AS FILED WITH THE SEC ON ____________. REGISTRATION NO. 2-80513
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-6
POST-EFFECTIVE AMENDMENT NO. 23
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933
OF SECURITIES OF UNIT INVESTMENT TRUSTS REGISTERED
ON FORM N-8B-2
----------------
PRUCO LIFE
VARIABLE INSURANCE ACCOUNT
(Exact Name of Trust)
PRUCO LIFE INSURANCE COMPANY
(Name of Depositor)
213 WASHINGTON STREET
NEWARK, NEW JERSEY 07102-2992
(800) 437-4016, EXT. 46
(Address and telephone number of principal executive offices)
----------------
THOMAS C. CASTANO
ASSISTANT SECRETARY
PRUCO LIFE INSURANCE COMPANY
213 WASHINGTON STREET
NEWARK, NEW JERSEY 07102-2992
(Name and address of agent for service)
Copy to:
JEFFREY C. MARTIN
SHEA & GARDNER
1800 MASSACHUSETTS AVENUE, N.W.
WASHINGTON, D.C. 20036
----------------
Variable Life Insurance Contracts--The Registrant has registered an indefinite
amount of securities pursuant to Rule 24f-2 under the Investment Company Act of
1940. The Rule 24f-2 notice for fiscal year 1995 was filed on February 29, 1996.
It is proposed that this filing will become effective (check appropriate space):
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[x] on May 1, 1996 pursuant to paragraph (b) of Rule 485
(date)
[ ] 60 days after filing pursuant to paragraph (a) of Rule 485
[ ] on ___________ pursuant to paragraph (a) of Rule 485
(date)
<PAGE>
CROSS REFERENCE SHEET
(AS REQUIRED BY FORM N-8B-2)
N-8B-2 ITEM NUMBER LOCATION
- ------------------ --------
1. Cover Page
2. Cover Page
3. Not Applicable
4. Sale of the Contract and Sales Commissions
5. Pruco Life Variable Insurance Account
6. Pruco Life Variable Insurance Account
7. Not Applicable
8. Not Applicable
9. Litigation
10. Brief Description of the Contract; Short-Term
Cancellation Right, or "Free Look"; Premiums; Premium
Adjustment; Allocation of Premiums; Transfers; Charges
and Expenses; How a Contract's Death Benefit Will
Vary; How a Contract's Cash Value Will Vary;
Withdrawal of a Portion of a Contract's Net Cash Value;
Surrender of a Contract for its Net Cash Value; When
Proceeds are Paid; Right to Exchange a Contract for a
Fixed-Benefit Whole-Life Policy; Lapse and
Reinstatement; Options on Lapse; Riders; Other General
Contract Provisions; Voting Rights; Substitution of
Series Fund Shares
11. Brief Description of the Contract; Pruco Life Variable
Insurance Account
12. Cover Page; Brief Description of the Contract; The
Prudential Series Fund, Inc.; Sale of the Contract and
Sales Commissions
13. Brief Description of the Contract; The Prudential Series
Fund, Inc.; Charges and Expenses; Sale of the Contract
and Sales Commissions
14. Brief Description of the Contract; Requirements for
Issuance of a Contract
15. Brief Description of the Contract; Allocation of
Premiums; Transfers
16. Brief Description of the Contract; Detailed Information
for Prospective Contract Owners
17. When Proceeds are Paid
18. Pruco Life Variable Insurance Account
19. Reports to Contract Owners
20. Not Applicable
21. Contract Loans
22. Not Applicable
23. Not Applicable
24. Other General Contract Provisions
<PAGE>
N-8B-2 ITEM NUMBER LOCATION
- ------------------ --------
25. Pruco Life Insurance Company
26. Brief Description of the Contract; The Prudential Series
Fund, Inc.; Charges and Expenses
27. Pruco Life Insurance Company; The Prudential Series
Fund, Inc.
28. Pruco Life Insurance Company; Directors and Officers
29. Pruco Life Insurance Company
30. Not Applicable
31. Not Applicable
32. Not Applicable
33. Not Applicable
34. Not Applicable
35. Pruco Life Insurance Company
36. Not Applicable
37. Not Applicable
38. Sale of the Contract and Sales Commissions
39. Sale of the Contract and Sales Commissions
40. Not Applicable
41. Sale of the Contract and Sales Commissions
42. Not Applicable
43. Not Applicable
44. Brief Description of the Contract; The Prudential Series
Fund, Inc.; How a Contract's Death Benefit Will Vary;
How a Contract's Cash Value Will Vary
45. Not Applicable
46. Brief Description of the Contract; Pruco Life Variable
Insurance Account; The Prudential Series Fund, Inc.
47. Pruco Life Variable Insurance Account; The Prudential
Series Fund, Inc.
48. Not Applicable
49. Not Applicable
50. Not Applicable
51. Not Applicable
52. Substitution of Series Fund Shares
53. Tax Treatment of Contract Benefits
54. Not Applicable
55. Not Applicable
56. Not Applicable
57. Not Applicable
58. Not Applicable
<PAGE>
N-8B-2 ITEM NUMBER LOCATION
- ------------------ --------
59. Financial Statements; Financial Statements of Pruco Life
Variable Insurance Account; Consolidated Financial
Statements of Pruco Life Insurance Company and
Subsidiaries
<PAGE>
PART I
INFORMATION REQUIRED IN PROSPECTUS
<PAGE>
PROSPECTUS
May 1, 1996
PRUCO LIFE INSURANCE COMPANY
VARIABLE INSURANCE ACCOUNT
VARIABLE
LIFE INSURANCE
CONTRACTS
This prospectus describes a variable life insurance contract (the "Contract")
issued by Pruco Life Insurance Company ("Pruco Life"), a stock life insurance
company that is a wholly-owned subsidiary of The Prudential Insurance Company of
America ("The Prudential"). As of January 1, 1992, these Contracts are no longer
available for sale. These Contracts provide whole-life insurance protection.
That is, they provide lifetime insurance coverage, as long as premiums are paid.
They also provide a cash value for the owner if the Contract is terminated
during the insured's lifetime. A Contract's death benefit varies monthly with
the investment performance of the subaccounts of the Pruco Life Variable
Insurance Account (the "Account") to which the owner allocates the net premiums.
Whatever the investment performance, however, it will not cause the death
benefit to be less than a guaranteed minimum amount (generally the face amount
specified in the Contract). The cash value of a Contract generally increases
with the payment of each premium, but it also varies daily with investment
performance. There is no guaranteed minimum cash value.
A Contract's net premiums and earnings on those premiums will be held in one or
more of the investment subaccounts of the Account or, pursuant to a real estate
investment option, in the Pruco Life Variable Contract Real Property Account
(the "Real Property Account"). The assets of each subaccount will be invested in
a corresponding portfolio of The Prudential Series Fund, Inc. (the "Series
Fund"). The attached prospectus for the Series Fund and its statement of
additional information describe the investment objectives of the thirteen
portfolios of the Series Fund in which net premiums under the Contracts may
currently be invested--the MONEY MARKET PORTFOLIO, the DIVERSIFIED BOND
PORTFOLIO, the GOVERNMENT INCOME PORTFOLIO, the CONSERVATIVE BALANCED PORTFOLIO,
the FLEXIBLE MANAGED PORTFOLIO, the HIGH YIELD BOND PORTFOLIO, the STOCK INDEX
PORTFOLIO, the EQUITY INCOME PORTFOLIO, the EQUITY PORTFOLIO, the PRUDENTIAL
JENNISON PORTFOLIO, the SMALL CAPITALIZATION STOCK PORTFOLIO, the GLOBAL
PORTFOLIO, and the NATURAL RESOURCES PORTFOLIO. Other subaccounts and portfolios
may be added in the future. The REAL PROPERTY ACCOUNT, through a partnership,
invests primarily in income-producing real property. The Real Property Account
is described in a prospectus that is attached to this one. This prospectus
describes the Contract generally and the Pruco Life Variable Insurance Account.
REPLACING EXISTING INSURANCE WITH A CONTRACT DESCRIBED IN THIS PROSPECTUS MAY
NOT BE TO YOUR ADVANTAGE. IF YOU CURRENTLY OWN A LIFE INSURANCE CONTRACT, THE
BENEFITS AND COSTS OF PURCHASING ADDITIONAL INSURANCE UNDER THE EXISTING POLICY
SHOULD BE COMPARED WITH THE BENEFITS AND COSTS OF PURCHASING THE CONTRACT
DESCRIBED IN THIS PROSPECTUS. IN MAKING THIS COMPARISON, YOU SHOULD CONSULT WITH
A QUALIFIED TAX ADVISOR.
PLEASE READ THIS PROSPECTUS AND KEEP IT FOR FUTURE REFERENCE. IT IS ATTACHED TO
A CURRENT PROSPECTUS FOR THE PRUDENTIAL SERIES FUND, INC. AND A CURRENT
PROSPECTUS FOR THE PRUCO LIFE VARIABLE CONTRACT REAL PROPERTY ACCOUNT.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PRUCO LIFE INSURANCE COMPANY
213 Washington Street
Newark, New Jersey 07102-2992
Telephone: (800) 437-4016, Ext. 46
VLI-1 Ed 5-96
Catalog No. 646964K
<PAGE>
PROSPECTUS CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
BRIEF DESCRIPTION OF THE CONTRACT........................................................1
GENERAL INFORMATION ABOUT PRUCO LIFE INSURANCE COMPANY, PRUCO LIFE VARIABLE
INSURANCE ACCOUNT, AND THE VARIABLE INVESTMENT OPTIONS AVAILABLE UNDER
THE CONTRACT.........................................................................2
PRUCO LIFE INSURANCE COMPANY.........................................................2
PRUCO LIFE VARIABLE INSURANCE ACCOUNT................................................2
THE PRUDENTIAL SERIES FUND, INC......................................................3
PRUCO LIFE VARIABLE CONTRACT REAL PROPERTY ACCOUNT...................................4
WHICH INVESTMENT OPTION SHOULD BE SELECTED...........................................4
DETAILED INFORMATION FOR PROSPECTIVE CONTRACT OWNERS.....................................5
REQUIREMENTS FOR ISSUANCE OF A CONTRACT..............................................5
PREMIUMS.............................................................................5
PREMIUM ADJUSTMENT...................................................................6
ALLOCATION OF PREMIUMS...............................................................6
CHARGES AND EXPENSES.................................................................6
TRANSFERS............................................................................8
HOW A CONTRACT'S DEATH BENEFIT WILL VARY.............................................8
HOW A CONTRACT'S CASH VALUE WILL VARY...............................................10
SURRENDER OF A CONTRACT FOR ITS NET CASH VALUE......................................12
WITHDRAWAL OF A PORTION OF A CONTRACT'S NET CASH VALUE..............................12
WHEN PROCEEDS ARE PAID..............................................................13
LIVING NEEDS BENEFIT................................................................13
ILLUSTRATIONS OF CASH VALUES, DEATH BENEFITS, AND ACCUMULATED PREMIUMS..............14
CONTRACT LOANS......................................................................15
RIGHT TO EXCHANGE A CONTRACT FOR A FIXED-BENEFIT WHOLE-LIFE POLICY..................16
SALE OF THE CONTRACT AND SALES COMMISSIONS..........................................16
TAX TREATMENT OF CONTRACT BENEFITS..................................................16
LAPSE AND REINSTATEMENT.............................................................18
OPTIONS ON LAPSE....................................................................18
LEGAL CONSIDERATIONS RELATING TO SEX-DISTINCT PREMIUMS AND BENEFITS.................20
OTHER GENERAL CONTRACT PROVISIONS...................................................20
RIDERS..............................................................................20
VOTING RIGHTS.......................................................................20
SUBSTITUTION OF SERIES FUND SHARES..................................................21
REPORTS TO CONTRACT OWNERS..........................................................21
STATE REGULATION....................................................................21
EXPERTS.............................................................................22
LITIGATION..........................................................................22
ADDITIONAL INFORMATION..............................................................22
FINANCIAL STATEMENTS................................................................22
DIRECTORS AND OFFICERS..............................................................23
FINANCIAL STATEMENTS OF PRUCO LIFE VARIABLE INSURANCE ACCOUNT...........................A1
CONSOLIDATED FINANCIAL STATEMENTS OF PRUCO LIFE INSURANCE COMPANY
AND SUBSIDIARIES....................................................................B1
ADDITIONAL ILLUSTRATIONS OF CASH VALUES, DEATH BENEFITS, AND ACCUMULATED PREMIUMS.......C1
</TABLE>
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO PERSON IS AUTHORIZED TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS, THE PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION FOR THE
SERIES FUND, AND THE PROSPECTUS FOR THE REAL PROPERTY ACCOUNT.
<PAGE>
BRIEF DESCRIPTION OF THE CONTRACT
This variable life insurance contract (the "Contract") being offered by Pruco
Life Insurance Company ("Pruco Life") is in many respects similar to traditional
"fixed-benefit" whole-life insurance. In other respects it is quite different.
As with fixed-benefit whole-life insurance, the owner pays level premiums for a
Contract that provides lifetime insurance coverage on the named insured. Like
fixed-benefit whole-life insurance, a Contract has a cash value that the owner
may obtain by terminating the Contract. Also like fixed-benefit whole-life
insurance, a variety of optional benefits and riders may be added and may
require an additional premium. Finally, like fixed-benefit whole-life insurance,
the cash value of a Contract during the early years will be substantially lower
than the sum of the premiums paid. Under a fixed-benefit contract, there are a
fixed guaranteed death benefit and a cash value that increases at a guaranteed
rate as additional premiums are paid; in some such contracts, the insurer may
refund some of the premium as a dividend if its experience is better than the
assumptions upon which it made its guarantees. The variable life insurance
Contract described here also has a schedule of cash values and a guaranteed
minimum death benefit. The distinctive feature of this Contract is that the
premiums, after certain deductions are made, are placed in one or more separate
investment subaccounts of Pruco Life's Variable Insurance Account, and the death
benefit and cash value may increase or decrease, depending on the investment
performance of the selected subaccount[s]. There is no minimum cash value. But,
as long as no premium is in default and there is no loan on the Contract, the
death benefit will not be less than a guaranteed minimum amount (the face amount
specified in the Contract, unless the Contract owner has withdrawn part of the
Contract's cash value). See WITHDRAWAL OF A PORTION OF A CONTRACT'S NET CASH
VALUE, page 12. The smallest Contract has a face amount of $25,000. As of
January 1, 1992, these Contracts are no longer available for sale.
The owner of a Contract chooses the subaccount[s] of the Pruco Life Variable
Insurance Account (the "Account") into which the net premiums will be placed. At
present there are thirteen subaccounts, each of which is invested in a
corresponding portfolio of The Prudential Series Fund, Inc. (the "Series Fund"),
a series mutual fund to which The Prudential Insurance Company of America ("The
Prudential") acts as investment advisor. The MONEY MARKET PORTFOLIO is invested
in short-term debt obligations similar to those purchased by money market funds;
the DIVERSIFIED BOND PORTFOLIO (formerly the Bond Portfolio) is invested
primarily in high quality medium-term corporate and government debt securities;
the GOVERNMENT INCOME PORTFOLIO (formerly the Government Securities Portfolio)
is invested primarily in US Government securities including intermediate and
long-term US Treasury securities and debt obligations issued by agencies of or
instrumentalities established, sponsored or guaranteed by the U.S. Government;
the CONSERVATIVE BALANCED PORTFOLIO (formerly the Conservatively Managed
Flexible Portfolio) is invested in a mix of money market instruments, fixed
income securities and common stock in proportions believed by the investment
manager to be appropriate for an investor who desires diversification of
investment who prefers a relatively lower risk of loss and correspondingly
reduced chance of high appreciation; the FLEXIBLE MANAGED PORTFOLIO (formerly
the Aggressively Managed Flexible Portfolio) is invested in a mix of money
market instruments, fixed income securities and common stocks, in proportions
believed by the investment manager to be appropriate for an investor desiring
diversification of investment who is willing to accept a relatively high level
of loss in an effort to achieve greater appreciation; the HIGH YIELD BOND
PORTFOLIO is invested primarily in high yield fixed-income securities of medium
to lower quality, also known as high risk bonds; the STOCK INDEX PORTFOLIO is
invested in common stocks selected to duplicate the price and yield performance
of the Standard & Poor's 500 Composite Stock Price Index; the EQUITY INCOME
PORTFOLIO (formerly the High Dividend Stock Portfolio) is invested primarily in
common stocks and convertible securities that provide favorable prospects for
investment income returns above those of the Standard & Poor's 500 Stock Index
or the NYSE Composite Index; the EQUITY PORTFOLIO (formerly the Common Stock
Portfolio) is invested primarily in common stocks; the PRUDENTIAL JENNISON
PORTFOLIO (formerly the Growth Stock Portfolio) is invested primarily in equity
securities of established companies with above-average growth prospects; the
SMALL CAPITALIZATION STOCK PORTFOLIO is invested in equity securities of
publicly-traded companies with small market capitalization; the GLOBAL PORTFOLIO
(formerly the Global Equity Portfolio) is invested primarily in common stocks
and common stock equivalents (such as convertible debt securities) of foreign
and domestic issuers; the NATURAL RESOURCES PORTFOLIO is invested primarily in
common stocks and convertible securities of natural resource companies, and in
securities (typically debt securities or preferred stock) the terms of which are
related to the market value of a natural resource. Further information about the
Series Fund portfolios can be found under THE PRUDENTIAL SERIES FUND, INC. on
page 3.
The Contract owner may also invest a portion of his or her net premiums in the
Pruco Life Variable Contract Real Property Account (the "Real Property
Account"), which, through a partnership, invests primarily in income-producing
real property. If a Contract owner elects to invest a portion of his or her net
premiums in the Real Property Account, the assets will be maintained in a
subaccount of the Real Property Account related to the Contract that provides
the mechanism and maintains the records whereby the various Contract charges are
made. The investment objectives of the Real Property Account and the partnership
are described briefly under PRUCO LIFE VARIABLE CONTRACT REAL PROPERTY ACCOUNT
on page 4.
1
<PAGE>
Because the assets that relate to the Contract may be invested in these various
investment options, the Contract offers an opportunity for the cash value to
appreciate more rapidly than it would under comparable fixed-benefit whole-life
insurance. But the owner must accept the risk that if investment performance is
unfavorable the cash value may not appreciate as rapidly and, indeed, may
decrease in value.
Pruco Life deducts certain charges from each premium payment and from the
amounts held in the designated investment options. All these charges, which are
largely designed to cover insurance costs and risks as well as sales and
administrative expenses, are fully described under CHARGES AND EXPENSES on page
6. In brief, and subject to that fuller description, the following charges may
be made: (1) an annual administrative charge of $30 if premiums are paid
annually, $32 if paid semi-annually, $36 if paid quarterly, and $48 if paid
monthly; (2) a one-time first-year administrative charge upon each premium of up
to $5 for each $1,000 of face amount if premiums are paid annually, $2.52 if
paid semi-annually, $1.27 if paid quarterly, and $0.43 if paid monthly; (3)
sales load charges of not more than 30% of the basic premium in the first
Contract year, not more than 10% of the basic premium in the second year, and
not more than 9% of the sum of the basic premiums to be paid in the first 20
years; (4) a premium tax charge of 2% is deducted from each basic premium; (5) a
guaranteed minimum death benefit risk charge of not more than 1.2% of each basic
premium; (6) each month, a charge for anticipated mortality is deducted, with
the maximum charge based on the 1980 CSO Tables; (7) a daily charge equivalent
to an annual rate of up to 0.35% is deducted from the assets of the subaccounts
for mortality and expense risks; (8) if the Contract includes riders, a
deduction from each premium payment will be made for charges applicable to those
riders; and (9) certain fees and expenses are deducted from the assets of the
Series Fund and Real Property Account. Because of these charges, prospective
purchasers should purchase a Contract only if they intend and have the financial
capability to keep it in force for a substantial period. The death benefit
increases or decreases monthly (but not below the guaranteed minimum amount)
depending on the investment results of the subaccount[s] and/or the Real
Property Account in which the Contract participates. It does not change simply
because a premium is paid. The cash value also changes at a rate that depends
upon the investment results, but these changes take place daily rather than
monthly. Each premium payment has the effect of adding to the cash value. For
more detailed information about how the death benefit and cash value change, see
HOW A CONTRACT'S DEATH BENEFIT WILL VARY, page 8 and HOW A CONTRACT'S CASH VALUE
WILL VARY, page 10.
For a limited time, a Contract may be returned for a refund in accordance with
the terms of its "free look" provision. See SHORT-TERM CANCELLATION RIGHT OR
"FREE LOOK", page 5.
Each owner should retain a copy of the Contract document. That document,
together with the attached application, constitutes the entire agreement between
the owner and Pruco Life.
GENERAL INFORMATION ABOUT PRUCO LIFE INSURANCE
COMPANY, PRUCO LIFE VARIABLE INSURANCE ACCOUNT,
AND THE VARIABLE INVESTMENT OPTIONS AVAILABLE
UNDER THE CONTRACT
PRUCO LIFE INSURANCE COMPANY
Pruco Life Insurance Company ("Pruco Life") is a stock life insurance company,
organized in 1971 under the laws of the State of Arizona. It is licensed to sell
life insurance and annuities in the District of Columbia, Guam, and in all
states except New York.
Pruco Life is a wholly-owned subsidiary of The Prudential, a mutual insurance
company founded in 1875 under the laws of the State of New Jersey. As of
December 31, 1995, The Prudential has invested over $442 million in Pruco Life
in connection with Pruco Life's organization and operation. The Prudential
intends from time to time to make additional capital contributions to Pruco Life
as needed to enable it to meet its reserve requirements and expenses in
connection with its business. The Prudential is under no obligation to make such
contributions and its assets do not back the benefits payable under the
Contract. Pruco Life's consolidated financial statements begin on page B1 and
should be considered only as bearing upon Pruco Life's ability to meet its
obligations under the Contracts.
PRUCO LIFE VARIABLE INSURANCE ACCOUNT
The Pruco Life Variable Insurance Account (the "Account") was established on
November 10, 1982 under Arizona law as a separate investment account. The
Account meets the definition of a "separate account" under the federal
securities laws. The Account holds assets that are segregated from all of Pruco
Life's other assets.
The obligations to Contract owners and beneficiaries arising under the Contract
are general corporate obligations of Pruco Life. Pruco Life is also the legal
owner of the assets in the Account. Pruco Life will at all times maintain assets
in the Account with a total market value at least equal to the reserve and other
liabilities relating to the
2
<PAGE>
variable benefits attributable to the Account. These assets may not be charged
with liabilities which arise from any other business Pruco Life conducts. In
addition to these assets, the Account's assets may include funds contributed by
Pruco Life to commence operation of the Account and may include accumulations of
the charges Pruco Life makes against the Account. From time to time these
additional assets will be transferred to Pruco Life's general account. Before
making any such transfer, Pruco Life will consider any possible adverse impact
the transfer might have on the Account.
The Account is registered with the Securities and Exchange Commission ("SEC")
under the Investment Company Act of 1940 ("1940 Act") as a unit investment
trust, which is a type of investment company. This does not involve any
supervision by the SEC of the management or investment policies or practices of
the Account. For state law purposes, the Account is treated as a part or
division of Pruco Life. There are currently thirteen subaccounts within the
Account, each of which invests in a single corresponding portfolio of the Series
Fund. Additional subaccounts may be added in the future. The Account's financial
statements begin on page A1.
THE PRUDENTIAL SERIES FUND, INC.
The Prudential Series Fund, Inc. (the "Series Fund") is registered under the
1940 Act as an open-end diversified management investment company. Its shares
are currently sold only to separate accounts of The Prudential and certain other
insurers that offer variable life insurance and variable annuity contracts. On
October 31, 1986, the Pruco Life Series Fund, Inc., an open-end, diversified
management investment company which sold its shares only to separate accounts of
Pruco Life and Pruco Life Insurance Company of New Jersey, was merged into the
Series Fund. Prior to that date, the Account invested only in shares of the
Pruco Life Series Fund, Inc. The Account will purchase and redeem shares from
the Series Fund at net asset value. Shares will be redeemed to the extent
necessary for Pruco Life to provide benefits under the Contract and to transfer
assets from one subaccount to another, as requested by Contract owners. Any
dividend or capital gain distribution received from a portfolio of the Series
Fund will be reinvested immediately at net asset value in shares of that
portfolio and retained as assets of the corresponding subaccount.
The Prudential is the investment advisor for the assets of each of the
portfolios of the Series Fund. The Prudential's principal business address is
Prudential Plaza, Newark, New Jersey 07102-3777. The Prudential has a Service
Agreement with its wholly-owned subsidiary The Prudential Investment Corporation
("PIC"), which provides that, subject to The Prudential's supervision, PIC will
furnish investment advisory services in connection with the management of the
Series Fund. In addition, The Prudential has entered into a Subadvisory
Agreement with its wholly-owned subsidiary Jennison Associates Capital Corp.
