2004 Nationwide Financial Annual Report

The right people. The right strategy.
The right solutions for consumers.

Nationwide Financial® 2004 Annual Report

02 24 Condensed Consolidated Statements of Cash Flows
Financial Highlights
05 25 Report of Management, Report of Independent Registered
Letter to Shareholders
13 Business Segments Overview Public Accounting Firm & Certiﬁcation Conﬁrmation
14 26 Five-Year Summary Condensed Consolidated
Individual Investments
16 Individual Protection Statements of Income
18 27 Five-Year Summary Condensed Consolidated
Retirement Plans
20 In-Retirement Balance Sheets and Segment Data
22 28 Board of Directors & Management Team
Condensed Consolidated Statements of Income
23 29 Form 10-K & Exhibit A
Condensed Consolidated Balance Sheets

2004 Annual Report 1

In 2004 we: Named new leadership
Aligned our operations with our primary market segments
Instilled more rigorous ﬁnancial discipline
Created a more market-driven organization
Increased net operating earnings by 17 percent

With the right
people and strategy
We’re passionate about helping Americans reach their dreams for retirement, and
our spirit of innovation will help their dreams become reality. In 2004, we made
signiﬁcant progress in positioning our company for long-term value creation.

2 Nationwide Financial

Financial Highlights
Results of operations (in millions, except per share data)

Years Ended December 31, 2004 % Change 2003 2002 2001 2000
Total revenues $ 4,180.2 6% $ 3,944.2 $ 3,291.1 $ 3,067.6 $ 3,050.9
Operating revenues 4,219.7 5% 4,029.3 3,379.4 3,082.6 3,075.8
Net income 502.0 26% 397.8 144.2 412.8 434.9
Net operating earnings 531.1 17% 453.8 198.3 434.0 451.2
Total assets 116,950.6 5% 111,088.2 95,560.3 91,960.9 93,178.6
Return on average equity,
including accumulated other
comprehensive income (AOCI) 10.0% N/A 8.4% 3.9% 12.3% 15.8%
Net operating return on average equity,
excluding AOCI 11.6% N/A 10.8% 5.8% 13.8% 16.7%

Share Data (in millions, except per share data)

Years Ended December 31, 2004 % Change 2003 2002 2001 2000
Weighted average shares outstanding:
Basic 152.1 0% 151.8 132.4 128.9 128.7
Diluted 152.9 0% 152.3 132.6 129.2 128.9
Closing price per share of
Class A common stock $ 38.23 16% $ 33.06 $ 28.65 $ 41.46 $ 47.50
Net income per diluted share 3.28 26% 2.61 1.09 3.20 3.38
Net operating earnings per diluted share 3.47 16% 2.98 1.50 3.36 3.50
Dividends paid 0.67 29% 0.52 0.50 0.48 0.44
Book value per share:
Including AOCI 34.20 7% 32.10 29.25 26.71 23.29
Excluding AOCI 31.36 9% 28.77 26.62 25.14 22.40
Long-term debt/total capital ratio:
Including AOCI 21.2% N/A 22.4% 21.2% 20.7% 16.6%
Excluding AOCI 22.7% N/A 24.3% 22.9% 21.7% 17.2%
For a reconciliation of non-GAAP financial measures used in this annual report to the most directly comparable GAAP financial measures, please refer to Exhibit A, which is located on the last 3 pages of this annual report, directly preceding the
back cover. The non-GAAP financial measures used in this annual report are operating revenues; net operating earnings; net operating earnings per diluted share; net operating return on average equity and book value per share excluding AOCI.


Net Operating Return
Net Operating Earnings Operating Revenues Total Assets
on Average Equity*
(in millions) (in billions) (in billions)

$531 $4.0 $4.2 $111 $117 17%
$454
$451 $434 14%
$93 $92 $96
$3.1 $3.1 $3.4
11% 12%
$198 6%

00 01 02 03 04 00 01 02 03 04 00 01 02 03 04 00 01 02 03 04
*(Ex. AOCI)

Enhancing our financial discipline and
risk management capabilities
Building a culture of sound financial
discipline and risk management allows
Nationwide Financial to more effectively
manage our capital and to maximize returns.
This leads to increased shareholder value.

The risk and return measures we’ve put into
place enable us to make more educated
decisions about the products and features
we bring to market. And, as always, we’ll
continue to aggressively manage our cost
structure in a thoughtful way for the benefit
of our customers and shareholders.

“Improved financial discipline allows Nationwide Financial
to create the resources to grow our business.”
– Eileen Kennedy
Senior Vice President and
Chief Financial Officer


Jerry Jurgensen Mark Thresher
Chief Executive Oﬃcer President and Chief Operating Oﬃcer


To Our Shareholders:

We are pleased to report solid improvement in our financial
performance during 2004, reflecting the progress we’re making
toward our long-term objective of increasing returns and
creating value for our shareholders.

