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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
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(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the period ended March 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 333-18117
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
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(Exact name of Registrant as specified in its charter)
New Jersey 22-2426091
- ----------------------------- -------------------
(State or other jurisdiction, (IRS Employer
incorporation or organization) Identification No.)
213 Washington Street, Newark, New Jersey 07102
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(Address of principal executive offices) (Zip Code)
(201) 802-3780
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(Registrant's Telephone Number, including area code)
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES _X_ NO ___
State the aggregate market value of the voting stock held by non-affiliates
of the registrant: NONE.
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of March 31, 1997. Common stock, par value of $5 per
share: 400,000 shares outstanding
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<PAGE>
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
INDEX TO FINANCIAL STATEMENTS
INDEX
PAGE NO.
--------
COVER PAGE 1
INDEX 2
PART I -- FINANCIAL STATEMENTS
ITEM 1. PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
FINANCIAL STATEMENTS:
STATEMENTS OF FINANCIAL POSITION -- MARCH 31, 1997
(UNAUDITED) AND DECEMBER 31, 1996 3
STATEMENTS OF OPERATIONS (UNAUDITED) -- THREE MONTHS ENDED
MARCH 31, 1997 AND 1996 4
STATEMENTS OF STOCKHOLDER'S EQUITY -- THREE MONTHS ENDED
MARCH 31, 1997 (UNAUDITED) AND DECEMBER 31, 1996 5
STATEMENTS OF CASH FLOWS (UNAUDITED) -- THREE MONTHS ENDED
MARCH 31, 1997 AND 1996 6
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED) 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 8
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 9
ITEM 2. CHANGES IN SECURITIES 9
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 9
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 9
ITEM 5. OTHER INFORMATION 9
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 9
SIGNATURE PAGE 11
2
<PAGE>
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
STATEMENTS OF FINANCIAL POSITION
MARCH 31, 1997 (UNAUDITED) AND DECEMBER 31, 1996
MARCH 31, DECEMBER 31,
1997 1996
--------- ----------
(000'S)
ASSETS
Fixed maturities
Available for sale $541,030 $555,898
Policy loans 116,439 113,918
Short term investments 22,421 17,002
--------- ----------
Total invested assets 679,890 686,818
---------- ----------
Cash 48,999 3,928
Deferred policy acquisition costs 108,056 106,965
Premiums due 395 401
Accrued investment income 13,541 12,908
Receivable from affiliates 155 --
Other assets 33,598 1,335
Separate Account assets 881,599 883,261
---------- ----------
TOTAL ASSETS $1,766,233 $1,695,616
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES
Future policy benefits and other
policyholders' liabilities $ 102,764 $ 100,663
Policyholders' account balances 373,104 375,448
Federal income tax payable 4,940 1,970
Deferred federal income tax payable 17,632 24,175
Payable to affiliate 6,376 6,059
Other liabilities 93,579 11,990
Separate Account liabilities 878,472 880,065
---------- ----------
TOTAL LIABILITIES 1,476,867 1,400,370
---------- ----------
CONTINGENCIES
STOCKHOLDER'S EQUITY
Common Stock, $5 par value;
400,000 shares,
authorized; issued and outstanding
at March 31, 1997 and December 31, 1996 2,000 2,000
Paid-in-capital 125,000 125,000
Net unrealized investment (losses)gains
(less deferred income tax) (854) 2,032
Retained earnings 163,220 166,214
---------- ----------
TOTAL STOCKHOLDER'S EQUITY 289,366 295,246
---------- ----------
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $1,766,233 $1,695,616
========== ==========
3
<PAGE>
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
------------------------------
1997 1996
--------- ---------
(000'S)
REVENUES
Premiums $ 260 $ 356
Policy charges and fee income 14,150 14,727
Net investment income 11,173 10,587
Realized investment gains 329 947
Other income 416 894
---------- -------
TOTAL REVENUES 26,328 27,511
---------- -------
BENEFITS AND EXPENSES
Policyholders' benefits 18,232 7,831
Interest credited to policyholders'
account balances 4,780 4,555
Other operating costs and expenses 7,724 3,769
---------- -------
TOTAL BENEFITS AND EXPENSES 30,736 16,155
---------- -------
Income (loss) before income
tax provision (4,408) 11,356
---------- -------
Income tax provision (benefit) (1,414) 3,974
---------- -------
NET INCOME (LOSS) $(2,994) $ 7,382
========== =======
4
<PAGE>
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
STATEMENTS OF STOCKHOLDER'S EQUITY
MARCH 31, 1997 (UNAUDITED) AND DECEMBER 31, 1996
THREE MONTHS ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
1997 1996
------------ -----------
(000'S)
COMMON STOCK
Balance, beginning of year $ 2,000 $ 2,000
Issued during period -- --
--------- ----------
Balance, end of period 2,000 2,000
--------- ----------
PAID IN CAPITAL
Balance, beginning of year 125,000 125,000
Paid in during period -- --
