Borrower or any of its Subsidiaries in which such Borrower or such Subsidiary is not restricted hereby from engaging with any other Person. The Agent, in its individual capacity, is not obligated to remain a Lender or a Fronting Bank.

10.11 Lender and Fronting Bank Credit Decision. Each Lender and each Fronting Bank acknowledges that it has, independently and without reliance upon the Agent, any Arranger, any other Lender or any other Fronting Bank and based on the financial statements prepared by the Borrowers and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and the other Loan Documents. Each Lender and each Fronting Bank also acknowledges that it will, independently and without reliance upon the Agent, any Arranger, any other Lender or any other Fronting Bank and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement and the other Loan Documents.

10.12 Successor Agent. The Agent may resign at any time by giving written notice thereof to the Lenders, the Fronting Banks and the Borrowers, such resignation to be effective upon the appointment of a successor Agent or, if no successor Agent has been appointed, forty-five days after the retiring Agent gives notice of its intention to resign. The Agent may be removed at any time with or without cause by written notice received by the Agent from the Required Lenders, such removal to be effective on the date specified by the Required Lenders. Upon any such resignation or removal, the Required Lenders shall have the right to appoint, on behalf of the Borrowers, the Lenders and the Fronting Banks, a successor Agent. If no successor Agent shall have been so appointed by the Required Lenders within thirty days after the resigning Agent’s giving notice of its intention to resign, then the resigning Agent may appoint,

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on behalf of the Borrowers, the Lenders and the Fronting Banks, a successor Agent. Notwithstanding the previous sentence, the Agent may at any time without the consent of any Borrower, any Lender or any Fronting Bank, appoint any of its Affiliates which is a commercial bank as a successor Agent hereunder. If the Agent has resigned or been removed and no successor Agent has been appointed, the Lenders and the Fronting Banks may perform all the duties of the Agent hereunder and the Borrowers shall make all payments in respect of the Obligations to the applicable Lender and Fronting Bank and for all other purposes shall deal directly with the Lenders and the Fronting Banks. No successor Agent shall be deemed to be appointed hereunder until such successor Agent has accepted the appointment. Any such successor Agent shall be a commercial bank having capital and retained earnings of at least $100,000,000. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the resigning or removed Agent. Upon the effectiveness of the resignation or removal of the Agent, the resigning or removed Agent shall be discharged from its duties and obligations hereunder and under the Loan Documents. After the effectiveness of the resignation or removal of an Agent, the provisions of this Article X shall continue in effect for the benefit of such Agent in respect of any actions taken or omitted to be taken by it while it was acting as the Agent hereunder and under the other Loan Documents. In the event that there is a successor to the Agent by merger, or the Agent assigns its duties and obligations to an Affiliate pursuant to this Section 10.12, then the term “Prime Rate” as used in this Agreement shall mean the prime rate, base rate or other analogous rate of the new Agent.

10.13 Agent and Arranger Fees. The Borrowers agree to pay to the Agent and the Arrangers, for their respective accounts, the fees agreed to by (a) the Borrowers and CGMI pursuant to that certain letter agreement dated April 7, 2005 and (b) the Borrowers and WCM pursuant to the certain letter agreement dated April 5, 2005.

10.14 Delegation to Affiliates. The Borrower, the Lenders and the Fronting Banks agree that the Agent may delegate any of its duties under this Agreement to any of its Affiliates. Any such Affiliate (and such Affiliate’s directors, officers, agents and employees) which performs duties in connection with this Agreement shall be entitled to the same benefits of the indemnification, waiver and other protective provisions to which the Agent is entitled under Articles IX and X.

10.15 Co-Agents, Documentation Agent, Syndication Agent, Managing Agent, etc. Neither any of the Lenders identified in this Agreement as a “co-agent” nor any Documentation Agent, Syndication Agent or Senior Managing Agent shall have any right, power, obligation, liability, responsibility or duty under this Agreement other than those applicable to all Lenders and Fronting Banks as such. Without limiting the foregoing, none of such Lenders shall have or be deemed to have a fiduciary relationship with any Lender or any Fronting Bank. Each Lender and each Fronting Bank hereby makes the same acknowledgments with respect to such Lenders as it makes with respect to the Agent in Section 10.11.

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ARTICLE XI

SETOFF; RATABLE PAYMENTS

11.1 Setoff. In addition to, and without limitation of, any rights of the Lenders and the Fronting Banks under applicable law, if any Borrower becomes insolvent, however evidenced, or any Default occurs, any and all deposits (including all account balances, whether provisional or final and whether or not collected or available) and any other Indebtedness at any time held or owing by any Lender, any Fronting Bank or any Affiliate of any Lender or any Fronting Bank to or for the credit or account of such Borrower may be offset and applied toward the payment of the Obligations owing to such Lender or such Fronting Bank, whether or not the Obligations, or any part thereof, shall then be due.

11.2 Ratable Payments. If any Lender or any Fronting Bank, whether by setoff or otherwise, has payment made to it upon its Extensions of Credit (other than payments received pursuant to Section 3.1, 3.2, 3.4 or 3.5 or payments of principal or interest on Competitive Bid Loans by any Borrower at a time when no Default is continuing with respect to such Borrower) in a greater proportion than that received by any other Lender, such Lender or Fronting Bank, as applicable, agrees, promptly upon demand, to purchase a portion of the Extensions of Credit held by the other Lenders and Fronting Banks so that after such purchase each Lender and Fronting Bank will hold its ratable proportion of Extensions of Credit. If any Lender or Fronting Bank, whether in connection with setoff or amounts which might be subject to setoff or otherwise, receives collateral or other protection for its Obligations or such amounts which may be subject to setoff, such Lender or Fronting Bank, as applicable, agrees, promptly upon demand, to take such action necessary such that all Lenders and Fronting Banks share in the benefits of such collateral ratably in proportion to their Extensions of Credit. In case any such payment is disturbed by legal process, or otherwise, appropriate further adjustments shall be made.

ARTICLE XII

BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS

12.1 Successors and Assigns. The terms and provisions of the Loan Documents shall be binding upon and inure to the benefit of the Borrowers, the Lenders, the Fronting Banks and their respective successors and assigns, except that (a) no Borrower shall have the right to assign its rights or obligations under the Loan Documents and (b) any assignment by any Lender must be made in compliance with Section 12.3. The parties to this Agreement acknowledge that clause (b) of this Section 12.1 relates only to absolute assignments and does not prohibit assignments creating security interests, including, without limitation, any pledge or assignment by any Lender or any Fronting Bank of all or any portion of its rights under this Agreement, any Letter of Credit application and any Note to a Federal Reserve Bank; provided, however, that no such pledge or assignment creating a security interest shall release the transferor Lender or Fronting Bank, as applicable, from its obligations hereunder unless and until the parties thereto have complied with the provisions of Section 12.3. The Agent may treat the Person which made any Loan, issued any Letter of Credit or which holds any Note as the owner thereof for all purposes hereof unless and until such Person complies with Section 12.3; provided, however, that the Agent may in its discretion (but shall not be required to) follow instructions from the

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Person which made any Loan, issued any Letter of Credit or which holds any Note to direct payments relating to such Loan, Letter of Credit or Note to another Person. Any assignee of the rights to any Loan, Letter of Credit or any Note agrees by acceptance of such assignment to be bound by all the terms and provisions of the Loan Documents. Any request, authority or consent of any Person, who at the time of making such request or giving such authority or consent is the owner of the rights to any Letter of Credit or Loan (whether or not a Note has been issued in evidence thereof), shall be conclusive and binding on any subsequent holder or assignee of the rights to such Letter of Credit or Loan.

12.2 Participations.

12.2.1. Permitted Participants; Effect. Any Lender may, in the ordinary course of its business and in accordance with applicable law, at any time sell to one or more banks or other entities (“Participants”) participating interests in any Outstanding Credits owing to such Lender, any Note held by such Lender, any Commitment of such Lender or any other interest of such Lender under the Loan Documents. In the event of any such sale by a Lender of participating interests to a Participant, such Lender’s obligations under the Loan Documents shall remain unchanged, such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, such Lender shall remain the owner of its Outstanding Credits and the holder of any Note issued to it in evidence thereof for all purposes under the Loan Documents, all amounts payable by the Borrowers under this Agreement shall be determined as if such Lender had not sold such participating interests, and the Borrowers and the Agent shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under the Loan Documents.

12.2.2. Voting Rights. Each Lender, each Fronting Bank and each Swing Line Lender, as applicable, shall retain the sole right to approve, without the consent of any Participant, any amendment, modification or waiver of any provision of the Loan Documents other than any amendment, modification or waiver with respect to any Extension of Credit or Commitment in which such Participant has an interest which would require consent of all of the Lenders, the Fronting Banks or the Swing Line Lenders, as applicable, pursuant to the terms of Section 8.2 and 8.3 or of any other Loan Document.

12.2.3. Benefit of Setoff. Each Borrower agrees that each Participant shall be deemed to have the right of setoff provided in Section 11.1 in respect of its participating interest in amounts owing under the Loan Documents to the same extent as if the amount of its participating interest were owing directly to it as a Lender under the Loan Documents, provided that each Lender and each Fronting Bank shall retain the right of setoff provided in Section 11.1 with respect to the amount of participating interests sold to each Participant. The Lenders and the Fronting Banks agree to share with each Participant, and each Participant, by exercising the right of setoff provided in Section 11.1, agrees to share with each Lender and each Fronting Bank, any amount received pursuant to the exercise of its right of setoff, such amounts to be shared in accordance with Section 11.2 as if each Participant were a Lender.

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12.3 Assignments.

12.3.1. Permitted Assignments. Any Lender may, in the ordinary course of its business and in accordance with applicable law, at any time assign to one or more banks or other entities (“Purchasers”) all or any part of its rights and obligations under the Loan Documents. Such assignment shall be substantially in the form of Exhibit C or in such other form as may be agreed to by the parties thereto. The consent of the Borrowers and the Agent shall be required prior to an assignment becoming effective with respect to a Purchaser which is not a Lender or an Affiliate thereof; provided, however, that if a Default has occurred and is continuing, the consent of the Borrowers shall not be required. Such consent of the Agent and, if applicable, the Borrowers shall not be unreasonably withheld or delayed. The consent of each Fronting Bank (in its sole discretion) and each Swing Line Lender (in its sole discretion) shall be required prior to an assignment becoming effective. Each such assignment with respect to a Purchaser which is not a Lender or an Affiliate thereof shall (unless each of the Borrowers and the Agent otherwise consents) be in an amount not less than the lesser of (a) $10,000,000 or (b) the remaining amount of the assigning Lender’s Commitment (calculated as at the date of such assignment) or outstanding Loans (if the applicable Commitment has been terminated).

12.3.2. Effect; Effective Date. Upon (a) delivery to the Agent of an assignment, together with any consents required by Section 12.3.1, and (b) payment to the Agent by the Purchaser or the Lender of a $3,500 fee in respect of any assignment under this Section 12.3 for processing such assignment (unless such fee is waived by the Agent), such assignment shall become effective on the effective date specified in such assignment. The assignment shall contain a representation by the Purchaser to the effect that none of the consideration used to make the purchase of the Commitment and Loans under the applicable assignment agreement constitutes “plan assets” as defined under ERISA and that the rights and interests of the Purchaser in and under the Loan Documents will not be “plan assets” under ERISA. On and after the effective date of such assignment, such Purchaser shall for all purposes be a Lender party to this Agreement and any other Loan Document executed by or on behalf of the Lenders and shall have all the rights and obligations of a Lender under the Loan Documents, to the same extent as if it were an original party hereto, and no further consent or action by the Borrowers, the Lenders or the Agent shall be required to release the transferor Lender with respect to the percentage of the Aggregate Commitment and Outstanding Credits assigned to such Purchaser. Upon the consummation of any assignment to a Purchaser pursuant to this Section 12.3.2, the transferor Lender, the Agent and the Borrowers shall, if the transferor Lender or the Purchaser desires that its Loans be evidenced by Notes, make appropriate arrangements so that new Notes or, as appropriate, replacement Notes are issued to such transferor Lender and new Notes or, as appropriate, replacement Notes, are issued to such Purchaser, in each case in principal amounts reflecting their respective Commitments, as adjusted pursuant to such assignment.

12.4 Dissemination of Information. Each Borrower authorizes each Lender to disclose to any Participant or Purchaser or any other Person acquiring an interest in the Loan Documents by operation of law (each a “Transferee”) and any prospective Transferee any and all

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information in such Lender’s possession concerning the creditworthiness of such Borrower and its Subsidiaries, including without limitation any information contained in any Reports; provided that each Transferee and prospective Transferee agrees to be bound by Section 9.11 of this Agreement.

12.5 Tax Treatment. If any interest in any Loan Document is transferred to any Transferee which is organized under the laws of any jurisdiction other than the United States or any State thereof, the transferor Lender shall cause such Transferee, concurrently with the effectiveness of such transfer, to comply with the provisions of Section 3.5(d).

12.6 Designation. (a) Notwithstanding anything to the contrary contained herein, any Lender (a “Designating Lender”) may grant to one or more special purpose funding vehicles (each, an “SPV”), identified as such in writing from time to time by the Designating Lender to the Agent and the Borrowers, the option to provide to the Borrowers all or any part of any Loan that such Designating Lender would otherwise be obligated to make to the Borrowers pursuant to this Agreement; provided that (i) nothing herein shall constitute a commitment by any SPV to make any Loan, (ii) if an SPV elects not to exercise such option or otherwise fails to provide all or any part of such Loan, the Designating Lender shall be obligated to make such Loan pursuant to the terms hereof and (iii) the Designating Lender shall remain liable for any indemnity or other payment obligation with respect to its Commitment hereunder. The making of a Loan by an SPV hereunder shall utilize the Commitment of the Designating Lender to the same extent, and as if, such Loan were made by such Designating Lender.

(b) As to any Loans or portion thereof made by it, each SPV shall have all the rights that a Lender making such Loans or portion thereof would have had under this Agreement; provided, however, that each SPV shall have granted to its Designating Lender an irrevocable power of attorney, to deliver and receive all communications and notices under this Agreement (and any Loan Documents) and to exercise on such SPV’s behalf, all of such SPV’s voting rights under this Agreement. In the event that any Notes have been issued to the Designated Lender hereunder, no additional Notes shall be required to evidence the Loans or portion thereof made by an SPV; and the related Designating Lender shall be deemed to hold its Notes as agent for such SPV to the extent of the Loans or portion thereof funded by such SPV. In addition, any payments for the account of any SPV shall be paid to its Designating Lender as agent for such SPV.

(c) Each party hereto hereby agrees that no SPV shall be liable for any indemnity or payment under this Agreement for which a Lender would otherwise be liable. In furtherance of the foregoing, each party hereto hereby agrees (which agreements shall survive the termination of this Agreement) that, prior to the date that is one year and one day after the payment in full of all outstanding commercial paper or other senior indebtedness of any SPV, it will not institute against, or join any other person in instituting against, such SPV any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings under the laws of the United States or any State thereof.

(d) In addition, notwithstanding anything to the contrary contained in this Section 12.6 or otherwise in this Agreement, any SPV may (i) at any time and without

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paying any processing fee therefor, assign or participate all or a portion of its interest in any Loans to the Designating Lender or, with the prior consent of the Borrowers and the Agent (provided, that if a Default has occurred and is continuing, the consent of the Borrowers shall not be required) to any financial institutions providing liquidity and/or credit support to or for the account of such SPV to support the funding or maintenance of Loans and (ii) disclose on a confidential basis any non-public information relating to its Loan to any rating agency, commercial paper dealer or provider of any surety, guarantee or credit or liquidity enhancements to such SPV, provided that such Persons agree to keep such information confidential to the same extent required by the Lenders hereunder. This Section 12.6 may not be amended without the written consent of any Designating Lender affected thereby.

ARTICLE XIII

NOTICES

13.1 Notices. Except as otherwise permitted by Section 2.12 with respect to borrowing notices and except as provided in Section 2.17, 2.18 and 13.2, all notices, requests and other communications to any party hereunder shall be in writing (including electronic transmission, facsimile transmission or similar writing) and shall be given to such party: (a) in the case of any Borrower or the Agent, at its address or facsimile number set forth on the signature pages hereof, (b) in the case of any Lender or any Fronting Bank, at its address or facsimile number set forth below its signature hereto or (c) in the case of any party, at such other address or facsimile number as such party may hereafter specify for the purpose by notice to the Agent and the Borrowers in accordance with the provisions of this Section 13.1. Each such notice, request or other communication shall be effective (i) if given by facsimile transmission, when transmitted to the facsimile number specified in this Section and confirmation of receipt is received, (ii) if given by mail, 72 hours after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid, or (iii) if given by any other means, when delivered (or, in the case of electronic transmission, received) at the address specified in this Section; provided that notices to the Agent under Article II shall not be effective until received.

13.2 Electronic Communications.

(a) Each Borrower hereby agrees that, unless otherwise requested by the Agent, it will provide to the Agent all information, documents and other materials that it is obligated to furnish to the Agent pursuant to the Loan Documents, including, without limitation, all notices, requests, financial statements, financial and other reports, certificates and other information materials, but excluding any such communication that (i) relates to a request for a new, or a conversion of an existing, borrowing or other extension of credit (including any election of an interest rate or interest period relating thereto), (ii) relates to the payment of any principal or other amount due under this Agreement prior to the scheduled date therefor, (iii) provides notice of any Default or Unmatured Default under this Agreement, (iv) is required to be delivered to satisfy any condition precedent to the effectiveness of this Agreement and/or any borrowing or other extension of credit hereunder or (v) initiates or responds to legal process (all such non-excluded information being referred to herein collectively as the “Communications”) by

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either (A) transmitting the Communications in an electronic/soft medium (provided such Communications contain any required signatures) in a format acceptable to the Agent to oploanswebadmin@citigroup.com (or such other e-mail address designated by the Agent from time to time) or (B) delivering to the Agent a CD-ROM, DVD or similar digital media containing the Communications.

(b) Each party hereto agrees that the Agent may make the Communications available to the Lenders and the Fronting Banks by posting the Communications on IntraLinks or another relevant website, if any, to which each Lender, each Fronting Bank and the Agent have access (whether a commercial, third-party website or whether sponsored by the Agent) (the “Platform”). Nothing in this Section 13.2 shall prejudice the right of the Agent to make the Communications available to the Lenders and the Fronting Banks in any other manner specified in the Loan Documents.

(c) Each Borrower hereby acknowledges that certain of the Lenders and the Fronting Banks may be “public-side” Lenders or Fronting Banks (i.e., Lenders or Fronting Banks that do not wish to receive material non-public information with respect to the Borrowers or their securities) (each, a “Public Lender”). Each Borrower hereby agrees that (i) Communications that are to be made available on the Platform to Public Lenders shall be clearly and conspicuously marked “PUBLIC” which, at a minimum, shall mean that the word “PUBLIC” shall appear prominently on the first page thereof, (ii) by marking Communications “PUBLIC,” each Borrower shall be deemed to have authorized the Agent, the Lenders and the Fronting Banks to treat such Communications as either publicly available information or not material information (although it may be sensitive and proprietary) with respect to such Borrower or its securities for purposes of United States Federal and state securities laws, (iii) all Communications marked “PUBLIC” are permitted to be made available through a portion of the Platform designated “Public Investor,” and (iv) the Agent shall be entitled to treat any Communications that are not marked “PUBLIC” as being suitable only for posting on a portion of the Platform not designated “Public Investor.”

(d)Each Lender and each Fronting Bank agrees that e-mail notice to it (at the address provided pursuant to the next sentence and deemed delivered as provided in the next paragraph) specifying that Communications have been posted to the Platform shall constitute effective delivery of such Communications to such Lender and such Fronting Bank for purposes of this Agreement. Each Lender and each Fronting Bank agrees (i) to notify the Agent in writing (including by electronic communication) from time to time to ensure that the Agent has on record an effective e-mail address for such Lender or such Fronting Bank to which the foregoing notice may be sent by electronic transmission and (ii) that the foregoing notice may be sent to such e-mail address.

(e) Each party hereto agrees that any electronic communication referred to in this Section 13.2 shall be deemed delivered upon the posting of a record of such communication (properly addressed to such party at the e-mail address provided to the Agent) as “sent” in the e-mail system of the sending party or, in the case of any such communication to the Agent, upon the posting of a record of such communication as “received” in the e-mail system of the Agent; provided that if such communication is not

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so received by the Agent during the normal business hours of the Agent, such communication shall be deemed delivered at the opening of business on the next Business Day for the Agent.

(f) Each party hereto acknowledges that (i) the distribution of material through an electronic medium is not necessarily secure and there are confidentiality and other risks associated with such distribution, (ii) the Communications and the Platform are provided “as is” and “as available,” (iii) none of the Agent, its affiliates nor any of their respective officers, directors, employees, agents, advisors or representatives (collectively, the “Citigroup Parties”) warrants the adequacy of the Platform or the accuracy or completeness of any Communications, and each Citigroup Party expressly disclaims liability for errors or omissions in any Communications or the Platform, and (iv) no warranty of any kind, express, implied or statutory, including, without limitation, any warranty of merchantability, fitness for a particular purpose, non-infringement of third party rights or freedom from viruses or other code defects, is made by any Citigroup Party in connection with any Communications or the Platform. IN NO EVENT SHALL THE AGENT OR ANY OF ITS AFFILIATES OR ANY OF THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ADVISORS OR REPRESENTATIVES (COLLECTIVELY, “AGENT PARTIES”) HAVE ANY LIABILITY TO THE BORROWER, ANY LENDER, ANY FRONTING BANK OR ANY OTHER PERSON OR ENTITY FOR DAMAGES OF ANY KIND, INCLUDING, WITHOUT LIMITATION, DIRECT OR INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES, LOSSES OR EXPENSES (WHETHER IN TORT, CONTRACT OR OTHERWISE) ARISING OUT OF THE BORROWER’S OR THE AGENT’S TRANSMISSION OF COMMUNICATIONS THROUGH THE INTERNET, EXCEPT TO THE EXTENT THE LIABILITY OF ANY AGENT PARTY IS FOUND IN A FINAL NON-APPEALABLE JUDGMENT BY A COURT OF COMPETENT JURISDICTION TO HAVE RESULTED PRIMARILY FROM SUCH AGENT PARTY’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.

13.3 Change of Address. Any Borrower, the Agent, any Lender and any Fronting Bank may each change the address for service of notice upon it by a notice in writing to the other parties hereto.

ARTICLE XIV

COUNTERPARTS

This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one agreement, and any of the parties hereto may execute this Agreement by signing any such counterpart. This Agreement shall be effective when it has been executed by the Borrowers, the Agent, the Lenders the Fronting Banks and each party has notified the Agent by facsimile transmission or telephone that it has taken such action.

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ARTICLE XV

CHOICE OF LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL

15.1 CHOICE OF LAW. THE LOAN DOCUMENTS (OTHER THAN THOSE CONTAINING A CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.

15.2 CONSENT TO JURISDICTION. EACH BORROWER HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR NEW YORK STATE COURT SITTING IN NEW YORK, NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENTS AND EACH BORROWER HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE AGENT, ANY LENDER OR ANY FRONTING BANK TO BRING PROCEEDINGS AGAINST ANY BORROWER IN THE COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY ANY BORROWER AGAINST THE AGENT, ANY LENDER, ANY FRONTING BANK OR ANY AFFILIATE OF THE AGENT, ANY LENDER OR ANY FRONTING BANK INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT SHALL BE BROUGHT ONLY IN A COURT IN NEW YORK, NEW YORK.

15.3 WAIVER OF JURY TRIAL. EACH BORROWER, THE AGENT, EACH LENDER AND EACH FRONTING BANK HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT OR THE RELATIONSHIP ESTABLISHED THEREUNDER.

ARTICLE XVI

AMENDMENT AND RESTATEMENT

16.1. Subject to Section 16.2, on the Closing Date the Existing Credit Agreement shall be amended, restated and superseded in its entirety hereby. The parties hereto acknowledge and agree that (a) this Agreement, any Notes delivered pursuant to Section 2.3.5 and the other Loan Documents executed and delivered in connection herewith do not constitute a novation, payment and reborrowing, or termination of the “Obligations” (as defined in the Existing Credit Agreement) under the Existing Credit Agreement as in effect prior to the Closing Date and (b)

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such “Obligations” are in all respects continuing hereunder with only the terms thereof being modified as provided in this Agreement.

16.2. Notwithstanding anything herein to the contrary, in the event that this Agreement is executed by the Required Lenders but not by all the Lenders, then this Agreement shall not restate and supersede the Existing Credit Agreement in its entirety but shall instead be deemed an amendment of the Existing Credit Agreement effecting the modifications to the Existing Credit Agreement included herein and in the Schedules hereto.

16.3. Notwithstanding the modifications effected by this Agreement of the representations, warranties and covenants of the Borrowers contained in the Existing Credit Agreement, the Borrowers acknowledge and agree that any causes of action or other rights created in favor of any Lender and its successors arising out of the representations and warranties of the Borrowers contained in or delivered (including representations and warranties delivered in connection with the making of the loans or other extensions of credit thereunder) in connection with the Existing Credit Agreement shall survive the execution and delivery of this Agreement; provided, however, that it is understood and agreed that the Borrowers’ monetary obligations under the Existing Credit Agreement in respect of the loans thereunder are continued and evidenced by this Agreement and that all indemnification obligations of the Borrowers pursuant to the Existing Credit Agreement are continued hereunder.

[signature pages follow]

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

NATIONWIDE MUTUAL INSURANCE COMPANY
By:
	Carol L. Dove
Title:	Vice President – Assistant Treasurer
	One Nationwide Plaza 1-32-06
	Columbus, Ohio 43215-2220
	Attention: Carol L. Dove
	Telephone: (614) 249-6963
	FAX: (614) 249-2739
NATIONWIDE LIFE INSURANCE COMPANY
By:
	Carol L. Dove
Title:	Vice President – Assistant Treasurer
	One Nationwide Plaza 1-32-06
	Columbus, Ohio 43215-2220
	Attention: Carol L. Dove
	Telephone: (614) 249-6963
	FAX: (614) 249-2739
NATIONWIDE FINANCIAL SERVICES, INC.
By:
	Carol L. Dove
Title:	Vice President – Assistant Treasurer
	One Nationwide Plaza 1-32-06
	Columbus, Ohio 43215-2220
	Attention: Carol L. Dove
	Telephone: (614) 249-6963
	FAX: (614) 249-2739

[TO SECOND AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT]

CITICORP USA, INC., as Agent and as a Lender

By:

Name:

Title:

[TO SECOND AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT]

WACHOVIA BANK, NATIONAL

ASSOCIATION, as Syndication Agent and as a Lender

By:

Name:

Title:

[TO SECOND AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT]

ABN AMRO BANK N.V., as Co-Documentation

Agent and as a Lender

By:

Name:

Title:

[TO SECOND AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT]

BANK OF AMERICA, N.A., as Co-Documentation

Agent and as a Lender

By:

Name:

Title:

[TO SECOND AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT]

THE BANK OF NEW YORK, as Co-

Documentation Agent and as a Lender

By:

Name:

Title:

[TO SECOND AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT]

JPMORGAN CHASE BANK, N.A., as Co-

Documentation Agent and as a Lender

By:

Name:

Title:

[TO SECOND AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT]

KEYBANK NATIONAL ASSOCIATION, as Co-

Documentation Agent and as a Lender

By:

Name:

Title:

[TO SECOND AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT]

HSBC BANK USA, NATIONAL ASSOCIATION,

as Co-Documentation Agent and as a Lender

By:

Name:

Title:

[TO SECOND AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT]

MELLON BANK, N.A., as Senior Managing Agent

and as a Lender

By:

Name:

Title:

[TO SECOND AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT]

WELLS FARGO BANK, NATIONAL

ASSOCIATION, as Senior Managing Agent and as

a Lender

By:

Name:

Title:

By:

Name:

Title:

[TO SECOND AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT]

THE HUNTINGTON NATIONAL BANK, as Co-

Agent and as a Lender

By:

Name:

Title:

[TO SECOND AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT]

PNC BANK, NATIONAL ASSOCIATION, as Co-

Agent and as a Lender

By:

Name:

Title:

[TO SECOND AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT]

STATE STREET BANK AND TRUST

COMPANY, as Co-Agent and as a Lender

By:

Name:

Title:

[TO SECOND AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT]

US BANK, NATIONAL ASSOCIATION, as Co-

Agent and as a Lender

By:

Name:

Title:

[TO SECOND AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT]

BANK OF MONTREAL, as Co-Agent and as a

Lender

By:

Name:

Title:

[TO SECOND AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT]

FIFTH THIRD BANK, as a Lender

By:

Name:

Title:

[TO SECOND AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT]

NATIONAL CITY BANK, as a Lender

By:

Name:

Title:

[TO SECOND AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT]

PRICING SCHEDULE

	LEVEL I STATUS		LEVEL II STATUS		LEVEL III STATUS		LEVEL IV STATUS		LEVEL V STATUS		LEVEL VI STATUS
Eurodollar Margin	0.140	%	0.180	%	0.245	%	0.325	%	0.375	%	0.550	%
Facility Fee Rate	0.060	%	0.070	%	0.080	%	0.100	%	0.125	%	0.200	%
Utilization Fee Rate	0.050	%	0.050	%	0.050	%	0.075	%	0.125	%	0.125	%

For the purposes of this Schedule, the following terms have the following meanings, subject to the final paragraph of this Schedule:

“Level I Status” exists (a) with respect to Nationwide Mutual or Nationwide Life, at any date if, on such date, such Person’s Moody’s Rating is Aa2 or better or such Person’s S&P Rating is AA or better and (b) with respect to NFS, at any date if, on such date, NFS’s Moody’s Rating is A1 or better or NFS’s S&P Rating is A+ or better.

“Level II Status” exists with respect to any Borrower at any date if, on such date, (a) such Borrower has not qualified for Level I Status and (b) (i) with respect to Nationwide Mutual or Nationwide Life, such Person’s Moody’s Rating is Aa3 or better or such Person’s S&P Rating is AA- or better and (ii) with respect to NFS, NFS’s Moody’s Rating is A2 or better or NFS’s S&P Rating is A or better.

“Level III Status” exists with respect to any Borrower at any date if, on such date, (a) such Borrower has not qualified for Level I Status or Level II Status and (b) (i) with respect to Nationwide Mutual or Nationwide Life, such Person’s Moody’s Rating is A1 or better or such Person’s S&P Rating is A+ or better and (ii) with respect to NFS, NFS’s Moody’s Rating is A3 or better or NFS’s S&P Rating is A- or better.

“Level IV Status” exists with respect to any Borrower at any date if, on such date, (a) such Borrower has not qualified for Level I Status, Level II Status or Level III Status and (b) (i) with respect to Nationwide Mutual or Nationwide Life, such Person’s Moody’s Rating is A2 or better or such Person’s S&P Rating is A or better and (ii) with respect to NFS, NFS’s Moody’s Rating is Baa1 or better or NFS’s S&P Rating is BBB+ or better.

“Level V Status” exists with respect to any Borrower at any date if, on such date, (a) such Borrower has not qualified for Level I Status, Level II Status, Level III Status or Level IV Status and (b) (i) with respect to Nationwide Mutual or Nationwide Life, such Person’s Moody’s Rating is A3 or better or such Person’s S&P Rating is A- or better and (ii) with respect to NFS, NFS’s Moody’s Rating is Baa2 or better or NFS’s S&P Rating is BBB or better.

“Level VI Status” exists with respect to any Borrower at any date if, on such date, such Borrower has not qualified for Level I Status, Level II Status, Level III Status, Level IV Status, or Level V Status.

“Moody’s Rating” means, at any time, (a) with respect to Nationwide Mutual and Nationwide Life, the financial strength rating issued by Moody’s and then in effect with respect to such Person, and (b) with respect to NFS, the rating issued by Moody’s and then in effect with respect to NFS’s senior unsecured long-term debt securities without third-party credit enhancement.

“S&P Rating” means, at any time, (a) with respect to Nationwide Mutual and Nationwide Life, the financial strength rating issued by S&P and then in effect with respect to such Person, and (b) with respect to NFS, the rating issued by S&P and then in effect with respect to NFS’s senior unsecured long-term debt securities without third-party credit enhancement.

“Status” means either Level I Status, Level II Status, Level III Status, Level IV Status, Level V Status or Level VI Status.

The Applicable Margin and the Applicable Facility Fee Rate with respect to each Borrower shall be determined in accordance with the foregoing table based on such Borrower’s Status as determined from its then-current Moody’s and S&P Ratings. The Applicable Utilization Fee Rate shall be determined in accordance with the foregoing table based on the Status of the Borrower which has the lowest Status (with Level I Status being the highest Status and Level VI Status being the lowest Status) of all Borrowers to which Advances are then outstanding.

The credit rating in effect on any date for the purposes of this Schedule is that in effect at the close of business on such date. If at any time a Borrower has no Moody’s Rating or no S&P Rating, Level VI Status shall exist. Notwithstanding the foregoing, if the Moody’s Rating and the S&P Rating are more than one level apart, then Status shall be based on the level which is one level above the lower of the two levels.

SCHEDULE 1

COMMITMENTS

Lender	Commitment
Citicorp USA, Inc.	$	90,000,000
Wachovia Bank, National Association	$	90,000,000
ABN AMRO Bank N.V.	$	75,000,000
Bank of America, N.A.	$	75,000,000
The Bank of New York	$	75,000,000
JPMorgan Chase Bank, N.A.	$	75,000,000
KeyBank National Association	$	75,000,000
HSBC Bank USA, National Association	$	75,000,000
Mellon Bank, N.A.	$	55,000,000
Wells Fargo Bank, National Association	$	55,000,000
The Huntington National Bank	$	40,000,000
PNC Bank, National Association	$	40,000,000
State Street Bank and Trust Company	$	40,000,000
US Bank, National Association	$	40,000,000
Bank of Montreal	$	40,000,000
Fifth Third Bank	$	30,000,000
National City Bank	$	30,000,000
Aggregate Commitment:	$	1,000,000,000

SCHEDULE 2

LIST OF SWING LINE COMMITMENTS

Swing Line Lender	Swing Line Commitment
Citicorp USA, Inc.	$	90,000,000
Wachovia Bank, National Association	$	90,000,000

SCHEDULE 5.8

SUBSIDIARIES¹

(as of December 17, 2007)

1717 Advisory Services, Inc.

1717 Brokerage Services, Inc.

1717 Capital Management Company

1717 Insurance Agency of Massachusetts, Inc.

1717 Insurance Agency of Texas, Inc.

838-890 W. Goodale, LLC

AGMC Reinsurance, Ltd.

AID Finance Services, Inc.

ALLIED General Agency Company

ALLIED Group, Inc.

ALLIED Property and Casualty Insurance Company

ALLIED Texas Agency, Inc.

AMCO Insurance Company

American Marine Underwriters, Inc.

Arena District Owners Association

Atlantic Floridian Insurance Company

Audenstar Limited

Cal-Ag Insurance Services, Inc.

CalFarm Insurance Agency

Champions of the Community, Inc.

Colonial County Mutual Insurance Company

Continental Cool Springs East, LLC

Continental/North Shore I, L.P.

Continental/North Shore II, L.P.

Corviant Corporation

Crestbrook Insurance Company

Depositors Insurance Company

DVM Insurance Agency, Inc.

East of Madison, LLC

EIRN Investments, LLC

F & B, Inc.

Farmland Mutual Insurance Company

FutureHealth Corporation

FutureHealth Holding Company

¹ Nationwide Mutual Insurance Company, Nationwide Realty Investors, Ltd. (“NRI”) and potentially other Borrowers and Subsidiaries have, directly or indirectly, a majority interest in a number of entities that are not listed herein (“Excluded Entities”) because they are investment vehicles rather than operating companies. Each Excluded Entity might be considered a “Subsidiary” as defined under the Agreement. The Excluded Entities are formed in the ordinary course of business as permissible investments under applicable law, including, with respect to NRI, for ownership of, investment in, or development of real estate. A complete list of the NRI Subsidiaries and other Excluded Entities are available upon request.

FutureHealth Technologies Corporation

Gates, McDonald & Company

Gates, McDonald & Company of New York, Inc.

GatesMcDonald DTAO, LLC

GatesMcDonald DTC, LLC

GatesMcDonald DTNHP, LLC

GatesMcDonald Health Plus Inc.

GVH Participacoes e Empreendimentos Ltda.

Insurance Intermediaries, Inc.

Intervent USA, Inc.

Life REO Holdings, LLC

Lone Star General Agency, Inc.

Morley & Associates, Inc.

Mullin TBG Insurance Agency Services, LLC

National Casualty Company

National Casualty Company of America, Ltd.

Nationwide Advantage Mortgage Company

Nationwide Affinity Insurance Company of America

Nationwide Agribusiness Insurance Company

Nationwide Arena, LLC

Nationwide Asset Management Holdings

Nationwide Asset Management, LLC

Nationwide Assurance Company

Nationwide Bank

Nationwide Better Health, Inc.

Nationwide Cash Management Company

Nationwide Community Development Corporation, LLC

Nationwide Corporation

Nationwide Document Solutions, Inc.

Nationwide Emerging Managers, LLC

Nationwide Exclusive Agent Risk Purchasing Group, LLC

Nationwide Financial Assignment Company

Nationwide Financial Institution Distributors Agency, Inc.

Nationwide Financial Services Capital Trust

Nationwide Financial Services, Inc.

Nationwide Financial Sp.Zo.o

Nationwide Financial Structured Products, LLC

Nationwide Foundation

Nationwide Fund Advisors

Nationwide Fund Distributors LLC

Nationwide Fund Management LLC

Nationwide General Insurance Company

Nationwide Global Finance, LLC

Nationwide Global Funds

Nationwide Global Holdings, Inc.

Nationwide Global Ventures, Inc.

Nationwide Indemnity Company

Nationwide Insurance Company of America

Nationwide Insurance Company of Florida

Nationwide International Underwriters

Nationwide Investment Advisors, LLC

Nationwide Investment Services Corporation

Nationwide Life and Annuity Company of America

Nationwide Life and Annuity Insurance Company

Nationwide Life Insurance Company

Nationwide Life Insurance Company of America

Nationwide Life Insurance Company of Delaware

Nationwide Life Tax Credit Partners 2007-A, LLC

Nationwide Lloyds

Nationwide Management Systems, Inc.

Nationwide Mutual Capital I, LLC

Nationwide Mutual Capital, LLC

Nationwide Mutual Fire Insurance Company

Nationwide Mutual Funds

Nationwide Mutual Insurance Company

Nationwide Private Equity Fund, LLC

Nationwide Property and Casualty Insurance Company

Nationwide Property Protection Services, LLC

Nationwide Provident Holding Company

Nationwide Realty Investors, Ltd.

Nationwide Retirement Solutions Insurance Agency, Inc.

Nationwide Retirement Solutions, Inc.

Nationwide Retirement Solutions, Inc. of Arizona

Nationwide Retirement Solutions, Inc. of Ohio

Nationwide Retirement Solutions, Inc. of Texas

Nationwide SA Capital Trust

Nationwide Sales Solutions, Inc.

Nationwide Securities, Inc.

Nationwide Separate Accounts LLC

Nationwide Services Company, LLC

Nationwide Services For You, LLC

Nationwide Services Sp.Zo.o.

Nationwide Variable Insurance Trust

Newhouse Capital Partners, LLC

Newhouse MD LLC

Newhouse Special Situations Fund I, LLC

NF Reinsurance Ltd.

NFS Distributors, Inc.

NGH UK, Ltd

Northbank Condominium Home Owners Association

NorthPointe Capital LLC

NRI Equity Land Investments

NRI Equity Tampa, LLC

NRI-CKT Pinellas, LLC

NWD Asset Management Holdings, Inc.

NWD Investment Management, Inc.

NWD Investments, LLC

NWD Management & Research Trust

NWD MGT, LLC

OCH Company, LLC

Old Track Street Owners Association

Olentangy Reinsurance Company

Pension Associates, Inc.

Polaris A, Ltd.

Premier Agency, Inc.

Provestco, Inc.

RCMD Financial Services, Inc.

RC-NRI, LLLP

Registered Investment Advisors Services, Inc.

Retention Alternatives Ltd.

Riverview Alternative Investment Advisors, LLC

Riverview International Group, Inc.

RNN GP, LLC

RNN, LLLP

RP&C International (Securities), Inc.

RP&C International Ltd.

RP&C International, Inc.

Scottsdale Indemnity Company

Scottsdale Insurance Company

Scottsdale Surplus Lines Insurance Company

TBG Advisory Services Corporation

TBG Aviation, LLC

TBG Danco Insurance Services Corporation

TBG Financial & Insurance Services Corp.

TBG Financial and Insurance Services Corporation of Hawaii

TBG Insurance Services Corporation

The Healthcare Fund LDC

The Waterfront Partners, LLC

THI Holdings (Delaware), Inc.

Titan Auto Insurance of New Mexico, Inc.

Titan Indemnity Company

Titan Insurance Company

Titan Insurance Services, Inc.

V.P.I. Services, Inc.

Veterinary Pet Insurance Company

Victoria Automobile Insurance Company

Victoria Financial Corporation

Victoria Fire & Casualty Company

Victoria Insurance Agency, Inc.

Victoria National Insurance Company

Victoria Select Insurance Company

Victoria Specialty Insurance Company

Vida Seguradora SA

Washington Square Administrative Services, Inc.

Waterfront Market East, LLC

Western Heritage Insurance Company

Whitehall Holdings, Inc.

WI of Florida, Inc.

SCHEDULE 6.12

LIENS

Type of Facility	Lender	Commitment Amount		Secured	Collateral
Warehouse Credit Facility	National City Bank as Syndication Agent	$	150,000,000	Yes	Mortgage Loans and servicing rights
Securities sale and repurchase agreement	National City Bank	$	70,000,000	Yes	Mortgage Loans and Mortgage securities
7.96% senior secured notes	Mutual of Omaha Insurance Co.	$	10,000,000	Yes	Mortgage servicing rights
Repurchase Agreement	FHLB	$	157,400,000	Yes	Invested assets
Repurchase Agreement	Citibank	$	32,100,000	Yes	Invested assets
Repurchase Agreement	JPM Chase	$	24,200,000	Yes	Invested assets
Repurchase Agreements	State of Ohio	$	5,400,000	Yes	Invested assets
Repurchase Agreements	Corp One	$	6,000,000	Yes	Invested assets
Total		$	455,100,000

EXHIBIT A-1

RATABLE NOTE

(Section 2.11)

[Date]

                    , a                      (the “Borrower”), promises to pay to the order of                                          (the “Lender”) the aggregate unpaid principal amount of all Ratable Loans made by the Lender to the Borrower pursuant to Section 2.2 of the Agreement (as hereinafter defined), in immediately available funds at the main office of Citicorp USA, Inc., as Agent, together with interest on the unpaid principal amount hereof at the rates and on the dates set forth in the Agreement. The Borrower shall pay the principal of and accrued and unpaid interest on the Ratable Loans in full on the Facility Termination Date.