During 2004, we implemented significant our individual products to increase returns. We
changes to our operating model to align our enhanced our risk management capabilities,
operations with our primary market segments: including expansion of our financial hedging
Individual Investments, Individual Protection, strategies to better manage the volatility in
Retirement Plans and In-Retirement. At the our variable annuity business.
same time, we named new leadership. We
We’re taking a more disciplined approach
made these changes to create an organization
to capital allocation, which in certain cases
that is more market-driven and focused on the
means curtailing growth on some product
life-cycle needs of consumers – strengthening
lines and exiting others. And we continue
our ability to deliver On Your SideSM service
to focus on improving our cost structure
to more and more Americans. We’re very confi-
through disciplined expense management.
dent in our leadership team and believe our
These actions are moving us in the right
new operating model creates a solid founda-
direction. Total revenues in 2004 increased 6
tion for long-term growth.
percent to $4.2 billion. Net operating earnings
In the past year, we took significant steps
increased 17 percent to $531 million, or $3.47
designed to improve profitability and returns
per diluted share. Total assets increased
in our businesses. We re-priced the majority of


Building a focused distribution strategy
We continue to merge our smaller sales territories and to
re-structure and re-allocate our internal sales resources.
This results in a more streamlined sales organization that is
better aligned to serve our customers, producers and firms.
– Rick Karas
Senior Vice President
Sales

5 percent to $117 billion. And, our net operating Nationwide Financial emerged during the
return on average equity, excluding AOCI, late 1990s with one of the top distribution
increased 80 basis points to 11.6 percent. models in our industry. The business model
worked well as we focused on product
We achieved these results by improving
innovation and channel expansion. Our
operating performance in all of our businesses.
variable annuity business drove much of the
Favorable equity market performance and the
growth we experienced during that period.
positive impact of prepayment income from
our investment portfolio also contributed to That environment changed starting in 2000.
our results. The market downturn severely impacted the
profitability of the variable annuity business,
While we’re making progress, we aren’t
a legacy that remains with us today. Some
satisfied with these results. We have much
in our industry chose to take on more risk
work to do.
by offering additional guarantee features to
Strategic Priorities drive sales. Our decision to take a different
We have substantial opportunity for growth path was criticized by some, yet we have
by improving execution within our existing remained steadfast in our resolve to offer only
mix of businesses and by leveraging our core those products and features that meet our
strengths into new opportunities. Our ultimate disciplined risk-and-return profiles.
goal is clear: to become the premier provider
Our primary focus remains on value creation.
of financial solutions for consumers, helping
True economic value creation can occur only if
them to achieve financial security as they
we consistently achieve returns that exceed
prepare for and live in retirement.
our cost of capital. That is the guiding principle
upon which we have built our strategy.


Understanding and acting on consumer needs
We’re deepening our understanding of consumer needs,
and we’re using that knowledge to make intelligent
decisions about new products and services. Helping
consumers achieve their financial goals depends on our
ability to develop an environment and process through
which we can develop truly insightful and creative solutions.
– Gordon Hecker
Vice President and
Chief Marketing Officer

Our primary focus remains on value creation. True economic
value creation can occur only if we consistently achieve returns
that exceed our cost of capital.

During the past year, we’ve demonstrated accumulating assets to managing them during
our commitment to make the difficult deci- retirement. There is increasing recognition
sions necessary to improve our financial that individuals will need to become more
performance and position us for long-term responsible for their own retirement security.
growth. But as we look forward, our business
Against this backdrop, we operate our busi-
will continue to face uncertainty – not only
nesses with a strategic focus on the long term.
from the markets, but also from legislative and
This means we will allocate capital and make
regulatory reform. We will continue to evolve
investments in ways we believe will create
to meet these new challenges.
the greatest long-term value, even when it
The financial services marketplace is changing. appears the stock market might reward other
Consumer product preferences and buying alternatives more quickly.
habits are shifting; simplicity and packaged
investments are gaining interest. Those
Americans entering retirement in record
numbers have a growing need to move from


Managing our talent to drive business results
Talent management is critical to all our strategic
initiatives. We’re developing a comprehensive
talent-management strategy that includes a focus
on leader succession, a vital component of our
long-range planning effort. The right talent will
drive our results and our overall success.
– Kim Geyer
Vice President
Human Resources

Our 2005 Focus platforms that will allow us to take advantage
To succeed over the next several years and of the tremendous growth opportunities that
beyond, we must be willing to challenge the are emerging. To achieve these objectives,
status quo. We must be nimble and responsive we will concentrate on five strategic priorities
to rapidly changing consumer needs. We must during 2005.
deliver products and services valued by our
1. Enhancing our financial discipline and risk
customers in a way that defines a sustainable
management capabilities
competitive advantage. And we must operate
We will build on the progress we made in
efficiently to ensure our competitiveness
2004 to further improve the profitability of our
and profitability.
business by instilling more rigorous financial
During 2005, our top priority is to strengthen discipline and expense management into our
our underlying operating model while building operations. With greater financial discipline,

Sources of Long-Term Value Creation

Focus on profitability Focus on risk and Focus on growth
(near term) capital management (longer term)
Focus on Profitability
(medium term)
Financial discipline In-retirement business
Risk & Capital Management
Increased accountability Enhanced risk management Consumer focus
New Growth Opportunities capital management
Expense management Efficient Innovation


Developing more effective and efficient operations
By uniting our outbound sales support and inbound
customer service functions, we now have a more
holistic view of our service delivery to our customers and
producer partners. This gives us greater efficiency and
improves our ability to consistently deliver On Your Side
service to the customers and producers who count on
us every day.
– Bill Jackson
Vice President
Sales Support

During 2005, our top priority is to strengthen our underlying operating
model while building platforms that will allow us to take advantage of
the tremendous growth opportunities that are emerging.