--------- ----------
Balance, end of period 125,000 125,000
--------- ----------
NET UNREALIZED INVESTMENT (LOSSES) GAINS
(LESS DEFERRED INCOME TAX)
Balance, beginning of year 2,032 6,588
Net change in unrealized investment
(losses) gains (2,886) (4,556)
--------- ----------
Balance, end of period (854) 2,032
--------- ----------
RETAINED EARNINGS
Balance, beginning of year 166,214 134,427
Net income (loss) (2,994) 31,787
--------- ---------
Balance, end of period 163,220 166,214
--------- ---------
TOTAL STOCKHOLDER'S EQUITY $ 289,366 $ 295,246
========= =========
5
<PAGE>
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
1997 1996
-------- --------
(000's)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (2,994) $ 7,382
Adjustments to reconcile net income to net cash from
operating activities:
Increase in future policy benefits and other
policyholders' liabilities 2,101 3,185
General account policy fee income (2,130) (2,729)
Interest credited to policyholders' account
balances 4,780 4,555
Net decrease in Separate Accounts 69 36
Net realized investment gains (329) (947)
Amortization and other non-cash items 4,271 2,083
Change in:
Accrued investment income (633) (771)
Premiums due 6 (41)
Receivable from affiliates (155) 2,503
Deferred policy acquisition costs (1,091) (4,072)
Other assets (32,263) (107)
Payable to affiliate 317 1,135
Federal income tax payable 2,970 3,531
Deferred federal income tax payable (6,543) 2,021
Other liabilities 81,589 7,576
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES 49,965 25,340
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the sale/maturity of:
Fixed maturities:
Available for sale 197,443 228,477
Payments for the purchase of:
Fixed maturities:
Available for sale (189,403) (233,488)
Policy loans (2,521) (3,229)
Net payments of short term investments (5,419) (14,048)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES 100 (22,288)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Policyholders' account balances:
Deposits 11,025 4,149
Withdrawals (net of transfers to/from
separate accounts) (16,019) (7,201)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES (4,994) (3,052)
-------- --------
Net increase in Cash 45,071 --
Cash, beginning of year 3,928 --
-------- --------
CASH, END OF PERIOD $ 48,999 $ --
======== ========
6
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
MARCH 31, 1997
(UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRINCIPLES
A. GENERAL
Pruco Life Insurance Company of New Jersey (the Company), a stock life insurance
company domiciled in the state of New Jersey, is an indirect subsidiary of The
Prudential Insurance Company of America (Prudential), a mutual life insurance
company, and a direct subsidiary of Pruco Life Insurance Company (Pruco Life), a
stock life insurance company domiciled in the state of Arizona. The Company
markets individual life insurance and deferred annuities through Prudential's
sales force.
B. BASIS OF PRESENTATION
The accompanying unaudited financial statements of the Company have been
prepared in accordance with the instructions to Form 10-Q and do not include all
of the other information and disclosures required by generally accepted
accounting principles.
The accompanying financial statements have not been audited by independent
accountants in accordance with generally accepted auditing standards, but in the
opinion of management such financial statements include all adjustments,
consisting only of normal recurring accruals, necessary to summarize fairly the
Company's financial position and results of operations. The results of
operations for the three months ended March 31, 1997 may not be indicative of
the results that may be expected for the year ending December 31, 1997.
2. CONTINGENCIES
Several actions have been brought against the Company on behalf of those persons
who purchased life insurance policies based on complaints about sale practices
engaged in by Prudential, the Company and agents appointed by Prudential and the
Company. Prudential has agreed to indemnify the Company for any and all losses
resulting from such litigation.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
Pruco Life Insurance Company of New Jersey (the Company) is a stock life
insurance company organized in 1982 under the laws of the state of New Jersey.
The Company is an indirect subsidiary of The Prudential Insurance Company of
America (Prudential), and a direct subsidiary of Pruco Life Insurance Company
(Pruco Life). Pruco Life is a stock life insurance company domiciled in the
state of Arizona. The Company markets individual insurance and annuities through
Prudential's sales force.
The business climate in the insurance industry remained unchanged during the
first quarter as compared to 1996. Regulatory changes which opened the
insurance industry to other financial institutions, particularly banks and
mutual funds, continued to heighten competition in investment type products
since those institutions were positioned to deliver the same products through
large, stable distribution channels. In addition, the industry has been beset by
negative publicity following the discovery of unacceptable sales practices that
resulted in investigations of most large insurers, including Prudential.