("Jennison"), under which Jennison furnishes investment advisory services in
connection with the management of the Prudential Jennison Portfolio. Further
detail is provided in the prospectus and statement of additional information for
the Series Fund. The Prudential, PIC, and Jennison are registered as investment
advisors under the Investment Advisers Act of 1940.
As an investment advisor, The Prudential charges the Series Fund a daily
investment management fee as compensation for its services. The following table
shows the investment management fee charged for each portfolio of the Series
Fund available for investment by Contract owners.
------------------------------------------------------------------
ANNUAL INVESTMENT
PORTFOLIO MANAGEMENT FEE AS
A PERCENTAGE OF AVERAGE
DAILY NET ASSETS
------------------------------------------------------------------
MONEY MARKET PORTFOLIO 0.40%
DIVERSIFIED BOND PORTFOLIO 0.40%
GOVERNMENT INCOME PORTFOLIO 0.40%
CONSERVATIVE BALANCED PORTFOLIO 0.55%
FLEXIBLE MANAGED PORTFOLIO 0.60%
HIGH YIELD BOND PORTFOLIO 0.55%
STOCK INDEX PORTFOLIO 0.35%
EQUITY INCOME PORTFOLIO 0.40%
EQUITY PORTFOLIO 0.45%
PRUDENTIAL JENNISON PORTFOLIO 0.60%
SMALL CAPITALIZATION STOCK PORTFOLIO 0.40%
GLOBAL PORTFOLIO 0.75%
NATURAL RESOURCES PORTFOLIO 0.45%
-----------------------------------------------------------------
Some investment management fees and expenses charged to the Series Fund may be
higher than those that were previously charged to the Pruco Life Series Fund,
Inc. (0.4%), in which the Account previously invested. For the
3
<PAGE>
Money Market, Diversified Bond, Conservative Balanced, Flexible Managed, and
Equity Portfolios, Pruco Life will make daily adjustments that will offset the
effect on Contract owners of any higher investment management fees and expenses
charged against the Series Fund. No such offset will be made with respect to the
remaining portfolios, which had no counterparts in the Pruco Life Series Fund,
Inc.
It is conceivable that in the future it may become disadvantageous for both
variable life insurance and variable annuity contract separate accounts to
invest in the same underlying mutual fund. Although neither the companies which
invest in the Series Fund, nor the Series Fund currently foresees any such
disadvantage, the Series Fund's Board of Directors intends to monitor events in
order to identify any material conflict between variable life insurance and
variable annuity contract owners and to determine what action, if any, should be
taken in response thereto. Material conflicts could result from such things as:
(1) changes in state insurance law; (2) changes in federal income tax law; (3)
changes in the investment management of any portfolio of the Series Fund; or (4)
differences between voting instructions given by variable life insurance and
variable annuity contract owners.
A FULL DESCRIPTION OF THE SERIES FUND, ITS INVESTMENT OBJECTIVES, MANAGEMENT,
POLICIES, AND RESTRICTIONS, ITS EXPENSES, THE RISKS ATTENDANT TO INVESTMENT
THEREIN--INCLUDING ANY RISKS ASSOCIATED WITH INVESTMENT IN THE HIGH YIELD BOND
PORTFOLIO, AND ALL OTHER ASPECTS OF ITS OPERATION IS CONTAINED IN THE ATTACHED
PROSPECTUS FOR THE SERIES FUND AND IN ITS STATEMENT OF ADDITIONAL INFORMATION,
WHICH SHOULD BE READ IN CONJUNCTION WITH THIS PROSPECTUS. THERE IS NO ASSURANCE
THAT THE INVESTMENT OBJECTIVES WILL BE MET.
PRUCO LIFE VARIABLE CONTRACT REAL PROPERTY ACCOUNT
The Pruco Life Variable Contract Real Property Account (the "Real Property
Account") is a separate account of Pruco Life that, through a general
partnership formed by The Prudential and two of its subsidiaries, invests
primarily in income-producing real property such as office buildings, shopping
centers, agricultural land, hotels, apartments or industrial properties. It also
invests in mortgage loans and other real estate-related investments, including
sale-leaseback transactions. The objectives of the Real Property Account and the
partnership are to preserve and protect capital, provide for compounding of
income as a result of reinvestment of cash flow from investments, and provide
for increases over time in the amount of such income through appreciation in the
value of assets.
The partnership has entered into an investment management agreement with The
Prudential, under which The Prudential selects the properties and other
investments held by the partnership. The Prudential charges the partnership a
daily fee for investment management which amounts to 1.25% per year of the
average daily gross assets of the partnership.
A FULL DESCRIPTION OF THE REAL PROPERTY ACCOUNT, ITS MANAGEMENT, POLICIES, AND
RESTRICTIONS, ITS CHARGES AND EXPENSES, THE RISKS ATTENDANT TO INVESTMENT
THEREIN, THE PARTNERSHIP'S INVESTMENT OBJECTIVES, AND ALL OTHER ASPECTS OF THE
REAL PROPERTY ACCOUNT'S AND THE PARTNERSHIP'S OPERATIONS IS CONTAINED IN THE
ATTACHED PROSPECTUS FOR THE REAL PROPERTY ACCOUNT, WHICH SHOULD BE READ TOGETHER
WITH THIS PROSPECTUS BY ANY CONTRACT OWNER CONSIDERING THE REAL ESTATE
INVESTMENT OPTION. THERE IS NO ASSURANCE THAT THE INVESTMENT OBJECTIVES WILL BE
MET.
WHICH INVESTMENT OPTION SHOULD BE SELECTED?
A broad objective of the Contract is to provide benefits that will increase in
value if favorable investment results are achieved. Contract owners have a large
number of options as to how the amounts credited to their Contracts will be
invested. Historically, for investments held over relatively long periods, the
investment performance of common stocks has generally been superior to that of
short or long-term debt securities, even though common stocks have been subject
to much more dramatic changes in value over short periods of time. Accordingly,
the Stock Index, Equity Income, Equity, Prudential Jennison, Small
Capitalization Stock, Global, or Natural Resources Portfolios may be desirable
options for Contract owners who are willing to accept such volatility in their
Contract values. Each of these equity portfolios involves somewhat different
investment risks, policies, and programs.
Some Contract owners may prefer the somewhat greater protection against loss of
principal (and reduced chance of high total return) provided by the Government
Income or Diversified Bond Portfolios, while others, who desire even greater
safety of principal, may prefer the Money Market Portfolio, recognizing that the
level of short-term rates may change rather rapidly. Contract owners not
interested in common stocks but willing to take risks and seeking the
possibility of a high total return may prefer the High Yield Bond Portfolio,
recognizing that with higher yielding, lower quality bonds the risks are
greater. Some Contract owners may wish to divide their funds among two or more
of the portfolios. Some may wish to obtain diversification by relying on The
Prudential's judgment for an appropriate asset mix by choosing one of the
Balanced Portfolios. The Real Property Account permits a Contract owner to
diversify his or her investment under the Contract to include an interest in a
pool of income-producing real property, and real estate is often considered to
be a hedge against inflation.
Each Contract owner must make his or her own choice that takes into account how
willing he or she is to accept investment risks, the manner in which his or her
other assets are invested, and his or her own predictions about
4
<PAGE>
what investment results are likely to be in the future. The Prudential
recommends against frequent transfers among the several options as experience
generally indicates that "market timing" investing, particularly by
non-professional investors, is likely to prove unsuccessful.
DETAILED INFORMATION FOR PROSPECTIVE
CONTRACT OWNERS
REQUIREMENTS FOR ISSUANCE OF A CONTRACT
As of January 1, 1992, these Contracts are no longer available for sale. The
minimum initial guaranteed death benefit that can be applied for is $25,000. The
Contract may generally be issued on insureds below the age of 76. Before issuing
any Contract, Pruco Life requires evidence of insurability which may include a
medical examination. Non-smokers who meet preferred underwriting requirements
are offered the most favorable premium rate. A higher premium is charged if an
extra mortality risk is involved. These are the current underwriting
requirements. The Company reserves the right to change them on a
non-discriminatory basis.
SHORT-TERM CANCELLATION RIGHT OR "FREE LOOK"
Generally, a Contract may be returned for a refund within 10 days after it is
received by the Contract owner, within 45 days after Part I of the application
for insurance is signed or within 10 days after Pruco Life mails or delivers a
Notice of Withdrawal Right, whichever is latest. Some states allow a longer
period of time during which a Contract may be returned for a refund. A refund
can be requested by mailing or delivering the Contract to the representative who
sold it or to the Pruco Life Home Office specified in the Contract. A Contract
returned according to this provision shall be deemed void from the beginning.
The Contract owner will then receive a refund of all premium payments made, plus
or minus any change due to investment experience in the value of the invested
portion of the premiums, calculated as if no charges had been made against the
Account or the Series Fund. However, if applicable law so requires, the Contract
owner who exercises his or her short-term cancellation right will receive a
refund of all premium payments made, with no adjustment for investment
experience.
PREMIUMS
Premiums on the Contract are level, fixed, and payable in advance during the
insured's lifetime on an annual, semi-annual, quarterly or monthly basis. If
paid more often than annually, an extra fee will be charged to compensate Pruco
Life for the additional processing costs (see CHARGES AND EXPENSES, page 6) and
for the loss of interest (computed generally at an annual rate of 8%) incurred
because premiums are paid throughout rather than at the beginning of each
Contract year. The premium amount depends on the Contract's face amount, the
insured's sex (except where unisex rates apply) and age at issue, and the
insured's risk classification. Contract owners who pay premiums other than on a
monthly basis will receive notice that a premium is due about 3 weeks before
each due date. Contract owners who pay premiums monthly will receive each year a
book with twelve coupons that will serve as a reminder. With Pruco Life's
consent, an owner may change the frequency of premium payments.
A Contract owner may elect to have monthly premiums paid automatically under the
"Pru-Matic Premium Plan" by pre-authorized transfers from a bank checking
account. Some Contract owners may also be eligible to have monthly premiums paid
by pre-authorized deductions from an employer's payroll.
The following table shows representative standard and preferred annual premium
amounts for various face amounts:
----------------------------------------------------------------------------
$25,000 FACE $100,000 FACE
AMOUNT AMOUNT
-----------------------------------------------------------
Preferred Standard Preferred Standard
----------------------------------------------------------------------------
Male, age 25 $270.00 $283.25 $ 990.00 $1,043.00
at issue
----------------------------------------------------------------------------
Female, age 35 $333.75 $342.75 $1,245.00 $1,281.00
at issue
----------------------------------------------------------------------------
Male, age 40 $449.00 $484.50 $1,706.00 $1,848.00
at issue
----------------------------------------------------------------------------
5
<PAGE>
The following table compares annual and monthly premiums for insureds who are
standard risks. Note that in these examples the sum of 12 monthly premiums for a
particular Contract is approximately 105% to 110% of the annual premium for that
Contract.
-----------------------------------------------------------------------------
$25,000 FACE $100,000 FACE
AMOUNT AMOUNT
---------------------------------------------------------
Monthly Annual Monthly Annual
-----------------------------------------------------------------------------
Male, age 25 $26.00 $283.25 $ 92.00 $1,043.00
at issue
-----------------------------------------------------------------------------
Female, age 35 $31.00 $342.75 $112.00 $1,281.00
at issue
-----------------------------------------------------------------------------
Male, age 40 $43.25 $484.50 $161.00 $1,848.00
at issue
-----------------------------------------------------------------------------
There is a grace period of 31 days for each premium except the first one. During
the grace period, the Contract will continue in effect. A Contract will lapse if
a premium has not been paid by the end of the grace period. Upon lapse, the
Contract owner will have several options. These may include continuing the
amount of insurance coverage in effect on the due date of the unpaid premium,
less any Contract debt, for a fixed period, continuing a lesser amount of
insurance for the lifetime of the insured, or surrender of the Contract for its
net cash value. See OPTIONS ON LAPSE, page 18.
PREMIUM ADJUSTMENT
If the insured dies during the grace period before the premium is paid, the
portion of the unpaid premium that covers the period from the due date to the
date of death will be deducted from the death benefit. If the insured dies while
no premium is in default, Pruco Life will increase the death benefit by the
portion of the last premium that covers the period subsequent to the date of
death.
ALLOCATION OF PREMIUMS
Net premium payments--that is, the amount of the premiums less the deductions
described below in items 1 through 5 under Charges and Expenses--will be placed
when due (not when received) in one or more subaccounts of the Account and/or
the Real Property Account, as directed by the Contract owner. Any premium
payments received prior to the due date will be held in Pruco Life's general
account, and the net premium will not be credited to the investment option
selected by a Contract owner until the due date. Provided no premium is overdue,
the Contract owner may change the way in which premiums are allocated, beginning
on the next premium due date, by giving written notice to the Pruco Life Home
Office stated in the Contract. Contract owners may also change the way in which
premiums are allocated, beginning on the next premium due date, by telephoning
their Pruco Life Home Office, once they have completed a written telephone
transfer authorization form. There is no charge for reallocating future net
premiums. If any portion of a net premium is allocated to a particular
investment option, that portion must be at least 10% on the date the allocation
takes effect. All percentage allocations must be in whole numbers. For example,
33% can be selected but 33 1/3% cannot.
CHARGES AND EXPENSES
Every charge made by Pruco Life under the Contract is described below.
1. If premiums are paid annually, there is an annual administrative charge of
$30 for administrative expenses incurred, among other things, for billing,
collecting premiums, processing claims, paying cash values, making Contract
changes, keeping records, and communicating with Contract owners. If
premiums are paid more frequently, the annual administrative charge will be
higher to reflect the additional expense incurred in collecting and
processing more frequent premiums. The charge will be $32 if premiums are
paid semi-annually, $36 if premiums are paid quarterly, and $48 if premiums
are paid monthly. During 1995 and 1994, Pruco Life received a total of
approximately $3,804,569 and $4,001,491, respectively, in annual
administrative charges.
2. There is a one-time administrative charge in the first Contract year which,
if premiums are payable annually, will not be more than $5 for each $1,000
of face amount. (To compensate for the loss of interest when premiums are
paid on other than an annual basis, this charge will be slightly higher. The
charge upon each premium will be $2.52 for each $1,000 of face amount if
premiums are paid semi-annually, $1.27 if paid quarterly, and $0.43 if paid
monthly.) The one-time administrative charge covers the cost of processing
6
<PAGE>
applications, conducting medical examinations, determining insurability and
the insured's risk class, and establishing Contract records. The charge will
be reduced for certain Contracts issued upon young insureds because making
the full $5 per $1,000 charge would result in a cash value of zero
throughout the first year of the Contract. During 1995 and 1994 Pruco Life
did not receive any one-time administrative charges.
3. There is a charge to compensate Pruco Life for the cost of selling the
Contract. This cost includes sales commissions, advertising, and the
printing of prospectuses and sales literature. This charge is generally
called the "sales load." It is not more than 30% of the basic premium
(defined below) in the first Contract year, not more than 10% of the basic
premium in the second year, and not more than 9% of the sum of the basic
premiums to be paid in the first 20 years. Also, in any year it is never
more than in a prior year. The basic premium is what the gross annual
premium for the Contract, less the annual administrative charge, would be if
the insured were in the standard rating class and if the Contract had no
optional insurance benefits. During 1995 and 1994, Pruco Life received a
total of approximately $3,612,789 and $3,842,076, respectively, in sales
load charges.
4. There is a premium tax charge of 2% of each basic premium. The applicable
statutory tax rules differ from state to state, and in some states by
locality. Pruco Life may collect more or less for this charge than it
actually pays for premium taxes. To the extent that the 2% rate is
insufficient to pay taxes in all jurisdictions, the difference will be borne
by Pruco Life. During 1995 and 1994, Pruco Life received a total of
approximately $723,689 and $769,154, respectively, in charges for payment of
state premium taxes.
5. There is a charge of not more than 1.2% of each basic premium to compensate
Pruco Life for the risk that an insured may die at a time when the death
benefit exceeds the benefit that would have been payable in the absence of a
minimum guarantee. During 1995 and 1994, Pruco Life received a total of
approximately $434,213 and $461,492, respectively, for this risk charge.
When premiums are paid more frequently than annually, these charges will be
deducted proportionately from each premium payment. If there is an extra
premium for optional insurance benefits or for an extra mortality risk, or
if there is a premium discount because the insured is in the preferred
rating class, the amount allocated to the separate account will be equal to
the amount that would have been allocated if the insured had been in the
standard rating class and there were no optional insurance benefits.
6. Apart from the deductions from gross premiums just described, the amounts
held in the Account and/or the Real Property Account attributable to each
Contract are subject to a mortality charge and are reduced once a month to
compensate Pruco Life for the anticipated cost of paying death benefits to
the beneficiaries of those persons who die during that period. The amount of
this reduction is based on the assumption that actual mortality will be
accurately predicted by the 1980 Commissioner's Standard Ordinary Mortality
Table (the "1980 CSO Table") and is the maximum mortality charge that can be
made under the Contract. However, if Pruco Life determines that a lesser
amount than that called for by this mortality table will be adequate to
defray the anticipated cost of paying such death benefits, a lesser monthly
reduction may be made.
7. There is also a daily charge to the Account and/or the Real Property Account
for the mortality and expense risks that Pruco Life assumes. This charge is
made daily at an effective annual rate of up to 0.35% of the value of the
Account's and/or the Real Property Account's assets. The mortality risk
assumed is that insureds may live for a shorter period of time than that
predicted by the 1980 CSO Table. The expense risk assumed is that expenses
incurred in issuing and administering the Contracts will be greater than
Pruco Life estimated. Pruco Life will realize a gain from this charge to the
extent it is not needed to provide benefits and pay expenses under the
Contracts. During 1995 and 1994, Pruco Life received a total of
approximately $952,424 and $841,163, respectively, in mortality and expense
risk charges.
The deductions and charges described above will not be increased by Pruco Life
with respect to any Contract in effect regardless of any changes in longevity or
increases in expenses.
The earnings of the Account are taxed as part of the operations of Pruco Life.
No charge is being made currently to the Account for Company federal income
taxes. Pruco Life will review the question of a charge to the Account for
Company federal income taxes periodically. Such a charge may be made in future
years for any federal income taxes that would be attributable to the Contracts.
Under current laws Pruco Life may incur state and local taxes (in addition to
premium taxes) in several states. At present, these taxes are not significant
and they are not charged against the Contracts or the Account. If there is a
material change in applicable state or local tax laws, the imposition of any
such taxes upon Pruco Life that are attributable to the Account may result in a
corresponding charge against the Account.
The Account purchases shares of the Series Fund at net asset value. The net
asset value of those shares reflects management fees and expenses already
deducted from the assets of the Series Fund. The fees and expenses for the
Series Fund are briefly described under THE PRUDENTIAL SERIES FUND, INC. on page
3 in connection with a general
7
<PAGE>
description of the Series Fund. More detailed information is contained in the
attached prospectus for the Series Fund and its statement of additional
information.
TRANSFERS
Provided no premium is overdue or if the Contract is in force as variable
reduced paid-up insurance (see OPTIONS ON LAPSE, page 18), the owner may, up to
four times in each Contract year, transfer amounts from one subaccount to
another subaccount or to the Real Property Account. All or a portion of the
amount credited to a subaccount may be transferred. Transfers to and from the
Real Property Account are subject to restrictions described in the prospectus
for that investment option.
Transfers among subaccounts or to the Real Property Account will take effect as
of the end of the valuation period in which a proper transfer request is
received at a Pruco Life Home Office. The "valuation period" means the period of
time from one determination of the value of the amount invested in a subaccount
to the next. Such determinations are made when the net asset values of the
portfolios of the Series Fund are calculated, which is generally at 4:15 p.m.
New York City time on each day during which the New York Stock Exchange is open.
The request may be in terms of dollars, such as a request to transfer $10,000
from one subaccount to another, or may be in terms of a percentage reallocation
among subaccounts. In the latter case, as with premium reallocations, the
percentages must be in whole numbers. The Contract owner may transfer amounts by
proper written notice to a Pruco Life Home Office, or by telephone, provided the
Contract owner is enrolled to use the Telephone Transfer System. Contract owners
will automatically be enrolled to use the Telephone Transfer System unless they
elect not to have this privilege. Pruco Life has adopted procedures designed to
ensure that requests by telephone are genuine. The Company will not be held
liable for following telephone instructions that it reasonably believes to be
genuine. Pruco Life cannot guarantee that owners will be able to get through to
complete a telephone transfer during peak periods such as periods of drastic
economic or market change.
HOW A CONTRACT'S DEATH BENEFIT WILL VARY
Although a Contract's death benefit can never be less than the Contract's
guaranteed minimum amount (assuming no outstanding Contract debt or premium in
default), it will change on the first day of each Contract month after the first
month by an amount that depends on the investment performance of the subaccounts
and/or the Real Property Account in which the Contract participates. The first
Contract month starts on the Contract date. When the first premium is paid with
the application, the Contract date is ordinarily the later of the date of the
application or the date of any medical examination. If the first premium is not
paid with the application, the Contract date is ordinarily 2 or 3 days after the
application is approved by Pruco Life so that it either coincides with or is
prior to the date on which the first premium is paid. For the purpose of
calculating benefits, the initial net premium is deemed to be placed in the
Account on the Contract date. Each succeeding Contract month starts on the same
date in the month as the Contract date. The first day of each Contract month is
called the "Monthly date."
To simplify the following discussion, it is assumed that all of the net premiums
under a Contract have been allocated to a single subaccount. If the value of the
assets relating to the Contract held in the subaccount has increased due to
investment performance during the Contract month at greater than a 4% annual
rate, the Contract's death benefit will increase on the first day of the next
Contract month; if the value of these assets decreases or increases at less than
a 4% annual rate, the death benefit will decrease (but not below the guaranteed
minimum amount). The reason the assets of the subaccount relating to a Contract
must increase from one Monthly date to the next at a rate of more than 4% a year
in order for the death benefit to increase is that Pruco Life, in determining
the premiums for the Contract, has assumed that the value of the assets will
increase due to investment performance at a rate of 4% a year.
The exact amount by which the death benefit changes is determined by an
actuarial computation that is based, among other things, upon the age and sex
(except where unisex rates apply) of the insured, the size of the Contract, and
the number of years it has been in effect, as well as by the investment results
of the subaccount in which the Contract participates. In general, a change in
the dollar value of a subaccount's assets due to investment results will produce
a larger change in the death benefit for a younger insured than for an older
insured and a slightly larger change for a female insured than for a male.
Because the assets relating to a Contract tend to grow as net premiums are paid,
the dollar change in the death benefit will tend to be greater for a Contract
that has been in effect for a long time than for one that has been in effect for
a short time, despite the fact that the insured is older.
Illustrations of how the death benefit for representative Contracts will vary
over extended periods, assuming several different uniform investment results,
are included in tables on pages T1 and T2 and on pages C1 and C2 of this
prospectus. The death benefits shown are calculated upon the assumption that the
maximum mortality charges specified by the 1980 CSO Table are made throughout
the life of the Contract. The examples set forth below illustrate death benefits
calculated upon a maximum mortality charge assumption. These examples also
assume
8
<PAGE>
a total Series Fund expense ratio of 0.52% (taking into account the offsets
described under THE PRUDENTIAL SERIES FUND, INC. on page 3).
The following two examples show, for the same Contracts, how the death benefit
will vary over a selected year for two hypothetical investment results that are
different from those shown in the tables and thus provide additional
comparisons.
Example No. 1. Contract with $50,000 guaranteed death benefit and annual
premiums in effect for 18 years, during which the value of the assets in the
subaccount increased due to investment performance at a uniform rate of 7.13%
per year. In the 19th year the value of the assets increase at a uniform rate of
8.13%. (These percentages correspond to gross annual investment returns in the
corresponding Series Fund portfolio of 8% and 9% per year, respectively.)
--------------------------------------------------------
MAXIMUM MORTALITY CHARGE
ASSUMPTION
--------------------------------------------------------
DEATH BENEFIT DEATH BENEFIT
INSURED END OF YEAR 18 END OF YEAR 19
--------------------------------------------------------
Male, age 25 $59,371 $60,837
at issue
--------------------------------------------------------
Male, age 40 $60,494 $62,104
at issue
--------------------------------------------------------
Example No. 2. Same assumptions as in Example No. 1 except that the value of the
assets increases by 1.13% in the 19th year. (This percentage corresponds to a
gross annual investment return in the corresponding Series Fund portfolio of
2%.)