we’re able to more effectively manage our During 2005, we intend to implement a
diverse business mix and direct capital to segmentation strategy across our distribu-
higher-return businesses. tion channels, supported by a consistent and
repeatable sales process, to more fully focus
It’s critical that we continue to enhance our
and optimize sales productivity. In addition, we
risk management capability to fully optimize
believe we can increase sales by expanding the
returns based on levels of risk we choose to
reach of the Nationwide Financial Network.
accept. To do this, we’re more fully defining
our risk capacity, developing an enterprise 3. Understanding and acting on
portfolio view of risk, and investing in technol- consumer needs
ogy to expand our risk-modeling capability. A respected and well-known brand is essential
to our long-term success as we evolve our
2. Building a focused distribution strategy
business model from a sales company to a
Our distribution platform is already recognized
consumer-focused, market-driven organiza-
as one of the best in the industry. But we can
tion. A successful brand can create demand for
do better. We have significant opportunities to
products, outperform competitors and support
increase our sales by refining our sales pro-
premium pricing. During 2005, we will continue
cesses and relationships with key producers.


The opportunities to strengthen and grow our business have
never been better. We’re confident we have the right people
and the right strategy, and we are keenly focused on creating
the right financial solutions for consumers.

to invest in our brand through an expanded industry today, and the number of retirees
On Your Side marketing campaign in partner- will continue to grow in the coming years.
ship with our parent, Nationwide Mutual By leveraging our core strengths, Nationwide
Insurance Company. Financial is well positioned to capitalize on
this opportunity. During 2005, we will invest in
But to take full advantage of increased
infrastructure, new service delivery platforms
brand awareness, we must also enhance our
and product solutions to help secure our
marketing capabilities. As part of our effort
position in this market.
to establish a culture of innovation, we’re
implementing new methods for identifying 4. Developing more effective and
articulated and unarticulated consumer needs, efficient operations
and we’re using that knowledge to create Accountability, operational efficiency and
new products and services. prudent expense management continue to be
critical components of our drive to strengthen
We’re also building a new business to serve
our core operating model and improve profit-
the needs of consumers approaching or living
ability and returns. While we have streamlined
in retirement. We believe the retirement trend
many processes over the last several years,
represents an unprecedented opportunity
significant opportunities remain. In 2005, we
in U.S. business history. The unique financial
will focus on lowering the cost structure in our
needs of consumers living in retirement are
core operations. We’ve implemented many
not adequately met by the financial services
initiatives designed to combine functions


and technologies that can be shared across and we are keenly focused on creating the
multiple business units. In some cases, these right financial solutions for consumers. This
efforts may require some investment in new positions us well to achieve profitable growth
technologies that will result in increased and improve returns for our shareholders over
efficiencies in the coming years. the next several years.

5. Managing our talent to drive We thank you for your continued support.
business results
We’re very proud of the talent and dedication
exhibited by our associates each and every
day. And as we evolve our business model, we
must appropriately manage our talent. Having
the right people, in the right places, doing
– Jerry Jurgensen
the right things is critical to the successful
Chief Executive Officer
execution of our strategy. During 2005, we will
continue to refine our talent-management
process to support diversity and inclusion and
to reward performance that drives both short-
and long-term results.

Meeting the Challenge – Mark R. Thresher
President and Chief Operating Officer
We do not underestimate the complexity of
the challenges we face. However, the oppor-
tunities to strengthen and grow our business
have never been better. We’re confident we
have the right people and the right strategy,


We build long-term value for shareholders by serving
the long-term needs of our customers.
It’s no secret in our industry that consumer preferences are chang-
ing. The trick is to understand why and to do something about it so
we keep the customers we have and attract new ones in the future.
We’ve structured our entire business around meeting the life-cycle
needs of our customers – providing the solutions that help them
achieve ﬁnancial security as they prepare for and live in retirement.


Individual Investments Individual Protection
With an eye on innovative, consumer- Life insurance is an important part
focused solutions, we oﬀer a portfolio of of any financial plan, and we offer
products that provide guarantees as well solutions that meet a wide range of
as those that allow individuals to tap into consumer needs.
market potential.
Variable life insurance
Variable annuities
Universal life insurance
Fixed annuities
Term insurance
Advisory services
Whole life insurance

Corporate-owned life insurance

Retirement Plans In-Retirement
We’re a market leader in this business, Our goal is to become the trusted
and we’re continually seeking new and ﬁnancial advisor to consumers who are
better ways to help plan sponsors serve entering and living in retirement.
the retirement-planning needs of their
employees.

Private-sector retirement plans

Public-sector retirement plans


“We’re creating solutions that
address consumer demand
for principle protection
and the desire for upside
market participation.”
– Mark Phelan

Identifying solutions to meet consumers’ investing needs

A growing market means growing opportu- We’re energized and ready for this opportu-
nity. By 2010, the number of Americans 55 nity, armed with new products and a diverse
or older is estimated to increase to 75 million solution set that makes it easier for consumers
from 60 million in 2002.1 to achieve a secure and flexible retirement.

In addition, retirement wealth has increased Innovating today
by about 14 percent since 2003, yet annuities In 2004, we streamlined our business model to
account for only 3 percent of total house- focus on creating solutions that are right for our
hold wealth.2 customers, producers and shareholders.