The Lender shall, and is hereby authorized to, record on the schedule attached hereto, or to otherwise record in accordance with its usual practice, the date and amount of each Ratable Loan and the date and amount of each principal payment hereunder.

This Note is one of the Ratable Notes issued pursuant to, and is entitled to the benefits of, the Second Amended and Restated Five Year Credit Agreement dated as of December 31, 2007 (which, as it may be amended or modified and in effect from time to time, is herein called the “Agreement”), among the Borrower, [Nationwide Mutual Insurance Company,] [Nationwide Life Insurance Company,] [Nationwide Financial Services, Inc.,] [the Subsidiary Borrowers party thereto,] the Fronting Banks party thereto, the Lenders party thereto, including the Lender, and Citicorp USA, Inc., as Agent, to which Agreement reference is hereby made for a statement of the terms and conditions governing this Note, including the terms and conditions under which this Note may be prepaid or its maturity date accelerated. Capitalized terms used herein and not otherwise defined herein are used with the meanings attributed to them in the Agreement.

By:

Print Name:

Title:

SCHEDULE OF LOANS AND PAYMENTS OF PRINCIPAL

TO

NOTE OF                                 ,

DATED                     ,         

Date Principal Amount of Loan Maturity of Interest Period Principal Amount Paid Unpaid Balance

EXHIBIT A-2

COMPETITIVE BID NOTE

(Section 2.11)

[Date]

                    , a                      (the “Borrower”), promises to pay to the order of                                          (the “Lender”) the aggregate unpaid principal amount of all Competitive Bid Loans made by the Lender to the Borrower pursuant to Section 2.3 of the Agreement (as hereinafter defined), in immediately available funds at the main office of Citicorp USA, Inc., as Agent, together with interest on the unpaid principal amount hereof at the rates and on the dates set forth in the Agreement. The Borrower shall pay the principal of and accrued and unpaid interest on the Competitive Bid Loans in full on the Facility Termination Date.

The Lender shall, and is hereby authorized to, record on the schedule attached hereto, or to otherwise record in accordance with its usual practice, the date and amount of each Competitive Bid Loan and the date and amount of each principal payment hereunder.

This Note is one of the Competitive Bid Notes issued pursuant to, and is entitled to the benefits of, the Second Amended and Restated Five Year Credit Agreement dated as of December 31, 2007 (which, as it may be amended or modified and in effect from time to time, is herein called the “Agreement”), among the Borrower, [Nationwide Mutual Insurance Company,] [Nationwide Life Insurance Company,] [Nationwide Financial Services, Inc.,] [the Subsidiary Borrowers party thereto,] the Fronting Banks party thereto, the Lenders party thereto, including the Lender, and Citicorp USA, Inc., as Agent, to which Agreement reference is hereby made for a statement of the terms and conditions governing this Note, including the terms and conditions under which this Note may be prepaid or its maturity date accelerated. Capitalized terms used herein and not otherwise defined herein are used with the meanings attributed to them in the Agreement.

By:

Print Name:

Title:

SCHEDULE OF LOANS AND PAYMENTS OF PRINCIPAL

TO

NOTE OF                         ,

DATED             ,         

Date Principal Amount of Loan Maturity of Interest Period Principal Amount Paid Unpaid Balance

EXHIBIT B

COMPLIANCE CERTIFICATE

(Sections 4.2 and 6.1(f))

To: The Lenders, Fronting Banks and Swing Line Banks to the

Credit Agreement Described Below

This Compliance Certificate is furnished pursuant to that certain Second Amended and Restated Five Year Credit Agreement dated as of December 31, 2007 (as amended, modified, renewed or extended from time to time, the “Agreement”) among Nationwide Mutual Insurance Company, Nationwide Life Insurance Company, Nationwide Financial Services, Inc., the Subsidiary Borrowers party thereto, the Fronting Banks party thereto, the Lenders party thereto and Citicorp USA, Inc., as Agent. Unless otherwise defined herein, capitalized terms used in this Compliance Certificate have the meanings ascribed thereto in the Agreement.

THE UNDERSIGNED HEREBY CERTIFIES THAT:

1. I am the duly elected                          of                                          (the “Borrower”);

2. I have reviewed the terms of the Agreement and I have made, or have caused to be made under my supervision, a detailed review of the transactions and conditions of the Borrower and its Subsidiaries during the accounting period covered by the attached financial statements;

3. The examinations described in paragraph 2 did not disclose, and I have no knowledge of, the existence of any condition or event which constitutes a Default or Unmatured Default with respect to the Borrower during or at the end of the accounting period covered by the attached financial statements or as of the date of this Certificate, except as set forth below; and

4. Schedule I attached hereto sets forth financial data and computations evidencing the Borrower’s compliance with certain covenants of the Agreement for the quarter ended                         ,             , all of which data and computations are true, complete and correct.

Described below are the exceptions, if any, to paragraph 3 by listing, in detail, the nature of the condition or event, the period during which it has existed and the action which the Borrower has taken, is taking, or proposes to take with respect to each such condition or event:

The foregoing certifications, together with the computations set forth in Schedule I hereto and the financial statements delivered with this Certificate in support hereof, are made and delivered this      day of             ,          .

SCHEDULE I TO COMPLIANCE CERTIFICATE

Compliance as of             ,         with

Provisions of Section 6.15 of

the Agreement

Section 6.15 - Financial Covenants

1.	Section 6.15.1 - Statutory Surplus of Nationwide Mutual
	(a)	Required:			$
	(b)	Actual:			$
2.	Section 6.15.2 - Statutory Surplus of Nationwide Life
	(a)	Required:			$
	(b)	Actual:			$
3.	Section 6.15.3 - Leverage Ratio of NFS
	(a)	Required:				0.40:1.0
	(b)	Actual:
		(i)	Indebtedness:		$
		(ii)	Total Capitalization:
			(A)	Consolidated stockholders’ equity:	$
			(B)	3(b)(i) plus 3(b)(ii)(A):	$
		(iii)	Ratio of 3(b)(i) to 3(b)(ii)(B):			:1.0

EXHIBIT C

ASSIGNMENT AGREEMENT

(Section 12.3.1)

This Assignment Agreement (this “Assignment Agreement”) between                                          (the “Assignor”) and                                          (the assignee”) is dated as of                     , 20    . The parties hereto agree as follows:

1. PRELIMINARY STATEMENT. The Assignor is a party to a Second Amended and Restated Five Year Credit Agreement (which, as it may be amended, modified, renewed or extended from time to time is herein called the “Credit Agreement”) described in Item 1 of Schedule 1 attached hereto (“Schedule 1”). Capitalized terms used herein and not otherwise defined herein shall have the meanings attributed to them in the Credit Agreement.

2. ASSIGNMENT AND ASSUMPTION. The Assignor hereby sells and assigns to the Assignee, and the Assignee hereby purchases and assumes from the Assignor, an interest in and to the Assignor’s rights and obligations under the Credit Agreement and the other Loan Documents, such that after giving effect to such assignment the Assignee shall have purchased pursuant to this Assignment Agreement the percentage interest specified in Item 3(a) of Schedule 1 of all outstanding rights and obligations under the Credit Agreement and the other Loan Documents relating to the facilities listed in Item 3 of Schedule 1. The aggregate Commitment (or Loans, if the applicable Commitment has been terminated) purchased by the Assignee hereunder is set forth in Item 3(b) of Schedule 1.

3. EFFECTIVE DATE. The effective date of this Assignment Agreement (the “Effective Date”) shall be the later of the date specified in Item 3(d) of Schedule 1 or two Business Days (or such shorter period agreed to by the Agent) after this Assignment Agreement, together with any consents required under the Credit Agreement, are delivered to the Agent. In no event will the Effective Date occur if the payments required to be made by the Assignee to the Assignor on the Effective Date are not made on the proposed Effective Date.

4. PAYMENT OBLIGATIONS. In consideration for the sale and assignment of Loans hereunder, the Assignee shall pay the Assignor, on the Effective Date, the amount agreed to by the Assignor and the Assignee. On and after the Effective Date, the Assignee shall be entitled to receive from the Agent all payments of principal, interest and fees with respect to the interest assigned hereby. The Assignee will promptly remit to the Assignor any interest on Loans and fees received from the Agent which relate to the portion of the Commitment or Loans assigned to the Assignee hereunder for periods prior to the Effective Date and not previously paid by the Assignee to the Assignor. In the event that either party hereto receives any payment to which the other party hereto is entitled under this Assignment Agreement, then the party receiving such amount shall promptly remit it to the other party hereto.

5. RECORDATION FEE. The Assignor and Assignee each agree to pay one-half of the recordation fee required to be paid to the Agent in connection with this Assignment Agreement unless otherwise specified in Item 3(e) of Schedule 1.

6. REPRESENTATIONS OF THE ASSIGNOR; LIMITATIONS ON THE ASSIGNOR’S LIABILITY. The Assignor represents and warrants that (a) it is the legal and beneficial owner of the interest being assigned by it hereunder, (b) such interest is free and clear of any adverse claim created by the Assignor and (c) the execution and delivery of this Assignment Agreement by the Assignor is duly authorized. It is understood and agreed that the assignment and assumption hereunder are made without recourse to the Assignor and that the Assignor makes no other representation or warranty of any kind to the Assignee. Neither the Assignor nor any of its officers, directors, employees, agents or attorneys shall be responsible for (a) the due execution, legality, validity, enforceability, genuineness, sufficiency or collectability of any Loan Document, including without limitation, documents granting the Assignor and the other Lenders and Fronting Banks a security interest in assets of any Borrower or any guarantor, (b) any representation, warranty or statement made in or in connection with any of the Loan Documents, (c) the financial condition or creditworthiness of any Borrower or any guarantor, (d) the performance of or compliance with any of the terms or provisions of any of the Loan Documents, (e) inspecting any of the property, books or records of any Borrower, (f) the validity, enforceability, perfection, priority, condition, value or sufficiency of any collateral securing or purporting to secure the Loans or (g) any mistake, error of judgment, or action taken or omitted to be taken in connection with the Loans or the Loan Documents.

7. REPRESENTATIONS AND UNDERTAKINGS OF THE ASSIGNEE. The Assignee (a) confirms that it has received a copy of the Credit Agreement, together with copies of the financial statements requested by the Assignee and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment Agreement, (b) agrees that it will, independently and without reliance upon the Agent, the Assignor or any other Lender or Fronting Bank and based on such documents and information at it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents, (c) appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under the Loan Documents as are delegated to the Agent by the terms thereof, together with such powers as are reasonably incidental thereto, (d) confirms that the execution and delivery of this Assignment Agreement by the Assignee is duly authorized, (e) agrees that it will perform in accordance with their terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as a Lender, (f) agrees that its payment instructions and notice instructions are as set forth in the attachment to Schedule 1, (g) confirms that none of the funds, monies, assets or other consideration being used to make the purchase and assumption hereunder are “plan assets” as defined under ERISA and that its rights, benefits and interests in and under the Loan Documents will not be “plan assets” under ERISA, (h) agrees to indemnify and hold the Assignor harmless against all losses, costs and expenses (including, without limitation, reasonable attorneys’ fees) and liabilities incurred by the Assignor in connection with or arising in any manner from the Assignee’s non-performance of the obligations assumed under this Assignment Agreement, and (i) if applicable, attaches the forms prescribed by the Internal Revenue Service of the United

States certifying that the Assignee is entitled to receive payments under the Loan Documents without deduction or withholding of any United States federal income taxes.

8. GOVERNING LAW. This Assignment Agreement shall be governed by the internal law, and not the law of conflicts, of the State of New York.

9. NOTICES. Notices shall be given under this Assignment Agreement in the manner set forth in the Credit Agreement. For the purpose hereof, the addresses of the parties hereto (until notice of a change is delivered) shall be the address set forth in the attachment to Schedule 1.

10. COUNTERPARTS; DELIVERY BY FACSIMILE. This Assignment Agreement may be executed in counterparts. Transmission by facsimile of an executed counterpart of this Assignment Agreement shall be deemed to constitute due and sufficient delivery of such counterpart and such facsimile shall be deemed to be an original counterpart of this Assignment Agreement.

IN WITNESS WHEREOF, the duly authorized officers of the parties hereto have executed this Assignment Agreement by executing Schedule 1 hereto as of the date first above written.

SCHEDULE 1

to Assignment Agreement

1. Description and Date of Credit Agreement: Second Amended and Restated Five Year Credit Agreement, dated as of December 31, 2007, among Nationwide Mutual Insurance Company, Nationwide Life Insurance Company, Nationwide Financial Services, Inc., the Subsidiary Borrowers party thereto, the Fronting Banks party thereto, the Lenders party thereto (the “Lenders”) and Citicorp USA, Inc., as Agent.

2. Date of Assignment Agreement:             , 20     .

3. Amounts (As of Date of Item 2 above):

(a) Assignee’s percentage of Obligations purchased under this Agreement:             %*

(b) Amount of outstanding Loans purchased under this Agreement:

(i) Base Rate Loans: $                    

(ii) Competitive Bid Loans: $                    

(c) Assignee’s Commitment (or Loans with respect to terminated Commitments) purchased hereunder: $                    .

(d) Proposed Effective Date:                     ,         

(e) Non-standard Recordation Fee Arrangement: [N/A] [Assignor/Assignee to pay 100% of fee] [fee waived by Agent].**

Accepted and Agreed:

[NAME OF ASSIGNOR]	[NAME OF ASSIGNEE]
By:	By:
Title:	Title:

ACCEPTED AND CONSENTED TO*** BY NATIONWIDE  MUTUAL INSURANCE COMPANY	ACCEPTED AND CONSENTED TO*** BY NATIONWIDE LIFE INSURANCE COMPANY
By:	By:
Title:	Title:
ACCEPTED AND CONSENTED TO*** BY NATIONWIDE FINANCIAL SERVICES, INC.	ACCEPTED AND CONSENTED TO BY CITICORP USA, INC.
By:	By:
Title:	Title:
ACCEPTED AND CONSENTED TO BY [NAME OF FRONTING BANK]	ACCEPTED AND CONSENTED TO BY [NAME OF SWING LINE LENDER]
By:	By:
Title:	Title:

* Percentage taken to 10 decimal places

** If fee is split 50-50, pick N/A as option

*** Delete if not required by Credit Agreement

Attachment to SCHEDULE 1 to ASSIGNMENT AGREEMENT

ADMINISTRATIVE INFORMATION SHEET

Attach Assignor’s Administrative Information Sheet, which must

include notice addresses for the Assignor and the Assignee

(Sample form shown below)

ASSIGNOR INFORMATION

Contact:

Name:	Telephone No.:
Fax No.:	Telex No.:
	Answerback:

Payment Information:

Name & ABA # of Destination Bank:

Account Name & Number for Wire Transfer:

Other Instructions:

Address for Notices for Assignor:

ASSIGNEE INFORMATION

Credit Contact:

Name:	Telephone No.:
Fax No.:	Telex No.:
	Answerback:

Key Operations Contacts:

Booking Installation:	Booking Installation:
Name:	Name:
Telephone No.:	Telephone No.:
Fax No.:	Fax No.:
Telex No.:	Telex No.:
Answerback:	Answerback:

Payment Information:

Name & ABA # of Destination Bank:

Account Name & Number for Wire Transfer:

Other Instructions:                                                                                                                                                                           

Address for Notices for Assignee:

CUSA INFORMATION

Assignee will be called promptly upon receipt of the signed agreement.

Initial Funding Contact:		Subsequent Operations Contact:
Name:		Name:
Telephone No.:	(212)	Telephone No.:	(212)
Fax No.:	(212)	Fax No.:	(212)

Initial Funding Standards:

Libor - Fund 2 days after rates are set.

CUSA Wire Instructions:	Citicorp USA, Inc., ABA #
	Incoming Account #
	Ref:
Address for Notices for CUSA:
	Fax No.:

EXHIBIT D

COMPETITIVE BID QUOTE

(Section 2.3.4)

                    ,       

To: Citicorp USA, Inc.

  as Agent

Re: Competitive Bid Quote to                                                (the “Borrower”)

In response to your invitation on behalf of the Borrower dated                 ,         , we hereby make the following Competitive Bid Quote pursuant to Section 2.3.4 of the Agreement hereinafter referred to and on the following terms:

1. Quoting Lender:                             

2. Person to contact at Quoting Lender:                             

3. Borrowing Date:                             ¹

4. We hereby offer to make Competitive Bid Loan(s) in the following principal amounts, for the following Interest Periods and at the following rates:

Principal Amount 2	Interest Period 3	[Competitive Bid Margin 4 ]	[Absolute Rate 5 ]	Minimum/Maximum Amount6
$				$

We understand and agree that the offer(s) set forth above, subject to the satisfaction of the applicable conditions set forth in the Second Amended and Restated Five Year Credit Agreement dated as of December 31, 2007 (as amended, supplemented or otherwise modified from time to

¹ As set forth in the Invitation for Competitive Bid Quotes.

² Principal amount bid for each Interest Period may not exceed the principal amount requested. Bids must be made for at least $25,000,000 and an integral multiple of $1,000,000.

³ One, two, three or six months or at least 1 and up to 180 days, as specified in the related Invitation For Competitive Bid Quotes.

⁴ Competitive Bid Margin over or under the Eurodollar Base Rate determined for the applicable Interest Period. Specify percentage (rounded to the nearest 1/100 of 1%) and specify whether “PLUS” or “MINUS”.

⁵ Specify rate of interest per annum (rounded to the nearest 1/100 of 1%).

⁶ Specify minimum or maximum amount, if any, which the Borrower may accept (see Sections 2.3.4(b)(iv) and (vi)).

time through the date hereof, the “Agreement”) among the Borrower, [Nationwide Mutual Insurance Company,] [Nationwide Life Insurance Company,] [Nationwide Financial Services, Inc.,] [the Subsidiary Borrowers party thereto], the Lenders and Fronting Banks from time to time party thereto and Citicorp USA, Inc., as Agent, irrevocably obligates us to make the Competitive Bid Loan(s) for which any offer(s) are accepted, in whole or in part. Capitalized terms used herein and not otherwise defined herein shall have their meanings as defined in the Agreement.

Very truly yours,

[NAME OF LENDER]

By:

Title:

EXHIBIT E

COMPETITIVE BID QUOTE REQUEST

(Section 2.3.2)

                ,         

To: Citicorp USA, Inc.,

  as agent (the “Agent”)

From:                             (the “Borrower”)

Re: Second Amended and Restated Five Year Credit Agreement dated as of December 31, 2007 (as amended, supplemented or otherwise modified from time to time through the date hereof, the “Agreement”) among the Borrower, [Nationwide Mutual Insurance Company,] [Nationwide Life Insurance Company,] [Nationwide Financial Services, Inc.,] [the Subsidiary Borrowers party thereto,] the Lenders and Fronting Banks from time to time party thereto and Citicorp USA, Inc., as Agent.

1. Capitalized terms used herein have the meanings assigned to them in the Agreement.

2. We hereby give notice pursuant to Section 2.3.2 of the Agreement that we request Competitive Bid Quotes for the following proposed Competitive Bid Advance(s):

Borrowing Date:                     ,       

Principal Amount1	Interest Period2
$

3. Such Competitive Bid Quotes should offer [a Competitive Bid Margin] [an Absolute Rate].

4. Upon acceptance by the undersigned of any or all of the Competitive Bid Advances offered by Lenders in response to this request, the undersigned shall be deemed to affirm as of the Borrowing Date thereof the representations and warranties made by the Borrower in Article V of the Agreement [(other than Sections 5.5 and 5.7 thereof) ³].

¹ Amount must be at least $25,000,000 and an integral multiple of $1,000,000.

² One, two, three or six months (Eurodollar Auction) or at least 1 and up to 180 days (Absolute Rate Auction), subject to the provisions of the definitions of Eurodollar Interest Period and Absolute Rate Interest Period.

³ Delete for initial Extension of Credit.

[NAME OF BORROWER]

By:

Title:

EXHIBIT F

INVITATION FOR COMPETITIVE BID QUOTES

(Section 2.3.3)

                ,         

To: Each of the Lenders party to the Agreement

referred to below

Re: Invitation for Competitive Bid Quotes to

                     (the “Borrower”)

Pursuant to Section 2.3.3 of the Second Amended and Restated Five Year Credit Agreement dated as of December 31, 2007 (as amended, supplemented or otherwise modified from time to time through the date hereof, the “Agreement”) among the Borrower, [Nationwide Mutual Insurance Company,] [Nationwide Life Insurance Company,] [Nationwide Financial Services, Inc.,] [the Subsidiary Borrowers party thereto,] the Lenders and Fronting Banks from time to time party thereto and Citicorp USA, Inc., as Agent, we are pleased on behalf of the Borrower to invite you to submit Competitive Bid Quotes to the Borrower for the following proposed Competitive Bid Advance(s):

Borrowing Date:                     ,       

Principal Amount	Interest Period
$

Such Competitive Bid Quotes should offer [a Competitive Bid Margin] [an Absolute Rate]. Your Competitive Bid Quote must comply with Section 2.3.4 of the Agreement and the foregoing. Capitalized terms used herein have the meanings assigned to them in the Agreement.

Please respond to this invitation by no later than 10:00 a.m. (New York time) on                 ,       .

CITICORP USA, INC.,

as Agent

By:

Title:

EXHIBIT G

FORM OF NOTICE OF SWING LINE BORROWING

(Section 2.17(b))

Citicorp USA, Inc.,

as agent (the “Agent”)

[                                               ]

[                                               ]

Attention: [                            ]

                 , 200    

Ladies and Gentlemen:

The undersigned,                     , (the “Borrower”), refers to that certain Second Amended and Restated Credit Agreement, dated as of December 31, 2007 (the “Credit Agreement”), among the Borrower, [Nationwide Mutual Insurance Company,] [Nationwide Life Insurance Company,] [Nationwide Financial Services, Inc.,] [the Subsidiary Borrowers party thereto], the Lenders and Fronting Banks party thereto and Citicorp USA, Inc., as Agent, and hereby gives you notice, irrevocably, pursuant to Section 2.17(b) of the Credit Agreement that the undersigned hereby requests a Swing Line Borrowing under the Credit Agreement, and in that connection sets forth below the information relating to such Swing Line Borrowing (the “Proposed Borrowing”) as required by Section 2.17(b) of the Credit Agreement:

(i) The Business Day of the Proposed Borrowing is                         ,       .

(ii) The aggregate amount of the Proposed Borrowing is $                    .

(iii) The Borrower requesting the Proposed Borrowing is                     .

The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the date of the Proposed Borrowing:

(A) the representations and warranties of such Borrower contained in Article V [(other than Sections 5.5 and 5.7 thereof)]^* of the Credit Agreement are

* Delete for initial Extension of Credit.

correct, before and after giving effect to the Proposed Borrowing and to the application of the proceeds therefrom, as though made on and as of such date;

(B) no event has occurred and is continuing, or would result from such Proposed Borrowing or from the application of the proceeds therefrom, that constitutes a Default with respect to such Borrower (and if another Borrower has executed and delivered a Guaranty with respect to the obligations of such Borrower thereunder, with respect to the Borrower issuing the applicable Guaranty) or would constitute an Default with respect to such Borrower (and if another Borrower has executed and delivered a Guaranty with respect to the obligations of such Borrower thereunder, with respect to the Borrower issuing the applicable Guaranty) but for the requirement that notice be given or time elapse or both; and

(C) immediately following such Proposed Borrowing, (1) the aggregate amount of Outstanding Credits shall not exceed the aggregate amount of the Commitments then in effect, (2) the Outstanding Credits of any Lender shall not exceed the amount of such Lender’s Commitment and (3) the aggregate principal amount of the Swing Line Advances outstanding shall not exceed the Swing Line Sublimit.

Very truly yours,

[NAME OF BORROWER]

By: 

Title:

EXHIBIT H

FORM OF LETTER OF CREDIT REQUEST

(Section 2.18(c))

                 , 200    

Citicorp USA, Inc.,

as agent (the “Agent”)

[                                               ]

[                                               ]

Attention: [                            ]

[                                    , as Fronting Bank

[ADDRESS]]

Ladies and Gentlemen:

The undersigned,                     , (the “Borrower”), refers to that certain Second Amended and Restated Credit Agreement, dated as of December 31, 2007 (the “Credit Agreement”), among the Borrower, [Nationwide Mutual Insurance Company,] [Nationwide Life Insurance Company,] [Nationwide Financial Services, Inc.,] [the Subsidiary Borrowers party thereto,] the Lenders and Fronting Banks party thereto and Citicorp USA, Inc., as Agent. Capitalized terms used herein, and not otherwise defined herein, shall have their respective defined meanings as set forth in the Credit Agreement.

Pursuant to Section 2.18(c) of the Credit Agreement, the Borrower irrevocably requests that the Fronting Bank to which this Letter of Credit Request is addressed issue a Letter of Credit on the following terms:

1. Date of Issuance:

2. Expiration Date:

3. Stated Amount:

4. Beneficiary:

5. Account Party:

and the terms set forth in the attached application for said Letter of Credit.

The Borrower hereby further certifies that (i) as of the date hereof, (ii) as of the Date of Issuance and (iii) after the issuance of the Letter of Credit requested hereby:

(A) the representations and warranties of such Borrower contained in Article V [(other than Sections 5.5 and 5.7 thereof)]^* of the Credit Agreement are true and correct on and as of the date hereof, before and after giving effect to the issuance of such Letter of Credit and to the application of the proceeds therefrom, as though made on and as of such dates;

(B) no event has occurred and is continuing, or would result from the issuance of the Letter of Credit requested hereby or from the application of the proceeds therefrom, that constitutes a Default with respect to such Borrower (and if another Borrower has executed and delivered a Guaranty with respect to the obligations of such Borrower thereunder, with respect to the Borrower issuing the applicable Guaranty) or would constitute a Default with respect to such Borrower (and if another Borrower has executed and delivered a Guaranty with respect to the obligations of such Borrower thereunder, with respect to the Borrower issuing the applicable Guaranty) but for the requirement that notice be given or time elapse or both; and

(C) immediately following the issuance of such Letter of Credit, (1) the aggregate amount of Outstanding Credits shall not exceed the aggregate amount of the Commitments then in effect, (2) the Outstanding Credits of any Lender shall not exceed the amount of such Lender’s Commitment and (3) the Stated Amount thereof, when aggregated with (x) the Stated Amount of each other Letter of Credit that is outstanding or with respect to which a Letter of Credit Request has been received and (y) the outstanding Reimbursement Obligations, shall not exceed the L/C Commitment Amount.

If notice of the request for the above referenced Letter of Credit has been given by the Borrower previously by telephone, then this notice shall be considered a written confirmation of such telephone notice as required by Section 2.18(c) of the Credit Agreement.

[NAME OF BORROWER]

By:

Title:

* Delete for initial Extension of Credit.

EXHIBIT I

FORM OF DESIGNATION LETTER

(Section 2.19(a))

                        ,             

Citicorp USA, Inc.,

as agent (the “Agent”)

[                                                     ]

[                                                     ]

Attention: [                                ]

Ladies and Gentlemen:

We refer to the Credit Agreement (as amended, restated, supplemented or otherwise modified and in effect from time to time, the “Second Amended and Restated Five Year Credit Agreement”) dated as of December 31, 2007 among the undersigned (the “Borrower”) [Nationwide Mutual Insurance Company,] [Nationwide Life Insurance Company,] [Nationwide Financial Services, Inc.,] the Subsidiary Borrowers party thereto, the Lenders and Fronting Banks party thereto and Citicorp USA, Inc., as Agent. Unless otherwise defined herein, capitalized terms used in this Designation Letter have the meanings ascribed thereto in the Credit Agreement.

The Borrower hereby designates [                    ] (the “Designated Subsidiary”), a Wholly-Owned Subsidiary of the Borrower and a [corporation duly incorporated under the laws of [                ]], as a “Subsidiary Borrower” in accordance with Section 2.19(a) of the Credit Agreement until such designation is terminated in accordance with Section 2.19(b) of the Credit Agreement.

The Designated Subsidiary hereby accepts the above designation and hereby expressly and unconditionally accepts the obligations of a Subsidiary Borrower under the Credit Agreement and agrees and confirms that, upon your execution and return to the Borrower of the enclosed copy of this letter, and subject to the satisfaction of each of the other terms and conditions set forth in Section 2.19(a) of the Credit Agreement, the Designated Subsidiary shall be a Subsidiary Borrower for purposes of the Credit Agreement and agrees to be bound by and perform and comply with the terms and provisions of the Credit Agreement applicable to it as if it had originally executed the Credit Agreement as a Subsidiary Borrower. The Designated Subsidiary hereby authorizes and empowers the Borrower to act as its representative and attorney-in-fact for the purposes of signing documents and giving and receiving notices (including borrowing requests and interest elections under the Credit Agreement) and other communications in connection with the Credit Agreement and the transactions contemplated thereby and for the purposes of modifying or amending any provision of the Credit Agreement and further agrees that the Agent and each Lender and Fronting Bank may conclusively rely on the foregoing authorization.

The Borrower hereby represents and warrants to the Agent, and to each of the Lenders and the Fronting Banks that, before and after giving effect to this Designation Letter, (i) the representations and warranties set forth in Article V of the Credit Agreement [(other than Sections 5.5 and 5.7 thereof)]^* are true and correct on the date hereof as if made on and as of the date hereof, and (ii) no Default has occurred and is continuing. The Designated Subsidiary represents and warrants that, in so far as they relate to such Designated Subsidiary, each of the representations and warranties set forth in Article V of the Credit Agreement [(other than Sections 5.5 and 5.7 thereof)]^* is true and correct on the date hereof as if made on and as of the date hereof. This Designation Letter shall be governed by, and construed in accordance with, the internal laws (without regard to the conflict of laws provisions) of the State of New York. Without limiting any other provisions hereof, the Designated Subsidiary hereby submits to jurisdiction and makes the waivers and otherwise in all aspects agrees to the terms set forth in Article XIV of the Credit Agreement as if fully set forth herein.

EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS DESIGNATION LETTER, THE CREDIT AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS DESIGNATION LETTER BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

Very truly yours,

[NAME OF BORROWER]

By:

Name:

Title:

[NAME OF DESIGNATED SUBSIDIARY]

By:

Name:

Title:

^* Delete for initial Extension of Credit.

EXHIBIT J

FORM OF TERMINATION LETTER

(Section 2.19(b))

Citicorp USA, Inc.,

as agent (the “Agent”)

[                                                     ]

[                                                     ]

Attention: [                                ]

Ladies and Gentlemen:

We refer to the Credit Agreement (as amended, restated, supplemented or otherwise modified and in effect from time to time, the “Second Amended and Restated Five Year Credit Agreement”) dated as of December 31, 2007 among the undersigned (the “Borrower”) [Nationwide Mutual Insurance Company,] [Nationwide Life Insurance Company,] [Nationwide Financial Services, Inc.,] the Subsidiary Borrowers party thereto, the Lenders and Fronting Banks party thereto and Citicorp USA, Inc., as Agent. Unless otherwise defined herein, capitalized terms used in this Termination Letter have the meanings ascribed thereto in the Credit Agreement.

The Borrower hereby terminates the status as a Subsidiary Borrower of                     , a corporation incorporated under the laws of                      (the “Designated Subsidiary”), in accordance with Section 2.19(b) of the Credit Agreement, effective as of the date of receipt of this notice by the Agent. The undersigned hereby represent and warrant that all Loans made to the Designated Subsidiary and all related interest have been paid in full on or prior to the date hereof. Notwithstanding the foregoing, this Termination Letter shall not terminate (a) any Obligation of such Designated Subsidiary that remains unpaid on the date hereof (including, without limitation, any Obligation arising hereafter in respect of the Designated Subsidiary under Article III of the Credit Agreement) or (b) the obligations of the Borrower under the Guaranty with respect to any such unpaid Obligations.

Very truly yours,

[NAME OF BORROWER]

By:

Name:

Title:

[SUBSIDIARY BORROWER]

By:

Name:

Title:

EXHIBIT K

FORM OF GUARANTY

(Section 2.19(a))

GUARANTY, dated as of             , 200    , made by the undersigned (the “Guarantor”), in favor of the Lenders (as defined in the Credit Agreement referred to below), Citibank USA, Inc. (“Citibank”), as Agent for the Lenders (the “Agent”), the fronting banks party to the Credit Agreement referred to below from time to time (the “Fronting Banks”) and the swing line lenders party to the Credit Agreement referred to below from time to time (the “Swing Line Lenders”, and together with the Lenders, the Agent and the Fronting Banks, the “Beneficiaries”).

PRELIMINARY STATEMENT

The Guarantor, [Nationwide Mutual Insurance Company], [Nationwide Life Insurance Company] and [Nationwide Financial Services, Inc.] (together, the “Borrowers”), are parties to a Second Amended and Restated Five Year Credit Agreement, dated as of December 31, 2007 (as amended, amended and restated, supplemented or otherwise modified from time to time, the “Credit Agreement”; the capitalized terms defined therein and not otherwise defined herein being used herein as therein defined), with the Beneficiaries. The Guarantor may receive, directly or indirectly, a portion of the proceeds of the Extensions of Credit under the Credit Agreement and will derive substantial direct and indirect benefits from the transactions contemplated by the Credit Agreement. It is a condition precedent to the Guarantor’s designation of                      (the “Guaranteed Borrower”) as a “Subsidiary Borrower” under the Credit Agreement that the Guarantor deliver this Guaranty. The Guarantor desires to deliver this Guaranty in fulfillment of such condition.

NOW, THEREFORE, in consideration of the premises and in order to induce the Beneficiaries to make Advances to, to issue Letters of Credit for the account of the Guaranteed Borrower and to otherwise satisfy their obligations under the Credit Agreement, the Guarantor hereby agrees as follows:

SECTION 1. Guaranty; Limitation of Liability.

The Guarantor hereby absolutely, unconditionally and irrevocably guarantees the punctual payment when due, whether at scheduled maturity or on any date of a required prepayment or by acceleration, demand or otherwise, of all payment, performance and other obligations of the Guaranteed Borrower now or hereafter existing under or in respect of the Loan Documents (including, without limitation, any extensions, modifications, substitutions, amendments or renewals of any or all of the foregoing Obligations), whether direct or indirect, absolute or contingent, and whether for principal, interest, reimbursement obligations, premiums, fees, indemnities, contract causes of action, costs, expenses or otherwise, including, without limitation, (i) the obligation of the Guaranteed Borrower to pay principal, interest, Letter of Credit fees, charges, expenses, fees, attorneys’ fees and disbursements, indemnities and other amounts payable by the Guaranteed Borrower under any Loan Document, (ii) the obligation of the Guaranteed Borrower to reimburse any amount in respect of any drawing under any Letter of Credit issued for the account of the Guaranteed Borrower and (iii) any liability of the Guaranteed

Borrower on any claim, whether or not the right of any creditor to payment in respect of such claim is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, disputed, undisputed, legal, equitable, secured or unsecured, and whether or not such claim is discharged, stayed or otherwise affected by any proceeding (such obligations being the “Guaranteed Obligations”), and agrees to pay any and all reasonable expenses (including, without limitation, fees and expenses of counsel) incurred by any Beneficiary in enforcing any rights under this Guaranty or any other Loan Document.

The Guarantor, and by its acceptance of this Guaranty, each Beneficiary hereby confirms that it is the intention of all such Persons that this Guaranty and the Guaranteed Obligations of the Guarantor hereunder not constitute a fraudulent transfer or conveyance for purposes of Bankruptcy Law (as hereinafter defined), the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar foreign, federal or state law to the extent applicable to this Guaranty and the Guaranteed Obligations. To effectuate the foregoing intention, the Beneficiaries and the Guarantor hereby irrevocably agree that the Guaranteed Obligations at any time shall be limited to the maximum amount as will result in the Guaranteed Obligations not constituting a fraudulent transfer or conveyance. For purposes hereof, “Bankruptcy Law” means any proceeding of the type referred to in Section 7.6 or 7.7 of the Credit Agreement or Title 11, U.S. Code, or any similar foreign, federal or state law for the relief of debtors.

SECTION 2. Guaranty Absolute.

The Guarantor guarantees that the Guaranteed Obligations will be paid strictly in accordance with the terms of the Loan Documents, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of any Beneficiary with respect thereto. The obligations of the Guarantor under or in respect of this Guaranty are independent of the Guaranteed Obligations or any other obligations the Guaranteed Borrower under or in respect of the Loan Documents, and a separate action or actions may be brought and prosecuted against the Guarantor to enforce this Guaranty, irrespective of whether any action is brought against the Guaranteed Borrower or whether the Guaranteed Borrower is joined in any such action or actions. The liability of the Guarantor under this Guaranty shall be irrevocable, absolute and unconditional irrespective of, and the Guarantor hereby irrevocably waives any defenses it may now have or hereafter acquire in any way relating to, any or all of the following:

(a) any lack of validity or enforceability of any Loan Document or any agreement or instrument relating thereto;

(b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Guaranteed Obligations or any other obligations of any other Borrower under or in respect of the Loan Documents, or any other amendment or waiver of or any consent to departure from any Loan Document, including, without limitation, any increase in the Guaranteed Obligations resulting from the extension of additional credit to the Guaranteed Borrower or any other Borrower or any of its Subsidiaries or otherwise;

(c) any taking, exchange, release or non-perfection of any collateral, or any taking, release or amendment or waiver of, or consent to departure from, any other guaranty, for all or any of the Guaranteed Obligations;

(d) any manner of application of any collateral, or proceeds thereof, to all or any of the Guaranteed Obligations, or any manner of sale or other disposition of any collateral for all or any of the Guaranteed Obligations or any other assets of the Guaranteed Borrower or any of its Subsidiaries;

(e) any change, restructuring or termination of the corporate structure or existence of the Guaranteed Borrower or any other Borrower or any of its Subsidiaries;

(f) any failure of any Beneficiary to disclose to the Guarantor any information relating to the business, condition (financial or otherwise), operations, performance, properties or prospects of the Guaranteed Borrower now or hereafter known to such Beneficiary (the Guarantor waiving any duty on the part of Beneficiaries to disclose such information);

(g) the failure of any other Person to execute or deliver this Guaranty or any other guaranty or agreement or the release or reduction of liability of the Guarantor or other guarantor or surety with respect to the Guaranteed Obligations; or

(h) any other circumstance (including, without limitation, any statute of limitations) or any existence of or reliance on any representation by any Beneficiary that might otherwise constitute a defense available to, or a discharge of, the Guarantor or any other guarantor or surety.

This Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Guaranteed Obligations is rescinded or must otherwise be returned by any Beneficiary or any other Person upon the insolvency, bankruptcy or reorganization of the Guarantor, the Guaranteed Borrower or otherwise, all as though such payment had not been made.

SECTION 3. Waivers and Acknowledgments.

(a) The Guarantor hereby unconditionally and irrevocably waives promptness, diligence, notice of acceptance, presentment, demand for performance, notice of nonperformance, default, acceleration, protest or dishonor and any other notice with respect to any of the Guaranteed Obligations and this Guaranty and any requirement that any Beneficiary protect, secure, perfect or insure any Lien or any property subject thereto or exhaust any right or take any action against the Guaranteed Borrower or any other Person or any collateral.

(b) The Guarantor hereby unconditionally and irrevocably waives any right to revoke this Guaranty and acknowledges that this Guaranty is continuing in nature and applies to all Guaranteed Obligations, whether existing now or in the future.

(c) The Guarantor hereby unconditionally and irrevocably waives (i) any defense arising by reason of any claim or defense based upon an election of remedies by any Beneficiary that in any manner impairs, reduces, releases or otherwise adversely affects the subrogation, reimbursement, exoneration, contribution or indemnification rights of the Guarantor or other rights of the Guarantor to proceed against the Guaranteed Borrower, any other guarantor or any other Person or any collateral and (ii) any defense based on any right of set-off or counterclaim against or in respect of the Guaranteed Obligations.

(d) The Guarantor hereby unconditionally and irrevocably waives any duty on the part of any Beneficiary to disclose to the Guarantor any matter, fact or thing relating to the business, condition (financial or otherwise), operations, performance, properties or prospects of the Guaranteed Borrower or any other Borrower or any of its Subsidiaries now or hereafter known by such Beneficiary.

(e) The Guarantor acknowledges that it will receive substantial direct and indirect benefits from the financing arrangements contemplated by the Loan Documents and that the waivers set forth in Section 2 and this Section 3 are knowingly made in contemplation of such benefits.

SECTION 4. Subrogation.

The Guarantor hereby unconditionally and irrevocably agrees not to exercise any rights that it may now have or hereafter acquire against the Guaranteed Borrower that arise from the existence, payment, performance or enforcement of the Guaranteed Obligations under or in respect of this Guaranty, including, without limitation, any right of subrogation, reimbursement, exoneration, contribution or indemnification and any right to participate in any claim or remedy of any Beneficiary against the Guaranteed Borrower, whether or not such claim, remedy or right arises in equity or under contract, statute or common law, including, without limitation, the right to take or receive from the Guaranteed Borrower, directly or indirectly, in cash or other property or by set-off or in any other manner, payment or security on account of such claim, remedy or right, unless and until all of the Guaranteed Obligations and all other amounts payable under this Guaranty shall have been paid in full in cash, all Letters of Credit issued for the account of the Guaranteed Borrower shall have expired or been terminated and the Commitments relating to the Guaranteed Borrower shall have expired or been terminated. If any amount shall be paid to the Guarantor in violation of the immediately preceding sentence at any time prior to the latest of (a) the payment in full in cash of the Guaranteed Obligations and all other amounts payable under this Guaranty, (b) the Facility Termination Date, and (c) the latest date of expiration or termination of all Letters of Credit issued for the account of the Guaranteed Borrower, such amount shall be received and held in trust for the benefit of the Beneficiaries, shall be segregated from other property and funds of the Guarantor and shall forthwith be paid or delivered to the Agent in the same form as so received (with any necessary endorsement or assignment) to be

credited and applied to the Guaranteed Obligations and all other amounts payable under this Guaranty, whether matured or unmatured, in accordance with the terms of the Loan Documents, or to be held as collateral for any Guaranteed Obligations or other amounts payable under this Guaranty thereafter arising. If (i) the Guarantor shall make payment to any Beneficiary of all or any part of the Guaranteed Obligations, (ii) all of the Guaranteed Obligations and all other amounts payable under this Guaranty shall have been paid in full in cash, (iii) the Facility Termination Date shall have occurred and (iv) all Letters of Credit shall have expired or been terminated, the Beneficiaries will, at the Guarantor’s request and expense, execute and deliver to the Guarantor appropriate documents, without recourse and without representation or warranty, necessary to evidence the transfer by subrogation to the Guarantor of an interest in the Guaranteed Obligations resulting from such payment made by the Guarantor pursuant to this Guaranty.