--------------------------------------------------------
MAXIMUM MORTALITY CHARGE
ASSUMPTION
--------------------------------------------------------
DEATH BENEFIT DEATH BENEFIT
INSURED END OF YEAR 18 END OF YEAR 19
--------------------------------------------------------
Male, age 25 $59,371 $58,352
at issue
--------------------------------------------------------
Male, age 40 $60,494 $59,375
at issue
---------------------------------------------------------
In these examples the changes are slightly greater for the Contract issued on
the older insured because the premiums for a $50,000 Contract issued at age 40
are greater than those for one issued at age 25, and the dollar amount of the
increase resulting from a 7.13% compounded return upon the assets in the Account
relating to the Contract on the older insured is therefore larger. The changes
in the death benefit are greater even though the increase or decrease in the
death benefit resulting from a $1 change in the assets relating to the Contract
is greater for a younger insured.
Example No. 3. This example and the one following provide information for a
Contract with an $800 annual premium, in effect for 18 years, during which the
value of the assets in the subaccount increased due to investment performance at
a uniform rate of 7.13% per year. In the 19th year the value of the assets
increases at a uniform rate of 8.13%. (These percentages correspond to gross
annual investment returns in the corresponding Series Fund portfolio of 8% and
9% per year, respectively.)
-------------------------------------------------------------------------
MAXIMUM MORTALITY CHARGE ASSUMPTION
-------------------------------------------------------------------------
GUARANTEED DEATH BENEFIT DEATH BENEFIT
INSURED DEATH BENEFIT END OF YEAR 18 END OF YEAR 19
-------------------------------------------------------------------------
Male, age 25 $76,012 $90,258 $92,487
at issue
-------------------------------------------------------------------------
Male, age 40 $42,354 $51,243 $52,607
at issue
-------------------------------------------------------------------------
9
<PAGE>
Example No. 4. Same assumptions as Example No. 3 except that the value of the
assets increases by 1.13% in the 19th year. (This percentage corresponds to a
gross annual investment return in the corresponding Series Fund portfolio of
2%.)
--------------------------------------------------------------------------
MAXIMUM MORTALITY CHARGE ASSUMPTION
--------------------------------------------------------------------------
GUARANTEED DEATH BENEFIT DEATH BENEFIT
INSURED DEATH BENEFIT END OF YEAR 18 END OF YEAR 19
--------------------------------------------------------------------------
Male, age 25 $76,012 $90,258 $88,709
at issue
--------------------------------------------------------------------------
Male, age 40 $42,354 $51,243 $50,295
at issue
--------------------------------------------------------------------------
These examples show how the same investment results affect the death benefit
more significantly for a younger insured.
If the assets in the subaccount in which the Contract participates have earned
less than 4%, and the death benefit accordingly equals the guaranteed minimum
amount, Pruco Life will keep a record of what the death benefit would have been
had there not been a guaranteed minimum. If later investment results are
favorable, that is if the value of the assets in the subaccount later increases
at a rate greater than 4% a year, the death benefit will not become more than
the guaranteed minimum amount until the earlier unfavorable investment results
have been offset. For example, suppose for the first 3 years the value of the
assets in the subaccount increases due to investment performance at only a rate
of 2% per year. The death benefit will nevertheless remain at the guaranteed
minimum amount. If the value of the assets increases at a rate of 8% in the
fourth year, this might not be enough to offset the earlier unfavorable
investment results. If so, the death benefit will not increase.
For further information, see the tables on pages T1 and T2. They show for
various insureds how a Contract's death benefit and cash value will change if
the gross investment return in the selected Series Fund portfolio[s] is 0%, 4%
or 8%. In addition, the tables on pages C1 and C2 show, for various insureds,
how a Contract's death benefit and cash value will change if the gross
investment return is 0%, 6% or 12%. The registration statement of the Account on
file with the SEC contains a full and precise description of how the death
benefit and cash value of a Contract are determined.
HOW A CONTRACT'S CASH VALUE WILL VARY
A variable life insurance Contract has a net cash value which the owner may get
by surrender of the Contract while the insured is living. Unlike traditional
fixed-benefit whole-life insurance, however, a Contract's cash value is not
known in advance even if it is assumed that premiums are paid when due, because
it varies daily with the investment performance of the subaccount[s] and/or the
Real Property Account in which the Contract participates.
A Contract's value upon surrender is its "net cash value," which is the cash
value less any outstanding Contract debt. See CONTRACT LOANS, page 15. The
following discussion of cash values assumes that there is no Contract debt, that
no premium is in default, and that the net premiums have all been allocated to a
single subaccount.
During the early months of the first Contract year, the cash value will be very
small or zero because of the charges made in connection with issuance of the
Contract. On the Contract date the cash value is equal to the first net premium,
unless, as may be the case throughout the first Contract year, there are unpaid
issue charge installments which reduce the cash value. Thereafter, the cash
value on every Monthly date will be equal to the cash value on the preceding
Monthly date increased or decreased by the change in the value of the assets
relating to the Contract, less the amount Pruco Life needs to provide for the
death benefit for the period between the two dates. If a premium is due and paid
on a Monthly date, the cash value on that date is further increased by the
amount of the net premium. The cash value between Monthly dates is computed in a
similar way.
While the death benefit increases if the value of the assets in the subaccount
increases at a rate of more than 4% a year, the investment performance needed to
produce an increase in the cash value cannot be stated in advance. It is
different for insureds of different age and sex (except where unisex rates
apply) at issue. It is also different for Contracts on comparable insureds if
those Contracts have been in effect for different lengths of time. Moreover, the
crediting of the net premium on the due date (even if it has not yet been paid)
does not result in any change in the death benefit, while the cash value is
assumed to increase by exactly the amount of the net premium. But if the net
premium is not paid before the end of the grace period, or if the Contract is
surrendered
10
<PAGE>
before then, the cash value is adjusted downward to take into account the
failure to pay the premium on the due date.
The tables on pages T1 and T2 and on pages C1 and C2 of this prospectus
illustrate what the cash values would be for representative Contracts over
extended periods, assuming uniform investment results, together with information
about the aggregate premiums paid under these Contracts. As is the case for
death benefit illustrations (see HOW A CONTRACT'S DEATH BENEFIT WILL VARY, page
8), such tables show cash values calculated upon maximum mortality assumptions.
The examples set forth below assume a total Series Fund expense ratio of 0.52%
(taking into account the offsets described under THE PRUDENTIAL SERIES FUND,
INC. on page 3).
The following two examples show, for the same Contracts, how the cash values
will vary over a selected year for two hypothetical investment results that are
different from those shown in the tables.
Example No. 1. Contract with $50,000 guaranteed death benefit and annual
premiums in effect for 18 years, during which the value of the assets in the
subaccount increased due to investment performance at a uniform rate of 7.13%
per year. In the 19th year the value of the assets increases at a uniform rate
of 8.13%. (These percentages correspond to gross annual investment returns in
the corresponding Series Fund portfolio of 8% and 9% per year, respectively.)
-------------------------------------------------------
MAXIMUM MORTALITY CHARGE
ASSUMPTION
-------------------------------------------------------
CASH VALUE CASH VALUE
INSURED END OF YEAR 18 END OF YEAR 19
-------------------------------------------------------
Male, age 25 $11,825 $13,075
at issue
-------------------------------------------------------
Male, age 40 $20,049 $22,023
at issue
-------------------------------------------------------
Example No. 2. Same assumptions as in Example No. 1 except that the value of the
assets increases by 1.13% in the 19th year. (This percentage corresponds to a
gross annual investment return in the corresponding Series Fund portfolio of
2%.)
-------------------------------------------------------
MAXIMUM MORTALITY CHARGE
ASSUMPTION
-------------------------------------------------------
CASH VALUE CASH VALUE
INSURED END OF YEAR 18 END OF YEAR 19
-------------------------------------------------------
Male, age 25 $11,825 $12,225
at issue
-------------------------------------------------------
Male, age 40 $20,049 $20,585
at issue
-------------------------------------------------------
The changes are greater for the older insured because the premiums (and hence
the assets in the Account relating to the Contract on that insured) are greater
and the same rate of increase therefore produces a greater dollar amount.
Example No. 3. This example and the one following provide information for a
Contract with an $800 annual premium, in effect for 18 years, during which time
the value of the assets in the subaccount increased due to investment
performance at a uniform rate of 7.13% per year. In the 19th year the value of
the assets increases at a uniform rate of 8.13%. (These percentages correspond
to gross annual investment returns in the corresponding Series Fund portfolio of
8% and 9% per year, respectively.)
11
<PAGE>
-------------------------------------------------------
MAXIMUM MORTALITY CHARGE
ASSUMPTION
-------------------------------------------------------
CASH VALUE CASH VALUE
INSURED END OF YEAR 18 END OF YEAR 19
-------------------------------------------------------
Male, age 25 $17,976 $19,878
at issue
-------------------------------------------------------
Male, age 40 $16,983 $18,655
at issue
-------------------------------------------------------
Example No. 4. Same assumptions as in Example No. 3 except that the value of the
assets increases by 1.13% in the 19th year. (This percentage corresponds to a
gross annual investment return in the corresponding Series Fund portfolio of
2%.)
-------------------------------------------------------
MAXIMUM MORTALITY CHARGE
ASSUMPTION
-------------------------------------------------------
CASH VALUE CASH VALUE
INSURED END OF YEAR 18 END OF YEAR 19
-------------------------------------------------------
Male, age 25 $17,976 $18,585
at issue
-------------------------------------------------------
Male, age 40 $16,983 $17,437
at issue
-------------------------------------------------------
The last two examples might be compared with Examples No. 3 and 4 on pages 9 and
10. Note that while the same premium results in a larger death benefit for the
younger insured, the cash values for the younger and older insureds are quite
similar. Note also that while the death benefit decreases if the investment
return is 1.13% per year, the cash value increases.
Because a substantial part of each premium is used to provide life insurance
protection, the cash values cannot meaningfully be compared with the amounts
that would have been available had the gross premiums been invested without
obtaining life insurance protection.
SURRENDER OF A CONTRACT FOR ITS NET CASH VALUE
A Contract may be surrendered in whole or in part for its net cash value while
the insured is living. Surrendering a Contract in part involves splitting the
Contract into two Contracts. One is surrendered for its net cash value; the
other is continued in force on the same terms as the original Contract except
that premiums and values will be appropriately reduced. The Contract continued
must have a face amount of at least $25,000, and its premium will be based on
the new face amount. Surrender of all or part of a Contract may have tax
consequences. See TAX TREATMENT OF CONTRACT BENEFITS, page 16.
To surrender a Contract in whole or in part, the owner must deliver or mail it,
together with a written request in a form that meets Pruco Life's needs, to a
Pruco Life Home Office. The net cash value of a surrendered Contract will be
determined as of the valuation period such notice is received in the Pruco Life
Home Office.
WITHDRAWAL OF A PORTION OF A CONTRACT'S NET CASH VALUE
Pruco Life will permit a Contract owner to withdraw a portion of the Contract's
net cash value (generally that resulting from investment performance in excess
of 4% a year) without surrendering the Contract, provided that the death benefit
is reduced by the amount of paid-up whole life insurance that the cash value
withdrawn would have purchased for that Contract owner, and that the guaranteed
minimum death benefit is reduced so that the difference between the death
benefit and the guaranteed minimum death benefit is the same percentage of cash
value after the withdrawal as before. The right to withdraw such excess net cash
value may be usefully compared with a partial surrender. As noted above, a
partial surrender essentially involves splitting an existing Contract into two
Contracts and surrendering one for its net cash value; the death benefit, the
guaranteed minimum death benefit, and the cash value of the continuing Contract
will all be proportionately reduced and a new lower scheduled premium will
henceforth be payable. If a Contract owner elects to withdraw excess cash value,
the scheduled premium is not reduced. The cash value is, of course, reduced by
exactly the amount of the withdrawal. Both the death benefit and the guaranteed
minimum death benefit are also reduced but by a lesser amount than they would be
under a partial surrender. It is important to note, however, that a death
benefit decrease may under
12
<PAGE>
certain circumstances cause the Contract to become a Modified Endowment
Contract. For a brief discussion of the potential tax consequences of a Contract
owner's withdrawal of the excess cash value, see TAX TREATMENT OF CONTRACT
BENEFITS, page 16.
Upon request, Pruco Life will tell a Contract owner the amount of the net cash
value that may be withdrawn in this manner and the amount of the corresponding
reductions in the death benefit and guaranteed minimum death benefit for that or
any lesser amount of cash value withdrawn. A Contract owner is able to exercise
the right to withdraw a portion of the Contract's cash value either on an
isolated or occasional basis or automatically every year, to the extent
investment performance warrants, for the purpose of applying partial cash value
withdrawals toward the payment of premiums on the Contract. To exercise this
right, a Contract owner must deliver or mail a written request in a form that
meets Pruco Life's needs to a Pruco Life Home Office.
WHEN PROCEEDS ARE PAID
Pruco Life will generally pay any death benefit, cash value or loan proceeds
within 7 days after receipt at a Pruco Life Home Office of all the documents
required for such a payment. Other than the death benefit, which is determined
as of the date of death, the amount will be determined as of the end of the
valuation period in which the necessary documents are received. However, Pruco
Life may delay payment of proceeds from the subaccount[s] and the variable
portion of the death benefit due under the Contract if the disposal or valuation
of the Account's assets is not reasonably practicable because the New York Stock
Exchange is closed for other than a regular holiday or weekend, trading is
restricted by the SEC or the SEC declares that an emergency exists.
With respect to a Contract in force as extended term or fixed reduced paid-up
insurance, Pruco Life expects to pay any cash value promptly upon request.
However, Pruco Life has the right to delay payment of such cash value for up to
6 months (or a shorter period if required by applicable law). Pruco Life will
pay interest of at least 3% a year if it delays such a payment for 30 days or
more (or a shorter period if required by applicable law).
LIVING NEEDS BENEFIT
Contract applicants may elect to add the LIVING NEEDS BENEFIT(SM) to their
Contracts at issue, subject to Pruco Life's receipt of satisfactory evidence of
insurability. The benefit may vary state-by-state. It can generally be added
only to Contracts of $50,000 or more or when the aggregate face amounts of the
insured's eligible contracts equal $50,000 or more.
The LIVING NEEDS BENEFIT allows the Contract owner to elect to receive an
accelerated payment of all or part of the Contract's death benefit, adjusted to
reflect current value, at a time when certain special needs exist. The adjusted
death benefit will always be less than the death benefit, but will generally be
greater than the Contract's cash surrender value. Depending upon state
regulatory approval, one or both of the following options may be available. A
Pruco Life representative should be consulted as to whether additional options
may be available.
Terminal Illness Option. This option is available if the insured is diagnosed as
terminally ill with a life expectancy of 6 months or less. When satisfactory
evidence is provided, Pruco Life will provide an accelerated payment of the
portion of the death benefit selected by the Contract owner as a LIVING NEEDS
BENEFIT. The Contract owner may (1) elect to receive the benefit in a single sum
or (2) receive equal monthly payments for 6 months. If the insured dies before
all of the payments have been made, the present value of the remaining payments
will be paid to the beneficiary designated in the Living Needs Benefit claim
form in a single sum.
Nursing Home Option. This option is available after the insured has been
confined to an eligible nursing home for 6 months or more. When satisfactory
evidence is provided, including certification by a licensed physician, that the
insured is expected to remain in the nursing home until death, Pruco Life will
provide an accelerated payment of the portion of the death benefit selected by
the Contract owner as a LIVING NEEDS BENEFIT. The Contract owner may (1) elect
to receive the benefits in a single sum or (2) receive equal monthly payments
for a specified number of years (not more than 10 nor less than 2), depending
upon the age of the insured. If the insured dies before all of the payments have
been made, the present value of the remaining payments will be paid to the
beneficiary designated in the Living Needs Benefit claim form in a single sum.
All or part of the Contract's death benefit may be accelerated under the LIVING
NEEDS BENEFIT. If the benefit is only partially accelerated, a death benefit of
at least $25,000 must remain under the Contract. Pruco Life reserves the right
to determine the minimum amount that may be accelerated.
The LIVING NEEDS BENEFIT is available only to the extent regulatory approval has
been obtained. If desired by a Contract owner, the benefit must be requested on
the Contract's application. There is no charge for adding the benefit to the
Contract. However, an administrative charge (not to exceed $150) will be made at
the time the LIVING NEEDS BENEFIT is paid.
13
<PAGE>
No benefit will be payable if the Contract owner is required to elect it in
order to meet the claims of creditors or to obtain a government benefit. Pruco
Life can furnish details about the amount of Living Needs Benefit that is
available to an eligible Contract owner under a particular Contract, and the
adjusted premium payments that would be in effect if less than the entire death
benefit is accelerated.
The Contract owner should consider whether adding this settlement option is
appropriate in his or her given situation. Adding the LIVING NEEDS BENEFIT to
the Contract has no adverse consequences; however, electing to use it could.
Contract owners should consult a qualified tax advisor before electing to
receive this benefit. Unlike a death benefit received by a beneficiary after the
death of an insured, receipt of a LIVING NEEDS BENEFIT payment may give rise to
a federal or state income tax. Receipt of a LIVING NEEDS BENEFIT payment may
also affect a Contract owner's eligibility for certain government benefits or
entitlements.
ILLUSTRATIONS OF CASH VALUES, DEATH BENEFITS, AND ACCUMULATED PREMIUMS
The following tables have been prepared to help show how values under the
Contract change with investment performance of the Account. The tables assume
that no portion of the Contract's cash value is allocated to the Real Property
Account. The tables illustrate how cash values and death benefits of Contracts
with a given premium and face amount issued on an insured of a given age would
vary over time if the return on the assets held in the selected Series Fund
portfolios were a uniform, gross, after-tax, annual rate of 0%, 4% or 8%. The
death benefits and cash values would be different from those shown if the
returns averaged 0%, 4%, and 8% but fluctuated over and under those averages
throughout the years.
The death benefits and cash values shown in the tables are calculated upon the
assumption that the maximum mortality charges specified by the 1980 CSO Table
will be made throughout the life of the Contract.
The amounts shown for the death benefit and cash value as of each Contract year
reflect the fact that the net investment return on the assets held in the
subaccounts is lower than the gross, after-tax return of the portfolios. This is
because the tables assume a total Series Fund expense ratio of 0.52% (taking
into account the offsets described under THE PRUDENTIAL SERIES FUND, INC. on
page 3), and also reflect a daily mortality and expense risk charge to the
Account equal to an effective annual charge of 0.35%. The actual fees and
expenses of the portfolios associated with a particular Contract may be more or
less than 0.52% and will depend on which subaccounts are selected. Based on the
above assumptions, gross annual rates of return of 0%, 4%, and 8% correspond to
approximate net annual rates of return of -0.87%, 3.13%, and 7.13%.
The tables reflect the fact that no charges for federal or state income taxes
are currently made against the Account. If such a charge is made in the future,
it will take a higher gross rate of return to produce after-tax returns of 0%,
4% or 8% than it does now.
The second column of each table shows what results would be achieved if an
amount equal to the total annual premium were invested to earn 4% interest
compounded annually.
Upon request, Pruco Life will furnish a comparable illustration based on the
proposed insured's age and sex (except where unisex rates apply) and on the face
amount or premium amount requested. Such an illustration will assume that the
insured is a standard (or, on request, a preferred) risk and that the premium
will be paid on an annual basis.
Additional illustrations that assume the gross annual investment return is 0%,
6%, and 12% can be found on pages C1 and C2. These percentages correspond to
approximate net annual rates of return of -0.87%, 5.13%, and 11.13%,
respectively.
14
<PAGE>
<TABLE>
ILLUSTRATIONS
-------------
VARIABLE LIFE INSURANCE CONTRACT
MALE ISSUE AGE 25
$50,000 GUARANTEED DEATH BENEFIT
$536.50 ANNUAL PREMIUM FOR STANDARD UNDERWRITING RISK (1)
USING MAXIMUM CONTRACTUAL MORTALITY CHARGES
<CAPTION>
Death Benefit (2) Cash Value (2)
---------------------------------------------- ----------------------------------------------
Assuming Hypothetical Gross (and Net) Assuming Hypothetical Gross (and Net)
Premiums Annual Investment Return of Annual Investment Return of
End of Accumulated ---------------------------------------------- ----------------------------------------------
Policy at 4% Interest 0% Gross 4% Gross 8% Gross 0% Gross 4% Gross 8% Gross
Year Per Year (minus 0.87% Net) (3.13% Net) (7.13% Net) (minus 0.87% Net) (3.13% Net) (7.13% Net)
-------- -------------- ----------------- ----------- ----------- ----------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 558 $50,000 $50,000 $ 50,012 $ 22 $ 25 $ 28
2 $ 1,138 $50,000 $50,000 $ 50,080 $ 376 $ 396 $ 416
3 $ 1,742 $50,000 $50,000 $ 50,206 $ 729 $ 781 $ 834
4 $ 2,369 $50,000 $50,000 $ 50,391 $1,079 $ 1,177 $ 1,281
5 $ 3,022 $50,000 $50,000 $ 50,635 $1,436 $ 1,596 $ 1,771
6 $ 3,701 $50,000 $50,000 $ 50,939 $1,789 $ 2,027 $ 2,293
7 $ 4,407 $50,000 $50,000 $ 51,303 $2,139 $ 2,470 $ 2,850
8 $ 5,141 $50,000 $50,000 $ 51,728 $2,483 $ 2,925 $ 3,445
9 $ 5,905 $50,000 $50,000 $ 52,214 $2,823 $ 3,391 $ 4,078
10 $ 6,699 $50,000 $50,000 $ 52,761 $3,157 $ 3,868 $ 4,751
15 $11,172 $50,000 $50,000 $ 56,422 $4,723 $ 6,404 $ 8,789
20 $16,615 $50,000 $50,000 $ 61,659 $6,076 $ 9,144 $14,148
25 $23,237 $50,000 $50,000 $ 68,545 $7,205 $12,064 $21,198
30 $31,293 $50,000 $50,000 $ 77,201 $8,086 $15,103 $30,362
40 (Age 65) $53,020 $50,000 $50,000 $100,497 $8,987 $21,101 $56,699
</TABLE>
(1) If premiums are paid more frequently than annually, the payments would be
$274.50 semi-annually, $139.50 quarterly or $48 monthly. The death benefits
and cash values would be slightly different for a Contract with more
frequent premium payments.
(2) Assumes no Contract loan has been made.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN
THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A
REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF
FACTORS INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING
INTEREST RATES, AND RATES OF INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR
A CONTRACT WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN
AVERAGED 0%, 4%, AND 8% OVER A PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR
BELOW THOSE AVERAGES FOR INDIVIDUAL CONTRACT YEARS. NO REPRESENTATIONS CAN
BE MADE BY PRUCO LIFE OR THE SERIES FUND THAT THESE HYPOTHETICAL RATES OF
RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF
TIME.
T1
<PAGE>
<TABLE>
VARIABLE LIFE INSURANCE CONTRACT
MALE ISSUE AGE 40
$50,000 GUARANTEED DEATH BENEFIT
$939 ANNUAL PREMIUM FOR STANDARD UNDERWRITING RISK (1)
USING MAXIMUM CONTRACTUAL MORTALITY CHARGES
<CAPTION>
Death Benefit (2) Cash Value (2)
---------------------------------------------- ----------------------------------------------
Assuming Hypothetical Gross (and Net) Assuming Hypothetical Gross (and Net)
Premiums Annual Investment Return of Annual Investment Return of
End of Accumulated ---------------------------------------------- ----------------------------------------------
Policy at 4% Interest 0% Gross 4% Gross 8% Gross 0% Gross 4% Gross 8% Gross
Year Per Year (minus 0.87% Net) (3.13% Net) (7.13% Net) (minus 0.87% Net) (3.13% Net) (7.13% Net)
------- -------------- ----------------- ----------- ----------- ----------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 977 $50,000 $50,000 $50,029 $ 197 $ 208 $ 219
2 $ 1,992 $50,000 $50,000 $50,120 $ 815 $ 863 $ 912
3 $ 3,048 $50,000 $50,000 $50,273 $ 1,416 $ 1,526 $ 1,641
4 $ 4,147 $50,000 $50,000 $50,487 $ 2,001 $ 2,198 $ 2,409
5 $ 5,289 $50,000 $50,000 $50,768 $ 2,640 $ 2,953 $ 3,296
6 $ 6,477 $50,000 $50,000 $51,116 $ 3,262 $ 3,717 $ 4,230
7 $ 7,713 $50,000 $50,000 $51,531 $ 3,867 $ 4,493 $ 5,215
8 $ 8,998 $50,000 $50,000 $52,012 $ 4,454 $ 5,278 $ 6,254
9 $10,335 $50,000 $50,000 $52,559 $ 5,024 $ 6,073 $ 7,349
10 $11,725 $50,000 $50,000 $53,174 $ 5,576 $ 6,877 $ 8,503
15 $19,554 $50,000 $50,000 $57,244 $ 8,032 $10,985 $15,210
20 $29,080 $50,000 $50,000 $63,004 $ 9,939 $15,129 $23,667
25 (Age 65) $40,670 $50,000 $50,000 $70,524 $11,287 $19,187 $34,194
</TABLE>
(1) If premiums are paid more frequently than annually, the payments would
be $479.50 semi-annually, $243 quarterly or $82.50 monthly. The death
benefits and cash values would be slightly different for a Contract with
more frequent premium payments.