We believe this under-consumption of prod- We answered the call of our customers’
ucts that help consumers save for retirement changing needs and found a way to take our
is about to change. As saving for retirement variable annuities to a new level. Our newest
becomes more of a personal responsibility for feature, Capital Preservation PlusSM Lifetime
those approaching retirement, the products Income, combines some of the best of all
we offer are quickly coming to the forefront living benefits on the market today, but with
of the public’s attention. greater protection, flexibility and liquidity.


2004 Sales by Channel/Product Type Pre-Tax Operating Earnings Operating Revenues
(in millions) (in millions) (in billions)
Variable Fixed Adv. Svcs./
Annuity Annuity Other Total
$276 $1.4 $1.5
Non-Affiliated Distribution
$239
$227 $1.2
Independent Broker/Dealers $1,492.3 $ 16.2 $190.6 $1,699.1 $1.1 $1.1
$186
Wirehouse and Regional Firms 991.6 20.6 52.2 1,064.4
Financial Institutions 1,270.8 774.3 32.3 2,077.4
Life Specialists 2.3 — — 2.3
CPA Channel 42.3 0.9 40.2 83.4
00 01 02 03 04
Total Non-Affiliated 3,799.3 812.0 315.3 4,926.6
Affiliated Distribution 00 01 02 03 04 00 01 02 03 04
Nationwide Agents 224.6 38.6 8.7 271.9
Nationwide Financial Network 106.4 8.2 25.4 140.0
($121)
Total Affiliated 331.0 46.8 34.1 411.9
TOTAL $4,130.3 $858.8 $349.4 $5,338.5

Customers can have upside potential and leading service. In addition, we expect to invest
downside protection at the same time. And in the creation of new financial solutions that
the product has the profitability and risk-and- include variable and fixed annuities, personal
return profile that safeguards the interests of pension plans and managed separate accounts.
our shareholders.
We’ll maintain our commitment to improv-
We’ve also enhanced our America’s marketing efficiency, which saved us more than
FLEX® product. MarketFLEX embodies our $2 million last year. We’ve already re-engineered
disciplined investment strategy, focusing on our workflow and improved our technology,
world-class money management. It provides eliminating many manual processes.
improved diversification for investment port-
Recognizing the growing consumer interest in
folios, enhanced risk management to protect
packaged investments, our advisory services
assets and the possibility to make money in
platform will help investment professionals
all market conditions.
spend more time building client relationships
Planning for tomorrow by providing the service and technology sup-
We enjoy a history of stability and effective port they need to grow their businesses.
risk management, and we’ll continue this by
We’re ready for the future, and we’re making
making decisions that incorporate strong
sure our customers are, too.
financial discipline.
U.S. Census, 2000
1

For a profitable future that emphasizes long- Federal Reserve
2

term value creation, we’ll continue to simplify
our products and improve upon our market-


Individual Protection
Pre-Tax
2004 Sales by Channel/Product Type
Fixed Variable
(in millions) Operating Earnings Operating Revenues
Life Life/COLI Total
(in millions) (in millions)
Independent Broker/Dealers $ 24.0 $258.6 $282.6
$243 $1,352 $1,355
Wirehouse and Regional Firms 15.2 48.8 64.0 $215
$190 $187 $1,004
Financial Institutions 14.2 33.6 47.8
$161
$751 $835
Life Specialists — 380.5 380.5
CPA Channel 0.9 2.8 3.7
Total Non-Affiliated 54.3 724.3 778.6
Affiliated Distribution
Nationwide Agents 275.9 95.3 371.2
Nationwide Financial Network 176.7 256.1 432.8 00 01 02 03 04 00 01 02 03 04
TBG Financial — 184.2 184.2
Total Affiliated 452.6 535.6 988.2
TOTAL $506.9 $1,259.9 $1,766.8

Helping consumers protect what matters most

The desire for a secure financial future for the vast majority who do own life products are
loved ones leads many Americans to consider underinsured, so there’s ample opportunity for
life insurance as a foundation for personal growth by getting them to increase their cov-
financial planning. And life insurance can be erage to more appropriate levels of protection.
a valuable tool for business owners to protect
Secondly, we’ll focus on the small-business
themselves and their business interests.
market – represented by approximately 5
While conventional wisdom might say the million small businesses in the United States.
life insurance market is mature, we believe Nearly 60 percent of small-business owners
there are segments of the market that have don’t own a life insurance product, so we’ll
very attractive growth potential. Nationwide focus our efforts on educating them about the
Financial is a market leader in individual vari- role life insurance can play in protecting their
able universal life (VUL) and corporate-owned financial interests.
life insurance (COLI), and we’re building on
Thirdly, we’re prepared to meet the opportuni-
this strong foundation by focusing on three
ties in the in-retirement market. Life insurance
strategic opportunities.
will play a significant role as clients seek tax-
First, we’ll target affluent, high-net-worth advantaged vehicles to execute wealth transfer
consumers, who have a greater tendency to and tax-preferred income strategies. Cash-
own life insurance products. We’ve found that value life insurance can be an ideal vehicle to


“ Life insurance will play a
significant role as consumers
seek tax-advantaged vehicles
to execute wealth-transfer and
tax-preferred income strategies.”