SECTION 5. Payments Free and Clear of Taxes, Etc.

(a) Any and all payments made by the Guarantor under or in respect of this Guaranty or any other Loan Document shall be made, in accordance with Section 3.5 of the Credit Agreement, free and clear of and without deduction for any and all present or future taxes. If the Guarantor shall be required by law to deduct any taxes from or in respect of any sum payable under or in respect of this Guaranty or any other Loan Document to any Beneficiary, (i) the sum payable by the Guarantor shall be increased as may be necessary so that after the Guarantor and the Agent have made all required deductions (including deductions applicable to additional sums payable under this Section 5), such Beneficiary receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Guarantor shall make all such deductions and (iii) the Guarantor shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law.

(b) In addition, the Guarantor agrees to pay any present or future Other Taxes that arise from any payment made by or on behalf of the Guarantor under or in respect of this Guaranty or any other Loan Document or from the execution, delivery or registration of, performance under, or otherwise with respect to, this Guaranty and the other Loan Documents.

(c) The Guarantor agrees to indemnify each Beneficiary for and hold it harmless against the full amount of taxes and Other Taxes, (including, without limitation, any taxes or Other Taxes of any kind imposed by any jurisdiction on amounts payable under this Section 5) imposed on or paid by such Beneficiary and any liability (including penalties, additions to tax, interest and expenses) arising therefrom or with respect thereto. This indemnification shall be made within 30 days from the date such Beneficiary makes written demand therefor.

(d) From time to time thereafter if requested by the Guarantor or the Agent, each Beneficiary organized under the laws of a jurisdiction outside the United States shall provide the Agent, each Fronting Bank, each Swing Line Lender and the Guarantor with the forms prescribed by the Internal Revenue Service of the United States certifying that such Beneficiary is exempt from United States withholding taxes with respect to all payments to be made to such Beneficiary hereunder. If for any reason during the term of

this Guaranty, any Beneficiary becomes unable to submit the forms referred to above or the information or representations contained therein are no longer accurate in any material respect, such Beneficiary shall promptly notify the Agent, each Fronting Bank, each Swing Line Lender and the Guarantor in writing to that effect. Unless the Guarantor, the Fronting Banks, the Swing Line Lenders and the Agent have received forms or other documents satisfactory to them indicating that payments hereunder are not subject to United States withholding tax, the Guarantor, each Fronting Bank, each Swing Line Lender or the Agent shall withhold taxes from such payments at the applicable statutory rate in the case of payments to or for any Beneficiary organized under the laws of a jurisdiction outside the United States.

(e) Any Beneficiary claiming any additional amounts payable pursuant to this Section 5 shall use its best efforts (consistent with its internal policy and legal and regulatory restrictions) to change the jurisdiction of its Lending Installation if the making of such a change would avoid the need for, or reduce the amount of, any such additional amounts that may thereafter accrue and would not, in the reasonable judgment of such Beneficiary, be otherwise disadvantageous to such Beneficiary.

(f) Without prejudice to the survival of any other agreement of the Guarantor hereunder, the agreements and obligations of the Guarantor contained in this Section 5 shall survive the payment in full or termination of the Guaranteed Obligations.

SECTION 6. Representations and Warranties.

The Guarantor hereby makes each representation and warranty made in the Loan Documents by the Borrowers with respect to the Guarantor and the Guarantor hereby further represents and warrants as follows:

(a) There are no conditions precedent to the effectiveness of this Guaranty that have not been satisfied or waived.

(b) The Guarantor has, independently and without reliance upon any Beneficiary and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Guaranty and each other Loan Document to which it is or is to be a party, and the Guarantor has established adequate means of obtaining from the Guaranteed Borrower on a continuing basis information pertaining to, and is now and on a continuing basis will be completely familiar with, the business, condition (financial or otherwise), operations, performance, properties and prospects of the Guaranteed Borrower.

SECTION 7. Covenants.

The Guarantor covenants and agrees that, so long as any part of the Guaranteed Obligations shall remain unpaid, any Letter of Credit issued for the account of the Guaranteed Borrower shall be outstanding or any Lender shall have any Commitment relating to the Guaranteed Borrower, the Guarantor will perform and observe, and cause each of its Subsidiaries to perform and observe, all of the terms, covenants and agreements set forth in the Loan

Documents on its or their part to be performed or observed or that the Guarantor has agreed to cause the Guaranteed Borrower or such Subsidiaries to perform or observe.

SECTION 8. Amendments.

No amendment or waiver of any provision of this Guaranty and no consent to any departure by the Guarantor therefrom shall in any event be effective unless the same shall be in compliance with Article VIII of the Credit Agreement.

SECTION 9. Notices, Etc.

All notices and other communications provided for hereunder shall be in writing (including telegraphic, telecopy or cable communication) and mailed, telegraphed, telecopied, cabled or delivered to it, if to the Guarantor, addressed to it at its addresses specified in Section 13.1 of the Credit Agreement, if to the Agent, any Lender or any Fronting Bank, at its address specified in Section 13.1 of the Credit Agreement, or, as to each party, at such other address as shall be designated by such party in a written notice to each other party. All such notices and other communications shall, when mailed, telegraphed, telecopied or cabled, be effective when deposited in the mails, delivered to the telegraph company, telecopied or delivered to the cable company, respectively. Delivery by telecopier of an executed counterpart of a signature page to any amendment or waiver of any provision of this Guaranty or of any supplemental guaranty to be executed and delivered hereunder shall be effective as delivery of an original executed counterpart thereof.

SECTION 10. No Waiver, Remedies.

No failure on the part of any Beneficiary to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law.

SECTION 11. Right of Set-off.

Upon the occurrence and during the continuance of a Default, each Beneficiary and each of its Affiliates that is acting as a Fronting Bank under the Credit Agreement is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final, excluding, however, (i) any payroll accounts maintained by the Guarantor with such Beneficiary if and to the extent that such Beneficiary shall have expressly waived its set-off rights in writing in respect of such payroll account and (ii) any accounts maintained by the Guarantor with such Beneficiary pursuant to statutory or regulatory requirements, including, without limitation, reserve accounts supporting insurance claims) at any time held and other indebtedness at any time owing by such Beneficiary or such Affiliate to or for the credit or the account of the Guarantor against any and all of the obligations of the Guarantor now or hereafter existing under this Guaranty, irrespective of whether such Beneficiary shall have made any demand under this Guaranty or any other Loan Document and although such obligations may be unmatured. Each Beneficiary agrees promptly to notify the Guarantor after any such set-off and application; provided, however, that the failure to give such notice shall not affect the validity of such set-off and application. The rights of each Beneficiary and its respective Affiliates under this Section are in addition to other rights and

remedies (including, without limitation, other rights of set-off) that such Beneficiary and its respective Affiliates may have.

SECTION 12. Indemnification.

(a) Without limitation on any other Guaranteed Obligations of the Guarantor or remedies of the Beneficiaries under this Guaranty, the Guarantor shall, to the fullest extent permitted by law, indemnify, defend and save and hold harmless each Beneficiary and each of its Affiliates and their respective officers, directors, employees, agents and advisors (each, an “Indemnified Party”) from and against, and shall pay on demand, any and all claims, damages, losses, liabilities and expenses (including, without limitation, reasonable fees and expenses of counsel) that may be incurred by or asserted or awarded against any Indemnified Party in connection with or as a result of any failure of any Guaranteed Obligations to be the legal, valid and binding obligations of the Guaranteed Borrower enforceable against the Guaranteed Borrower in accordance with their terms.

(b) Absent the Indemnified Party’s gross negligence or willful misconduct, the Guarantor hereby also agrees that none of the Indemnified Parties shall have any liability (whether direct or indirect, in contract, tort or otherwise) to the Guarantor or any of its respective Affiliates or any of their respective officers, directors, employees, agents and advisors. The Guarantor hereby agrees not to assert any claim against any Indemnified Party on any theory of liability, for special, indirect, consequential or punitive damages in connection with, arising out of, or otherwise relating to this Guaranty, any of the transactions contemplated herein or the actual or proposed use of the proceeds of the Advances constituting Guaranteed Obligations.

(c) Without prejudice to the survival of any of the other agreements of the Guarantor under this Guaranty or any of the other Loan Documents, the agreements and obligations of the Guarantor contained in Section 1(a) (with respect to enforcement expenses), the last sentence of Section 2, Section 5 and this Section 12 shall survive the payment in full of the Guaranteed Obligations and all of the other amounts payable under this Guaranty.

SECTION 13. Subordination.

If a Default or Unmatured Default shall have occurred and be continuing, the Guarantor agrees to subordinate any and all debts, liabilities and other obligations owed to the Guarantor by the Guaranteed Borrower (the “Subordinated Obligations”) to the Guaranteed Obligations to the extent and in the manner hereinafter set forth in this Section 13:

(a) Prohibited Payments, Etc. Except during the continuance of a Default or Unmatured Default (including the commencement and continuation of any proceeding under any Bankruptcy Law relating to the Guaranteed Borrower), the Guarantor may receive regularly scheduled payments from the Guaranteed Borrower on account of the Subordinated Obligations. After the occurrence and during the continuance of a Default or Unmatured Default (including the commencement and continuation of any proceeding under any Bankruptcy Law relating to the Guaranteed Borrower), however, unless the

Agent otherwise agrees, the Guarantor shall not demand, accept or take any action to collect any payment on account of the Subordinated Obligations.

(b) Prior Payment of Guaranteed Obligations. In any proceeding under any Bankruptcy Law relating to the Guaranteed Borrower, the Guarantor agrees that the Beneficiaries shall be entitled to receive payment in full in cash of all Guaranteed Obligations (including all interest and expenses accruing after the commencement of a proceeding under any Bankruptcy Law, whether or not constituting an allowed claim in such proceeding (“Post Petition Interest”)) before the Guarantor receives payment of any Subordinated Obligations.

(c) Turn-Over. After the occurrence and during the continuance of a Default or Unmatured Default (including the commencement and continuation of any proceeding under any Bankruptcy Law relating to the Guaranteed Borrower), the Guarantor shall, if the Agent so requests, collect, enforce and receive payments on account of the Subordinated Obligations as trustee for the Beneficiaries and deliver such payments to the Agent on account of the Guaranteed Obligations (including all Post Petition Interest), together with any necessary endorsements or other instruments of transfer, but without reducing or affecting in any manner the liability of the Guarantor under the other provisions of this Guaranty.

(d) Agent Authorization. After the occurrence and during the continuance of a Default or Unmatured Default (including the commencement and continuation of any proceeding under any Bankruptcy Law relating to any other the Guaranteed Borrower), the Agent is authorized and empowered (but without any obligation to so do), in its discretion, (i) in the name of the Guarantor, to collect and enforce, and to submit claims in respect of, Subordinated Obligations and to apply any amounts received thereon to the Guaranteed Obligations (including any and all Post Petition Interest), and (ii) to require the Guarantor (A) to collect and enforce, and to submit claims in respect of, Subordinated Obligations and (B) to pay any amounts received on such obligations to the Agent for application to the Guaranteed Obligations (including any and all Post Petition Interest).

SECTION 14. Continuing Guaranty; Assignments under the Credit Agreement.

This Guaranty is a continuing guaranty and shall (a) remain in full force and effect until the latest of (i) the payment in full in cash of the Guaranteed Obligations and all other amounts payable under this Guaranty, (ii) the Facility Termination Date, (iii) the latest date of expiration or termination of all Letters of Credit issued for the account of the Guaranteed Borrower, (b) be binding upon the Guarantor, its successors and assigns and (c) inure to the benefit of and be enforceable by the Beneficiaries and their successors, transferees and assigns. Without limiting the generality of clause (c) of the immediately preceding sentence, any Beneficiary may assign or otherwise transfer all or any portion of its rights and obligations under the Credit Agreement (including, without limitation, all or any portion of its Commitments, the Advances owing to it and the Note or Notes held by it) to any other Person, and such other Person shall thereupon become vested with all the benefits in respect thereof granted to such Beneficiary herein or otherwise, in each case as and to the extent provided in Section 12.3 of the Credit Agreement.

The Guarantor shall not have the right to assign its rights hereunder or any interest herein without the prior written consent of the Beneficiaries.

SECTION 15. Execution in Counterparts.

This Guaranty and each amendment, waiver and consent with respect hereto may be executed in any number of counterparts and by different parties thereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Guaranty by telecopier shall be effective as delivery of an original executed counterpart of this Guaranty.

SECTION 16. Governing Law; Jurisdiction; Waiver of Jury Trial, Etc.

(a) THIS GUARANTY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

(b) To the fullest extent permitted by law, the Guarantor hereby irrevocably and unconditionally (i) submits, for itself and its property, to the nonexclusive jurisdiction of any New York State court or Federal court of the United States of America sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Guaranty or any of the other Loan Documents to which it is or is to be a party, and (ii) agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State court or, in such Federal court. The Guarantor agrees, to the fullest extent permitted by law, that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.

(c) The Guarantor hereby irrevocably and unconditionally waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Guaranty or any of the other Loan Documents to which it is or is to be a party in any New York State or federal court. The Guarantor hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such suit, action or proceeding in any such court. The Guarantor also, irrevocably consents, to the fullest extent permitted by law, to the service of any and all process in any such action or proceeding by the mailing of certified mail of copies of such process to the Guarantor at its address specified in Section 9.

(d) THE GUARANTOR AND EACH BENEFICIARY HEREBY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS GUARANTY, ANY OTHER LOAN DOCUMENT, OR ANY OTHER INSTRUMENT OR DOCUMENT DELIVERED HEREUNDER OR THEREUNDER.

IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be duly executed and delivered by its officer thereunto duly authorized as of the date first above written.

[NAME OF BORROWER]

By:

Name:

Title:

EX-10.33

Exhibit 10.33

Summary of Non-Employee Director Compensation

Members of the Board of Directors (the “Board”) who are employees of Nationwide Financial Services, Inc. (the “Company”) or its affiliates are not separately compensated for service on the Board of Directors or any of its committees.

Effective January 1, 2008, directors of the Company who are not employees of the Company or its affiliates will receive an annual cash retainer of $55,000 paid in monthly installments and a deferred cash retainer of $90,000 payable to the Director when his or her service on the Board ends. The retainers are awarded to directors on the date of the annual shareholders’ meeting.

The Chairman of the Board receives a supplemental annual retainer of $40,000 for his additional duties. This supplemental retainer of cash is also paid in monthly installments. The Chairman of the Audit Committee of the Board receives a supplemental annual retainer of $15,000, and the Chairman of each other committee of the Board receives a supplemental annual retainer of $6,000. These supplemental retainers are paid in monthly installments.

Non-employee directors also receive a cash meeting fee of $2,250 for each Audit Committee meeting attended, and a meeting fee of $2,000 for each other Board or committee meeting attended.

An additional retainer of $15,000 is payable in cash to the members of special committees, if and when such committees are established by the Board.

Non-employee directors may elect annually to defer any or all of their cash compensation for service. Amounts deferred earn a return equivalent to the rate of return on selected investment choices offered under the Nationwide Financial Services, Inc. 2008 Deferred Compensation Plan for Non-Employee Directors.

The Company reimburses directors for reasonable travel expenses incurred in connection with attendance at Board, committee or shareholder meetings and other Company events. This may include travel on the Company plane. Travel expenses for the spouses or guests of directors may also be reimbursed. The Company will also provide a gross-up payment in some circumstances for travel expenses for spouses or guests. This amount is taxed to the appropriate director.

Directors may also be provided with computers and certain other office equipment, office supplies, and additional home phone or computer lines at the discretion of the Company. The Company also pays the dues for each director’s membership in the National Association of Corporate Directors and reimburses directors for expenses related to educational or professional seminars the directors choose to attend. The Company will also reimburse directors for certain physical examinations.

EX-10.49

Exhibit 10.49

EXECUTIVE SEVERANCE AGREEMENT

This EXECUTIVE SEVERANCE AGREEMENT (the “Agreement”) is entered into as of January 1, 2008, by and between Nationwide Mutual Insurance Company (the “Company”) and Larry Hilsheimer (“Executive”).

WHEREAS, the parties desire to enter into an agreement to reflect Executive’s executive capacities in the Company’s business and to provide for Executive’s employment by the Company, upon the terms and conditions set forth herein.

WHEREAS, Executive has agreed to certain confidentiality, non-competition and non-solicitation covenants contained hereunder, in consideration of the additional benefits provided to Executive under this Agreement.

WHEREAS, certain capitalized terms shall have the meanings given those terms in Section 3 of this Agreement.

NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby agree as follows:

1. Employment. The Company hereby agrees to employ Executive, and Executive hereby accepts such employment and agrees to perform Executive’s duties and responsibilities, in accordance with the terms, conditions and provisions hereinafter set forth.

1.1 Employment Term. This Agreement shall be effective as of the date set forth above, and shall continue until December 31, 2009, unless the Agreement is terminated sooner in accordance with Section 2 below. In addition, the term of the Agreement shall automatically renew for periods of one year unless either party gives written notice to the other party, at least 60 days prior to the end of the initial term or at least 60 days prior to the end of any one-year renewal period, that the Agreement shall not be further extended. The period commencing on the effective date and ending on the date on which the term of Executive’s employment under the Agreement shall terminate is hereinafter referred to as the “Employment Term.” The failure of the Company to renew this Agreement shall not be considered a termination of Executive’s employment under this Agreement and shall not give Executive grounds to terminate employment for Good Reason (as defined in Section 3) under this Agreement.

1.2 Duties and Responsibilities. During the Employment Term, Executive shall serve as the Executive Vice President and Chief Financial Officer of the Company, or in such other executive positions as the Board of Directors of the Company (the “Board”) determines. Executive shall perform all duties and accept all responsibilities incident to such position or as may be reasonably assigned to him by the Chief Executive Officer of the Company or the Board.

1.3 Extent of Service. During the Employment Term, Executive agrees to use Executive’s full and best efforts to carry out Executive’s duties and responsibilities under Section 1.2 hereof with the highest degree of loyalty and the highest standards of care and, consistent with the other provisions of this Agreement, Executive agrees to devote substantially

all of Executive’s business time, attention and energy thereto. The foregoing shall not be construed as preventing Executive from making investments in other businesses or enterprises, provided that Executive agrees not to become engaged in any other business activity which, in the reasonable judgment of the Board, is likely to interfere with Executive’s ability to discharge Executive’s duties and responsibilities to the Company. The Executive will not serve on the board of directors of an entity unrelated to the Company (other than a non-profit charitable organization) without the consent of the Board.

1.4 Base Salary. During the Employment Term, for all the services rendered by Executive hereunder, the Company shall pay Executive a base salary (“Base Salary”), at the annual rate in effect on the date of this Agreement, payable in installments at such times as the Company customarily pays its other employees. Executive’s Base Salary shall be reviewed periodically for appropriate increases by the Board (or a committee of the Board) pursuant to the Board’s normal performance review policies for senior level executives.

1.5 Retirement, Welfare and Other Benefit Plans and Programs. During the Employment Term, Executive shall be entitled to participate in all employee retirement and welfare benefit plans and programs made available to the Company’s senior level executives as a group, as such retirement and welfare plans may be in effect from time to time and subject to the eligibility requirements of such plans. During the Employment Term, Executive shall be provided with executive fringe benefits and perquisites under the same terms as those made available to the Company’s senior level executives as a group, as such programs may be in effect from time to time. During the Employment Term, Executive shall be entitled to vacation and sick leave in accordance with the Company’s vacation, holiday and other pay for time not worked policies. Nothing in this Agreement or otherwise shall prevent the Company from amending or terminating any retirement, welfare or other employee benefit plans, programs, policies or perquisites from time to time as the Company deems appropriate.

1.6 Reimbursement of Expenses. During the Employment Term, Executive shall be provided with reimbursement of reasonable expenses related to Executive’s employment by the Company on a basis no less favorable than that which may be authorized from time to time for senior level executives as a group.

1.7 Incentive Compensation. During the Employment Term, Executive shall be entitled to participate in all short-term and long-term incentive programs established by the Company for its senior level executives generally, at levels commensurate with the benefits provided to other senior executives and Executive’s position with the Company. Executive’s incentive compensation shall be subject to the terms of the applicable plans and shall be determined based on Executive’s individual performance and Company performance as determined by the Board (or a committee of the Board).

2. Termination. Executive’s employment shall terminate upon the occurrence of any of the following events:

2.1 Termination Without Cause. The Company (by action of the Board) may remove Executive at any time without Cause (as defined in Section 3) from the position in which Executive is employed hereunder (in which case the Employment Term shall be deemed to have

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ended) upon not less than 60 days’ prior written notice pursuant to Section 15 to Executive; provided, however, that, in the event that such notice is given, Executive shall be under no obligation to render any additional services to the Company and shall be allowed to seek other employment, to the extent such other employment is consistent with Executive’s obligations under Section 6.

2.2 Resignation for Good Reason After a Substantial Reorganization. If the Board determines for purposes of this Agreement that a substantial reorganization of the Company has occurred, the Board may establish a period of time during which Executive may elect to resign if an event constituting Good Reason (as defined in Section 3) occurs. In that event, Executive may initiate termination of employment by resigning under this Section 2.2 for Good Reason during the period specified by the Board. Executive shall give the Company not less than 60 days prior written notice pursuant to Section 15 of such resignation, which notice shall be provided to the Company within 60 days following the occurrence of the event giving rise to the Good Reason resignation. A substantial reorganization shall not be considered to have occurred unless the Board specifically determines that a substantial reorganization has occurred for purposes of this Agreement and the Board establishes a time period during which Executive may elect to resign if an event constituting Good Reason occurs. Nothing in this Agreement shall obligate the Board to make any such determination.

2.3 Benefits Payable Upon Termination Without Cause or Resignation for Good Reason After a Substantial Reorganization.

(a) Upon any removal or resignation described in Section 2.1 or 2.2 above, Executive shall be entitled to receive only the amount due to Executive under the Company’s then current severance pay plan for employees, if any. No other payments or benefits shall be due under this Agreement to Executive, but Executive shall be entitled to any benefits accrued or earned in accordance with the terms of any applicable benefit plans and programs of the Company.

(b) Notwithstanding the provisions of Section 2.3(a), in the event of a removal or resignation described in Section 2.1 or 2.2 during the Employment Term, if Executive executes and does not revoke a written release and waiver of claims upon such removal or resignation, in form and substance acceptable to the Company (the “Release”), of any and all claims against the Company and all related parties with respect to all matters arising out of Executive’s employment by the Company, or the termination thereof (other than claims based upon any severance entitlements under the terms of this Agreement or entitlements under any plans or programs of the Company under which Executive has accrued a benefit), Executive shall be entitled to receive the severance benefits described below, in lieu of the payment described in Section 2.3(a).

(i) Executive shall receive a lump sum cash payment equal to two times Executive’s annual Base Salary in effect immediately before the Termination Date (including salary reduction amounts of Base Salary under the Company’s benefit plans and programs).

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(ii) Executive shall receive Executive’s annual short-term incentive bonus (PIP) for the year in which Executive’s Termination Date occurs, at the time that annual bonuses for the year are paid to other executives, based on the Company’s actual performance for the year, but in an amount not less than Executive’s target annual bonus in effect for the year.

(iii) The Company shall pay Executive a lump sum cash payment equal to the cost that Executive would incur if Executive continued medical, dental and vision coverage under section 4980B of the Code (as defined in Section 3)(“COBRA”) or the Company’s retiree medical plan, if applicable, for Executive, and, where applicable, his or her spouse and dependents, for the Severance Period (as defined in Section 3). The cash payment shall include a tax gross up to cover Executive’s income and FICA taxes imposed on the payment under this subsection (iii). Executive may elect COBRA continuation coverage according to the terms of the Company’s applicable benefit plans, for the period permitted under such plans.

(iv) Executive shall receive a lump sum payment equal to two times the amount of Executive’s NVA Target Award Opportunity and/or Business Unit Target Award Opportunity, as applicable, under the Nationwide Property and Casualty Long-Term Performance Plan, as amended, the Third Amended and Restated Nationwide Financial Services, Inc. 1996 Long-Term Equity Compensation Plan, or any successor plan in effect for the year in which Executive’s Termination Date occurs. The amount determined under this subsection (iv) shall be paid at the time that NVA or Business Unit awards for the year are paid to other executives, but not later than March 15 after the end of the year in which the Termination Date occurs. The payment under this subsection (iv) shall be paid in lieu of any NVA or Business Unit award under the applicable plan for the year in which Executive’s Termination Date occurs.

(v) Executive’s outstanding stock options and restricted stock with respect to stock of Nationwide Financial Services, Inc. or any Affiliate of the Company shall become vested and exercisable on the Termination Date to the extent that such options and restricted stock would have become vested and exercisable on the next vesting date had Executive remained an employee of the Company. All other unvested stock options and restricted stock shall be forfeited, except to the extent that the applicable grant agreement requires otherwise. No additional grants shall be made to Executive after Executive’s termination of employment.

(vi) Executive shall receive supplemental benefits under this Agreement equal to:

(A) the benefits that Executive would have received under the Nationwide Retirement Plan, Nationwide Supplemental Retirement Plan, Nationwide Excess Benefit Plan, Nationwide Savings Plan, Nationwide Supplemental Defined Contribution Plan and Nationwide Individual Deferred Compensation Plan, as in effect at Executive’s Termination Date, had Executive’s benefits under those Plans been fully vested as of Executive’s Termination Date, reduced by

(B) the benefits that Executive actually receives under the Nationwide Retirement Plan, Nationwide Supplemental Retirement Plan, Nationwide Excess Benefit

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Plan, Nationwide Savings Plan, Nationwide Supplemental Defined Contribution Plan and Nationwide Individual Deferred Compensation Plan.

The benefits under this subsection (vi) shall be paid as described in Section 8. The benefits payable under this subsection (vi) and subsection (vii) below shall not result in any duplication of benefits.

(vii) If Executive’s Termination Date occurs within three years of the date on which Executive would have been first eligible to retire under the Nationwide Retirement Plan, Executive shall receive a supplemental benefit under this Agreement equal to:

(A) the benefits that Executive would have received under the Nationwide Retirement Plan, Nationwide Supplemental Retirement Plan and Nationwide Excess Benefit Plan as in effect at Executive’s Termination Date, had Executive earned service and age credit for the period ending on the first to occur of (i) three years after the Termination Date or (ii) the earliest date on which Executive would have been eligible to retire under the Nationwide Retirement Plan, and had Executive been fully vested in Executive’s benefit under such Plans, reduced by

(B) the benefits that Executive actually receives under the Nationwide Retirement Plan, Nationwide Supplemental Retirement Plan and Nationwide Excess Benefit Plan, and the benefits payable under subsection (vi) above with respect to the Nationwide Retirement Plan, Nationwide Supplemental Retirement Plan and Nationwide Excess Benefit Plan.

The benefits under this subsection (vii) shall be paid as described in Section 8. The benefits payable under this subsection (vii) and subsection (vi) above shall not result in any duplication of benefits.

(viii) The Company shall pay Executive a lump sum cash payment equal to the matching contributions that the Company would have made for Executive under the Nationwide Savings Plan and the Nationwide Supplemental Defined Contribution Plan, as in effect at Executive’s Termination Date, as if Executive continued in employment for the Severance Period, receiving compensation at a rate equal to Executive’s covered compensation amount for the calendar year prior to the year in which the Termination Date occurs and as if Executive continued the same rate of contributions to the applicable plans as in effect immediately before Executive’s Termination Date.

(ix) The Company shall cause Executive to receive service and age credit for purposes of eligibility under the Company’s retiree medical plan (but not for Company contributions towards the cost of retiree medical) until the end of the Severance Period, as if Executive had continued in employment during the Severance Period.

(x) During the Severance Period, the Company shall pay or reimburse Executive for the cost of reasonable outplacement assistance services (not to exceed a total of $11,000) provided by any outplacement agency selected by Executive.

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(xi) The Company shall pay Executive a lump sum cash payment equal to the annual value of the financial counseling services provided by the Company to Executive immediately before Executive’s Termination Date.

(xii) Executive shall have the right to retain the computer, printer, fax machine and office furniture that was provided by the Company for use by Executive at Executive’s residence at the Termination Date.

(xiii) Executive shall receive any other amounts earned, accrued or owing but not yet paid under Section 1 above and any other benefits in accordance with the terms of any applicable plans and programs of the Company.

(xiv) Payment of the lump sum benefits described above (other than as described in subsections (ii) and (iv) above) shall be made within 30 days after Executive’s Termination Date (as defined in Section 3), subject to Executive’s execution of an effective Release.

2.4 Retirement or Other Voluntary Termination. Executive may voluntarily terminate employment for any reason, including voluntary retirement, upon 60 days’ prior written notice pursuant to Section 15. In such event, after the effective date of such termination, except as provided in Section 2.2 (with respect to a resignation for Good Reason), no further payments shall be due under this Agreement. However, Executive shall be entitled to any benefits due in accordance with the terms of any applicable benefit plans and programs of the Company.

2.5 Disability. The Company (by action of the Board) may terminate Executive’s employment if Executive has been unable to perform the essential functions of Executive’s position with the Company, with or without reasonable accommodation, by reason of physical or mental incapacity for a period of six consecutive months (“Disability”); provided, however, that the Company shall continue to pay Executive’s Base Salary until the Company acts to terminate Executive’s employment. Executive agrees, in the event of a dispute under this Section 2.5 relating to Executive’s Disability, to submit to a physical examination by a licensed physician selected by the Board. Executive acknowledges that the provisions of this Section 2.5 supersede the employment termination provisions otherwise applied to disabled employees. If Executive’s employment terminates on account of Disability, no further payments shall be due under this Agreement. However, Executive shall be entitled to (i) any benefits due in accordance with the terms of any applicable benefit plans and programs of the Company and (ii) a pro rated bonus for the year in which Executive’s Disability occurs, which bonus shall be calculated (on a prorated basis) and paid according to Section 2.3(b)(ii) above.

2.6 Death. If Executive dies while employed by the Company, the Company shall pay to Executive’s executor, legal representative, administrator or designated beneficiary, as applicable, (i) any amounts earned, accrued or owing but not yet paid under Section 1 above and any benefits accrued or earned under the Company’s benefit plans and programs according to the terms of such plans and (ii) a pro rated bonus for the year in which Executive’s death occurs, which bonus shall be calculated (on a prorated basis) and paid according to Section 2.3(b)(ii) above. Otherwise, the Company shall have no further liability or obligation under this Agreement to Executive’s executors, legal representatives, administrators, heirs or assigns.

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2.7 Cause. The Company (by action of the Board) may terminate Executive’s employment at any time for Cause upon written notice to Executive, in which event all payments under this Agreement shall cease, except for Base Salary to the extent already accrued. Executive shall be entitled to any benefits accrued or earned before Executive’s termination in accordance with the terms of any applicable benefit plans and programs of the Company; provided that Executive shall not be entitled to receive any unpaid short-term or long-term cash incentive payments or unvested options.

3. Definitions. For purposes of this Agreement, the following terms shall have the meanings specified in this Section 3:

(a) “Affiliate” shall mean any subsidiary of the Company, Nationwide Financial Services, Inc. and any of its subsidiaries, and any other entity that, directly or indirectly, through one or more intermediaries, controls, is controlled by or is under common control with the Company, as determined by the Board.

(b) “Cause” shall mean any of the following grounds for termination of Executive’s employment:

(i) Executive shall have been convicted of a felony;

(ii) Executive neglects, refuses or fails to perform his or her material duties to the Company (other than a failure resulting from Executive’s incapacity due to physical or mental illness), which failure has continued for a period of at least 30 days after a written notice of demand for substantial performance, signed by a duly authorized officer of the Company, has been delivered to Executive specifying the manner in which Executive has failed substantially to perform;

(iii) Executive engages in misconduct in the performance of Executive’s duties;

(iv) Executive engages in public conduct that is harmful to the reputation of the Company;

(v) Executive breaches any written non-competition, non-disclosure or non-solicitation agreement in effect with the Company, including without limitation the provisions of Section 5 or 6 of this Agreement; or

(vi) Executive breaches the Company’s written code of business conduct and ethics.

(c) “Code” shall mean the Internal Revenue Code of 1986, as amended.

(d) “Employer” shall mean the Company, its Affiliates and their successors.

(e) “Good Reason” shall mean the occurrence of any of the following events, without Executive’s consent, except in connection with the termination of Executive’s

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employment for Disability, Cause, as a result of death or by Executive other than for Good Reason and except as provided in the last sentence of this subsection (e):

(i) A material diminution in Executive’s authority, duties or responsibilities, as reasonably determined by the Board;

(ii) A material change in the geographic location at which Executive must perform services under this Agreement (which, for purposes of this Agreement, means relocation of the offices of the Company at which Executive is principally employed to a location more than 50 miles from the location of such offices immediately prior to the relocation);

(iii) A material diminution in Executive’s Base Salary; provided, however, that a change in Base Salary for all senior executives of the Company, in which Executive is treated similarly as all other executives of a comparable responsibility level, shall not constitute Good Reason under this Agreement; or

(iv) Any action or inaction that constitutes a material breach by the Company of this Agreement, including the failure of the Company to obtain from its successors the express assumption and agreement required under Section 16 hereof.

Notwithstanding the foregoing, Executive shall not have Good Reason for termination if, within 60 days after the date on which Executive gives notice of his or her termination, as provided in Section 2.2 the Company corrects the action or failure to act that constitutes the grounds for termination for Good Reason as set forth in Executive’s notice of termination. If the Company does not correct the action or failure to act, Executive must terminate his or her employment for Good Reason within 30 days after the end of the cure period, in order for the termination to be considered a Good Reason termination.

(f) “Severance Period” shall mean the period beginning on Executive’s Termination Date and ending two years after the Termination Date.

(g) “Termination Date” shall mean the effective date of the termination of Executive’s employment relationship with the Company pursuant to this Agreement.

4. Notice of Termination. Any termination of Executive’s employment shall be communicated by a written notice of termination to the other party hereto given in accordance with Section 15. The notice of termination shall (i) indicate the specific termination provision in this Agreement relied upon, (ii) briefly summarize the facts and circumstances deemed to provide a basis for a termination of employment and the applicable provision hereof, and (iii) specify the Termination Date in accordance with the requirements of this Agreement.

5. Confidential Information. Executive recognizes and acknowledges that, by reason of Executive’s employment by and service to the Employer (as defined in Section 3) during and, if applicable, after the Employment Term, Executive will continue to have access to certain confidential and proprietary information relating to the business of the Employer, which may include, but is not limited to, trade secrets, trade “know-how”, customer information, supplier information, cost and pricing information, marketing and sales techniques, strategies and

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programs, computer programs and software and financial information (collectively referred to as “Confidential Information”). Executive acknowledges that such Confidential Information is a valuable and unique asset of the Employer and Executive covenants that Executive will not, unless expressly authorized in writing by the Board, at any time during the course of Executive’s employment, use any Confidential Information or divulge or disclose any Confidential Information to any person, firm or corporation except in connection with the performance of Executive’s duties for the Employer and in a manner consistent with the Employer’s policies regarding Confidential Information. Executive also covenants that at any time after the termination of such employment, directly or indirectly, Executive will not use any Confidential Information or divulge or disclose any Confidential Information to any person, firm or corporation, unless such information is in the public domain through no fault of Executive or except when required to do so by law or legal process, in which case Executive will inform the Employer in writing promptly of such required disclosure, but in any event at least two business days prior to disclosure. All written Confidential Information (including, without limitation, in any computer or other electronic format) which comes into Executive’s possession during the course of Executive’s employment shall remain the property of the Employer. Except as required in the performance of Executive’s duties for the Employer, or unless expressly authorized in writing by the Board, Executive shall not remove any written Confidential Information from the Employer’s premises, except in connection with the performance of Executive’s duties for the Employer and in a manner consistent with the Employer’s policies regarding Confidential Information. Upon termination of Executive’s employment, Executive agrees immediately to return to the Employer all written Confidential Information in Executive’s possession.

6. Non-Competition; Non-Solicitation.

(a) During Executive’s employment by the Employer and for a period of one year after Executive’s termination of employment for any reason, Executive will not, except with the prior written consent of the Board, directly or indirectly, own, manage, operate, join, control, finance or participate in the ownership, management, operation, control or financing of, or be connected as an officer, director, employee, partner, principal, agent, representative, consultant or otherwise with, or use or permit Executive’s name to be used in connection with, any business or enterprise which is engaged in any financial services, insurance or other business that is competitive with any business or enterprise in which the Employer is engaged, anywhere in the world, during Executive’s employment or (with respect to the application of this covenant after Executive’s termination of employment) during the two year period preceding Executive’s termination of employment. The parties acknowledge that the Employer engages in its business on a worldwide basis, and Executive acknowledges that his or her responsibilities extend to the Employer’s worldwide operations.

(b) The foregoing restrictions shall not be construed to prohibit the ownership by Executive of less than five percent of any class of securities of any corporation which is engaged in any of the foregoing businesses having a class of securities registered pursuant to the Securities Exchange Act of 1934, as amended, provided that such ownership represents a passive investment and that neither Executive nor any group of persons including Executive in any way, either directly or indirectly, manages or exercises control of any such corporation, guarantees

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any of its financial obligations, otherwise takes any part in its business, other than exercising Executive’s rights as a shareholder, or seeks to do any of the foregoing.

(c) Executive further covenants and agrees that during Executive’s employment by the Employer and for a period of one year thereafter, Executive will not, except with the prior written consent of the Board, directly or indirectly, solicit or hire, or encourage the solicitation or hiring of, any person who was a managerial or higher level employee of the Employer at any time during the term of Executive’s employment by the Employer by any employer other than the Employer for any position as an employee, independent contractor, consultant or otherwise. The foregoing covenant of Executive shall not apply to any person after 12 months have elapsed after the date on which such person’s employment by the Employer has terminated.

(d) The covenants described in this Section 6 shall continue to apply during the period specified herein after Executive’s termination of employment for any reason, without regard to whether Executive executes a Release or receives any severance benefits as a result of such termination. If Executive breaches any of the covenants described in this Section 6, the applicable period during which the covenant applies shall be tolled during the period of the breach. Without limiting the foregoing, the severance benefits provided under this Agreement are specifically designated as additional consideration for the covenants described in Section 5 and this Section 6.

7. Equitable Relief.

(a) Executive acknowledges and agrees that the restrictions contained in Sections 5 and 6 are reasonable and necessary to protect and preserve the legitimate interests, properties, goodwill and business of the Employer, that the Employer would not have entered into this Agreement in the absence of such restrictions and that irreparable injury will be suffered by the Employer should Executive breach any of the provisions of those Sections. Executive represents and acknowledges that (i) Executive has been advised by the Employer to consult Executive’s own legal counsel in respect of this Agreement, and (ii) Executive has had full opportunity, prior to execution of this Agreement, to review thoroughly this Agreement with Executive’s counsel.

(b) Executive further acknowledges and agrees that a breach of any of the restrictions in Sections 5 and 6 cannot be adequately compensated by monetary damages. Executive agrees that the Employer shall be entitled to preliminary and permanent injunctive relief, without the necessity of proving actual damages, as well as an equitable accounting of all earnings, profits and other benefits arising from any violation of Section 5 or 6 hereof, which rights shall be cumulative and in addition to any other rights or remedies to which the Employer may be entitled. In the event that any of the provisions of Section 5 or 6 hereof should ever be adjudicated to exceed the time, geographic, service, or other limitations permitted by applicable law in any jurisdiction, it is the intention of the parties that the provision shall be amended to the extent of the maximum time, geographic, service, or other limitations permitted by applicable law, that such amendment shall apply only within the jurisdiction of the court that made such adjudication and that the provision otherwise be enforced to the maximum extent permitted by law.

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(c) Notwithstanding anything in this Agreement to the contrary, if Executive breaches any of Executive’s obligations under Section 5 or 6 hereof, the Company shall thereafter be obligated only for the compensation and other benefits provided in any Company benefit plans, policies or practices then applicable to Executive in accordance with the terms thereof, and all payments under Section 2 of this Agreement shall cease.

(d) Executive irrevocably and unconditionally (i) agrees that any suit, action or other legal proceeding arising out of Section 5 or 6 hereof, including without limitation, any action commenced by the Employer for preliminary and permanent injunctive relief and other equitable relief, may be brought in a United States District Court for Ohio, or if such court does not have jurisdiction or will not accept jurisdiction, in any court of general jurisdiction in Columbus, Ohio, (ii) consents to the non-exclusive jurisdiction of any such court in any such suit, action or proceeding, and (iii) waives any objection which Executive may have to the laying of venue of any such suit, action or proceeding in any such court. Executive also irrevocably and unconditionally consents to the service of any process, pleadings, notices or other papers in a manner permitted by the notice provisions of Section 15 hereof.

(e) Executive agrees that for a period of three years following the termination of Executive’s employment for any reason, Executive will provide, and at all times after the date hereof the Employer may similarly provide, a copy of Sections 5 and 6 hereof to any business or enterprise (i) which Executive may directly or indirectly own, manage, operate, finance, join, control or in which Executive may participate in the ownership, management, operation, financing, or control, or (ii) with which Executive may be connected as an officer, director, employee, partner, principal, agent, representative, consultant or otherwise, or in connection with which Executive may use or permit to be used Executive’s name; provided, however, that this provision shall not apply in respect of Section 6 after expiration of the time periods set forth therein.

8. Payment of Supplemental Benefits. The supplemental benefits under Sections 2.3(b)(vi) and (vii) (the “Enhanced Benefits”) shall be paid as follows:

(a) The Enhanced Benefits that are calculated with respect to the Nationwide Retirement Plan and Nationwide Supplemental Retirement Plan shall be paid in the same form and the same time as Executive’s benefits under the Nationwide Supplemental Retirement Plan are paid (or under the default provisions of the Nationwide Supplemental Retirement Plan if Executive is not otherwise entitled to receive a benefit under that Plan).