(2) Assumes no Contract loan has been made.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN
THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A
REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF
FACTORS INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING
INTEREST RATES, AND RATES OF INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR
A CONTRACT WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN
AVERAGED 0%, 4%, AND 8% OVER A PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR
BELOW THOSE AVERAGES FOR INDIVIDUAL CONTRACT YEARS. NO REPRESENTATIONS CAN
BE MADE BY PRUCO LIFE OR THE SERIES FUND THAT THESE HYPOTHETICAL RATES OF
RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF
TIME.
T2
<PAGE>
CONTRACT LOANS
After the first Contract year, the owner may borrow from Pruco Life using the
Contract as the only security for the loan. During the first Contract year, no
loans are permitted. Except as provided in the following paragraph, after the
first Contract year a Contract owner may borrow up to 75% of the Contract's cash
value. The minimum amount that may be borrowed at any one time is $500, except
that a smaller amount may be borrowed if used to pay premiums on the Contract.
The owner who is paying premiums other than monthly may elect in advance to have
Pruco Life automatically make a loan against the Contract, if the net cash value
is large enough, in order to pay a premium that has not been paid at the end of
a grace period. In some states this automatic premium loan may be available to
owners who pay premiums monthly.
Under one of the loan provisions available under this Contract, interest on a
loan accrues daily at a fixed effective annual rate of 5.5% (6% for Contracts
issued to Texas residents). However, if a Contract owner so desires, and if
Pruco Life has received any required approvals from the regulatory officials in
the state or other jurisdiction in which the Contract is to be issued, the
Contract owner may elect at the time of issuance of the Contract to have a
different loan provision in the Contract under which the interest rate will vary
from time to time. Under this variable loan interest rate provision, a Contract
owner may borrow up to 90% of the Contract's cash value after the first Contract
year.
If an owner elects the variable loan interest rate provision, interest on any
loan will accrue daily at an effective annual rate Pruco Life determines at the
start of each Contract year (instead of at the fixed 5.5% rate). This interest
rate will not exceed the greatest of: (1) the "Published Monthly Average" for
the calendar month ending 2 months before the calendar month of the Contract
anniversary; (2) 5%, which is the assumed rate of return for the Contract plus
1%; and (3) any rate required by law in the state of issue of the Contract. The
"Published Monthly Average" means Moody's Corporate Bond Yield Average--Monthly
Average Corporates, as published by Moody's Investors Service, Inc. or any
successor to that service, or if that average is no longer published, a
substantially similar average established by the insurance regulator where the
Contract is issued. For example, the Published Monthly Average in 1995 ranged
from 7.11% to 8.71%.
Interest payments on any loan are due at the end of each Contract year. If
interest is not paid when due, it is added to the amount of the loan. If the sum
of all outstanding loans plus accrued interest exceeds what the net cash value
would be if there were no Contract debt, Pruco Life will notify the Contract
owner of its intent to terminate the Contract in 31 days, within which time the
owner may repay all or enough of the loan to obtain a positive net cash value
and thus keep the Contract in force. If you fail to keep the Contract in force,
the amount of unpaid Contract debt will be treated as a distribution which may
be taxable. See TAX TREATMENT OF CONTRACT BENEFITS -- Pre-Death Distributions,
page 17, and LAPSE AND REINSTATEMENT, page 18.
When a loan is made, an amount equal to the loan proceeds will be transferred
out of the Account and the Real Property Account, as applicable. The reduction
will generally be made in the same proportions as the value in each subaccount
and Real Property Account bears to the total value of the Contract. While a
fixed-rate loan is outstanding, the amount that was so transferred will be
credited with the assumed investment return of 4% rather than with the actual
rate of return of the subaccount[s] and/or the Real Property Account. While a
loan made pursuant to the variable loan interest rate provision is outstanding,
the amount that was so transferred will be credited with a rate which is 1% less
than the loan interest rate for the Contract year (instead of 4%), rather than
with the actual rate of return of the subaccount[s] and/or the Real Property
Account.
A loan will not affect the amount of the premiums due. Should the death benefit
become payable while a loan is outstanding, or should the Contract be
surrendered, the amount of the Contract debt will be deducted from the death
benefit or the cash value otherwise payable.
A loan will have a permanent effect on a Contract's death benefit and cash value
because the investment results of the subaccount[s] and/or the Real Property
Account will apply only to the amount remaining in the subaccount[s] and/or the
Real Property Account. The longer the loan is outstanding, the greater the
effect is likely to be. The effect could be favorable or unfavorable. If
investment results are favorable while the loan is outstanding, the death
benefit and cash value will not increase as rapidly as they would have if no
loan had been made. If investment results are unfavorable, the death benefit and
the cash value will not be as adversely affected as they would have been had no
loan been made. Of course, a loan that is repaid will not have any effect upon
the guaranteed minimum death benefit.
The tax treatment of Contract loans depends upon whether the Contract is
classified as a Modified Endowment Contract for federal tax purposes. See TAX
TREATMENT OF CONTRACT BENEFITS, page 16.
Consider the Contract issued on a 25 year old insured illustrated in the table
on page T1 with an 8% gross investment return. Assume a $2,500 (5.5%) fixed-rate
loan was made at the end of Contract year 8 and repaid at the end of Contract
year 9. Upon repayment, the death benefit would be $51,904.44 and the cash value
$4,001.08. These amounts are lower than the death benefit and cash value shown
on that page for the end of
15
<PAGE>
Contract year 9 because the loan amount was credited with the 4% assumed
investment return rather than the 8% gross rate of return for the selected
subaccounts.
RIGHT TO EXCHANGE A CONTRACT FOR A FIXED-BENEFIT WHOLE-LIFE POLICY
At any time during the first 24 months after a Contract is issued, so long as no
premium due remains unpaid, the owner may exchange it for a fixed benefit
whole-life policy on the insured's life. No evidence of insurability will be
required to make an exchange. The new policy's death benefit will be the same as
the guaranteed minimum amount of the Contract. The new policy will also have the
same issue date and risk classification for the insured as the Contract, but it
will be issued by The Prudential and will be a participating (potentially
dividend-paying) policy. Premiums for the new policy will be based on The
Prudential's rates in effect on the original issue date for the same class of
risk which are currently higher than premiums under the Contract. The new
policy's cash value will be the same as it would have been had the new policy
been purchased at the outset. There will be an equitable cash adjustment on the
exchange equal to the difference between the premiums on the new policy and the
premiums on the Contract for the period between the Contract date and the date
of the exchange, reduced by the amount, if any, by which the cash value of the
Contract on the date of the exchange exceeds what the cash value would have been
had the subaccounts and/or the Real Property Account in which the Contract
participated uniformly earned the assumed investment return of 4%. A further
adjustment will be made for any differences in premiums for any optional
benefits carried over to the new policy.
The exchange will be effective when Pruco Life receives a written request in a
form that meets its needs, and receives the Contract and payment of any
adjustment due on the exchange. Any outstanding Contract debt must be repaid on
or before the effective date of the exchange.
The Contract owner may also exchange the Contract for a fixed-benefit life
insurance policy according to procedures meeting applicable state insurance law
requirements if the Series Fund or one of its portfolios has a material change
in its investment policy. Pruco Life, in conjunction with the Arizona Director
of Insurance, will determine if a change in investment policy is material. The
Contract owner will be able to exchange within 60 days of receipt of notice of
such a material change or of the effective date of the change, whichever is
later. Upon such an exchange, there will be a cash adjustment based on any
difference in net cash value between the Contract and the new policy.
SALE OF THE CONTRACT AND SALES COMMISSIONS
Pruco Securities Corporation ("Prusec"), an indirect wholly-owned subsidiary of
The Prudential, acts as the principal underwriter of the Contract. Prusec,
organized in 1971 under New Jersey law, is registered as a broker and dealer
under the Securities Exchange Act of 1934 and is a member of the National
Association of Securities Dealers, Inc. Prusec's principal business address is
1111 Durham Avenue, South Plainfield, New Jersey, 07080. The Contract is sold by
registered representatives of Prusec who are also authorized by state insurance
departments to do so. The Contract may also be sold through other broker-dealers
authorized by Prusec and applicable law to do so. Registered representatives of
such other broker-dealers may be paid on a different basis than described below.
Where the insured is less than 58 years of age, the representative will
generally receive a commission of no more than 50% of the premiums for the first
year, no more than 11% of the premiums for the second, third, and fourth years,
no more than 3% of the premiums for the fifth through tenth years, and no more
than 2% of the premiums thereafter. For insureds over 58 years of age, the
commission will be lower. The representative may be required to return all or
part of the first year commission if the Contract is not continued through the
second year. Representatives with less than 3 years of service may be paid on a
different basis. Representatives who meet certain productivity, profitability
and persistency standards with regard to the sale of the Contract will be
eligible for additional compensation.
Sales expenses in any year are not equal to the deduction for sales load in that
year. Pruco Life expects to recover its total sales expenses over the periods
the Contracts are in effect. To the extent that the sales charges are
insufficient to cover total sales expenses, the sales expenses will be recovered
from Pruco Life's surplus, which may include the amounts derived from the risk
charge and the mortality and expense risk charge, described in items 5 and 7
under CHARGES AND EXPENSES, page 6.
TAX TREATMENT OF CONTRACT BENEFITS
Each prospective purchaser is urged to consult a qualified tax advisor. The
following discussion is not intended as tax advice, and it is not a complete
statement of what the effect of federal income taxes will be under all
circumstances. Rather, it provides information about how Pruco Life believes the
current tax laws apply in the most commonly occurring circumstances. There is no
guarantee, however, that the current federal income tax laws and regulations or
interpretations will not change.
16
<PAGE>
Treatment as Life Insurance. The Contract will be treated as "life insurance,"
as long as it satisfies certain definitional tests set forth in Sections 7702 of
the Internal Revenue Code (the "Code") and as long as the underlying investments
for the Contract satisfy diversification requirements. (See DIVIDENDS,
DISTRIBUTIONS, AND TAXES in the attached prospectus for the Series Fund.)
Pruco Life believes that the Contract meets these definitional and
diversification requirements and accordingly will be treated as life insurance
for tax purposes. This means that: (1) except as noted below, the Contract owner
should not be taxed on any part of the Contract's cash value, including
additions attributable to interest, dividends or appreciation; and (2) the death
benefit should be excludible from the gross income of the beneficiary under
Section 101(a) of the Code.
However, Section 7702 of the Code which defines life insurance for tax purposes
gives the Secretary of the Treasury authority to prescribe regulations to carry
out the purposes of the Section. In this regard, proposed regulations governing
mortality charges were issued in 1991 and proposed regulations under Sections
101, 7702 and 7702A governing the treatment of life insurance policies that
provide accelerated death benefits were issued in 1992. None of these proposed
regulations has yet been finalized. Additional regulations under Section 7702
may also be promulgated in the future. Moreover, in connection with the issuance
of temporary regulations under Section 817(h), the Treasury Department announced
that such regulations do not provide guidance concerning the extent to which
Contract owners may direct their investments to particular divisions of a
separate account. Such guidance will be included in regulations or rulings under
Section 817(d) relating to the definition of a variable contract.
Pruco Life intends to comply with final regulations issued under sections 7702
and 817. Therefore, it reserves the right to make such changes as it deems
necessary to assure that the Contract continues to qualify as life insurance for
tax purposes. Any such changes will apply uniformly to affected Contract owners
and will be made only after advance written notice to affected Contract owners.
Pre-Death Distributions. The taxation of pre-death distributions depends on
whether the Contract is classified as a Modified Endowment Contract. The
following discussion first deals with distributions under Contracts not so
classified, and then with Modified Endowment Contracts.
1. A surrender or lapse of the Contract may have tax consequences. Upon
surrender, the owner will not be taxed on the net cash value except for the
amount, if any, that exceeds the gross premiums paid less the untaxed portion
of any prior withdrawals. The amount of any unpaid Contract debt will, upon
surrender or lapse, be added to the net cash value and treated, for this
purpose, as if it had been received. Any loss incurred upon surrender is
generally not deductible. The tax consequences of a surrender may differ if
the proceeds are received under any income payment settlement option.
A withdrawal (or partial surrender) generally is not taxable unless it
exceeds total premiums paid to the date of withdrawal less the untaxed
portion of any prior withdrawals. However, under certain limited
circumstances, in the first 15 Contract years all or a portion of a
withdrawal may be taxable if the Contract's cash value exceeds the total
premiums paid less the untaxed portions of any prior withdrawals, even if
total withdrawals do not exceed total premiums paid to date.
Extra premiums for optional benefits and riders generally do not count in
computing gross premiums paid, which in turn determines the extent to which a
withdrawal might be taxed.
Loans received under the Contract will ordinarily be treated as indebtedness
of the owner and will not be considered to be distributions subject to tax.
2. Some of the above rules are changed if the Contract is classified as a
Modified Endowment Contract under Section 7702A of the Code. In general, this
Contract should not become a Modified Endowment Contract. However, certain
actions may cause the Contract to become a Modified Endowment Contract. These
actions may include partial surrenders or withdrawals, the deletion of
certain riders or the selection of certain options upon the lapse of the
Contract. Contract owners contemplating any of these steps should first
consult a qualified tax advisor and their Pruco Life representative.
If the Contract is classified as a Modified Endowment Contract, then
pre-death distributions, including loans and withdrawals, are includible in
income to the extent that the Contract's cash value prior to surrender
charges exceeds the gross premiums paid for the Contract increased by the
amount of any loans previously includible in income and reduced by any
untaxed amounts previously received other than the amount of any loans
excludible from income. These rules may also apply to pre-death
distributions, including loans, made during the 2 year period prior to the
Contract becoming a Modified Endowment Contract.
In addition, pre-death distributions from such Contracts (including full
surrenders) will be subject to a penalty of 10 per cent of the amount
includible in income unless the amount is distributed on or after age
59 1/2, on
17
<PAGE>
account of the taxpayer's disability or as a life annuity. It is presently
unclear how the penalty tax provisions apply to Contracts owned by nonnatural
persons such as corporations.
Under certain circumstances, Modified Endowment Contracts issued during any
calendar year will be treated as a single contract for purposes of applying
the above rules.
Withholding. The taxable portion of any amounts received under the Contract will
be subject to withholding to meet federal income tax obligations if the Contract
owner fails to elect that no taxes be withheld or in certain other
circumstances. Contract owners who do not provide a social security number or
other taxpayer identification number will not be permitted to elect out of
withholding. All recipients may be subject to penalties under the estimated tax
payment rules if withholding and estimated tax payments are not sufficient.
Other Tax Considerations. Transfer of the Contract to a new owner or assignment
of the Contract may have tax consequences depending on the circumstances. In the
case of a transfer of the Contract for a valuable consideration, the death
benefit may be subject to federal income taxes under Section 101(a)(2) of the
Code. In addition, a transfer of the Contract to or the designation of a
beneficiary who is either 37 1/2 years younger than the Contract owner or a
grandchild of the Contract owner may have Generation Skipping Transfer tax
consequences under Section 2601 of the Code.
In certain circumstances, deductions for interest paid or accrued on Contract
debt or on other loans that are incurred or continued to purchase or carry the
Contract may be denied under Section 163 of the Code as personal interest or
under Section 264 of the Code. Contract owners should consult a tax advisor
regarding the application of these provisions to their circumstances.
Business-owned life insurance is subject to additional rules. Section 264(a)(1)
of the Code generally precludes business Contract owners from deducting premium
payments. Under Section 264(a)(4) of the Code, a deduction is not allowed for
any interest paid or accrued on any Contract debt on an insurance policy to the
extent the indebtedness exceeds $50,000 per officer, employee or financially
interested person. The Congress is also considering legislation to deny interest
deductions generally for loans on business-owned policies. The Code also imposes
an indirect tax upon additions to the Contract's cash value or the receipt of
death benefits under businessowned life insurance policies under certain
circumstances by way of the corporate alternative minimum tax.
The individual situation of each Contract owner or beneficiary will determine
the federal estate taxes and the state and local estate, inheritance and other
taxes due if the owner or insured dies.
LAPSE AND REINSTATEMENT
This Contract ensures that as long as premiums are paid, insurance protection
remains in effect. However, if a premium is not paid on or before each due date,
or within the grace period after each due date, the Contract will go into
default. Should this happen, Pruco Life will send the Contract owner a notice of
default setting forth the payment necessary to keep the Contact in force on a
premium paying basis. This payment must be received at the Pruco Life Home
Office within the 31 day grace period after the notice of default is mailed or
the Contract will lapse. A Contract that lapses with an outstanding Contract
loan may have tax consequences. See TAX TREATMENT OF CONTRACT BENEFITS on
page 16.
A Contract that has lapsed may be reinstated within 3 years after the date of
default unless the Contract has been surrendered for its cash value. To
reinstate a lapsed Contract, Pruco Life requires renewed evidence of
insurability, and submission of certain payments due under the Contract.
If a Contract does lapse, it may still provide some benefits. Those benefits are
described below under OPTIONS ON LAPSE.
OPTIONS ON LAPSE
If a Contract lapses because the premium has not been paid before the end of the
grace period, some life insurance coverage may continue in effect or the owner
may choose to surrender the Contract for its net cash value. A lapse of a
Contract with a Contract loan may have tax consequences. See TAX TREATMENT OF
CONTRACT BENEFITS, page 16.
1. Extended Term Insurance. With one exception explained below, if the owner
does not communicate at all with Pruco Life, life insurance coverage will
continue for a length of time that depends on the net cash value on the due date
of the first unpaid premium, the amount of insurance, and the age and sex
(except where unisex rates apply) of the insured. The insurance amount will be
what it would have been on the due date of the unpaid premium, taking into
account any Contract debt on that date. The amount will not change while the
insurance stays in force. This benefit is known as extended term insurance. The
owner will be told in writing how long the insurance will be in effect. Extended
term insurance has a cash value but no loan value.
18
<PAGE>
Contracts issued on the lives of certain insureds in high risk rating classes
will include a statement that extended term insurance will not be provided. In
that case, variable reduced paid-up insurance (as described in item 3 below)
will be the automatic benefit provided on lapse for Contracts issued in
jurisdictions where required approvals have been obtained from regulatory
authorities. Such approvals have been received in all jurisdictions except the
District of Columbia and Texas. The automatic benefit provided on lapse for
these insureds under Contracts issued in these two remaining jurisdictions will
be fixed reduced paid-up insurance (as described in item 2 below) until such
time as approvals for variable reduced paid-up insurance are obtained.
2. Fixed Reduced Paid-Up Insurance. The owner may choose to have insurance
coverage provided for the lifetime of the insured. The amount will be lower than
what extended term insurance would provide. This is known as fixed reduced
paid-up insurance. The insurance amount will depend on the net cash value on the
due date of the first premium in default, and the age and sex (except where
unisex rates apply) of the insured. The amount will not change thereafter unless
a loan is taken against the fixed reduced paid-up insurance. Pruco Life will, if
asked, tell the owner what the amount will be. Apart from the case described
above in which fixed reduced paid-up insurance is the automatic benefit provided
on lapse, the owner who wants fixed reduced paid-up insurance must ask for it in
writing, in a form that meets Pruco Life's needs, within 3 months of the due
date of the first unpaid premium. Fixed reduced paid-up insurance has a cash
value and a loan value. Acquisition of reduced paid-up insurance within the
first 7 Contract years may result in the Contract becoming a Modified Endowment
Contract. See TAX TREATMENT OF CONTRACT BENEFITS, page 16.
3. Variable Reduced Paid-Up Insurance. Variable reduced paid-up insurance
provides insurance coverage for the lifetime of the insured. The initial
insurance amount will depend upon the net cash value on the due date of the
first premium in default and the age and sex (except where unisex rates apply)
of the insured. This will be a new guaranteed minimum death benefit. Aside from
this guarantee, the cash value and the amount of insurance will vary with
investment performance in the same manner as a Contract in force on a premium
paying basis (see HOW A CONTRACT'S DEATH BENEFIT WILL VARY, page 8 and HOW A
CONTRACT'S CASH VALUE WILL VARY, page 10). Variable reduced paid-up insurance
has a loan privilege identical to that available on premium paying Contracts
(see CONTRACT LOANS, page 15). The availability of variable reduced paid-up
insurance is subject to the receipt of required state regulatory approvals.
Acquisition of reduced paid-up insurance within the first 7 Contract years may
result in the Contract becoming a Modified Endowment Contract. See TAX TREATMENT
OF CONTRACT BENEFITS, page 16.
As explained in item 1 above, variable reduced paid-up insurance is the
automatic benefit on lapse for Contracts issued on certain insureds in those
jurisdictions where regulatory approval has been obtained for such insurance.
Owners of other Contracts who want variable reduced paid-up insurance must ask
for it in writing, in a form that meets Pruco Life's needs, within 3 months of
the date of default; it will be available to such owners only if the initial
amount of variable reduced paid-up insurance would be at least $5,000. This
minimum is not applicable to Contracts for which variable reduced paid-up
insurance is the automatic benefit upon lapse.
4. Payment of Net Cash Value. The owner can receive the net cash value by
surrendering the Contract and making a written request in a form that meets
Pruco Life's needs. If Pruco Life receives the request within the days of grace
of a premium in default, the net cash value will be the net cash value as of the
due date of that premium, adjusted for any loan made or repaid during the days
of grace, plus or minus an amount that depends upon the investment performance
between the due date and the date Pruco Life receives the request. Whether the
net cash value as of the due date of the unpaid premium is increased or
decreased by subsequent investment performance depends upon whether or not the
assets relating to the Contract have increased at more than 4% a year. If Pruco
Life receives the request after the grace period expires, the net cash value
will be the net value of any extended term insurance then in force, or the net
value of any reduced paid-up insurance then in force (either fixed or variable),
less any Contract debt. Surrender of the Contract may have tax consequences. See
TAX TREATMENT OF CONTRACT BENEFITS, page 16.
The following table shows, the cash value, extended term insurance, and both
fixed and variable reduced paid-up insurance for two representative Contracts,
each with a guaranteed death benefit of $50,000, which lapse at the end of 8
years after a uniform gross annual investment return of 8%. The tables assume a
total Series Fund expense ratio of 0.52% (taking into account the offsets
described under THE PRUDENTIAL SERIES FUND, INC. on page 3).
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<PAGE>
- --------------------------------------------------------------------------------
MAXIMUM MORTALITY CHARGE ASSUMPTION
- --------------------------------------------------------------------------------
Extended Reduced
Insured Cash Value Term Insurance Paid-Up Insurance
- --------------------------------------------------------------------------------
Male, age 25 $3,445 $51,728 $14,381
at issue for 19.82 years for life
- --------------------------------------------------------------------------------
Male, age 40 $6,254 $52,012 $16,174
at issue for 12.72 years for life
- --------------------------------------------------------------------------------
LEGAL CONSIDERATIONS RELATING TO SEX-DISTINCT PREMIUMS AND BENEFITS
The Contract generally employs mortality tables that distinguish between males
and females. Thus, premiums and benefits under Contracts issued on males and
females of the same age will generally differ. However, in those states that
have adopted regulations prohibiting sex-distinct insurance rates, premiums and
cost of insurance charges will be based on male mortality tables whether the
insured is male or female. In addition, employers and employee organizations
considering purchase of a Contract should consult their legal advisors to
determine whether purchase of a Contract based on sex-distinct actuarial tables
is consistent with Title VII of the Civil Rights Act of 1964 or other applicable
law. Pruco Life may offer the Contract with unisex mortality rates to such
prospective purchasers.
OTHER GENERAL CONTRACT PROVISIONS
Beneficiary. The beneficiary is designated and named in the application by the
Contract owner. Thereafter, the owner may change the beneficiary, provided it is
in accordance with the terms of the Contract. Should the insured die with no
surviving beneficiary, the insured's estate will become the beneficiary.
Incontestability. After the Contract has been in force during the insured's
lifetime for 2 years from the Contract date, Pruco Life will not contest its
liability under the Contract in accordance with its terms.
Misstatement of Age or Sex. If the insured's stated age or sex (except where
unisex rates apply) or both are incorrect in the Contract, Pruco Life will
adjust the benefits payable, as required by law, to reflect what the premium
would have purchased for the correct age and sex.