– Peter Golato
Individual Protection

provide tax-preferred supplemental income to • a new pricing structure in our existing uni-
help retirees live the life they planned for. versal life series, which makes this solution
available to a larger customer base.
Developing innovative solutions
Moving the Individual Protection segment for- • our new policy management system,
ward won’t happen without innovation, and which helps producers and customers
we have several new products and changes to better manage policies throughout their
existing products expected in 2005, including: life cycles, making us easier to do business
with and reflecting the On Your Side
• a new version of our accumulation VUL
promise we’ve made to our customers.
product, “The Best of America Next
Generation® II.” This life insurance solution We have re-focused our efforts to maximize
includes protection against policy lapses, production in both the affiliated and non-
as well as an option for long-term care. affiliated distribution platforms.
Benefits to brokers include additional
Nationwide Financial recognizes the impor-
sales support and an improved under-
tance of life insurance in financial planning,
writing capability that enables quicker
and our expertise in this segment is providing
turnaround time.
real value for our customers and shareholders.


“Our market leadership,
dedicated field presence and
focus on education give us a
competitive advantage in the
retirement plan market.”

– Duane Meek
Retirement Plans

Serving the retirement needs of partners and participants

As the debate over Social Security takes We anticipate steady growth for the retirement
center stage in Washington, defined contri- business. Industry estimates indicate public-
bution plans are becoming more important sector IRS Code Section 457 plans will reach
in Americans’ financial plans. Through their $158 billion in assets by 2008.1 Furthermore,
employer-sponsored programs, participants more than 12,000 small businesses will likely
are becoming more accountable for their establish new 401(k) plans in 2005.2 Our goal is
own retirement. to maintain our position as an industry leader
in this market. By leveraging the strengths of
Consumer education will remain a priority as
our private- and public -sector businesses,
individuals better understand the importance
we have the scale to bring a wide range of
of contributing to their retirement plans.
solutions to the varied needs of this market.
Nationwide Financial is committed to partner-
ing with investment professionals and plan During 2004, our private-sector retirement
sponsors to deliver this important benefit to plan business intensified its focus on the
working Americans. small-plan retirement market. In 2005, we’ll


Retirement Plans
2004 Sales by Channel/Product Type Pre-Tax
Private Public
(in millions) Operating Earnings Operating Revenues
Sector Sector Total
(in millions) (in millions)
Independent Broker/Dealers $3,018.3 $ — $3,018.3
Wirehouse and Regional Firms 863.7 — 863.7 $1,066 $983
$213
$919 $953 $1,008
Financial Institutions 493.3 — 493.3 $179 $179
$140 $149
Pension Plan Administrators 476.1 — 476.1
CPA Channel 136.1 — 136.1
Total Non-Affiliated 4,987.5 — 4,987.5
Affiliated Distribution
Nationwide Retirement Solutions 28.8 3,637.1 3,665.9
Nationwide Agents 71.2 — 71.2 00 01 02 03 04 00 01 02 03 04
Nationwide Financial Network 188.1 — 188.1
The 401(k) Company 893.1 — 893.1
Total Affiliated 1,181.2 3,637.1 4,818.3
TOTAL $6,168.7 $3,637.1 $9,805.8

further align our services around our customers State of Alabama and Marin County, California,
and expect to increase our presence in the and we established a new relationship with
market by simplifying business processes and the City of Phoenix.
providing greater flexibility to third-party
The ongoing measurement of our customers’
administrators and investment professionals.
satisfaction demonstrates success for the
The 401(k) Company continued making sig- fourth consecutive year. In the coming year,
nificant strides in the large-plan private-sector NRS is launching the Education Statement,
market in 2004. We demonstrated our strength which gives plan participants easy-to-use tools
in this market through the acquisition of nine and information to help them maximize the
new client relationships and the growth of assets value of their retirement accounts.
under administration by more than $4 billion.
As the face of retirement changes, Nationwide
Within the public sector, Nationwide Financial will continue to change with it, help-
Retirement Solutions (NRS) has renewed ing investment professionals serve their clients
long-standing relationships with our and improving consumers’ understanding
business partners and plan sponsors while of their complex retirement needs.
acquiring new clients. In 2004, we renewed 2004 Cerulli Quantitative Update
1

contracts with the City of Chicago, the RG Wuelfing & Associates
2


In-Retirement
Retirees: The Fastest Growing Aging Population to
Leveraging the Market Opportunity
U.S. Population Segment(1) Control More Assets(1)(2)
Americans’ life expectancy is increasing, meaning 336 Investable assets* by age group
309 million
293
consumers are living longer in retirement than million Age
7%
million 14%
13%
14%
6% 10%
6% 75+
ever before. Nationwide Financial is committed to 7% 17%
6% Fully Retired 18%
13% 22%
12%
10%
serving the financial needs of consumers as they 65-74
12%
14%
14%
Transitioning retirees 25% 30%
enter and live in retirement. 31%
55-64
Pre-retired
25%
59%
64% 61% 24%
45-54 19%
A
<45 75
18% 15% 14%
65
55
2004 2010 2020 2001 2010 2020 45
<
Estimates Estimates
U.S. Census *Investable assets include financial
(1)

Survey of Consumer assets held in pension accounts
(2)

Finances; McKinsey such as 401(k) and IRAs.