(b) The Enhanced Benefits that are calculated with respect to the Nationwide Excess Benefit Plan shall be paid in the same form and at the same time as Executive’s benefits under the Nationwide Excess Benefit Plan are paid (or under the default provisions of the Nationwide Excess Benefit Plan if Executive is not otherwise entitled to receive a benefit under that Plan).

(c) The Enhanced Benefits that are calculated with respect to the Nationwide Savings Plan and Nationwide Supplemental Defined Contribution Plan shall be paid in the same form and at the same time as Executive’s benefits under the Nationwide Supplemental Defined Contribution Plan are paid.

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(d) The Enhanced Benefits that are calculated with respect to the Nationwide Individual Deferred Compensation Retirement Plan shall be paid in the same form and the same time as Executive’s benefits under the Nationwide Individual Deferred Compensation Plan are paid.

9. Indemnification. The Company shall indemnify Executive with respect to Executive’s actions in the performance of Executive’s duties as set forth in Section 1.2 to the fullest extent permitted by the Company’s Amended and Restated Code of Bylaws as in effect from time to time.

10. Non-Exclusivity of Rights; Resignation from Boards.

(a) Nothing in this Agreement shall prevent or limit Executive’s continuing or future participation in or rights under any benefit, bonus, incentive or other plan or program provided by the Company and for which Executive may qualify; provided, however, that if Executive becomes entitled to and receives the payments described in Section 2.3(b) of this Agreement, Executive hereby waives Executive’s right to receive payments under any severance plan or similar program applicable to all employees of the Company.

(b) If Executive’s employment with the Company terminates for any reason, Executive shall immediately resign from all boards of directors of the Company, any Affiliates and any other entities for which Executive serves as a representative of the Company.

11. Survivorship. The respective rights and obligations of the parties under this Agreement (including without limitation Sections 5, 6 and 7) shall survive any termination of Executive’s employment to the extent necessary to the intended preservation of such rights and obligations.

12. Mitigation. Executive shall not be required to mitigate the amount of any payment or benefit provided for in this Agreement by seeking other employment or otherwise, and there shall be no offset against amounts due Executive under this Agreement on account of any remuneration attributable to any subsequent employment that Executive may obtain.

13. Benefit Plans; Outstanding Awards. All references in this Agreement to specific retirement or other benefit plans of the Company shall be deemed to include any successor retirement or other benefit plans. The terms of Executive’s outstanding stock options, restricted stock and long-term incentive awards are hereby amended to provide that, without adversely affecting any rights that Executive has under such award agreements, the award agreements are amended to provide for the accelerated vesting and payments upon termination of employment as provided in Section 2.3(b) of this Agreement, to the extent consistent with the applicable plans. In all respects not amended, the provisions of such outstanding awards shall remain in effect according to their terms.

14. Arbitration; Expenses. In the event of any dispute under the provisions of this Agreement, other than a dispute in which the primary relief sought is an equitable remedy such as an injunction, the parties shall be required to have the dispute, controversy or claim settled by arbitration in Columbus, Ohio in accordance with the National Rules for the Resolution of Employment Disputes then in effect of the American Arbitration Association, before a panel of

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three arbitrators, one of whom shall be selected by the Company, one of whom shall be selected by Executive, and the third of whom shall be selected by the arbitrators selected by the Company and Executive. Any award entered by the arbitrators shall be final, binding and nonappealable and judgment may be entered thereon by either party in accordance with applicable law in any court of competent jurisdiction. This arbitration provision shall be specifically enforceable. The arbitrators shall have no authority to modify any provision of this Agreement or to award a remedy for a dispute involving this Agreement other than a benefit specifically provided under or by virtue of the Agreement. In the event of a dispute, each party shall be responsible for its own expenses (including attorneys’ fees) relating to the conduct of the arbitration, and the parties shall share equally the fees of the American Arbitration Association. Each party shall give the other party written notice as described in Section 16 of its intent to submit a claim under this Agreement to arbitration and a description of the basis of such claim, within six months after the event giving rise to the claim occurs.

15. Notices. All notices and other communications required or permitted under this Agreement or necessary or convenient in connection herewith shall be in writing and shall be deemed to have been given when hand delivered or mailed by registered or certified mail, as follows (provided that notice of change of address shall be deemed given only when received):

If to the Company, to:

Nationwide Mutual Insurance Company

One Nationwide Plaza, 1-35-03

Columbus, OH 43215

Attention:  Executive Vice President and Chief Administrative Officer

                  Executive Vice President and Chief Legal and Governance

                  Officer

With a required copy to:

Morgan, Lewis & Bockius LLP

1701 Market Street

Philadelphia, PA 19103-2921

Attention: Mims Maynard Zabriskie

If to Executive, to:

Larry Hilsheimer

7278 Lambton Park Road

New Albany, OH 43054

or to such other names or addresses as the Company or Executive, as the case may be, shall designate by notice to each other person entitled to receive notices in the manner specified in this Section.

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16. Contents of Agreement; Amendment and Assignment.

(a) This Agreement sets forth the entire understanding between the parties hereto with respect to the subject matter hereof and cannot be changed, modified, extended or terminated except upon written amendment approved by the Board and executed on its behalf by a duly authorized officer of the Company and by Executive.

(b) All of the terms and provisions of this Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective heirs, executors, administrators, legal representatives, successors and assigns of the parties hereto, except that the duties and responsibilities of Executive under this Agreement are of a personal nature and shall not be assignable or delegatable in whole or in part by Executive. The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation, reorganization or otherwise) to all or substantially all of the business or assets of the Company, within 15 days of such succession, expressly to assume and agree to perform this Agreement in the same manner and to the same extent as the Company would be required to perform if no such succession had taken place.

17. Severability. If any provision of this Agreement or application thereof to anyone or under any circumstances is adjudicated to be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect any other provision or application of this Agreement which can be given effect without the invalid or unenforceable provision or application and shall not invalidate or render unenforceable such provision or application in any other jurisdiction. If any provision is held void, invalid or unenforceable with respect to particular circumstances, it shall nevertheless remain in full force and effect in all other circumstances.

18. Remedies Cumulative; No Waiver. No remedy conferred upon a party by this Agreement is intended to be exclusive of any other remedy, and each and every such remedy shall be cumulative and shall be in addition to any other remedy given under this Agreement or now or hereafter existing at law or in equity. No delay or omission by a party in exercising any right, remedy or power under this Agreement or existing at law or in equity shall be construed as a waiver thereof, and any such right, remedy or power may be exercised by such party from time to time and as often as may be deemed expedient or necessary by such party in its sole discretion.

19. Beneficiaries/References. Executive shall be entitled, to the extent permitted under any applicable law, to select and change a beneficiary or beneficiaries to receive any compensation or benefit payable under this Agreement following Executive’s death by giving the Company written notice thereof. In the event of Executive’s death or a judicial determination of Executive’s incompetence, reference in this Agreement to Executive shall be deemed, where appropriate, to refer to Executive’s beneficiary, estate or other legal representative.

20. Miscellaneous. All section headings used in this Agreement are for convenience only. This Agreement may be executed in counterparts, each of which is an original. It shall not be necessary in making proof of this Agreement or any counterpart hereof to produce or account for any of the other counterparts.

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21. Withholding Taxes. All payments under this Agreement shall be made subject to applicable tax withholding, and the Company shall withhold from any payments under this Agreement all federal, state and local taxes as the Company is required to withhold pursuant to any law or governmental rule or regulation. Except as specifically provided otherwise in this Agreement, Executive shall be responsible for all taxes applicable to amounts payable under this Agreement and payments under this Agreement shall not be grossed up for taxes.

22. Section 409A of the Code. This Agreement is intended to comply with section 409A of the Code and its corresponding regulations, or an exemption, to the extent applicable. Severance benefits under the Agreement are intended to be exempt from section 409A under the “short term deferral” exemption. Notwithstanding anything in this Agreement to the contrary, if required by section 409A, if Executive is considered a “specified executive” for purposes of section 409A and if payment of any amounts under this Agreement is required to be delayed for a period of six months after separation from service pursuant to section 409A, payment of such amounts shall be delayed as required by section 409A, and the accumulated amounts shall be paid in a lump sum payment within five days after the end of the six-month period. If Executive dies during the postponement period prior to the payment of benefits, the amounts withheld on account of section 409A shall be paid to the personal representative of Executive’s estate within sixty days after the date of Executive’s death. Payments may only be made under this Agreement upon an event and in a manner permitted by section 409A, to the extent applicable. As used in the Agreement, the term “termination of employment” shall mean Executive’s separation from service with the Company within the meaning of section 409A. In no event may Executive, directly or indirectly, designate the calendar year of a payment. For purposes of section 409A, the right to a series of payments under the Agreement shall be treated as a right to a series of separate payments. All reimbursements and in-kind benefits provided under the Agreement shall be made or provided in accordance with the requirements of section 409A.

23. Governing Law. This Agreement shall be governed by and interpreted under the laws of the State of Ohio without giving effect to any conflict of laws provisions.

IN WITNESS WHEREOF, the undersigned, intending to be legally bound, have executed this Agreement as of the date first above written.

NATIONWIDE MUTUAL INSURANCE COMPANY
By:	/s/ W.G. Jurgensen
Name:	W.G. Jurgensen
Title:	Chief Executive Officer
	/s/ Larry Hilsheimer
	Executive

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EX-10.50

Exhibit 10.50

EXECUTIVE SEVERANCE AGREEMENT

This EXECUTIVE SEVERANCE AGREEMENT (the “Agreement”) is entered into as of January 1, 2008, by and between Nationwide Mutual Insurance Company (the “Company”) and Terri L. Hill (“Executive”).

WHEREAS, the parties desire to enter into an agreement to reflect Executive’s executive capacities in the Company’s business and to provide for Executive’s employment by the Company, upon the terms and conditions set forth herein.

WHEREAS, Executive has agreed to certain confidentiality, non-competition and non-solicitation covenants contained hereunder, in consideration of the additional benefits provided to Executive under this Agreement.

WHEREAS, certain capitalized terms shall have the meanings given those terms in Section 3 of this Agreement.

WHEREAS, Executive and the Company are parties to an Employment Agreement dated September 23, 2003 (the “Employment Agreement”), and the parties have agreed that this Agreement shall supercede and replace the Employment Agreement.

NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby agree as follows:

1. Employment. The Company hereby agrees to employ Executive, and Executive hereby accepts such employment and agrees to perform Executive’s duties and responsibilities, in accordance with the terms, conditions and provisions hereinafter set forth.

1.1 Employment Term. This Agreement shall be effective as of the date set forth above, and shall continue until December 31, 2008, unless the Agreement is terminated sooner in accordance with Section 2 below. In addition, the term of the Agreement shall automatically renew for periods of one year unless either party gives written notice to the other party, at least 60 days prior to the end of the initial term or at least 60 days prior to the end of any one-year renewal period, that the Agreement shall not be further extended. The period commencing on the effective date and ending on the date on which the term of Executive’s employment under the Agreement shall terminate is hereinafter referred to as the “Employment Term.” The failure of the Company to renew this Agreement shall not be considered a termination of Executive’s employment under this Agreement and shall not give Executive grounds to terminate employment for Good Reason (as defined in Section 3) under this Agreement.

1.2 Duties and Responsibilities. During the Employment Term, Executive shall serve as the Executive Vice President and Chief Administrative Officer of the Company, or in such other executive positions as the Board of Directors of the Company (the “Board”) determines. Executive shall perform all duties and accept all responsibilities incident to such position or as may be reasonably assigned to him by the Chief Executive Officer of the Company or the Board.

1.3 Extent of Service. During the Employment Term, Executive agrees to use Executive’s full and best efforts to carry out Executive’s duties and responsibilities under Section 1.2 hereof with the highest degree of loyalty and the highest standards of care and, consistent with the other provisions of this Agreement, Executive agrees to devote substantially all of Executive’s business time, attention and energy thereto. The foregoing shall not be construed as preventing Executive from making investments in other businesses or enterprises, provided that Executive agrees not to become engaged in any other business activity which, in the reasonable judgment of the Board, is likely to interfere with Executive’s ability to discharge Executive’s duties and responsibilities to the Company. The Executive will not serve on the board of directors of an entity unrelated to the Company (other than a non-profit charitable organization) without the consent of the Board.

1.4 Base Salary. During the Employment Term, for all the services rendered by Executive hereunder, the Company shall pay Executive a base salary (“Base Salary”), at the annual rate in effect on the date of this Agreement, payable in installments at such times as the Company customarily pays its other employees. Executive’s Base Salary shall be reviewed periodically for appropriate increases by the Board (or a committee of the Board) pursuant to the Board’s normal performance review policies for senior level executives.

1.5 Retirement, Welfare and Other Benefit Plans and Programs. During the Employment Term, Executive shall be entitled to participate in all employee retirement and welfare benefit plans and programs made available to the Company’s senior level executives as a group, as such retirement and welfare plans may be in effect from time to time and subject to the eligibility requirements of such plans. During the Employment Term, Executive shall be provided with executive fringe benefits and perquisites under the same terms as those made available to the Company’s senior level executives as a group, as such programs may be in effect from time to time. During the Employment Term, Executive shall be entitled to vacation and sick leave in accordance with the Company’s vacation, holiday and other pay for time not worked policies. Nothing in this Agreement or otherwise shall prevent the Company from amending or terminating any retirement, welfare or other employee benefit plans, programs, policies or perquisites from time to time as the Company deems appropriate.

1.6 Reimbursement of Expenses. During the Employment Term, Executive shall be provided with reimbursement of reasonable expenses related to Executive’s employment by the Company on a basis no less favorable than that which may be authorized from time to time for senior level executives as a group.

1.7 Incentive Compensation. During the Employment Term, Executive shall be entitled to participate in all short-term and long-term incentive programs established by the Company for its senior level executives generally, at levels commensurate with the benefits provided to other senior executives and Executive’s position with the Company. Executive’s incentive compensation shall be subject to the terms of the applicable plans and shall be determined based on Executive’s individual performance and Company performance as determined by the Board (or a committee of the Board).

2. Termination. Executive’s employment shall terminate upon the occurrence of any of the following events:

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2.1 Termination Without Cause. The Company (by action of the Board) may remove Executive at any time without Cause (as defined in Section 3) from the position in which Executive is employed hereunder (in which case the Employment Term shall be deemed to have ended) upon not less than 60 days’ prior written notice pursuant to Section 15 to Executive; provided, however, that, in the event that such notice is given, Executive shall be under no obligation to render any additional services to the Company and shall be allowed to seek other employment, to the extent such other employment is consistent with Executive’s obligations under Section 6.

2.2 Resignation for Good Reason After a Substantial Reorganization. If the Board determines for purposes of this Agreement that a substantial reorganization of the Company has occurred, the Board may establish a period of time during which Executive may elect to resign if an event constituting Good Reason (as defined in Section 3) occurs. In that event, Executive may initiate termination of employment by resigning under this Section 2.2 for Good Reason during the period specified by the Board. Executive shall give the Company not less than 60 days prior written notice pursuant to Section 15 of such resignation, which notice shall be provided to the Company within 60 days following the occurrence of the event giving rise to the Good Reason resignation. A substantial reorganization shall not be considered to have occurred unless the Board specifically determines that a substantial reorganization has occurred for purposes of this Agreement and the Board establishes a time period during which Executive may elect to resign if an event constituting Good Reason occurs. Nothing in this Agreement shall obligate the Board to make any such determination.

2.3 Benefits Payable Upon Termination Without Cause or Resignation for Good Reason After a Substantial Reorganization.

(a) Upon any removal or resignation described in Section 2.1 or 2.2 above, Executive shall be entitled to receive only the amount due to Executive under the Company’s then current severance pay plan for employees, if any. No other payments or benefits shall be due under this Agreement to Executive, but Executive shall be entitled to any benefits accrued or earned in accordance with the terms of any applicable benefit plans and programs of the Company.

(b) Notwithstanding the provisions of Section 2.3(a), in the event of a removal or resignation described in Section 2.1 or 2.2 during the Employment Term, if Executive executes and does not revoke a written release and waiver of claims upon such removal or resignation, in form and substance acceptable to the Company (the “Release”), of any and all claims against the Company and all related parties with respect to all matters arising out of Executive’s employment by the Company, or the termination thereof (other than claims based upon any severance entitlements under the terms of this Agreement or entitlements under any plans or programs of the Company under which Executive has accrued a benefit), Executive shall be entitled to receive the severance benefits described below, in lieu of the payment described in Section 2.3(a).

(i) Executive shall receive a lump sum cash payment equal to two times Executive’s annual Base Salary in effect immediately before the Termination Date

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(including salary reduction amounts of Base Salary under the Company’s benefit plans and programs).

(ii) Executive shall receive Executive’s annual short-term incentive bonus (PIP) for the year in which Executive’s Termination Date occurs, at the time that annual bonuses for the year are paid to other executives, based on the Company’s actual performance for the year, but in an amount not less than Executive’s target annual bonus in effect for the year.

(iii) The Company shall pay Executive a lump sum cash payment equal to the cost that Executive would incur if Executive continued medical, dental and vision coverage under section 4980B of the Code (as defined in Section 3)(“COBRA”) or the Company’s retiree medical plan, if applicable, for Executive, and, where applicable, his or her spouse and dependents, for the Severance Period (as defined in Section 3). The cash payment shall include a tax gross up to cover Executive’s income and FICA taxes imposed on the payment under this subsection (iii). Executive may elect COBRA continuation coverage according to the terms of the Company’s applicable benefit plans, for the period permitted under such plans.

(iv) Executive shall receive a lump sum payment equal to two times the amount of Executive’s NVA Target Award Opportunity and/or Business Unit Target Award Opportunity, as applicable, under the Nationwide Property and Casualty Long-Term Performance Plan, as amended, the Third Amended and Restated Nationwide Financial Services, Inc. 1996 Long-Term Equity Compensation Plan, or any successor plan in effect for the year in which Executive’s Termination Date occurs. The amount determined under this subsection (iv) shall be paid at the time that NVA or Business Unit awards for the year are paid to other executives, but not later than March 15 after the end of the year in which the Termination Date occurs. The payment under this subsection (iv) shall be paid in lieu of any NVA or Business Unit award under the applicable plan for the year in which Executive’s Termination Date occurs.

(v) Executive’s outstanding stock options and restricted stock with respect to stock of Nationwide Financial Services, Inc. or any Affiliate of the Company shall become vested and exercisable on the Termination Date to the extent that such options and restricted stock would have become vested and exercisable on the next vesting date had Executive remained an employee of the Company. All other unvested stock options and restricted stock shall be forfeited, except to the extent that the applicable grant agreement requires otherwise. No additional grants shall be made to Executive after Executive’s termination of employment.

(vi) Executive shall receive supplemental benefits under this Agreement equal to:

(A) the benefits that Executive would have received under the Nationwide Retirement Plan, Nationwide Supplemental Retirement Plan, Nationwide Excess Benefit Plan, Nationwide Savings Plan, Nationwide Supplemental Defined Contribution Plan and Nationwide Individual Deferred Compensation Plan, as in effect at Executive’s Termination Date, had Executive’s benefits under those Plans been fully vested as of Executive’s Termination Date, reduced by

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(B) the benefits that Executive actually receives under the Nationwide Retirement Plan, Nationwide Supplemental Retirement Plan, Nationwide Excess Benefit Plan, Nationwide Savings Plan, Nationwide Supplemental Defined Contribution Plan and Nationwide Individual Deferred Compensation Plan.

The benefits under this subsection (vi) shall be paid as described in Section 8. The benefits payable under this subsection (vi) and subsection (vii) below shall not result in any duplication of benefits.

(vii) If Executive’s Termination Date occurs within three years of the date on which Executive would have been first eligible to retire under the Nationwide Retirement Plan, Executive shall receive a supplemental benefit under this Agreement equal to:

(A) the benefits that Executive would have received under the Nationwide Retirement Plan, Nationwide Supplemental Retirement Plan and Nationwide Excess Benefit Plan as in effect at Executive’s Termination Date, had Executive earned service and age credit for the period ending on the first to occur of (i) three years after the Termination Date or (ii) the earliest date on which Executive would have been eligible to retire under the Nationwide Retirement Plan, and had Executive been fully vested in Executive’s benefit under such Plans, reduced by

(B) the benefits that Executive actually receives under the Nationwide Retirement Plan, Nationwide Supplemental Retirement Plan and Nationwide Excess Benefit Plan, and the benefits payable under subsection (vi) above with respect to the Nationwide Retirement Plan, Nationwide Supplemental Retirement Plan and Nationwide Excess Benefit Plan.

The benefits under this subsection (vii) shall be paid as described in Section 8. The benefits payable under this subsection (vii) and subsection (vi) above shall not result in any duplication of benefits.

(viii) The Company shall pay Executive a lump sum cash payment equal to the matching contributions that the Company would have made for Executive under the Nationwide Savings Plan and the Nationwide Supplemental Defined Contribution Plan, as in effect at Executive’s Termination Date, as if Executive continued in employment for the Severance Period, receiving compensation at a rate equal to Executive’s covered compensation amount for the calendar year prior to the year in which the Termination Date occurs and as if Executive continued the same rate of contributions to the applicable plans as in effect immediately before Executive’s Termination Date.

(ix) The Company shall cause Executive to receive service and age credit for purposes of eligibility under the Company’s retiree medical plan (but not for Company contributions towards the cost of retiree medical) until the end of the Severance Period, as if Executive had continued in employment during the Severance Period.

(x) During the Severance Period, the Company shall pay or reimburse Executive for the cost of reasonable outplacement assistance services (not to exceed a total of $11,000) provided by any outplacement agency selected by Executive.

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(xi) The Company shall pay Executive a lump sum cash payment equal to the annual value of the financial counseling services provided by the Company to Executive immediately before Executive’s Termination Date.

(xii) Executive shall have the right to retain the computer, printer, fax machine and office furniture that was provided by the Company for use by Executive at Executive’s residence at the Termination Date.

(xiii) Executive shall receive any other amounts earned, accrued or owing but not yet paid under Section 1 above and any other benefits in accordance with the terms of any applicable plans and programs of the Company.

(xiv) Payment of the lump sum benefits described above (other than as described in subsections (ii) and (iv) above) shall be made within 30 days after Executive’s Termination Date (as defined in Section 3), subject to Executive’s execution of an effective Release.

2.4 Retirement or Other Voluntary Termination. Executive may voluntarily terminate employment for any reason, including voluntary retirement, upon 60 days’ prior written notice pursuant to Section 15. In such event, after the effective date of such termination, except as provided in Section 2.2 (with respect to a resignation for Good Reason), no further payments shall be due under this Agreement. However, Executive shall be entitled to any benefits due in accordance with the terms of any applicable benefit plans and programs of the Company.

2.5 Disability. The Company (by action of the Board) may terminate Executive’s employment if Executive has been unable to perform the essential functions of Executive’s position with the Company, with or without reasonable accommodation, by reason of physical or mental incapacity for a period of six consecutive months (“Disability”); provided, however, that the Company shall continue to pay Executive’s Base Salary until the Company acts to terminate Executive’s employment. Executive agrees, in the event of a dispute under this Section 2.5 relating to Executive’s Disability, to submit to a physical examination by a licensed physician selected by the Board. Executive acknowledges that the provisions of this Section 2.5 supersede the employment termination provisions otherwise applied to disabled employees. If Executive’s employment terminates on account of Disability, no further payments shall be due under this Agreement. However, Executive shall be entitled to (i) any benefits due in accordance with the terms of any applicable benefit plans and programs of the Company and (ii) a pro rated bonus for the year in which Executive’s Disability occurs, which bonus shall be calculated (on a prorated basis) and paid according to Section 2.3(b)(ii) above.

2.6 Death. If Executive dies while employed by the Company, the Company shall pay to Executive’s executor, legal representative, administrator or designated beneficiary, as applicable, (i) any amounts earned, accrued or owing but not yet paid under Section 1 above and any benefits accrued or earned under the Company’s benefit plans and programs according to the terms of such plans and (ii) a pro rated bonus for the year in which Executive’s death occurs, which bonus shall be calculated (on a prorated basis) and paid according to Section 2.3(b)(ii) above. Otherwise, the Company shall have no further liability or obligation under this Agreement to Executive’s executors, legal representatives, administrators, heirs or assigns.

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2.7 Cause. The Company (by action of the Board) may terminate Executive’s employment at any time for Cause upon written notice to Executive, in which event all payments under this Agreement shall cease, except for Base Salary to the extent already accrued. Executive shall be entitled to any benefits accrued or earned before Executive’s termination in accordance with the terms of any applicable benefit plans and programs of the Company; provided that Executive shall not be entitled to receive any unpaid short-term or long-term cash incentive payments or unvested options.

3. Definitions. For purposes of this Agreement, the following terms shall have the meanings specified in this Section 3:

(a) “Affiliate” shall mean any subsidiary of the Company, Nationwide Financial Services, Inc. and any of its subsidiaries, and any other entity that, directly or indirectly, through one or more intermediaries, controls, is controlled by or is under common control with the Company, as determined by the Board.

(b) “Cause” shall mean any of the following grounds for termination of Executive’s employment:

(i) Executive shall have been convicted of a felony;

(ii) Executive neglects, refuses or fails to perform his or her material duties to the Company (other than a failure resulting from Executive’s incapacity due to physical or mental illness), which failure has continued for a period of at least 30 days after a written notice of demand for substantial performance, signed by a duly authorized officer of the Company, has been delivered to Executive specifying the manner in which Executive has failed substantially to perform;

(iii) Executive engages in misconduct in the performance of Executive’s duties;

(iv) Executive engages in public conduct that is harmful to the reputation of the Company;

(v) Executive breaches any written non-competition, non-disclosure or non-solicitation agreement in effect with the Company, including without limitation the provisions of Section 5 or 6 of this Agreement; or

(vi) Executive breaches the Company’s written code of business conduct and ethics.

(c) “Code” shall mean the Internal Revenue Code of 1986, as amended.

(d) “Employer” shall mean the Company, its Affiliates and their successors.

(e) “Good Reason” shall mean the occurrence of any of the following events, without Executive’s consent, except in connection with the termination of Executive’s

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employment for Disability, Cause, as a result of death or by Executive other than for Good Reason and except as provided in the last sentence of this subsection (e):

(i) A material diminution in Executive’s authority, duties or responsibilities, as reasonably determined by the Board;

(ii) A material change in the geographic location at which Executive must perform services under this Agreement (which, for purposes of this Agreement, means relocation of the offices of the Company at which Executive is principally employed to a location more than 50 miles from the location of such offices immediately prior to the relocation);

(iii) A material diminution in Executive’s Base Salary; provided, however, that a change in Base Salary for all senior executives of the Company, in which Executive is treated similarly as all other executives of a comparable responsibility level, shall not constitute Good Reason under this Agreement; or

(iv) Any action or inaction that constitutes a material breach by the Company of this Agreement, including the failure of the Company to obtain from its successors the express assumption and agreement required under Section 16 hereof.

Notwithstanding the foregoing, Executive shall not have Good Reason for termination if, within 60 days after the date on which Executive gives notice of his or her termination, as provided in Section 2.2 the Company corrects the action or failure to act that constitutes the grounds for termination for Good Reason as set forth in Executive’s notice of termination. If the Company does not correct the action or failure to act, Executive must terminate his or her employment for Good Reason within 30 days after the end of the cure period, in order for the termination to be considered a Good Reason termination.

(f) “Severance Period” shall mean the period beginning on Executive’s Termination Date and ending two years after the Termination Date.

(g) “Termination Date” shall mean the effective date of the termination of Executive’s employment relationship with the Company pursuant to this Agreement.

4. Notice of Termination. Any termination of Executive’s employment shall be communicated by a written notice of termination to the other party hereto given in accordance with Section 15. The notice of termination shall (i) indicate the specific termination provision in this Agreement relied upon, (ii) briefly summarize the facts and circumstances deemed to provide a basis for a termination of employment and the applicable provision hereof, and (iii) specify the Termination Date in accordance with the requirements of this Agreement.

5. Confidential Information. Executive recognizes and acknowledges that, by reason of Executive’s employment by and service to the Employer (as defined in Section 3) during and, if applicable, after the Employment Term, Executive will continue to have access to certain confidential and proprietary information relating to the business of the Employer, which may include, but is not limited to, trade secrets, trade “know-how”, customer information, supplier information, cost and pricing information, marketing and sales techniques, strategies and

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programs, computer programs and software and financial information (collectively referred to as “Confidential Information”). Executive acknowledges that such Confidential Information is a valuable and unique asset of the Employer and Executive covenants that Executive will not, unless expressly authorized in writing by the Board, at any time during the course of Executive’s employment, use any Confidential Information or divulge or disclose any Confidential Information to any person, firm or corporation except in connection with the performance of Executive’s duties for the Employer and in a manner consistent with the Employer’s policies regarding Confidential Information. Executive also covenants that at any time after the termination of such employment, directly or indirectly, Executive will not use any Confidential Information or divulge or disclose any Confidential Information to any person, firm or corporation, unless such information is in the public domain through no fault of Executive or except when required to do so by law or legal process, in which case Executive will inform the Employer in writing promptly of such required disclosure, but in any event at least two business days prior to disclosure. All written Confidential Information (including, without limitation, in any computer or other electronic format) which comes into Executive’s possession during the course of Executive’s employment shall remain the property of the Employer. Except as required in the performance of Executive’s duties for the Employer, or unless expressly authorized in writing by the Board, Executive shall not remove any written Confidential Information from the Employer’s premises, except in connection with the performance of Executive’s duties for the Employer and in a manner consistent with the Employer’s policies regarding Confidential Information. Upon termination of Executive’s employment, Executive agrees immediately to return to the Employer all written Confidential Information in Executive’s possession.

6. Non-Competition; Non-Solicitation.

(a) During Executive’s employment by the Employer and for a period of one year after Executive’s termination of employment for any reason, Executive will not, except with the prior written consent of the Board, directly or indirectly, own, manage, operate, join, control, finance or participate in the ownership, management, operation, control or financing of, or be connected as an officer, director, employee, partner, principal, agent, representative, consultant or otherwise with, or use or permit Executive’s name to be used in connection with, any business or enterprise which is engaged in any financial services, insurance or other business that is competitive with any business or enterprise in which the Employer is engaged, anywhere in the world, during Executive’s employment or (with respect to the application of this covenant after Executive’s termination of employment) during the two year period preceding Executive’s termination of employment. The parties acknowledge that the Employer engages in its business on a worldwide basis, and Executive acknowledges that his or her responsibilities extend to the Employer’s worldwide operations.

(b) The foregoing restrictions shall not be construed to prohibit the ownership by Executive of less than five percent of any class of securities of any corporation which is engaged in any of the foregoing businesses having a class of securities registered pursuant to the Securities Exchange Act of 1934, as amended, provided that such ownership represents a passive investment and that neither Executive nor any group of persons including Executive in any way, either directly or indirectly, manages or exercises control of any such corporation, guarantees

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any of its financial obligations, otherwise takes any part in its business, other than exercising Executive’s rights as a shareholder, or seeks to do any of the foregoing.

(c) Executive further covenants and agrees that during Executive’s employment by the Employer and for a period of one year thereafter, Executive will not, except with the prior written consent of the Board, directly or indirectly, solicit or hire, or encourage the solicitation or hiring of, any person who was a managerial or higher level employee of the Employer at any time during the term of Executive’s employment by the Employer by any employer other than the Employer for any position as an employee, independent contractor, consultant or otherwise. The foregoing covenant of Executive shall not apply to any person after 12 months have elapsed after the date on which such person’s employment by the Employer has terminated.

(d) The covenants described in this Section 6 shall continue to apply during the period specified herein after Executive’s termination of employment for any reason, without regard to whether Executive executes a Release or receives any severance benefits as a result of such termination. If Executive breaches any of the covenants described in this Section 6, the applicable period during which the covenant applies shall be tolled during the period of the breach. Without limiting the foregoing, the severance benefits provided under this Agreement are specifically designated as additional consideration for the covenants described in Section 5 and this Section 6.

7. Equitable Relief.

(a) Executive acknowledges and agrees that the restrictions contained in Sections 5 and 6 are reasonable and necessary to protect and preserve the legitimate interests, properties, goodwill and business of the Employer, that the Employer would not have entered into this Agreement in the absence of such restrictions and that irreparable injury will be suffered by the Employer should Executive breach any of the provisions of those Sections. Executive represents and acknowledges that (i) Executive has been advised by the Employer to consult Executive’s own legal counsel in respect of this Agreement, and (ii) Executive has had full opportunity, prior to execution of this Agreement, to review thoroughly this Agreement with Executive’s counsel.

(b) Executive further acknowledges and agrees that a breach of any of the restrictions in Sections 5 and 6 cannot be adequately compensated by monetary damages. Executive agrees that the Employer shall be entitled to preliminary and permanent injunctive relief, without the necessity of proving actual damages, as well as an equitable accounting of all earnings, profits and other benefits arising from any violation of Section 5 or 6 hereof, which rights shall be cumulative and in addition to any other rights or remedies to which the Employer may be entitled. In the event that any of the provisions of Section 5 or 6 hereof should ever be adjudicated to exceed the time, geographic, service, or other limitations permitted by applicable law in any jurisdiction, it is the intention of the parties that the provision shall be amended to the extent of the maximum time, geographic, service, or other limitations permitted by applicable law, that such amendment shall apply only within the jurisdiction of the court that made such adjudication and that the provision otherwise be enforced to the maximum extent permitted by law.

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(c) Notwithstanding anything in this Agreement to the contrary, if Executive breaches any of Executive’s obligations under Section 5 or 6 hereof, the Company shall thereafter be obligated only for the compensation and other benefits provided in any Company benefit plans, policies or practices then applicable to Executive in accordance with the terms thereof, and all payments under Section 2 of this Agreement shall cease.

(d) Executive irrevocably and unconditionally (i) agrees that any suit, action or other legal proceeding arising out of Section 5 or 6 hereof, including without limitation, any action commenced by the Employer for preliminary and permanent injunctive relief and other equitable relief, may be brought in a United States District Court for Ohio, or if such court does not have jurisdiction or will not accept jurisdiction, in any court of general jurisdiction in Columbus, Ohio, (ii) consents to the non-exclusive jurisdiction of any such court in any such suit, action or proceeding, and (iii) waives any objection which Executive may have to the laying of venue of any such suit, action or proceeding in any such court. Executive also irrevocably and unconditionally consents to the service of any process, pleadings, notices or other papers in a manner permitted by the notice provisions of Section 15 hereof.

(e) Executive agrees that for a period of three years following the termination of Executive’s employment for any reason, Executive will provide, and at all times after the date hereof the Employer may similarly provide, a copy of Sections 5 and 6 hereof to any business or enterprise (i) which Executive may directly or indirectly own, manage, operate, finance, join, control or in which Executive may participate in the ownership, management, operation, financing, or control, or (ii) with which Executive may be connected as an officer, director, employee, partner, principal, agent, representative, consultant or otherwise, or in connection with which Executive may use or permit to be used Executive’s name; provided, however, that this provision shall not apply in respect of Section 6 after expiration of the time periods set forth therein.

8. Payment of Supplemental Benefits. The supplemental benefits under Sections 2.3(b)(vi) and (vii) (the “Enhanced Benefits”) shall be paid as follows:

(a) The Enhanced Benefits that are calculated with respect to the Nationwide Retirement Plan and Nationwide Supplemental Retirement Plan shall be paid in the same form and the same time as Executive’s benefits under the Nationwide Supplemental Retirement Plan are paid (or under the default provisions of the Nationwide Supplemental Retirement Plan if Executive is not otherwise entitled to receive a benefit under that Plan).

(b) The Enhanced Benefits that are calculated with respect to the Nationwide Excess Benefit Plan shall be paid in the same form and at the same time as Executive’s benefits under the Nationwide Excess Benefit Plan are paid (or under the default provisions of the Nationwide Excess Benefit Plan if Executive is not otherwise entitled to receive a benefit under that Plan).

(c) The Enhanced Benefits that are calculated with respect to the Nationwide Savings Plan and Nationwide Supplemental Defined Contribution Plan shall be paid in the same form and at the same time as Executive’s benefits under the Nationwide Supplemental Defined Contribution Plan are paid.

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(d) The Enhanced Benefits that are calculated with respect to the Nationwide Individual Deferred Compensation Retirement Plan shall be paid in the same form and the same time as Executive’s benefits under the Nationwide Individual Deferred Compensation Plan are paid.

9. Indemnification. The Company shall indemnify Executive with respect to Executive’s actions in the performance of Executive’s duties as set forth in Section 1.2 to the fullest extent permitted by the Company’s Amended and Restated Code of Bylaws as in effect from time to time.

10. Non-Exclusivity of Rights; Resignation from Boards.

(a) Nothing in this Agreement shall prevent or limit Executive’s continuing or future participation in or rights under any benefit, bonus, incentive or other plan or program provided by the Company and for which Executive may qualify; provided, however, that if Executive becomes entitled to and receives the payments described in Section 2.3(b) of this Agreement, Executive hereby waives Executive’s right to receive payments under any severance plan or similar program applicable to all employees of the Company.

(b) If Executive’s employment with the Company terminates for any reason, Executive shall immediately resign from all boards of directors of the Company, any Affiliates and any other entities for which Executive serves as a representative of the Company.

11. Survivorship. The respective rights and obligations of the parties under this Agreement (including without limitation Sections 5, 6 and 7) shall survive any termination of Executive’s employment to the extent necessary to the intended preservation of such rights and obligations.

12. Mitigation. Executive shall not be required to mitigate the amount of any payment or benefit provided for in this Agreement by seeking other employment or otherwise, and there shall be no offset against amounts due Executive under this Agreement on account of any remuneration attributable to any subsequent employment that Executive may obtain.

13. Benefit Plans; Outstanding Awards. All references in this Agreement to specific retirement or other benefit plans of the Company shall be deemed to include any successor retirement or other benefit plans. The terms of Executive’s outstanding stock options, restricted stock and long-term incentive awards are hereby amended to provide that, without adversely affecting any rights that Executive has under such award agreements, the award agreements are amended to provide for the accelerated vesting and payments upon termination of employment as provided in Section 2.3(b) of this Agreement, to the extent consistent with the applicable plans. In all respects not amended, the provisions of such outstanding awards shall remain in effect according to their terms.

14. Arbitration; Expenses. In the event of any dispute under the provisions of this Agreement, other than a dispute in which the primary relief sought is an equitable remedy such as an injunction, the parties shall be required to have the dispute, controversy or claim settled by arbitration in Columbus, Ohio in accordance with the National Rules for the Resolution of Employment Disputes then in effect of the American Arbitration Association, before a panel of

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three arbitrators, one of whom shall be selected by the Company, one of whom shall be selected by Executive, and the third of whom shall be selected by the arbitrators selected by the Company and Executive. Any award entered by the arbitrators shall be final, binding and nonappealable and judgment may be entered thereon by either party in accordance with applicable law in any court of competent jurisdiction. This arbitration provision shall be specifically enforceable. The arbitrators shall have no authority to modify any provision of this Agreement or to award a remedy for a dispute involving this Agreement other than a benefit specifically provided under or by virtue of the Agreement. In the event of a dispute, each party shall be responsible for its own expenses (including attorneys’ fees) relating to the conduct of the arbitration, and the parties shall share equally the fees of the American Arbitration Association. Each party shall give the other party written notice as described in Section 16 of its intent to submit a claim under this Agreement to arbitration and a description of the basis of such claim, within six months after the event giving rise to the claim occurs.

15. Notices. All notices and other communications required or permitted under this Agreement or necessary or convenient in connection herewith shall be in writing and shall be deemed to have been given when hand delivered or mailed by registered or certified mail, as follows (provided that notice of change of address shall be deemed given only when received):

If to the Company, to:

Nationwide Mutual Insurance Company

One Nationwide Plaza, 1-35-03

Columbus, OH 43215

Attention:  Executive Vice President and Chief Legal and Governance

                  Officer

With a required copy to:

Morgan, Lewis & Bockius LLP

1701 Market Street

Philadelphia, PA 19103-2921

Attention: Mims Maynard Zabriskie

If to Executive, to:

Terri L. Hill

1475 W. 3rd Avenue

Unit 301

Columbus, OH 43212

or to such other names or addresses as the Company or Executive, as the case may be, shall designate by notice to each other person entitled to receive notices in the manner specified in this Section.

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16. Contents of Agreement; Amendment and Assignment.

(a) This Agreement sets forth the entire understanding between the parties hereto with respect to the subject matter hereof and cannot be changed, modified, extended or terminated except upon written amendment approved by the Board and executed on its behalf by a duly authorized officer of the Company and by Executive. This Agreement supercedes and replaces the Employment Agreement in its entirety.

(b) All of the terms and provisions of this Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective heirs, executors, administrators, legal representatives, successors and assigns of the parties hereto, except that the duties and responsibilities of Executive under this Agreement are of a personal nature and shall not be assignable or delegatable in whole or in part by Executive. The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation, reorganization or otherwise) to all or substantially all of the business or assets of the Company, within 15 days of such succession, expressly to assume and agree to perform this Agreement in the same manner and to the same extent as the Company would be required to perform if no such succession had taken place.

17. Severability. If any provision of this Agreement or application thereof to anyone or under any circumstances is adjudicated to be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect any other provision or application of this Agreement which can be given effect without the invalid or unenforceable provision or application and shall not invalidate or render unenforceable such provision or application in any other jurisdiction. If any provision is held void, invalid or unenforceable with respect to particular circumstances, it shall nevertheless remain in full force and effect in all other circumstances.

18. Remedies Cumulative; No Waiver. No remedy conferred upon a party by this Agreement is intended to be exclusive of any other remedy, and each and every such remedy shall be cumulative and shall be in addition to any other remedy given under this Agreement or now or hereafter existing at law or in equity. No delay or omission by a party in exercising any right, remedy or power under this Agreement or existing at law or in equity shall be construed as a waiver thereof, and any such right, remedy or power may be exercised by such party from time to time and as often as may be deemed expedient or necessary by such party in its sole discretion.

19. Beneficiaries/References. Executive shall be entitled, to the extent permitted under any applicable law, to select and change a beneficiary or beneficiaries to receive any compensation or benefit payable under this Agreement following Executive’s death by giving the Company written notice thereof. In the event of Executive’s death or a judicial determination of Executive’s incompetence, reference in this Agreement to Executive shall be deemed, where appropriate, to refer to Executive’s beneficiary, estate or other legal representative.

20. Miscellaneous. All section headings used in this Agreement are for convenience only. This Agreement may be executed in counterparts, each of which is an original. It shall not

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be necessary in making proof of this Agreement or any counterpart hereof to produce or account for any of the other counterparts.