Suicide Exclusion. Generally, if the insured, whether sane or insane, dies by
suicide within 2 years from the Contract date, Pruco Life will pay no more under
the Contract than the sum of the premiums paid.
Assignment. This Contract may not be assigned if such assignment would violate
any federal, state or local law or regulation. Pruco Life assumes no
responsibility for the validity or sufficiency of any assignment, and it will
not be obligated to comply with any assignment unless it has received a copy at
one of its Home Offices.
Settlement Options. The Contract grants to most owners, or to the beneficiary, a
wide variety of optional ways of receiving Contract proceeds, other than in a
lump sum. Any Pruco Life representative authorized to sell this Contract can
explain these options upon request.
RIDERS
The Contract owner may be able to obtain extra fixed benefits, which may require
an additional premium. These benefits will be described in what is known as a
"rider" to the Contract. For example, one benefit pays an additional amount if
the insured dies in an accident. Others waive certain premiums if the insured is
disabled within the meaning of the provision (or, in the case of a Contract
issued on an insured under the age of 15, if the applicant dies or becomes
disabled within the meaning of the provision). Others pay an additional amount
if the insured dies within a stated number of years after issue; similar
benefits may be available if the insured's spouse or child should die. The
amounts of these benefits are fully guaranteed at issue; they do not depend on
the performance of the Account. Certain restrictions may apply; they are clearly
described in the applicable rider. Any Pruco Life representative authorized to
sell the Contract can explain these extra benefits further. Samples of the
provisions are available from Pruco Life upon written request.
VOTING RIGHTS
As stated above, all of the assets held in the subaccounts of the Account will
be invested in shares of the corresponding portfolios of the Series Fund. Pruco
Life is the legal owner of those shares and as such has the right to vote on any
matter voted on at Series Fund shareholders meetings. However, Pruco Life will,
as required by law, vote the shares of the Series Fund at any regular and
special shareholders meetings it is required to hold in accordance with voting
instructions received from Contract owners. The Series Fund will not hold annual
20
<PAGE>
shareholders meetings when not required to do so under Maryland law or the
Investment Company Act of 1940. Series Fund shares for which no timely
instructions from Contract owners are received, and any shares attributable to
general account investments of Pruco Life will be voted in the same proportion
as shares in the respective portfolios for which instructions are received.
Should the applicable federal securities laws or regulations, or their current
interpretation, change so as to permit Pruco Life to vote shares of the Series
Fund in its own right, it may elect to do so.
Matters on which Contract owners may give voting instructions include the
following: (1) election of the Board of Directors of the Series Fund; (2)
ratification of the independent accountant of the Series Fund; (3) approval of
the investment advisory agreement for a portfolio of the Series Fund
corresponding to the Contract owner's selected subaccount[s]; (4) any change in
the fundamental investment policy of a portfolio corresponding to the Contract
owner's selected subaccount[s]; and (5) any other matter requiring a vote of the
shareholders of the Series Fund. With respect to approval of the investment
advisory agreement or any change in a portfolio's fundamental investment policy,
Contract owners participating in such portfolios will vote separately on the
matter, pursuant to the requirements of Rule 18f-2 under the 1940 Act.
The number of Series Fund shares for which instructions may be given by a
Contract owner is determined by dividing the portion of the value of the
Contract derived from participation in a subaccount, by the value of one share
in the corresponding portfolio of the Series Fund. The number of votes for which
each Contract owner may give Pruco Life instructions will be determined as of
the record date chosen by the Board of Directors of the Series Fund. Pruco Life
will furnish Contract owners with proper forms and proxies to enable them to
give these instructions. Pruco Life reserves the right to modify the manner in
which the weight to be given voting instructions is calculated where such a
change is necessary to comply with current federal regulations or
interpretations of those regulations.
Pruco Life may, if required by state insurance regulations, disregard voting
instructions if such instructions would require shares to be voted so as to
cause a change in the sub-classification or investment objectives of one or more
of the Series Fund's portfolios, or to approve or disapprove an investment
advisory contract for the Series Fund. In addition, Pruco Life itself may
disregard voting instructions that would require changes in the investment
policy or investment advisor of one or more of the Series Fund's portfolios,
provided that Pruco Life reasonably disapproves such changes in accordance with
applicable federal regulations. If Pruco Life does disregard voting
instructions, it will advise Contract owners of that action and its reasons for
such action in the next annual or semi-annual report to Contract owners.
SUBSTITUTION OF SERIES FUND SHARES
Although Pruco Life believes it to be unlikely, it is possible that in the
judgment of its management, one or more of the portfolios of the Series Fund may
become unsuitable for investment by Contract owners because of investment policy
changes, tax law changes or the unavailability of shares for investment. In that
event, Pruco Life may seek to substitute the shares of another portfolio or of
an entirely different mutual fund. Before this can be done, the approval of the
SEC, and possibly one or more state insurance departments, will be required.
Contract owners will be notified of such substitution.
REPORTS TO CONTRACT OWNERS
Once each Contract year (except where the Contract is in force as fixed extended
term insurance or fixed reduced paid-up insurance), Contract owners will be sent
statements that provide certain information pertinent to their own Contract.
These statements detail values and transactions made and specific Contract data
that apply only to each particular Contract. On request, a Contract owner will
be sent a current statement in a form similar to that of the annual statement
described above, but Pruco Life may limit the number of such requests or impose
a reasonable charge if such requests are made too frequently.
Each Contract owner will be sent an annual report for the Account. Contract
owners will also be sent annual and semi-annual reports of the Series Fund
showing the financial condition of the portfolios and the investments held in
each.
STATE REGULATION
Pruco Life is subject to regulation and supervision by the Department of
Insurance of the State of Arizona, which periodically examines its operations
and financial condition. It is also subject to the insurance laws and
regulations of all jurisdictions in which it is authorized to do business.
Pruco Life is required to submit annual statements of its operations, including
financial statements, to the insurance departments of the various jurisdictions
in which it does business to determine solvency and compliance with local
insurance laws and regulations.
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<PAGE>
In addition to the annual statements referred to above, Pruco Life is required
to file with Arizona and other jurisdictions a separate statement with respect
to the operations of all its variable contract accounts, in a form promulgated
by the National Association of Insurance Commissioners.
EXPERTS
The financial statements included in this prospectus have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their reports
appearing herein, and are included in reliance upon the reports of such firm
given upon their authority as experts in accounting and auditing. Deloitte &
Touche LLP's principal business address is Two Hilton Court, Parsippany, New
Jersey 07054-0319. Actuarial matters included in this prospectus have been
examined by Nancy D. Davis, FSA, MAAA, whose opinion is filed as an exhibit to
the registration statement.
On March 12, 1996, Deloitte & Touche LLP was dismissed as the independent
accountants of Pruco Life. There have been no disagreements with Deloitte &
Touche LLP on any matter of accounting principles or practices, financial
statements disclosure or auditing scope or procedure which, if not resolved to
the satisfaction of the accountant, would have caused them to make a reference
to the matter in their reports.
LITIGATION
Several actions have been brought against Pruco Life on behalf of those persons
who purchased life insurance policies based on complaints about sales practices
engaged in by The Prudential, Pruco Life and agents appointed by The Prudential
and Pruco Life. The Prudential has agreed to indemnify Pruco Life for any and
all losses resulting from such litigation.
ADDITIONAL INFORMATION
A registration statement has been filed with the SEC under the Securities Act of
1933, relating to the offering described in this prospectus. This prospectus
does not include all of the information set forth in the registration statement.
Certain portions have been omitted pursuant to the rules and regulations of the
SEC. The omitted information may, however, be obtained from the SEC's principal
office in Washington, D.C., upon payment of a prescribed fee.
Further information may also be obtained from Pruco Life's office. The address
and telephone number are set forth on the cover of this prospectus.
FINANCIAL STATEMENTS
The consolidated financial statements of Pruco Life and subsidiaries included
herein should be distinguished from the financial statements of the Account, and
should be considered only as bearing upon the ability of Pruco Life to meet its
obligations under the Contracts.
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<PAGE>
DIRECTORS AND OFFICERS
The directors and major officers of Pruco Life, listed with their principal
occupations during the past 5 years, are shown below.
DIRECTORS OF PRUCO LIFE
E. MICHAEL CAULFIELD, Director. -- Chief Executive Officer, Prudential Money
Management Group since 1995; 1993 to 1995: President, Prudential Preferred
Financial Services; 1992 to 1993: President, Prudential Property and Casualty
Insurance Company*; Prior to 1992: President of Investment Services of The
Prudential.
GARNETT L. KEITH, JR., Director. -- Vice Chairman of The Prudential.
IRA J. KLEINMAN, Director. -- Chief Marketing and Product Development Officer,
Prudential Individual Insurance Group since 1995; 1993 to 1995: President,
Prudential Select; Prior to 1993: Senior Vice President of The Prudential.
ESTHER H. MILNES, President and Director. -- Vice President and Actuary,
Prudential Individual Insurance Group since 1996; 1993 to 1996: Senior Vice
President and Chief Actuary, Prudential Insurance and Financial Services; Prior
to 1993: Vice President and Associate Actuary of The Prudential.
I. EDWARD PRICE, Vice Chairman and Director. -- Senior Vice President and
Actuary, Prudential Individual Insurance Group since 1995; 1994 to 1995: Chief
Executive Officer, Prudential International Insurance; 1993 to 1994: President,
Prudential International Insurance; Prior to 1993: Senior Vice President and
Company Actuary of The Prudential.
WILLIAM F. YELVERTON, Director. -- Chief Executive Officer, Prudential
Individual Insurance Group since 1995; Prior to 1995: Chief Executive Officer,
New York Life Worldwide.
OFFICERS WHO ARE NOT DIRECTORS
BEVERLY R. BARNEY, Senior Vice President. -- Vice President and Re-Engineering
Officer, Prudential Individual Insurance Group since 1995; 1993 to 1995: Senior
Vice President and Associate Actuary, Prudential Direct; Prior to 1993: Senior
Vice President and Actuary of Pruco Life.
SUSAN L. BLOUNT, Secretary. -- Vice President and Secretary of The Prudential
since 1995; Prior to 1995: Assistant General Counsel for Prudential Residential
Services Company.
C. EDWARD CHAPLIN, Treasurer. -- Vice President and Treasurer of The Prudential
since 1995; 1993 to 1995: Managing Director and Assistant Treasurer of The
Prudential; 1992 to 1993: Vice President and Assistant Treasurer, Banking and
Cash Management for The Prudential; Prior to 1992: Regional Vice President of
Prudential Mortgage Capital Company.
CLIFFORD E. KIRSCH, Chief Legal Officer. -- Chief Counsel, Variable Products,
Law Department of The Prudential since 1995; 1994 to 1995: Associate General
Counsel with Paine Webber; Prior to 1994: Assistant Director in the Division of
Investment Management with the Securities and Exchange Commission.
RICHARD F. LAMBERT, Senior Vice President and Chief Actuary. -- Vice President
and Actuary, Prudential Individual Insurance Group since 1996; 1994 to 1996:
Vice President and Chief Actuary, Prudential Preferred Financial Services; 1993
to 1994: Vice President and Actuary, Prudential Preferred Financial Services;
Prior to 1993: Vice President and Associate Actuary of The Prudential.
FRANK MARINO, Senior Vice President. -- Vice President, Policyholder Relations
Department, Prudential Individual Insurance Group since 1996; Prior to 1996:
Senior Vice President, Prudential Mutual Fund Services.
MICHAEL R. SHAPIRO, Senior Vice President. -- Vice President, Marketing and
Product Development, Prudential Individual Insurance Group since 1996; Prior to
1996: Senior Vice President, Prudential Select Brokerage.
STEPHEN P. TOOLEY, Vice President, Comptroller and Chief Accounting Officer. --
Vice President, Product Performance, Prudential Individual Insurance Group since
1996; 1993 to 1996: Vice President and Comptroller, Prudential Insurance and
Financial Services; Prior to 1993: Director, Financial Analysis for The
Prudential.
The business address of all directors and officers of Pruco Life is 213
Washington Street, Newark, New Jersey 07102-2992.
* SUBSIDIARY OF THE PRUDENTIAL
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<PAGE>
FINANCIAL STATEMENTS OF
PRUCO LIFE VARIABLE INSURANCE ACCOUNT
STATEMENTS OF NET ASSETS
December 31, 1995
<TABLE>
<CAPTION>
SUBACCOUNTS
--------------------------------------------------------------
MONEY DIVERSIFIED FLEXIBLE
TOTAL MARKET BOND EQUITY MANAGED
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investment in shares of The Prudential Series
Fund, Inc.
Portfolios at net asset value [Note 2]........ $ 296,716,654 $ 15,946,635 $ 21,491,802 $ 107,624,988 $ 105,647,473
-------------- -------------- -------------- -------------- --------------
LIABILITIES
Payable to Related Separate Account............. 43,430 0 0 0 43,430
-------------- -------------- -------------- -------------- --------------
NET ASSETS........................................ $ 296,673,224 $ 15,946,635 $ 21,491,802 $ 107,624,988 $ 105,604,043
-------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- --------------
NET ASSETS, representing:
Equity of Contract owners....................... $ 296,337,719 $ 15,901,841 $ 21,485,655 $ 107,588,953 $ 105,557,680
Equity of Pruco Life Insurance Company.......... 335,505 44,794 6,147 36,035 46,363
-------------- -------------- -------------- -------------- --------------
$ 296,673,224 $ 15,946,635 $ 21,491,802 $ 107,624,988 $ 105,604,043
-------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- --------------
</TABLE>
STATEMENTS OF OPERATIONS
For the year ended December 31, 1995
<TABLE>
<CAPTION>
SUBACCOUNTS
--------------------------------------------------------------
MONEY DIVERSIFIED FLEXIBLE
TOTAL MARKET BOND EQUITY MANAGED
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend distributions received................. $ 9,162,354 $ 884,330 $ 1,360,626 $ 2,062,719 $ 3,101,499
EXPENSES
Charges to Contract owners for assuming
mortality risk and expense risk [Note 3A]..... 937,272 54,578 68,781 336,037 332,236
Reimbursement for excess expenses [Note 3B]..... (409,174) (6,389) (8,980) (95,005) (237,616)
-------------- -------------- -------------- -------------- --------------
NET EXPENSES...................................... 528,098 48,189 59,801 241,032 94,620
-------------- -------------- -------------- -------------- --------------
NET INVESTMENT INCOME (LOSS)...................... 8,634,256 836,141 1,300,825 1,821,687 3,006,879
-------------- -------------- -------------- -------------- --------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Capital gains distributions received............ 9,591,082 0 46,988 3,775,598 4,387,819
Realized gain (loss) on shares redeemed
[average cost basis].......................... 918,882 0 25,897 592,148 234,407
Net unrealized gain on investments.............. 38,815,929 0 2,288,395 19,423,426 12,905,968
-------------- -------------- -------------- -------------- --------------
NET GAIN ON INVESTMENTS........................... 49,325,893 0 2,361,280 23,791,172 17,528,194
-------------- -------------- -------------- -------------- --------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS....................... $ 57,960,149 $ 836,141 $ 3,662,105 $ 25,612,859 $ 20,535,073
-------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- --------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A9 AND A10.
A1
<PAGE>
STATEMENTS OF NET ASSETS (CONTINUED)
December 31, 1995
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
------------------------------------------------------------------------------
HIGH
CONSERVATIVE YIELD STOCK EQUITY NATURAL
BALANCED BOND INDEX INCOME RESOURCES
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investment in shares of The Prudential Series
Fund, Inc.
Portfolios at net asset value [Note 2]........ $ 34,528,788 $ 1,834,463 $ 4,568,536 $ 2,320,246 $ 1,541,873
-------------- -------------- -------------- -------------- --------------
LIABILITIES
Payable to Related Separate Account............. 0 0 0 0 0
-------------- -------------- -------------- -------------- --------------
NET ASSETS........................................ $ 34,528,788 $ 1,834,463 $ 4,568,536 $ 2,320,246 $ 1,541,873
-------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- --------------
NET ASSETS, representing:
Equity of Contract owners....................... $ 34,437,738 $ 1,829,331 $ 4,545,682 $ 2,300,236 $ 1,525,868
Equity of Pruco Life Insurance Company.......... 91,050 5,132 22,854 20,010 16,005
-------------- -------------- -------------- -------------- --------------
$ 34,528,788 $ 1,834,463 $ 4,568,536 $ 2,320,246 $ 1,541,873
-------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- --------------
<CAPTION>
GOVERNMENT PRUDENTIAL
GLOBAL INCOME JENNISON
-------------- -------------- --------------
<S> <C> <C> <C>
ASSETS
Investment in shares of The Prudential Series
Fund, Inc.
Portfolios at net asset value [Note 2]........ $ 580,374 $ 468,422 $ 89,990
-------------- -------------- --------------
LIABILITIES
Payable to Related Separate Account............. 0 0 0
-------------- -------------- --------------
NET ASSETS........................................ $ 580,374 $ 468,422 $ 89,990
-------------- -------------- --------------
-------------- -------------- --------------
NET ASSETS, representing:
Equity of Contract owners....................... $ 554,254 $ 466,386 $ 80,661
Equity of Pruco Life Insurance Company.......... 26,120 2,036 9,329
-------------- -------------- --------------
$ 580,374 $ 468,422 $ 89,990
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
STATEMENTS OF OPERATIONS (CONTINUED)
For the year ended December 31, 1995
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
------------------------------------------------------------------------------
HIGH
CONSERVATIVE YIELD STOCK EQUITY NATURAL
BALANCED BOND INDEX INCOME RESOURCES
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend distributions received................. $ 1,351,932 $ 181,504 $ 84,287 $ 80,529 $ 17,543
EXPENSES
Charges to Contract owners for assuming
mortality risk and expense risk [Note 3A]..... 111,230 5,973 13,296 7,129 4,704
Reimbursement for excess expenses [Note 3B]..... (61,184) 0 0 0 0
-------------- -------------- -------------- -------------- --------------
NET EXPENSES...................................... 50,046 5,973 13,296 7,129 4,704
-------------- -------------- -------------- -------------- --------------
NET INVESTMENT INCOME (LOSS)...................... 1,301,886 175,531 70,991 73,400 12,839
-------------- -------------- -------------- -------------- --------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Capital gains distributions received............ 1,170,397 0 32,489 96,854 69,644
Realized gain (loss) on shares redeemed
[average cost basis].......................... 31,524 (933) 16,334 7,871 2,181
Net unrealized gain on investments.............. 2,509,581 95,010 1,052,064 203,709 233,804
-------------- -------------- -------------- -------------- --------------
NET GAIN ON INVESTMENTS........................... 3,711,502 94,077 1,100,887 308,434 305,629
-------------- -------------- -------------- -------------- --------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS....................... $ 5,013,388 $ 269,608 $ 1,171,878 $ 381,834 $ 318,468
-------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- --------------
<CAPTION>
GOVERNMENT PRUDENTIAL
GLOBAL INCOME JENNISON*
-------------- -------------- --------------
<S> <C> <C> <C>
INVESTMENT INCOME
Dividend distributions received................. $ 8,360 $ 28,804 $ 6
EXPENSES
Charges to Contract owners for assuming
mortality risk and expense risk [Note 3A]..... 1,629 1,531 80
Reimbursement for excess expenses [Note 3B]..... 0 0 0
-------------- -------------- --------------
NET EXPENSES...................................... 1,629 1,531 80
-------------- -------------- --------------
NET INVESTMENT INCOME (LOSS)...................... 6,731 27,273 (74)
-------------- -------------- --------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Capital gains distributions received............ 10,665 0 0
Realized gain (loss) on shares redeemed
[average cost basis].......................... 823 8,064 506
Net unrealized gain on investments.............. 53,463 43,870 3,478
-------------- -------------- --------------
NET GAIN ON INVESTMENTS........................... 64,951 51,934 3,984
-------------- -------------- --------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS....................... $ 71,682 $ 79,207 $ 3,910
-------------- -------------- --------------
-------------- -------------- --------------
*Commenced
Business
on 5/1/95
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A9 AND A10.
A2
<PAGE>
STATEMENTS OF NET ASSETS (CONTINUED)
December 31, 1995
<TABLE>
<CAPTION>
SUBACCOUNTS
--------------
SMALL
CAPITALIZATION
STOCK
--------------
<S> <C>
ASSETS
Investment in shares of The Prudential Series
Fund, Inc.
Portfolios at net asset value [Note 2]........ $ 73,064
--------------
LIABILITIES
Payable to Related Separate Account............. 0
--------------
NET ASSETS........................................ $ 73,064
--------------
--------------
NET ASSETS, representing:
Equity of Contract owners....................... $ 63,434
Equity of Pruco Life Insurance Company.......... 9,630
--------------
$ 73,064
--------------
--------------
</TABLE>
STATEMENTS OF OPERATIONS (CONTINUED)
For the year ended December 31, 1995
<TABLE>
<CAPTION>
SUBACCOUNTS
--------------
SMALL
CAPITALIZATION
STOCK*
--------------
<S> <C>
INVESTMENT INCOME
Dividend distributions received................. $ 215
EXPENSES
Charges to Contract owners for assuming
mortality risk and expense risk [Note 3A]..... 68
Reimbursement for excess expenses [Note 3B]..... 0
--------------
NET EXPENSES...................................... 68
--------------
NET INVESTMENT INCOME (LOSS)...................... 147
--------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Capital gains distributions received............ 628
Realized gain (loss) on shares redeemed
[average cost basis].......................... 60
Net unrealized gain on investments.............. 3,161
--------------
NET GAIN ON INVESTMENTS........................... 3,849
--------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS....................... $ 3,996
--------------
--------------
*Commenced
Business
on 5/1/95
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A9 AND A10.
A3
<PAGE>
(This page intentionally left blank.)
A4
<PAGE>
FINANCIAL STATEMENTS OF
PRUCO LIFE VARIABLE INSURANCE ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
SUBACCOUNTS
--------------------------------------------------------------
MONEY DIVERSIFIED
TOTAL MARKET BOND
------------------------------ ------------------------------ ------------------------------
1995 1994 1995 1994 1995 1994
-------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss)..... $ 8,634,256 $ 6,924,016 $ 836,141 $ 559,929 $ 1,300,825 $ 1,112,882
Capital gains distributions
received....................... 9,591,082 6,346,543 0 0 46,988 40,866
Realized gain (loss) on shares
redeemed
[average cost basis]........... 918,882 376,565 0 0 25,897 8,522
Net unrealized gain (loss) on
investments.................... 38,815,929 (14,916,341) 0 0 2,288,395 (1,825,278)
-------------- -------------- -------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM OPERATIONS........ 57,960,149 (1,269,217) 836,141 559,929 3,662,105 (663,008)
-------------- -------------- -------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM PREMIUM PAYMENTS
AND OTHER OPERATING TRANSFERS.... (948,126) 3,752,964 (251,391) (470,898) (215,375) (238,081)
-------------- -------------- -------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM SURPLUS
TRANSFERS........................ (88,204) (359,061) 13,580 (40,960) (15,824) (12,282)
-------------- -------------- -------------- -------------- -------------- --------------
TOTAL INCREASE (DECREASE)
IN NET ASSETS.................... 56,923,819 2,124,686 598,330 48,071 3,430,906 (913,371)
NET ASSETS:
Beginning of year................ 239,749,405 237,624,719 15,348,305 15,300,234 18,060,896 18,974,267
-------------- -------------- -------------- -------------- -------------- --------------
End of year...................... $ 296,673,224 $ 239,749,405 $ 15,946,635 $ 15,348,305 $ 21,491,802 $ 18,060,896
-------------- -------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- -------------- --------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A9 AND A10.