Providing financial advice for people living in retirement

Nationwide Financial is committed to served through Nationwide Retirement
maintaining relationships for life by helping Solutions – a group that currently holds
consumers manage their finances before and $7.2 billion in assets – will likely retire.
after their retirement. Evolving retiree needs
The dramatic increase in the number of
require creative solutions. Nationwide Financial
retirees versus workers will profoundly change
is positioned to address this opportunity
the financial services industry. Retirees will be
through our emerging In-Retirement segment.
a dominant population group in size and in
But we’re not starting from scratch. We have assets. While our history with most of these
sizable and meaningful relationships with customers has been on the accumulation
many customers within our existing busi- side, we believe we have the agility to provide
nesses who already rely on us to help them in-retirement solutions by capitalizing on our
achieve their retirement goals. For example, existing relationships and forging new ones.
our private-sector retirement plan business
We’ll achieve success in this segment by
serves over 3.5 million customers, with 500,000
understanding the uniqueness of in-retirement
participants age 55 and over. In the next five
consumers. We will package solutions that
years, nearly a quarter million public employees


“Serving the needs of consum-
ers in retirement provides a
natural, strategic complement
to all our other businesses.”

– Keith Millner
In-Retirement

meet these unique needs by supporting our means helping them manage risks, such as
investment professionals and firms as they serve longevity, health care, long-term care, inflation
those in retirement and by building strategic and investment risks. And it means manag-
partnerships and alliances with companies ing their assets to meet income, growth and
who have demonstrated best-in-class solutions. protection needs for decades.

We will develop solutions that help retirees get It means providing On Your Side service to help
the most value out of their largest assets; and them fulfill their retirement dreams.
help customers and their dependents make
informed decisions about their health care that
in the long-term will help protect their wealth.
And we’ll communicate and interact with
our customers in the manner that is most
convenient and effective for them.

Delivering to this population is something we
take seriously. This means giving consumers
guidance through trustworthy providers. It


Condensed Consolidated Statements of Income
(in millions, except earnings per share amounts)

Years Ended December 31, 2004 2003 2002

Revenues:
Policy charges $ 1,235.0 $ 1,126.8 $ 1,028.4
Life insurance premiums 402.7 426.2 302.3
Net investment income 2,265.7 2,226.5 1,913.2
Net realized losses on investments, hedging instruments and hedged items (30.8) (69.4) (79.4)
Other 307.6 234.1 126.6

Total revenues 4,180.2 3,944.2 3,291.1

Benefits and expenses:
Interest credited to policyholder account values 1,352.5 1,391.4 1,279.1
Other benefits and claims 526.9 563.5 374.8
Policyholder dividends on participating policies 101.4 105.7 63.5
Amortization of deferred policy acquisition costs 442.1 399.5 678.1
Amortization of value of business acquired 52.3 46.4 15.2
Interest expense on debt 102.2 96.2 76.8
Other operating expenses 928.2 823.7 670.1

Total benefits and expenses 3,505.6 3,426.4 3,157.6

Income from continuing operations before federal income tax expense 674.6 517.8 133.5
Federal income tax expense (benefit) 169.2 119.4 (7.3)

Income from continuing operations 505.4 398.4 140.8
Discontinued operations, net of tax — — 3.4
Cumulative effect of adoption of accounting principles, net of tax (3.4) (0.6) —

Net income $ 502.0 $ 397.8 $ 144.2

Earnings from continuing operations per common share:
Basic $ 3.32 $ 2.62 $ 1.06
Diluted $ 3.30 $ 2.61 $ 1.06

Earnings per common share:
Basic $ 3.30 $ 2.62 $ 1.09
Diluted $ 3.28 $ 2.61 $ 1.09

Weighted average common shares outstanding:
Basic 152.1 151.8 132.4
Diluted 152.9 152.3 132.6

Cash dividends declared per common share $ 0.72 $ 0.52 $ 0.51


Condensed Consolidated Balance Sheets
(in millions, except per share amounts)

December 31, 2004 2003

Assets
Investments:
Securities available-for-sale, at fair value:
Fixed maturity securities (cost $30,423.2 in 2004; $29,562.9 in 2003) $ 31,516.8 $ 30,787.1
Equity securities (cost $73.1 in 2004; $117.0 in 2003) 87.0 128.7
Trading assets, at fair value 15.9 4.9
Mortgage loans on real estate, net 9,267.5 8,964.7
Real estate, net 108.3 123.4
Policy loans 987.2 963.2
Other long-term investments 604.2 194.6
Short-term investments, including amounts managed by a related party 2,009.9 1,970.3

Total investments 44,596.8 43,136.9

Cash 52.4 11.5
Accrued investment income 428.7 439.6
Deferred policy acquisition costs 3,561.1 3,329.9
Value of business acquired 480.4 523.0
Other intangible assets 48.7 52.3
Goodwill 382.3 406.7
Other assets 2,497.0 2,250.7
Assets held in separate accounts 64,903.2 60,937.6

Total assets $ 116,950.6 $ 111,088.2

Liabilities and Shareholders’ Equity
Liabilities:
Future policy beneﬁts and claims $ 41,077.2 $ 40,049.3
Short-term debt 230.8 205.3
Long-term debt 1,406.0 1,405.6
Other liabilities 4,118.3 3,615.0
Liabilities related to separate accounts 64,903.2 60,937.6