The Company's assets were $1.8 billion at March 31, 1996 compared to $1.7
billion at December 31, 1996. The Company recorded a net loss of $3.0 million
during 1997, a decrease of $10.4 million in comparison to the $7.4 million of
income earned in the first quarter of 1996.
1. RESULTS OF OPERATIONS
1997 versus 1996
Realized investment gains decreased by $.6 million from $.9 million for the
quarter ended March 31,1996 to $.3 million for the same period in 1997. This
decrease is a result of trading activity in the bond portfolio and current
market conditions.
Policyholders' benefits for the quarter ended March 31, 1997 were $18.2 million
compared to $7.8 million for the same period in 1996. This increase of $10.4
million is mainly attributable to increased policyholder withdrawal activity.
Other operating costs and expenses increased $4.0 million from $3.8 million for
the three months ended March 1996 to $7.7 million for the same period in 1997.
This is primarily due to an increase in costs associated with the introduction
of Discovery Select. Along with, technological advancements made in annuity
processing, customer service, and product development areas in order to increase
future sales and revenues.
2. LIQUIDITY
For an insurance company, cash needs, for the purpose of paying current
benefits, making policy loans, and paying expenses, are met primarily from
premiums and investment income. Benefit expenses incurred for the three months
ended March 31, 1997, and 1996, were $30.7 million, and $16.1 million,
respectively. Cash flows are anticipated to be sufficient to meet the Company's
liquidity needs for the foreseeable future.
3. CAPITAL RESOURCES
The primary components of the Company's total assets of $1.8 billion at March
31, 1997 are as follows (as a percentage of total assets): fixed income
securities 30.6%, separate account assets (fixed income and equity securities)
49.9%, policy loans 6.6%, and other assets 12.9%.
8
<PAGE>
PART II
ITEM 1 LEGAL PROCEEDING
Pruco Life Insurance Company of New Jersey is not involved in any litigation
that is expected to have a material effect.
ITEM 2 CHANGES IN SECURITIES
Not Applicable
ITEM 3 DEFAULTS UPON SENIOR SECURITIES
Not Applicable
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
ITEM 5 OTHER INFORMATION
Not Applicable.
ITEM 6 EXHIBITS AND REPORTS ON FORM 8K
(a)(1) and (2) financial Statements of registrant and subsidiaries are
listed on pages 3-6 hereof and are filed as part of this Report.
(a)(3) Exhibits
Regulation S-K
2. Not Applicable
3. Documents Incorporated by Reference
(i) The Articles of Incorporation of Pruco Life Insurance Company of New
Jersey, as amended March 11, 1983 and the By-laws of Pruco Life Insurance
Company of New Jersey, as amended February 1, 1991 are incorporated herein
by reference to Post-Effective Amendment No. 26 to Form S-6, Registration
No. 2-89780, filed April 28, 1997 on behalf of the Pruco Life of New
Jersey.
4. Exhibits
Market-Value Adjustment Annuity Contract, incorporated by reference to
Registrant's Form S-1 Registration Statement, Registration No. 33-18053,
filed December 17, 1996.
10. None.
11. Not Applicable.
15. Not Applicable.
18. None.
19. Not Applicable.
9
<PAGE>
20. Not Applicable.
22. None.
23. None.
24. Not Applicable.
25. Not Applicable.
27. Exhibit 27, Financial Data Schedule appended to this form in
accordance with EDGAR instructions.
99. None
10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf of the
undersigned, thereunto duly authorized.
............................ PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
(Registrant)
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ ESTHER H. MILNES President and Director May 15, 1997
--------------------
Esther H. Milnes
/s/ LINDA S. DOUGHERTY Vice President and Comptroller May 15, 1997
-------------------- and Chief Accounting Officer
Linda S. Dougherty
11
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
Exhibit 27
FINANCIAL DATA SCHEDULE
Article 7 of Regulation S-X
Pruco Life Insurance Company of New Jersey
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<DEBT-HELD-FOR-SALE> 541,030
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 0
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 679,890
<CASH> 48,999
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 108,056
<TOTAL-ASSETS> 1,766,233
<POLICY-LOSSES> 373,104
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 102,764
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 0
0
0
<COMMON> 2,000
<OTHER-SE> 287,366
<TOTAL-LIABILITY-AND-EQUITY> 1,766,233
260
<INVESTMENT-INCOME> 11,173
<INVESTMENT-GAINS> 329
<OTHER-INCOME> 416
<BENEFITS> 23,012
<UNDERWRITING-AMORTIZATION> 2,381
<UNDERWRITING-OTHER> 5,343
<INCOME-PRETAX> (4,408)
<INCOME-TAX> (1,414)
<INCOME-CONTINUING> (2,994)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,994)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