21. Withholding Taxes. All payments under this Agreement shall be made subject to applicable tax withholding, and the Company shall withhold from any payments under this Agreement all federal, state and local taxes as the Company is required to withhold pursuant to any law or governmental rule or regulation. Except as specifically provided otherwise in this Agreement, Executive shall be responsible for all taxes applicable to amounts payable under this Agreement and payments under this Agreement shall not be grossed up for taxes.

22. Section 409A of the Code. This Agreement is intended to comply with section 409A of the Code and its corresponding regulations, or an exemption, to the extent applicable. Severance benefits under the Agreement are intended to be exempt from section 409A under the “short term deferral” exemption. Notwithstanding anything in this Agreement to the contrary, if required by section 409A, if Executive is considered a “specified executive” for purposes of section 409A and if payment of any amounts under this Agreement is required to be delayed for a period of six months after separation from service pursuant to section 409A, payment of such amounts shall be delayed as required by section 409A, and the accumulated amounts shall be paid in a lump sum payment within five days after the end of the six-month period. If Executive dies during the postponement period prior to the payment of benefits, the amounts withheld on account of section 409A shall be paid to the personal representative of Executive’s estate within sixty days after the date of Executive’s death. Payments may only be made under this Agreement upon an event and in a manner permitted by section 409A, to the extent applicable. As used in the Agreement, the term “termination of employment” shall mean Executive’s separation from service with the Company within the meaning of section 409A. In no event may Executive, directly or indirectly, designate the calendar year of a payment. For purposes of section 409A, the right to a series of payments under the Agreement shall be treated as a right to a series of separate payments. All reimbursements and in-kind benefits provided under the Agreement shall be made or provided in accordance with the requirements of section 409A.

23. Governing Law. This Agreement shall be governed by and interpreted under the laws of the State of Ohio without giving effect to any conflict of laws provisions.

IN WITNESS WHEREOF, the undersigned, intending to be legally bound, have executed this Agreement as of the date first above written.

NATIONWIDE MUTUAL INSURANCE COMPANY
By:	/s/ W.G. Jurgensen
Name:	W.G. Jurgensen
Title:	Chief Executive Officer
/s/ Terri L. Hill
Executive

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EX-10.51

Exhibit 10.51

EXECUTIVE SEVERANCE AGREEMENT

This EXECUTIVE SEVERANCE AGREEMENT (the “Agreement”) is entered into as of January 1, 2008, by and between Nationwide Mutual Insurance Company (the “Company”) and James Lyski (“Executive”).

WHEREAS, the parties desire to enter into an agreement to reflect Executive’s executive capacities in the Company’s business and to provide for Executive’s employment by the Company, upon the terms and conditions set forth herein.

WHEREAS, Executive has agreed to certain confidentiality, non-competition and non-solicitation covenants contained hereunder, in consideration of the additional benefits provided to Executive under this Agreement.

WHEREAS, certain capitalized terms shall have the meanings given those terms in Section 3 of this Agreement.

WHEREAS, Executive and the Company are parties to an Employment Agreement dated October 16, 2006 (the “Employment Agreement”), and the parties have agreed that this Agreement shall supercede and replace the Employment Agreement.

NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby agree as follows:

1. Employment. The Company hereby agrees to employ Executive, and Executive hereby accepts such employment and agrees to perform Executive’s duties and responsibilities, in accordance with the terms, conditions and provisions hereinafter set forth.

1.1 Employment Term. This Agreement shall be effective as of the date set forth above, and shall continue until December 31, 2008, unless the Agreement is terminated sooner in accordance with Section 2 below. In addition, the term of the Agreement shall automatically renew for periods of one year unless either party gives written notice to the other party, at least 60 days prior to the end of the initial term or at least 60 days prior to the end of any one-year renewal period, that the Agreement shall not be further extended. The period commencing on the effective date and ending on the date on which the term of Executive’s employment under the Agreement shall terminate is hereinafter referred to as the “Employment Term.” The failure of the Company to renew this Agreement shall not be considered a termination of Executive’s employment under this Agreement and shall not give Executive grounds to terminate employment for Good Reason (as defined in Section 3) under this Agreement.

1.2 Duties and Responsibilities. During the Employment Term, Executive shall serve as the Executive Vice President and Chief Marketing Officer of the Company, or in such other executive positions as the Board of Directors of the Company (the “Board”) determines. Executive shall perform all duties and accept all responsibilities incident to such position or as may be reasonably assigned to him by the Chief Executive Officer of the Company or the Board.

1.3 Extent of Service. During the Employment Term, Executive agrees to use Executive’s full and best efforts to carry out Executive’s duties and responsibilities under Section 1.2 hereof with the highest degree of loyalty and the highest standards of care and, consistent with the other provisions of this Agreement, Executive agrees to devote substantially all of Executive’s business time, attention and energy thereto. The foregoing shall not be construed as preventing Executive from making investments in other businesses or enterprises, provided that Executive agrees not to become engaged in any other business activity which, in the reasonable judgment of the Board, is likely to interfere with Executive’s ability to discharge Executive’s duties and responsibilities to the Company. The Executive will not serve on the board of directors of an entity unrelated to the Company (other than a non-profit charitable organization) without the consent of the Board.

1.4 Base Salary. During the Employment Term, for all the services rendered by Executive hereunder, the Company shall pay Executive a base salary (“Base Salary”), at the annual rate in effect on the date of this Agreement, payable in installments at such times as the Company customarily pays its other employees. Executive’s Base Salary shall be reviewed periodically for appropriate increases by the Board (or a committee of the Board) pursuant to the Board’s normal performance review policies for senior level executives.

1.5 Retirement, Welfare and Other Benefit Plans and Programs. During the Employment Term, Executive shall be entitled to participate in all employee retirement and welfare benefit plans and programs made available to the Company’s senior level executives as a group, as such retirement and welfare plans may be in effect from time to time and subject to the eligibility requirements of such plans. During the Employment Term, Executive shall be provided with executive fringe benefits and perquisites under the same terms as those made available to the Company’s senior level executives as a group, as such programs may be in effect from time to time. During the Employment Term, Executive shall be entitled to vacation and sick leave in accordance with the Company’s vacation, holiday and other pay for time not worked policies. Nothing in this Agreement or otherwise shall prevent the Company from amending or terminating any retirement, welfare or other employee benefit plans, programs, policies or perquisites from time to time as the Company deems appropriate.

1.6 Reimbursement of Expenses. During the Employment Term, Executive shall be provided with reimbursement of reasonable expenses related to Executive’s employment by the Company on a basis no less favorable than that which may be authorized from time to time for senior level executives as a group.

1.7 Incentive Compensation. During the Employment Term, Executive shall be entitled to participate in all short-term and long-term incentive programs established by the Company for its senior level executives generally, at levels commensurate with the benefits provided to other senior executives and Executive’s position with the Company. Executive’s incentive compensation shall be subject to the terms of the applicable plans and shall be determined based on Executive’s individual performance and Company performance as determined by the Board (or a committee of the Board).

2. Termination. Executive’s employment shall terminate upon the occurrence of any of the following events:

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2.1 Termination Without Cause. The Company (by action of the Board) may remove Executive at any time without Cause (as defined in Section 3) from the position in which Executive is employed hereunder (in which case the Employment Term shall be deemed to have ended) upon not less than 60 days’ prior written notice pursuant to Section 15 to Executive; provided, however, that, in the event that such notice is given, Executive shall be under no obligation to render any additional services to the Company and shall be allowed to seek other employment, to the extent such other employment is consistent with Executive’s obligations under Section 6.

2.2 Resignation for Good Reason After a Substantial Reorganization. If the Board determines for purposes of this Agreement that a substantial reorganization of the Company has occurred, the Board may establish a period of time during which Executive may elect to resign if an event constituting Good Reason (as defined in Section 3) occurs. In that event, Executive may initiate termination of employment by resigning under this Section 2.2 for Good Reason during the period specified by the Board. Executive shall give the Company not less than 60 days prior written notice pursuant to Section 15 of such resignation, which notice shall be provided to the Company within 60 days following the occurrence of the event giving rise to the Good Reason resignation. A substantial reorganization shall not be considered to have occurred unless the Board specifically determines that a substantial reorganization has occurred for purposes of this Agreement and the Board establishes a time period during which Executive may elect to resign if an event constituting Good Reason occurs. Nothing in this Agreement shall obligate the Board to make any such determination.

2.3 Benefits Payable Upon Termination Without Cause or Resignation for Good Reason After a Substantial Reorganization.

(a) Upon any removal or resignation described in Section 2.1 or 2.2 above, Executive shall be entitled to receive only the amount due to Executive under the Company’s then current severance pay plan for employees, if any. No other payments or benefits shall be due under this Agreement to Executive, but Executive shall be entitled to any benefits accrued or earned in accordance with the terms of any applicable benefit plans and programs of the Company.

(b) Notwithstanding the provisions of Section 2.3(a), in the event of a removal or resignation described in Section 2.1 or 2.2 during the Employment Term, if Executive executes and does not revoke a written release and waiver of claims upon such removal or resignation, in form and substance acceptable to the Company (the “Release”), of any and all claims against the Company and all related parties with respect to all matters arising out of Executive’s employment by the Company, or the termination thereof (other than claims based upon any severance entitlements under the terms of this Agreement or entitlements under any plans or programs of the Company under which Executive has accrued a benefit), Executive shall be entitled to receive the severance benefits described below, in lieu of the payment described in Section 2.3(a).

(i) Executive shall receive a lump sum cash payment equal to two times Executive’s annual Base Salary in effect immediately before the Termination Date

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(including salary reduction amounts of Base Salary under the Company’s benefit plans and programs).

(ii) Executive shall receive Executive’s annual short-term incentive bonus (PIP) for the year in which Executive’s Termination Date occurs, at the time that annual bonuses for the year are paid to other executives, based on the Company’s actual performance for the year, but in an amount not less than Executive’s target annual bonus in effect for the year.

(iii) The Company shall pay Executive a lump sum cash payment equal to the cost that Executive would incur if Executive continued medical, dental and vision coverage under section 4980B of the Code (as defined in Section 3)(“COBRA”) or the Company’s retiree medical plan, if applicable, for Executive, and, where applicable, his or her spouse and dependents, for the Severance Period (as defined in Section 3). The cash payment shall include a tax gross up to cover Executive’s income and FICA taxes imposed on the payment under this subsection (iii). Executive may elect COBRA continuation coverage according to the terms of the Company’s applicable benefit plans, for the period permitted under such plans.

(iv) Executive shall receive a lump sum payment equal to two times the amount of Executive’s NVA Target Award Opportunity and/or Business Unit Target Award Opportunity, as applicable, under the Nationwide Property and Casualty Long-Term Performance Plan, as amended, the Third Amended and Restated Nationwide Financial Services, Inc. 1996 Long-Term Equity Compensation Plan, or any successor plan in effect for the year in which Executive’s Termination Date occurs. The amount determined under this subsection (iv) shall be paid at the time that NVA or Business Unit awards for the year are paid to other executives, but not later than March 15 after the end of the year in which the Termination Date occurs. The payment under this subsection (iv) shall be paid in lieu of any NVA or Business Unit award under the applicable plan for the year in which Executive’s Termination Date occurs.

(v) Executive’s outstanding stock options and restricted stock with respect to stock of Nationwide Financial Services, Inc. or any Affiliate of the Company shall become vested and exercisable on the Termination Date to the extent that such options and restricted stock would have become vested and exercisable on the next vesting date had Executive remained an employee of the Company. All other unvested stock options and restricted stock shall be forfeited, except to the extent that the applicable grant agreement requires otherwise. No additional grants shall be made to Executive after Executive’s termination of employment.

(vi) Executive shall receive supplemental benefits under this Agreement equal to:

(A) the benefits that Executive would have received under the Nationwide Retirement Plan, Nationwide Supplemental Retirement Plan, Nationwide Excess Benefit Plan, Nationwide Savings Plan, Nationwide Supplemental Defined Contribution Plan and Nationwide Individual Deferred Compensation Plan, as in effect at Executive’s Termination Date, had Executive’s benefits under those Plans been fully vested as of Executive’s Termination Date, reduced by

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(B) the benefits that Executive actually receives under the Nationwide Retirement Plan, Nationwide Supplemental Retirement Plan, Nationwide Excess Benefit Plan, Nationwide Savings Plan, Nationwide Supplemental Defined Contribution Plan and Nationwide Individual Deferred Compensation Plan.

The benefits under this subsection (vi) shall be paid as described in Section 8. The benefits payable under this subsection (vi) and subsection (vii) below shall not result in any duplication of benefits.

(vii) If Executive’s Termination Date occurs within three years of the date on which Executive would have been first eligible to retire under the Nationwide Retirement Plan, Executive shall receive a supplemental benefit under this Agreement equal to:

(A) the benefits that Executive would have received under the Nationwide Retirement Plan, Nationwide Supplemental Retirement Plan and Nationwide Excess Benefit Plan as in effect at Executive’s Termination Date, had Executive earned service and age credit for the period ending on the first to occur of (i) three years after the Termination Date or (ii) the earliest date on which Executive would have been eligible to retire under the Nationwide Retirement Plan, and had Executive been fully vested in Executive’s benefit under such Plans, reduced by

(B) the benefits that Executive actually receives under the Nationwide Retirement Plan, Nationwide Supplemental Retirement Plan and Nationwide Excess Benefit Plan, and the benefits payable under subsection (vi) above with respect to the Nationwide Retirement Plan, Nationwide Supplemental Retirement Plan and Nationwide Excess Benefit Plan.

The benefits under this subsection (vii) shall be paid as described in Section 8. The benefits payable under this subsection (vii) and subsection (vi) above shall not result in any duplication of benefits.

(viii) The Company shall pay Executive a lump sum cash payment equal to the matching contributions that the Company would have made for Executive under the Nationwide Savings Plan and the Nationwide Supplemental Defined Contribution Plan, as in effect at Executive’s Termination Date, as if Executive continued in employment for the Severance Period, receiving compensation at a rate equal to Executive’s covered compensation amount for the calendar year prior to the year in which the Termination Date occurs and as if Executive continued the same rate of contributions to the applicable plans as in effect immediately before Executive’s Termination Date.

(ix) The Company shall cause Executive to receive service and age credit for purposes of eligibility under the Company’s retiree medical plan (but not for Company contributions towards the cost of retiree medical) until the end of the Severance Period, as if Executive had continued in employment during the Severance Period.

(x) During the Severance Period, the Company shall pay or reimburse Executive for the cost of reasonable outplacement assistance services (not to exceed a total of $11,000) provided by any outplacement agency selected by Executive.

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(xi) The Company shall pay Executive a lump sum cash payment equal to the annual value of the financial counseling services provided by the Company to Executive immediately before Executive’s Termination Date.

(xii) Executive shall have the right to retain the computer, printer, fax machine and office furniture that was provided by the Company for use by Executive at Executive’s residence at the Termination Date.

(xiii) Executive shall receive any other amounts earned, accrued or owing but not yet paid under Section 1 above and any other benefits in accordance with the terms of any applicable plans and programs of the Company.

(xiv) Payment of the lump sum benefits described above (other than as described in subsections (ii) and (iv) above) shall be made within 30 days after Executive’s Termination Date (as defined in Section 3), subject to Executive’s execution of an effective Release.

2.4 Retirement or Other Voluntary Termination. Executive may voluntarily terminate employment for any reason, including voluntary retirement, upon 60 days’ prior written notice pursuant to Section 15. In such event, after the effective date of such termination, except as provided in Section 2.2 (with respect to a resignation for Good Reason), no further payments shall be due under this Agreement. However, Executive shall be entitled to any benefits due in accordance with the terms of any applicable benefit plans and programs of the Company.

2.5 Disability. The Company (by action of the Board) may terminate Executive’s employment if Executive has been unable to perform the essential functions of Executive’s position with the Company, with or without reasonable accommodation, by reason of physical or mental incapacity for a period of six consecutive months (“Disability”); provided, however, that the Company shall continue to pay Executive’s Base Salary until the Company acts to terminate Executive’s employment. Executive agrees, in the event of a dispute under this Section 2.5 relating to Executive’s Disability, to submit to a physical examination by a licensed physician selected by the Board. Executive acknowledges that the provisions of this Section 2.5 supersede the employment termination provisions otherwise applied to disabled employees. If Executive’s employment terminates on account of Disability, no further payments shall be due under this Agreement. However, Executive shall be entitled to (i) any benefits due in accordance with the terms of any applicable benefit plans and programs of the Company and (ii) a pro rated bonus for the year in which Executive’s Disability occurs, which bonus shall be calculated (on a prorated basis) and paid according to Section 2.3(b)(ii) above.

2.6 Death. If Executive dies while employed by the Company, the Company shall pay to Executive’s executor, legal representative, administrator or designated beneficiary, as applicable, (i) any amounts earned, accrued or owing but not yet paid under Section 1 above and any benefits accrued or earned under the Company’s benefit plans and programs according to the terms of such plans and (ii) a pro rated bonus for the year in which Executive’s death occurs, which bonus shall be calculated (on a prorated basis) and paid according to Section 2.3(b)(ii) above. Otherwise, the Company shall have no further liability or obligation under this Agreement to Executive’s executors, legal representatives, administrators, heirs or assigns.

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2.7 Cause. The Company (by action of the Board) may terminate Executive’s employment at any time for Cause upon written notice to Executive, in which event all payments under this Agreement shall cease, except for Base Salary to the extent already accrued. Executive shall be entitled to any benefits accrued or earned before Executive’s termination in accordance with the terms of any applicable benefit plans and programs of the Company; provided that Executive shall not be entitled to receive any unpaid short-term or long-term cash incentive payments or unvested options.

3. Definitions. For purposes of this Agreement, the following terms shall have the meanings specified in this Section 3:

(a) “Affiliate” shall mean any subsidiary of the Company, Nationwide Financial Services, Inc. and any of its subsidiaries, and any other entity that, directly or indirectly, through one or more intermediaries, controls, is controlled by or is under common control with the Company, as determined by the Board.

(b) “Cause” shall mean any of the following grounds for termination of Executive’s employment:

(i) Executive shall have been convicted of a felony;

(ii) Executive neglects, refuses or fails to perform his or her material duties to the Company (other than a failure resulting from Executive’s incapacity due to physical or mental illness), which failure has continued for a period of at least 30 days after a written notice of demand for substantial performance, signed by a duly authorized officer of the Company, has been delivered to Executive specifying the manner in which Executive has failed substantially to perform;

(iii) Executive engages in misconduct in the performance of Executive’s duties;

(iv) Executive engages in public conduct that is harmful to the reputation of the Company;

(v) Executive breaches any written non-competition, non-disclosure or non-solicitation agreement in effect with the Company, including without limitation the provisions of Section 5 or 6 of this Agreement; or

(vi) Executive breaches the Company’s written code of business conduct and ethics.

(c) “Code” shall mean the Internal Revenue Code of 1986, as amended.

(d) “Employer” shall mean the Company, its Affiliates and their successors.

(e) “Good Reason” shall mean the occurrence of any of the following events, without Executive’s consent, except in connection with the termination of Executive’s

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employment for Disability, Cause, as a result of death or by Executive other than for Good Reason and except as provided in the last sentence of this subsection (e):

(i) A material diminution in Executive’s authority, duties or responsibilities, as reasonably determined by the Board;

(ii) A material change in the geographic location at which Executive must perform services under this Agreement (which, for purposes of this Agreement, means relocation of the offices of the Company at which Executive is principally employed to a location more than 50 miles from the location of such offices immediately prior to the relocation);

(iii) A material diminution in Executive’s Base Salary; provided, however, that a change in Base Salary for all senior executives of the Company, in which Executive is treated similarly as all other executives of a comparable responsibility level, shall not constitute Good Reason under this Agreement; or

(iv) Any action or inaction that constitutes a material breach by the Company of this Agreement, including the failure of the Company to obtain from its successors the express assumption and agreement required under Section 16 hereof.

Notwithstanding the foregoing, Executive shall not have Good Reason for termination if, within 60 days after the date on which Executive gives notice of his or her termination, as provided in Section 2.2 the Company corrects the action or failure to act that constitutes the grounds for termination for Good Reason as set forth in Executive’s notice of termination. If the Company does not correct the action or failure to act, Executive must terminate his or her employment for Good Reason within 30 days after the end of the cure period, in order for the termination to be considered a Good Reason termination.

(f) “Severance Period” shall mean the period beginning on Executive’s Termination Date and ending two years after the Termination Date.

(g) “Termination Date” shall mean the effective date of the termination of Executive’s employment relationship with the Company pursuant to this Agreement.

4. Notice of Termination. Any termination of Executive’s employment shall be communicated by a written notice of termination to the other party hereto given in accordance with Section 15. The notice of termination shall (i) indicate the specific termination provision in this Agreement relied upon, (ii) briefly summarize the facts and circumstances deemed to provide a basis for a termination of employment and the applicable provision hereof, and (iii) specify the Termination Date in accordance with the requirements of this Agreement.

5. Confidential Information. Executive recognizes and acknowledges that, by reason of Executive’s employment by and service to the Employer (as defined in Section 3) during and, if applicable, after the Employment Term, Executive will continue to have access to certain confidential and proprietary information relating to the business of the Employer, which may include, but is not limited to, trade secrets, trade “know-how”, customer information, supplier information, cost and pricing information, marketing and sales techniques, strategies and

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programs, computer programs and software and financial information (collectively referred to as “Confidential Information”). Executive acknowledges that such Confidential Information is a valuable and unique asset of the Employer and Executive covenants that Executive will not, unless expressly authorized in writing by the Board, at any time during the course of Executive’s employment, use any Confidential Information or divulge or disclose any Confidential Information to any person, firm or corporation except in connection with the performance of Executive’s duties for the Employer and in a manner consistent with the Employer’s policies regarding Confidential Information. Executive also covenants that at any time after the termination of such employment, directly or indirectly, Executive will not use any Confidential Information or divulge or disclose any Confidential Information to any person, firm or corporation, unless such information is in the public domain through no fault of Executive or except when required to do so by law or legal process, in which case Executive will inform the Employer in writing promptly of such required disclosure, but in any event at least two business days prior to disclosure. All written Confidential Information (including, without limitation, in any computer or other electronic format) which comes into Executive’s possession during the course of Executive’s employment shall remain the property of the Employer. Except as required in the performance of Executive’s duties for the Employer, or unless expressly authorized in writing by the Board, Executive shall not remove any written Confidential Information from the Employer’s premises, except in connection with the performance of Executive’s duties for the Employer and in a manner consistent with the Employer’s policies regarding Confidential Information. Upon termination of Executive’s employment, Executive agrees immediately to return to the Employer all written Confidential Information in Executive’s possession.

6. Non-Competition; Non-Solicitation.

(a) During Executive’s employment by the Employer and for a period of one year after Executive’s termination of employment for any reason, Executive will not, except with the prior written consent of the Board, directly or indirectly, own, manage, operate, join, control, finance or participate in the ownership, management, operation, control or financing of, or be connected as an officer, director, employee, partner, principal, agent, representative, consultant or otherwise with, or use or permit Executive’s name to be used in connection with, any business or enterprise which is engaged in any financial services, insurance or other business that is competitive with any business or enterprise in which the Employer is engaged, anywhere in the world, during Executive’s employment or (with respect to the application of this covenant after Executive’s termination of employment) during the two year period preceding Executive’s termination of employment. The parties acknowledge that the Employer engages in its business on a worldwide basis, and Executive acknowledges that his or her responsibilities extend to the Employer’s worldwide operations.

(b) The foregoing restrictions shall not be construed to prohibit the ownership by Executive of less than five percent of any class of securities of any corporation which is engaged in any of the foregoing businesses having a class of securities registered pursuant to the Securities Exchange Act of 1934, as amended, provided that such ownership represents a passive investment and that neither Executive nor any group of persons including Executive in any way, either directly or indirectly, manages or exercises control of any such corporation, guarantees

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any of its financial obligations, otherwise takes any part in its business, other than exercising Executive’s rights as a shareholder, or seeks to do any of the foregoing.

(c) Executive further covenants and agrees that during Executive’s employment by the Employer and for a period of one year thereafter, Executive will not, except with the prior written consent of the Board, directly or indirectly, solicit or hire, or encourage the solicitation or hiring of, any person who was a managerial or higher level employee of the Employer at any time during the term of Executive’s employment by the Employer by any employer other than the Employer for any position as an employee, independent contractor, consultant or otherwise. The foregoing covenant of Executive shall not apply to any person after 12 months have elapsed after the date on which such person’s employment by the Employer has terminated.

(d) The covenants described in this Section 6 shall continue to apply during the period specified herein after Executive’s termination of employment for any reason, without regard to whether Executive executes a Release or receives any severance benefits as a result of such termination. If Executive breaches any of the covenants described in this Section 6, the applicable period during which the covenant applies shall be tolled during the period of the breach. Without limiting the foregoing, the severance benefits provided under this Agreement are specifically designated as additional consideration for the covenants described in Section 5 and this Section 6.

7. Equitable Relief.

(a) Executive acknowledges and agrees that the restrictions contained in Sections 5 and 6 are reasonable and necessary to protect and preserve the legitimate interests, properties, goodwill and business of the Employer, that the Employer would not have entered into this Agreement in the absence of such restrictions and that irreparable injury will be suffered by the Employer should Executive breach any of the provisions of those Sections. Executive represents and acknowledges that (i) Executive has been advised by the Employer to consult Executive’s own legal counsel in respect of this Agreement, and (ii) Executive has had full opportunity, prior to execution of this Agreement, to review thoroughly this Agreement with Executive’s counsel.

(b) Executive further acknowledges and agrees that a breach of any of the restrictions in Sections 5 and 6 cannot be adequately compensated by monetary damages. Executive agrees that the Employer shall be entitled to preliminary and permanent injunctive relief, without the necessity of proving actual damages, as well as an equitable accounting of all earnings, profits and other benefits arising from any violation of Section 5 or 6 hereof, which rights shall be cumulative and in addition to any other rights or remedies to which the Employer may be entitled. In the event that any of the provisions of Section 5 or 6 hereof should ever be adjudicated to exceed the time, geographic, service, or other limitations permitted by applicable law in any jurisdiction, it is the intention of the parties that the provision shall be amended to the extent of the maximum time, geographic, service, or other limitations permitted by applicable law, that such amendment shall apply only within the jurisdiction of the court that made such adjudication and that the provision otherwise be enforced to the maximum extent permitted by law.

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(c) Notwithstanding anything in this Agreement to the contrary, if Executive breaches any of Executive’s obligations under Section 5 or 6 hereof, the Company shall thereafter be obligated only for the compensation and other benefits provided in any Company benefit plans, policies or practices then applicable to Executive in accordance with the terms thereof, and all payments under Section 2 of this Agreement shall cease.

(d) Executive irrevocably and unconditionally (i) agrees that any suit, action or other legal proceeding arising out of Section 5 or 6 hereof, including without limitation, any action commenced by the Employer for preliminary and permanent injunctive relief and other equitable relief, may be brought in a United States District Court for Ohio, or if such court does not have jurisdiction or will not accept jurisdiction, in any court of general jurisdiction in Columbus, Ohio, (ii) consents to the non-exclusive jurisdiction of any such court in any such suit, action or proceeding, and (iii) waives any objection which Executive may have to the laying of venue of any such suit, action or proceeding in any such court. Executive also irrevocably and unconditionally consents to the service of any process, pleadings, notices or other papers in a manner permitted by the notice provisions of Section 15 hereof.

(e) Executive agrees that for a period of three years following the termination of Executive’s employment for any reason, Executive will provide, and at all times after the date hereof the Employer may similarly provide, a copy of Sections 5 and 6 hereof to any business or enterprise (i) which Executive may directly or indirectly own, manage, operate, finance, join, control or in which Executive may participate in the ownership, management, operation, financing, or control, or (ii) with which Executive may be connected as an officer, director, employee, partner, principal, agent, representative, consultant or otherwise, or in connection with which Executive may use or permit to be used Executive’s name; provided, however, that this provision shall not apply in respect of Section 6 after expiration of the time periods set forth therein.

8. Payment of Supplemental Benefits. The supplemental benefits under Sections 2.3(b)(vi) and (vii) (the “Enhanced Benefits”) shall be paid as follows:

(a) The Enhanced Benefits that are calculated with respect to the Nationwide Retirement Plan and Nationwide Supplemental Retirement Plan shall be paid in the same form and the same time as Executive’s benefits under the Nationwide Supplemental Retirement Plan are paid (or under the default provisions of the Nationwide Supplemental Retirement Plan if Executive is not otherwise entitled to receive a benefit under that Plan).

(b) The Enhanced Benefits that are calculated with respect to the Nationwide Excess Benefit Plan shall be paid in the same form and at the same time as Executive’s benefits under the Nationwide Excess Benefit Plan are paid (or under the default provisions of the Nationwide Excess Benefit Plan if Executive is not otherwise entitled to receive a benefit under that Plan).

(c) The Enhanced Benefits that are calculated with respect to the Nationwide Savings Plan and Nationwide Supplemental Defined Contribution Plan shall be paid in the same form and at the same time as Executive’s benefits under the Nationwide Supplemental Defined Contribution Plan are paid.

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(d) The Enhanced Benefits that are calculated with respect to the Nationwide Individual Deferred Compensation Retirement Plan shall be paid in the same form and the same time as Executive’s benefits under the Nationwide Individual Deferred Compensation Plan are paid.

9. Indemnification. The Company shall indemnify Executive with respect to Executive’s actions in the performance of Executive’s duties as set forth in Section 1.2 to the fullest extent permitted by the Company’s Amended and Restated Code of Bylaws as in effect from time to time.

10. Non-Exclusivity of Rights; Resignation from Boards.

(a) Nothing in this Agreement shall prevent or limit Executive’s continuing or future participation in or rights under any benefit, bonus, incentive or other plan or program provided by the Company and for which Executive may qualify; provided, however, that if Executive becomes entitled to and receives the payments described in Section 2.3(b) of this Agreement, Executive hereby waives Executive’s right to receive payments under any severance plan or similar program applicable to all employees of the Company.

(b) If Executive’s employment with the Company terminates for any reason, Executive shall immediately resign from all boards of directors of the Company, any Affiliates and any other entities for which Executive serves as a representative of the Company.

11. Survivorship. The respective rights and obligations of the parties under this Agreement (including without limitation Sections 5, 6 and 7) shall survive any termination of Executive’s employment to the extent necessary to the intended preservation of such rights and obligations.

12. Mitigation. Executive shall not be required to mitigate the amount of any payment or benefit provided for in this Agreement by seeking other employment or otherwise, and there shall be no offset against amounts due Executive under this Agreement on account of any remuneration attributable to any subsequent employment that Executive may obtain.

13. Benefit Plans; Outstanding Awards. All references in this Agreement to specific retirement or other benefit plans of the Company shall be deemed to include any successor retirement or other benefit plans. The terms of Executive’s outstanding stock options, restricted stock and long-term incentive awards are hereby amended to provide that, without adversely affecting any rights that Executive has under such award agreements, the award agreements are amended to provide for the accelerated vesting and payments upon termination of employment as provided in Section 2.3(b) of this Agreement, to the extent consistent with the applicable plans. In all respects not amended, the provisions of such outstanding awards shall remain in effect according to their terms.

14. Arbitration; Expenses. In the event of any dispute under the provisions of this Agreement, other than a dispute in which the primary relief sought is an equitable remedy such as an injunction, the parties shall be required to have the dispute, controversy or claim settled by arbitration in Columbus, Ohio in accordance with the National Rules for the Resolution of Employment Disputes then in effect of the American Arbitration Association, before a panel of

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three arbitrators, one of whom shall be selected by the Company, one of whom shall be selected by Executive, and the third of whom shall be selected by the arbitrators selected by the Company and Executive. Any award entered by the arbitrators shall be final, binding and nonappealable and judgment may be entered thereon by either party in accordance with applicable law in any court of competent jurisdiction. This arbitration provision shall be specifically enforceable. The arbitrators shall have no authority to modify any provision of this Agreement or to award a remedy for a dispute involving this Agreement other than a benefit specifically provided under or by virtue of the Agreement. In the event of a dispute, each party shall be responsible for its own expenses (including attorneys’ fees) relating to the conduct of the arbitration, and the parties shall share equally the fees of the American Arbitration Association. Each party shall give the other party written notice as described in Section 16 of its intent to submit a claim under this Agreement to arbitration and a description of the basis of such claim, within six months after the event giving rise to the claim occurs.

15. Notices. All notices and other communications required or permitted under this Agreement or necessary or convenient in connection herewith shall be in writing and shall be deemed to have been given when hand delivered or mailed by registered or certified mail, as follows (provided that notice of change of address shall be deemed given only when received):

If to the Company, to:

Nationwide Mutual Insurance Company

One Nationwide Plaza, 1-35-03

Columbus, OH 43215

Attention:  Executive Vice President and Chief Administrative Officer

                  Executive Vice President and Chief Legal and Governance Officer

With a required copy to:

Morgan, Lewis & Bockius LLP

1701 Market Street

Philadelphia, PA 19103-2921

Attention: Mims Maynard Zabriskie

If to Executive, to:

James Lyski

305 North Parkview Avenue

Bexley, OH 43209

or to such other names or addresses as the Company or Executive, as the case may be, shall designate by notice to each other person entitled to receive notices in the manner specified in this Section.

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16. Contents of Agreement; Amendment and Assignment.

(a) This Agreement sets forth the entire understanding between the parties hereto with respect to the subject matter hereof and cannot be changed, modified, extended or terminated except upon written amendment approved by the Board and executed on its behalf by a duly authorized officer of the Company and by Executive. This Agreement supercedes and replaces the Employment Agreement in its entirety.

(b) All of the terms and provisions of this Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective heirs, executors, administrators, legal representatives, successors and assigns of the parties hereto, except that the duties and responsibilities of Executive under this Agreement are of a personal nature and shall not be assignable or delegatable in whole or in part by Executive. The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation, reorganization or otherwise) to all or substantially all of the business or assets of the Company, within 15 days of such succession, expressly to assume and agree to perform this Agreement in the same manner and to the same extent as the Company would be required to perform if no such succession had taken place.

17. Severability. If any provision of this Agreement or application thereof to anyone or under any circumstances is adjudicated to be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect any other provision or application of this Agreement which can be given effect without the invalid or unenforceable provision or application and shall not invalidate or render unenforceable such provision or application in any other jurisdiction. If any provision is held void, invalid or unenforceable with respect to particular circumstances, it shall nevertheless remain in full force and effect in all other circumstances.

18. Remedies Cumulative; No Waiver. No remedy conferred upon a party by this Agreement is intended to be exclusive of any other remedy, and each and every such remedy shall be cumulative and shall be in addition to any other remedy given under this Agreement or now or hereafter existing at law or in equity. No delay or omission by a party in exercising any right, remedy or power under this Agreement or existing at law or in equity shall be construed as a waiver thereof, and any such right, remedy or power may be exercised by such party from time to time and as often as may be deemed expedient or necessary by such party in its sole discretion.

19. Beneficiaries/References. Executive shall be entitled, to the extent permitted under any applicable law, to select and change a beneficiary or beneficiaries to receive any compensation or benefit payable under this Agreement following Executive’s death by giving the Company written notice thereof. In the event of Executive’s death or a judicial determination of Executive’s incompetence, reference in this Agreement to Executive shall be deemed, where appropriate, to refer to Executive’s beneficiary, estate or other legal representative.

20. Miscellaneous. All section headings used in this Agreement are for convenience only. This Agreement may be executed in counterparts, each of which is an original. It shall not

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be necessary in making proof of this Agreement or any counterpart hereof to produce or account for any of the other counterparts.

21. Withholding Taxes. All payments under this Agreement shall be made subject to applicable tax withholding, and the Company shall withhold from any payments under this Agreement all federal, state and local taxes as the Company is required to withhold pursuant to any law or governmental rule or regulation. Except as specifically provided otherwise in this Agreement, Executive shall be responsible for all taxes applicable to amounts payable under this Agreement and payments under this Agreement shall not be grossed up for taxes.

22. Section 409A of the Code. This Agreement is intended to comply with section 409A of the Code and its corresponding regulations, or an exemption, to the extent applicable. Severance benefits under the Agreement are intended to be exempt from section 409A under the “short term deferral” exemption. Notwithstanding anything in this Agreement to the contrary, if required by section 409A, if Executive is considered a “specified executive” for purposes of section 409A and if payment of any amounts under this Agreement is required to be delayed for a period of six months after separation from service pursuant to section 409A, payment of such amounts shall be delayed as required by section 409A, and the accumulated amounts shall be paid in a lump sum payment within five days after the end of the six-month period. If Executive dies during the postponement period prior to the payment of benefits, the amounts withheld on account of section 409A shall be paid to the personal representative of Executive’s estate within sixty days after the date of Executive’s death. Payments may only be made under this Agreement upon an event and in a manner permitted by section 409A, to the extent applicable. As used in the Agreement, the term “termination of employment” shall mean Executive’s separation from service with the Company within the meaning of section 409A. In no event may Executive, directly or indirectly, designate the calendar year of a payment. For purposes of section 409A, the right to a series of payments under the Agreement shall be treated as a right to a series of separate payments. All reimbursements and in-kind benefits provided under the Agreement shall be made or provided in accordance with the requirements of section 409A.

23. Governing Law. This Agreement shall be governed by and interpreted under the laws of the State of Ohio without giving effect to any conflict of laws provisions.

IN WITNESS WHEREOF, the undersigned, intending to be legally bound, have executed this Agreement as of the date first above written.

NATIONWIDE MUTUAL INSURANCE COMPANY
By:	/s/ W.G. Jurgensen
Name:	W.G. Jurgensen
Title:	Chief Executive Officer
/s/ James Lyski
Executive

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EX-10.52

Exhibit 10.52

EXECUTIVE SEVERANCE AGREEMENT

This EXECUTIVE SEVERANCE AGREEMENT (the “Agreement”) is entered into as of January 1, 2008, by and between Nationwide Mutual Insurance Company (the “Company”) and Michael C. Keller (“Executive”).

WHEREAS, the parties desire to enter into an agreement to reflect Executive’s executive capacities in the Company’s business and to provide for Executive’s employment by the Company, upon the terms and conditions set forth herein.

WHEREAS, Executive has agreed to certain confidentiality, non-competition and non-solicitation covenants contained hereunder, in consideration of the additional benefits provided to Executive under this Agreement.

WHEREAS, certain capitalized terms shall have the meanings given those terms in Section 3 of this Agreement.

WHEREAS, Executive and the Company are parties to an Employment Agreement dated June 4, 2001 (the “Employment Agreement”), and the parties have agreed that this Agreement shall supercede and replace the Employment Agreement.

NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby agree as follows:

1. Employment. The Company hereby agrees to employ Executive, and Executive hereby accepts such employment and agrees to perform Executive’s duties and responsibilities, in accordance with the terms, conditions and provisions hereinafter set forth.

1.1 Employment Term. This Agreement shall be effective as of the date set forth above, and shall continue until December 31, 2008, unless the Agreement is terminated sooner in accordance with Section 2 below. In addition, the term of the Agreement shall automatically renew for periods of one year unless either party gives written notice to the other party, at least 60 days prior to the end of the initial term or at least 60 days prior to the end of any one-year renewal period, that the Agreement shall not be further extended. The period commencing on the effective date and ending on the date on which the term of Executive’s employment under the Agreement shall terminate is hereinafter referred to as the “Employment Term.” The failure of the Company to renew this Agreement shall not be considered a termination of Executive’s employment under this Agreement and shall not give Executive grounds to terminate employment for Good Reason (as defined in Section 3) under this Agreement.

1.2 Duties and Responsibilities. During the Employment Term, Executive shall serve as the Executive Vice President and Chief Information Officer of the Company, or in such other executive positions as the Board of Directors of the Company (the “Board”) determines. Executive shall perform all duties and accept all responsibilities incident to such position or as may be reasonably assigned to him by the Chief Executive Officer of the Company or the Board.

1.3 Extent of Service. During the Employment Term, Executive agrees to use Executive’s full and best efforts to carry out Executive’s duties and responsibilities under Section 1.2 hereof with the highest degree of loyalty and the highest standards of care and, consistent with the other provisions of this Agreement, Executive agrees to devote substantially all of Executive’s business time, attention and energy thereto. The foregoing shall not be construed as preventing Executive from making investments in other businesses or enterprises, provided that Executive agrees not to become engaged in any other business activity which, in the reasonable judgment of the Board, is likely to interfere with Executive’s ability to discharge Executive’s duties and responsibilities to the Company. The Executive will not serve on the board of directors of an entity unrelated to the Company (other than a non-profit charitable organization) without the consent of the Board.

1.4 Base Salary. During the Employment Term, for all the services rendered by Executive hereunder, the Company shall pay Executive a base salary (“Base Salary”), at the annual rate in effect on the date of this Agreement, payable in installments at such times as the Company customarily pays its other employees. Executive’s Base Salary shall be reviewed periodically for appropriate increases by the Board (or a committee of the Board) pursuant to the Board’s normal performance review policies for senior level executives.

1.5 Retirement, Welfare and Other Benefit Plans and Programs. During the Employment Term, Executive shall be entitled to participate in all employee retirement and welfare benefit plans and programs made available to the Company’s senior level executives as a group, as such retirement and welfare plans may be in effect from time to time and subject to the eligibility requirements of such plans. During the Employment Term, Executive shall be provided with executive fringe benefits and perquisites under the same terms as those made available to the Company’s senior level executives as a group, as such programs may be in effect from time to time. During the Employment Term, Executive shall be entitled to vacation and sick leave in accordance with the Company’s vacation, holiday and other pay for time not worked policies. Nothing in this Agreement or otherwise shall prevent the Company from amending or terminating any retirement, welfare or other employee benefit plans, programs, policies or perquisites from time to time as the Company deems appropriate.

1.6 Reimbursement of Expenses. During the Employment Term, Executive shall be provided with reimbursement of reasonable expenses related to Executive’s employment by the Company on a basis no less favorable than that which may be authorized from time to time for senior level executives as a group.

1.7 Incentive Compensation. During the Employment Term, Executive shall be entitled to participate in all short-term and long-term incentive programs established by the Company for its senior level executives generally, at levels commensurate with the benefits provided to other senior executives and Executive’s position with the Company. Executive’s incentive compensation shall be subject to the terms of the applicable plans and shall be determined based on Executive’s individual performance and Company performance as determined by the Board (or a committee of the Board).