A5
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
For the years ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
--------------------------------------------------------------
FLEXIBLE
EQUITY MANAGED
------------------------------ ------------------------------
1995 1994 1995 1994
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss)..... $ 1,821,687 $ 1,683,712 $ 3,006,879 $ 2,308,550
Capital gains distributions
received....................... 3,775,598 3,446,147 4,387,819 2,439,446
Realized gain (loss) on shares
redeemed
[average cost basis]........... 592,148 270,343 234,407 57,114
Net unrealized gain (loss) on
investments.................... 19,423,426 (3,314,767) 12,905,968 (7,638,295)
-------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM OPERATIONS........ 25,612,859 2,085,435 20,535,073 (2,833,185)
-------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM PREMIUM PAYMENTS
AND OTHER OPERATING TRANSFERS.... (966,669) 191,542 (777,608) 1,830,761
-------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM SURPLUS
TRANSFERS........................ 1,701 (99,540) (110,202) (126,969)
-------------- -------------- -------------- --------------
TOTAL INCREASE (DECREASE)
IN NET ASSETS.................... 24,647,891 2,177,437 19,647,263 (1,129,393)
NET ASSETS:
Beginning of year................ 82,977,097 80,799,660 85,956,780 87,086,173
-------------- -------------- -------------- --------------
End of year...................... $ 107,624,988 $ 82,977,097 $ 105,604,043 $ 85,956,780
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
<CAPTION>
HIGH
CONSERVATIVE YIELD
BALANCED BOND
------------------------------ ------------------------------
1995 1994 1995 1994
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss)..... $ 1,301,886 $ 955,348 $ 175,531 $ 154,127
Capital gains distributions
received....................... 1,170,397 306,877 0 0
Realized gain (loss) on shares
redeemed
[average cost basis]........... 31,524 8,992 (933) 2,079
Net unrealized gain (loss) on
investments.................... 2,509,581 (1,583,036) 95,010 (205,610)
-------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM OPERATIONS........ 5,013,388 (311,819) 269,608 (49,404)
-------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM PREMIUM PAYMENTS
AND OTHER OPERATING TRANSFERS.... 374,732 1,302,374 (24,810) (3,900)
-------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM SURPLUS
TRANSFERS........................ 9,314 (63,244) (217) (3,448)
-------------- -------------- -------------- --------------
TOTAL INCREASE (DECREASE)
IN NET ASSETS.................... 5,397,434 927,311 244,581 (56,752)
NET ASSETS:
Beginning of year................ 29,131,354 28,204,043 1,589,882 1,646,634
-------------- -------------- -------------- --------------
End of year...................... $ 34,528,788 $ 29,131,354 $ 1,834,463 $ 1,589,882
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A9 AND A10.
A6
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
For the years ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
SUBACCOUNTS
----------------------------------------------------------------------------------------------
STOCK EQUITY NATURAL
INDEX INCOME RESOURCES
------------------------------ ------------------------------ ------------------------------
1995 1994 1995 1994 1995 1994
-------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss)..... $ 70,991 $ 64,000 $ 73,400 $ 51,821 $ 12,839 $ 7,326
Capital gains distributions
received....................... 32,489 4,568 96,854 85,670 69,644 22,870
Realized gain (loss) on shares
redeemed
[average cost basis]........... 16,334 13,026 7,871 4,284 2,181 11,808
Net unrealized gain (loss) on
investments.................... 1,052,064 (58,977) 203,709 (130,972) 233,804 (94,709)
-------------- -------------- -------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM OPERATIONS........ 1,171,878 22,617 381,834 10,803 318,468 (52,705)
-------------- -------------- -------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM PREMIUM PAYMENTS
AND OTHER OPERATING TRANSFERS.... 291,051 182,827 239,675 418,737 80,100 186,135
-------------- -------------- -------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM SURPLUS
TRANSFERS........................ (9,754) 7,658 18,454 (25,455) 13,605 (31,173)
-------------- -------------- -------------- -------------- -------------- --------------
TOTAL INCREASE (DECREASE)
IN NET ASSETS.................... 1,453,175 213,102 639,963 404,085 412,173 102,257
NET ASSETS:
Beginning of year................ 3,115,361 2,902,259 1,680,283 1,276,198 1,129,700 1,027,443
-------------- -------------- -------------- -------------- -------------- --------------
End of year...................... $ 4,568,536 $ 3,115,361 $ 2,320,246 $ 1,680,283 $ 1,541,873 $ 1,129,700
-------------- -------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- -------------- --------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A9 AND A10.
A7
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
For the years ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
----------------------------------------------------------------------------------------------
SMALL
GOVERNMENT PRUDENTIAL CAPITALIZATION
GLOBAL** INCOME JENNISON* STOCK*
------------------------------ ------------------------------ -------------- --------------
1995 1994 1995 1994 1995 1995
-------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss)..... $ 6,731 $ 131 $ 27,273 $ 26,190 $ (74) $ 147
Capital gains distributions
received....................... 10,665 99 0 0 0 628
Realized gain (loss) on shares
redeemed
[average cost basis]........... 823 0 8,064 397 506 60
Net unrealized gain (loss) on
investments.................... 53,463 (15,549) 43,870 (49,148) 3,478 3,161
-------------- -------------- -------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM OPERATIONS........ 71,682 (15,319) 79,207 (22,561) 3,910 3,996
-------------- -------------- -------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM PREMIUM PAYMENTS
AND OTHER OPERATING TRANSFERS.... 161,379 340,684 2,911 12,783 77,699 60,180
-------------- -------------- -------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM SURPLUS
TRANSFERS........................ 12,250 9,698 (38,380) 26,654 8,381 8,888
-------------- -------------- -------------- -------------- -------------- --------------
TOTAL INCREASE (DECREASE)
IN NET ASSETS.................... 245,311 335,063 43,738 16,876 89,990 73,064
NET ASSETS:
Beginning of year................ 335,063 0 424,684 407,808 0 0
-------------- -------------- -------------- -------------- -------------- --------------
End of year...................... $ 580,374 $ 335,063 $ 468,422 $ 424,684 $ 89,990 $ 73,064
-------------- -------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- -------------- --------------
**Commenced *Commenced
Business Business
on 5/1/94 on 5/1/95
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A9 AND A10.
A8
<PAGE>
NOTES TO FINANCIAL STATEMENTS OF
PRUCO LIFE VARIABLE INSURANCE ACCOUNT
FOR THE YEARS ENDED DECEMBER 31, 1995 AND DECEMBER 31, 1994
NOTE 1: GENERAL
Pruco Life Variable Insurance Account (the "Account") was established on
November 10, 1982 under Arizona law as a separate investment account of Pruco
Life Insurance Company ("Pruco Life") which is a wholly-owned subsidiary of The
Prudential Insurance Company of America ("The Prudential"). The assets of the
Account are segregated from Pruco Life's other assets.
The Account is registered under the Investment Company Act of 1940, as amended,
as a unit investment trust. There are thirteen subaccounts within the Account,
each of which invests only in a corresponding portfolio of The Prudential Series
Fund, Inc. (the "Series Fund"). The Series Fund is a diversified open-end
management investment company, and is managed by The Prudential.
New sales of the product which invests in the Account were discontinued as of
January 1, 1992. However, premium payments made by current Contract owners will
continue to be received by the Account.
NOTE 2: INVESTMENT INFORMATION FOR THE PRUDENTIAL SERIES FUND, INC. PORTFOLIOS
The net asset value per share for each portfolio of the Series Fund, the number
of shares of each portfolio held by the subaccounts of the Account and the
aggregate cost of investments in such shares at December 31, 1995 were as
follows:
<TABLE>
<CAPTION>
PORTFOLIOS
---------------------------------------------------------------------------
PORTFOLIO MONEY DIVERSIFIED FLEXIBLE CONSERVATIVE
INFORMATION MARKET BOND EQUITY MANAGED BALANCED
- ------------------------- ------------- ------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Number of shares: 1,594,664 1,899,724 4,197,567 5,915,537 2,255,492
Net asset value per
share: $ 10.0000 $ 11.3131 $ 25.6399 $ 17.8593 $ 15.3088
Cost: $ 15,946,635 $ 20,102,191 $ 71,640,147 $87,271,562 $ 30,758,824
</TABLE>
<TABLE>
<CAPTION>
PORTFOLIOS (CONTINUED)
----------------------------------------------------------
HIGH
PORTFOLIO YIELD STOCK EQUITY NATURAL
INFORMATION BOND INDEX INCOME RESOURCES
- ------------------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Number of shares: 235,175 228,930 142,601 89,271
Net asset value per
share: $ 7.8004 $ 19.9561 $ 16.2709 $ 17.2718
Cost: $ 1,869,013 $ 3,085,808 $ 2,096,490 $ 1,243,132
<CAPTION>
PORTFOLIOS (CONTINUED)
----------------------------------------------------------
SMALL
PORTFOLIO GOVERNMENT PRUDENTIAL CAPITALIZATION
INFORMATION GLOBAL INCOME JENNISON STOCK
- ------------------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Number of shares: 37,363 39,971 7,172 6,174
Net asset value per
share: $ 15.5332 $ 11.7189 $ 12.5468 $ 11.8334
Cost: $ 542,461 $ 454,612 $ 86,512 $ 69,902
</TABLE>
NOTE 3: CHARGES AND EXPENSES
A. Mortality Risk and Expense Risk Charges
The mortality risk and expense risk charges at an effective annual rate of
0.35% are applied daily against the net assets representing equity of
Contract owners held in each subaccount.
B. Expense Reimbursement
Pursuant to a prior merger agreement, the Account is reimbursed by Pruco
Life for expenses in excess of 0.40% of the average daily net assets
incurred by the Money Market, Diversified Bond, Equity, Flexible Managed and
the Conservative Balanced Portfolios of the Series Fund.
A9
<PAGE>
NOTE 4: TAXES
The operations of the subaccounts form a part of, and are taxed with, the
operations of Pruco Life. Under the Internal Revenue Code, all ordinary income
and capital gains allocated to the Contract owners are not taxed to Pruco Life.
As a result, the net asset values of the subaccounts are not affected by federal
income taxes on distributions received by the subaccounts.
NOTE 5: NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SURPLUS TRANSFERS
The increase (decrease) in net assets resulting from surplus transfers
represents the net contributions (withdrawals) of Pruco Life to the Account.
A10
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Contract Owners of
Pruco Life Variable Insurance
Account and the Board of Directors
of Pruco Life Insurance Company
Newark, New Jersey
We have audited the accompanying statements of net assets of Pruco Life Variable
Insurance Account of Pruco Life Insurance Company (comprising, respectively, the
Money Market, Diversified Bond, Equity, Flexible Managed, Conservative Balanced,
High Yield Bond, Stock Index, Equity Income, Natural Resources, Global,
Government Income, Prudential Jennison, and Small Capitalization Stock
subaccounts) as of December 31, 1995, the related statements of operations for
the periods presented in the year then ended, and the statements of changes in
net assets for each of the periods presented in the two years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1995. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of each of the respective subaccounts
constituting the Pruco Life Variable Insurance Account as of December 31, 1995,
the results of their operations, and the changes in their net assets for the
respective stated periods in conformity with generally accepted accounting
principles.
Deloitte & Touche LLP
Parsippany, New Jersey
February 15, 1996
A11
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
DECEMBER 31,
-----------------------------
1995 1994
-------- -------
($000'S)
ASSETS
Fixed maturities (market value $2,598,439
and $2,596,172)....................... $2,510,783 $2,647,315
Equity securities (cost $5,317 and $5,434) 4,009 3,326
Mortgage loans........................... 64,464 71,919
Investment in real estate................ 4,059 7,189
Policy loans............................. 569,273 493,862
Other long-term investments.............. 4,159 4,044
Short-term investments................... 228,016 191,455
---------- ----------
Total Investments..................... 3,384,763 3,419,110
Cash..................................... 41,435 27,780
Accrued investment income................ 59,862 59,382
Premiums due and deferred................ 19,521 16,821
Receivable from affiliates............... 8,275 7,517
Federal income taxes--from affiliate..... 8,875 23,306
Other assets............................. 9,436 25,102
Assets held in Separate Accounts......... 4,285,269 3,511,784
---------- ----------
TOTAL ASSETS............................. $7,817,436 $7,090,802
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES:
Policy liabilities and insurance reserves:
Future policy benefits and claims...... $2,606,856 $2,767,552
Other policy claims and benefits payable 13,822 15,184
Interest Maintenance Reserve (IMR)..... 27,282 21,802
Payable to affiliates.................... 41,584 30,257
Other liabilities........................ 52,865 131,695
Asset Valuation Reserve (AVR)............ 37,268 23,690
Liabilities related to Separate Accounts 4,208,737 3,424,535
---------- ----------
TOTAL LIABILITIES ........................ 6,988,414 6,414,715
---------- ----------
STOCKHOLDER'S EQUITY:
Common Stock, $10 par value; authorized,
1,000,000 shares; issued and outstanding,
250,000 shares......................... 2,500 2,500
Paid-in capital.......................... 439,582 439,582
Unassigned surplus....................... 386,940 234,005
---------- ----------
TOTAL STOCKHOLDER'S EQUITY................ 829,022 676,087
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY. $7,817,436 $7,090,802
========== ==========
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31,
----------------------------------
1995 1994 1993
-------- -------- --------
($000'S)
REVENUE
Premiums and annuity considerations....... $570,440 $611,820 $563,900
Net investment income..................... 250,386 245,977 260,939
Net realized investment gains/(losses).... 3,952 (21,215) 8,878
Other income.............................. 40,987 13,259 18,882
-------- -------- --------
TOTAL REVENUE.............................. 865,765 849,841 852,599
-------- -------- --------
BENEFITS AND EXPENSES
Current and future benefits and claims.... 512,988 559,658 534,354
Commission expenses....................... 25,755 30,169 28,386
General, administrative and other expenses 118,808 119,309 129,171
-------- -------- --------
TOTAL BENEFITS AND EXPENSES................ 657,551 709,136 691,911
-------- -------- --------
Income before provision in lieu of federal
income tax............................... 208,214 140,705 160,688
Provision in lieu of federal
income tax............................... (50,013) (87,750) (83,640)
-------- -------- --------
NET INCOME................................. $158,201 $ 52,955 $ 77,048
======== ======== ========
SEE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
B-1
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
YEARS ENDED DECEMBER 31,
---------------------------------
1995 1994 1993
-------- -------- -------
($000'S)
COMMON STOCK
Balance, beginning of year................. $ 2,500 $ 2,500 $ 2,500
Issued during year......................... - - -
-------- -------- --------
Balance, end of year....................... 2,500 2,500 2,500
-------- -------- --------
PAID-IN CAPITAL
Balance, beginning of year................. 439,582 439,582 439,582
Paid-in during year........................ - - -
-------- -------- --------
Balance, end of year ...................... 439,582 439,582 439,582
-------- -------- --------
UNASSIGNED SURPLUS
Balance, beginning of year................. 234,005 176,711 162,530
Net income................................. 158,201 52,955 77,048
Net unrealized investment gains/(losses)... 8,761 5,814 (9,351)
(Increase) decrease in non-admitted assets. (449) (477) 575
(Increase) decrease in AVR................. (13,578) (998) 5,909
Dividends to stockholder................... - - (60,000)
-------- -------- --------
Balance, end of year....................... 386,940 234,005 176,711
-------- -------- --------
TOTAL STOCKHOLDER'S EQUITY.................. $829,022 $676,087 $618,793
======== ======== ========
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31,
---------------------------------
1995 1994 1993
-------- -------- ------
($000'S)
CASH FLOW FROM OPERATING ACTIVITIES
Net income............................... $ 158,201 $ 52,955 $ 77,048
Adjustments to reconcile net income
to net cash from operations:
Increase/(decrease) in policy
liabilities and insurance reserves..... (162,058) (143,153) (124,602)
Net decrease in Separate Accounts....... 10,717 5,674 12,173
Net realized investment (gains)/losses.. (3,952) 21,215 (8,878)
Depreciation, amortization and
other non-cash items................... (2,854) 314 1,907
(Increase)/decrease in operating assets:
Policy loans........................... (75,411) (73,591) (71,472)
Notes receivable from affiliates....... - 50,000 9,000
Interest receivable from affiliates.... - 23 420
Accrued investment income.............. (480) (2,597) 880
Premiums due and deferred.............. (2,700) (252) (880)
Receivable from affiliates............. (758) (637) 1,970
Federal income taxes--from affiliate... 14,467 (19,155) 6,879
Other assets........................... 15,666 (9,273) (9,481)
Increase/(decrease) in operating
liabilities:
Payable to affiliates.................. 11,327 (24,029) 13,260
Federal income taxes--to affiliate..... (36) - -
Other liabilities...................... (78,830) 27,710 34,632
--------- --------- ---------
CASH FLOW FROM (USED FOR) OPERATING
ACTIVITIES ............................ (116,701) (114,796) (57,144)
--------- --------- ---------
CASH FLOW FROM INVESTING ACTIVITIES
Proceeds from the sale/maturity of:
Fixed maturities....................... 2,031,587 2,710,424 1,687,992
Equity securities...................... 5,557 1,909 4,032
Mortgage loans......................... 7,395 10,821 21,691
Other long-term investments............ 1,559 607 520
Investment in real estate.............. 2,925 8,676 -
Payments for the purchase of:
Fixed maturities....................... (1,876,232) (2,561,081) (1,483,234)
Equity securities...................... (4,279) (2,436) (3,068)
Mortgage loans......................... - (35,276) (918)
Other long-term investments............ (1,674) (1,584) (84)
Investment in real estate.............. - - (20)
Net proceeds/(payments) of short-term
investments............................ (36,482) 9,845 (116,735)
--------- ---------- ----------
CASH FLOW FROM INVESTING ACTIVITIES...... 130,356 141,905 110,176
--------- ---------- ----------
CASH FLOW FROM FINANCING ACTIVITIES
Dividends paid......................... - - (60,000)
--------- ---------- -----------
Net increase/(decrease) in Cash........ 13,655 27,109 (6,968)
Cash, beginning of year................ 27,780 671 7,639
--------- ---------- ----------
CASH, END OF YEAR....................... $ 41,435 $ 27,780 $ 671
========= ========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Non-cash financing:
Investment in real estate from
foreclosed mortgage loans.......... $ - $ 4,139 $ 7,300
========= ========== ==========
Cash paid in lieu of income taxes.... $ 53,107 $ 73,903 $ 76,760
========= ========== ==========
SEE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
B-2
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRINCIPLES
A. PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
Pruco Life Insurance Company (Pruco Life), a stock life insurance company,
and its subsidiaries (collectively, the Company). Pruco Life is a
wholly-owned subsidiary of The Prudential Insurance Company of America
(The Prudential), a mutual life insurance company. The Company markets
individual life insurance and single pay deferred annuities primarily
through The Prudential's sales force. All significant intercompany
balances and transactions have been eliminated in consolidation.
B. BASIS OF PRESENTATION
The consolidated financial statements are presented in conformity with
generally accepted accounting principles ("GAAP"), which for mutual life
insurance companies and their insurance subsidiaries are statutory
accounting practices prescribed or permitted by the National Association
of Insurance Commissioners ("NAIC") and their respective domiciliary home
state insurance departments. Prescribed statutory accounting practices
include publications of the NAIC, state laws, regulations and general
administrative rules. Permitted statutory accounting practices encompass
all accounting practices not so prescribed.
The Company, with permission from the Arizona Department of Insurance
("the Department"), prepares an Annual Report that differs from the Annual
Statement filed with the Department in that subsidiaries are consolidated
and certain financial statement captions are presented differently.
Certain reclassifications have been made to the 1994 and 1993 financial
statements and footnotes to conform to the 1995 presentation. Included in
the Statement of Operations are certain items which, under statutory
accounting practices, are charged or credited directly to surplus.
Management has used estimates and assumptions in the preparation of the
financial statements that affect the reported amounts of assets,
liabilities, revenue and expenses. Actual results could differ from those
estimates.
The following is a reconciliation of Pruco Life's Statutory Net Income
with net income per the consolidated financial statements.
YEARS ENDED DECEMBER 31,
-----------------------------
1995 1994 1993
-------- -------- -------
($000'S)
Pruco Life Statutory Net Income including net
gains and losses on sales of investments....... $113,565 $ 49,374 $ 79,405
Adjustments to reconcile to net income
as follows:
Dividends from subsidiary...................... - - (26,000)
Change in General Account Reserve due to
changes in valuation basis................... 8,990 10,853 (2,331)
Provision for future assessments............... 367 377 588
Net gain from operations in Separate Accounts.. (9,775) 8,880 5,114
Gain/(Loss) due to income tax applicable to
other than current year...................... 19,752 (33,001) -
Other.......................................... (510) (13) 67
Subsidiaries' Statutory Net Income............. 25,812 16,485 20,205
-------- -------- --------
Consolidated Net Income.......................... $158,201 $ 52,955 $ 77,048
======== ======== ========
C. FUTURE APPLICATION OF ACCOUNT STANDARDS
The Financial Accounting Standards Board (the "FASB") issued
Interpretation No. 40, "Applicability of Generally Accepted Accounting
Principles to Mutual Life Insurance and Other Enterprises," which, as
amended, is effective for fiscal years beginning after December 15, 1995.
Interpretation No. 40 changes the current practice of
B-3
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
mutual life insurance companies, with respect to utilizing statutory basis
financial statements for general purposes, in not allowing such financial
statements to be referred to as having been prepared in accordance with
GAAP. Interpretation No. 40 requires GAAP financial statements of mutual
life insurance companies to apply all GAAP pronouncements, unless
specifically exempted. Implementation of Interpretation No. 40 will
require significant effort and judgement. The company is assessing the
impact of Interpretation No. 40 on its consolidated financial statements,
such effort has not been completed and management currently believes
surplus will increase significantly.
D. SELECTED FINANCIAL DATA OF PRUCO LIFE
Pruco Life markets the Future Value Annuity Contract, and individual
deferred annuity contract. Only assets of Pruco Life, shown below, are
available to meet the guarantees under this annuity contract. The
following is the selected financial data of Pruco Life:
DECEMBER 31,
------------------------------
1995 1994
---------- ----------
($000'S)
Assets:
Investments other than subsidiaries........ $2,736,259 $2,758,088
Investment in subsidiaries................. 198,601 169,816
Other assets............................... 132,185 135,778
Assets held in Separate Accounts........... 3,495,841 2,869,734
---------- ----------
Total Assets............................... $6,562,886 $5,933,416
========== ==========
Liabilities:
Policy liabilities and insurance reserves.. $2,187,632 $2,296,987
Other liabilities.......................... 115,115 163,322
Liabilities related to Separate Accounts... 3,431,117 2,797,020
---------- ----------
Total Liabilities.......................... $5,733,864 $5,257,329
========== ==========
YEARS ENDED DECEMBER 31,
--------------------------------------
1995 1994 1993
--------- --------- ---------
($000'S)
Revenues........................... $717,990 $698,685 $716,402
Benefits, expenses and taxes....... 588,812 659,237 633,277
-------- -------- --------
Net Income......................... $129,178 $ 39,448 $ 83,125
======== ======== ========
E. INVESTMENTS
Fixed maturities, which include long-term bonds and redeemable preferred
stock, are stated primarily at amortized cost. Certain investments in this
category were non-income producing at December 31, 1995 and 1994. These
investments amounted to $29 million and $13 million, respectively.
Equity securities, which consist primarily of common stock, are carried at
market value which is based on quoted market prices, where available, or
prices provided by the National Association of Insurance Commissioners'
(NAIC) Securities Valuation Office (SVO).
Mortgage loans are carried at the lower of the fair value of the
underlying property or unpaid principal balance. At December 31, 1995, two
loans were in foreclosure in the amount of $8 million. At December 31,
1994, one loan was in foreclosure in the amount of $6 million.
Policy loans are stated primarily at unpaid principal balances.
B-4
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
All the Company's real estate investments were acquired through
foreclosure during 1995 and 1994. These properties are carried at the
lower of cost of fair value less disposition costs. Fair value is
considered to be the amount that could reasonably be expected in a current
transaction between willing parties, other than in forced or liquidation
sale. Depreciation on these properties for the years ended December 31,
1995 and 1994 was $106 thousand and $456 thousand, respectively.
Other long-term investments, which consist solely of limited partnerships,
are valued at the aggregate net equity in the partnerships. Certain
investments in this category were non-income producing at December 31,
1995. These investments amounted to $300 thousand. There were no
non-income producing investments at December 31, 1994.
Short-term investments are stated at amortized cost, which approximates
fair value.
Realized investment gains and losses are reported based on specific
identification of the investments sold.
F. FUTURE POLICY BENEFITS, LOSSES AND CLAIMS
Reserves for individual life insurance are calculated using various
methods, interest rates and mortality tables which produce reserves that
meet the aggregate requirements of state laws and regulations.
Approximately 7% of individual life insurance reserves are determined
using the net level premium method, or by using the greater of a net level
premium reserve or the policy cash value. About 93% of individual life
insurance reserves are calculated according to the Commissioner's Reserve
Valuation Method ("CRVM"), or methods which compare CRVM reserves to
policy cash values.
Reserves for deferred individual annuity contracts are determined using
the Commissioner's Annuity Reserve Valuation Method.
For life insurance and annuities, unpaid claims include estimates of both
the death benefits on reported claims and those which are incurred but not
reported.
Reserves for other deposit funds or other liabilities with life
contingencies reflect the contract deposit account or experience
accumulation for the contract and any purchased annuity reserves.
G. REVENUE RECOGNITION AND RELATED EXPENSES
Premium revenues are recognized as income over the premium paying period
of the related policies. Annuity considerations are recognized as revenue
when received. Expenses, including new business acquisition costs such as
commissions, are charged to operations as incurred.