Total liabilities 111,735.5 106,212.8
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 — 66.2 and 65.5 shares
in 2004 and 2003, respectively; outstanding — 56.9 and 56.3 shares in 2004 and 2003, respectively 0.7 0.6
Class B common stock, $0.01 par value; authorized — 750.0 shares; issued and outstanding —
95.6 shares 1.0 1.0
Additional paid-in capital 1,634.6 1,614.3
Retained earnings 3,400.0 3,006.4
Accumulated other comprehensive income 432.2 504.9
Treasury stock (251.4) (247.6)
Other, net (2.0) (4.2)

Total shareholders’ equity 5,215.1 4,875.4

Total liabilities and shareholders’ equity $ 116,950.6 $ 111,088.2


Condensed Consolidated Statements of Cash Flows
(in millions)

Years Ended December 31, 2004 2003 2002

Cash flows from operating activities:
Net income $ 502.0 $ 397.8 $ 144.2
Adjustments to reconcile net income to net cash provided by operating activities:
Interest credited to policyholder account values 1,352.5 1,391.4 1,279.1
Capitalization of deferred policy acquisition costs (561.9) (642.9) (695.0)
Amortization of deferred policy acquisition costs 442.1 399.5 678.1
Amortization and depreciation 167.3 170.8 36.7
Net realized losses on investments, hedging instruments and hedged items 30.8 69.4 79.4
Decrease (increase) in accrued investment income 10.9 (37.1) (18.6)
Increase in other assets (342.4) (727.9) (597.2)
(Decrease) increase in policy liabilities (2.0) 17.4 64.5
Increase in other liabilities 464.3 294.1 470.8
Income from discontinued operations — — (3.4)
Other, net 23.4 61.8 40.0

Net cash provided by continuing operations 2,087.0 1,394.3 1,478.6
Net cash provided by discontinued operations — — 3.4

Net cash provided by operating activities 2,087.0 1,394.3 1,482.0

Cash flows from investing activities:
Proceeds from maturity of securities available-for-sale 3,888.4 4,622.2 4,095.1
Proceeds from sale of securities available-for-sale 3,767.2 2,538.0 1,610.1
Proceeds from repayments of mortgage loans on real estate 2,083.2 1,554.9 1,029.3
Proceeds from sale of real estate 21.9 33.2 111.3
Proceeds from repayments of policy loans and sale of other invested assets 95.3 121.7 66.3
Cost of securities available-for-sale acquired (8,368.8) (10,181.4) (10,381.8)
Cost of mortgage loans on real estate acquired (2,348.4) (2,053.7) (1,835.7)
Net change in short-term investments (48.7) (539.6) (242.4)
Collateral received (paid) — securities lending, net 89.4 (26.1) 158.9
Other, net (473.7) (55.9) (704.2)

Net cash used in investing activities (1,294.2) (3,986.7) (6,093.1)

Cash flows from financing activities:
Net proceeds from issuance of long-term debt — 197.2 296.0
Net change in short-term debt 25.5 202.6 (97.3)
Cash dividends paid (101.9) (78.9) (70.5)
Investment and universal life insurance product deposits 4,399.1 5,471.0 6,785.4
Investment and universal life insurance product withdrawals (5,091.3) (3,214.5) (2,350.5)
Other, net 16.7 4.8 4.7

Net cash (used in) provided by financing activities (751.9) 2,582.2 4,567.8

Net increase (decrease) in cash 40.9 (10.2) (43.3)
Cash, beginning of period 11.5 21.7 65.0

Cash, end of period $ 52.4 $ 11.5 $ 21.7


Report of Management
The management of Nationwide Financial Services, Inc. and its subsidiaries (the “Company”) is responsible for the preparation and
integrity of the condensed consolidated financial statements and other information contained in this Summary Annual Report.
The condensed 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. The condensed
consolidated financial statements should be read in conjunction with the consolidated financial statements, including the
footnotes thereto, contained in the Annual Report on Form 10-K. The Annual Report on Form 10-K is furnished in conjunction
with the Company’s Proxy Statement for the 2005 Annual Meeting of Shareholders.

Mark R. Thresher
President and Chief Operating Officer
March 1, 2005

Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders
Nationwide Financial Services, Inc.:

We have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the con-
solidated balance sheets of Nationwide Financial Services, Inc. and subsidiaries (the “Company”) as of December 31, 2004 and 2003,
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, 2004 (not presented herein); and in our report dated March 1, 2005, we expressed an unqualified
opinion on those consolidated financial statements with an explanatory paragraph referring to the Company’s adoption of the
American Institute of Certified Public Accountants’ Statement of Position 03-1, Accounting and Reporting by Insurance Enterprises for
Certain Nontraditional Long-Duration Contracts and for Separate Accounts, in 2004.

In our opinion, the information set forth in the accompanying condensed consolidated financial statements is fairly stated, in all
material respects, in relation to the consolidated financial statements from which it has been derived.

Columbus, Ohio
March 1, 2005

Certification Confirmation
Nationwide Financial Services, Inc. submitted a CEO Certification to the New York Stock Exchange (NYSE), as required by Section
303A.12(a) of the NYSE Listed Company Manual, certifying that Mr. Jurgensen was not aware of any violation by the Company of
the NYSE’s Corporate Governance listing standards. The CEO Certification was submitted to the NYSE within thirty days of the
Company’s Annual Meeting of Shareholders in 2004, as required by the NYSE rules. Also, the certifications by the Company’s CEO
and CFO required by Section 302 of the Sarbanes-Oxley Act of 2002 were filed with the Securities and Exchange Commission with
the Company’s Annual Report on Form 10-K for the year ended December 31, 2004.