2. Termination. Executive’s employment shall terminate upon the occurrence of any of the following events:

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2.1 Termination Without Cause. The Company (by action of the Board) may remove Executive at any time without Cause (as defined in Section 3) from the position in which Executive is employed hereunder (in which case the Employment Term shall be deemed to have ended) upon not less than 60 days’ prior written notice pursuant to Section 15 to Executive; provided, however, that, in the event that such notice is given, Executive shall be under no obligation to render any additional services to the Company and shall be allowed to seek other employment, to the extent such other employment is consistent with Executive’s obligations under Section 6.

2.2 Resignation for Good Reason After a Substantial Reorganization. If the Board determines for purposes of this Agreement that a substantial reorganization of the Company has occurred, the Board may establish a period of time during which Executive may elect to resign if an event constituting Good Reason (as defined in Section 3) occurs. In that event, Executive may initiate termination of employment by resigning under this Section 2.2 for Good Reason during the period specified by the Board. Executive shall give the Company not less than 60 days prior written notice pursuant to Section 15 of such resignation, which notice shall be provided to the Company within 60 days following the occurrence of the event giving rise to the Good Reason resignation. A substantial reorganization shall not be considered to have occurred unless the Board specifically determines that a substantial reorganization has occurred for purposes of this Agreement and the Board establishes a time period during which Executive may elect to resign if an event constituting Good Reason occurs. Nothing in this Agreement shall obligate the Board to make any such determination.

2.3 Benefits Payable Upon Termination Without Cause or Resignation for Good Reason After a Substantial Reorganization.

(a) Upon any removal or resignation described in Section 2.1 or 2.2 above, Executive shall be entitled to receive only the amount due to Executive under the Company’s then current severance pay plan for employees, if any. No other payments or benefits shall be due under this Agreement to Executive, but Executive shall be entitled to any benefits accrued or earned in accordance with the terms of any applicable benefit plans and programs of the Company.

(b) Notwithstanding the provisions of Section 2.3(a), in the event of a removal or resignation described in Section 2.1 or 2.2 during the Employment Term, if Executive executes and does not revoke a written release and waiver of claims upon such removal or resignation, in form and substance acceptable to the Company (the “Release”), of any and all claims against the Company and all related parties with respect to all matters arising out of Executive’s employment by the Company, or the termination thereof (other than claims based upon any severance entitlements under the terms of this Agreement or entitlements under any plans or programs of the Company under which Executive has accrued a benefit), Executive shall be entitled to receive the severance benefits described below, in lieu of the payment described in Section 2.3(a).

(i) Executive shall receive a lump sum cash payment equal to two times Executive’s annual Base Salary in effect immediately before the Termination Date

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(including salary reduction amounts of Base Salary under the Company’s benefit plans and programs).

(ii) Executive shall receive Executive’s annual short-term incentive bonus (PIP) for the year in which Executive’s Termination Date occurs, at the time that annual bonuses for the year are paid to other executives, based on the Company’s actual performance for the year, but in an amount not less than Executive’s target annual bonus in effect for the year.

(iii) The Company shall pay Executive a lump sum cash payment equal to the cost that Executive would incur if Executive continued medical, dental and vision coverage under section 4980B of the Code (as defined in Section 3)(“COBRA”) or the Company’s retiree medical plan, if applicable, for Executive, and, where applicable, his or her spouse and dependents, for the Severance Period (as defined in Section 3). The cash payment shall include a tax gross up to cover Executive’s income and FICA taxes imposed on the payment under this subsection (iii). Executive may elect COBRA continuation coverage according to the terms of the Company’s applicable benefit plans, for the period permitted under such plans.

(iv) Executive shall receive a lump sum payment equal to two times the amount of Executive’s NVA Target Award Opportunity and/or Business Unit Target Award Opportunity, as applicable, under the Nationwide Property and Casualty Long-Term Performance Plan, as amended, the Third Amended and Restated Nationwide Financial Services, Inc. 1996 Long-Term Equity Compensation Plan, or any successor plan in effect for the year in which Executive’s Termination Date occurs. The amount determined under this subsection (iv) shall be paid at the time that NVA or Business Unit awards for the year are paid to other executives, but not later than March 15 after the end of the year in which the Termination Date occurs. The payment under this subsection (iv) shall be paid in lieu of any NVA or Business Unit award under the applicable plan for the year in which Executive’s Termination Date occurs.

(v) Executive’s outstanding stock options and restricted stock with respect to stock of Nationwide Financial Services, Inc. or any Affiliate of the Company shall become vested and exercisable on the Termination Date to the extent that such options and restricted stock would have become vested and exercisable on the next vesting date had Executive remained an employee of the Company. All other unvested stock options and restricted stock shall be forfeited, except to the extent that the applicable grant agreement requires otherwise. No additional grants shall be made to Executive after Executive’s termination of employment.

(vi) Executive shall receive supplemental benefits under this Agreement equal to:

(A) the benefits that Executive would have received under the Nationwide Retirement Plan, Nationwide Supplemental Retirement Plan, Nationwide Excess Benefit Plan, Nationwide Savings Plan, Nationwide Supplemental Defined Contribution Plan and Nationwide Individual Deferred Compensation Plan, as in effect at Executive’s Termination Date, had Executive’s benefits under those Plans been fully vested as of Executive’s Termination Date, reduced by

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(B) the benefits that Executive actually receives under the Nationwide Retirement Plan, Nationwide Supplemental Retirement Plan, Nationwide Excess Benefit Plan, Nationwide Savings Plan, Nationwide Supplemental Defined Contribution Plan and Nationwide Individual Deferred Compensation Plan.

The benefits under this subsection (vi) shall be paid as described in Section 8. The benefits payable under this subsection (vi) and subsection (vii) below shall not result in any duplication of benefits.

(vii) If Executive’s Termination Date occurs within three years of the date on which Executive would have been first eligible to retire under the Nationwide Retirement Plan, Executive shall receive a supplemental benefit under this Agreement equal to:

(A) the benefits that Executive would have received under the Nationwide Retirement Plan, Nationwide Supplemental Retirement Plan and Nationwide Excess Benefit Plan as in effect at Executive’s Termination Date, had Executive earned service and age credit for the period ending on the first to occur of (i) three years after the Termination Date or (ii) the earliest date on which Executive would have been eligible to retire under the Nationwide Retirement Plan, and had Executive been fully vested in Executive’s benefit under such Plans, reduced by

(B) the benefits that Executive actually receives under the Nationwide Retirement Plan, Nationwide Supplemental Retirement Plan and Nationwide Excess Benefit Plan, and the benefits payable under subsection (vi) above with respect to the Nationwide Retirement Plan, Nationwide Supplemental Retirement Plan and Nationwide Excess Benefit Plan.

The benefits under this subsection (vii) shall be paid as described in Section 8. The benefits payable under this subsection (vii) and subsection (vi) above shall not result in any duplication of benefits.

(viii) The Company shall pay Executive a lump sum cash payment equal to the matching contributions that the Company would have made for Executive under the Nationwide Savings Plan and the Nationwide Supplemental Defined Contribution Plan, as in effect at Executive’s Termination Date, as if Executive continued in employment for the Severance Period, receiving compensation at a rate equal to Executive’s covered compensation amount for the calendar year prior to the year in which the Termination Date occurs and as if Executive continued the same rate of contributions to the applicable plans as in effect immediately before Executive’s Termination Date.

(ix) The Company shall cause Executive to receive service and age credit for purposes of eligibility under the Company’s retiree medical plan (but not for Company contributions towards the cost of retiree medical) until the end of the Severance Period, as if Executive had continued in employment during the Severance Period.

(x) During the Severance Period, the Company shall pay or reimburse Executive for the cost of reasonable outplacement assistance services (not to exceed a total of $11,000) provided by any outplacement agency selected by Executive.

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(xi) The Company shall pay Executive a lump sum cash payment equal to the annual value of the financial counseling services provided by the Company to Executive immediately before Executive’s Termination Date.

(xii) Executive shall have the right to retain the computer, printer, fax machine and office furniture that was provided by the Company for use by Executive at Executive’s residence at the Termination Date.

(xiii) Executive shall receive any other amounts earned, accrued or owing but not yet paid under Section 1 above and any other benefits in accordance with the terms of any applicable plans and programs of the Company.

(xiv) Payment of the lump sum benefits described above (other than as described in subsections (ii) and (iv) above) shall be made within 30 days after Executive’s Termination Date (as defined in Section 3), subject to Executive’s execution of an effective Release.

2.4 Retirement or Other Voluntary Termination. Executive may voluntarily terminate employment for any reason, including voluntary retirement, upon 60 days’ prior written notice pursuant to Section 15. In such event, after the effective date of such termination, except as provided in Section 2.2 (with respect to a resignation for Good Reason), no further payments shall be due under this Agreement. However, Executive shall be entitled to any benefits due in accordance with the terms of any applicable benefit plans and programs of the Company.

2.5 Disability. The Company (by action of the Board) may terminate Executive’s employment if Executive has been unable to perform the essential functions of Executive’s position with the Company, with or without reasonable accommodation, by reason of physical or mental incapacity for a period of six consecutive months (“Disability”); provided, however, that the Company shall continue to pay Executive’s Base Salary until the Company acts to terminate Executive’s employment. Executive agrees, in the event of a dispute under this Section 2.5 relating to Executive’s Disability, to submit to a physical examination by a licensed physician selected by the Board. Executive acknowledges that the provisions of this Section 2.5 supersede the employment termination provisions otherwise applied to disabled employees. If Executive’s employment terminates on account of Disability, no further payments shall be due under this Agreement. However, Executive shall be entitled to (i) any benefits due in accordance with the terms of any applicable benefit plans and programs of the Company and (ii) a pro rated bonus for the year in which Executive’s Disability occurs, which bonus shall be calculated (on a prorated basis) and paid according to Section 2.3(b)(ii) above.

2.6 Death. If Executive dies while employed by the Company, the Company shall pay to Executive’s executor, legal representative, administrator or designated beneficiary, as applicable, (i) any amounts earned, accrued or owing but not yet paid under Section 1 above and any benefits accrued or earned under the Company’s benefit plans and programs according to the terms of such plans and (ii) a pro rated bonus for the year in which Executive’s death occurs, which bonus shall be calculated (on a prorated basis) and paid according to Section 2.3(b)(ii) above. Otherwise, the Company shall have no further liability or obligation under this Agreement to Executive’s executors, legal representatives, administrators, heirs or assigns.

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2.7 Cause. The Company (by action of the Board) may terminate Executive’s employment at any time for Cause upon written notice to Executive, in which event all payments under this Agreement shall cease, except for Base Salary to the extent already accrued. Executive shall be entitled to any benefits accrued or earned before Executive’s termination in accordance with the terms of any applicable benefit plans and programs of the Company; provided that Executive shall not be entitled to receive any unpaid short-term or long-term cash incentive payments or unvested options.

3. Definitions. For purposes of this Agreement, the following terms shall have the meanings specified in this Section 3:

(a) “Affiliate” shall mean any subsidiary of the Company, Nationwide Financial Services, Inc. and any of its subsidiaries, and any other entity that, directly or indirectly, through one or more intermediaries, controls, is controlled by or is under common control with the Company, as determined by the Board.

(b) “Cause” shall mean any of the following grounds for termination of Executive’s employment:

(i) Executive shall have been convicted of a felony;

(ii) Executive neglects, refuses or fails to perform his or her material duties to the Company (other than a failure resulting from Executive’s incapacity due to physical or mental illness), which failure has continued for a period of at least 30 days after a written notice of demand for substantial performance, signed by a duly authorized officer of the Company, has been delivered to Executive specifying the manner in which Executive has failed substantially to perform;

(iii) Executive engages in misconduct in the performance of Executive’s duties;

(iv) Executive engages in public conduct that is harmful to the reputation of the Company;

(v) Executive breaches any written non-competition, non-disclosure or non-solicitation agreement in effect with the Company, including without limitation the provisions of Section 5 or 6 of this Agreement; or

(vi) Executive breaches the Company’s written code of business conduct and ethics.

(c) “Code” shall mean the Internal Revenue Code of 1986, as amended.

(d) “Employer” shall mean the Company, its Affiliates and their successors.

(e) “Good Reason” shall mean the occurrence of any of the following events, without Executive’s consent, except in connection with the termination of Executive’s

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employment for Disability, Cause, as a result of death or by Executive other than for Good Reason and except as provided in the last sentence of this subsection (e):

(i) A material diminution in Executive’s authority, duties or responsibilities, as reasonably determined by the Board;

(ii) A material change in the geographic location at which Executive must perform services under this Agreement (which, for purposes of this Agreement, means relocation of the offices of the Company at which Executive is principally employed to a location more than 50 miles from the location of such offices immediately prior to the relocation);

(iii) A material diminution in Executive’s Base Salary; provided, however, that a change in Base Salary for all senior executives of the Company, in which Executive is treated similarly as all other executives of a comparable responsibility level, shall not constitute Good Reason under this Agreement; or

(iv) Any action or inaction that constitutes a material breach by the Company of this Agreement, including the failure of the Company to obtain from its successors the express assumption and agreement required under Section 16 hereof.

Notwithstanding the foregoing, Executive shall not have Good Reason for termination if, within 60 days after the date on which Executive gives notice of his or her termination, as provided in Section 2.2 the Company corrects the action or failure to act that constitutes the grounds for termination for Good Reason as set forth in Executive’s notice of termination. If the Company does not correct the action or failure to act, Executive must terminate his or her employment for Good Reason within 30 days after the end of the cure period, in order for the termination to be considered a Good Reason termination.

(f) “Severance Period” shall mean the period beginning on Executive’s Termination Date and ending two years after the Termination Date.

(g) “Termination Date” shall mean the effective date of the termination of Executive’s employment relationship with the Company pursuant to this Agreement.

4. Notice of Termination. Any termination of Executive’s employment shall be communicated by a written notice of termination to the other party hereto given in accordance with Section 15. The notice of termination shall (i) indicate the specific termination provision in this Agreement relied upon, (ii) briefly summarize the facts and circumstances deemed to provide a basis for a termination of employment and the applicable provision hereof, and (iii) specify the Termination Date in accordance with the requirements of this Agreement.

5. Confidential Information. Executive recognizes and acknowledges that, by reason of Executive’s employment by and service to the Employer (as defined in Section 3) during and, if applicable, after the Employment Term, Executive will continue to have access to certain confidential and proprietary information relating to the business of the Employer, which may include, but is not limited to, trade secrets, trade “know-how”, customer information, supplier information, cost and pricing information, marketing and sales techniques, strategies and

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programs, computer programs and software and financial information (collectively referred to as “Confidential Information”). Executive acknowledges that such Confidential Information is a valuable and unique asset of the Employer and Executive covenants that Executive will not, unless expressly authorized in writing by the Board, at any time during the course of Executive’s employment, use any Confidential Information or divulge or disclose any Confidential Information to any person, firm or corporation except in connection with the performance of Executive’s duties for the Employer and in a manner consistent with the Employer’s policies regarding Confidential Information. Executive also covenants that at any time after the termination of such employment, directly or indirectly, Executive will not use any Confidential Information or divulge or disclose any Confidential Information to any person, firm or corporation, unless such information is in the public domain through no fault of Executive or except when required to do so by law or legal process, in which case Executive will inform the Employer in writing promptly of such required disclosure, but in any event at least two business days prior to disclosure. All written Confidential Information (including, without limitation, in any computer or other electronic format) which comes into Executive’s possession during the course of Executive’s employment shall remain the property of the Employer. Except as required in the performance of Executive’s duties for the Employer, or unless expressly authorized in writing by the Board, Executive shall not remove any written Confidential Information from the Employer’s premises, except in connection with the performance of Executive’s duties for the Employer and in a manner consistent with the Employer’s policies regarding Confidential Information. Upon termination of Executive’s employment, Executive agrees immediately to return to the Employer all written Confidential Information in Executive’s possession.

6. Non-Competition; Non-Solicitation.

(a) During Executive’s employment by the Employer and for a period of one year after Executive’s termination of employment for any reason, Executive will not, except with the prior written consent of the Board, directly or indirectly, own, manage, operate, join, control, finance or participate in the ownership, management, operation, control or financing of, or be connected as an officer, director, employee, partner, principal, agent, representative, consultant or otherwise with, or use or permit Executive’s name to be used in connection with, any business or enterprise which is engaged in any financial services, insurance or other business that is competitive with any business or enterprise in which the Employer is engaged, anywhere in the world, during Executive’s employment or (with respect to the application of this covenant after Executive’s termination of employment) during the two year period preceding Executive’s termination of employment. The parties acknowledge that the Employer engages in its business on a worldwide basis, and Executive acknowledges that his or her responsibilities extend to the Employer’s worldwide operations.

(b) The foregoing restrictions shall not be construed to prohibit the ownership by Executive of less than five percent of any class of securities of any corporation which is engaged in any of the foregoing businesses having a class of securities registered pursuant to the Securities Exchange Act of 1934, as amended, provided that such ownership represents a passive investment and that neither Executive nor any group of persons including Executive in any way, either directly or indirectly, manages or exercises control of any such corporation, guarantees

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any of its financial obligations, otherwise takes any part in its business, other than exercising Executive’s rights as a shareholder, or seeks to do any of the foregoing.

(c) Executive further covenants and agrees that during Executive’s employment by the Employer and for a period of one year thereafter, Executive will not, except with the prior written consent of the Board, directly or indirectly, solicit or hire, or encourage the solicitation or hiring of, any person who was a managerial or higher level employee of the Employer at any time during the term of Executive’s employment by the Employer by any employer other than the Employer for any position as an employee, independent contractor, consultant or otherwise. The foregoing covenant of Executive shall not apply to any person after 12 months have elapsed after the date on which such person’s employment by the Employer has terminated.

(d) The covenants described in this Section 6 shall continue to apply during the period specified herein after Executive’s termination of employment for any reason, without regard to whether Executive executes a Release or receives any severance benefits as a result of such termination. If Executive breaches any of the covenants described in this Section 6, the applicable period during which the covenant applies shall be tolled during the period of the breach. Without limiting the foregoing, the severance benefits provided under this Agreement are specifically designated as additional consideration for the covenants described in Section 5 and this Section 6.

7. Equitable Relief.

(a) Executive acknowledges and agrees that the restrictions contained in Sections 5 and 6 are reasonable and necessary to protect and preserve the legitimate interests, properties, goodwill and business of the Employer, that the Employer would not have entered into this Agreement in the absence of such restrictions and that irreparable injury will be suffered by the Employer should Executive breach any of the provisions of those Sections. Executive represents and acknowledges that (i) Executive has been advised by the Employer to consult Executive’s own legal counsel in respect of this Agreement, and (ii) Executive has had full opportunity, prior to execution of this Agreement, to review thoroughly this Agreement with Executive’s counsel.

(b) Executive further acknowledges and agrees that a breach of any of the restrictions in Sections 5 and 6 cannot be adequately compensated by monetary damages. Executive agrees that the Employer shall be entitled to preliminary and permanent injunctive relief, without the necessity of proving actual damages, as well as an equitable accounting of all earnings, profits and other benefits arising from any violation of Section 5 or 6 hereof, which rights shall be cumulative and in addition to any other rights or remedies to which the Employer may be entitled. In the event that any of the provisions of Section 5 or 6 hereof should ever be adjudicated to exceed the time, geographic, service, or other limitations permitted by applicable law in any jurisdiction, it is the intention of the parties that the provision shall be amended to the extent of the maximum time, geographic, service, or other limitations permitted by applicable law, that such amendment shall apply only within the jurisdiction of the court that made such adjudication and that the provision otherwise be enforced to the maximum extent permitted by law.

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(c) Notwithstanding anything in this Agreement to the contrary, if Executive breaches any of Executive’s obligations under Section 5 or 6 hereof, the Company shall thereafter be obligated only for the compensation and other benefits provided in any Company benefit plans, policies or practices then applicable to Executive in accordance with the terms thereof, and all payments under Section 2 of this Agreement shall cease.

(d) Executive irrevocably and unconditionally (i) agrees that any suit, action or other legal proceeding arising out of Section 5 or 6 hereof, including without limitation, any action commenced by the Employer for preliminary and permanent injunctive relief and other equitable relief, may be brought in a United States District Court for Ohio, or if such court does not have jurisdiction or will not accept jurisdiction, in any court of general jurisdiction in Columbus, Ohio, (ii) consents to the non-exclusive jurisdiction of any such court in any such suit, action or proceeding, and (iii) waives any objection which Executive may have to the laying of venue of any such suit, action or proceeding in any such court. Executive also irrevocably and unconditionally consents to the service of any process, pleadings, notices or other papers in a manner permitted by the notice provisions of Section 15 hereof.

(e) Executive agrees that for a period of three years following the termination of Executive’s employment for any reason, Executive will provide, and at all times after the date hereof the Employer may similarly provide, a copy of Sections 5 and 6 hereof to any business or enterprise (i) which Executive may directly or indirectly own, manage, operate, finance, join, control or in which Executive may participate in the ownership, management, operation, financing, or control, or (ii) with which Executive may be connected as an officer, director, employee, partner, principal, agent, representative, consultant or otherwise, or in connection with which Executive may use or permit to be used Executive’s name; provided, however, that this provision shall not apply in respect of Section 6 after expiration of the time periods set forth therein.

8. Payment of Supplemental Benefits. The supplemental benefits under Sections 2.3(b)(vi) and (vii) (the “Enhanced Benefits”) shall be paid as follows:

(a) The Enhanced Benefits that are calculated with respect to the Nationwide Retirement Plan and Nationwide Supplemental Retirement Plan shall be paid in the same form and the same time as Executive’s benefits under the Nationwide Supplemental Retirement Plan are paid (or under the default provisions of the Nationwide Supplemental Retirement Plan if Executive is not otherwise entitled to receive a benefit under that Plan).

(b) The Enhanced Benefits that are calculated with respect to the Nationwide Excess Benefit Plan shall be paid in the same form and at the same time as Executive’s benefits under the Nationwide Excess Benefit Plan are paid (or under the default provisions of the Nationwide Excess Benefit Plan if Executive is not otherwise entitled to receive a benefit under that Plan).

(c) The Enhanced Benefits that are calculated with respect to the Nationwide Savings Plan and Nationwide Supplemental Defined Contribution Plan shall be paid in the same form and at the same time as Executive’s benefits under the Nationwide Supplemental Defined Contribution Plan are paid.

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(d) The Enhanced Benefits that are calculated with respect to the Nationwide Individual Deferred Compensation Retirement Plan shall be paid in the same form and the same time as Executive’s benefits under the Nationwide Individual Deferred Compensation Plan are paid.

9. Indemnification. The Company shall indemnify Executive with respect to Executive’s actions in the performance of Executive’s duties as set forth in Section 1.2 to the fullest extent permitted by the Company’s Amended and Restated Code of Bylaws as in effect from time to time.

10. Non-Exclusivity of Rights; Resignation from Boards.

(a) Nothing in this Agreement shall prevent or limit Executive’s continuing or future participation in or rights under any benefit, bonus, incentive or other plan or program provided by the Company and for which Executive may qualify; provided, however, that if Executive becomes entitled to and receives the payments described in Section 2.3(b) of this Agreement, Executive hereby waives Executive’s right to receive payments under any severance plan or similar program applicable to all employees of the Company.

(b) If Executive’s employment with the Company terminates for any reason, Executive shall immediately resign from all boards of directors of the Company, any Affiliates and any other entities for which Executive serves as a representative of the Company.

11. Survivorship. The respective rights and obligations of the parties under this Agreement (including without limitation Sections 5, 6 and 7) shall survive any termination of Executive’s employment to the extent necessary to the intended preservation of such rights and obligations.

12. Mitigation. Executive shall not be required to mitigate the amount of any payment or benefit provided for in this Agreement by seeking other employment or otherwise, and there shall be no offset against amounts due Executive under this Agreement on account of any remuneration attributable to any subsequent employment that Executive may obtain.

13. Benefit Plans; Outstanding Awards. All references in this Agreement to specific retirement or other benefit plans of the Company shall be deemed to include any successor retirement or other benefit plans. The terms of Executive’s outstanding stock options, restricted stock and long-term incentive awards are hereby amended to provide that, without adversely affecting any rights that Executive has under such award agreements, the award agreements are amended to provide for the accelerated vesting and payments upon termination of employment as provided in Section 2.3(b) of this Agreement, to the extent consistent with the applicable plans. In all respects not amended, the provisions of such outstanding awards shall remain in effect according to their terms.

14. Arbitration; Expenses. In the event of any dispute under the provisions of this Agreement, other than a dispute in which the primary relief sought is an equitable remedy such as an injunction, the parties shall be required to have the dispute, controversy or claim settled by arbitration in Columbus, Ohio in accordance with the National Rules for the Resolution of Employment Disputes then in effect of the American Arbitration Association, before a panel of

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three arbitrators, one of whom shall be selected by the Company, one of whom shall be selected by Executive, and the third of whom shall be selected by the arbitrators selected by the Company and Executive. Any award entered by the arbitrators shall be final, binding and nonappealable and judgment may be entered thereon by either party in accordance with applicable law in any court of competent jurisdiction. This arbitration provision shall be specifically enforceable. The arbitrators shall have no authority to modify any provision of this Agreement or to award a remedy for a dispute involving this Agreement other than a benefit specifically provided under or by virtue of the Agreement. In the event of a dispute, each party shall be responsible for its own expenses (including attorneys’ fees) relating to the conduct of the arbitration, and the parties shall share equally the fees of the American Arbitration Association. Each party shall give the other party written notice as described in Section 16 of its intent to submit a claim under this Agreement to arbitration and a description of the basis of such claim, within six months after the event giving rise to the claim occurs.

15. Notices. All notices and other communications required or permitted under this Agreement or necessary or convenient in connection herewith shall be in writing and shall be deemed to have been given when hand delivered or mailed by registered or certified mail, as follows (provided that notice of change of address shall be deemed given only when received):

If to the Company, to:

Nationwide Mutual Insurance Company

One Nationwide Plaza, 1-35-03

Columbus, OH 43215

Attention:  Executive Vice President and Chief Administrative Officer

                  Executive Vice President and Chief Legal and Governance

                  Officer

With a required copy to:

Morgan, Lewis & Bockius LLP

1701 Market Street

Philadelphia, PA 19103-2921

Attention: Mims Maynard Zabriskie

If to Executive, to:

Michael C. Keller

10542 Mackenzie Way

Dublin, OH 43017

or to such other names or addresses as the Company or Executive, as the case may be, shall designate by notice to each other person entitled to receive notices in the manner specified in this Section.

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16. Contents of Agreement; Amendment and Assignment.

(a) This Agreement sets forth the entire understanding between the parties hereto with respect to the subject matter hereof and cannot be changed, modified, extended or terminated except upon written amendment approved by the Board and executed on its behalf by a duly authorized officer of the Company and by Executive. This Agreement supercedes and replaces the Employment Agreement in its entirety.

(b) All of the terms and provisions of this Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective heirs, executors, administrators, legal representatives, successors and assigns of the parties hereto, except that the duties and responsibilities of Executive under this Agreement are of a personal nature and shall not be assignable or delegatable in whole or in part by Executive. The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation, reorganization or otherwise) to all or substantially all of the business or assets of the Company, within 15 days of such succession, expressly to assume and agree to perform this Agreement in the same manner and to the same extent as the Company would be required to perform if no such succession had taken place.

17. Severability. If any provision of this Agreement or application thereof to anyone or under any circumstances is adjudicated to be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect any other provision or application of this Agreement which can be given effect without the invalid or unenforceable provision or application and shall not invalidate or render unenforceable such provision or application in any other jurisdiction. If any provision is held void, invalid or unenforceable with respect to particular circumstances, it shall nevertheless remain in full force and effect in all other circumstances.

18. Remedies Cumulative; No Waiver. No remedy conferred upon a party by this Agreement is intended to be exclusive of any other remedy, and each and every such remedy shall be cumulative and shall be in addition to any other remedy given under this Agreement or now or hereafter existing at law or in equity. No delay or omission by a party in exercising any right, remedy or power under this Agreement or existing at law or in equity shall be construed as a waiver thereof, and any such right, remedy or power may be exercised by such party from time to time and as often as may be deemed expedient or necessary by such party in its sole discretion.

19. Beneficiaries/References. Executive shall be entitled, to the extent permitted under any applicable law, to select and change a beneficiary or beneficiaries to receive any compensation or benefit payable under this Agreement following Executive’s death by giving the Company written notice thereof. In the event of Executive’s death or a judicial determination of Executive’s incompetence, reference in this Agreement to Executive shall be deemed, where appropriate, to refer to Executive’s beneficiary, estate or other legal representative.

20. Miscellaneous. All section headings used in this Agreement are for convenience only. This Agreement may be executed in counterparts, each of which is an original. It shall not

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be necessary in making proof of this Agreement or any counterpart hereof to produce or account for any of the other counterparts.

21. Withholding Taxes. All payments under this Agreement shall be made subject to applicable tax withholding, and the Company shall withhold from any payments under this Agreement all federal, state and local taxes as the Company is required to withhold pursuant to any law or governmental rule or regulation. Except as specifically provided otherwise in this Agreement, Executive shall be responsible for all taxes applicable to amounts payable under this Agreement and payments under this Agreement shall not be grossed up for taxes.

22. Section 409A of the Code. This Agreement is intended to comply with section 409A of the Code and its corresponding regulations, or an exemption, to the extent applicable. Severance benefits under the Agreement are intended to be exempt from section 409A under the “short term deferral” exemption. Notwithstanding anything in this Agreement to the contrary, if required by section 409A, if Executive is considered a “specified executive” for purposes of section 409A and if payment of any amounts under this Agreement is required to be delayed for a period of six months after separation from service pursuant to section 409A, payment of such amounts shall be delayed as required by section 409A, and the accumulated amounts shall be paid in a lump sum payment within five days after the end of the six-month period. If Executive dies during the postponement period prior to the payment of benefits, the amounts withheld on account of section 409A shall be paid to the personal representative of Executive’s estate within sixty days after the date of Executive’s death. Payments may only be made under this Agreement upon an event and in a manner permitted by section 409A, to the extent applicable. As used in the Agreement, the term “termination of employment” shall mean Executive’s separation from service with the Company within the meaning of section 409A. In no event may Executive, directly or indirectly, designate the calendar year of a payment. For purposes of section 409A, the right to a series of payments under the Agreement shall be treated as a right to a series of separate payments. All reimbursements and in-kind benefits provided under the Agreement shall be made or provided in accordance with the requirements of section 409A.

23. Governing Law. This Agreement shall be governed by and interpreted under the laws of the State of Ohio without giving effect to any conflict of laws provisions.

IN WITNESS WHEREOF, the undersigned, intending to be legally bound, have executed this Agreement as of the date first above written.

NATIONWIDE MUTUAL INSURANCE COMPANY
By:	/s/ W.G. Jurgensen
Name:	W.G. Jurgensen
Title:	Chief Executive Officer
/s/ Michael C. Keller
Executive

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EX-10.53

Exhibit 10.53

EXECUTIVE SEVERANCE AGREEMENT

This EXECUTIVE SEVERANCE AGREEMENT (the “Agreement”) is entered into as of January 1, 2008, by and between Nationwide Mutual Insurance Company (the “Company”) and Patricia R. Hatler (“Executive”).

WHEREAS, the parties desire to enter into an agreement to reflect Executive’s executive capacities in the Company’s business and to provide for Executive’s employment by the Company, upon the terms and conditions set forth herein.

WHEREAS, Executive has agreed to certain confidentiality, non-competition and non-solicitation covenants contained hereunder, in consideration of the additional benefits provided to Executive under this Agreement.

WHEREAS, certain capitalized terms shall have the meanings given those terms in Section 3 of this Agreement.

WHEREAS, Executive and the Company are parties to an Employment Agreement dated January 1, 2000 (the “Employment Agreement”), and the parties have agreed that this Agreement shall supercede and replace the Employment Agreement.

NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby agree as follows:

1. Employment. The Company hereby agrees to employ Executive, and Executive hereby accepts such employment and agrees to perform Executive’s duties and responsibilities, in accordance with the terms, conditions and provisions hereinafter set forth.

1.1 Employment Term. This Agreement shall be effective as of the date set forth above, and shall continue until December 31, 2008, unless the Agreement is terminated sooner in accordance with Section 2 below. In addition, the term of the Agreement shall automatically renew for periods of one year unless either party gives written notice to the other party, at least 60 days prior to the end of the initial term or at least 60 days prior to the end of any one-year renewal period, that the Agreement shall not be further extended. The period commencing on the effective date and ending on the date on which the term of Executive’s employment under the Agreement shall terminate is hereinafter referred to as the “Employment Term.” The failure of the Company to renew this Agreement shall not be considered a termination of Executive’s employment under this Agreement and shall not give Executive grounds to terminate employment for Good Reason (as defined in Section 3) under this Agreement.

1.2 Duties and Responsibilities. During the Employment Term, Executive shall serve as the Executive Vice President and Chief Legal and Governance Officer of the Company, or in such other executive positions as the Board of Directors of the Company (the “Board”) determines. Executive shall perform all duties and accept all responsibilities incident to such position or as may be reasonably assigned to her by the Chief Executive Officer of the Company or the Board.

1.3 Extent of Service. During the Employment Term, Executive agrees to use Executive’s full and best efforts to carry out Executive’s duties and responsibilities under Section 1.2 hereof with the highest degree of loyalty and the highest standards of care and, consistent with the other provisions of this Agreement, Executive agrees to devote substantially all of Executive’s business time, attention and energy thereto. The foregoing shall not be construed as preventing Executive from making investments in other businesses or enterprises, provided that Executive agrees not to become engaged in any other business activity which, in the reasonable judgment of the Board, is likely to interfere with Executive’s ability to discharge Executive’s duties and responsibilities to the Company. The Executive will not serve on the board of directors of an entity unrelated to the Company (other than a non-profit charitable organization) without the consent of the Board.

1.4 Base Salary. During the Employment Term, for all the services rendered by Executive hereunder, the Company shall pay Executive a base salary (“Base Salary”), at the annual rate in effect on the date of this Agreement, payable in installments at such times as the Company customarily pays its other employees. Executive’s Base Salary shall be reviewed periodically for appropriate increases by the Board (or a committee of the Board) pursuant to the Board’s normal performance review policies for senior level executives.

1.5 Retirement, Welfare and Other Benefit Plans and Programs. During the Employment Term, Executive shall be entitled to participate in all employee retirement and welfare benefit plans and programs made available to the Company’s senior level executives as a group, as such retirement and welfare plans may be in effect from time to time and subject to the eligibility requirements of such plans. During the Employment Term, Executive shall be provided with executive fringe benefits and perquisites under the same terms as those made available to the Company’s senior level executives as a group, as such programs may be in effect from time to time. During the Employment Term, Executive shall be entitled to vacation and sick leave in accordance with the Company’s vacation, holiday and other pay for time not worked policies. Nothing in this Agreement or otherwise shall prevent the Company from amending or terminating any retirement, welfare or other employee benefit plans, programs, policies or perquisites from time to time as the Company deems appropriate.

1.6 Reimbursement of Expenses. During the Employment Term, Executive shall be provided with reimbursement of reasonable expenses related to Executive’s employment by the Company on a basis no less favorable than that which may be authorized from time to time for senior level executives as a group.

1.7 Incentive Compensation. During the Employment Term, Executive shall be entitled to participate in all short-term and long-term incentive programs established by the Company for its senior level executives generally, at levels commensurate with the benefits provided to other senior executives and Executive’s position with the Company. Executive’s incentive compensation shall be subject to the terms of the applicable plans and shall be determined based on Executive’s individual performance and Company performance as determined by the Board (or a committee of the Board).

2. Termination. Executive’s employment shall terminate upon the occurrence of any of the following events:

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2.1 Termination Without Cause. The Company (by action of the Board) may remove Executive at any time without Cause (as defined in Section 3) from the position in which Executive is employed hereunder (in which case the Employment Term shall be deemed to have ended) upon not less than 60 days’ prior written notice pursuant to Section 15 to Executive; provided, however, that, in the event that such notice is given, Executive shall be under no obligation to render any additional services to the Company and shall be allowed to seek other employment, to the extent such other employment is consistent with Executive’s obligations under Section 6.

2.2 Resignation for Good Reason After a Substantial Reorganization. If the Board determines for purposes of this Agreement that a substantial reorganization of the Company has occurred, the Board may establish a period of time during which Executive may elect to resign if an event constituting Good Reason (as defined in Section 3) occurs. In that event, Executive may initiate termination of employment by resigning under this Section 2.2 for Good Reason during the period specified by the Board. Executive shall give the Company not less than 60 days prior written notice pursuant to Section 15 of such resignation, which notice shall be provided to the Company within 60 days following the occurrence of the event giving rise to the Good Reason resignation. A substantial reorganization shall not be considered to have occurred unless the Board specifically determines that a substantial reorganization has occurred for purposes of this Agreement and the Board establishes a time period during which Executive may elect to resign if an event constituting Good Reason occurs. Nothing in this Agreement shall obligate the Board to make any such determination.

2.3 Benefits Payable Upon Termination Without Cause or Resignation for Good Reason After a Substantial Reorganization.

(a) Upon any removal or resignation described in Section 2.1 or 2.2 above, Executive shall be entitled to receive only the amount due to Executive under the Company’s then current severance pay plan for employees, if any. No other payments or benefits shall be due under this Agreement to Executive, but Executive shall be entitled to any benefits accrued or earned in accordance with the terms of any applicable benefit plans and programs of the Company.

(b) Notwithstanding the provisions of Section 2.3(a), in the event of a removal or resignation described in Section 2.1 or 2.2 during the Employment Term, if Executive executes and does not revoke a written release and waiver of claims upon such removal or resignation, in form and substance acceptable to the Company (the “Release”), of any and all claims against the Company and all related parties with respect to all matters arising out of Executive’s employment by the Company, or the termination thereof (other than claims based upon any severance entitlements under the terms of this Agreement or entitlements under any plans or programs of the Company under which Executive has accrued a benefit), Executive shall be entitled to receive the severance benefits described below, in lieu of the payment described in Section 2.3(a).

(i) Executive shall receive a lump sum cash payment equal to two times Executive’s annual Base Salary in effect immediately before the Termination Date

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(including salary reduction amounts of Base Salary under the Company’s benefit plans and programs).

(ii) Executive shall receive Executive’s annual short-term incentive bonus (PIP) for the year in which Executive’s Termination Date occurs, at the time that annual bonuses for the year are paid to other executives, based on the Company’s actual performance for the year, but in an amount not less than Executive’s target annual bonus in effect for the year.

(iii) The Company shall pay Executive a lump sum cash payment equal to the cost that Executive would incur if Executive continued medical, dental and vision coverage under section 4980B of the Code (as defined in Section 3)(“COBRA”) or the Company’s retiree medical plan, if applicable, for Executive, and, where applicable, her spouse and dependents, for the Severance Period (as defined in Section 3). The cash payment shall include a tax gross up to cover Executive’s income and FICA taxes imposed on the payment under this subsection (iii). Executive may elect COBRA continuation coverage according to the terms of the Company’s applicable benefit plans, for the period permitted under such plans.

(iv) Executive shall receive a lump sum payment equal to two times the amount of Executive’s NVA Target Award Opportunity and/or Business Unit Target Award Opportunity, as applicable, under the Nationwide Property and Casualty Long-Term Performance Plan, as amended, the Third Amended and Restated Nationwide Financial Services, Inc. 1996 Long-Term Equity Compensation Plan, or any successor plan in effect for the year in which Executive’s Termination Date occurs. The amount determined under this subsection (iv) shall be paid at the time that NVA or Business Unit awards for the year are paid to other executives, but not later than March 15 after the end of the year in which the Termination Date occurs. The payment under this subsection (iv) shall be paid in lieu of any NVA or Business Unit award under the applicable plan for the year in which Executive’s Termination Date occurs.

(v) Executive’s outstanding stock options and restricted stock with respect to stock of Nationwide Financial Services, Inc. or any Affiliate of the Company shall become vested and exercisable on the Termination Date to the extent that such options and restricted stock would have become vested and exercisable on the next vesting date had Executive remained an employee of the Company. All other unvested stock options and restricted stock shall be forfeited, except to the extent that the applicable grant agreement requires otherwise. No additional grants shall be made to Executive after Executive’s termination of employment.

(vi) Executive shall receive supplemental benefits under this Agreement equal to:

(A) the benefits that Executive would have received under the Nationwide Retirement Plan, Nationwide Supplemental Retirement Plan, Nationwide Excess Benefit Plan, Nationwide Savings Plan, Nationwide Supplemental Defined Contribution Plan and Nationwide Individual Deferred Compensation Plan, as in effect at Executive’s Termination Date, had Executive’s benefits under those Plans been fully vested as of Executive’s Termination Date, reduced by

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(B) the benefits that Executive actually receives under the Nationwide Retirement Plan, Nationwide Supplemental Retirement Plan, Nationwide Excess Benefit Plan, Nationwide Savings Plan, Nationwide Supplemental Defined Contribution Plan and Nationwide Individual Deferred Compensation Plan.

The benefits under this subsection (vi) shall be paid as described in Section 8. The benefits payable under this subsection (vi) and subsection (vii) below shall not result in any duplication of benefits.

(vii) If Executive’s Termination Date occurs within three years of the date on which Executive would have been first eligible to retire under the Nationwide Retirement Plan, Executive shall receive a supplemental benefit under this Agreement equal to:

(A) the benefits that Executive would have received under the Nationwide Retirement Plan, Nationwide Supplemental Retirement Plan and Nationwide Excess Benefit Plan as in effect at Executive’s Termination Date, had Executive earned service and age credit for the period ending on the first to occur of (i) three years after the Termination Date or (ii) the earliest date on which Executive would have been eligible to retire under the Nationwide Retirement Plan, and had Executive been fully vested in Executive’s benefit under such Plans, reduced by

(B) the benefits that Executive actually receives under the Nationwide Retirement Plan, Nationwide Supplemental Retirement Plan and Nationwide Excess Benefit Plan, and the benefits payable under subsection (vi) above with respect to the Nationwide Retirement Plan, Nationwide Supplemental Retirement Plan and Nationwide Excess Benefit Plan.

The benefits under this subsection (vii) shall be paid as described in Section 8. The benefits payable under this subsection (vii) and subsection (vi) above shall not result in any duplication of benefits.

(viii) The Company shall pay Executive a lump sum cash payment equal to the matching contributions that the Company would have made for Executive under the Nationwide Savings Plan and the Nationwide Supplemental Defined Contribution Plan, as in effect at Executive’s Termination Date, as if Executive continued in employment for the Severance Period, receiving compensation at a rate equal to Executive’s covered compensation amount for the calendar year prior to the year in which the Termination Date occurs and as if Executive continued the same rate of contributions to the applicable plans as in effect immediately before Executive’s Termination Date.