H. ASSET VALUATION RESERVE AND INTEREST MAINTENANCE RESERVE
The Asset Valuation Reserve (AVR) and the Interest Maintenance Reserve
(IMR) are required for life insurance companies under NAIC regulations.
The AVR is calculated based on a statutory formula and designed to
mitigate the effect of valuation and credit-related losses on unassigned
surplus.
The components of AVR at December 31, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
($000'S)
FIXED EQUITY REAL ESTATE
MATURITIES MORTGAGES SECURITIES & OTHER INV. TOTAL
---------- --------- ---------- ------------ --------
<S> <C> <C> <C> <C> <C>
Beginning of Year 1994 -- AVR ................ $ 18,294 $ 3,699 $ 699 $ 0 $ 22,692
Additions .................................... 12,062 2,166 348 2,047 16,623
Deductions ................................... (10,454) (4,355) (314) (502) (15,625)
-------- ------- ------- ------ --------
End of Year 1994 -- AVR ...................... $ 19,902 $ 1,510 $ 733 $1,545 $ 23,690
======== ======= ======= ====== ========
Beginning of Year 1995 -- AVR ................ $ 19,902 $ 1,510 $ 733 $1,545 $ 23,690
Additions .................................... 14,540 1,007 2,764 272 18,583
Deductions ................................... (1,832) (39) (2,627) (507) (5,005)
-------- ------- ------- ------ --------
End of Year 1995-- AVR ....................... $ 32,610 $ 2,478 $ 870 $1,310 $ 37,268
========= ======= ======= ====== ========
</TABLE>
B-5
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
The IMR captures net realized capital gains and losses resulting from
changes in the general level of interest rates. These gains and losses are
amortized into investment income over the expected remaining life of the
investment sold. The IMR balance was $27.3 million and $21.8 million at
December 31, 1995 and 1994, respectively. "Net realized investment
gains/(losses)" of $9.2 million and $(19.9) million were deferred in 1995
and 1994, respectively. Amortized into "Net investment income" were $3.8
million and $4.8 million of IMR for the year ended December 31, 1995 and
1994, respectively.
I. FEDERAL INCOME TAXES
The Company is a member of a group of affiliated companies which join in
filing a consolidated federal tax return. Pursuant to a tax allocation
agreement, current tax liabilities are determined for individual companies
based upon their separate return basis taxable income. Members with
taxable income incur an amount in lieu of the separate return basis
federal tax. Members with a loss for tax purposes recognize a current
benefit in proportion to the amount of their losses utilized in computing
consolidated taxable income. Differences between estimated liabilities and
actual payments are included in the current year's operations as an
adjustment to the provision in lieu of income taxes. For the year 1993,
the Company was allocated a portion of the consolidated income tax
liability attributable to Section 809 of the Internal Revenue Code
(commonly referred to as "Equity Tax"). Since 1994, the Company has no
longer been allocated this Equity Tax.
Taxes on the Company are calculated under the Internal Revenue Code of
1986 which provides that life insurance companies be taxed on their gain
from operations after dividends to policyholders. In calculating this tax,
the Code requires the capitalization and amortization of policy
acquisition expenses.
J. SEPARATE ACCOUNTS
Separate accounts represent funds for which investment income and
investment gains and losses accrue directly to, and investment risk is
borne by, the policyholders, with the exception of the Pruco Life Modified
Guaranteed Annuity Account. The Pruco Life Modified Guaranteed Annuity
Account is a non-unitized separate account, which funds the Modified
Guaranteed Annuity Contract and the Market Value Adjustment Annuity
Contract. Owners of the Pruco Life Modified Annuity and the Market Value
Adjustment Annuity Contracts do not participate in the investment gain or
loss from assets relating to such accounts. Such gain, or loss is borne,
in total, by Pruco Life. Assets are carried at market value. Deposits to
such accounts are included in revenues with a corresponding liability
increase included in benefits and expenses. The assets of each account are
legally segregated and are not subject to claims that arise out of any
other business of the Company. Consequently, management believes that it
is appropriate to combine Separate Account policyholder net investment
income and net realized and unrealized capital gains/(losses) along with
benefit payments and change in reserves in "Current and future benefits
and claims". Policyholder net investment income and net realized and
unrealized gains/(losses) for the years ended December 31, 1995, 1994 and
1993 were $805 million, ($28) million and $443 million, respectively.
B-6
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
2. FEDERAL INCOME TAXES
The following is a reconciliation of the Company's federal tax provision
as computed at the federal tax rate with that computed at the Company's
effective tax rate. The below amounts include federal income tax
applicable to prior years, where appropriate.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------
1995 1994 1993
-------- -------- -------
($000'S)
<S> <C> <C> <C>
Income before provision in lieu of
federal income taxes.................... $208,214 $140,705 $160,688
Statutory tax rate........................ 35% 35% 35%
--------- -------- --------
Expected federal income taxes............. $ 72,875 $ 49,247 $ 56,241
Tax effect of:
Statutory/tax policy reserve
difference............................ (14,524) 19,949 14,577
Timing differences in tax/book income
recognition on investments............ (6,980) 11,608 4,055
Timing differences in tax/book income
Recognition--other.................... (7,173) (6,816) (415)
Decrease/(Increase) in life insurance
premiums deferred and uncollected..... (953) (88) (308)
Capitalization of policy acquisition
expenses.............................. 6,768 13,850 7,374
Allocated equity tax.................... - - 2,116
-------- -------- --------
Federal income taxes...................... $ 50,013 $ 87,750 $ 83,640
======== ======== ========
Effective tax rate........................ 24% 62% 52%
======== ======== ========
</TABLE>
3. NET INVESTMENT INCOME
Net investment income consisted of:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------
1995 1994 1993
---------- ---------- --------
($000'S)
<S> <C> <C> <C>
Gross investment income
Fixed maturities......................... $194,198 $196,909 $216,660
Equity securities......................... 104 14 22
Mortgage loans............................ 7,757 4,041 6,359
Investment in real estate................. 647 2,146 2,066
Policy loans.............................. 29,775 25,692 21,741
Short-term investments.................... 15,092 12,676 9,031
Other..................................... 3,949 5,075 3,945
-------- -------- --------
251,522 246,553 259,824
Investment expenses......................... (4,904) (5,421) (5,570)
-------- -------- --------
Net investment income before IMR............ 246,618 241,132 254,254
Amortization of Interest Maintenance Reserve 3,768 4,845 6,685
-------- -------- --------
Net investment income....................... $250,386 $245,977 $260,939
======== ======== ========
</TABLE>
B-7
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
4. INVESTMENT AND INVESTMENT GAINS (LOSSES)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------
1995 1994 1993
---------- ---------- --------
($000'S)
<S> <C> <C> <C>
Realized Gains (Losses)
Fixed maturities.......................... $ 11,359 $(38,180) $ 32,471
Equity securities......................... 2,020 503 607
Mortgage loans............................ (90) (4,581) (2,592)
Investment in real estate................. (99) 1,184 (2,004)
Other..................................... 10 (1) (411)
Tax effected amounts transferred to Interest
Maintenance Reserve....................... (9,248) 19,860 (19,193)
-------- -------- --------
Net realized investment gains............... $ 3,952 $(21,215) $ 8,878
======== ======== ========
Unrealized Gains (Losses)
Fixed maturities.......................... 9,192 5,430 (9,380)
Equity securities......................... 799 (490) 260
Other..................................... (1,229) 874 (231)
-------- -------- --------
Net unrealized investment gains (losses) 8,762 5,814 (9,351)
Balance beginning of year................... (12,352) (18,166) (8,815)
-------- -------- --------
Balance end of year......................... $ (3,590) $(12,352) $(18,166)
======== ======== ========
</TABLE>
EQUITY SECURITIES AT DECEMBER 31,
($000'S)
GROSS UNREALIZED
-----------------------------------------------------
FAIR
MARKET
COST GAINS LOSSES VALUE
------- ------- -------- -------
1995 ........... $5,317 $581 $1,889 $4,009
1994 ........... 5,434 386 2,493 3,327
1993 ........... 4,405 742 2,359 2,788
FIXED MATURIES
--------------------------------
($000'S)
INCREASE (DECREASE)
AT DECEMBER 31, IN DIFFERENCE BETWEEN
-------------------------------- MARKET VALUE AND
AMORTIZED MARKET AND AMORTIZED COST
COST VALUE DURING THE YEAR
---------- ---------- ------------------
1995 .... $2,510,782 $2,598,439 $ 138,800
1994 .... 2,647,315 2,596,172 (167,494)
1993 .... 2,835,251 2,951,602 10,453
B-8
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
The amortized cost and estimated market value of fixed maturities at December
31, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1995
--------------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
($000's) ($000's) ($000's) ($000's)
----------- -------- ---------- ----------
<S> <C> <C> <C> <C>
U.S. Treasury securities
and obligations of
U.S. government corporations
and agencies ........................ $ 324,854 $ 6,829 $ 61 $ 331,622
Obligations of U.S. and
political subdivisions .............. - - - -
Debt securities issued by foreign
governments and
their agencies ...................... 73,042 3,055 - 76,097
Corporate securities .................. 1,943,696 73,489 3,974 2,013,211
Mortgage backed securities ............ 169,190 8,717 398 177,509
---------- -------- ------- ----------
Total ................................. $2,510,782 $ 92,090 $ 4,433 $2,598,439
========== ======== ======= ==========
</TABLE>
<TABLE>
<CAPTION>
1994
--------------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
($000'S) ($000'S) ($000'S) ($000'S)
---------- -------- ---------- ----------
<S> <C> <C> <C> <C>
U.S. Treasury securities
and obligations of
U.S. government corporations
and agencies $ 409,678 $ 224 $ 20,259 $ 389,643
Obligations of U.S. and
political subdivisions ............. - - - -
Debt securities issued by
foreign governments and
their agencies ..................... 86,026 2,075 2,310 85,791
Corporate securities ................. 1,960,296 17,005 43,521 1,933,780
Mortgage-backed securities ........... 191,315 1,429 5,786 186,958
---------- -------- -------- ----------
Total ................................ $2,647,315 $ 20,733 $ 71,876 $2,596,172
========== ======== ======== ==========
</TABLE>
The amortized cost and estimated market value of fixed maturities at December
31, 1995 by contractual maturity, are shown below. Expected maturities will
differ from contractual maturities because borrowers may have the right to call
or prepay obligations with or without call or prepayment penalties.
ESTIMATED
AMORTIZED MARKET
COST VALUE
($000's) ($000's)
---------- ----------
Due in one year or less ................... $ 161,693 $ 163,629
Due after one year through five years ..... 1,500,204 1,549,264
Due after five years through ten years .... 529,845 556,294
Due after ten years ....................... 149,850 151,743
---------- ----------
2,341,592 2,420,930
Mortgage-backed securities ................ 169,190 177,509
---------- ----------
Total ..................................... $2,510,782 $2,598,439
========== ==========
Proceeds from the sale/maturity of fixed maturities during 1995, 1994, and
1993 were $2.0 billion, $2.7 billion and $1.7 billion, respectively. Gross
gains of $28.8 million, $16.8 million and $44.5 million and gross losses
of $17.5 million, $49.8 million and $12.0 million were realized on those
sales during 1995, 1994, and 1993, respectively.
The Company invests in both investment grade and non-investment grade
securities. The SVO of the NAIC rates fixed maturities held by insurers
(SVO rated securities accounted for approximately 87.2% and 93.6% of the
Company's total fixed maturities balances at both December 31, 1995 and
1994) for regulatory purposes and
B-9
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
groups investments into six categories ranging from highest quality bonds
to those in or near default. The lowest three NAIC categories represent,
for the most part, high-yield securities and are defined by the NAIC as
including any security with a public agency rating of B+ or B1 or less.
Included in "fixed maturities" are securities that are classified by the
NAIC as being in the lowest three rating categories. These approximated
1.0% and 1.5% of the Company's assets at December 31, 1995 and 1994,
respectively. The amount by which the market value of these securities
exceeded the carrying value was approximately $1.8 million and $(0.9)
million at December 31, 1995 and 1994, respectively.
5. RELATED PARTY TRANSACTIONS
A. SERVICE AGREEMENTS
The Company, The Prudential, Pruco Life of New Jersey and Pruco Securities
Corporation, an indirect wholly-owned subsidiary of The Prudential,
operate under service and lease agreements whereby services of officers
and employees, supplies, use of equipment and office space are provided.
The net cost of these services allocated to the Company were $98 million,
$78 million, and $98 million for the years ended December 31, 1995, 1994,
and 1993, respectively.
In a reorganization of the parent's Individual Insurance Department,
effective January 1, 1993, the corporate staff of the Company was absorbed
by the parent. The costs associated with these employees, which were
previously borne by the Company, are now charged to the Company under the
service and lease agreements with the parent.
B. EMPLOYEE BENEFIT PLANS
PENSION PLANS
The Company is a wholly-owned subsidiary of The Prudential which sponsors
several defined benefit pension plans that cover substanially all of its
employees. Benefits are generally based on career average earnings and
credited length of service. The Prudential's funding policy is to
contribute annually the amount necessary to satisfy the Internal Revenue
Service contribution guidelines.
No pension expense for contributions to the plan was allocated to the
Company in 1995, 1994 or 1993 because the plan was subject to the full
funding limitation under the Internal Revenue Code.
POSTRETIREMENT LIFE AND HEALTH BENEFITS
The Prudential also sponsors certain life insurance and health care
benefits for its retired employees. Substantially all employees may become
eligible to receive a benefit if they retire after age 55 with at least 10
years of service. Postretirement benefits, with respect to The Prudential,
are recognized in accordance with the prescribed NAIC policy. The
Prudential elected to amortize its obligation over twenty years. A
provision for contributions to the postretirement fund is included in the
net cost of services allocated to the Company discussed above for the
years ended December 31, 1995, 1994, and 1993.
C. REINSURANCE
The Company currently has three reinsurance agreements in place with The
Prudential (the reinsurer). Specifically: reinsurance of a Group Annuity
Contract, whereby the reinsurer, in consideration for a single premium
payment by the Company, provides Reinsurance equal to 100% of all payments
due under the contact; and, two Yearly Renewable Term agreement in which
the Company may offer and the reinsurer may accept reinsurance on any life
in excess of the Company's maximum limit of retention ($2.5 million).
These agreements had no material effect on net income for the years ended
December 1995, 1994, and 1993.
D. OTHER TRANSACTIONS
The Company has issued approximately 375 variable universal life contracts
to The Prudential for the purpose of funding non-qualified pension
benefits for certain employees. Included in insurance premiums and annuity
considerations for the years ended December 31, 1995, 1994 and 1993 are
respectively, $12 million, $12 million and $12 million, which are
attributable to these contracts.
B-10
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
6. DIVIDENDS
The Company is subject to Arizona law which limits the amount of dividends
that insurance companies can pay to stockholders. The maximum dividend
which may be paid in any 12 month period without notification or approval
is limited to the lesser of 10% of surplus as of December 31 of the
preceding year or the net gain from operations of the preceding calendar
year. Cash dividends may only be paid out of surplus derived from realized
net profits. Based on these limitations and the Company's surplus position
at December 31, 1995, the Company would be permitted a maximum of $83
million in dividend distributions in 1996, all of which could be paid in
cash, without approval from The State of Arizona Department of Insurance.
7. FAIR VALUE INFORMATION
The fair value amounts have been determined by the Company using available
information and reasonable valuation methodologies for only those accounts
for which fair value disclosures are required. Considerable judgement is
necessarily applied in interpreting data to develop the estimates of fair
value. Accordingly, the estimates presented may not be realized in a
current market exchange. The use of different market assumptions and/or
estimation methodologies could have a material effect on the estimated
fair values.
The following methods and assumptions were used in calculating the fair
values. For all other financial instruments presented in the table, the
carrying value is a reasonable estimate of fair value.
FIXED MATURITIES. Fair values for fixed maturities, other than private
placement securities, are based on quoted market prices or estimates from
independent pricing services. Fair values for private placement securities
are estimated using a discounted cash flow model which considers the
current market spreads between the U.S. Treasury yield curve and corporate
bond yield curve adjusted for the type of issue, its current quality and
its remaining average life. The fair value of certain non-performing
private placement securities is based on amounts provided by state
regulatory authorities.
EQUITY SECURITIES. Fair value is based on quoted market prices, where
available, or prices provided by state regulatory authorities.
MORTGAGE LOANS. The fair value of the commercial mortgage and agricultural
loan portfolio is primarily based upon the present value of the scheduled
cash flows discounted at the appropriate U.S. Treasury rate, adjusted for
the current market spread for a similar quality mortgage. For certain
non-performing and other loans, fair value is based upon the value of the
underlying collateral.
POLICY LOANS. The estimated fair value is calculated using a discounted
cash flow model based upon current U.S. Treasury rates and historical loan
repayments.
INVESTMENT-TYPE INSURANCE CONTRACT LIABILITIES. Fair values for the
Company's investment-type insurance contract liabilities are estimated
using a discounted cash flow model, based on interest rates currently
being offered for similar contracts.
B-11
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
The following table discloses the carrying amounts and estimated fair
values of the Company's financial instruments at December 31, 1995 and
1994.
<TABLE>
<CAPTION>
(000's) (000's)
1995 1994
----------------------- --------------------------
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Financial Assets:
Fixed maturities ............. $2,510,782 $2,598,438 $ 2,647,315 $ 2,596,172
Equity securities ............ 4,009 4,036 3,326 3,326
Mortgage Loans ............... 64,464 63,635 71,919 71,805
Policy Loans ................. 569,273 577,975 493,862 448,617
Other Long term investments .. 4,159 4,159 4,044 4,044
Short term investments ....... 228,016 228,016 191,455 191,455
Financial Liabilities:
Investment type
insurance contracts ........ $ 536,963 $ 537,241 $ 794,691 $ 761,324
</TABLE>
8. CONTINGENCIES
Several actions have been brought against the Company on behalf of
those persons who purchased life insurance policies based on complaints
about sales practices engaged in by The Prudential, the Company and agents
appointed by The Prudential and the Company. The Prudential has agreed to
indemnify the Company for any and all losses resulting from such
litigation.
B-12
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Pruco Life Insurance Company
Newark, New Jersey
We have audited the accompanying consolidated statements of financial position
of Pruco Life Insurance Company and Subsidiaries as of December 31, 1995 and
1994, and the related consolidated statements of operations, stockholder's
equity, and cash flows for each of the three years in the period ended December
31, 1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on the financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Pruco Life Insurance Company and
subsidiaries as of December 31, 1995 and 1994 and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1995 in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Parsippany, New Jersey
March 15, 1996
B-13
<PAGE>
<TABLE>
ADDITIONAL ILLUSTRATIONS OF
CASH VALUES, DEATH BENEFITS, AND ACCUMULATED PREMIUMS
-----------------------------------------------------
VARIABLE LIFE INSURANCE CONTRACT
MALE ISSUE AGE 25
$50,000 GUARANTEED DEATH BENEFIT
$536.50 ANNUAL PREMIUM FOR STANDARD UNDERWRITING RISK (1)
USING MAXIMUM CONTRACTUAL MORTALITY CHARGES
<CAPTION>
DEATH BENEFIT (2) CASH VALUE (2)
---------------------------------------------- ----------------------------------------------
ASSUMING HYPOTHETICAL GROSS (AND NET) ASSUMING HYPOTHETICAL GROSS (AND NET)
PREMIUMS ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
END OF ACCUMULATED ---------------------------------------------- ----------------------------------------------
POLICY AT 4% INTEREST 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12% GROSS
YEAR PER YEAR (-0.87% NET) (5.13% NET) (11.13% NET) (-0.87% NET) (5.13% NET) (11.13% NET)
---------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 558 $50,000 $50,004 $ 50,026 $ 22 $ 26 $ 31
2 $ 1,138 $50,000 $50,029 $ 50,184 $ 376 $ 406 $ 437
3 $ 1,742 $50,000 $50,074 $ 50,478 $ 729 $ 807 $ 889
4 $ 2,369 $50,000 $50,139 $ 50,917 $1,079 $ 1,229 $ 1,392
5 $ 3,022 $50,000 $50,224 $ 51,509 $1,436 $ 1,682 $ 1,960
6 $ 3,701 $50,000 $50,330 $ 52,262 $1,789 $ 2,156 $ 2,590
7 $ 4,407 $50,000 $50,455 $ 53,183 $2,139 $ 2,654 $ 3,286
8 $ 5,141 $50,000 $50,599 $ 54,280 $2,483 $ 3,174 $ 4,056
9 $ 5,905 $50,000 $50,762 $ 55,562 $2,823 $ 3,718 $ 4,907
10 $ 6,699 $50,000 $50,944 $ 57,037 $3,157 $ 4,286 $ 5,846
15 $11,172 $50,000 $52,117 $ 67,687 $4,723 $ 7,492 $ 12,185
20 $16,615 $50,000 $53,700 $ 84,969 $6,076 $11,339 $ 22,374
25 $23,237 $50,000 $55,652 $111,056 $7,205 $15,906 $ 38,647
30 $31,293 $50,000 $57,944 $149,058 $8,086 $21,243 $ 64,388
40 (AGE 65) $53,020 $50,000 $63,454 $280,125 $8,987 $34,108 $166,247
</TABLE>
(1) IF PREMIUMS ARE PAID MORE FREQUENTLY THAN ANNUALLY, THE PAYMENTS WOULD BE
$274.50 SEMI-ANNUALLY, $139.50 QUARTERLY OR $48 MONTHLY. THE DEATH BENEFITS
AND CASH VALUES WOULD BE SLIGHTLY DIFFERENT FOR A CONTRACT WITH MORE
FREQUENT PREMIUM PAYMENTS.
(2) ASSUMES NO CONTRACT LOAN HAS BEEN MADE.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING INTEREST RATES, AND RATES OF
INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A CONTRACT WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A
PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL
CONTRACT YEARS. NO REPRESENTATIONS CAN BE MADE BY PRUCO LIFE OR THE SERIES FUND
THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
C1
<PAGE>
<TABLE>
VARIABLE LIFE INSURANCE CONTRACT
MALE ISSUE AGE 40
$50,000 GUARANTEED DEATH BENEFIT
$939 ANNUAL PREMIUM FOR STANDARD UNDERWRITING RISK (1)
USING MAXIMUM CONTRACTUAL MORTALITY CHARGES
<CAPTION>
DEATH BENEFIT (2) CASH VALUE (2)
---------------------------------------------- ----------------------------------------------
ASSUMING HYPOTHETICAL GROSS (AND NET) ASSUMING HYPOTHETICAL GROSS (AND NET)
PREMIUMS ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
END OF ACCUMULATED ---------------------------------------------- ----------------------------------------------
POLICY AT 4% INTEREST 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12% GROSS
YEAR PER YEAR (-0.87% NET) (5.13% NET) (11.13% NET) (-0.87% NET) (5.13% NET) (11.13% NET)
---------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 977 $50,000 $50,010 $ 50,065 $ 197 $ 214 $ 231
2 $ 1,992 $50,000 $50,043 $ 50,275 $ 815 $ 887 $ 962
3 $ 3,048 $50,000 $50,097 $ 50,634 $ 1,416 $ 1,583 $ 1,761
4 $ 4,147 $50,000 $50,173 $ 51,147 $ 2,001 $ 2,302 $ 2,635
5 $ 5,289 $50,000 $50,271 $ 51,833 $ 2,640 $ 3,120 $ 3,671
6 $ 6,477 $50,000 $50,391 $ 52,699 $ 3,262 $ 3,966 $ 4,806
7 $ 7,713 $50,000 $50,533 $ 53,753 $ 3,867 $ 4,841 $ 6,049
8 $ 8,998 $50,000 $50,696 $ 55,001 $ 4,454 $ 5,745 $ 7,410
9 $10,335 $50,000 $50,879 $ 56,454 $ 5,024 $ 6,680 $ 8,901
10 $11,725 $50,000 $51,082 $ 58,120 $ 5,576 $ 7,645 $10,533
15 $19,554 $50,000 $52,383 $ 70,039 $ 8,032 $12,908 $21,268
20 $29,080 $50,000 $54,116 $ 89,212 $ 9,939 $18,864 $37,832
25 (AGE 65) $40,670 $50,000 $56,236 $118,005 $11,287 $25,481 $63,151
</TABLE>
(1) If premiums are paid more frequently than annually, the payments would be
$479.50 semi-annually, $243 quarterly or $82.50 monthly. The death benefits
and cash values would be slightly different for a Contract with more
frequent premium payments.