Five-Year Summary Condensed Consolidated
Statements of Income

Years Ended December 31, 2004 2003 2002 2001 2000

Revenues:
Policy charges $ 1,235.0 $ 1,126.8 $ 1,028.4 $ 1,019.1 $ 1,092.2
Life insurance premiums 402.7 426.2 302.3 251.1 240.0
Net investment income 2,265.7 2,226.5 1,913.2 1,735.1 1,661.9
Net realized losses on investments,
hedging instruments and hedged items (30.8) (69.4) (79.4) (14.3) (24.9)
Other 307.6 234.1 126.6 76.6 81.7

Total revenues 4,180.2 3,944.2 3,291.1 3,067.6 3,050.9

Benefits and expenses:
Interest credited and other benefits 1,980.8 2,060.6 1,717.4 1,567.4 1,470.0
Interest expense on debt 102.2 96.2 76.8 54.9 48.5
Other operating expenses 1,422.6 1,269.6 1,363.4 877.1 910.0

Total benefits and expenses 3,505.6 3,426.4 3,157.6 2,499.4 2,428.5

Income from continuing operations
before federal income taxes 674.6 517.8 133.5 568.2 622.4
Federal income tax expense (benefit) 169.2 119.4 (7.3) 143.9 187.3

Income from continuing operations 505.4 398.4 140.8 424.3 435.1
Discontinued operations, net of tax — — 3.4 (4.4) (0.2)
Cumulative effect of adoption of accounting
principles, net of tax (3.4) (0.6) — (7.1) —

Net income $ 502.0 $ 397.8 $ 144.2 $ 412.8 $ 434.9

Earnings per common share:
Basic $ 3.30 $ 2.62 $ 1.09 $ 3.20 $ 3.38
Diluted $ 3.28 $ 2.61 $ 1.09 $ 3.20 $ 3.38

Weighted average common shares
outstanding:
Basic 152.1 151.8 132.4 128.9 128.7
Diluted 152.9 152.3 132.6 129.2 128.9

Cash dividends declared per common share $ 0.72 $ 0.52 $ 0.51 $ 0.48 $ 0.46


Five-Year Summary Condensed Consolidated Balance
Sheets and Segment Data

Years Ended December 31, 2004 2003 2002 2001 2000

Assets:
Total invested assets $ 44,596.8 $ 43,136.9 $ 39,132.5 $ 27,814.4 $ 23,359.2
Deferred policy acquisition costs 3,561.1 3,329.9 3,026.9 3,213.7 2,872.7
Other assets 3,889.5 3,683.8 3,052.6 1,286.1 977.9
Assets held in separate accounts 64,903.2 60,937.6 50,348.3 59,646.7 65,968.8

Total assets $ 116,950.6 $ 111,088.2 $ 95,560.3 $ 91,960.9 $ 93,178.6

Liabilities:
Future policy beneﬁts and claims $ 41,077.2 $ 40,049.3 $ 36,274.3 $ 25,491.6 $ 22,243.3
Short-term debt 230.8 205.3 2.7 100.0 118.7
Long-term debt 1,406.0 1,405.6 1,197.6 897.0 598.4
Other liabilities 4,118.3 3,615.0 3,294.1 2,382.3 1,251.9
Liabilities related to separate accounts 64,903.2 60,937.6 50,348.3 59,646.7 65,968.8

Total liabilities 111,735.5 106,212.8 91,117.0 88,517.6 90,181.1
Shareholders’ equity: 5,215.1 4,875.4 4,443.3 3,443.3 2,997.5

Total liabilities and shareholders’ equity $ 116,950.6 $ 111,088.2 $ 95,560.3 $ 91,960.9 $ 93,178.6

Book value per common share $ 34.20 $ 32.10 $ 29.25 $ 26.71 $ 23.29

Customer funds managed and administered:
Individual Investments $ 52,481.9 $ 49,333.9 $ 40,896.5 $ 42,186.7 $ 43,694.9
Retirement Plans 76,661.2 64,224.3 45,524.8 47,289.2 45,526.3
Individual Protection 15,683.0 13,897.1 12,158.9 8,099.2 7,225.5
Corporate and Other 4,401.6 4,606.3 4,273.6 3,128.1 1,627.7

Total $ 149,227.7 $ 132,061.6 $ 102,853.8 $ 100,703.2 $ 98,074.4

Pre-tax operating earnings (loss) by
reporting segment:
Individual Investments $ 239.4 $ 185.5 $ (121.1) $ 227.2 $ 276.3
Retirement Plans 178.6 148.8 139.6 179.1 212.5
Individual Protection 243.0 215.2 186.7 189.7 161.1
Corporate and Other 53.1 53.4 16.6 (12.8) (2.6)

Sales by reporting segment:
Individual Investments $ 5,338.5 $ 6,738.8 $ 7,330.3 $ 7,625.6 $ 7,338.7
Retirement Plans 9,805.8 8,400.9 7,424.7 6,985.7 7,392.2
Individual Protection 1,766.8 1,722.5 1,543.3 1,540.6 1,530.2
Corporate and Other — — — — —

Total $ 16,911.1 $ 16,862.2 $ 16,298.3 $ 16,151.9 $ 16,261.1

2004 Nationwide Financial Annual Report

2004 Nationwide Financial Annual Report

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2004 Nationwide Financial Annual Report