(ix) The Company shall cause Executive to receive service and age credit for purposes of eligibility under the Company’s retiree medical plan (but not for Company contributions towards the cost of retiree medical) until the end of the Severance Period, as if Executive had continued in employment during the Severance Period.

(x) During the Severance Period, the Company shall pay or reimburse Executive for the cost of reasonable outplacement assistance services (not to exceed a total of $11,000) provided by any outplacement agency selected by Executive.

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(xi) The Company shall pay Executive a lump sum cash payment equal to the annual value of the financial counseling services provided by the Company to Executive immediately before Executive’s Termination Date.

(xii) Executive shall have the right to retain the computer, printer, fax machine and office furniture that was provided by the Company for use by Executive at Executive’s residence at the Termination Date.

(xiii) Executive shall receive any other amounts earned, accrued or owing but not yet paid under Section 1 above and any other benefits in accordance with the terms of any applicable plans and programs of the Company.

(xiv) Payment of the lump sum benefits described above (other than as described in subsections (ii) and (iv) above) shall be made within 30 days after Executive’s Termination Date (as defined in Section 3), subject to Executive’s execution of an effective Release.

2.4 Retirement or Other Voluntary Termination. Executive may voluntarily terminate employment for any reason, including voluntary retirement, upon 60 days’ prior written notice pursuant to Section 15. In such event, after the effective date of such termination, except as provided in Section 2.2 (with respect to a resignation for Good Reason), no further payments shall be due under this Agreement. However, Executive shall be entitled to any benefits due in accordance with the terms of any applicable benefit plans and programs of the Company.

2.5 Disability. The Company (by action of the Board) may terminate Executive’s employment if Executive has been unable to perform the essential functions of Executive’s position with the Company, with or without reasonable accommodation, by reason of physical or mental incapacity for a period of six consecutive months (“Disability”); provided, however, that the Company shall continue to pay Executive’s Base Salary until the Company acts to terminate Executive’s employment. Executive agrees, in the event of a dispute under this Section 2.5 relating to Executive’s Disability, to submit to a physical examination by a licensed physician selected by the Board. Executive acknowledges that the provisions of this Section 2.5 supersede the employment termination provisions otherwise applied to disabled employees. If Executive’s employment terminates on account of Disability, no further payments shall be due under this Agreement. However, Executive shall be entitled to (i) any benefits due in accordance with the terms of any applicable benefit plans and programs of the Company and (ii) a pro rated bonus for the year in which Executive’s Disability occurs, which bonus shall be calculated (on a prorated basis) and paid according to Section 2.3(b)(ii) above.

2.6 Death. If Executive dies while employed by the Company, the Company shall pay to Executive’s executor, legal representative, administrator or designated beneficiary, as applicable, (i) any amounts earned, accrued or owing but not yet paid under Section 1 above and any benefits accrued or earned under the Company’s benefit plans and programs according to the terms of such plans and (ii) a pro rated bonus for the year in which Executive’s death occurs, which bonus shall be calculated (on a prorated basis) and paid according to Section 2.3(b)(ii) above. Otherwise, the Company shall have no further liability or obligation under this Agreement to Executive’s executors, legal representatives, administrators, heirs or assigns.

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2.7 Cause. The Company (by action of the Board) may terminate Executive’s employment at any time for Cause upon written notice to Executive, in which event all payments under this Agreement shall cease, except for Base Salary to the extent already accrued. Executive shall be entitled to any benefits accrued or earned before Executive’s termination in accordance with the terms of any applicable benefit plans and programs of the Company; provided that Executive shall not be entitled to receive any unpaid short-term or long-term cash incentive payments or unvested options.

3. Definitions. For purposes of this Agreement, the following terms shall have the meanings specified in this Section 3:

(a) “Affiliate” shall mean any subsidiary of the Company, Nationwide Financial Services, Inc. and any of its subsidiaries, and any other entity that, directly or indirectly, through one or more intermediaries, controls, is controlled by or is under common control with the Company, as determined by the Board.

(b) “Cause” shall mean any of the following grounds for termination of Executive’s employment:

(i) Executive shall have been convicted of a felony;

(ii) Executive neglects, refuses or fails to perform her material duties to the Company (other than a failure resulting from Executive’s incapacity due to physical or mental illness), which failure has continued for a period of at least 30 days after a written notice of demand for substantial performance, signed by a duly authorized officer of the Company, has been delivered to Executive specifying the manner in which Executive has failed substantially to perform;

(iii) Executive engages in misconduct in the performance of Executive’s duties;

(iv) Executive engages in public conduct that is harmful to the reputation of the Company;

(v) Executive breaches any written non-competition, non-disclosure or non-solicitation agreement in effect with the Company, including without limitation the provisions of Section 5 or 6 of this Agreement; or

(vi) Executive breaches the Company’s written code of business conduct and ethics.

(c) “Code” shall mean the Internal Revenue Code of 1986, as amended.

(d) “Employer” shall mean the Company, its Affiliates and their successors.

(e) “Good Reason” shall mean the occurrence of any of the following events, without Executive’s consent, except in connection with the termination of Executive’s

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employment for Disability, Cause, as a result of death or by Executive other than for Good Reason and except as provided in the last sentence of this subsection (e):

(i) A material diminution in Executive’s authority, duties or responsibilities, as reasonably determined by the Board;

(ii) A material change in the geographic location at which Executive must perform services under this Agreement (which, for purposes of this Agreement, means relocation of the offices of the Company at which Executive is principally employed to a location more than 50 miles from the location of such offices immediately prior to the relocation);

(iii) A material diminution in Executive’s Base Salary; provided, however, that a change in Base Salary for all senior executives of the Company, in which Executive is treated similarly as all other executives of a comparable responsibility level, shall not constitute Good Reason under this Agreement; or

(iv) Any action or inaction that constitutes a material breach by the Company of this Agreement, including the failure of the Company to obtain from its successors the express assumption and agreement required under Section 16 hereof.

Notwithstanding the foregoing, Executive shall not have Good Reason for termination if, within 60 days after the date on which Executive gives notice of her termination, as provided in Section 2.2 the Company corrects the action or failure to act that constitutes the grounds for termination for Good Reason as set forth in Executive’s notice of termination. If the Company does not correct the action or failure to act, Executive must terminate her employment for Good Reason within 30 days after the end of the cure period, in order for the termination to be considered a Good Reason termination.

(f) “Severance Period” shall mean the period beginning on Executive’s Termination Date and ending two years after the Termination Date.

(g) “Termination Date” shall mean the effective date of the termination of Executive’s employment relationship with the Company pursuant to this Agreement.

4. Notice of Termination. Any termination of Executive’s employment shall be communicated by a written notice of termination to the other party hereto given in accordance with Section 15. The notice of termination shall (i) indicate the specific termination provision in this Agreement relied upon, (ii) briefly summarize the facts and circumstances deemed to provide a basis for a termination of employment and the applicable provision hereof, and (iii) specify the Termination Date in accordance with the requirements of this Agreement.

5. Confidential Information. Executive recognizes and acknowledges that, by reason of Executive’s employment by and service to the Employer (as defined in Section 3) during and, if applicable, after the Employment Term, Executive will continue to have access to certain confidential and proprietary information relating to the business of the Employer, which may include, but is not limited to, trade secrets, trade “know-how”, customer information, supplier information, cost and pricing information, marketing and sales techniques, strategies and

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programs, computer programs and software and financial information (collectively referred to as “Confidential Information”). Executive acknowledges that such Confidential Information is a valuable and unique asset of the Employer and Executive covenants that Executive will not, unless expressly authorized in writing by the Board, at any time during the course of Executive’s employment, use any Confidential Information or divulge or disclose any Confidential Information to any person, firm or corporation except in connection with the performance of Executive’s duties for the Employer and in a manner consistent with the Employer’s policies regarding Confidential Information. Executive also covenants that at any time after the termination of such employment, directly or indirectly, Executive will not use any Confidential Information or divulge or disclose any Confidential Information to any person, firm or corporation, unless such information is in the public domain through no fault of Executive or except when required to do so by law or legal process, in which case Executive will inform the Employer in writing promptly of such required disclosure, but in any event at least two business days prior to disclosure. All written Confidential Information (including, without limitation, in any computer or other electronic format) which comes into Executive’s possession during the course of Executive’s employment shall remain the property of the Employer. Except as required in the performance of Executive’s duties for the Employer, or unless expressly authorized in writing by the Board, Executive shall not remove any written Confidential Information from the Employer’s premises, except in connection with the performance of Executive’s duties for the Employer and in a manner consistent with the Employer’s policies regarding Confidential Information. Upon termination of Executive’s employment, Executive agrees immediately to return to the Employer all written Confidential Information in Executive’s possession.

6. Non-Competition; Non-Solicitation.

(a) During Executive’s employment by the Employer and for a period of one year after Executive’s termination of employment for any reason, Executive will not, except with the prior written consent of the Board, or except as otherwise provided below, directly or indirectly, own, manage, operate, join, control, finance or participate in the ownership, management, operation, control or financing of, or be connected as an officer, director, employee, partner, principal, agent, representative, consultant or otherwise with, or use or permit Executive’s name to be used in connection with, any business or enterprise which is engaged in any financial services, insurance or other business that is competitive with any business or enterprise in which the Employer is engaged, anywhere in the world, during Executive’s employment or (with respect to the application of this covenant after Executive’s termination of employment) during the two year period preceding Executive’s termination of employment. Notwithstanding the foregoing, the provisions of the immediately preceding sentence shall not prevent Executive from acting as an attorney for any such business or enterprise after Executive’s termination of employment with the Employer, and the provisions of this Section 6 shall not in any way restrict the rights of Executive, as an attorney, to practice law after the termination of Executive’s employment with the Employer. The parties acknowledge that the Employer engages in its business on a worldwide basis, and Executive acknowledges that her responsibilities extend to the Employer’s worldwide operations.

(b) The foregoing restrictions shall not be construed to prohibit the ownership by Executive of less than five percent of any class of securities of any corporation which is

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engaged in any of the foregoing businesses having a class of securities registered pursuant to the Securities Exchange Act of 1934, as amended, provided that such ownership represents a passive investment and that neither Executive nor any group of persons including Executive in any way, either directly or indirectly, manages or exercises control of any such corporation, guarantees any of its financial obligations, otherwise takes any part in its business, other than exercising Executive’s rights as a shareholder, or seeks to do any of the foregoing.

(c) Executive further covenants and agrees that during Executive’s employment by the Employer and for a period of one year thereafter, Executive will not, except with the prior written consent of the Board, directly or indirectly, solicit or hire, or encourage the solicitation or hiring of, any person who was a managerial or higher level employee of the Employer at any time during the term of Executive’s employment by the Employer by any employer other than the Employer for any position as an employee, independent contractor, consultant or otherwise. The foregoing covenant of Executive shall not apply to any person after 12 months have elapsed after the date on which such person’s employment by the Employer has terminated.

(d) The covenants described in this Section 6 shall continue to apply during the period specified herein after Executive’s termination of employment for any reason, without regard to whether Executive executes a Release or receives any severance benefits as a result of such termination. If Executive breaches any of the covenants described in this Section 6, the applicable period during which the covenant applies shall be tolled during the period of the breach. Without limiting the foregoing, the severance benefits provided under this Agreement are specifically designated as additional consideration for the covenants described in Section 5 and this Section 6.

7. Equitable Relief.

(a) Executive acknowledges and agrees that the restrictions contained in Sections 5 and 6 are reasonable and necessary to protect and preserve the legitimate interests, properties, goodwill and business of the Employer, that the Employer would not have entered into this Agreement in the absence of such restrictions and that irreparable injury will be suffered by the Employer should Executive breach any of the provisions of those Sections. Executive represents and acknowledges that (i) Executive has been advised by the Employer to consult Executive’s own legal counsel in respect of this Agreement, and (ii) Executive has had full opportunity, prior to execution of this Agreement, to review thoroughly this Agreement with Executive’s counsel.

(b) Executive further acknowledges and agrees that a breach of any of the restrictions in Sections 5 and 6 cannot be adequately compensated by monetary damages. Executive agrees that the Employer shall be entitled to preliminary and permanent injunctive relief, without the necessity of proving actual damages, as well as an equitable accounting of all earnings, profits and other benefits arising from any violation of Section 5 or 6 hereof, which rights shall be cumulative and in addition to any other rights or remedies to which the Employer may be entitled. In the event that any of the provisions of Section 5 or 6 hereof should ever be adjudicated to exceed the time, geographic, service, or other limitations permitted by applicable law in any jurisdiction, it is the intention of the parties that the provision shall be amended to the

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extent of the maximum time, geographic, service, or other limitations permitted by applicable law, that such amendment shall apply only within the jurisdiction of the court that made such adjudication and that the provision otherwise be enforced to the maximum extent permitted by law.

(c) Notwithstanding anything in this Agreement to the contrary, if Executive breaches any of Executive’s obligations under Section 5 or 6 hereof, the Company shall thereafter be obligated only for the compensation and other benefits provided in any Company benefit plans, policies or practices then applicable to Executive in accordance with the terms thereof, and all payments under Section 2 of this Agreement shall cease.

(d) Executive irrevocably and unconditionally (i) agrees that any suit, action or other legal proceeding arising out of Section 5 or 6 hereof, including without limitation, any action commenced by the Employer for preliminary and permanent injunctive relief and other equitable relief, may be brought in a United States District Court for Ohio, or if such court does not have jurisdiction or will not accept jurisdiction, in any court of general jurisdiction in Columbus, Ohio, (ii) consents to the non-exclusive jurisdiction of any such court in any such suit, action or proceeding, and (iii) waives any objection which Executive may have to the laying of venue of any such suit, action or proceeding in any such court. Executive also irrevocably and unconditionally consents to the service of any process, pleadings, notices or other papers in a manner permitted by the notice provisions of Section 15 hereof.

(e) Executive agrees that for a period of three years following the termination of Executive’s employment for any reason, Executive will provide, and at all times after the date hereof the Employer may similarly provide, a copy of Sections 5 and 6 hereof to any business or enterprise (i) which Executive may directly or indirectly own, manage, operate, finance, join, control or in which Executive may participate in the ownership, management, operation, financing, or control, or (ii) with which Executive may be connected as an officer, director, employee, partner, principal, agent, representative, consultant or otherwise, or in connection with which Executive may use or permit to be used Executive’s name; provided, however, that this provision shall not apply in respect of Section 6 after expiration of the time periods set forth therein.

8. Payment of Supplemental Benefits. The supplemental benefits under Sections 2.3(b)(vi) and (vii) (the “Enhanced Benefits”) shall be paid as follows:

(a) The Enhanced Benefits that are calculated with respect to the Nationwide Retirement Plan and Nationwide Supplemental Retirement Plan shall be paid in the same form and the same time as Executive’s benefits under the Nationwide Supplemental Retirement Plan are paid (or under the default provisions of the Nationwide Supplemental Retirement Plan if Executive is not otherwise entitled to receive a benefit under that Plan).

(b) The Enhanced Benefits that are calculated with respect to the Nationwide Excess Benefit Plan shall be paid in the same form and at the same time as Executive’s benefits under the Nationwide Excess Benefit Plan are paid (or under the default provisions of the Nationwide Excess Benefit Plan if Executive is not otherwise entitled to receive a benefit under that Plan).

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(c) The Enhanced Benefits that are calculated with respect to the Nationwide Savings Plan and Nationwide Supplemental Defined Contribution Plan shall be paid in the same form and at the same time as Executive’s benefits under the Nationwide Supplemental Defined Contribution Plan are paid.

(d) The Enhanced Benefits that are calculated with respect to the Nationwide Individual Deferred Compensation Retirement Plan shall be paid in the same form and the same time as Executive’s benefits under the Nationwide Individual Deferred Compensation Plan are paid.

9. Indemnification. The Company shall indemnify Executive with respect to Executive’s actions in the performance of Executive’s duties as set forth in Section 1.2 to the fullest extent permitted by the Company’s Amended and Restated Code of Bylaws as in effect from time to time.

10. Non-Exclusivity of Rights; Resignation from Boards.

(a) Nothing in this Agreement shall prevent or limit Executive’s continuing or future participation in or rights under any benefit, bonus, incentive or other plan or program provided by the Company and for which Executive may qualify; provided, however, that if Executive becomes entitled to and receives the payments described in Section 2.3(b) of this Agreement, Executive hereby waives Executive’s right to receive payments under any severance plan or similar program applicable to all employees of the Company.

(b) If Executive’s employment with the Company terminates for any reason, Executive shall immediately resign from all boards of directors of the Company, any Affiliates and any other entities for which Executive serves as a representative of the Company.

11. Survivorship. The respective rights and obligations of the parties under this Agreement (including without limitation Sections 5, 6 and 7) shall survive any termination of Executive’s employment to the extent necessary to the intended preservation of such rights and obligations.

12. Mitigation. Executive shall not be required to mitigate the amount of any payment or benefit provided for in this Agreement by seeking other employment or otherwise, and there shall be no offset against amounts due Executive under this Agreement on account of any remuneration attributable to any subsequent employment that Executive may obtain.

13. Benefit Plans; Outstanding Awards. All references in this Agreement to specific retirement or other benefit plans of the Company shall be deemed to include any successor retirement or other benefit plans. The terms of Executive’s outstanding stock options, restricted stock and long-term incentive awards are hereby amended to provide that, without adversely affecting any rights that Executive has under such award agreements, the award agreements are amended to provide for the accelerated vesting and payments upon termination of employment as provided in Section 2.3(b) of this Agreement, to the extent consistent with the applicable plans. In all respects not amended, the provisions of such outstanding awards shall remain in effect according to their terms.

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14. Arbitration; Expenses. In the event of any dispute under the provisions of this Agreement, other than a dispute in which the primary relief sought is an equitable remedy such as an injunction, the parties shall be required to have the dispute, controversy or claim settled by arbitration in Columbus, Ohio in accordance with the National Rules for the Resolution of Employment Disputes then in effect of the American Arbitration Association, before a panel of three arbitrators, one of whom shall be selected by the Company, one of whom shall be selected by Executive, and the third of whom shall be selected by the arbitrators selected by the Company and Executive. Any award entered by the arbitrators shall be final, binding and nonappealable and judgment may be entered thereon by either party in accordance with applicable law in any court of competent jurisdiction. This arbitration provision shall be specifically enforceable. The arbitrators shall have no authority to modify any provision of this Agreement or to award a remedy for a dispute involving this Agreement other than a benefit specifically provided under or by virtue of the Agreement. In the event of a dispute, each party shall be responsible for its own expenses (including attorneys’ fees) relating to the conduct of the arbitration, and the parties shall share equally the fees of the American Arbitration Association. Each party shall give the other party written notice as described in Section 16 of its intent to submit a claim under this Agreement to arbitration and a description of the basis of such claim, within six months after the event giving rise to the claim occurs.

15. Notices. All notices and other communications required or permitted under this Agreement or necessary or convenient in connection herewith shall be in writing and shall be deemed to have been given when hand delivered or mailed by registered or certified mail, as follows (provided that notice of change of address shall be deemed given only when received):

If to the Company, to:

Nationwide Mutual Insurance Company

One Nationwide Plaza, 1-35-03

Columbus, OH 43215

Attention:  Executive Vice President and Chief Administrative Officer

With a required copy to:

Morgan, Lewis & Bockius LLP

1701 Market Street

Philadelphia, PA 19103-2921

Attention: Mims Maynard Zabriskie

If to Executive, to:

Patricia R. Hatler

17 N. Parkview Avenue

Bexley, OH 43209

or to such other names or addresses as the Company or Executive, as the case may be, shall designate by notice to each other person entitled to receive notices in the manner specified in this Section.

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16. Contents of Agreement; Amendment and Assignment.

(a) This Agreement sets forth the entire understanding between the parties hereto with respect to the subject matter hereof and cannot be changed, modified, extended or terminated except upon written amendment approved by the Board and executed on its behalf by a duly authorized officer of the Company and by Executive. This Agreement supercedes and replaces the Employment Agreement in its entirety.

(b) All of the terms and provisions of this Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective heirs, executors, administrators, legal representatives, successors and assigns of the parties hereto, except that the duties and responsibilities of Executive under this Agreement are of a personal nature and shall not be assignable or delegatable in whole or in part by Executive. The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation, reorganization or otherwise) to all or substantially all of the business or assets of the Company, within 15 days of such succession, expressly to assume and agree to perform this Agreement in the same manner and to the same extent as the Company would be required to perform if no such succession had taken place.

17. Severability. If any provision of this Agreement or application thereof to anyone or under any circumstances is adjudicated to be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect any other provision or application of this Agreement which can be given effect without the invalid or unenforceable provision or application and shall not invalidate or render unenforceable such provision or application in any other jurisdiction. If any provision is held void, invalid or unenforceable with respect to particular circumstances, it shall nevertheless remain in full force and effect in all other circumstances.

18. Remedies Cumulative; No Waiver. No remedy conferred upon a party by this Agreement is intended to be exclusive of any other remedy, and each and every such remedy shall be cumulative and shall be in addition to any other remedy given under this Agreement or now or hereafter existing at law or in equity. No delay or omission by a party in exercising any right, remedy or power under this Agreement or existing at law or in equity shall be construed as a waiver thereof, and any such right, remedy or power may be exercised by such party from time to time and as often as may be deemed expedient or necessary by such party in its sole discretion.

19. Beneficiaries/References. Executive shall be entitled, to the extent permitted under any applicable law, to select and change a beneficiary or beneficiaries to receive any compensation or benefit payable under this Agreement following Executive’s death by giving the Company written notice thereof. In the event of Executive’s death or a judicial determination of Executive’s incompetence, reference in this Agreement to Executive shall be deemed, where appropriate, to refer to Executive’s beneficiary, estate or other legal representative.

20. Miscellaneous. All section headings used in this Agreement are for convenience only. This Agreement may be executed in counterparts, each of which is an original. It shall not

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be necessary in making proof of this Agreement or any counterpart hereof to produce or account for any of the other counterparts.

21. Withholding Taxes. All payments under this Agreement shall be made subject to applicable tax withholding, and the Company shall withhold from any payments under this Agreement all federal, state and local taxes as the Company is required to withhold pursuant to any law or governmental rule or regulation. Except as specifically provided otherwise in this Agreement, Executive shall be responsible for all taxes applicable to amounts payable under this Agreement and payments under this Agreement shall not be grossed up for taxes.

22. Section 409A of the Code. This Agreement is intended to comply with section 409A of the Code and its corresponding regulations, or an exemption, to the extent applicable. Severance benefits under the Agreement are intended to be exempt from section 409A under the “short term deferral” exemption. Notwithstanding anything in this Agreement to the contrary, if required by section 409A, if Executive is considered a “specified executive” for purposes of section 409A and if payment of any amounts under this Agreement is required to be delayed for a period of six months after separation from service pursuant to section 409A, payment of such amounts shall be delayed as required by section 409A, and the accumulated amounts shall be paid in a lump sum payment within five days after the end of the six-month period. If Executive dies during the postponement period prior to the payment of benefits, the amounts withheld on account of section 409A shall be paid to the personal representative of Executive’s estate within sixty days after the date of Executive’s death. Payments may only be made under this Agreement upon an event and in a manner permitted by section 409A, to the extent applicable. As used in the Agreement, the term “termination of employment” shall mean Executive’s separation from service with the Company within the meaning of section 409A. In no event may Executive, directly or indirectly, designate the calendar year of a payment. For purposes of section 409A, the right to a series of payments under the Agreement shall be treated as a right to a series of separate payments. All reimbursements and in-kind benefits provided under the Agreement shall be made or provided in accordance with the requirements of section 409A.

23. Governing Law. This Agreement shall be governed by and interpreted under the laws of the State of Ohio without giving effect to any conflict of laws provisions.

IN WITNESS WHEREOF, the undersigned, intending to be legally bound, have executed this Agreement as of the date first above written.

NATIONWIDE MUTUAL INSURANCE COMPANY
By:	/s/ W.G. Jurgensen
Name:	W.G. Jurgensen
Title:	Chief Executive Officer
/s/ Patricia R. Hatler
Executive

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EX-10.55

Exhibit 10.55

EXECUTIVE SEVERANCE AGREEMENT

This EXECUTIVE SEVERANCE AGREEMENT (the “Agreement”) is entered into as of January 1, 2008, by and between Nationwide Mutual Insurance Company (the “Company”) and Stephen S. Rasmussen (“Executive”).

WHEREAS, the parties desire to enter into an agreement to reflect Executive’s executive capacities in the Company’s business and to provide for Executive’s employment by the Company, upon the terms and conditions set forth herein.

WHEREAS, Executive has agreed to certain confidentiality, non-competition and non-solicitation covenants contained hereunder, in consideration of the additional benefits provided to Executive under this Agreement.

WHEREAS, certain capitalized terms shall have the meanings given those terms in Section 3 of this Agreement.

WHEREAS, Executive and the Company are parties to an Employment Agreement dated January 1, 2002 (the “Employment Agreement”), and the parties have agreed that this Agreement shall supercede and replace the Employment Agreement.

NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby agree as follows:

1. Employment. The Company hereby agrees to employ Executive, and Executive hereby accepts such employment and agrees to perform Executive’s duties and responsibilities, in accordance with the terms, conditions and provisions hereinafter set forth.

1.1 Employment Term. This Agreement shall be effective as of the date set forth above, and shall continue until December 31, 2008, unless the Agreement is terminated sooner in accordance with Section 2 below. In addition, the term of the Agreement shall automatically renew for periods of one year unless either party gives written notice to the other party, at least 60 days prior to the end of the initial term or at least 60 days prior to the end of any one-year renewal period, that the Agreement shall not be further extended. The period commencing on the effective date and ending on the date on which the term of Executive’s employment under the Agreement shall terminate is hereinafter referred to as the “Employment Term.” The failure of the Company to renew this Agreement shall not be considered a termination of Executive’s employment under this Agreement and shall not give Executive grounds to terminate employment for Good Reason (as defined in Section 3) under this Agreement.

1.2 Duties and Responsibilities. During the Employment Term, Executive shall serve as the President and Chief Operating Officer of Property Casualty Insurance Operations, or in such other executive positions as the Board of Directors of the Company (the “Board”) determines. Executive shall perform all duties and accept all responsibilities incident to such position or as may be reasonably assigned to him by the Chief Executive Officer of the Company or the Board.

1.3 Extent of Service. During the Employment Term, Executive agrees to use Executive’s full and best efforts to carry out Executive’s duties and responsibilities under Section 1.2 hereof with the highest degree of loyalty and the highest standards of care and, consistent with the other provisions of this Agreement, Executive agrees to devote substantially all of Executive’s business time, attention and energy thereto. The foregoing shall not be construed as preventing Executive from making investments in other businesses or enterprises, provided that Executive agrees not to become engaged in any other business activity which, in the reasonable judgment of the Board, is likely to interfere with Executive’s ability to discharge Executive’s duties and responsibilities to the Company. The Executive will not serve on the board of directors of an entity unrelated to the Company (other than a non-profit charitable organization) without the consent of the Board.

1.4 Base Salary. During the Employment Term, for all the services rendered by Executive hereunder, the Company shall pay Executive a base salary (“Base Salary”), at the annual rate in effect on the date of this Agreement, payable in installments at such times as the Company customarily pays its other employees. Executive’s Base Salary shall be reviewed periodically for appropriate increases by the Board (or a committee of the Board) pursuant to the Board’s normal performance review policies for senior level executives.

1.5 Retirement, Welfare and Other Benefit Plans and Programs. During the Employment Term, Executive shall be entitled to participate in all employee retirement and welfare benefit plans and programs made available to the Company’s senior level executives as a group, as such retirement and welfare plans may be in effect from time to time and subject to the eligibility requirements of such plans. During the Employment Term, Executive shall be provided with executive fringe benefits and perquisites under the same terms as those made available to the Company’s senior level executives as a group, as such programs may be in effect from time to time. During the Employment Term, Executive shall be entitled to vacation and sick leave in accordance with the Company’s vacation, holiday and other pay for time not worked policies. Nothing in this Agreement or otherwise shall prevent the Company from amending or terminating any retirement, welfare or other employee benefit plans, programs, policies or perquisites from time to time as the Company deems appropriate.

1.6 Reimbursement of Expenses. During the Employment Term, Executive shall be provided with reimbursement of reasonable expenses related to Executive’s employment by the Company on a basis no less favorable than that which may be authorized from time to time for senior level executives as a group.

1.7 Incentive Compensation. During the Employment Term, Executive shall be entitled to participate in all short-term and long-term incentive programs established by the Company for its senior level executives generally, at levels commensurate with the benefits provided to other senior executives and Executive’s position with the Company. Executive’s incentive compensation shall be subject to the terms of the applicable plans and shall be determined based on Executive’s individual performance and Company performance as determined by the Board (or a committee of the Board).

2. Termination. Executive’s employment shall terminate upon the occurrence of any of the following events:

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2.1 Termination Without Cause. The Company (by action of the Board) may remove Executive at any time without Cause (as defined in Section 3) from the position in which Executive is employed hereunder (in which case the Employment Term shall be deemed to have ended) upon not less than 60 days’ prior written notice pursuant to Section 15 to Executive; provided, however, that, in the event that such notice is given, Executive shall be under no obligation to render any additional services to the Company and shall be allowed to seek other employment, to the extent such other employment is consistent with Executive’s obligations under Section 6.

2.2 Resignation for Good Reason After a Substantial Reorganization. If the Board determines for purposes of this Agreement that a substantial reorganization of the Company has occurred, the Board may establish a period of time during which Executive may elect to resign if an event constituting Good Reason (as defined in Section 3) occurs. In that event, Executive may initiate termination of employment by resigning under this Section 2.2 for Good Reason during the period specified by the Board. Executive shall give the Company not less than 60 days prior written notice pursuant to Section 15 of such resignation, which notice shall be provided to the Company within 60 days following the occurrence of the event giving rise to the Good Reason resignation. A substantial reorganization shall not be considered to have occurred unless the Board specifically determines that a substantial reorganization has occurred for purposes of this Agreement and the Board establishes a time period during which Executive may elect to resign if an event constituting Good Reason occurs. Nothing in this Agreement shall obligate the Board to make any such determination.

2.3 Benefits Payable Upon Termination Without Cause or Resignation for Good Reason After a Substantial Reorganization.

(a) Upon any removal or resignation described in Section 2.1 or 2.2 above, Executive shall be entitled to receive only the amount due to Executive under the Company’s then current severance pay plan for employees, if any. No other payments or benefits shall be due under this Agreement to Executive, but Executive shall be entitled to any benefits accrued or earned in accordance with the terms of any applicable benefit plans and programs of the Company.

(b) Notwithstanding the provisions of Section 2.3(a), in the event of a removal or resignation described in Section 2.1 or 2.2 during the Employment Term, if Executive executes and does not revoke a written release and waiver of claims upon such removal or resignation, in form and substance acceptable to the Company (the “Release”), of any and all claims against the Company and all related parties with respect to all matters arising out of Executive’s employment by the Company, or the termination thereof (other than claims based upon any severance entitlements under the terms of this Agreement or entitlements under any plans or programs of the Company under which Executive has accrued a benefit), Executive shall be entitled to receive the severance benefits described below, in lieu of the payment described in Section 2.3(a).

(i) Executive shall receive a lump sum cash payment equal to two times Executive’s annual Base Salary in effect immediately before the Termination Date

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(including salary reduction amounts of Base Salary under the Company’s benefit plans and programs).

(ii) Executive shall receive Executive’s annual short-term incentive bonus (PIP) for the year in which Executive’s Termination Date occurs, at the time that annual bonuses for the year are paid to other executives, based on the Company’s actual performance for the year, but in an amount not less than Executive’s target annual bonus in effect for the year.

(iii) The Company shall pay Executive a lump sum cash payment equal to the cost that Executive would incur if Executive continued medical, dental and vision coverage under section 4980B of the Code (as defined in Section 3)(“COBRA”) or the Company’s retiree medical plan, if applicable, for Executive, and, where applicable, his or her spouse and dependents, for the Severance Period (as defined in Section 3). The cash payment shall include a tax gross up to cover Executive’s income and FICA taxes imposed on the payment under this subsection (iii). Executive may elect COBRA continuation coverage according to the terms of the Company’s applicable benefit plans, for the period permitted under such plans.

(iv) Executive shall receive a lump sum payment equal to two times the amount of Executive’s NVA Target Award Opportunity and/or Business Unit Target Award Opportunity, as applicable, under the Nationwide Property and Casualty Long-Term Performance Plan, as amended, the Third Amended and Restated Nationwide Financial Services, Inc. 1996 Long-Term Equity Compensation Plan, or any successor plan in effect for the year in which Executive’s Termination Date occurs. The amount determined under this subsection (iv) shall be paid at the time that NVA or Business Unit awards for the year are paid to other executives, but not later than March 15 after the end of the year in which the Termination Date occurs. The payment under this subsection (iv) shall be paid in lieu of any NVA or Business Unit award under the applicable plan for the year in which Executive’s Termination Date occurs.

(v) Executive’s outstanding stock options and restricted stock with respect to stock of Nationwide Financial Services, Inc. or any Affiliate of the Company shall become vested and exercisable on the Termination Date to the extent that such options and restricted stock would have become vested and exercisable on the next vesting date had Executive remained an employee of the Company. All other unvested stock options and restricted stock shall be forfeited, except to the extent that the applicable grant agreement requires otherwise. No additional grants shall be made to Executive after Executive’s termination of employment.

(vi) Executive shall receive supplemental benefits under this Agreement equal to:

(A) the benefits that Executive would have received under the Nationwide Retirement Plan, Nationwide Supplemental Retirement Plan, Nationwide Excess Benefit Plan, Nationwide Savings Plan, Nationwide Supplemental Defined Contribution Plan and Nationwide Individual Deferred Compensation Plan, as in effect at Executive’s Termination Date, had Executive’s benefits under those Plans been fully vested as of Executive’s Termination Date, reduced by

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(B) the benefits that Executive actually receives under the Nationwide Retirement Plan, Nationwide Supplemental Retirement Plan, Nationwide Excess Benefit Plan, Nationwide Savings Plan, Nationwide Supplemental Defined Contribution Plan and Nationwide Individual Deferred Compensation Plan.

The benefits under this subsection (vi) shall be paid as described in Section 8. The benefits payable under this subsection (vi) and subsection (vii) below shall not result in any duplication of benefits.

(vii) If Executive’s Termination Date occurs within three years of the date on which Executive would have been first eligible to retire under the Nationwide Retirement Plan, Executive shall receive a supplemental benefit under this Agreement equal to:

(A) the benefits that Executive would have received under the Nationwide Retirement Plan, Nationwide Supplemental Retirement Plan and Nationwide Excess Benefit Plan as in effect at Executive’s Termination Date, had Executive earned service and age credit for the period ending on the first to occur of (i) three years after the Termination Date or (ii) the earliest date on which Executive would have been eligible to retire under the Nationwide Retirement Plan, and had Executive been fully vested in Executive’s benefit under such Plans, reduced by

(B) the benefits that Executive actually receives under the Nationwide Retirement Plan, Nationwide Supplemental Retirement Plan and Nationwide Excess Benefit Plan, and the benefits payable under subsection (vi) above with respect to the Nationwide Retirement Plan, Nationwide Supplemental Retirement Plan and Nationwide Excess Benefit Plan.

The benefits under this subsection (vii) shall be paid as described in Section 8. The benefits payable under this subsection (vii) and subsection (vi) above shall not result in any duplication of benefits.

(viii) The Company shall pay Executive a lump sum cash payment equal to the matching contributions that the Company would have made for Executive under the Nationwide Savings Plan and the Nationwide Supplemental Defined Contribution Plan, as in effect at Executive’s Termination Date, as if Executive continued in employment for the Severance Period, receiving compensation at a rate equal to Executive’s covered compensation amount for the calendar year prior to the year in which the Termination Date occurs and as if Executive continued the same rate of contributions to the applicable plans as in effect immediately before Executive’s Termination Date.

(ix) The Company shall cause Executive to receive service and age credit for purposes of eligibility under the Company’s retiree medical plan (but not for Company contributions towards the cost of retiree medical) until the end of the Severance Period, as if Executive had continued in employment during the Severance Period.

(x) During the Severance Period, the Company shall pay or reimburse Executive for the cost of reasonable outplacement assistance services (not to exceed a total of $11,000) provided by any outplacement agency selected by Executive.

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(xi) The Company shall pay Executive a lump sum cash payment equal to the annual value of the financial counseling services provided by the Company to Executive immediately before Executive’s Termination Date.

(xii) Executive shall have the right to retain the computer, printer, fax machine and office furniture that was provided by the Company for use by Executive at Executive’s residence at the Termination Date.

(xiii) Executive shall receive any other amounts earned, accrued or owing but not yet paid under Section 1 above and any other benefits in accordance with the terms of any applicable plans and programs of the Company.

(xiv) Payment of the lump sum benefits described above (other than as described in subsections (ii) and (iv) above) shall be made within 30 days after Executive’s Termination Date (as defined in Section 3), subject to Executive’s execution of an effective Release.

2.4 Retirement or Other Voluntary Termination. Executive may voluntarily terminate employment for any reason, including voluntary retirement, upon 60 days’ prior written notice pursuant to Section 15. In such event, after the effective date of such termination, except as provided in Section 2.2 (with respect to a resignation for Good Reason), no further payments shall be due under this Agreement. However, Executive shall be entitled to any benefits due in accordance with the terms of any applicable benefit plans and programs of the Company.

2.5 Disability. The Company (by action of the Board) may terminate Executive’s employment if Executive has been unable to perform the essential functions of Executive’s position with the Company, with or without reasonable accommodation, by reason of physical or mental incapacity for a period of six consecutive months (“Disability”); provided, however, that the Company shall continue to pay Executive’s Base Salary until the Company acts to terminate Executive’s employment. Executive agrees, in the event of a dispute under this Section 2.5 relating to Executive’s Disability, to submit to a physical examination by a licensed physician selected by the Board. Executive acknowledges that the provisions of this Section 2.5 supersede the employment termination provisions otherwise applied to disabled employees. If Executive’s employment terminates on account of Disability, no further payments shall be due under this Agreement. However, Executive shall be entitled to (i) any benefits due in accordance with the terms of any applicable benefit plans and programs of the Company and (ii) a pro rated bonus for the year in which Executive’s Disability occurs, which bonus shall be calculated (on a prorated basis) and paid according to Section 2.3(b)(ii) above.

2.6 Death. If Executive dies while employed by the Company, the Company shall pay to Executive’s executor, legal representative, administrator or designated beneficiary, as applicable, (i) any amounts earned, accrued or owing but not yet paid under Section 1 above and any benefits accrued or earned under the Company’s benefit plans and programs according to the terms of such plans and (ii) a pro rated bonus for the year in which Executive’s death occurs, which bonus shall be calculated (on a prorated basis) and paid according to Section 2.3(b)(ii) above. Otherwise, the Company shall have no further liability or obligation under this Agreement to Executive’s executors, legal representatives, administrators, heirs or assigns.

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2.7 Cause. The Company (by action of the Board) may terminate Executive’s employment at any time for Cause upon written notice to Executive, in which event all payments under this Agreement shall cease, except for Base Salary to the extent already accrued. Executive shall be entitled to any benefits accrued or earned before Executive’s termination in accordance with the terms of any applicable benefit plans and programs of the Company; provided that Executive shall not be entitled to receive any unpaid short-term or long-term cash incentive payments or unvested options.

3. Definitions. For purposes of this Agreement, the following terms shall have the meanings specified in this Section 3:

(a) “Affiliate” shall mean any subsidiary of the Company, Nationwide Financial Services, Inc. and any of its subsidiaries, and any other entity that, directly or indirectly, through one or more intermediaries, controls, is controlled by or is under common control with the Company, as determined by the Board.

(b) “Cause” shall mean any of the following grounds for termination of Executive’s employment:

(i) Executive shall have been convicted of a felony;

(ii) Executive neglects, refuses or fails to perform his or her material duties to the Company (other than a failure resulting from Executive’s incapacity due to physical or mental illness), which failure has continued for a period of at least 30 days after a written notice of demand for substantial performance, signed by a duly authorized officer of the Company, has been delivered to Executive specifying the manner in which Executive has failed substantially to perform;

(iii) Executive engages in misconduct in the performance of Executive’s duties;

(iv) Executive engages in public conduct that is harmful to the reputation of the Company;

(v) Executive breaches any written non-competition, non-disclosure or non-solicitation agreement in effect with the Company, including without limitation the provisions of Section 5 or 6 of this Agreement; or

(vi) Executive breaches the Company’s written code of business conduct and ethics.

(c) “Code” shall mean the Internal Revenue Code of 1986, as amended.

(d) “Employer” shall mean the Company, its Affiliates and their successors.

(e) “Good Reason” shall mean the occurrence of any of the following events, without Executive’s consent, except in connection with the termination of Executive’s

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employment for Disability, Cause, as a result of death or by Executive other than for Good Reason and except as provided in the last sentence of this subsection (e):

(i) A material diminution in Executive’s authority, duties or responsibilities, as reasonably determined by the Board;

(ii) A material change in the geographic location at which Executive must perform services under this Agreement (which, for purposes of this Agreement, means relocation of the offices of the Company at which Executive is principally employed to a location more than 50 miles from the location of such offices immediately prior to the relocation);

(iii) A material diminution in Executive’s Base Salary; provided, however, that a change in Base Salary for all senior executives of the Company, in which Executive is treated similarly as all other executives of a comparable responsibility level, shall not constitute Good Reason under this Agreement; or

(iv) Any action or inaction that constitutes a material breach by the Company of this Agreement, including the failure of the Company to obtain from its successors the express assumption and agreement required under Section 16 hereof.

Notwithstanding the foregoing, Executive shall not have Good Reason for termination if, within 60 days after the date on which Executive gives notice of his or her termination, as provided in Section 2.2 the Company corrects the action or failure to act that constitutes the grounds for termination for Good Reason as set forth in Executive’s notice of termination. If the Company does not correct the action or failure to act, Executive must terminate his or her employment for Good Reason within 30 days after the end of the cure period, in order for the termination to be considered a Good Reason termination.

(f) “Severance Period” shall mean the period beginning on Executive’s Termination Date and ending two years after the Termination Date.

(g) “Termination Date” shall mean the effective date of the termination of Executive’s employment relationship with the Company pursuant to this Agreement.