(2) Assumes no Contract loan has been made.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING INTEREST RATES, AND RATES OF
INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A CONTRACT WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A
PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL
CONTRACT YEARS. NO REPRESENTATIONS CAN BE MADE BY PRUCO LIFE OR THE SERIES FUND
THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
C2
<PAGE>
VARIABLE
LIFE INSURANCE
CONTRACTS
PRUCO LIFE INSURANCE COMPANY
213 Washington Street
Newark, New Jersey 07102-2992
Telephone: (800) 437-4016, Ext. 46
<PAGE>
PART II
OTHER INFORMATION
<PAGE>
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities Exchange
Act of 1934, the undersigned Registrant hereby undertakes to file with the
Securities and Exchange Commission such supplementary and periodic information,
documents, and reports as may be prescribed by any rule or regulation of the
Commission heretofore or hereafter duly adopted pursuant to authority conferred
in that section.
UNDERTAKING WITH RESPECT TO INDEMNIFICATION
The Prudential Directors' and Officers' Liability and Corporation Reimbursement
Insurance Program, purchased by The Prudential from Aetna Casualty & Surety
Company, CNA Insurance Companies, Lloyds of London, Great American Insurance
Company, Reliance Insurance Company, Corporate Officers & Directors Assurance
Ltd., A.C.E. Insurance Company, Ltd., XL Insurance Company, Ltd., and
Zurich-American Insurance Company, provides reimbursement for "Loss" (as defined
in the policies) which the Company pays as indemnification to its directors or
officers resulting from any claim for any actual or alleged act, error,
misstatement, misleading statement, omission, or breach of duty by persons in
the discharge of their duties in their capacities as directors or officers of
The Prudential, any of its subsidiaries, or certain investment companies
affiliated with The Prudential. Coverage is also provided to the individual
directors or officers for such Loss, for which they shall not be indemnified.
Loss essentially is the legal liability on claims against a director or officer,
including adjudicated damages, settlements and reasonable and necessary legal
fees and expenses incurred in defense of adjudicatory proceedings and appeals
therefrom. Loss does not include punitive or exemplary damages or the multiplied
portion of any multiplied damage award, criminal or civil fines or penalties
imposed by law, taxes or wages, or matters which are uninsurable under the law
pursuant to which the policies are construed.
There are a number of exclusions from coverage. Among the matters excluded are
Losses arising as the result of (1) claims brought about or contributed to by
the criminal or fraudulent acts or omissions or the willful violation of any law
by a director or officer, (2) claims based on or attributable to directors or
officers gaining personal profit or advantage to which they were not legally
entitled, and (3) claims arising from actual or alleged performance of, or
failure to perform, services as, or in any capacity similar to, an investment
adviser, investment banker, underwriter, broker or dealer, as those terms are
defined in the Securities Act of 1933, the Securities Exchange Act of 1934, the
Investment Advisers Act of 1940, the Investment Company Act of 1940, any rules
or regulations thereunder, or any similar federal, state or local statute, rule
or regulation.
The limit of coverage under the Program for both individual and corporate
reimbursement coverage is $150,000,000. The retention for corporate
reimbursement coverage is $10,000,000 per loss.
The relevant provisions of New Jersey law permitting or requiring
indemnification, New Jersey being the state of organization of The Prudential,
can be found in Section 14A:3-5 of the New Jersey Statutes Annotated. The
relevant provisions of Arizona law permitting or requiring indemnification,
Arizona being the state of organization of Pruco Life, can be found in Section
10-005 of the Arizona Statutes Annotated. The text of The Prudential's by-law
26, which relates to indemnification of officers and directors, is incorporated
by reference to Exhibit 1.A.(6)(b) of Post-Effective Amendment No. 1 to Form
S-6, Registration No. 33-61079, filed April 25, 1996, on behalf of The
Prudential Variable Appreciable Account. The text of Pruco Life's by-laws,
Article VIII, which relates to indemnification of officers and directors, is
incorporated by reference to Exhibit (8)(ii) to this Registration Statement.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions or otherwise, the Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-1
<PAGE>
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
The facing sheet.
Cross-reference to items required by Form N-8B-2.
The prospectus consisting of 54 pages.
The undertaking to file reports.
The undertaking with respect to indemnification.
The signatures.
Written consents of the following persons:
1. Deloitte and Touche LLP, independent auditors.
2. Clifford E. Kirsch, Esq.
3. Nancy Davis, FSA, MAAA
The following exhibits:
1. The following exhibits correspond to those required by paragraph A of the
instructions as to exhibits in Form N-8B-2:
A. (1) Resolution of Board of Directors of Pruco Life Insurance Company
establishing the Pruco Life Variable Insurance Account. (Note 2)
(2) Not Applicable.
(3) Distributing Contracts:
(a) Distribution Agreement between Pruco Securities Corporation
and Pruco Life Insurance Company, as amended June 1, 1984.
(Note 10)
(b) Proposed form of Agreement between Pruco Securities
Corporation and independent brokers with respect to the Sale
of the Contracts. (Note 4)
(c) Schedules of Sales Commissions. (Note 3)
(4) Not Applicable.
(5) (a) Variable Life Insurance Contract. (Note 3)
(b) Illustrative Tabular Cash Values. (Note 3)
(c) Copy of Colorado and North Dakota VL-83 Endorsement to the
Variable Life Insurance Contract. (Note 4)
(d) Copy of the Oklahoma VL-83 Endorsement to the Variable Life
Insurance Contract. (Note 4)
(e) Copy of South Carolina VL-83 Endorsement to the Variable Life
Insurance Contract. (Note 4)
(f) Copy of Alternate Copy face page for Pennsylvania and
Maryland to the Variable Life Insurance Contract. (Note 4)
(g) Copy of Illinois Notice PLI 3 to the Variable Life Insurance
Contract. (Note 4)
(h) Copy of North Carolina Endorsement PLI 16 to the Variable
Life Insurance Contract. (Note 4)
(i) Copy of North Carolina Endorsement PLI 17 to the Variable
Life Insurance Contract. (Note 4)
(j) Copy of Missouri Endorsement PLI 18 to the Variable Life
Insurance Contract. (Note 4)
(k) Copy of Texas Endorsement PLI 21 to the Variable Life
Insurance Contract. (Note 4)
(m) Copy of Rhode Island Endorsement PLI-47 to the Variable Life
Insurance Contract. (Note 4)
(n) Copy of Maryland Endorsement PLI 48 to the Variable Life
Insurance Contract. (Note 4)
(o) Copy of Minnesota Endorsement PLI 50 to the Variable Life
Insurance Contract. (Note 4)
(p) Copy of Endorsement PLI 28 to the Variable Life Insurance
Contract used in all states except New York and New Jersey.
(Note 5)
II-2
<PAGE>
(q) Copy of Endorsement PLI 73 to the Variable Life Insurance
Contract used in all states except New York and New Jersey.
(Note 5)
(r) Copy of Pennsylvania Endorsement PLI 86 to the Variable Life
Insurance Contract. (Note 5)
(s) Copy of Texas Endorsement PLI 90 to the Variable Life
Insurance Contract. (Note 5)
(t) Copy of Iowa Endorsement PLI 97 to the Variable Life
Insurance Contract. (Note 5)
(u) Copy of Endorsement PLI 99 to the Variable Life Insurance
Contract used in all states except New York and New Jersey.
(Note 6)
(v) Copy of Virginia jacket to the Variable Life Insurance
Contract. (Note 7)
(w) Copy of page 9 to the Variable Life Insurance
Contract--Virginia Issues. (Note 7)
(x) Copy of page 11 to the Variable Life Insurance Contract--West
Virginia Issues. (Note 7)
(y) Copy of page 13 to the Variable Life Insurance
Contract--Virginia Issues. (Note 7)
(z) Copy of page 13 to the Variable Life Insurance Contract for
use with variable loan interest rate provision--Kentucky
Issues. (Note 7)
(aa) Copy of Endorsement PLI 25 to the Variable Life Insurance
Contract for use in all states except New York and New
Jersey. (Note 7)
(bb) Copy of Endorsement PLI 104 to the Variable Life Insurance
Contract for use in Pennsylvania. (Note 7)
(cc) Copy of Endorsement PLI 134 to the Variable Life Insurance
Contract for use in all states except New York and New
Jersey. (Note 7)
(dd) Notice of Consumer Information for use in Illinois. (Note 7)
(ee) Complaint Procedure Notice for use in Texas. (Note 7)
(ff) Certification of right to convert Variable Life Insurance
Contract for use in Pennsylvania. (Note 7)
(gg) Copy of Endorsement PLI 168-85 to the Variable Life Insurance
Contract for use in all states except New York and New Jersey
(Note 8)
(6) (a) Articles of Incorporation of Pruco Life Insurance Company, as
amended July 25, 1972. (Note 2)
(b) By-laws of Pruco Life Insurance Company, as amended June 14,
1983. (Note 9)
(7) Not Applicable.
(8) Not Applicable.
(9) Not Applicable.
(10) (a) Application Form for Variable Life Insurance Contract.
(Note 2)
(b) Supplement to the Application for Variable Life Insurance
Contract. (Note 2)
(c) Application Form for Variable Life Insurance Contract--
Maryland issues. (Note 7)
(d) Application Form for Variable Life Insurance Contract--
Connecticut issues. (Note 7)
(e) Application Form for Variable Life Insurance Contract--
Missouri issues. (Note 7)
(f) Application Form for Variable Life Insurance Contracts--
Pennsylvania and South Carolina issues. (Note 7)
(11) Form of Notice of Withdrawal Right. (Note 4)
(12) Memorandum describing Pruco Life's issuance, transfer, and
redemption procedures for the Contracts pursuant to Rule 6e-2(b)
(12)(ii) and method of computing cash adjustment upon exercise of
right to exchange for fixed-benefit insurance pursuant to Rule
6e-2(b)(13) (v)(B).(Note 7)
(13) Available Contract Riders.
(a) Rider for Insured's Waiver of Premium Benefit. (Note 3)
(b) Rider for Insured's Accidental Death Benefit. (Note 3)
(c) Rider for Term Insurance Benefit on Life of Insured-
Decreasing Amount. (Note 3)
(d) Rider for Option to Purchase Additional Insurance on Life of
Insured. (Note 3)
(e) Rider for Interim Term Insurance Benefit. (Note 3)
(f) Rider for Term Insurance Benefit on Life of Insured
Spouse-Decreasing Amount. (Note 3)
(g) Rider for Level Term Insurance Benefit on Dependent Children.
(Note 3)
(h) Rider for Impaired Eyesight. (Note 5)
(i) Rider for Insured's Waiver of Premium Benefit. (Note 5)
(j) Rider for Insured's Accidental Death Benefit. (Note 5)
(k) Rider for Aviation Risk Exclusion. (Note 5)
II-3
<PAGE>
(l) Rider for Aviation Risk Exclusion. (Note 5)
(m) Rider for Military Aviation Risk Exclusion. (Note 5)
(n) Rider for Military Aviation Risk Exclusion. (Note 5)
(o) Rider for Level Term Insurance Benefit on Dependent Children.
(Note 5)
(p) Rider for Insured's Waiver of Premium Benefit. (Note 5)
(q) Rider for Insured's Waiver of Premium Benefit. (Note 5)
(r) Rider for Insured's Accidental Death Benefit. (Note 5)
(s) Rider for Insured's Accidental Death Benefit. (Note 5)
(t) Rider for Insured's Accidental Death Benefit. (Note 5)
(u) Rider for Level Term Insurance Benefit on Dependent Children.
(Note 5)
(v) Rider for Level Term Insurance Benefit on Dependent Children.
(Note 5)
(w) Rider for Reduced Paid-Up Insurance. (Note 5)
(x) Rider for Exempting Child from Reinstatement. (Note 5)
(y) Rider Defining Incontestable Period. (Note 5)
(z) Rider for Modification of Insured's Waiver of Premium Benefit
Provision. (Note 5)
(aa) Rider for Termination of Benefit. (Note 5)
(bb) Rider for Aviation Risk Exclusion. (Note 5)
(cc) Rider for Military Aviation Risk Exclusion. (Note 5)
(dd) Rider for War Risk Exclusion. (Note 5)
(ee) Rider Defining Incontestable Period. (Note 5)
(ff) Rider for Suicide Provision. (Note 5)
(gg) Rider Defining Incontestable Period. (Note 5)
(hh) Rider for Aviation Risk Exclusion. (Note 5)
(ii) Rider for Military Aviation Risk Exclusion. (Note 5)
(jj) Rider for Level Term Benefit on Dependent Children. (Note 5)
(kk) Rider for Insured's Waiver of Premium Benefit. (Note 5)
(ll) Rider for Insured's Accidental Death Benefit. (Note 5)
(mm) Rider for Ownership and Control. (Note 5)
(nn) Rider for Ownership and Control. (Note 5)
(oo) Rider for Applicant's Waiver of Premium Benefit. (Note 5)
(pp) Rider for Applicant's Waiver of Premium Benefit. (Note 5)
(qq) Rider for Applicant's Waiver of Premium Benefit. (Note 5)
(rr) Rider for Applicant's Waiver of Premium Benefit. (Note 5)
(ss) Rider for Applicant's Waiver of Premium Benefit. (Note 5)
(tt) Rider for Applicant's Waiver of Premium Benefit. (Note 5)
(uu) Rider for Level Term Benefit on Insured for use in West
Virginia. (Note 7)
(vv) Rider for Level Term Benefit on Insured for use in all states
except West Virginia. (Note 7)
(ww) Rider permitting Special Premium Remittance Plan for use in
all states except New York, New Jersey, and Pennsylvania.
(Note 7)
(xx) Rider for Variable Loan Interest Rate for use in all states
except New York, New Jersey, and Michigan. (Note 7)
(yy) Rider for Variable Loan Interest Rate for use in Michigan.
(Note 7)
(zz) Rider permitting Special Premium Remittance Plan for use in
Pennsylvania. (Note 7)
(aaa) Rider for Decreasing Term Insurance Benefit for use in West
Virginia. (Note 8)
(bbb) Rider for Decreasing Term Insurance Benefit for use in all
states except New York, New Jersey and West Virginia.
(Note 8)
(ccc) Rider for Decreasing Term Insurance Benefit on life of
Insured Spouse for use in all states except New York, New
Jersey, South Carolina and West Virginia. (Note 8)
(ddd) Rider for Decreasing Term Insurance Benefit on life of
Insured Spouse for use in South Carolina. (Note 8)
(eee) Rider for Decreasing Term Insurance Benefit on life of
Insured Spouse for use in West Virginia. (Note 8)
(fff) Rider for Variable Loan Interest Rate for use in Michigan.
(Note 8)
(ggg) Rider for Variable Loan Interest Rate for use in South
Carolina. (Note 8)
(hhh) Rider for Variable Loan Interest Rate for use in all states
except New York, New Jersey, Michigan and South Carolina.
(Note 8)
(iii) Rider providing Options on Lapse for use in all states except
New York and New
II-4
<PAGE>
Jersey. (Note 8)
(jjj) Rider for Variable Reduced Paid-Up Insurance for use in all
states except New York and New Jersey. (Note 8)
(kkk) Living Needs Benefit Rider for use in Florida. (Note 11)
(lll) Living Needs Benefit Rider for use in all approved
jurisdictions except Florida. (Note 12)
2. See Exhibit 1.A.(5).
3. Opinion and Consent of Clifford E. Kirsch, Esq. as to the legality of the
securities being registered. (Note 1)
4. None.
5. Not Applicable.
6. Opinion and Consent of Nancy D. Davis, FSA, MAAA, as to actuarial matters
pertaining to the securities being registered. (Note 1)
7. Powers of Attorney.
(a) E. Michael Caufield, Garnett L. Keith, Jr., Ira J. Kleinman, Esther H.
Milnes, I. Edward Price, Stephen P. Tooley (Note 13)
(b) William F. Yelverton (Note 14)
27. Financial Data Schedule (Note 1)
(Note 1) Filed herewith.
(Note 2) Incorporated by reference to Registrant's Form N-8B-2, filed
November 22, 1982.
(Note 3) Incorporated by reference to Pre-Effective Amendment No. 1 to this
Registration Statement, filed February 17, 1983.
(Note 4) Incorporated by reference to Pre-Effective Amendment No. 2 to this
Registration Statement, filed May 19, 1983.
(Note 5) Incorporated by reference to Post-Effective Amendment No. 2 to this
Registration Statement, filed March 22, 1984.
(Note 6) Incorporated by reference to Post-Effective Amendment No. 3 to this
Registration Statement, filed April 27, 1984.
(Note 7) Incorporated by reference to Post-Effective Amendment No. 4 to this
Registration Statement, filed April 30, 1985.
(Note 8) Incorporated by reference to Post-Effective Amendment No. 5 to this
Registration Statement, filed March 7, 1986.
(Note 9) Incorporated by reference to Post-Effective Amendment No. 13 to Form
S-6, Registration No. 2-89558, filed March 2, 1989, on behalf of the
Pruco Life Variable Appreciable Account.
(Note 10) Incorporated by reference to Post-Effective Amendment No. 14 to this
Registration Statement, filed March 1, 1990.
(Note 11) Incorporated by reference to Post-Effective Amendment No. 15 to this
Registration Statement, filed April 26, 1990.
(Note 12) Incorporated by reference to Post-Effective Amendment No. 20 to this
Registration Statement, filed March 2, 1994.
(Note 13) Incorporated by reference to Form N-4, Registration No. 33-61125,
filed July 19, 1995 on behalf of the Pruco Life Flexible Premium
Variable Annuity Account.
(Note 14) Incorporated by reference to Pre-Effective Amendment No. 1 to Form
N-4, Registration No. 33-61125, filed November 17, 1995 on behalf of
Pruco Life Flexible Premium Variable Annuity Account.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant, the
Pruco Life Variable Insurance Account, certifies that this Amendment is filed
solely for one or more of the purposes specified in Rule 485(b)(1) under the
Securities Act of 1933 and that no material event requiring disclosure in the
prospectus, other than one listed in Rule 485(b)(1), has occurred since the
effective date of the most recent Post-Effective Amendment to the Registration
Statement which included a prospectus and has duly caused this Registration
Statement to be signed on its behalf by the undersigned thereunto duly
authorized and its seal hereunto affixed and attested, all in the city of Newark
and the State of New Jersey, on this 25th day of April, 1996.
(Seal) PRUCO LIFE VARIABLE INSURANCE ACCOUNT
(Registrant)
By: PRUCO LIFE INSURANCE COMPANY
(Depositor)
Attest: /s/ Thomas C. Castano By: /s/ Esther H. Milnes
------------------------------ ----------------------------------
Thomas C. Castano Esther H. Milnes
Assistant Secretary President
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment No. 23 to the Registration Statement has been signed below by the
following persons in the capacities indicated on this 25th day of April, 1996.
SIGNATURE AND TITLE
-------------------
/s/ *
- ----------------------------------------
Esther Milnes
President and Director
/s/ *
- ----------------------------------------
Stephen Tooley
Chief Accounting Officer and Comptroller
/s/ *
- ----------------------------------------
E. Michael Caulfield
Director
/s/ *
- ---------------------------------------- *By: /s/ Thomas C. Castano
Garnett L. Keith, Jr. -----------------------------
Director Thomas C. Castano
(Attorney-in-Fact)
/s/ *
- ----------------------------------------
Ira J. Kleinman, Jr.
Director
/s/ *
- ----------------------------------------
I. Edward Price
Director
/s/ *
- ----------------------------------------
William F. Yelverton
Director
II-6
<PAGE>
EXHIBIT INDEX
Consent of Deloitte and Touche LLP, independent auditors. Page II-7
3. Opinion and Consent of Clifford E. Kirsch, Esq. as to Page II-9
legality of the securities being registered.
6. Opinion and Consent of Nancy Davis, FSA, MAAA, as to Page II-10
actuarial matters pertaining to the securities being
registered.
27. Financial Data Schedule. Page II-11
II-8
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 23 to Registration
Statement No. 2-80513 on Form S-6 of Pruco Life Variable Insurance Account of
Pruco Life Insurance Company of our report dated February 15, 1996, relating to
the financial statements of Pruco Life Variable Insurance Account, and of our
report dated March 15, 1996, relating to the consolidated financial statements
of Pruco Life Insurance Company and subsidiaries appearing in the Prospectus,
which is part of such Registration Statement, and to the reference to us under
the heading "Experts" in such Prospectus.
/S/ Deloitte & Touche LLP
Parsippany, New Jersey
April 25, 1996
II-7
Exhibit 3
April 25, 1996
Pruco Life Insurance Company
213 Washington Street
Newark, New Jersey 07102-2992
Gentlemen:
In my capacity as Chief Counsel of Pruco Life Insurance Company ("Pruco Life"),
I have reviewed the establishment of Pruco Life Variable Insurance Account (the
"Account") on November 10, 1982 by the Executive Committee of the Board of
Directors of Pruco Life as a separate account for assets applicable to certain
variable life insurance contracts, pursuant to the provisions of Section 20-651
of the Arizona Insurance Code. I was responsible for oversight of the
preparation and review of the Registration Statement on Form S-6, as amended,
filed by Pruco Life with the Securities and Exchange Commission (Registration
No. 2-80513) under the Securities Act of 1933 for the registration of certain
variable life insurance contracts issued with respect to the Account.
I am of the following opinion:
(1) Pruco Life was duly organized under the laws of Arizona and is a
validly existing corporation.
(2) The Account has been duly created and is validly existing as a
separate account pursuant to the aforesaid provisions of Arizona law.
(3) The portion of the assets held in the Account equal to the reserve and
other liabilities for variable benefits under the variable life
insurance contracts is not chargeable with liabilities arising out of
any other business Pruco Life may conduct.
(4) The variable life insurance contracts are legal and binding
obligations of Pruco Life in accordance with their terms.
In arriving at the foregoing opinion, I have made such examination of law and
examined such records and other documents as I judged to be necessary or
appropriate.
I hereby consent to the filing of this opinion as an exhibit to the Registration
Statement.
Very truly yours,
Clifford E. Kirsch
vli.pl
II-9
Exhibit 6
April 25, 1996
Pruco Life Insurance Company
213 Washington Street
Newark, New Jersey 07102-2992
To Pruco Life Insurance Company:
This opinion is furnished in connection with the registration by Pruco Life
Insurance Company of variable life insurance contracts ("Contracts") under the
Securities Act of 1933. The prospectus included in Post-Effective Amendment No.
23 to Registration Statement No. 2-80513 on Form S-6 describes the Contracts. I
have reviewed the Contract form and I have participated in the preparation and
review of the Registration statement and Exhibits thereto. In my opinion:
(1) The illustrations of death benefits included in the prospectus section
entitled "How a Contract's Death Benefit Will Vary", based on the
assumptions stated in the illustrations, are consistent with the
provisions of the Contract.
(2) The illustrations of cash values included in the prospectus section
entitled "How a Contract's Cash Value Will Vary", based on the
assumptions stated in the illustrations, are consistent with the
provisions of the Contract.
(3) The illustrations of cash values and death benefits included in the
section entitled "Illustrations" and in the Appendix of the
prospectus, based on the assumptions stated in the illustrations, are
consistent with the provisions of the Contract. The rate structure of
the Contract has not been designed so as to make the relationship
between premiums and benefits, as shown in the illustrations, appear
more favorable to a prospective purchaser of a Contract for male age
25 or male age 40, than to prospective purchasers of Contracts on
males of other ages or on females.
(4) The illustrations of the effect of a Contract loan on the death
benefit and cash value included in the prospectus section entitled
"Contract Loans", based on the assumptions stated in the illustration,
is consistent with the provisions of the Contract.
(5) The illustrations (with respect to a lapsed Contract) of cash values,
extended term insurance and reduced paid-up insurance which are
included in the prospectus section entitled "Options on Lapse", based
on the assumptions stated in the illustrations, are consistent with
the Contract.
I hereby consent to the use of this opinion as an exhibit to the Registration
Statement and to the reference to my name under the heading "Experts" in the
prospectus.
Very truly yours,
Nancy D. Davis, FSA, MAAA
Vice President and Assistant Actuary
The Prudential Insurance Company of America
vli.pl
II-10
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<ARTICLE> 6
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 235,167
<INVESTMENTS-AT-VALUE> 296,717
<RECEIVABLES> 0
<ASSETS-OTHER> (43)
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 296,717
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<SHARES-COMMON-STOCK> 16,650
<SHARES-COMMON-PRIOR> 0
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<NET-ASSETS> 296,673
<DIVIDEND-INCOME> 9,162
<INTEREST-INCOME> 0
<OTHER-INCOME> 9,591
<EXPENSES-NET> 528
<NET-INVESTMENT-INCOME> 8,634
<REALIZED-GAINS-CURRENT> 919
<APPREC-INCREASE-CURRENT> 38,816
<NET-CHANGE-FROM-OPS> 57,960
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 56,924
<ACCUMULATED-NII-PRIOR> 0
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<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
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<PER-SHARE-NAV-BEGIN> 0
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<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
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<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
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