4. Notice of Termination. Any termination of Executive’s employment shall be communicated by a written notice of termination to the other party hereto given in accordance with Section 15. The notice of termination shall (i) indicate the specific termination provision in this Agreement relied upon, (ii) briefly summarize the facts and circumstances deemed to provide a basis for a termination of employment and the applicable provision hereof, and (iii) specify the Termination Date in accordance with the requirements of this Agreement.

5. Confidential Information. Executive recognizes and acknowledges that, by reason of Executive’s employment by and service to the Employer (as defined in Section 3) during and, if applicable, after the Employment Term, Executive will continue to have access to certain confidential and proprietary information relating to the business of the Employer, which may include, but is not limited to, trade secrets, trade “know-how”, customer information, supplier information, cost and pricing information, marketing and sales techniques, strategies and

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programs, computer programs and software and financial information (collectively referred to as “Confidential Information”). Executive acknowledges that such Confidential Information is a valuable and unique asset of the Employer and Executive covenants that Executive will not, unless expressly authorized in writing by the Board, at any time during the course of Executive’s employment, use any Confidential Information or divulge or disclose any Confidential Information to any person, firm or corporation except in connection with the performance of Executive’s duties for the Employer and in a manner consistent with the Employer’s policies regarding Confidential Information. Executive also covenants that at any time after the termination of such employment, directly or indirectly, Executive will not use any Confidential Information or divulge or disclose any Confidential Information to any person, firm or corporation, unless such information is in the public domain through no fault of Executive or except when required to do so by law or legal process, in which case Executive will inform the Employer in writing promptly of such required disclosure, but in any event at least two business days prior to disclosure. All written Confidential Information (including, without limitation, in any computer or other electronic format) which comes into Executive’s possession during the course of Executive’s employment shall remain the property of the Employer. Except as required in the performance of Executive’s duties for the Employer, or unless expressly authorized in writing by the Board, Executive shall not remove any written Confidential Information from the Employer’s premises, except in connection with the performance of Executive’s duties for the Employer and in a manner consistent with the Employer’s policies regarding Confidential Information. Upon termination of Executive’s employment, Executive agrees immediately to return to the Employer all written Confidential Information in Executive’s possession.

6. Non-Competition; Non-Solicitation.

(a) During Executive’s employment by the Employer and for a period of one year after Executive’s termination of employment for any reason, Executive will not, except with the prior written consent of the Board, directly or indirectly, own, manage, operate, join, control, finance or participate in the ownership, management, operation, control or financing of, or be connected as an officer, director, employee, partner, principal, agent, representative, consultant or otherwise with, or use or permit Executive’s name to be used in connection with, any business or enterprise which is engaged in any financial services, insurance or other business that is competitive with any business or enterprise in which the Employer is engaged, anywhere in the world, during Executive’s employment or (with respect to the application of this covenant after Executive’s termination of employment) during the two year period preceding Executive’s termination of employment. The parties acknowledge that the Employer engages in its business on a worldwide basis, and Executive acknowledges that his or her responsibilities extend to the Employer’s worldwide operations.

(b) The foregoing restrictions shall not be construed to prohibit the ownership by Executive of less than five percent of any class of securities of any corporation which is engaged in any of the foregoing businesses having a class of securities registered pursuant to the Securities Exchange Act of 1934, as amended, provided that such ownership represents a passive investment and that neither Executive nor any group of persons including Executive in any way, either directly or indirectly, manages or exercises control of any such corporation, guarantees

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any of its financial obligations, otherwise takes any part in its business, other than exercising Executive’s rights as a shareholder, or seeks to do any of the foregoing.

(c) Executive further covenants and agrees that during Executive’s employment by the Employer and for a period of one year thereafter, Executive will not, except with the prior written consent of the Board, directly or indirectly, solicit or hire, or encourage the solicitation or hiring of, any person who was a managerial or higher level employee of the Employer at any time during the term of Executive’s employment by the Employer by any employer other than the Employer for any position as an employee, independent contractor, consultant or otherwise. The foregoing covenant of Executive shall not apply to any person after 12 months have elapsed after the date on which such person’s employment by the Employer has terminated.

(d) The covenants described in this Section 6 shall continue to apply during the period specified herein after Executive’s termination of employment for any reason, without regard to whether Executive executes a Release or receives any severance benefits as a result of such termination. If Executive breaches any of the covenants described in this Section 6, the applicable period during which the covenant applies shall be tolled during the period of the breach. Without limiting the foregoing, the severance benefits provided under this Agreement are specifically designated as additional consideration for the covenants described in Section 5 and this Section 6.

7. Equitable Relief.

(a) Executive acknowledges and agrees that the restrictions contained in Sections 5 and 6 are reasonable and necessary to protect and preserve the legitimate interests, properties, goodwill and business of the Employer, that the Employer would not have entered into this Agreement in the absence of such restrictions and that irreparable injury will be suffered by the Employer should Executive breach any of the provisions of those Sections. Executive represents and acknowledges that (i) Executive has been advised by the Employer to consult Executive’s own legal counsel in respect of this Agreement, and (ii) Executive has had full opportunity, prior to execution of this Agreement, to review thoroughly this Agreement with Executive’s counsel.

(b) Executive further acknowledges and agrees that a breach of any of the restrictions in Sections 5 and 6 cannot be adequately compensated by monetary damages. Executive agrees that the Employer shall be entitled to preliminary and permanent injunctive relief, without the necessity of proving actual damages, as well as an equitable accounting of all earnings, profits and other benefits arising from any violation of Section 5 or 6 hereof, which rights shall be cumulative and in addition to any other rights or remedies to which the Employer may be entitled. In the event that any of the provisions of Section 5 or 6 hereof should ever be adjudicated to exceed the time, geographic, service, or other limitations permitted by applicable law in any jurisdiction, it is the intention of the parties that the provision shall be amended to the extent of the maximum time, geographic, service, or other limitations permitted by applicable law, that such amendment shall apply only within the jurisdiction of the court that made such adjudication and that the provision otherwise be enforced to the maximum extent permitted by law.

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(c) Notwithstanding anything in this Agreement to the contrary, if Executive breaches any of Executive’s obligations under Section 5 or 6 hereof, the Company shall thereafter be obligated only for the compensation and other benefits provided in any Company benefit plans, policies or practices then applicable to Executive in accordance with the terms thereof, and all payments under Section 2 of this Agreement shall cease.

(d) Executive irrevocably and unconditionally (i) agrees that any suit, action or other legal proceeding arising out of Section 5 or 6 hereof, including without limitation, any action commenced by the Employer for preliminary and permanent injunctive relief and other equitable relief, may be brought in a United States District Court for Ohio, or if such court does not have jurisdiction or will not accept jurisdiction, in any court of general jurisdiction in Columbus, Ohio, (ii) consents to the non-exclusive jurisdiction of any such court in any such suit, action or proceeding, and (iii) waives any objection which Executive may have to the laying of venue of any such suit, action or proceeding in any such court. Executive also irrevocably and unconditionally consents to the service of any process, pleadings, notices or other papers in a manner permitted by the notice provisions of Section 15 hereof.

(e) Executive agrees that for a period of three years following the termination of Executive’s employment for any reason, Executive will provide, and at all times after the date hereof the Employer may similarly provide, a copy of Sections 5 and 6 hereof to any business or enterprise (i) which Executive may directly or indirectly own, manage, operate, finance, join, control or in which Executive may participate in the ownership, management, operation, financing, or control, or (ii) with which Executive may be connected as an officer, director, employee, partner, principal, agent, representative, consultant or otherwise, or in connection with which Executive may use or permit to be used Executive’s name; provided, however, that this provision shall not apply in respect of Section 6 after expiration of the time periods set forth therein.

8. Payment of Supplemental Benefits. The supplemental benefits under Sections 2.3(b)(vi) and (vii) (the “Enhanced Benefits”) shall be paid as follows:

(a) The Enhanced Benefits that are calculated with respect to the Nationwide Retirement Plan and Nationwide Supplemental Retirement Plan shall be paid in the same form and the same time as Executive’s benefits under the Nationwide Supplemental Retirement Plan are paid (or under the default provisions of the Nationwide Supplemental Retirement Plan if Executive is not otherwise entitled to receive a benefit under that Plan).

(b) The Enhanced Benefits that are calculated with respect to the Nationwide Excess Benefit Plan shall be paid in the same form and at the same time as Executive’s benefits under the Nationwide Excess Benefit Plan are paid (or under the default provisions of the Nationwide Excess Benefit Plan if Executive is not otherwise entitled to receive a benefit under that Plan).

(c) The Enhanced Benefits that are calculated with respect to the Nationwide Savings Plan and Nationwide Supplemental Defined Contribution Plan shall be paid in the same form and at the same time as Executive’s benefits under the Nationwide Supplemental Defined Contribution Plan are paid.

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(d) The Enhanced Benefits that are calculated with respect to the Nationwide Individual Deferred Compensation Retirement Plan shall be paid in the same form and the same time as Executive’s benefits under the Nationwide Individual Deferred Compensation Plan are paid.

9. Indemnification. The Company shall indemnify Executive with respect to Executive’s actions in the performance of Executive’s duties as set forth in Section 1.2 to the fullest extent permitted by the Company’s Amended and Restated Code of Bylaws as in effect from time to time.

10. Non-Exclusivity of Rights; Resignation from Boards.

(a) Nothing in this Agreement shall prevent or limit Executive’s continuing or future participation in or rights under any benefit, bonus, incentive or other plan or program provided by the Company and for which Executive may qualify; provided, however, that if Executive becomes entitled to and receives the payments described in Section 2.3(b) of this Agreement, Executive hereby waives Executive’s right to receive payments under any severance plan or similar program applicable to all employees of the Company.

(b) If Executive’s employment with the Company terminates for any reason, Executive shall immediately resign from all boards of directors of the Company, any Affiliates and any other entities for which Executive serves as a representative of the Company.

11. Survivorship. The respective rights and obligations of the parties under this Agreement (including without limitation Sections 5, 6 and 7) shall survive any termination of Executive’s employment to the extent necessary to the intended preservation of such rights and obligations.

12. Mitigation. Executive shall not be required to mitigate the amount of any payment or benefit provided for in this Agreement by seeking other employment or otherwise, and there shall be no offset against amounts due Executive under this Agreement on account of any remuneration attributable to any subsequent employment that Executive may obtain.

13. Benefit Plans; Outstanding Awards. All references in this Agreement to specific retirement or other benefit plans of the Company shall be deemed to include any successor retirement or other benefit plans. The terms of Executive’s outstanding stock options, restricted stock and long-term incentive awards are hereby amended to provide that, without adversely affecting any rights that Executive has under such award agreements, the award agreements are amended to provide for the accelerated vesting and payments upon termination of employment as provided in Section 2.3(b) of this Agreement, to the extent consistent with the applicable plans. In all respects not amended, the provisions of such outstanding awards shall remain in effect according to their terms.

14. Arbitration; Expenses. In the event of any dispute under the provisions of this Agreement, other than a dispute in which the primary relief sought is an equitable remedy such as an injunction, the parties shall be required to have the dispute, controversy or claim settled by arbitration in Columbus, Ohio in accordance with the National Rules for the Resolution of Employment Disputes then in effect of the American Arbitration Association, before a panel of

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three arbitrators, one of whom shall be selected by the Company, one of whom shall be selected by Executive, and the third of whom shall be selected by the arbitrators selected by the Company and Executive. Any award entered by the arbitrators shall be final, binding and nonappealable and judgment may be entered thereon by either party in accordance with applicable law in any court of competent jurisdiction. This arbitration provision shall be specifically enforceable. The arbitrators shall have no authority to modify any provision of this Agreement or to award a remedy for a dispute involving this Agreement other than a benefit specifically provided under or by virtue of the Agreement. In the event of a dispute, each party shall be responsible for its own expenses (including attorneys’ fees) relating to the conduct of the arbitration, and the parties shall share equally the fees of the American Arbitration Association. Each party shall give the other party written notice as described in Section 16 of its intent to submit a claim under this Agreement to arbitration and a description of the basis of such claim, within six months after the event giving rise to the claim occurs.

15. Notices. All notices and other communications required or permitted under this Agreement or necessary or convenient in connection herewith shall be in writing and shall be deemed to have been given when hand delivered or mailed by registered or certified mail, as follows (provided that notice of change of address shall be deemed given only when received):

If to the Company, to:

Nationwide Mutual Insurance Company

One Nationwide Plaza, 1-35-03

Columbus, OH 43215

Attention:  Executive Vice President and Chief Administrative Officer

                  Executive Vice President and Chief Legal and Governance

                  Officer

With a required copy to:

Morgan, Lewis & Bockius LLP

1701 Market Street

Philadelphia, PA 19103-2921

Attention: Mims Maynard Zabriskie

If to Executive, to:

Stephen S. Rasmussen

One Miranova Place Suite 2425

Columbus, OH 43215

or to such other names or addresses as the Company or Executive, as the case may be, shall designate by notice to each other person entitled to receive notices in the manner specified in this Section.

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16. Contents of Agreement; Amendment and Assignment.

(a) This Agreement sets forth the entire understanding between the parties hereto with respect to the subject matter hereof and cannot be changed, modified, extended or terminated except upon written amendment approved by the Board and executed on its behalf by a duly authorized officer of the Company and by Executive. This Agreement supercedes and replaces the Employment Agreement in its entirety.

(b) All of the terms and provisions of this Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective heirs, executors, administrators, legal representatives, successors and assigns of the parties hereto, except that the duties and responsibilities of Executive under this Agreement are of a personal nature and shall not be assignable or delegatable in whole or in part by Executive. The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation, reorganization or otherwise) to all or substantially all of the business or assets of the Company, within 15 days of such succession, expressly to assume and agree to perform this Agreement in the same manner and to the same extent as the Company would be required to perform if no such succession had taken place.

17. Severability. If any provision of this Agreement or application thereof to anyone or under any circumstances is adjudicated to be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect any other provision or application of this Agreement which can be given effect without the invalid or unenforceable provision or application and shall not invalidate or render unenforceable such provision or application in any other jurisdiction. If any provision is held void, invalid or unenforceable with respect to particular circumstances, it shall nevertheless remain in full force and effect in all other circumstances.

18. Remedies Cumulative; No Waiver. No remedy conferred upon a party by this Agreement is intended to be exclusive of any other remedy, and each and every such remedy shall be cumulative and shall be in addition to any other remedy given under this Agreement or now or hereafter existing at law or in equity. No delay or omission by a party in exercising any right, remedy or power under this Agreement or existing at law or in equity shall be construed as a waiver thereof, and any such right, remedy or power may be exercised by such party from time to time and as often as may be deemed expedient or necessary by such party in its sole discretion.

19. Beneficiaries/References. Executive shall be entitled, to the extent permitted under any applicable law, to select and change a beneficiary or beneficiaries to receive any compensation or benefit payable under this Agreement following Executive’s death by giving the Company written notice thereof. In the event of Executive’s death or a judicial determination of Executive’s incompetence, reference in this Agreement to Executive shall be deemed, where appropriate, to refer to Executive’s beneficiary, estate or other legal representative.

20. Miscellaneous. All section headings used in this Agreement are for convenience only. This Agreement may be executed in counterparts, each of which is an original. It shall not

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be necessary in making proof of this Agreement or any counterpart hereof to produce or account for any of the other counterparts.

21. Withholding Taxes. All payments under this Agreement shall be made subject to applicable tax withholding, and the Company shall withhold from any payments under this Agreement all federal, state and local taxes as the Company is required to withhold pursuant to any law or governmental rule or regulation. Except as specifically provided otherwise in this Agreement, Executive shall be responsible for all taxes applicable to amounts payable under this Agreement and payments under this Agreement shall not be grossed up for taxes.

22. Section 409A of the Code. This Agreement is intended to comply with section 409A of the Code and its corresponding regulations, or an exemption, to the extent applicable. Severance benefits under the Agreement are intended to be exempt from section 409A under the “short term deferral” exemption. Notwithstanding anything in this Agreement to the contrary, if required by section 409A, if Executive is considered a “specified executive” for purposes of section 409A and if payment of any amounts under this Agreement is required to be delayed for a period of six months after separation from service pursuant to section 409A, payment of such amounts shall be delayed as required by section 409A, and the accumulated amounts shall be paid in a lump sum payment within five days after the end of the six-month period. If Executive dies during the postponement period prior to the payment of benefits, the amounts withheld on account of section 409A shall be paid to the personal representative of Executive’s estate within sixty days after the date of Executive’s death. Payments may only be made under this Agreement upon an event and in a manner permitted by section 409A, to the extent applicable. As used in the Agreement, the term “termination of employment” shall mean Executive’s separation from service with the Company within the meaning of section 409A. In no event may Executive, directly or indirectly, designate the calendar year of a payment. For purposes of section 409A, the right to a series of payments under the Agreement shall be treated as a right to a series of separate payments. All reimbursements and in-kind benefits provided under the Agreement shall be made or provided in accordance with the requirements of section 409A.

23. Governing Law. This Agreement shall be governed by and interpreted under the laws of the State of Ohio without giving effect to any conflict of laws provisions.

IN WITNESS WHEREOF, the undersigned, intending to be legally bound, have executed this Agreement as of the date first above written.

NATIONWIDE MUTUAL INSURANCE COMPANY
By:	/s/ W.G. Jurgensen
Name:	W.G. Jurgensen
Title:	Chief Executive Officer
/s/ Stephen S. Rasmussen
Executive

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EX-10.57

Exhibit 10.57

NATIONWIDE FINANCIAL SERVICES, INC.

2008 DEFERRED COMPENSATION PLAN

FOR NON-EMPLOYEE DIRECTORS

1. Name of Plan. This plan shall be known as the “Nationwide Financial Services, Inc. 2008 Deferred Compensation Plan for Non-Employee Directors” and is hereinafter referred to as the “Plan.”

2. Purpose of Plan. The purpose of the Plan is to enable Nationwide Financial Services, Inc. (the “Company”) to attract and retain qualified persons to serve as directors.

3. Effective Date and Term. The Plan became effective as of February 20, 2008 and shall remain in effect until terminated by the Board.

4. Participants. Each member of the Board of Directors of the Company (the “Board”) in 2008 who is not an employee of the Company or any of its subsidiaries or of any controlling affiliate or its subsidiaries and who is designated by the Board as a participant in the Plan shall be a participant (“Participant”) in the Plan.

5. Deferred Retainer. Ninety thousand dollars ($90,000) of each Participant’s annual retainer for service on the Board in 2008 will be deferred under the Plan (“Deferred Amount”).

6. Accounts and Allocations.

(a) Deferred Amount: Each Participant’s Deferred Amount shall be credited to an account (the “Book Account”) established for the Participant on or as soon as administratively practicable after the date such Deferred Amount would have been paid to the Participant had it not been deferred pursuant to Section 5 of the Plan.

(b) Book Account: The Book Account shall be maintained for a Participant on the accounting system of the Company reflecting such Participant’s Deferred Amount and earnings or losses on the Deferred Amount; provided, however, that the existence of such book entries and a Book Account shall not create and shall not be deemed to create a trust of any kind, or a fiduciary relationship between the Company and (i) the Participant, (ii) the individual, trust or institution designated by the Participant to assume ownership of the Participant’s Book Account upon the Participant’s death (the “Beneficiary”) or (iii) any other person, under the Plan.

(c) Earnings Credited to Book Account: Each Participant’s Book Account will be credited or debited with earnings or losses for the period from the date on which the Deferred Amount is credited to the Book Account until the last day that the New York Stock Exchange is open for business preceding the date on which the Deferred Amount is distributed. Such earnings or losses will be credited or debited to reflect credits and debits that would have occurred had an amount equal to the Participant’s Book Account been invested in the investment options chosen, from time to time, by the Participant from among the options made available by the Company. Subject to such

restrictions or limitations as the Company may prescribe from time to time, the Participant may change the investment options in which his or her account is deemed to be invested for this purpose on any date that the New York Stock Exchange is open for business. The Company shall, in its sole discretion, select the investment options available to Participants.

(d) The initial investment option for the Deferred Amount will be the Nationwide Guaranteed Investment Fund and the Book Account will remain in such investment option until the Participant changes the investment option in accordance with available investment options and in accordance with the procedures provided by the Company.

(e) Vested Interest: Each Participant shall always be 100% vested in the balance in his or her Book Account.

7. Payment. The amount in a Participant’s Book Account shall be paid in cash in a lump sum to the Participant upon, or as soon as administratively practicable after (but in no event more than 90 days after), the date the Participant has a “separation from service” within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”). If the Participant’s separation from service results from the Participant’s death, payment shall be made to the Participant’s Beneficiary (or to the administrator or executor of the Participant’s estate if no valid beneficiary designation is in effect upon the death of the Participant) in the manner and at the time specified in the prior sentence.

8. Amendment and Termination. The Board, without the consent of any Participant or Beneficiary, may amend or terminate the Plan at any time; provided, however, that no amendment shall be made or act of termination taken which divests any Participant or Beneficiary of the right to receive payments under the Plan with respect to amounts then credited to the Participant’s Book Account.

9. Administration of the Plan. The Plan will be administered by a committee appointed by the Board, consisting of two or more persons who are not eligible to participate in the Plan (the “Committee”). Members of the Committee need not be members of the Board. The Committee shall adopt such rules as it may deem appropriate in order to carry out the purpose of the Plan. All questions of interpretation, administration and application of the Plan shall be determined by the Committee, except that the Committee may authorize any one or more of its members, or any officer of the Company, to execute and deliver documents on behalf of the Committee. The determination of the Committee shall be final and binding in all matters relating to the Plan.

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10. Miscellaneous.

(a) Nothing in the Plan shall be deemed to create any obligation on the part of the Board to nominate any director for reelection by the Company’s stockholders or to limit the rights of the stockholders to remove any director. It is expressly understood that the Plan relates merely to the promise of payment of deferred compensation for the Participant’s services as a member of the Board, payable after the Participant’s separation from service on the Board as described in Section 7.

(b) Nothing contained in the Plan, and no action taken pursuant to the Plan by the Company or any Participant shall create, or be construed to create, a trust of any kind, or a fiduciary relationship between the Company and the Participant, a Beneficiary or any other person. Any trust created by the Company and any assets held by any such trust to assist the Company in meeting its obligations under the Plan shall conform to the terms of the model trust described in Internal Revenue Procedure 92-64 and as subsequently modified.

(c) Nothing contained in the Plan shall prevent the Company from adopting other or additional compensation arrangements for the Participants.

(d) Payments to any Participant or Beneficiary shall be made from assets which shall continue, for all purposes, to be a part of the general, unrestricted assets of the Company. Title to and beneficial ownership of any assets, whether cash or investments that the Company may earmark to pay the Deferred Amount hereunder, shall at all times remain assets of the Company and no Participant or Beneficiary or other person who may be entitled to payment under the Plan shall have any property interest in any specific asset of the Company as a result of the Plan. The obligation of the Company under this Plan shall be an unfunded, for tax purposes, and unsecured promise to pay money in the future. To the extent any person acquires a right to receive payments from the Company under the Plan, such right shall be no greater than the right of any unsecured general creditor of the Company, and no such person shall have nor require any legal or equitable right, interest or claim in or to any property or asset of the Company as a result of the Plan. The Company shall have no obligation to invest any assets as directed by Participants pursuant to Section 6(c). The elections made by Participants pursuant to that section shall be used solely for purposes of measuring the earnings credited to the Book Accounts of Participants.

(e) If, in its discretion, the Company purchases an insurance policy or policies insuring the life of a Participant or any other property to allow the Company to recover the cost of providing amounts, in whole or in part, under this Plan, neither the Participant, the Beneficiary nor any other person shall have any rights whatsoever to the proceeds from such policy or policies. The Company shall be the sole owner and beneficiary of any such insurance policy and shall possess and may exercise all incidents of ownership in such policy. No such policy, policies or other property shall be held in any trust for the Participant or any other person nor as collateral security for any obligation of the Company under this Plan.

3

(f) There is no obligation on the part of the Company to fund for any liability which accrues as a result of the Plan.

(g) Neither the Participant, a Beneficiary nor any other beneficiary under the Plan shall have any power or right to transfer, assign, anticipate, hypothecate or otherwise encumber any part or all of the amounts payable under this Plan. A Participant’s or a Beneficiary’s rights to benefit payments under the Plan are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment or garnishment by creditors of the Participant or of the Beneficiary, and no such amounts shall be subject to seizure by any creditor of any Participant or Beneficiary, by a proceeding at law or in equity, nor shall such amounts be transferable by operation of law in the event of bankruptcy, insolvency or death of the Participant or the Beneficiary, or any other beneficiary hereunder. Any such attempted assignment or transfer shall be void.

(h) A Participant who believes that such Participant is being denied an amount to which the Participant is entitled under the Plan may file a written request for such amount with the Committee, setting forth the Participant’s claim. The request must be addressed to the Committee at the Company’s address as provided in Section 10(m).

(i) If any provision of the Plan is held invalid or unenforceable, such invalidity or unenforceability shall not affect any other provision of the Plan, and the Plan shall be construed and enforced as if such invalid or unenforceable provision had not been included in the Plan.

(j) It is the intention that the provisions of this Plan comply with Section 409A of the Code and the rules, regulations and other authorities promulgated under Section 409A of the Code and all provisions of this Plan will be construed and interpreted in a manner consistent with Section 409A of the Code.

(k) Headings used throughout the Plan are for convenience only and shall not be given legal significance.

(l) The Plan shall be binding upon and shall inure to the benefit of, the Company and its successors and assigns, and the Participants and their Beneficiaries and the successors, heirs, executors, administrators and beneficiaries of the Company, the Participants and the Beneficiaries.

(m) Any notice, consent or demand required or permitted to be given under the Plan shall be in writing and shall be signed by the party giving or making the same. If such notice, consent or demand is mailed to any Participant or the Company, it shall be sent by United States certified mail, postage prepaid, and addressed to such party’s last known address as shown on the records of the Company. The address of the Company, for this purpose, shall be One Nationwide Plaza, Columbus, Ohio 43215-2220. The date of such mailing shall be deemed the date of notice, consent or demand. Any party may change the address to which notice is to be sent by giving notice of the change of address in the manner described in this Section 10(m).

4

11. Governing Law. The Plan shall be governed by and construed in accordance with the laws of the State of Delaware to the extent that such laws are not preempted by any federal laws, excluding any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of this Plan to the substantive law of another jurisdiction.

Approved by the Board of Directors February_20, 2008, effective February_20, 2008.

5

EX-10.58

Exhibit 10.58

FIRST AMENDMENT to the NATIONWIDE INDIVIDUAL

DEFERRED COMPENSATION PLAN AS

AMENDED AND RESTATED

January 1, 2005

It is hereby understood and agreed that the Nationwide Individual Deferred Compensation Plan as Amended and Restated January 1, 2005 (“Plan”), is further amended, as follows:

1. Effective January 1, 2005, a definition of “Company” is added to read as follows:

Company: Nationwide Mutual Insurance Company

2. Effective January 1, 2005, the definition of Hardship Distribution is renamed and restated as follows:

Unforeseeable Emergency Distribution: A distribution following a Participant’s Termination Date on account of severe financial hardship of the Participant or Beneficiary resulting from an illness or accident of the Participant or of his or her spouse or dependent (as defined by Code Section 152(a)), loss of a Participant’s property due to casualty, or other similar or extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant or Beneficiary. The circumstances that would constitute an unforeseeable emergency will depend upon the facts of each case, but, in any case, a Hardship Distribution may not be made to the extent that such hardship is or may be relieved (i) through reimbursement or compensation by insurance or otherwise, (ii) by liquidation of the Participant’s assets, to the extent the liquidation or assets would not itself cause severe financial hardship, or (iii) by cessation of deferrals under any other plan.

3. Effective January 1, 2005, the definition of Nationwide Retirement Plans is amended to add reference to Nationwide Life Insurance Company of America Retirement Plan.

4. Effective January 1, 2005, the third paragraph of Section 3.02 is restated as:

Notwithstanding the foregoing, the Administrator may adjust a Participant’s Election of Deferral prior to the end of a Plan Year if the Administrator determines, in its sole discretion, that such change is appropriate to carry out the terms of the Plan. Such mid-year adjustment in the Election of Deferral shall only be permitted with respect to Compensation for services to be performed by the Eligible Participant subsequent to the date of the election. Any change in Election of Deferral made pursuant to this paragraph shall supersede any prior Election of Deferral and shall remain in effect until the end of the then-current Plan Year.

5. Effective September 1, 2005, the first sentence of the last paragraph of Section 4.02 is restated as:

Except for Insiders, the Participant may change the investment options in which his or her account is deemed to be invested for this purpose once every seven (7) calendar days, and may make different elections with respect to such deemed investments with respect to each of his or her sub-accounts.

6. Effective January 1, 2005, Section 5.05 is renamed from Hardship Distribution to Unforeseeable Emergency.

IN WITNESS WHEREOF, Nationwide Mutual Insurance Company, on behalf of the Companies, has hereby executed this Amendment to be effective January 1, 2005.

NATIONWIDE MUTUAL INSURANCE COMPANY
By:	/s/ Bruce Thompson
	Bruce Thompson
	Associate Vice President – Associate General Counsel

EX-10.59

Exhibit 10.59

SECOND AMENDMENT to the NATIONWIDE INDIVIDUAL

DEFERRED COMPENSATION PLAN AS

AMENDED AND RESTATED

January 1, 2005

It is hereby understood and agreed that the Nationwide Individual Deferred Compensation Plan as Adopted January 1, 2005 (“Plan”), is further amended, as follows:

1. Effective September 1, 2005, the first sentence of the last paragraph of Section 4.02 is restated as:

Except for Insiders, the Participant may change the investment options in which his or her account is deemed to be invested for this purpose once every seven (7) calendar days, and may make different elections with respect to such deemed investments with respect to each of his or her sub-accounts.

2. Effective July 1, 2006, the definition of “Eligible Participant” is restated as follows:

1.20 Eligible Participant: An individual who is an Executive and any employee of the Companies who had an individual deferred compensation agreement or deferred compensation election under this Plan in effect for any prior calendar year. A newly hired Executive will become eligible to participate in the Plan on the first of the month following completion of a waiting period of one month from date of hire. An individual who was eligible to participate in the Nationwide Employee Deferred Compensation Plan will not become an Eligible Participant under this Plan until the year following the year in which he or she first becomes an Executive.

3. Effective January 1, 2006, the following new Sections 1.09 and 1.10 are added:

1.09 Business Unit Target Award Compensation (“BUTA Compensation”): the payment of Business Unit Target Award under the Nationwide Property and Casualty, Long Term Performance Plan (“LTPP”).

1.10 Business Unit Target Award Compensation Deferral Percentage: The percentage elected for deferral from BUTA Compensation by an Eligible Participant pursuant to Article 3. Participants may elect to cap the deferral percentage with a dollar amount maximum each year.

4. Effective January 1, 2006, the existing Sections 1.09 through 1.45 are renumbered as 1.11 through 1.47.

5. Effective January 1, 2006, the defined term “Key Employee” is hereby replaced in all instances with the term “Specified Executive” and “Specified Executive” shall have the meaning given “Key Employee” in Section 1.24 of the Definitions of the Plan.

6. Effective January 1, 2006, all references to “NVA Compensation” are replaced with “NVA Compensation and BUTA Compensation” in each instance used in Article 2 through Article 7 of the Plan, including amendments to those sections reflected in the First Amendment to the Plan.

7. Effective January 1, 2005, the last paragraph of Section 3.02 is hereby deleted.

8. Effective January 1, 2006, the following paragraph is hereby added to the end of Section 3.02:

Notwithstanding the foregoing, any Election of Deferral for NVA Compensation or BUTA Compensation made with respect to amounts earned on or after January 1, 2006, will be irrevocable Elections of Deferral for all NVA Compensation and BUTA Compensation earned on or after January 1, 2006. NVA Compensation and BUTA Compensation earned on or after January 1, 2007, will not be eligible for a new Election of Deferral after December 31, 2006.

9. Effective January 1, 2007, the last paragraph of Section 5.01 is restated as:

Distributions for the Savings Plan Company matching contribution credit described in Section 4.04 (“Savings Plan benefit”) shall be distributed in accordance with the Participant’s Distribution Election applicable to the Salary Election of Deferral applicable to the Plan Year in which the Participant becomes one hundred percent (100%) vested in the Nationwide Savings Plan. If the Participant has no Salary Election Deferral for the applicable Plan Year, the Savings Plan benefit shall be distributed in accordance with the Participant’s Election Deferral in the following order:

(a) in accordance with the Short-Term Incentive Election Deferral for the Plan Year in which the Short-Term Incentive would have been paid;

(b) If Participant does not have a Short-Term Incentive Election Deferral for the applicable Plan Year, in accordance with the Periodic Incentive Compensation Election Deferral for the Plan Year in which the Periodic Incentive Compensation would have been paid;

(c) If the Participant does not have a Periodic Incentive Election Deferral for the applicable Plan Year, in accordance with most recent Restricted Stock Election Deferral, if any; and

(d) If the Participant has no Election of Deferral for Compensation or restricted stock in the applicable Plan Year, the default distribution

method of payment beginning in 10 years and paid in equal 10-year installments.

Methods of distribution elected pursuant to individual deferred compensation agreements in effect prior to January 1, 2005, shall remain in effect with respect to each Participant’s sub-account, if any, which relates to deferrals under any such agreement.

IN WITNESS WHEREOF, Nationwide Mutual Insurance Company, on behalf of the Companies, has hereby executed this Amendment to be effective January 1, 2005.

NATIONWIDE MUTUAL INSURANCE COMPANY
By:	/s/ Bruce Thompson
	Bruce Thompson
	Associate Vice President – Associate General Counsel

EX-10.60

Exhibit 10.60

THIRD AMENDMENT to the NATIONWIDE INDIVIDUAL

DEFERRED COMPENSATION PLAN AS

AMENDED AND RESTATED

January 1, 2005

It is hereby understood and agreed that the Nationwide Individual Deferred Compensation Plan as Adopted January 1, 2005 (“Plan”), is further amended, as follows:

1. Effective January 1, 2007, the name of the Plan is changed to the “Nationwide Officer Deferred Compensation Plan.”

2. Effective January 1, 2005, new Section 5.08 of the Plan is hereby added as follows:

5.08 Distributions to Specified Executives: Notwithstanding Sections 5.01 through 5.07 of this Article, distributions to be made to any Specified Executive, as such is defined in Section 1.24 of this Plan, shall be subject to a delay of six months following a Specified Executive’s Separation from Service. The initial payment will be made as soon as administratively feasible after the first day of the seventh month that follows the month in which Separation from Service occurs. The initial payment will include any payments that would otherwise have been paid under the terms of this Plan during the six month delay.

3. Effective August 27, 2007, the following paragraph is hereby added as Section 7.14:

Spin Off of Plan Liabilities: In the event of a divestiture, by stock sale, of one or more of the Companies, the Administrator of the Plan, without the consent of any Participant or Designated Beneficiary, may act to spin off the deferred compensation liabilities to the acquiring entity. The Administrator shall have complete discretion in determining the amount of the deferred compensation liabilities associated with any affected Participants’ Book Account that will be transferred to the acquiring entity.

4. Effective January 1, 2005, Section 1.42 is hereby deleted and replaced with the following:

1.42 Separation from Service: The last day the Executive performs services, as set forth in Code Section 409A and corresponding Treasury Regulations, for the Companies and any company in the same controlled group of companies.

5. Effective January 1, 2005, all references within the Plan to “Termination Date” are hereby replaced with “Separation from Service.”

6. Effective January 1, 2005 the following Sections are renumbered:

Section 1.41 “Stock” is renumbered Section 1.42.

Section 1.42 “Separation of Service” is renumbered Section 1.41.

7. Effective January 1, 2005, the definition of “Compensation” in Section 1.11 is hereby deleted and replaced with the following:

1.11 Compensation: Compensation shall have the meaning given to “Wages” in the Internal Revenue Code Section 3121(a), otherwise known as “Medicare Wages.”

IN WITNESS WHEREOF, Nationwide Mutual Insurance Company, on behalf of the Companies, has hereby executed this Amendment to be effective January 1, 2005.

NATIONWIDE MUTUAL INSURANCE COMPANY
By:	/s/ Bruce Thompson
	Bruce Thompson
	Associate Vice President – Associate General Counsel

EX-12

Exhibit 12

NATIONWIDE FINANCIAL SERVICES, INC. AND SUBSIDIARIES

Statement Regarding Computation of Earnings to Fixed Charges

(in millions)

	Years ended December 31,
	2007		2006		2005		2004		2003
Earnings:
Income from continuing operations before federal income tax expense	$	800.4	$	799.3	$	780.4	$	700.5	$	542.6
Fixed charges		1,462.8		1,484.6		1,510.2		1,430.7		1,463.4
	$	2,263.2	$	2,283.9	$	2,290.6	$	2,131.2	$	2,006.0
Fixed Charges:
Interest credited to policyholder account balances	$	1,342.0	$	1,381.5	$	1,380.9	$	1,328.3	$	1,367.6
Interest on debt		110.6		103.1		107.6		102.4		95.8
Debt extinguishment costs		10.2				21.7		—		—
	$	1,462.8	$	1,484.6	$	1,510.2	$	1,430.7	$	1,463.4
Ratio of earnings to fixed charges		1.5		1.5		1.5		1.5		1.4
Ratio of earnings to fixed charges, excluding interest credited to policyholder account balances		7.6		8.8		7.0		7.8		6.7

EX-21

Exhibit 21

NATIONWIDE FINANCIAL SERVICES, INC. AND SUBSIDIARIES

Subsidiaries of the Registrant

As of December 31, 2007

The following list includes subsidiaries of Nationwide Financial Services, Inc. Subsidiaries of subsidiaries are indicated by indentations. All subsidiaries are wholly-owned unless otherwise indicated.

Subsidiary	State of Incorporation or Organization
Nationwide Life Insurance Company	Ohio
Nationwide Life and Annuity Insurance Company	Ohio
Olentangy Reinsurance Company	Vermont
Nationwide Investment Services Corporation	Oklahoma
Nationwide Financial Assignment Company	Ohio
Nationwide Investment Advisors LLC	Ohio
Nationwide Community Development Corporation, LLC (67% owned)	Ohio
Nationwide Fund Advisors	Delaware
Life REO Holdings LLC	Ohio
Nationwide Life Insurance Company of America	Pennsylvania
Nationwide Life and Annuity Company of America	Delaware
Nationwide Life Insurance Company of Delaware	Delaware
Nationwide Provident Holding Company	Pennsylvania
1717 Capital Management Company	Pennsylvania
Washington Square Administrative Services, Inc.	Pennsylvania
Provestco, Inc.	Delaware
RCMD Financial Services, Inc.	Delaware
1717 Advisory Services, Inc.	Pennsylvania
1717 Brokerage Services, Inc.	Pennsylvania
Nationwide Financial Services Capital Trust	Delaware
Nationwide Bank	Federal Incorporation
Nationwide Financial Structured Products, LLC	Ohio
TBG Insurance Services Corporation d/b/a TBG Financial (69% owned)	Delaware
TBG Aviation, LLC	California
TBG Danco Insurance Services Corporation	California
TBG Financial & Insurance Services Corporation	California
Mullin TBG Insurance Agency Services, LLC (50% owned)	Delaware
NF Reinsurance Ltd.	Bermuda

Subsidiary	State of Incorporation or Organization
NFS Distributors, Inc.	Delaware
Nationwide Fund Management LLC	Delaware
Nationwide Fund Distributors LLC	Delaware
Nationwide Retirement Solutions, Inc.	Delaware
Nationwide Retirement Solutions, Inc. of Arizona	Arizona
Nationwide Retirement Solutions Insurance Agency, Inc.	Massachusetts
Nationwide Retirement Solutions, Inc. of Ohio	Ohio
Nationwide Retirement Solutions, Inc. of Texas	Texas
Nationwide Financial Institution Distributors Agency, Inc.	Delaware
Pension Associates, Inc.	Wisconsin
Registered Investment Advisors Services, Inc. d/b/a RIA Services, Inc.	Texas

All business operations of Nationwide Financial Services, Inc. and all of its subsidiaries are conducted using each company’s legally registered name, except for TBG Insurance Services Corporation d/b/a TBG Financial and Registered Investment Advisors, Inc. d/b/a RIA Services, Inc.

EX-23

Exhibit 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders

Nationwide Financial Services, Inc:

We consent to the incorporation by reference in the registration statement (No. 333-132910) on Form S-3 and (No. 333-110628) on Form S-8 of Nationwide Financial Services, Inc. of our reports dated February 29, 2008, with respect to the consolidated balance sheets of Nationwide Financial Services, Inc. and subsidiaries as of December 31, 2007 and 2006, and the related consolidated statements of income, shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2007, and all related financial statement schedules, and the effectiveness of internal control over financial reporting as of December 31, 2007, which reports appear in the December 31, 2007 annual report on Form 10-K of Nationwide Financial Services, Inc. Our report with respect to the financial statements refers to the Company’s adoption of the American Institute of Certified Public Accountants’ Statement of Position 05-1, Accounting by Insurance Enterprises for Deferred Acquisition Costs in Connection with Modifications or Exchanges of Insurance Contracts, in 2007.

/s/ KPMG LLP

Columbus, Ohio

February 29, 2008

EX-31.1

Exhibit 31.1

CERTIFICATION

I, W.G. Jurgensen, certify that:

1. I have reviewed this report on Form 10-K of Nationwide Financial Services, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 29, 2008

	/S/    W.G. JURGENSEN
Name:	W.G. Jurgensen
Title:	Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Timothy G. Frommeyer, certify that:

1. I have reviewed this report on Form 10-K of Nationwide Financial Services, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 29, 2008

	/s/    TIMOTHY G. FROMMEYER
Name:	Timothy G. Frommeyer
Title:	Senior Vice President—Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Nationwide Financial Services, Inc. (the “Company”) on Form 10-K for the period ending December 31, 2007 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, W.G. Jurgensen, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

February 29, 2008

 /s/ W.G. Jurgensen

Name: W.G. Jurgensen

Title: Chief Executive Officer

A signed original of this written statement required by Section 906 has been provided to Nationwide Financial Services, Inc. and will be retained by Nationwide Financial Services, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Nationwide Financial Services, Inc. (the “Company”) on Form 10-K for the period ending December 31, 2007 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Timothy G. Frommeyer, Senior Vice President—Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

February 29, 2008

 /s/ Timothy G. Frommeyer

Name: Timothy G. Frommeyer

Title:   Senior Vice President—

Chief Financial Officer

A signed original of this written statement required by Section 906 has been provided to Nationwide Financial Services, Inc. and will be retained by Nationwide Financial Services, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.